Exhibit 10.3

SHAREHOLDERS AGREEMENT
 
THIS SHAREHOLDERS AGREEMENT (this “Agreement”), dated as of [•], 2011, by and
among Milestone Longcheng Limited, a company organized under the laws of the
British Virgin Islands (the “Investor”), CHINA BCT PHARMACY GROUP, INC., a
company organized under the laws of Delaware (the “Company”), the Persons listed
on Schedule 1 hereto (the “Shareholders”), and Mr. Tian Hui Tang as
representative for the Shareholders (“Shareholders’ Representative” and together
with the Investor, the Company and the Shareholders, the “Parties” and each
individually sometimes referred to herein as a “Party”).
 
W I T N E S S E T H:
 
WHEREAS, the Company has created a new series of preferred shares designated as
Series A Convertible Preferred Shares (the “Preferred Shares”) which are
convertible into Common Shares of the Company, par value US$0.001 per share
(“Common Shares”);
 
WHEREAS, pursuant to that certain Series A Convertible Preferred Shares Purchase
Agreement, dated as of January 18, 2011 (the “Preferred Shares Purchase
Agreement”), the Company is issuing certain Preferred Shares to the Investor;
and
 
WHEREAS, the Parties desire to enter into this Agreement to set forth certain
rights and obligations among them (it being acknowledged that the Shareholders
and the Company are entering into this Agreement to induce the Investor to
consummate the transactions contemplated by the Preferred Shares Purchase
Agreement).
 
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements herein contained, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Parties agree as follows:
 
Section 1. Definitions and Interpretation.
 
(a) Definitions.  As used in this Agreement, the following terms shall have the
following meanings (such meanings to be equally applicable to both the singular
and plural forms of the terms defined).
 
“Affiliate” of a Person means any other Person (a) that directly or indirectly
controls, is controlled by or is under common control with, the Person or any of
its Subsidiaries, (b) that directly or indirectly beneficially owns or holds 5%
or more of any class of equity security or other similar interests of the Person
or any of its Subsidiaries or (c) 5% or more of the equity securities of which
is directly or indirectly beneficially owned or held by the Person or any of its
Subsidiaries.  For purposes of this definition, the term “control” means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract, agreement or otherwise.
 
 
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“Arbitration Notice” has the meaning set forth in Section 7(f).
 
“Business Day” means a day other than Saturday or Sunday or other day on which
commercial banks in New York City, New York, Hong Kong or PRC are authorized or
required by law or other governmental action to close and a day on which
dealings are carried on for deposits in Dollars by and among banks in the London
interbank market.
 
“Certificate of Designation” means the Certificate of Designation signed by the
Company on the Closing Date.
 
“Closing Date” means [•], 2011.
 
“Common Shares” has the meaning set forth in the Recitals above.
 
“Company” has the meaning set forth in the Preamble to this Agreement.
 
“Competing Business” means any provision of services or goods that would be
reasonably considered to be competitive with any services or goods now being
offered or hereafter offered by the Company and its Subsidiaries.
 
“Consultation Period” has the meaning set forth in Section 7(f).
 
“Co-Sale Offered Shares” has the meaning set forth in Section 3(d)(i).
 
“Co-Sale Preferred Shareholder” has the meaning set forth in Section 3(d)(i).
 
“Co-Sale Shareholder” has the meaning set forth in Section 3(d)(i).
 
“Covenanter” has the meaning set forth in Section 4(a).
 
“Dispute” has the meaning set forth in Section 7(f).
 
“Earn-in Agreement” means the Earn-in Agreement dated December 30, 2009, as
amended on May 19, 2010, by and among the Shareholders.
 
“Election Notice” has the meaning set forth in Section 3(d)(i).
 
“Entity” means any corporation, partnership, limited liability company, joint
venture, association, partnership, business trust or other entity.
 
“Exempt Transfer” shall have the meaning set forth in Section 3(e).
 
“First Refusal Allotment” has the meaning set forth in Section 3(c)(i).
 
“First Refusal Expiration Notice” has the meaning set forth in Section 3(c)(ii).
 
“First Refusal Notice” has the meaning set forth in Section 3(c).
 
“First Refusal Period” has the meaning set forth in Section 3(c).
 
 
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“Governmental Authority” means any government or political subdivision or
department thereof, any governmental or regulatory body, commission, board,
bureau, agency or instrumentality, or any court or arbitrator or alternative
dispute resolution body, in each case whether federal, state, local, foreign or
supranational, as well as any applicable self regulatory body.
 
“HKIAC” has the meaning set forth in Section 7(f).
 
“Hong Kong” means the Special Administrative Region of Hong Kong.
 
“Investor” has the meaning set forth in the Preamble to this Agreement.
 
“Investor Director” has the meaning ascribed to it in the Preferred Shares
Purchase Agreement.
 
“Law” means any judgment, order (whether temporary, preliminary or permanent),
writ, injunction, decree, statute, rule, regulation, notice, law or ordinance
and shall also include any regulations of any applicable self regulatory
organizations.
 
“Material Adverse Effect” has the meaning ascribed to it in the Preferred Shares
Purchase Agreement.
 
“Non-compete Period” has the meaning set forth in Section 4(a).
 
“Notice of Sale” has the meaning set forth in Section 3(b).
 
“Offered Shares” has the meaning set forth in Section 3(b).
 
“Party” and “Parties” have the meanings set forth in the Preamble to this
Agreement.
 
“Person” means any individual, Entity, unincorporated association or
Governmental Authority.
 
“PRC” means the People’s Republic of China.
 
“Preferred Shareholders” has the meaning set forth in Section 3(c).
 
“Preferred Shareholder Co-Sale Pro Rata Portion” has the meaning set forth in
Section 3(d)(i).
 
“Preferred Shareholder Pro Rata Percentage” has the meaning set forth in Section
3(d)(i).
 
“Preferred Shares” has the meaning set forth in the Recitals above.
 
“Preferred Shares Purchase Agreement” has the meaning set forth in the Recitals
above.
 
 
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“Purchase Price” has the meaning ascribed to it in the Preferred Shares Purchase
Agreement.
 
“Purchaser” has the meaning set forth in Section 3(a).
 
“Qualified Public Offering” means a firmly committed underwritten public
offering of the Common Shares (or equity securities of an entity that holds all
or substantially all the share capital of the Company) pursuant to an effective
registration statement filed under the United States Securities Act of 1933, as
amended or under other comparable applicable Law for jurisdictions outside of
the United States in which (a) the Common Share is listed on the NASDAQ Global
Market, the New York Stock Exchange or an internationally recognized exchange
approved by the holders of majority of the Preferred Shares, (b) the gross
proceeds received by the Company and the shareholders participating in the
offering are no less than US$60,000,000, (c) the market capitalization of the
offering entity immediately after the offering is no less than US$300,000,000,
and (d) the number of securities of the offering entity which are publicly
traded immediately after the offering is no less than 20% of the total issued
share capital of the offering entity.
 
“Selling Shareholder” has the meaning set forth in Section 3(b).
 
“Selling Shareholder Co-Sale Pro Rata Portion” has the meaning set forth in
Section 3(d)(i).
 
“Selling Shareholder Pro Rata Percentage” has the meaning set forth in Section
3(d)(i).
 
“Service Termination Date” means with respect to any Person, the date on which
such Person ceases to be an employee, a director or a consultant, as the case
may be, of the Company or any of its Subsidiaries, for any reason (other than by
reason of death or disability), with or without cause.
 
“Shareholders” has the meaning set forth in the Preamble to this Agreement.
 
“Shareholders’ Representative” has the meaning set forth in the Preamble to this
Agreement.
 
“Subsidiary” means with respect to any Person, any corporation, partnership,
limited liability company, association, joint venture or other business entity
of which more than 50% of the total voting power of shares of stock or other
ownership interests entitled (without regard to the occurrence of any
contingency) to vote in the election of the Person or Persons (whether
directors, managers, trustees or other Persons performing similar functions)
having the power to direct or cause the direction of the management and policies
thereof is at the time owned or controlled, directly or indirectly, by that
Person or one or more of the other Subsidiaries of that Person or a combination
thereof.
 
 
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“Tax” means any tax, governmental fee or other like assessment or charge of any
kind whatsoever (including any tax imposed under Subtitle A of the U.S. Internal
Revenue Code of 1986, as amended, and any net income, alternative or add-on
minimum tax, gross income, gross receipts, sale, bulk sales, use, real property,
personal property, ad valorem, value added, transfer, franchise, profits,
license, withholding tax on amounts paid, withholding, payroll, employment,
excise severance, stamp, capital stock, occupation, property, environmental or
windfall profits tax, premium, custom, duty or other tax or assessment),
together with any interest, penalty, addition to tax or additional amount
thereto, imposed by any Governmental Authority.
 
“Transaction Documents” has the meaning ascribed to it in the Preferred Shares
Purchase Agreement.
 
“Transfer” of a security means any sale, assignment, transfer, exchange, pledge,
grant of a security or participation interest in, hypothecation, encumbrance or
other disposition or conveyance of any interest in such security.
 
(b) Interpretation.
 
(i) Headings.  The headings to the Sections and Subsections of this Agreement
are inserted for convenience of reference only and shall not affect the meaning
or interpretation of this Agreement.
 
(ii) Usage.  In this Agreement, unless the context requires otherwise:  (i) the
singular number includes the plural number and vice versa;  (ii) reference to
any gender includes each other gender; (iii) the Exhibits and Schedules to this
Agreement are hereby incorporated into, and shall be deemed to be a part of,
this Agreement; (iv) the terms “hereunder”, “hereof”, “herein”, “hereto” and
words of similar import shall be deemed references to this Agreement as a whole
and not to any particular section or other provision hereof; (v) the words
“include”, “includes” and “including” shall be deemed to be followed by the
words “without limitation”; and (vi) a reference to any Article, Section or
Subsection shall be deemed to refer to the corresponding Article, Section, or
Subsection of this Agreement.
 
Section 2. Investor Board Representation.  Each Shareholder agrees to vote all
voting securities held by it in the Company from time to time and to take all
other necessary actions within its control (whether in its capacity as
shareholder or otherwise, including without limitation, causing its directors
and officers to take all such necessary actions), and shall cause the Company to
take all necessary actions, in order to effect the appointment, election,
reelection or removal as contemplated in Section 5.7 of the Preferred Shares
Purchase Agreement of any Investor Director at the direction of the Investor.
 
Section 3. Share Transfers.
 
(a) Restrictions on Transfer. No Shareholder shall Transfer any Common Shares
held directly or indirectly by it to any prospective transferee (the
“Purchaser”) without first requesting the prior written consent of the holders
of majority of the then outstanding Preferred Shares. Any purported Transfer by
any Shareholder in violation of this Section 3(a) shall be null and void and
shall have no force and effect. In the event that the consent is not received
within ten (10) days of the request, the Selling Shareholder may only transfer
in accordance with the remaining provisions of this Section 3.
 
 
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(b) Notice of Sale.  In the event that any Shareholder proposes to undertake a
Transfer of Common Shares held directly or indirectly by it at the time of the
proposed Transfer, such Shareholder (the “Selling Shareholder”) shall deliver or
cause to be delivered a written notice (the “Notice of Sale”) to each Preferred
Shareholder at least fifteen (15) days prior to making any such Transfer.  The
Notice of Sale shall state (i) the number of Common Shares to be Transferred
(the “Offered Shares”) and the percentage that such Common Shares represent of
all Common Shares then held by such Shareholder, (ii) such Shareholder’s bona
fide intention to Transfer such Common Shares and (iii) the terms and conditions
of the contemplated Transfer, including the price.
 
(c) Right of First Refusal. Each of the Investor and its permitted assigns to
whom its rights under this Section 3 have been duly assigned in accordance with
this Agreement (collectively, the “Preferred Shareholders” and each, a
“Preferred Shareholder”) will have the right, exercisable upon written notice
(the “First Refusal Notice”) to the Selling Shareholder, the Company and each
other Preferred Shareholder within twenty (20) days after receipt of the Notice
of Sale (the “First Refusal Period”) of its election to exercise its right of
first refusal hereunder. The First Refusal Notice shall set forth the number of
Offered Shares that such Preferred Shareholder wishes to purchase, which amount
shall not exceed the First Refusal Allotment (as defined below) of such
Preferred Shareholder.  Such right of first refusal may be exercised as follows:
 
(i) First Refusal Allotment. Each Preferred Shareholder shall have the right to
purchase that number of the Offered Shares (the “First Refusal Allotment”)
equivalent to the product obtained by multiplying the aggregate number of the
Offered Shares by a fraction, the numerator of which is the number of Common
Shares (calculated on an as converted and fully-diluted basis) held by such
Preferred Shareholder at the time of the transaction and the denominator of
which is the total number of Common Shares (calculated on an as converted and
fully-diluted basis) owned by all Preferred Shareholders at the time of the
transaction.  To the extent that any Preferred Shareholder does not exercise its
right of first refusal to the full extent of its First Refusal Allotment, the
Selling Shareholder and the exercising Preferred Shareholders shall, within five
(5) days after the end of the First Refusal Period, make such adjustments to the
First Refusal Allotment of each exercising Preferred Shareholder so that any
remaining Offered Shares may be allocated to those Preferred Shareholders
exercising their rights of first refusal on a pro rata basis.
 
(ii) Expiration Notice.  Within ten (10) days after expiration of the First
Refusal Period the Company will give written notice (the “First Refusal
Expiration Notice”) to the Selling Shareholder specifying either (A) that all of
the Offered Shares were subscribed by the Preferred Shareholders exercising
their rights of first refusal or (B) that the Preferred Shareholders have not
subscribed for all of the Offered Shares in which case the First Refusal
Expiration Notice will specify the Preferred Shareholder Co-Sale Pro Rata
Portion (as defined below) and the Selling Shareholder Co-Sale Pro Rata Portion
(as defined below) of the remaining Offered Shares for the purpose of their
co-sale right described in Section 3(d) below.
 
(iii) Purchase Price. The purchase price for the Offered Shares to be purchased
by the Preferred Shareholders exercising their right of first refusal will be
the price set forth in the Notice of Sale, but will be payable as set forth in
Section 3(c)(iv) below. If the purchase price in the Notice of Sale includes
consideration other than cash, the cash equivalent value of the non-cash
consideration will be as previously determined by the Board in good faith, which
determination will be binding upon the Company, the Preferred Shareholders and
the Selling Shareholder, absent fraud or error.
 
 
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(iv) Payment. Payment of the purchase price for the Offered Shares purchased by
the Preferred Shareholders shall be made within thirty (30) days following the
date of the First Refusal Expiration Notice.  Payment of the purchase price will
be made by wire transfer or check as directed by the Selling Shareholder.
 
(v) Rights of a Selling Shareholder.  If any Preferred Shareholder exercises its
right of first refusal to purchase the Offered Shares, then, upon the date the
notice of such exercise is given by such Preferred Shareholders, the Selling
Shareholder’s rights as a holder of such Offered Shares shall be suspended until
the Selling Shareholder receives payment for such Offered Shares from such
Preferred Shareholder in accordance with the terms of this Agreement, and the
Selling Shareholder will forthwith cause all certificate(s) evidencing such
Offered Shares to be surrendered to the Company for transfer to such Preferred
Shareholder.
 
(vi) Application of Co-Sale Right.  In the event that the Preferred Shareholders
have not elected to purchase any or all of the Offered Shares, then the sale of
the remaining Offered Shares will become subject to the co-sale right of the
Preferred Shareholders as set forth in Section 3(d) below.
 
(d) Co-Sale Right.  To the extent that the Preferred Shareholders have not
exercised their right of first refusal with respect to any or all the Offered
Shares, then each Preferred Shareholder shall have the right to exercise its
co-sale right hereunder. Such co-sale right may be exercised as follows:
 
(i) Participation Procedures.
 
(A)           Within ten (10) Business Days after receipt of the First Refusal
Expiration Notice, upon written notice (an “Election Notice”) to the Selling
Shareholder, the Company and each other Preferred Shareholder, each Preferred
Shareholder may elect to include in such proposed Transfer up to the number of
Preferred Shares that is equal to the product obtained by multiplying (x) the
aggregate number of the Offered Shares subject to the co-sale right hereunder as
set forth in the First Refusal Expiration Notice (the “Co-Sale Offered Shares”)
by (y) a fraction (the “Preferred Shareholder Pro Rata Percentage”), the
numerator of which is the number of Common Shares (calculated on an as converted
and fully-diluted basis) held by such Preferred Shareholder (the “Co-Sale
Preferred Shareholder”) at the time of the transaction and the denominator of
which is the total number of Common Shares (calculated on an as converted and
fully-diluted basis) of the Selling Shareholder and the Co-Sale Preferred
Shareholder (collectively, the “Co-Sale Shareholders”) at the time of the
transaction (the “Preferred Shareholder Co-Sale Pro Rata Portion”).
 
 
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(B)           To the extent one or more of the Preferred Shareholders exercise
such right of participation in accordance with Section 3(d)(i)(A), the maximum
number of Co-Sale Offered Shares that the Selling Shareholder may sell in the
proposed Transfer shall be equal to the product obtained by multiplying (x) the
Co-Sale Offered Shares by (y) a fraction (the “Selling Shareholder Pro Rata
Percentage”), the numerator of which is the number of Common Shares held by such
Selling Shareholder at the time of the transaction and the denominator of which
is the total number of Common Shares (calculated on an as converted and
fully-diluted basis) of the Co-Sale Shareholders at the time of the transaction
(the “Selling Shareholder Co-Sale Pro Rata Portion”).

(C)           The Selling Shareholder shall not consummate any proposed Transfer
unless the Purchaser purchases all of the Preferred Shares in the Election
Notice upon the same terms and conditions as those contained in the Notice of
Sale; provided, that if the number of Common Shares (calculated on an as
converted and fully-diluted basis) which the Purchaser elects to purchase is
more or less than the Co-Sale Offered Shares, the number of Common Shares
(calculated on an as converted and fully-diluted basis) to be sold by each
Co-Sale Shareholder shall be reduced on a pro rata basis in accordance with the
Preferred Shareholder Pro Rata Percentage (in the case of the Preferred
Shareholder(s)) and the Selling Shareholder Pro Rata Percentage (in the case of
the Selling Shareholder), respectively. For the purpose of determining the terms
and conditions on which any Preferred Shares are to be sold to the Purchaser
hereunder, each Preferred Share being deemed to be equivalent to the number of
Common Shares into which such Preferred Share is then convertible pursuant to
Article 4 of the Certificate of Designation.
 
(ii) Single Closing.  All Common Shares and Preferred Shares to be Transferred
by the Selling Shareholder and the Preferred Shareholder(s) with respect to a
single Notice of Sale and any related Election Notice shall be Transferred to
the Purchaser in a single closing on the terms and conditions described in such
Notice of Sale.  The Company agrees not to register any Transfer of Common
Shares by the Selling Shareholder to which the Preferred Shareholder’s co-sale
right apply unless the Selling Shareholder is in full compliance with the
applicable provisions of this Agreement.
 
(e) Exempt Transfers.  The right of first refusal and co-sale right of the
Preferred Shareholders shall not apply to (i) any sale by the Selling
Shareholder of Common Shares in a Qualified Public Offering or (ii) any Transfer
among the Shareholders pursuant to the Earn-in Agreement (in either case, an
“Exempt Transfer”).
 
(f) Right to Transfer. To the extent the Preferred Shareholders do not elect to
purchase, or to participate in the sale of, the Offered Shares subject to the
Notice of Sale, the Selling Shareholder shall have the right, for ninety (90)
days following delivery of the First Refusal Expiration Notice, undertake a
transfer of the Offered Shares covered by the Notice of Sale and not elected to
be purchased by the Preferred Shareholders, which in each case shall be on the
same terms and conditions as those described in the Notice of Sale.  Any
proposed transfer on terms and conditions which are materially different from
those described in the Notice of Sale, as well as any subsequent proposed
transfer of any Common Shares held directly or indirectly by the Selling
Shareholder (including without limitation any Common Shares held directly or
indirectly by the Selling Shareholder which are proposed to be sold to the
Purchaser in the event the Purchaser elects to purchase more than the Co-Sale
Offered Shares), shall again be subject to the right of first refusal and the
co-sale right of the Preferred Shareholders and shall require compliance by the
Selling Shareholder with the procedures described in Section 3.
 
 
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(g) Term.  The provisions under this Section 3 shall terminate upon the
occurrence a Qualified Public Offering.
 
(h) Assignment.  The rights of the Preferred Shareholders under Section 3 are
fully assignable in connection with a transfer of shares of the Company by the
Preferred Shareholders; provided, however, that no party may be assigned any of
the foregoing rights unless the Company is given written notice by such
Preferred Shareholder stating the name and address of the assignee and
identifying the securities of the Company as to which the rights in question are
being assigned; and provided further, that any such assignee shall receive such
assigned rights subject to all the terms and conditions of this Agreement.
 
Section 4. Non-competition
 
(a) In consideration of the Investor entering into the transactions contemplated
by the Preferred Shares Purchase Agreement and performing its obligations
thereunder, each Shareholder (each a “Covenanter”) severally but not jointly
hereby agrees that:
 
(i) During the period from the Service Termination Date to and including the
second anniversary of the Service Termination Date (the “Non-compete Period”),
each Covenanter shall not, and shall procure that each of his or her Affiliates
do not, directly or indirectly, own any interest in, manage, control,
participate in (whether as an owner, operator, manager, consultant, officer,
director, employee, investor, agent, representative or otherwise), consult with,
render services (including through outsourcing, or as an intermediary or agent
or otherwise) for or otherwise engage in or provide assistance to any Competing
Business in the PRC, Hong Kong and any other country in which the Company or its
Subsidiaries engage in business; provided, however, nothing in this Section 4
shall prohibit such Covenanter from being passive owners of not more than one
percent (1%) of the outstanding shares of any corporation which is publicly
traded, so long as such Covenanter has no active participation in the business
of such corporation.
 
(ii) During the Non-compete Period, such Covenanter shall not, directly or
indirectly through another entity, (A) induce or attempt to induce any employee
of the Company or any of its Subsidiaries to leave the employ of the Company or
any of its Subsidiaries, or in any way interfere with the relationship between
the Company or any of its Subsidiaries and any of its employees, (B) hire any
person who was an employee of the Company or any of its Subsidiaries within one
hundred and eighty (180) days prior to the time such employee is hired by such
covenanter or such entity, (C) induce or attempt to induce any customer,
supplier, licensee, licensor, franchisee, lessor or other business relation of
the Company or any of its Subsidiaries to cease or refrain from doing business
with the Company or any of its Subsidiaries, or in any way interfere with the
relationship between any such customer, supplier, licensee, licensor, franchisee
or other business relation and the Company or any of its Subsidiaries
(including, without limitation, making any negative statements or communications
about the Company or any of its Subsidiaries) or (D) directly or indirectly
acquire or attempt to acquire an interest in any Competing Business or any
business with which the Company or any of its Subsidiaries has entertained
discussions or has requested and received information relating to the
acquisition of such business by the Company or any of its Subsidiaries
(regardless of whether such business is a Competing Business); provided that
none of the foregoing shall apply with respect to or limit any Covenanter in the
performance of his or her duties as an executive or employee of the Company or
any Subsidiary thereof.
 
 
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(b) The Investor and each of the Covenanters agree that the covenants set forth
in this Section 4 are reasonable with respect to period, geographical area and
scope.  Notwithstanding anything in this Section 4 to the contrary, if at any
time, in any arbitral proceeding, any of the restrictions stated in this Section
4 are found pursuant to Section 7(f) to be unreasonable or otherwise
unenforceable under circumstances then existing, each Covenanter agrees that the
period, scope and/or geographical area, as the case may be, shall be reduced to
the extent necessary to enable the arbitral tribunal to enforce the restrictions
to the extent such provisions are allowable under Law, giving effect to the
agreement and intent of the Parties that the restrictions contained herein shall
be effective to the fullest extent permissible.  Each of the Covenanters
acknowledges and agrees that monetary damages may not be an adequate remedy for
any breach or threatened breach of the provisions of this Section 4 and that, in
such event, the Investor and/or its respective successors or assigns shall, in
addition to any other rights and remedies existing in their favor, be entitled
to specific performance, injunctive and/or other relief from any arbitral
tribunal of competent jurisdiction in order to enforce or prevent any violations
of the provisions of this Section 4 (including the extension of the Non-compete
Period applicable to such Covenanter by a period equal to the length of the
arbitral proceedings necessary to stop such violation); provided that such
Covenanter is found to have been in violation of the provisions of this Section
4.  Any injunction shall be available without the posting of any bond or other
security.  In the event of an alleged breach or violation by any Covenanter of
any of the provisions of this Section 4, the Non-compete Period will be tolled
for such Covenanter until such alleged breach or violation is resolved if such
Covenanter is found to have not violated the provisions of this Section 4, then
the Non-compete Period will not be deemed to have been tolled.  Each Covenanter
agrees that the restrictions contained in this Section 4 are reasonable in all
respects and are necessary to protect the goodwill of the business of the
Company and its Subsidiaries and are an integral part of the Purchase Price to
be paid under the Preferred Shares Purchase Agreement.
 
Section 5. Tax Matters. Each Shareholder shall pay all Tax required to be paid
by it or cause the Company and each of its Subsidiaries to withhold and pay all
Taxes required to be withheld in connection with such Shareholder’s tax
liability so that any failure to pay or withhold would not reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect,
and each of the Shareholders agree to, several and not jointly, indemnify the
Company against any losses arising out of its failure to pay such Taxes.
 
Section 6. Shareholders’ Representative
 
(a) Mr. Hui Tian Tang shall be constituted and appointed as agent for and on
behalf of all Shareholders as their attorney-in-fact and representative, (i) to
do any and all things and to execute any and all documents or other papers, in
each such Shareholder’s name, place and stead, in any way in which each such
Shareholder could do if personally present, in connection with this Agreement
and the applicable Transaction Documents and the transactions contemplated
hereby and thereby, and (ii) to amend, cancel or extend, or waive the terms of,
this Agreement and any of the Transaction Documents in a manner that would not
disproportionately affect such Shareholder as compared to the other
Shareholders, The power of attorney granted hereby is coupled with an interest.
The Shareholders shall be bound by all actions taken and documents executed by
the Shareholders’ Representative pursuant hereto, and the Investor shall be
entitled to rely on any action or decision of the Shareholders’ Representative.
 
 
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(b) The Shareholders’ Representative may, by giving not less than thirty (30)
days written notice to the other Parties, resign as the Shareholders’
Representative under this Agreement. In the event that the Shareholders’
Representative becomes unable or unwilling to continue in his capacity as the
Shareholders’ Representative under this Agreement, the Shareholders shall (by
majority-in-interest) promptly appoint a successor Shareholders’ Representative
by written notice to the Investor, and the appointment of such successor
Shareholders’ Representative shall become effective only upon the Investor’s
receipt of such written notice.  Each Shareholder hereby agrees that any
successor Shareholders’ Representative so selected by such Shareholder shall be
entitled to act as such under this Agreement on behalf of such Shareholder.  All
references herein to the Shareholders’ Representative shall include any such
successor Shareholders’ Representative.  Except as otherwise expressly set forth
herein, each Shareholder hereby consents to the taking by the Shareholders’
Representative of any and all actions and the making of any decisions required
or permitted to be taken by such Shareholders under this Agreement.  The
Shareholders shall be bound by all actions taken by the Shareholders’
Representative in his capacity as the Shareholders’ Representative.
 
(c) In performing the functions specified in this Agreement, the Shareholders’
Representative shall not be liable to any Shareholder in the absence of gross
negligence or willful misconduct on the part of the Shareholders’
Representative.  Each Shareholder shall severally and not jointly, indemnify and
hold harmless the Shareholders’ Representative from and against any loss,
liability or expense incurred without gross negligence or willful misconduct on
the part of the Shareholders’ Representative and arising out of or in connection
with the acceptance or administration of his duties hereunder, including any
out-of-pocket costs and expenses and legal fees and other legal costs reasonably
incurred by the Shareholders’ Representative.
 
Section 7. Miscellaneous.
 
(a) Notices.  All notices, requests, demands and other communications to any
Party or given under this Agreement shall be in writing and delivered
personally, by overnight delivery or courier, by e-mail, by registered mail or
by telecopier (with confirmation received) to the Parties at the address, the
e-mail address or telecopy number specified for such Parties below (or at such
other address, e-mail address or telecopy number as may be specified by a Party
in writing given at least five Business Days prior thereto).  All notices,
requests, demands and other communications shall be deemed delivered when
actually received:
 
 
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(i) If to the Company, at:
 
China BCT Pharmacy Group, Inc.
No 102, Chengzhan Road
Liuzhou City, Guangxi Province, PRC
China
Phone:  +86 772 3638318
Fax:      +86 772 3611763
Attn:      Mr. Hui Tian Tang, Chairman & CEO
e-mail:   huitian.tang@china-bct.com

with a copy by fax or messenger or courier or e-mail to:
 
McKenna Long & Aldridge LLP
303 Peachtree Street, NE, Suite 5300
Atlanta, GA  30308  USA
Phone:  (404) 527-4990
Fax:      (404) 527-4198 and (404) 527-8890
Attn:      Mr. Thomas Wardell, Esq.
e-mail:   twardell@mckennalong.com

 
(ii) If to the Shareholders, to the Shareholders’ Representative at:
 
Mr. Hui Tian Tang
China BCT Pharmacy Group, Inc.
No 102, Chengzhan Road
Liuzhou City, Guangxi Province, PRC
Phone:  +86 772 3638318
Fax:      +86 772 3611763
e-mail:   huitian.tang@china-bct.com

 
(iii) If to the Investor, at:
 
Milestone Longcheng Limited
318 Hu Nan Road
Shanghai 200031, PRC
Fax: (8621) 6437-9590
Attn: Ms. Yunli Lou
e-mail: yunli@mcmchina.com

With a copy by fax or messenger or courier or e-mail to:

Latham & Watkins
41St Floor, One Exchange Square
8 Connaught Place, Central
Hong Kong
Fax: +852.2522.7006
Attn: Mr. David T. Zhang, Esq.
e-mail:  david.zhang@lw.com
 
 
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(iv)                 If to a Preferred Shareholder (other than the Investor), at
such holder's last address as shown on the stock ledger of the Company.

(b) Counterparts.  This Agreement may be executed simultaneously in one or more
counterparts, and by different Parties hereto in separate counterparts, each of
which when executed shall be deemed an original, but all of which taken together
shall constitute one and the same instrument.
 
(c) Modification or Amendment of Agreement.  This Agreement may not be modified
or amended except by an instrument in writing signed by all of the Parties.
 
(d) Successors and Assigns.  This Agreement shall be binding upon and inures to
the benefit of and is enforceable by the respective successors and permitted
assigns of the Parties hereto.
 
(e) Governing Law.  This Agreement, and all claims, disputes and matters arising
hereunder or thereunder or related hereto or thereto, shall be governed by, and
construed in accordance with, the laws of the state of New York applicable to
contracts executed in and to be performed entirely within that state, without
reference to conflicts of laws provisions.
 
(f) Arbitration. Any dispute, controversy, claim or difference of any kind
whatsoever arising out of, relating to or in connection with this Agreement, or
the breach, termination or invalidity hereof (including the validity, scope and
enforceability of this arbitration provision) (the “Dispute”) shall first be
attempted to be resolved through discussions and consultations between the
parties in good faith for a period of thirty (30) days after written notice has
been sent by any Party to the other Party pursuant to the notice provisions set
out in Section 7 (the “Consultation Period”).
 
(i) If the Dispute remains unresolved upon expiration of the Consultation
Period, any Party may in its sole discretion elect to submit the matter to
arbitration with notice to any other Party or Parties (the “Arbitration
Notice”). The arbitration shall be conducted in Hong Kong and shall be
administered by the Hong Kong International Arbitration Centre (the “HKIAC”) in
accordance with the HKIAC Administered Arbitration Rules in force at the time of
the commencement of the arbitration. However, if such rules are in conflict with
the provisions of this Section 7(f), the provisions of this Section 7(f) shall
prevail.
 
(ii) The language of the arbitration proceedings and written decisions or
correspondence shall be in English.
 
(iii) The number of arbitrators shall be three. Each opposing party to a dispute
shall be entitled to appoint one arbitrator, and the third arbitrator shall be
jointly appointed by the disputing parties or, failing such agreement by thirty
(30) days after the appointment by each party of its arbitrator, the HKIAC shall
appoint the third arbitrator in accordance with the HKIAC Administered
Arbitration Rules in force at the time of the commencement of the arbitration.
 
 
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(iv) Any party to the Dispute shall be entitled to seek preliminary injunctive
relief, if possible, from any court of competent jurisdiction pending the
constitution of the arbitration tribunal.
 
(v) The arbitrators shall decide any Dispute submitted by the parties to the
arbitration strictly in accordance with the substantive laws of New York and
shall not apply any other substantive law.
 
(vi) The award of the arbitration tribunal shall be final and binding upon the
disputing parties, and the prevailing party or parties may apply to a court of
competent jurisdiction for enforcement of such award.
 
(g) Integration.  This Agreement, together with the Preferred Shares Purchase
Agreement and the other Transaction Documents, contains and constitutes the
entire agreement of the Parties with respect to the subject matter hereof and
supersedes all prior negotiations, agreements and understandings, whether
written or oral, of the Parties hereto.
 
(h) Severability.  If any term or other provision of this Agreement is invalid,
illegal or incapable of being enforced by any rule of law, or public policy, all
other conditions and provisions of this Agreement shall nevertheless remain in
full force and effect so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any manner adverse to any
Party.  Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the Parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
Parties as closely as possible in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
 
(i) Ambiguities.  This Agreement was negotiated between legal counsel for the
Parties and any ambiguity in this Agreement shall not be construed against the
Party who drafted this Agreement.
 
(j) No Third-Party Rights.  This Agreement is not intended, and shall not be
construed, to create any rights in any parties other than the Company, the
Shareholders and the Investor, and no Person may assert any rights as
third-party beneficiary hereunder.
 
(k) No Waiver; Remedies.  No failure or delay by any Party in exercising any
right, power or privilege under this Agreement shall operate as a waiver of the
right, power or privilege.  A single or partial exercise of any right, power or
privilege shall not preclude any other or further exercise of the right, power
or privilege or the exercise of any other right, power or privilege.
 
[SIGNATURE PAGE FOLLOWS]
 
 
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed and
delivered by their duly authorized representatives as of the day and year first
written above.
 
COMPANY:
CHINA BCT PHARMACY GROUP, INC.
 
 
By: /S/ TIAN HUI TANG                              
Name: TIAN HUI TANG
Title: CHIEF EXECUTIVE OFFICER
 
 
 
 
 

 
 
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed and
delivered by their duly authorized representatives as of the day and year first
written above.
 
SHAREHOLDERS:
 
XIAO YAN ZHANG
 
/S/ XIAO YAN ZHANG                              
 
 
HUITIAN TANG
 
/S/ HUITIAN TANG                                    
 
 
JIANG YOU RU
 
/S/ JIANG YOU RU                                      
 
 
LIU CHUN LIN
 
/S/ LIU CHUN LIN                                       
 
 
WEI WEN DE
 
/S/ WEI WEN DE                                         
 
 
WANG BANG FU
 
/S/ WANG BANG FU                                  
 
 
ZHAO MING AN
 
/S/ ZHAO MING AN                                   
 
 
 

 
 
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed and
delivered by their duly authorized representatives as of the day and year first
written above.
 
SHAREHOLDERS:
 
ZHANG QING QIU
 
/S/ ZHANG QING QIU                                 
 
 
YANG XIAO JIAN
 
/S/ YANG XIAO JIAN                                 
 
 
MENG YUAN GANG
 
/S/ MENG YUAN GANG                            
 
 
JIANG QI FENG
 
/S/ JIANG QI FENG                                     
 
 
HE WEN HENG
 
/S/ HE WEN HENG                                      
 
 
LIU GONG CHUN
 
/S/ LIU GONG CHUN                                  
 
 
JIA JUN WEN
 
/S/ JIA JUN WEN                                        
 
 

 
 
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed and
delivered by their duly authorized representatives as of the day and year first
written above.
 
SHAREHOLDERS:
 
TAN YU JING
 
/S/ TAN YU JING                                         
 
 
LI JING HUA
 
/S/ LI JING HUA                                           
 
 
YE YUAN JIAN
 
/S/ YE YUAN JIAN                                     
 
 
 

 
 
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed and
delivered by their duly authorized representatives as of the day and year first
written above.

INVESTOR:
MILESTONE LONGCHENG LIMITED
 
 
By: /S/ MILESTONE LONGCHENG LIMITED      
Name: MILESTONE LONGCHENG LIMITED
Title:
 
 
 
 
 

 
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed and
delivered by their duly authorized representatives as of the day and year first
written above.

SHAREHOLDERS’ REPRESENTATIVE:
Mr. Tian Hui Tang
(in his capacity as the Shareholders’ Representive)
 
 
 
/s/ Tian Hui Tang                                         
 
 
 
 
 
 

 
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SCHEDULE 1
 
LIST OF SHAREHOLDERS
 

 
Name
 
PRC ID/Passport number
 
Xiao Yang Zhang
     
Hui Tian Tang（唐恢天）
     
Jiang You Ru（江有如）
     
Liu Chun Lin（刘春林）
     
Wei Wen De（韦文德）
     
Wang Bang Fu（王邦福）
     
Zhao Ming An（赵明安）
     
Zhang Qing Qiu（张庆秋）
 
 
 
Yang Xiao Jian（杨晓俭）
 
 
 
Meng Yuan Gang（蒙源钢）
 
 
 
Jiang Qi Feng（蒋旗峰）
 
 
 
He Wen Heng（何文亨）
     
Liu Gong Chun（刘功纯）
 
 
 
Jia Jun Wen（贾俊文）
 
 
 
Tan Yu Jing（谭钰菁）
 
 
 
Li Jing Hua（李景华）
 
 
 
Ye Yuan Jian（叶远箭）
 
 

 
 
 
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