Weikang Bio-Tech (PINK:WKBT)

Pursuant to a make good escrow agreement dated December 2, 2010, Lucky Wheel Limited, the principal shareholder of the Company, whose shares in the Company Yin Wang, the Company’s chief executive officer, has dispositive and voting power, agreed to deposit into escrow 2,083,333 shares of common stock, which are to be held in escrow to be returned to Lucky Wheel Limited or delivered to the investors of a private placement on a pro-rata basis, depending on whether the Company meets certain financial performance targets for the years ending December 31, 2010 and December 31, 2011. 

• The performance target for 2010 is after-tax net income, as defined, of at least $21,000,000.
• The performance target for 2011 is after-tax net income of at least $25,000,000. 

If the performance target for either 2010 or 2011 is not met, the Company shall allocate to the investors that number of escrowed shares as equals the shortfall for such year, based on each investor’s actual investment, on a pro-rata basis.

Net income targets in connection with private placement on January 20, 2010:  

• Fiscal Year ending December 31, 2009: $13,000,000 
• Fiscal year ending December 31, 2010: $17,000,000 

Formula to be applied to issue shares to investors if targets are not attained:

• The percentage of variation of the Actual 2009 Net Income from the 2009 Targeted Net Income times the number of Purchased Shares acquired by such Subscriber pursuant to the private placement.
• The percentage of variation of the Actual 2010 Net Income from the 2010 Targeted Net Income times the number of Purchased Shares acquired by such Subscriber pursuant to the private placement.

Example..

if the Actual 2009 Net Income is $11,700,000, which is a variation of 10% of the 2009 Targeted Net Income, then the Company shall issue to each Subscriber, shares of the Company’s Common Stock, equal to a total of 10% of the Purchased Shares acquired by such Subscriber hereunder.