PLEDGE AND SECURITY AGREEMENT

PLEDGE AND SECURITY AGREEMENT (as amended, restated, supplemented or otherwise
modified from time to time in accordance herewith and including all attachments,
exhibits and schedules hereto, this “Agreement”), dated as of April 19 , 2005,
made by AXM PHARMA, INC., a Nevada corporation (the “Grantor”), in favor of the
secured parties listed on Exhibit A to this Agreement (collectively, the
“Secured Parties”).

WHEREAS, the Grantor has issued or will issue separate secured convertible
promissory notes to the Secured Parties (the “Notes”) pursuant to a Note and
Warrant Purchase Agreement dated as of April 19 , 2005 (the “Purchase
Agreement”), by and among the Grantor and the Secured Parties; and

WHEREAS, the Company is the sole shareholder of Werke Pharmaceuticals, Inc., a
Delaware corporation (the “Subsidiary”).  The Subsidiary is the sole shareholder
of AXM Shenyang (as defined below); and

WHEREAS, the Secured Parties and the Grantor agree that the Grantor execute and
deliver to the Secured Parties this Agreement providing for pledge to the
Secured Parties of the Company’s interest in the Subsidiary and the grant to the
Secured Parties of a continuing security interest in certain assets of the
Grantor, including, without limitation, real property and the Company’s
interests in the Subsidiary, all in substantially the form hereof to secure all
Obligations (hereinafter defined).

NOW, THEREFORE, the parties agree as follows:

ARTICLE I.  Definitions

Section 1.1.

Definition of Terms Used Herein.  All capitalized terms used herein and not
defined herein have the respective meanings provided therefor in the Purchase
Agreement or the Notes, as applicable.  All terms defined in the Uniform
Commercial Code (hereinafter defined) as in effect from time to time and used
herein and not otherwise defined herein (whether or not such terms are
capitalized) have the same definitions herein as specified therein.

Section 1.2.

Definition of Certain Terms Used Herein.  As used herein, the following terms
 have the following meanings:

“AXM Shenyang” means AXM Pharma (Shenyang), Inc., the Grantor’s wholly foreign
owned enterprise, incorporated in the Peoples Republic of China.  

"Collateral" means the real property owned by AXM Shenyang located at No.2
Feiyun Road, Hunnan New District,  Shenyang, China as more fully described in
the Mortgage Agreement and all equipment and inventory of every kind and nature
located on the real property, and all proceeds and products of such real
property, equipment and inventory, but excluding any accounts receivables.

“Default” means any event or circumstance which, with the giving of notice, the
lapse of time, or both, would (if not cured, waived, or otherwise remedied
during such time) constitute an Event of Default.

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“Event of Default” has the meaning specified in the Notes.

“Indemnitees” has the meaning specified in Section 7.5(b).

“Lien” means: (i) any interest in property securing an obligation owed to, or a
claim by, a Person other than the owner of the property, whether such interest
is based on the common law, statute, or contract, and including a security
interest, charge, claim, or lien arising from a mortgage, deed of trust,
encumbrance, pledge, hypothecation, assignment, deposit arrangement, agreement,
security agreement, conditional sale or trust receipt or a lease, consignment or
bailment for security purposes; (ii) to the extent not included under
clause (i), any reservation, exception, encroachment, easement, right-of-way,
covenant, condition, restriction, lease or other title exception or encumbrance
affecting property; and (iii) any contingent or other agreement to provide any
of the foregoing.

“Mortgage Agreement” means the mortgage agreement dated as of the date hereof
among AXM Shenyang and the Secured Parties creating a security interest in and
under the Collateral.

"Notes" has the meaning assigned to such term in the first recital of this
Agreement.

"Obligations" means all indebtedness, liabilities, obligations, covenants and
duties of the Grantor to the Secured Parties of every kind, nature and
description, direct or indirect, absolute or contingent, due or not due,
contractual or tortious, liquidated or unliquidated, arising by operation of law
or otherwise, now existing of hereafter arising under or in connection with the
Notes, this Agreement or the other Transaction Documents.

“Registered Organization” means an entity formed by filing a registration
document with a United States Governmental Authority, such as a corporation,
limited partnership or limited liability company.

"Security Interest" has the meaning specified in Section 2.1 of this Agreement.

“Uniform Commercial Code” means the Uniform Commercial Code from time to time in
effect in the State of New York.

ARTICLE II.  Security Interest

Section 2.1.

Security Interest.  As security for the payment and performance, in full of the
Obligations, and any extensions, renewals, modifications or refinancings of the
Obligations, the Grantor hereby bargains, sells, conveys, assigns, sets over,
mortgages, pledges, hypothecates and transfers to the Secured Parties, and
hereby grants to the Secured Parties, their successors and assigns, a security
interest in, all of such Grantor's right, title and interest in, to and under
the Collateral (the "Security Interest").   In connection with the Security
Interest and constituting a part of the Collateral for all of the Obligations
secured by the Security Interest granted hereunder, the Company hereby pledges
and assigns to the Secured Parties, and grants to the Secured Parties a
continuing security interest in, the following, whether now existing or
hereafter acquired or arising:

(a)     all of the Company’s right, title and interest in the Subsidiary;

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(b)     all of the Company’s share and interest as shareholders in the business,
assets, capital, profits, goodwill and other property of the Subsidiary;

(c)     all of the Company’s rights, powers and privileges under the articles of
incorporation, bylaws and other organizational documents of the Subsidiary;

(d)     any and all fees, distributions and other payments and compensation due
and to become due to each Grantor from the Subsidiary;

(e)     any and all securities, stock, partnership interests, membership
interests, financial assets, founders fees, fees, distributions, receivables,
contract rights, general intangibles and other amounts now or hereafter payable
in respect of the Company’s interest in the Subsidiary;

(f)     all investment property and securities entitlements in or arising from
any of the foregoing;

(g)     the proceeds (whether cash or non-cash) to be paid and payable to the
Company or the Subsidiary upon any sale or other transfer of any right, title or
interest of the Company in the Subsidiary; and

(h)     any and all cash and non-cash proceeds of any of the foregoing.

Section 2.2.

Stock Powers.  Concurrently with the delivery to the Secured Parties of each
certificate representing the shares of pledged stock of the Subsidiary, the
Company in respect of such certificate shall deliver an undated stock power
covering such certificate, duly executed by the Company in blank with, if the
Secured Parties so request, signature guaranteed.

Section 2.3.

Voting Rights.  Unless an Event of Default shall have occurred and be continuing
and the Secured Parties shall have given notice to the Grantors of the Secured
Parties’ intent to exercise its rights pursuant to Article VI hereof, the
Company shall be entitled to receive all cash dividends paid in the normal
course of business of the Subsidiary and consistent with past practice and to
exercise all voting and corporate rights with respect to the pledged stock of
the Subsidiary; provided, however, that no vote shall be cast or corporate right
exercised or action taken which, in the reasonable judgment of the Secured
Parties, would impair the Collateral or otherwise be inconsistent with or result
in any violation of any provision of this Agreement.

Section 2.4.

No Assumption of Liability.  The Security Interest is granted as security only
and shall not subject the Secured Parties to, or in any way alter or modify, any
obligation or liability of the Grantor with respect to or arising out of the
Collateral.

Section 2.5.

Filing of Mortgage Agreement.  The Grantor shall cause AXM Shenyang to execute
and perform its obligations under the Mortgage Agreement, including, without
limitation, perfecting the Security Interest in accordance with the terms of the
Mortgage Agreement.

ARTICLE III.  Representations and Warranties

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The Grantor represents and warrants to the Secured Parties that:

Section 3.1.

Title and Authority.  The Grantor has good and valid rights in and title to the
Collateral with respect to which it has purported to grant a security interest
hereunder and has full power and authority to grant to the Secured Parties the
Security Interest and to execute, deliver and perform its obligations in
accordance with the terms of this Agreement, without the consent or approval of
any other Person other than any consent or approval which has been obtained.

Section 3.2.

Filings; Actions to Achieve Perfection.  Fully executed Uniform Commercial Code
financing statements (including fixture filings, as applicable) or other
appropriate filings, recordings or registrations containing a description of the
Collateral have been delivered to the Secured Parties for filing in each United
States governmental, municipal or other office specified in Schedule A, which
are all the filings, recordings and registrations that are necessary to publish
notice of and protect the validity of and to establish a legal, valid and
perfected security interest in favor of the Secured Parties in respect of all
Collateral in which the Security Interest may be perfected by filing, recording
or registration in the United States (or any political subdivision thereof) and
its territories and possessions, and no further or subsequent filing, refiling,
recording, rerecording, registration or reregistration is necessary in any such
jurisdiction, except as provided under applicable law with respect to the filing
of continuation statements or with respect to the filing of amendments or new
filings to reflect the change of the Grantor's name, location, identity or
corporate structure.  The Grantor’s name is listed in the preamble of this
Agreement identically to how it appears on its articles of incorporation or
other organizational documents.

Section 3.3.

Validity and Priority of Security Interest.  The Security Interest constitutes
(a) a legal and valid security interest in all the Collateral securing the
payment and performance of the Obligations, (b) subject only to the filings
described in Section 3.2 above and other previously perfected security interests
in the Collateral listed on Schedule 3.3 to this Agreement (“Existing Liens”), a
perfected security interest in all Collateral in which a security interest may
be perfected by filing, recording or registration in the United States pursuant
to the Uniform Commercial Code or other applicable law in the United States (or
any political subdivision thereof) and its territories and possessions or any
other country, state or nation (or any political subdivision thereof).  The
Security Interest is and shall be subordinate to any other Existing Lien on any
of the Collateral.

Section 3.4.

Absence of Other Liens.  The Grantor's Collateral is owned by the Grantor free
and clear of any Lien other than Existing Liens.  Without limiting the foregoing
and except as set forth on Schedule 3.4 to this Agreement, the Grantor has not
filed or consented to any filing described in Schedule A in favor of any Person
other than the Secured Parties, nor permitted the granting or assignment of a
security interest or permitted perfection of any security interest in the
Collateral in favor of any Person other than the Secured Parties.  The Grantor’s
having possession of all instruments and cash constituting Collateral from time
to time and the filing of financing statements in the offices referred to in
Schedule A hereto results in the perfection of such security interest.  Such
security interest is, or in the case of Collateral in which the Grantor obtain
rights after the date hereof, will be, a perfected, first priority security
interest.  Such notices, filings and all other action necessary or desirable to
perfect and protect such security interest have been duly taken.

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Section 3.5.

Valid and Binding Obligation.  This Agreement constitutes the legal, valid and
binding obligation of the Grantor, enforceable against the Grantor in accordance
with its terms, except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, and other laws of general application affecting
enforcement of creditors’ rights generally, (ii) as limited by laws relating to
the availability of specific performance, injunctive relief, or other equitable
remedies, and (iii) to the extent the indemnification provisions contained in
this Agreement may be limited by applicable federal or state securities laws.

ARTICLE IV.  Covenants

Section 4.1.

Change of Name; Location of Collateral; Place of Business, State of Formation or
Organization.

(a)     The Grantor shall notify the Secured Parties in writing promptly of any
change (i) in its corporate name or in any trade name used to identify it in the
conduct of its business or in the ownership of its properties, (ii) in the
location of its chief executive office, its principal place of business, any
office in which it maintains books or records relating to Collateral owned by it
(including the establishment of any such new office or facility), (iii) in its
identity or corporate structure such that a filed filing made under the Uniform
Commercial Code becomes misleading or (iv) in its Federal Taxpayer
Identification Number.  In extension of the foregoing, the Grantor shall not
effect or permit any change referred to in the preceding sentence unless all
filings have been made under the Uniform Commercial Code or otherwise that are
required in order for the Secured Parties to continue at all times following
such change to have a valid, legal and perfected first priority security
interest in all the Collateral.

(b)     Without limiting Section 4.1(a), without the prior written consent of
the Secured Parties in each instance, the Grantor shall not change its (i)
principal residence, if it is an individual, (ii) place of business, if it has
only one place of business and is not a Registered Organization, (iii) principal
place of business, if it has more than one place of business and is not a
Registered Organization, or (iv) state of incorporation, formation or
organization, if it is a Registered Organization.

Section 4.2.

Records.  The Grantor shall maintain, at its own cost and expense, such complete
and accurate records with respect to the Collateral owned by it as is consistent
with its current practices and in accordance with such prudent and standard
practices used in industries that are the same as or similar to those in which
the Grantor is engaged, but in any event to include complete accounting records
indicating all payments and proceeds received with respect to any part of the
Collateral, and, at such time or times as the Secured Parties may reasonably
request, promptly to prepare and deliver to the Secured Parties a duly certified
schedule or schedules in form and detail satisfactory to the Secured Parties
showing the identity, amount and location of any and all Collateral.

Section 4.3.

Periodic Certification; Notice of Changes.  In the event there should at any
time be any change in the information represented and warranted herein or in the
documents and instruments executed and delivered in connection herewith, the
Grantor shall immediately notify the Secured Parties in writing of such change
(this notice requirement shall be in extension of and shall not limit or relieve
the Grantor of any other covenants hereunder).

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Section 4.4.

Protection of Security.  The Grantor shall, at its own cost and expense, take
any and all actions necessary to defend title to the Collateral against all
persons and to defend the Security Interest of the Secured Parties in the
Collateral and the priority thereof against any Lien.  

Section 4.5.

Inspection and Verification.  The Secured Parties and such persons as the
Secured Parties may reasonably designate shall have the right to inspect the
Collateral, all records related thereto (and to make extracts and copies from
such records) and the premises upon which any of the Collateral is located, to
discuss the Grantor's affairs with the officers of the Grantor and its
independent accountants and to verify under reasonable procedures the validity,
amount, quality, quantity, value, condition and status of, or any other matter
relating to, the Collateral, including, in the case of collateral in the
possession of any third Person, by contacting any account debtor or third Person
possessing such Collateral for the purpose of making such a verification.
 Out-of-pocket expenses in connection with any inspections by representatives of
the Secured Parties shall be (a) the obligations of the Grantor with respect to
any inspection after the Secured Parties’ demand payment of the Notes or (b) the
obligation of the Secured Parties in any other case.

Section 4.6.

Taxes; Encumbrances.  At their option, the Secured Parties may discharge, Liens
other than Existing Liens at any time levied or placed on the Collateral and may
pay for the maintenance and preservation of the Collateral to the extent the
Grantor fails to do so and the Grantor shall reimburse the Secured Parties on
demand for any payment made or any expense incurred by the Secured Parties
pursuant to the foregoing authorization; provided, however, that nothing in this
Section shall be interpreted as excusing the Grantor from the performance of, or
imposing any obligation on the Secured Parties to cure or perform, any covenants
or other obligation of the Grantor with respect to any Lien or maintenance or
preservation of Collateral as set forth herein.

Section 4.7.

Use and Disposition of Collateral.  The Grantor shall not make or permit to be
made an assignment, pledge or hypothecation of any Collateral or shall grant any
other Lien in respect of the Collateral without the prior written consent of the
Secured Parties.  The Grantor shall not make or permit to be made any transfer
of any Collateral and the Grantor shall remain at all times in possession of the
Collateral owned by it, other than with respect to Existing Liens and other
liens approved by the Secured Parties.

Section 4.8.

Insurance/Notice of Loss.  Within a reasonable period of time following the date
of this Agreement, Grantor, at its own expense, shall maintain or cause to be
maintained insurance covering physical loss or damage to the Collateral.  In
extension of the foregoing and without limitation, such insurance shall be
payable to the Secured Parties as loss payee under a “standard” loss payee
clause, and the Secured Parties shall be listed as an “additional insured” on
Grantor’s general liability insurance.  Such insurance shall not be terminated,
cancelled or not renewed for any reason, including non-payment of insurance
premiums, unless the insurer shall have provided the Secured Parties at least 30
days prior written notice.  Grantor irrevocably makes, constitutes and appoints
the Secured Parties (and all officers, employees or agents designated by the
Secured Parties) as its true and lawful agent and attorney-in-fact for the
purpose, at any time following the Secured Parties’ demand for payment of the
Notes, of making, settling and adjusting claims in respect of Collateral under
policies of insurance, endorsing the name of Grantor on any check, draft,
instrument or other item of payment for the proceeds of

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such policies of insurance and for making all determinations and decisions with
respect thereto.  In the event that Grantor at any time or times shall fail to
obtain or maintain any of the policies of insurance required hereby or to pay
any premium in whole or part relating thereto, the Secured Parties may, without
waiving or releasing any obligation or liability of Grantor hereunder, in their
sole discretion, obtain and maintain such policies of insurance and pay such
premium and take any other actions with respect thereto as the Secured Parties
deem advisable.  All sums disbursed by the Secured Parties in connection and in
accordance with this Section, including reasonable attorneys' fees, court costs,
expenses and other charges relating thereto, shall be payable upon demand, by
Grantor to the Secured Parties and shall be additional Obligations secured
hereby.  Grantor shall promptly notify the Secured Parties if any material
portion of the Collateral owned or held by Grantor is damaged or destroyed.  The
proceeds of any casualty insurance in respect of any casualty loss of any of the
Collateral shall (i) so long as the Secured Parties have not demanded payment of
the Notes, be disbursed to Grantor for direct application by Grantor solely to
the repair or replacement of Grantor’s property so damaged or destroyed, and
(ii) in all other circumstances, be held by the Secured Parties as cash
collateral for the Obligations.  The Secured Parties may, at their sole option,
disburse from time to time all or any part of such proceeds so held as cash
collateral, upon such terms and conditions as the Secured Parties may reasonably
prescribe, for direct application by the Secured Parties solely to the repair or
replacement of Grantor’s property so damaged or destroyed, or Grantor may apply
all or any part of such proceeds to the Obligations.

Section 4.9.

Legend. Grantor shall legend, in form and manner satisfactory to the Secured
Parties, its accounts and its books, records and documents evidencing or
pertaining thereto with an appropriate reference to the fact that such accounts
have been assigned to the Secured Parties and that the Secured Parties have a
security interest therein.  

ARTICLE V.  Further Assurances; Power of Attorney

Section 5.1.

Further Assurances.  Grantor shall, at its own expense, execute, acknowledge,
deliver and cause to be duly filed all such further instruments and documents
and take all such actions as the Secured Parties may from time to time
reasonably request to better assure, preserve, protect and perfect the Security
Interest and the rights and remedies created hereby, including the payment of
any fees and taxes required in connection with the execution and delivery of
this Agreement, the granting of the Security Interest and the filing of any
financing statements (including fixture filings) or other documents in
connection herewith or therewith.  If any amount payable under or in connection
with any of the Collateral shall be or become evidenced by any promissory note
or other instrument, such note or instrument shall be immediately pledged and
delivered to the Secured Parties, duly endorsed in a manner satisfactory to the
Secured Parties.  

Section 5.2.

Power of Attorney.

(a)     Grantor hereby irrevocably (as a power coupled with an interest)
constitutes and appoints the Secured Parties (and all officers, employees or
agents designated by the Secured Parties), its attorney-in-fact with full power
of substitution, for the benefit of the Secured Parties,

(i)   to take all appropriate action and to execute all documents and
instruments that may be necessary or desirable to accomplish the purposes of
this

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Agreement, and without limiting the generality of the foregoing, Grantor hereby
grants the power to file one or more financing statements (including fixture
filings), continuation statements, filings with the United States Patent and
Trademark Office or United States Copyright Office (or any successor office or
any similar office in any other country) or other documents for the purpose of
perfecting, confirming, continuing, enforcing or protecting the Security
Interest granted by Grantor, without the signature of Grantor, and naming
Grantor as debtor and the Secured Parties as secured party; and

(ii)   at any time following the Secured Parties’ demand for payment of the
Notes (i) to receive, endorse, assign and/or deliver any and all notes,
acceptances, checks, drafts, money orders or other evidences of payment relating
to the Collateral or any part thereof; (ii) to demand, collect, receive payment
of, give receipt for and give discharges and releases of all or any of the
Collateral; (iii) to sign the name of Grantor on any invoice or bill of lading
relating to any of the Collateral; (iv) to send verifications of accounts to any
account debtor or any other Person liable for an account; (v) to commence and
prosecute any and all suits, actions or proceedings at law or in equity in any
court of competent jurisdiction to collect or otherwise realize on all or any of
the Collateral or to enforce any rights in respect of any Collateral; (vi) to
settle, compromise, compound, adjust or defend any actions, suits or proceeding
relating to all or any of the Collateral; and (vii) to use, sell, assign,
transfer, pledge, make any agreement with respect to or otherwise deal with all
or any of the Collateral, and to do all other acts and things necessary to carry
out the purposes of this Agree­ment, as fully and completely as though the
Secured Parties were the absolute owner of the Collateral for all purposes;
provided, however, that nothing herein contained shall be construed as requiring
or obligating the Secured Parties to make any commitment or to make any inquiry
as to the nature or sufficiency of any payment received by the Secured Parties,
or to present or file any claim or notice, or to take any action with respect to
the Collateral or any part thereof or the moneys due or to become due in respect
thereof or any property covered thereby, and no action taken or omitted to be
taken by the Secured Parties with respect to the Collateral or any part thereof
shall give rise to any defense, counterclaim or offset in favor of Grantor or to
any claim or action against the Secured Parties.  

(b)     The provisions of this Article shall in no event relieve Grantor of any
of its obligations hereunder with respect to the Collateral or any part thereof
or impose any obligation on the Secured Parties to proceed in any particular
manner with respect to the Collateral or any part thereof, or in any way limit
the exercise by the Secured Parties of any other or further right which it may
have on the date of this Agreement or hereafter, whether hereunder, by law or
otherwise.

ARTICLE VI.  Remedies

Section 6.1.

Remedies upon Default.

(a)     Upon the occurrence and during the continuance of an Event of Default,
Grantor agrees to deliver each item of its Collateral to the Secured Parties on
demand, and it is agreed that the Secured Parties shall have the right to take
any of or all the following actions at the same or different times (but at all
times subject to any Existing Liens): with or without legal process and with or
without prior notice or demand for

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performance, to take possession of the Collateral and without liability for
trespass to enter any premises where the Collateral may be located for the
purpose of taking possession of or removing the Collateral, exercise Grantor's
right to bill and receive payment for completed work and, generally, to exercise
any and all rights afforded to a secured party under the Uniform Commercial Code
or other applicable law.  Without limiting the generality of the foregoing,
Grantor agrees that the Secured Parties shall have the right, subject to the
mandatory requirements of applicable law, to sell or otherwise dispose of all or
any part of the Collateral, at public or private sale or at any broker's board
or on any securities exchange, for cash, upon credit or for future delivery as
the Secured Parties shall deem appropriate.  The Secured Parties shall be
authorized at any such sale (if it deems it advisable to do so) to restrict the
prospective bidders or purchasers to persons who will represent and agree that
they are purchasing the Collateral for their own account for investment and not
with a view to the distribution or sale thereof, and upon consum­mation of any
such sale the Secured Parties shall have the right to assign, transfer and
deliver to the purchaser or purchasers thereof the Collateral so sold.  Each
such purchaser at any such sale shall hold the property sold absolutely, free
from any claim or right on the part of Grantor, and Grantor hereby waives (to
the extent permitted by law) all rights of redemption, stay and appraisal which
Grantor now has or may at any time in the future have under any rule of law or
statute now existing or hereafter enacted.  

(b)     The Secured Parties shall give Grantor ten (10) days' written notice
(which Grantor agrees is reasonable notice within the meaning of Section
9-504(3) of the Uniform Commercial Code) of the Secured Parties’ intention to
make any sale of Collateral.  Such notice, in the case of a public sale, shall
state the time and place for such sale and, in the case of a sale at a broker's
board or on a securities exchange, shall state the board or exchange at which
such sale is to be made and the day on which the Collateral, or portion thereof,
will first be offered for sale at such board or exchange.  Any such public sale
shall be held at such time or times within ordinary business hours and at such
place or places as the Secured Parties may fix and state in the notice (if any)
of such sale.  At any such sale, the Collateral, or portion thereof, to be sold
may be sold in one lot as an entirety or in separate parcels, as the Secured
Parties may (in their sole and absolute discretion) determine.  The Secured
Parties shall not be obligated to make any sale of any Collateral if it shall
determine not to do so, regardless of the fact that notice of sale of such
Collateral shall have been given.  The Secured Parties may, without notice or
publication, adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and place fixed for
sale, and such sale may, without further notice, be made at the time and place
to which the same was so adjourned.  In case any sale of all or any part of the
Collateral is made on credit or for future delivery, the Collateral so sold may
be retained by the Secured Parties until the sale price is paid by the purchaser
or purchasers thereof, but the Secured Parties shall not incur any liability in
case any such purchaser or purchasers shall fail to take up and pay for the
Collateral so sold and, in case of any such failure, such Collateral may be sold
again upon like notice.  At any public (or, to the extent permitted by law,
private) sale made pursuant to this Section, the Secured Parties may bid for or
purchase, free (to the extent permitted by law) from any right of redemption,
stay, valuation or appraisal on the part of Grantor (all said rights being also
hereby waived and released to the extent permitted by law), the Collateral or
any part thereof offered for sale and may make

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payment on account thereof by using any claim then due and payable to the
Secured Parties from Grantor as a credit against the purchase price, and the
Secured Parties may, upon compliance with the terms of sale, hold, retain and
dispose of such property without further accountability to Grantor therefor.
 For purposes hereof, a written agreement to purchase the Collateral or any
portion thereof shall be treated as a sale thereof; the Secured Parties shall be
free to carry out such sale pursuant to such agreement and Grantor shall not be
entitled to the return of the Collateral or any portion thereof subject thereto,
notwithstanding the fact that after the Secured Parties shall have entered into
such an agreement all Obligations have been paid in full.  As an alternative to
exercising the power of sale herein conferred upon it, the Secured Parties may
proceed by a suit or suits at law or in equity to foreclose this Agreement and
to sell the Collateral or any portion thereof pursuant to a judgment or decree
of a court or courts having competent jurisdiction or pursuant to a proceeding
by a court-appointed receiver.

Section 6.2.

Application of Proceeds.  The Secured Parties shall apply the proceeds of any
collection or sale of the Collateral, as well as any Collateral consisting of
cash, as follows:

(a)     FIRST, to the payment of all costs and expenses incurred by the Secured
Parties in connection with such collection or sale or otherwise in connection
with this Agreement or any of the Obligations, including all court costs and the
fees and expenses of its agents and legal counsel, and any other costs or
expenses incurred in connection with the exercise of any right or remedy
hereunder, under the Purchase Agreement, the Notes and the other Transaction
 Documents;

(b)     SECOND, to the payment in full of the Obligations; and

(c)     THIRD, to Grantor, its successors or assigns, or to whomsoever may be
lawfully entitled to receive the same, or as a court of competent jurisdiction
may otherwise direct.

Subject to the foregoing, the Secured Parties shall have absolute discretion as
to the time of application of such proceeds, moneys or balances in accordance
with this Agreement.  Upon any sale of the Collateral by the Secured Parties
(including pursuant to a power of sale granted by statute or under a judicial
proceeding), the receipt of any such proceeds, moneys or balances by the Secured
Parties or of the officer making the sale shall be a sufficient discharge to the
purchaser or purchasers of the Collateral so sold and such purchaser or
purchasers shall not be obligated to see to the application of any part of the
purchase money paid over to the Secured Parties or such officer or be answerable
in any way for the misapplication thereof.

Section 6.3.

Grant of License to Use Intellectual Property.  For the purpose of enabling the
Secured Parties to exercise rights and remedies under this Article at such time
as the Secured Parties shall be lawfully entitled to exercise such rights and
remedies, Grantor hereby grants to the Secured Parties an irrevocable,
non-exclusive license (exercisable without payment of royalty or other
compensation to Grantor) to use, license or sub-license any of the Collateral
consisting of intellectual property now owned or hereafter acquired by Grantor,
and wherever the same may be located, and including in such license reasonable
access to all media in which any of the licensed items may be recorded or stored
and to all computer software and programs used for the compilation or printout
thereof.  The use of such license by the Secured Parties may be

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exercised, at the option of the Secured Parties, only following the Secured
Parties’ demand for payment of the Notes.  

ARTICLE VII.  Miscellaneous

Section 7.1.

Notices.  All communications and notices hereunder to the Grantor and to the
Secured Parties shall (except as otherwise expressly permitted herein) be in
writing and delivered to the Grantor or the Secured Parties, as the case may be,
as provided in the Purchase Agreement.  

Section 7.2.

Security Interest Absolute.  All rights of the Secured Parties hereunder, the
Security Interest and all obligations of Grantor hereunder shall be absolute and
unconditional irrespective of (a) any lack of validity or enforceability of the
Purchase Agreement, the Notes, any Transaction Document or any agreement with
respect to any of the Obligations or any other agreement or instrument relating
to any of the foregoing, (b) any change in the time, manner or place of payment
of, or in any other term of, all or any of the Obligations, or any other
amendment or waiver of or any consent to any departure from the Purchase
Agreement, the Notes, any Transaction Document or any other agreement or
instrument, (c) any exchange, release or non-perfection of any Lien on other
collateral, or any release or amendment or waiver of or consent under or
departure from any guarantee, securing or guaranteeing all or any of the
Obligations, or (d) any other circumstance that might otherwise constitute a
defense available to, or a discharge of, Grantor in respect of the Obligations
or this Agreement.  

Section 7.3.

Survival of Agreement.  All covenants, agreements, representations and
warranties made by Grantor herein and in the certificates or other instruments
prepared or delivered in connection with or pursuant to this Agreement shall be
considered to have been relied upon by the Secured Parties and shall survive the
making of the loan and the execution and delivery to the Secured Parties of the
Notes, regardless of any investigation made by the Secured Parties or on their
behalf; and shall continue in full force and effect until this Agreement shall
terminate.

Section 7.4.

Binding Effect; Several Agreement; Successors and Assigns.  This Agreement shall
become effective as to Grantor when a counterpart hereof executed on behalf of
Grantor shall have been delivered to the Secured Parties and a counterpart
hereof shall have been executed on behalf of the Secured Parties, and thereafter
shall be binding upon Grantor and the Secured Parties and their respective
successors and assigns, and shall inure to the benefit of Grantor, the Secured
Parties and their respective successors and assigns, except that Grantor shall
not have the right to assign or transfer its rights or obligations hereunder or
any interest herein or in the Collateral (and any such assignment or transfer
shall be void) except as expressly contemplated by this Agreement, the Purchase
Agreement, the Notes or the other Transaction Documents.

Section 7.5.

Secured Parties’ Fees and Expense; Indemnification.

(a)     Grantor agrees to pay upon demand to the Secured Parties the amount of
any and all reasonable expenses, including all reasonable fees, disbursements
and other

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12

charges of its counsel and of any experts or agents, which the Secured Parties
may incur in connection with (i) the administration of this Agreement (including
the customary fees and charges of the Secured Parties for any audits conducted
by them or on their behalf with respect to the accounts inventory), (ii) the
custody or preservation of, or the sale of, collection from or other realization
upon any of the Collateral, (iii) the exercise, enforcement or protection of any
of the rights of the Secured Parties hereunder or (iv) the failure of Grantor to
perform or observe any of the provisions hereof.  

(b)     Grantor agrees to indemnify the Secured Parties and the agent,
contractors and employees of the Secured Parties (collectively, the
“Indemnitees”) against, and hold each of them harmless from, any and all losses,
claims, damages, liabilities and related expenses, including reasonable fees,
disbursements and other charges of counsel, incurred by or asserted against any
of them arising out of, in any way connected with, or as a result of, the
execution, delivery, or performance of this Agreement or any agreement or
instrument contemplated hereby or any claim, litigation, investigation or
proceeding relating hereto or to the Collateral, whether or not any Indemnitee
is a party thereto; provided that such indemnity shall not, as to any
Indemnitee, be available to the extent that such losses, claims, damages,
liabilities or related expenses are determined by a court of competent
jurisdiction by final and nonappealable judgment to have resulted from the gross
negligence or willful misconduct of such Indemnitee.

(c)     Any such amounts payable as provided hereunder shall be additional
Obligations secured hereby.  The provisions of this Section shall remain
operative and in full force and effect regardless of the termination of this
Agreement, the Purchase Agreement, the Notes or the other Transaction Documents,
the consummation of the transactions contemplated hereby, the repayment of any
of the Obligations, the invalidity or unenforceability of any term or provision
of this Agreement, the Purchase Agreement, the Notes or the other Transaction
Documents, or any investigation made by or on behalf of the Secured Parties.
 All amounts due under this Section shall be payable on written demand therefor.
 

Section 7.6.

GOVERNING LAW.  THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ANY OF
THE CONFLICTS OF LAW PRINCIPLES WHICH WOULD RESULT IN THE APPLICATION OF THE
SUBSTANTIVE LAW OF ANOTHER JURISDICTION.  THIS AGREEMENT SHALL NOT BE
INTERPRETED OR CONSTRUED WITH ANY PRESUMPTION AGAINST THE PARTY CAUSING THIS
AGREEMENT TO BE DRAFTED.

Section 7.7.

Waivers; Amendment.  

(a)     No failure or delay of the Secured Parties in exercising any power or
right hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any other or
further exercise thereof or the exercise of any other right or power.  The
rights and remedies of the Secured Parties hereunder and under the Purchase
Agreement are cumulative and are not exclusive of any rights or remedies that
they would otherwise have.  No waiver of any provisions of this Agreement, the
Purchase Agreement, the Notes or the other

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13

Transaction Documents or consent to any departure by Grantor therefrom shall in
any event be effective unless the same shall be permitted by paragraph (b)
below, and then such waiver or consent shall be effective only in the specific
instance and for the purpose for which given.  No notice to or demand on Grantor
in any case shall entitle Grantor to any other or further notice or demand in
similar or other circumstances.

(b)     Neither this Agreement nor any provision hereof may be waived, amended
or modified except pursuant to an agreement or agreements, in writing entered
into by the Secured Parties and Grantor.

Section 7.8.

WAIVER OF JURY TRIAL.  EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT
OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION
WITH THIS AGREEMENT, THE PURCHASE AGREEMENT OR THE NOTES.  EACH PARTY HERETO (A)
CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES
THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS
AGREEMENT, THE PURCHASE AGREEMENT AND THE NOTES, AS APPLICABLE, BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

Section 7.9.

Severability.  In the event any one or more of the provisions contained in this
Agreement should be held invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby (it being understood
that the invalidity of a particular provision in a particular jurisdiction shall
not in and of itself affect the validity of such provision in any other
jurisdiction).  The parties shall endeavor in good-faith negotiations to replace
the invalid, illegal or unenforceable provisions with valid provisions the
economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.

Section 7.10.

Counterparts.  This Agreement may be executed in two or more counterparts, each
of which shall constitute an original but all of which when taken together shall
constitute but one contract.  Each party shall be entitled to rely on a
facsimile signature of any other party hereunder as if it were an original.

Section 7.11.

Jurisdiction; Consent to Service of Process.  

(a)     Grantor hereby irrevocably and unconditionally submits, for itself and
its property, to the nonexclusive jurisdiction of any New York State court or
Federal court of the United States of America sitting in New York City, Borough
of Manhattan, and any appellate court from any thereof, in any action or
proceeding arising out of or relating to this Agreement, the Purchase Agreement
or the Notes, or for recognition or enforcement of any judgment, and each of the
parties hereto hereby irrevocably and unconditionally agrees that all claims in
respect of any such action or proceeding may be heard and determined in such New
York State or, to the extent permitted by law, in such Federal court.  Each of
the parties hereto agrees that a final judgment in any such action or

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14

proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law.  Nothing in this
Agreement shall affect any right that the Secured Parties may otherwise have to
bring any action or proceeding relating to this Agreement, the Purchase
Agreement, the Notes or the other Transaction Documents against Grantor or its
properties in the courts of any jurisdiction.

(b)     Grantor hereby irrevocably and unconditionally waives, to the fullest
extent it may legally and effectively do so, any objection which it may now or
hereafter have to the laying of venue of any suit, action or proceeding arising
out of or relating to this Agreement, the Purchase Agreement, the Notes or the
other Transaction Documents in any New York State or Federal court.  Each of the
parties hereto hereby irrevocably waives, to the fullest extent permitted by
law, the defense of an inconvenient forum to the maintenance of such action or
proceeding in any such court.  

(c)     Each party to this Agreement irrevocably consents to service of process
in the manner provided for notices in Section 7.1.  Nothing in this Agreement
will affect the right of any party to this Agreement to process in any other
manner permitted by law.

Section 7.12.

Termination.  This Agreement and the Security Interest shall terminate when all
the Obligations have been paid in full, at which time the Secured Parties shall
execute and deliver to Grantor, at Grantor’s expense, all Uniform Commercial
Code termination statements and similar documents which Grantor shall reasonably
request to evidence such termination.  Any execution and delivery of termination
statements or documents pursuant to this Section shall be without recourse to or
warranty by the Secured Parties.

Section 7.13.

Prejudgment Remedy Waiver.  Grantor acknowledges that this Agreement, the
Purchase Agreement, the Notes and the other Transaction Documents evidence a
commercial transaction and that it could, under certain circumstances have the
right, to notice of and hearing on the right of the Secured Parties to obtain a
prejudgment remedy, such as attachment, garnishment and/or replevin, upon
commencing any litigation against Grantor.  Notwithstanding, Grantor hereby
waives all rights to notice, judicial hearing or prior court order to which it
might otherwise have the right under any state or federal statute or
constitution in connection with the obtaining by the Secured Parties of any
prejudgment remedy by reason of this Agreement, the Purchase Agreement, the
Notes, the other Transaction Documents or by reason of the Obligations or any
renewals or extensions of the same.  Grantor also waives any and all objection
which it might otherwise assert, now or in the future, to the exercise or use by
the Secured Parties of any right of setoff, repossession or self help as may
presently exist under statute or common law.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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IN WITNESS WHEREOF, the parties have duly executed this Pledge and Security
Agreement as of the day and year first written above.

AXM PHARMA, INC.

By: ________________________________

      Name:

      Title:

SECURED PARTY

By:

    ____

      Name:

      Title:

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EXHIBIT A

Secured Parties

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17

SCHEDULE A

Places of Business; Chief Executive Office; Filing Locations

State of Incorporation:  

Nevada

Chief Executive Office:

7251 West Lake Mead Blvd., Suite 300

Las Vegas, Nevada 89128

Filing Locations:

Secretary of State of the State of Nevada

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SCHEDULE 3.3

Existing Liens

Shenyang Branch of Shanghai Pudong Development Bank. Credit Line for up
approximately 19.84 million RMB (approximately US$2,400,000) to AXM Shenyang, of
which approximately 15 million RMB (approximately US $1,800,000) has been drawn
down.  This credit line is secured by a lien on the real property of AXM
Shenyang.

 

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SCHEDULE 3.4

Absence of Other Liens

Shenyang Branch of Shanghai Pudong Development Bank. Credit Line for up
approximately 19.84 million RMB (approximately US$2,400,000) to AXM Shenyang, of
which approximately 15 million RMB (approximately US $1,800,000) has been drawn
down.  This credit line is secured by a lien on the real property of AXM
Shenyang.