exv4w1



 





Exhibit 4.1




Subscription Agreement




Beijing Med-Pharm Corporation

600 W. Germantown Pike

Suite 400

Plymouth Meeting, Pennsylvania 19462




Ladies and Gentlemen:




The undersigned (the “Investor”) hereby confirms and agrees with you as follows:





	1.	 	The subscription terms set forth herein (this “Subscription Agreement”) are made as of the
date set forth below between Beijing Med-Pharm Corporation, a Delaware corporation (the
“Company”), and the Investor.
	 
	2.	 	As of the Closing (as defined below) and subject to the terms and conditions hereof, the
Company and the Investor agree that the Investor will purchase from the Company and the
Company will issue and sell to the Investor a 10.0% Senior Secured Promissory Note
substantially in the form of Exhibit A hereto in the aggregate principal amount (the “Note”,
and, together with other notes of like tenor offered to other investors in connection
herewith, the “Notes”) as is set forth on the signature page hereto (the “Signature Page”),
together with detachable 18-month Class A warrants substantially in the form of Exhibit B-1
hereto (the “Class A Warrants”) and detachable five-year Class B warrants substantially in the
form of Exhibit B-2 hereto, (the “Class B Warrants” and, together with the Class A Warrants,
the “Warrants;” and the Warrants, together with the Note, the “Securities”) to purchase in the
aggregate 45,112 shares (the “Shares”) of the Company’s common stock, par value $0.001 per
share (the “Common Stock”) for every $1,000,000 in principal amount of Notes issued, which
Warrants shall be immediately exercisable. The Investor acknowledges that the offering is not
a firm commitment underwriting and that the Closing will not occur unless the Company has
received Subscription Agreements for Notes in the aggregate principal amount of at least
$15,000,000.
	 
	3.	 	The completion of the purchase and sale of the Securities shall occur at a closing (the
“Closing”) which, in accordance with Rule 15c6-1 promulgated under the Securities Exchange Act
of 1934, as amended (the “Exchange Act”), is expected to occur on or about November 1, 2007.
At the Closing, (a) the Company shall deliver by overnight courier to the Investor the Note
and Warrants being purchased by the Investor, (b) pursuant to the terms of the Pledge
Agreement (as defined below), the Company will have caused to be delivered the Pledged Stock
(as defined below) to the Escrow Agent (as defined below) by overnight courier and (c) the
aggregate purchase price for the Securities being purchased by the Investor, less certain fees
and expenses to be paid on behalf of the Company and, unless such amounts have already been
funded in escrow by the Company, amounts to be held in escrow in respect of future interest
payments under the Note, will be delivered by or on behalf of the Investor to the Company.






	 	a.	 	Delivery of Funds. No later than one (1) business day after the execution of
this Agreement by the Investor and the Company, the Investor shall remit by wire
transfer the amount of funds equal to the aggregate purchase price for the Securities
being purchased by the Investor, equal to the sum of the aggregate principal amount of
the Notes being purchased plus an amount equal to the number of accompanying Warrants
being purchased multiplied by $0.125, to the following account (the “Escrow Account”)
designated by the Company and the Philadelphia Brokerage Corporation, as placement
agent (the “Placement Agent”) pursuant to the terms of that certain Escrow Agreement
(the “Escrow Agreement”) dated as of October 29, 2007 by and among the Company, the
Placement Agent and Bryn Mawr Trust Company (the “Escrow Agent”):




Bryn Mawr Trust Company

Bryn Mawr PA

ABA# 031908485

Cr A/C #069-6964 Trust Funds

F/C 761141000

N/O Beijing Med Pharm

Attn: Anrita McGinn





 









 









	 	 	 	Such funds shall be held in the Escrow Account until the Closing and delivered by
the Escrow Agent on behalf of the Investors to the Company upon the satisfaction, in
the sole judgment of the Placement Agent, of the Company closing conditions set
forth herein. The Placement Agent shall have no rights in or to any of the escrowed
funds, unless the Placement Agent and the Escrow Agent are notified in writing by
the Company in connection with the Closing that a portion of the escrowed funds
shall be applied to the Placement Fee (as defined below). The Company and the
Investor agree to indemnify and hold the Escrow Agent harmless from and against any
and all losses, costs, damages, expenses and claims (including, without limitation,
court costs and reasonable attorneys fees) (“Losses”) arising under this Section 3
or otherwise with respect to the funds held in escrow pursuant hereto or arising
under the Escrow Agreement, unless such Losses resulted directly from the willful
misconduct or gross negligence of the Escrow Agent.
	 
	 	b.	 	Delivery of Notes and Warrants. On the day of the Closing, the Company shall
deliver the Notes and the Warrants to the Investor by overnight courier to the address
designated by the Investor on the signature page of this Subscription Agreement.






	4.	 	The offering and sale of the Securities are being made pursuant to the Term Sheet (as defined
below). The Investor acknowledges that the Company intends to enter into subscriptions, which
the Company represents will be in substantially the same form as this Subscription Agreement,
with certain other investors and intends to offer and sell (the “Offering”) Notes (with
accompanying Warrants) with a minimum aggregate offering price of up to $15,000,000 and a
maximum aggregate offering price of up to $23,000,000 pursuant to the Term Sheet. The Company
may accept or reject this Subscription Agreement or any one or more other subscriptions with
other investors in its sole discretion.
	 
	5.	 	The Company has entered into an engagement letter, dated October 18, 2007, as amended as of
October 29, 2007 (the “Engagement Letter”), with Philadelphia Brokerage Corporation (the
“Placement Agent”), which will act as the Company’s Placement Agent with respect to the
Offering and receive a fee (the “Placement Fee”) in connection with the sale of the Securities
equal to four and one-half percent (4.5%) of the aggregate offering price of the Securities,
plus the reimbursement of various expenses not to exceed $55,000 in the aggregate.
	 
	6.	 	At the Closing, the Company will enter into a Pledge Agreement substantially in the form of
Exhibit D attached hereto (the “Pledge Agreement”) with Les Baledge, as agent for the
Investors thereunder (the “Agent”), and all the Investors. Pursuant to the Pledge Agreement,
a copy of which is attached hereto as Exhibit C, the Company will pledge as security for its
obligations under the Notes 49% of the issued and outstanding shares of capital stock or
equity securities of Hong Kong Fly International Health Care Limited, a Hong Kong corporation
(the “Pledged Stock”).
	 
	7.	 	The obligations of the Company to complete the transactions contemplated by this Subscription
Agreement shall be subject to the satisfaction of the following conditions:






	 	a.	 	the acceptance by the Company of this Subscription Agreement (as may be
indicated by the Company’s execution of the Signature Page hereto);
	 
	 	b.	 	the receipt by the Company of the purchase price for the Securities being
purchased hereunder as set forth on the Signature Page;
	 
	 	c.	 	the execution and delivery by the Investor of the signature page to the Pledge
Agreement; and
	 
	 	d.	 	the accuracy of the representations and warranties made by the Investor and the
fulfillment of those undertakings of the Investor to be fulfilled prior to the Closing
Date.




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	8.	 	The Investor’s obligation to purchase the Securities shall be subject to the satisfaction of
the following conditions:






	 	a.	 	the Placement Agent not having terminated the Engagement Letter;
	 
	 	b.	 	no action shall have been taken and no statute, rule, regulation or order shall
have been enacted, adopted or issued by any governmental agency or body which would, as
of the Closing Date, prevent the issuance or sale of the Securities; and no injunction,
restraining order or order of any other nature by any federal or state court of
competent jurisdiction shall have been issued as of the Closing Date which would
prevent the issuance or sale of the Securities;
	 
	 	c.	 	subsequent to June 30, 2007, (i) neither the Company nor any of Beijing
Medpharm Co. Ltd., Beijing Wanwei Pharmaceutical Co., Ltd. and Beijing Med-Pharm Hong
Kong Company Ltd. (each, a “Subsidiary” and collectively, the “Subsidiaries”) has
sustained any material loss or interference with its business from fire, explosion,
flood or other calamity, whether or not covered by insurance, or from any labor dispute
or court or governmental action, order or decree, otherwise than as set forth in the
Company’s periodic reports and other information filed with the Securities and Exchange
Commission, (ii) there has not been any change in the capital stock (other than a
change in the number of outstanding shares of Common Stock due to the issuance of
shares upon the exercise of outstanding options or warrants or the conversion of
convertible indebtedness), or material change in the short-term debt or long-term debt
of the Company or any Subsidiary (other than upon conversion of convertible
indebtedness) or any material adverse change in the business, affairs, operations,
properties, financial condition or results of operations of the Company and its
Subsidiaries taken as a whole, otherwise than as set forth in the Company’s periodic
reports and other information filed with the Securities and Exchange Commission;
	 
	 	d.	 	each of the representations and warranties of the Company contained in Exhibit
D attached hereto shall be true and correct when made and on and as of the Closing
Date, as if made on such date (except that those representations and warranties that
address matters only as of a particular date shall remain true and correct as of such
date), and all covenants and agreements herein contained to be performed on the part of
the Company and all conditions herein contained to be fulfilled or complied with by the
Company at or prior to the Closing Date shall have been duly performed, fulfilled or
complied with;
	 
	 	e.	 	the Placement Agent shall have received from Morgan, Lewis & Bockius LLP,
counsel to the Company, such counsel’s written opinion addressed to the Placement Agent
and the Investor with respect to such matters as is customary in transactions such as
the offering and reasonably satisfactory to the Placement Agent;
	 
	 	f.	 	the Placement Agent shall have received on the Closing Date a certificate,
addressed to the Placement Agent and dated the Closing Date, of the chief executive or
chief operating officer and the chief financial officer or chief accounting officer of
the Company to the effect that:






	 	(i)	 	each of the representations, warranties and agreements of the
Company in this Agreement were true and correct in all material respects when
originally made and are true and correct in all material respects as of the
Closing Date; and the Company has complied in all material respects with all
agreements and satisfied all the conditions on its part required under this
Agreement to be performed or satisfied at or prior to the Closing Date; and
	 
	 	(ii)	 	subsequent to June 30, 2007, (A) neither the Company nor any of
its Subsidiaries has sustained any material loss or interference with its
business from fire, explosion, flood or other calamity, whether or not covered
by insurance, or from any labor dispute or court or governmental action, order
or decree, otherwise than as set forth in the Company’s periodic reports and
other information filed with the Securities and Exchange Commission, (B) there
has been no material change in the financial position or results of




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	 		 	operation of the Company, otherwise than as set forth in the Company’s
periodic reports and other information filed with the Securities and
Exchange Commission;






	 	g.	 	on the Closing Date, the Company shall have furnished to the Placement Agent a
Secretary’s Certificate of the Company;
	 
	 	h.	 	the Company shall have entered into the Subscription Agreements with the
Investor and such other investors purchasing Notes and Warrants in the Offering in an
aggregate minimum principal amount of Notes of at least $15,000,000, and such
agreements shall be in full force and effect on the Closing Date;
	 
	 	i.	 	the Company shall have entered into the Escrow Agreement, and such agreement
shall be in full force and effect on the Closing Date; and
	 
	 	j.	 	prior to the Closing Date, the Company shall have furnished to the Placement
Agent such further information, certificates or documents as the Placement Agent shall
have reasonably requested.






	 	 	All opinions, letters, evidence and certificates mentioned above or elsewhere in this
Agreement shall be deemed to be in compliance with the provisions hereof only if they are in
form and substance reasonably satisfactory to counsel for the Placement Agent.
	 
	9.	 	The Investor hereby makes the following representations, warranties and covenants to the
Company:






	 	a.	 	The Investor represents that (i) it has been provided with a copy of the term
sheet with respect to the material terms of the Offering (the “Term Sheet”) and the
Company has made available to the Investor the Company’s periodic reports and other
information filed with the Securities and Exchange Commission, prior to or in
connection with its receipt of this Subscription Agreement, (ii) it is knowledgeable,
sophisticated and experienced in making, and is qualified to make, decisions with
respect to investments in securities representing an investment decision like that
involved in the purchase of the Securities, and (iii) it does not have any agreement or
understanding, directly or indirectly, with any person or entity to distribute any of
the Securities.
	 
	 	b.	 	The Investor has the requisite power and authority to enter into this
Subscription Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Subscription Agreement by the Investor and the
consummation by it of the transactions contemplated hereunder have been duly authorized
by all necessary action on the part of the Investor. This Subscription Agreement has
been executed by the Investor and, when delivered in accordance with the terms hereof,
will constitute a valid and binding obligation of the Investor enforceable against the
Investor in accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors’ and contracting parties’ rights generally and except as enforceability may
be subject to general principles of equity (regardless of whether such enforceability
is considered in a proceeding in equity or at law).
	 
	 	c.	 	The Investor understands that nothing in this Subscription Agreement or any
other materials presented to the Investor in connection with the purchase and sale of
the Securities constitutes legal, tax or investment advice. The Investor has consulted
such legal, tax and investment advisors as it, in its sole discretion, has deemed
necessary or appropriate in connection with its purchase of Securities.
	 
	 	d.	 	Neither the Investor nor any Person acting on behalf of, or pursuant to any
understanding with or based upon any information received from, the Investor has,
directly or indirectly, engaged in any transactions in the securities of the Company
(including, without limitation, any Short Sales involving the Company’s securities)
since the time that the Investor was first contacted by the Placement Agent or the
Company with respect to the transactions contemplated hereby. “Short




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	 	 	 	Sales” include, without limitation, all “short sales” as defined in Rule 200
promulgated under Regulation SHO under the Exchange Act, whether or not against the
box, and all types of direct and indirect stock pledges, forward sale contracts,
options, puts, calls, short sales, swaps, “put equivalent positions” (as defined in
Rule 16a-1(h) under the Exchange Act) and similar arrangements (including on a total
return basis), and sales and other transactions through non-U.S. broker dealers or
foreign regulated brokers. The Investor covenants that neither it, nor any Person
acting on behalf of, or pursuant to any understanding with or based upon any
information received from, the Investor will engage in any transactions in the
securities of the Company (including Short Sales) prior to the time that the
transactions contemplated by this Subscription Agreement are publicly disclosed.
	 
	 	e.	 	The Investor represents that, except as set forth below, (i) it has had no
position, office or other material relationship within the past three years with the
Company or persons known to it to be affiliates of the Company, (ii) it is not, and it
has no direct or indirect affiliation or association with, any NASD member or an
Associated Person (as such term is defined under the NASD Membership and Registration
Rules Section 1011) as of the date the Investor executes this Subscription Agreement,
and (iii) neither it nor any group of investors (as identified in a public filing made
with the Commission) of which it is a member, acquired, or obtained the right to
acquire, 20% or more of the Common Stock (or securities convertible or exercisable for
Common Stock) or the voting power of the Company on a post-transaction basis.
Exceptions:






	 	 	 	(If no exceptions, write “none.” If left blank, response will be deemed to be “none.”)
	 
	 	f.	 	The Investor, if outside the United States, will comply with all applicable
laws and regulations in each foreign jurisdiction in which it purchases, offers, sells
or delivers Securities or has in its possession or distributes any offering material,
in all cases at its own expense.






	10.	 	Covenants. The Company covenants and agrees with the Placement Agent as follows:






	 	a.	 	The Company will promptly take or cause to be taken, from time to time, such
actions as the Placement Agent may reasonably request to qualify the Securities for
offering and sale under the state securities, or blue sky, laws of such states or other
jurisdictions as the Placement Agent may reasonably request and to maintain such
qualifications in effect so long as the Placement Agent may request for the
distribution of the Securities, provided, that in no event shall the Company be
obligated to qualify as a foreign corporation in any jurisdiction in which it is not so
qualified or to file a general consent to service of process in any jurisdiction or
subject itself to taxation as doing business in any jurisdiction.
	 
	 	b.	 	The Company will apply the net proceeds from the sale of the Securities in the
manner set forth in the Term Sheet under the heading “Use of Proceeds.”
	 
	 	c.	 	Prior to 9:30 a.m. Philadelphia, Pennsylvania time on the business day
immediately subsequent to the Closing Date, the Company shall issue a press release
(the “Press Release”) reasonably acceptable to the Placement Agent disclosing the
closing of the transaction contemplated hereby.






	11.	 	Registration of the Shares; Compliance with the Securities Act.






	 	a.	 	The Company shall:






	 	(i)	 	subject to receipt in a timely manner of necessary information
from the Investors (after prompt request from the Company to the Investors to
provide such information),




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	 	 	 	including the information required to be provided
pursuant to Section 4(q) of this Agreement, prepare and file with the
Securities and Exchange Commission (“SEC”), within 120 days after the Closing
Date, a registration statement on Form S-3 (the “Registration Statement”) or
such other form that is then available to the Company to enable the resale of
the Shares by the Investors from time to time in accordance with the plan of
distribution to be described therein;
	 
	 	(ii)	 	subject to receipt of necessary information from the Investors
(after prompt request from the Company to the Investors to provide such
information), use its reasonable commercial efforts to cause the Registration
Statement to become effective as soon as practicable after filing and in any
event within ninety (90) days following the initial filing of the Registration
Statement;
	 
	 	(iii)	 	use its reasonable commercial efforts to prepare and file with
the SEC such amendments and supplements to the Registration Statement and the
prospectus used in connection therewith as may be necessary to keep the
Registration Statement current, effective and free from any material
misstatement or omission to state a material fact for a period (the
“Registration Period”) not exceeding, with respect to the Shares, the earlier
of: (i) the date that is two years after the Closing Date; or (ii) such time as
all Shares issuable pursuant to the Warrants have been sold pursuant to a
registration statement;
	 
	 	(iv)	 	furnish to the Investor with respect to the Shares registered
under the Registration Statement such number of copies of the Registration
Statement and prospectuses in conformity with the requirements of the
Securities Act (which may be provided electronically) as the Investor may
reasonably request in order to facilitate the public sale or other disposition
of all or any of the Shares by the Investor; provided, however; that the
obligation of the Company to deliver copies of prospectuses to the Investor
shall be subject to the receipt by the Company of reasonable assurances from
the Investor that the Investor will comply with the applicable provisions of
the Securities Act and of such other securities or blue sky laws as may be
applicable in connection with any use of such prospectuses;
	 
	 	(v)	 	bear all expenses in connection with the procedures in
paragraph (i) through (iv) of this Section 11 (other than underwriting
discounts or commissions, brokers’ fees and similar selling expenses, and any
other fees or expenses incurred by the Investor, including attorney fees of the
Investor) and the registration of the Shares pursuant to the Registration
Statement; and
	 
	 	(vi)	 	advise the Investor, promptly (which advice may be provided
electronically) after it shall receive notice or obtain knowledge of the
issuance of any stop order by the SEC delaying or suspending the effectiveness
of the Registration Statement or of the initiation or threat of any proceeding
for that purpose, and it will promptly use its reasonable commercial efforts to
prevent the issuance of any stop order or to obtain its withdrawal as soon as
practicable if such stop order should be issued.






	 	b.	 	The Company understands that the Investor disclaims being an underwriter, but
if the SEC deems the Investor to be an underwriter the Company shall not be relieved of
any obligations it has hereunder; provided, however, that if the Company receives
notification from the SEC that the Investor is deemed an underwriter, then the period
by which the Company is obligated to submit an acceleration request to the SEC shall be
extended to the earlier of (i) the 90th day after such SEC notification, or (ii) 120
days after the initial filing of the Registration Statement with the SEC. If required
by the rules and regulations promulgated by the SEC, the Company may disclose the names
of those Investors that may be deemed underwriters in the Registration Statement.





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	12.	 	Transfer of Shares After Registration; Suspension.






	 	a.	 	The Investor agrees that it will not effect any disposition of the Shares or
its right to obtain the Shares that would constitute a sale within the meaning of the
Securities Act except as contemplated in the Registration Statement or as otherwise
permitted by law, and in all cases in accordance with the procedures reasonably
requested by the Company to ensure compliance with the securities laws, and that it
will promptly notify the Company of any changes in the information set forth in the
Registration Statement regarding the Investor.
	 
	 	b.	 	Except in the event that paragraph (c) below applies, the Company shall: (i) if
deemed necessary by the Company, prepare and file from time to time with the SEC a
post-effective amendment to the Registration Statement or a supplement to the related
prospectus or a supplement or amendment to any document incorporated therein by
reference or file any other required document so that such Registration Statement will
not contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and so that, as thereafter delivered to purchasers of the Shares being sold
thereunder, such prospectus will not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made, not
misleading, (ii) provide the Investor copies (which may be provided electronically) of
any documents filed pursuant to Section 12(b)(i) as the Investor may reasonably
request, and (iii) inform the Investor that the Company has complied with its
obligations in Section 12(b)(i) (or that, if the Company has filed a post-effective
amendment to the Registration Statement that has not yet been declared effective, the
Company will notify the Investor to that effect, will use its reasonable commercial
efforts to secure the effectiveness of such post-effective amendment as promptly as
possible and will promptly notify the Investor when the amendment has become
effective).
	 
	 	c.	 	Subject to paragraph (d) below, in the event (i) of any request by the SEC or
any other federal or state governmental authority during the period of effectiveness of
the Registration Statement for amendments or supplements to a Registration Statement or
related prospectus or for additional information, (ii) of the issuance by the SEC or
any other federal or state governmental authority of any stop order suspending the
effectiveness of a Registration Statement or the initiation of any proceedings for that
purpose, (iii) of the receipt by the Company of any notification with respect to the
suspension of the qualification or exemption from qualification of any of the Shares
for sale in any jurisdiction or the initiation or threatening of any proceeding for
such purpose, or (iv) of any event or circumstance which, upon the advice of its
counsel, necessitates the making of any changes in the Registration Statement or
prospectus, or any document incorporated or deemed to be incorporated therein by
reference, so that, in the case of the Registration Statement, it will not contain any
untrue statement of a material fact or any omission to state a material fact required
to be stated therein or necessary to make the statements therein not misleading, and
that in the case of the prospectus, it will not contain any untrue statement of a
material fact or any omission to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances under which
they were made, not misleading; then the Company shall deliver (which delivery may
occur electronically) a certificate in writing to the Investor (the “Suspension
Notice”) to the effect of the foregoing and, upon receipt of such Suspension Notice,
the Investor will refrain from selling any Shares pursuant to the Registration
Statement (a “Suspension”) until the Investor’s receipt of copies (which may be
provided electronically) of a supplemented or amended prospectus prepared and filed by
the Company, or until it is advised in writing by the Company that the current
prospectus may be used, and has received copies of any additional or supplemental
filings that are incorporated or deemed incorporated by reference in any such
prospectus. In the event of any Suspension, the Company will use its reasonable
commercial efforts to cause the use of the prospectus so suspended to be resumed as
soon as reasonably practicable within twenty (20) business days after the delivery of a
Suspension Notice to the Investor. In addition to and without limiting any other
remedies (including, without limitation, at law or at equity) available to the
Investor, the Investor shall be entitled to specific performance in the event that the
Company fails to comply with the provisions of this Section 12(c).




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	 	d.	 	Provided that a Suspension is not then in effect, the Investor may sell Shares
under the Registration Statement, provided that it arranges for delivery of a current
prospectus to the transferee of such Shares and otherwise complies with applicable
federal and state securities laws in connection with such sale.
	 
	 	e.	 	In the event of a sale of Shares by the Investor pursuant to the Registration
Statement, the Investor shall deliver to the Company’s transfer agent such
documentation as reasonably required to effect such transfer.






	13.	 	Indemnification.






	 	a.	 	For the purpose of this Section 13:






	 	(i)	 	the term “Selling Stockholder” means the Investor and any
affiliate of such Investor;
	 
	 	(ii)	 	the term “Registration Statement” shall include the prospectus
in the form filed with the SEC pursuant to Rule 424(b) of the Securities Act or
filed as part of the Registration Statement at the time of effectiveness if no
Rule 424(b) filing is required, and any exhibit, supplement or amendment
included in or relating to such Registration Statement or prospectus; and
	 
	 	(iii)	 	the term “Untrue Statement” means any untrue statement or
alleged untrue statement, or any omission or alleged omission to state in the
Registration Statement a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.






	 	b.	 	The Company agrees to indemnify and hold harmless each Selling Stockholder from
and against any losses, claims, damages or liabilities to which such Selling
Stockholder may become subject (under the Securities Act or otherwise) insofar as such
losses, claims, damages or liabilities (or actions or proceedings in respect thereof)
arise out of, or are based upon: (i) any breach of the representations or warranties of
the Company contained herein or failure to comply with the covenants and agreements of
the Company contained herein, or (ii) any Untrue Statement, and the Company will
reimburse such Selling Stockholder for any reasonable legal or other out-of-pocket
expenses reasonably incurred in investigating, defending or preparing to defend any
such action, proceeding or claim, or preparing to defend any such action, proceeding or
claim, provided, however, that the Company shall not be liable in any such case to the
extent that such loss, claim, damage or liability arises out of, or is based upon, an
Untrue Statement made in reliance upon and in conformity with written information
furnished to the Company by or on behalf of such Selling Stockholder specifically for
use in preparation of the Registration Statement, as amended or supplemented from time
to time (including, without limitation, information set forth in this Subscription
Agreement), or the failure of such Selling Stockholder to comply with its covenants and
agreements contained in this Agreement. The Company shall reimburse each Selling
Stockholder for the indemnifiable amounts provided for herein on demand as such
expenses are incurred.
	 
	 	c.	 	The Investor agrees to indemnify and hold harmless the Company (and each
person, if any, who controls the Company within the meaning of Section 15 of the
Securities Act, each officer of the Company who signs the Registration Statement and
each director of the Company) from and against any losses, claims, damages or
liabilities to which the Company (or any such officer, director or controlling person)
may become subject (under the Securities Act or otherwise), insofar as such losses,
claims, damages or liabilities (or actions or proceedings in respect thereof) arise out
of, or are based upon (i) any failure by the Investor to comply with the covenants and
agreements contained in this Agreement, or (ii) any Untrue Statement if such Untrue
Statement was made in reliance upon and in conformity with written information
furnished by or on behalf of the Investor specifically for use in preparation of the
Registration Statement, as amended or supplemented from time to time (including,
without limitation, information set forth in this Subscription




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	 	 	 	Agreement), and the Investor will reimburse the Company (or such officer, director
or controlling person), as the case may be, for any legal or other out-of-pocket
expenses reasonably incurred in investigating, defending or preparing to defend any
such action, proceeding or claim. The Investor shall reimburse the Company or such
officer, director or controlling person, as the case may be, for the indemnifiable
amounts provided for herein on demand as such expenses are incurred.
Notwithstanding the foregoing, the Investor’s aggregate obligation to indemnify the
Company and such officers, directors and controlling persons shall be limited to the
net amount received by the Investor from the sale of the Shares less the amount of
any other claims, damages or liabilities paid by the Investor in connection with
such Investor’s sale of the Shares.
	 
	 	d.	 	Promptly after receipt by any indemnified person of a notice of a claim or the
beginning of any action in respect of which indemnity is to be sought against an
indemnifying person pursuant to this Section 13, such indemnified person shall notify
the indemnifying person in writing of such claim or of the commencement of such action,
but the omission to so notify the indemnifying person will not relieve it from any
liability which it may have to any indemnified person under this Section 13 (except to
the extent that such omission materially and adversely affects the indemnifying
person’s ability to defend such action) or from any liability otherwise than under this
Section 13. Subject to the provisions hereinafter stated, in case any such action
shall be brought against an indemnified person, the indemnifying person shall be
entitled to participate therein, and, to the extent that it shall elect by written
notice delivered to the indemnified person promptly after receiving the aforesaid
notice from such indemnified person, shall be entitled to assume the defense thereof,
with counsel reasonably satisfactory to such indemnified person. After notice from the
indemnifying person to such indemnified person of its election to assume the defense
thereof, such indemnifying person shall not be liable to such indemnified person for
any legal expenses subsequently incurred by such indemnified person in connection with
the defense thereof, provided, however, that if there exists or shall exist a conflict
of interest that would make it inappropriate, in the opinion of counsel to the
indemnified person, for the same counsel to represent both the indemnified person and
such indemnifying person or any affiliate or associate thereof, the indemnified person
shall be entitled to retain its own counsel at the expense of such indemnifying person;
provided, however, that no indemnifying person shall be responsible for the fees and
expenses of more than one separate counsel (together with appropriate local counsel)
for all indemnified parties. In no event shall any indemnifying person be liable in
respect of any amounts paid in settlement of any action unless the indemnifying person
shall have approved the terms of such settlement; provided that such consent shall not
be unreasonably withheld or delayed. No indemnifying person shall, without the prior
written consent of the indemnified person, effect any settlement of any pending or
threatened proceeding in respect of which any indemnified person is or could have been
a party and indemnification could have been sought hereunder by such indemnified
person, unless such settlement includes an unconditional release of such indemnified
person from all liability on claims that are the subject matter of such proceeding.
	 
	 	e.	 	If the indemnification provided for in this Section 13 is unavailable to or
insufficient to hold harmless an indemnified person under subsection (a) or (b) above
in respect of any losses, claims, damages or liabilities (or actions or proceedings in
respect thereof) referred to therein, then each indemnifying person shall contribute to
the amount paid or payable by such indemnified person as a result of such losses,
claims, damages or liabilities (or actions in respect thereof) in such proportion as is
appropriate to reflect the relative fault of the Company on the one hand and the
Investor, as well as any other Selling Stockholders under such Registration Statement
on the other in connection with the statements or omissions or other matters which
resulted in such losses, claims, damages or liabilities (or actions in respect
thereof), as well as any other relevant equitable considerations. The relative fault
shall be determined by reference to, among other things, in the case of an Untrue
Statement, whether the Untrue Statement relates to information supplied by the Company
on the one hand or an Investor or other Selling Stockholder on the other and the
parties’ relative intent, knowledge, access to information and opportunity to correct
or prevent such Untrue Statement. The Company and the Investor agree that it would not
be just and equitable if contribution pursuant to this subsection (e) were determined
by pro rata allocation (even if the Investor and other Selling Stockholders were
treated as one entity for such purpose) or by any




9









 






	 		 	other method of allocation that does not take into account the equitable
considerations referred to above in this subsection (e). The amount paid or payable
by an indemnified person as a result of the losses, claims, damages or liabilities
(or actions in respect thereof) referred to above in this subsection (e) shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified person in connection with investigating or defending any such action or
claim. Notwithstanding the provisions of this subsection (e), the Investor shall not
be required to contribute any amount in excess of the amount by which the net amount
received by the Investor from the sale of the Shares to which such loss relates
exceeds the amount of any damages that such Subscriber has otherwise been required
to pay by reason of such Untrue Statement. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall
be entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Investor’s obligations in this subsection to contribute
shall be in proportion to its Investor sale of Shares to which such loss relates and
shall not be joint with any other Selling Stockholders.
	 
	 	f.	 	The parties to this Agreement hereby acknowledge that they are sophisticated
business persons who were represented by counsel during the negotiations regarding the
provisions hereof including, without limitation, the provisions of this Section 13, and
are fully informed regarding said provisions. They further acknowledge that the
provisions of this Section 13 fairly allocate the risks in light of the ability of the
parties to investigate the Company and its business in order to assure that adequate
disclosure is made in the Registration Statement as required by the Securities Act and
the Exchange Act. The parties are advised that federal or state public policy as
interpreted by the courts in certain jurisdictions may be contrary to certain of the
provisions of this Section 13, and the parties hereto hereby expressly waive and
relinquish any right or ability to assert such public policy as a defense to a claim
under this Section 13 and further agree not to attempt to assert any such defense.






	14.	 	Termination of Conditions and Obligations. The conditions precedent imposed by Section 12
upon the transferability of the Shares shall cease and terminate as to any particular number
of the Shares when such Shares shall have been effectively registered under the Securities Act
and sold or otherwise disposed of in accordance with the intended method of disposition set
forth in the Registration Statement covering such Shares or at such time as an opinion of
counsel reasonably satisfactory to the Company shall have been rendered to the effect that
such conditions are not necessary in order to comply with the Securities Act.
	 
	15.	 	Legend; Restrictions on Transfer. Until such time as the Registration Statement has been
declared effective by the SEC, the certificate or certificates for the Shares and the Warrants
and any securities issued in respect of or exchange for the Shares or Warrants) shall be
subject to a legend or legends restricting transfer under the Securities Act and referring to
restrictions on transfer herein, such legend to be substantially as follows (and any
additional legend required under the Securities Act and otherwise):






	 	 	 	THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE “ACT”) AND MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED, OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR,
IN THE OPINION OF COUNSEL, IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER
OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER OR HYPOTHECATION IS IN
COMPLIANCE THEREWITH.






	 	 	The Company and the Investor acknowledge and agree that the Investor may, as permitted by
law, from time to time pledge pursuant to a bona fide margin agreement or grant a security
interest in some or all of the Shares and Warrants and, if required under the terms of such
arrangement, Subscriber may, as permitted by law, transfer pledged or secured Shares and
Warrants to the pledgees or secured parties. So long as
Subscriber is not an affiliate of the Company, such a pledge or transfer in compliance with
all applicable federal and state securities laws would not be subject to approval or consent
of the Company, provided that, upon the request of the Company, a legal opinion of legal
counsel to the pledgee, secured party or pledgor shall be obtained. At the Investor’s sole
expense, so long as the Shares and Warrants are subject to the




10









 






	 	 	legend required by this
Section 15, the Company will use its reasonable commercial efforts to execute and deliver
such reasonable documentation as a pledgee or secured party of Shares and Warrants may
reasonably request in connection with a pledge or transfer of the Shares and Warrants
including such amendments or supplements to the Registration Statement and prospectus as may
be reasonably required. The foregoing does not affect Subscriber’s obligations pursuant to
Section 12.
	 
	16.	 	Indemnification of the Company and affiliates. Notwithstanding anything else contained
herein to the contrary, the Investor hereby agrees to indemnify the Company, the Placement
Agent and their respective employees, agents, affiliates, officers, directors, general
partners, and the employees of each of them and to hold each of them harmless from and against
any and all liability, damage, cost or expense (including reasonable attorney’s fees and costs
of suit) incurred on account of or arising out of:






	 	a.	 	any inaccuracy or omission in the Investor’s declarations, representations and
warranties as set forth herein;
	 
	 	b.	 	the disposition of the Investor’s Shares and Warrants in a manner contrary to
his declarations, representations and warranties as made herein; and
	 
	 	c.	 	any action, suit or proceeding based upon: (i) the claim that said
declarations, representations, or warranties were inaccurate or misleading or otherwise
cause for obtaining damages or redress from the Company, the Placement Agent or their
respective affiliates, officers, employees or agents; or (ii) the disposition of any of
the Shares and Warrants or any part thereof.






	17.	 	Notwithstanding any investigation made by any party to this Subscription Agreement, all
covenants, agreements, representations and warranties made by the Company and the Investor
herein will survive the execution of this Subscription Agreement, the delivery to the Investor
of the Securities being purchased and the payment therefor.
	 
	18.	 	This Subscription Agreement may not be modified or amended except pursuant to an instrument
in writing signed by the Company and the Investor.
	 
	19.	 	In case any provision contained in this Subscription Agreement should be invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the remaining
provisions contained herein will not in any way be affected or impaired thereby.
	 
	20.	 	This Subscription Agreement will be governed by, and construed in accordance with, the
internal laws of the Commonwealth of Pennsylvania, without giving effect to the principles of
conflicts of law that would require the application of the laws of any other jurisdiction.
	 
	21.	 	All statements, requests, notices and agreements hereunder shall be in writing shall be
written in the English language and shall be delivered or sent by mail, telex or facsimile
transmission, and shall be deemed sent when delivered personally or by facsimile transmission
(with receipt acknowledged), one day after delivery to a recognized overnight courier serivce,
or three days after deposit in the U.S. mail, certified mail, return receipt requested, as
follows:






	 	a.	 	if to the Placement Agent, to:
	 
	 	 	 	Philadelphia Brokerage Corporation

992 Old Eagle School Road

Suite 915

Attention: Robert Fisk

Facsimile No.: (610) 975-9993




11









 






	 	b.	 	if to the Company, to:
	 
	 	 	 	Beijing Med-Pharm Corporation

600 West Germantown Pike

Plymouth Meeting, Pennsylvania 19462

Attention: Fred M. Powell

Facsimile: (610) 940-1676
	 
	 	c.	 	If to the Investor, to the address set forth on the signature page hereto.






	22.	 	This Subscription Agreement may be executed in one or more counterparts (delivery of which
may be by facsimile or as “pdf” or similar attachments to an electronic transmission), each of
which will constitute an original, but all of which, when taken together, will constitute but
one instrument, and will become effective when one or more counterparts have been signed by
each party hereto and delivered to the other parties.
	 
	23.	 	The Investor acknowledges and agrees that such Investor’s receipt of the Company’s
counterpart to this Subscription Agreement shall constitute written confirmation of the
Company’s sale of Securities to such Investor.
	 
	24.	 	In the event that the Placement Agreement is terminated by the Placement Agent pursuant to the
terms thereof, this Subscription Agreement shall terminate without any further action on the part
of the parties hereto.




12









 












INVESTOR SIGNATURE PAGE




Aggregate Principal Amount of Notes: $                                        




Number of Warrants being purchased                      x $0.125 = $                    




Aggregate purchase price for the Securities purchased by the Investor: $                    



Please confirm that the foregoing correctly sets forth the agreement between us by signing in the
space provided below for that purpose.




Dated as of: October __, 2007




	 	 	 	 	 
	INVESTOR
	 	 	 	 
	 
	By:
	 	 	 	 
	 

	 	 

	 	 
	Print Name:
	 	 	 	 
	 

	 	 

	 	 
	Title:
	 	 	 	 
	 

	 	 

	 	 
	Name in which

Note and Warrants

are to be registered:
	 	 	 	 
	 

	 	 

	 	 
	Mailing

Address:
	 	 	 	 
	 

	 	 

	 	 
	Address for delivery

of Notes and Warrants

(if different):
	 	 	 	 
	 

	 	 

	 	 
	Taxpayer

Identification

Number:
	 	 	 	 
	 

	 	 

	 	 






Manner of Settlement: As described in Section 3 of this Subscription Agreement




Agreed and Accepted this ___ day of                      2007:




BEIJING MED-PHARM CORPORATION




	 	 	 	 	 
	By:
	 	 	 	 
	 

	 	 

	 	 
	Title:
	 	 	 	 
	 

	 	 

	 	 
	Acknowledged this ____ day of _______________ 2007:	 	 
	 
	PHILADELPHIA BROKERAGE CORPORATION	 	 
	 
	By:
	 	 	 	 
	 

	 	 

	 	 
	Title:
	 	 	 	 
	 

	 	 

	 	 
















 






	 	 	 	 	 
	PURCHASER:	________________________

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 



[Pledge Agreement signature page]

















 






Exhibit A




Form of Note



THIS NOTE HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AS EVIDENCED BY THE DELIVERY TO THE COMPANY OF AN
OPINION OF COUNSEL REASONABLY ACCEPTABLE TO IT STATING THAT SUCH OFFER OR SALE IS EXEMPT FROM OR
NOT SUBJECT TO THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT) AND IN COMPLIANCE WITH
APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS. NOTWITHSTANDING THE FOREGOING, THIS NOTE MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT
SECURED BY SUCH NOTE.




			
	 	 	 
	No. [               ] 

Date: ______ ___,  2007
	 	$[                ]







BEIJING MED-PHARM CORPORATION

10.0% SENIOR SECURED PROMISSORY NOTE DUE

___________ __, 2009




     THIS NOTE is one of a series of duly authorized and issued notes of Beijing Med-Pharm
Corporation, a Delaware corporation (the “Company”), designated as its 10.0% Senior Secured
Promissory Notes due ___ ___, 2009, in the aggregate principal amount of up to $23,000,000 (the
“Notes”).



     FOR VALUE RECEIVED, the Company promises to pay to the order of [Holder] or its registered
assigns (the “Holder”), the principal sum of [___] $(___) (the “Original Principal
Amount”), on ___, 2009 (the “Maturity Date”), or such earlier date as the Notes are required
or permitted to be repaid as provided hereunder, and to pay interest to the Holder on the then
outstanding principal amount of this Note in accordance with the provisions hereof.
Notwithstanding the foregoing, the Company hereby unconditionally promises to pay to the order of
the Holder interest on any principal or interest payable hereunder that shall not be paid in full
when due, whether at the time of any stated interest payment date or maturity or by prepayment,
acceleration or declaration or otherwise, for the period from and including the due date of such
payment to but excluding the date the same is paid in full, at a rate of 18% per annum (but in no
event in excess of the maximum rate permitted under applicable law).



     Interest payable under this Note shall be computed on the basis of a year of 360 days and
actual days elapsed (including the first day but excluding the last day) occurring in the period
for which interest is payable.



     Payments of principal and interest shall be made in lawful money of the United States of
America to the Holder at its address as provided in Section 8or by wire transfer to such account
specified from time to time by the Holder hereof for such purpose as provided in Section 8.



     1. Definitions. In addition to the terms defined elsewhere in this Note, (a) capitalized
terms that are not otherwise defined herein have the meanings given to such terms in the
Subscription Agreement, dated as of ___, 2007, between the Company and the Holder (the
“Subscription Agreement”), and (b) the following terms have the meanings indicated:




     “Bankruptcy Event” means that the Company or any Subsidiary shall commence, or there
shall be commenced against the Company or any Subsidiary under any applicable bankruptcy or
insolvency laws as now or hereafter in effect or any successor thereto, or the Company or
any Subsidiary commences any other proceeding under any reorganization, arrangement,
adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law
of any jurisdiction whether now or hereafter in effect relating to the Company or any
Subsidiary or there is commenced against the Company or any Subsidiary any such bankruptcy,
insolvency or other proceeding which remains undismissed for a period of sixty-one (61)
days; or the Company or any Subsidiary is adjudicated insolvent or bankrupt; or any order of
relief or other order approving any such case or proceeding is entered; or the Company or
any Subsidiary suffers any



 









 







appointment of any custodian, private or court appointed receiver or the like for it or
any substantial part of its property which continues undischarged or unstayed for a period
of sixty one (61) days; or the Company or any Subsidiary makes a general assignment for the
benefit of creditors; or the Company or any Subsidiary shall fail to pay, or shall state
that it is unable to pay, or shall be unable to pay, its debts generally as they become due;
or the Company or any Subsidiary shall call a meeting of its creditors with a view to
arranging a composition, adjustment or restructuring of its debts; or the Company or any
Subsidiary shall by any act or failure to act expressly indicate its consent to, approval of
or acquiescence in any of the foregoing; or any corporate or other action is taken by the
Company or any Subsidiary for the purpose of effecting any of the foregoing.




     “Business Day” means any day except Saturday, Sunday and any day that shall be a federal
legal holiday or a day on which banking institutions in the state of New York are authorized or
required by law or other governmental action to close.




     “Change of Control” means the occurrence of (i) an acquisition after the date hereof by an
individual or legal entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the
Exchange Act) of effective control (whether through legal or beneficial ownership of capital
stock of the Company, by contract or otherwise) of in excess of fifty percent (50%) of the
voting securities of the Company (except that the acquisition of voting securities by the Holder
or any current holder of convertible securities of the Company shall not constitute a Change of
Control for purposes hereof); (ii) a replacement at one time or over time of more than one-half
of the members of the board of directors of the Company which is not approved by a majority of
those individuals who are members of the board of directors on the date hereof (or by those
individuals who are serving as members of the board of directors on any date whose nomination to
the board of directors was approved by a majority of the members of the board of directors who
are members on the date hereof); (iii) the merger or consolidation of the Company with or into
another entity as a result of which the holders of the voting securities of the Company
immediately before such merger or consolidation do not hold fifty percent (50%) or more of the
voting securities of the surviving or resulting entity; (iv) the sale of fifty percent (50%) or
more of the assets of the Company and its subsidiaries on a consolidated basis; or (v) the
execution by the Company of an agreement to which the Company is a party or by which it is
bound, providing for any of the events set forth above in (i), (ii), (iii) or (iv).




     “Company Prepayment Price” for any Notes which shall be subject to prepayment pursuant to
Section 8(a), shall equal the sum of: (i) if the Company Notice Date is prior to ___,
2008 [six months after the Closing Date], 103%of the then outstanding principal amount of this
Note; (ii) if the Company Notice Date is on or after ___, 2008 [six months after the
Closing Date] but before ___, 2009 [12 months after the Closing Date], 101% of the then
outstanding principal amount of this Note; and (iii) 100% of the principal amount of this Note
thereafter, plus all accrued but unpaid interest on the then outstanding principal amount.




     “Majority in Interest” means the holders of greater than fifty percent (50%) of the
aggregate principal amount of Notes then outstanding.




     “Subsidiary” means (i) any “significant subsidiary,” as defined in Item 1-02(w) of
Regulation S-X promulgated by the Securities and Exchange Commission, of the Company and (ii)
Hong Kong Fly International Health Care Limited, a Hong Kong corporation.



     2. Interest. The Company shall pay interest to the Holder on the aggregate then outstanding
principal amount of this Note at the rate of 10.0% per annum, payable semi-annually in arrears on
each May 1 and November 1, except if such date is not a Business Day, in which case such interest
shall be payable on the next succeeding Business Day (each, an “Interest Payment Date”). The first
Interest Payment Date shall be May 1, 2008.



     3. Ranking and Covenants.



     (a) No indebtedness of the Company is senior to this Note in right of payment, whether with
respect to interest, damages or upon liquidation or dissolution or otherwise. Other than
indebtedness to any commercial bank or other institutional lender of commercial loans and any
renewal, refinancing or replacement thereof, the Company will not, and will not permit any
Subsidiary to, directly or indirectly, enter into, create, incur, assume or suffer to exist any
indebtedness of any kind, on or with respect to any of its property or assets now owned or



 









 







hereafter acquired or any interest therein or any income or profits therefrom, that is not by
its terms specifically subordinated in all respects to the Company’s obligations under the Notes,
other than indebtedness secured by purchase money security interests (which will be senior only as
to the underlying assets covered thereby) and indebtedness under capital lease obligations (which
will be senior only as to the assets covered thereby).



     (b) So long as any Notes are outstanding, the Company shall maintain in an escrow account
established pursuant to the terms of the Escrow Agreement (as defined in the Subscription
Agreement) (i) at all times, an amount equal to the interest to be paid with respect to all the
Notes then outstanding on the next succeeding Interest Payment Date and (ii) at all times until
December 31, 2008, during the period fifteen (15) days prior to the next succeeding Interest
Payment Date, an amount equal to the interest to be paid with respect to all the Notes then
outstanding on the next two succeeding Interest Payment Dates.



     (c) So long as any Notes are outstanding, the Company shall own, directly or indirectly, at
least a 49% equity ownership interest in Sunstone Pharmaceutical Co., Ltd., a Hong Kong
corporation.



     (d) So long as any Notes are outstanding, neither the Company nor any Subsidiary shall,
directly or indirectly, redeem, purchase or otherwise acquire any capital stock or set aside any
monies for such a redemption, purchase or other acquisition.



     4. Registration of Notes. The Company shall register the Notes upon records to be maintained
by the Company for that purpose (the “Note Register”) in the name of each record holder thereof
from time to time. The Company may deem and treat the registered Holder of this Note as the
absolute owner hereof for the purpose of any payment of interest or principal hereon, and for all
other purposes, absent actual notice to the contrary.



     5. Registration of Transfers and Exchanges. The Company shall register the transfer of any
portion of this Note in the Note Register upon surrender of this Note to the Company at its address
for notice set forth herein. Upon any such registration or transfer, a new Note, in substantially
the form of this Note (any such new Note, a “New Note”), evidencing the portion of this Note so
transferred shall be issued to the transferee and a New Note evidencing the remaining portion of
this Note not so transferred, if any, shall be issued to the transferring Holder. The acceptance
of the New Note by the transferee thereof shall be deemed the acceptance by such transferee of all
of the rights and obligations of a holder of a Note. This Note is exchangeable for an equal
aggregate principal amount of Notes of different authorized denominations, as requested by the
Holder surrendering the same. No service charge or other fee will be imposed in connection with
any such registration of transfer or exchange. Notwithstanding anything herein to the contrary,
the Company shall not be required at any time to register any transfer to a transferee and any
transfer shall be void and of no force or effect unless the Note has been registered under the
Securities Act or the Company has received an opinion of counsel reasonably acceptable to it
stating that such transfer is exempt from the registration and prospectus delivery requirements of
the Securities Act.



     6. Prepayment.



     (a) At any time upon delivery of a written notice to the Holder (a “Company Prepayment Notice”
and the date such notice is delivered by the Company, the “Company Notice Date”), the Company shall
be entitled to prepay all or any portion of the outstanding principal amount of this Note plus any
accrued and unpaid interest thereon for an amount in cash equal to the Company Prepayment Price.
Once delivered, the Company shall not be entitled to rescind a Company Prepayment Notice.



     (b) The Company Prepayment Price shall be due on the fifteenth Business Day immediately
following the Company Notice Date. If any portion of the Company Prepayment Price shall not be
timely paid by the Company, interest shall accrue thereon at the rate of 18% per annum (or the
maximum rate permitted by applicable law, whichever is less) until the Company Prepayment Price
plus all such interest is paid in full, which payment shall constitute liquidated damages and not a
penalty. In addition, if any portion of the Company Prepayment Price remains unpaid after such
date, the Holder subject to such prepayment may elect by written notice to the Company to
invalidate ab initio such Company Prepayment Notice with respect to the unpaid amount,
notwithstanding anything herein contained to the contrary and no interest shall be owed to the
Holder in respect thereof. If the Holder makes such an election, the principal amount of this
Note, together with the accrued and unpaid interest



 









 







thereon shall be reinstated with respect to such unpaid amount and the Company shall no longer
have any prepayment rights under this Section 6.



     (c) Notwithstanding anything to the contrary herein, the Company may not elect a prepayment
pursuant to Section 6(a)(i) unless the Company makes such prepayment election to all of the Holders
on a pro rata basis, based on such Holders’ then outstanding principal amount of Notes.



     7. Events of Default.



     (a) “Event of Default” means any one of the following events (whatever the reason and whether
it shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment,
decree or order of any court, or any order, rule or regulation of any administrative or
governmental body):




          (i) (A) any default in the payment (free of any claim of subordination) of any
principal amount of the Notes, as and when the same becomes due and payable (whether on a
date specified for the payment of interest or the date on which the obligations under the
Note mature or by acceleration, redemption, prepayment or otherwise), (B) any default in the
payment (free of any claim of subordination) of interest in respect of any Notes, no later
than the third Business Day after such interest become due and payable (whether on a date
specified for the payment of interest or the date on which the obligations under the Note
mature or by acceleration, redemption, prepayment or otherwise), (C) any default by the
Company in the performance of its covenants set forth in paragraphs 3(b) or 3(c) of this
Note or (D) any default by the Company in the performance of any of its other covenants and
obligations under this Note not listed in clauses (A), (B) or (C) above, which defaults
remain uncured fifteen (15) Business Days after the Company receives written notice thereof
from the Holder or a representative of the Holder;




          (ii) the Company or any Subsidiary defaults in any of its obligations under any other
note or any mortgage, credit agreement or other facility, indenture agreement, factoring
agreement or other instrument under which there may be issued, or by which there may be
secured or evidenced, any indebtedness for borrowed money or money due under any long term
leasing or factoring arrangement of the Company or any Subsidiary in an amount exceeding
$1,000,000, whether such indebtedness now exists or is hereafter created, and such default
results in such indebtedness becoming or being declared due and payable prior to the date on
which it would otherwise become due and payable; or




          (iii) any default by the Company of any of its obligations pursuant to the Pledge
Agreement dated as of ___ ___, 2007 by and among the Company, Les Baledge, as Agent
thereunder, and the holders of the Notes.




          (iv) the occurrence of a Bankruptcy Event.



     (b) At any time or times that an Event of Default has occurred and is continuing, the full
unpaid principal amount of this Note, together with interest and other amounts owing in respect
thereof, to the date of acceleration shall become at the Holder’s election, immediately due and
payable in cash. The Holder need not provide, and the Company hereby waives, any presentment,
demand, protest or other notice of any kind, and the Holder may immediately and without expiration
of any grace period enforce any and all of its rights and remedies hereunder and all other remedies
available to it under applicable law. Such declaration may be rescinded and annulled by Holder at
any time prior to payment hereunder. No such rescission or annulment shall affect any subsequent
Event of Default or impair any right consequent thereon.



     (c) Upon the occurrence of any Bankruptcy Event, all amounts pursuant to Section 7(b) shall
immediately become due and payable in full in cash, without any further action by the Holder.



     (d) In connection with any Event of Default, the Holder need not provide and the Company
hereby waives any presentment, demand, protest or other notice of any kind, and the Holder may
immediately and without expiration of any grace period enforce any and all of its rights and
remedies hereunder and all other remedies available to it under applicable law. Any such
declaration may be rescinded and annulled by the Holder at any time



 









 







prior to payment hereunder. No such rescission or annulment shall affect any subsequent Event
of Default or impair any right consequent thereto.



     8. Notices. Any and all notices or other communications or deliveries hereunder shall be in
writing in the English language and shall be deemed given and effective on the earliest of (i) the
date of transmission, if such notice or communication is delivered via facsimile at the facsimile
number specified in this Section 8 prior to 5:00 p.m. (New York City time) on a Business Day, (ii)
the next Business Day after the date of transmission, if such notice or communication is delivered
via facsimile at the facsimile number specified in this Section 8 on a day that is not a Business
Day or later than 6:30 p.m. (New York City time) on any Business Day, (iii) the Business Day
following the date of mailing, if sent by nationally recognized overnight courier service, or (iv)
upon actual receipt by the party to whom such notice is required to be given. The addresses for
such communications shall be: (i) if to the Company, to 600 W. Germantown Pike, Suite 400, Plymouth
Meeting, PA 19482, facsimile: (610) 940-1676, attention Fred C. Powell, Chief Financial Officer, or
(ii) if to the Holder, to the address or facsimile number appearing on the Company’s Noteholder
records or such other address or facsimile number as the Holder may provide to the Company in
accordance with this Section 8.



     9. Miscellaneous.



     (a) Binding Nature of Note. This Note shall be binding on and inure to the benefit of the
parties hereto and their respective successors and permitted assigns. The Company shall not be
permitted to assign this Note.



     (b) Limitation of Rights. Subject to Section 9(a), nothing in this Note shall be construed to
give to any person or corporation other than the Company and the Holder any legal or equitable
right, remedy or cause under this Note.



     (c) GOVERNING LAW; VENUE; WAIVER OF JURY TRIAL. ALL QUESTIONS CONCERNING THE CONSTRUCTION,
VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE COMMONWEALTH OF PENNSYLVANIA, WITHOUT REGARD
TO THE PRINCIPLES OF CONFLICTS OF LAW THEREOF. EACH PARTY AGREES THAT ALL LEGAL PROCEEDINGS
CONCERNING THE INTERPRETATIONS, ENFORCEMENT AND DEFENSE OF THE TRANSACTIONS CONTEMPLATED BY ANY OF
THE TRANSACTION DOCUMENTS (WHETHER BROUGHT AGAINST A PARTY HERETO OR ITS RESPECTIVE AFFILIATES,
DIRECTORS, OFFICERS, SHAREHOLDERS, EMPLOYEES OR AGENTS) SHALL BE COMMENCED EXCLUSIVELY IN THE STATE
AND FEDERAL COURTS HAVING JURISDICTION OVER MONTGOMERY COUNTY, PENNSYLVANIA. EACH PARTY HERETO
HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS HAVING
JURISDICTION OVER MONTGOMERY COUNTY, PENNSYLVANIA FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR
IN CONNECTION HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED HEREIN (INCLUDING
WITH RESPECT TO THE ENFORCEMENT OF ANY OF THIS NOTE), AND HEREBY IRREVOCABLY WAIVES, AND AGREES NOT
TO ASSERT IN ANY SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE
JURISDICTION OF ANY SUCH COURT, THAT SUCH SUIT, ACTION OR PROCEEDING IS IMPROPER. EACH PARTY
HERETO HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS TO PROCESS BEING SERVED
IN ANY SUCH SUIT, ACTION OR PROCEEDING BY MAILING A COPY THEREOF VIA REGISTERED OR CERTIFIED MAIL
OR OVERNIGHT DELIVERY (WITH EVIDENCE OF DELIVERY) TO SUCH PARTY AT THE ADDRESS IN EFFECT FOR
NOTICES TO IT UNDER THIS NOTE AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD AND SUFFICIENT
SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING CONTAINED HEREIN SHALL BE DEEMED TO LIMIT IN ANY
WAY ANY RIGHT TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW. EACH PARTY HERETO HEREBY IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN
ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE OR ANY OF THE TRANSACTION DOCUMENTS OR
THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. IF EITHER PARTY SHALL COMMENCE AN ACTION OR
PROCEEDING TO ENFORCE ANY PROVISIONS OF THIS NOTE OR ANY TRANSACTION DOCUMENT, THEN THE



 









 







PREVAILING PARTY IN SUCH ACTION OR PROCEEDING SHALL BE REIMBURSED BY THE OTHER PARTY FOR ITS
REASONABLE ATTORNEYS FEES AND OTHER REASONABLE COSTS AND EXPENSES INCURRED WITH THE INVESTIGATION,
PREPARATION AND PROSECUTION OF SUCH ACTION OR PROCEEDING.



     (d) Headings. The headings herein are for convenience only, do not constitute a part of this
Note and shall not be deemed to limit or affect any of the provisions hereof.



     (e) Provisions Severable. In case any one or more of the provisions of this Note shall be
invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and
provisions of this Note shall not in any way be affected or impaired thereby and the parties will
attempt in good faith to agree upon a valid and enforceable provision which shall be a commercially
reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision
in this Note.



     (f) Lost, Stolen or Mutilated Note. Upon receipt by the Company of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of this Note, and, in the
case of loss, theft or destruction, of any indemnification undertaking by the Holder to the Company
in customary form and, in the case of mutilation, upon surrender and cancellation of this Note, the
Company shall execute and deliver to the Holder a new Note of like tenor representing the
outstanding principal.



     (g) Waiver and Amendment. No provision of this Note may be waived or amended except in a
written instrument signed, in the case of an amendment, by the Company and the Majority in Interest
or, or, in the case of a waiver, by the Majority in Interest; provided, that the Maturity Date
hereof, the rate of interest payable hereunder, the Interest Payment Dates hereunder, and the
currency in which any payments of principal of or interest on this Note shall be paid may not be
waived or amended except in a written instrument signed by the Holder hereof. No waiver of any
default with respect to any provision, condition or requirement of this Note shall be deemed to be
a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other
provision, condition or requirement hereof, nor shall any delay or omission of either party to
exercise any right hereunder in any manner impair the exercise of any such right.



[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK;

SIGNATURE PAGE FOLLOWS]




 









 








     IN WITNESS WHEREOF, the Company has caused this Note to be duly executed by a duly authorized
officer as of the date first above indicated.



BEIJING MED-PHARM CORPORATION




By




Name:




Title:




 









 





Exhibit B-1




Form of Class A Warrant




Beijing med-pharm corporation




Class A warrant for common stock



THIS WARRANT HAS BEEN ACQUIRED FOR INVESTMENT AND HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE “ACT”). THIS WARRANT MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO IT STATING
THAT SUCH SALE OR TRANSFER IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF
THE ACT.



Right to purchase ___(___) shares (subject to adjustment) of the common stock, $.001
par value (the “Stock”), of BEIJING MED-PHARM CORPORATION, a Delaware corporation (the “Company”).




The Company hereby certifies that, for value received,




[WARRANT HOLDER]



or registered assigns (the “Holder”) is entitled to purchase from the Company at any time or from
time to time during the Exercise Period (as hereinafter defined) an aggregate of ___ fully paid
and nonassessable shares, subject to adjustment as provided below, of the Stock, on the payment
therefor of the exercise price which shall be $12.43 per share (subject to adjustment) (the “Per
Share Exercise Price”) multiplied by the number of shares of Stock to be issued (the “Exercise
Price”), upon the surrender of this Warrant duly signed by the registered Holder hereof at the time
of exercise, accompanied by payment of the Exercise Price, upon the terms and subject to the
conditions hereinafter set forth.



The Warrant represented hereby is delivered pursuant to and is subject to that certain Subscription
Agreement accepted by the Company as of ___, 2007 by and between the Company and the Holder
(the “Agreement”). Capitalized terms used herein without definition shall have the meanings set
forth in the Agreement.



1. EXERCISE OF WARRANT. This Warrant shall be exercisable commencing on the date hereof and shall
expire at the times specified herein under the heading “EXPIRATION OF WARRANT” (the “Exercise
Period”). Subject to the foregoing restrictions, the Holder may, at its option, elect to exercise
this Warrant, in whole or in part and at any time or from time to time during the Exercise Period,
by surrendering this Warrant, with the Notice of Exercise appended hereto duly executed by or on
behalf of the Holder, at the principal office of the Company, or at such other office or agency as
the Company may designate, accompanied by payment in full, in lawful money of the United States, of
the Exercise Price payable in respect of the number of shares of Stock purchased upon such
exercise.



2. EXPIRATION OF WARRANT. This Warrant shall expire and shall no longer be exercisable upon the
earlier to occur of:





(i) 5:00 p.m., Philadelphia local time, on ___ ___, 2009;




(ii) a Change of Control (as defined below); or




(iii) the forty-fifth (45th) day following the Company’s delivery of notice to the
Holder of a Trading Price Termination Event (as defined below).




For purposes hereof, a “Trading Price Termination Event” shall mean at any time that the
Company’s Stock is listed for trading on a national securities exchange, including, but not
limited to, the NASDAQ



 









 







Global Market, or other nationally recognized trading system, or is quoted on the Pink
Sheets LLC or similar over-the-counter service, the occurrence of a period of twenty (20)
consecutive trading days during which the quoted bid price of the Company’s Common Stock has
been greater than a price equal to one hundred seventy-five percent (175%) of the Exercise
Price. The Company shall notify the Holder in writing of the occurrence of any Trading
Price Termination Event.




In the event of a proposed Change of Control, the Company shall give the Holder ten (10)
days prior notice of the proposed closing date of the Change of Control and, to the extent
the Warrant has not been exercised by such date, then this Warrant shall terminate. “Change
of Control” shall mean:




	 	(i)	 	the acquisition of the Company by another entity by means of
any transaction or series of related transactions (including, without
limitation, any merger, consolidation or other form of reorganization in which
outstanding shares of the Company are exchanged for securities or other
consideration issued, or caused to be issued, by the acquiring entity or its
subsidiary, but excluding any transaction effected primarily for the purpose of
changing the Company’s jurisdiction of incorporation), unless the Company’s
stockholders of record as constituted immediately prior to such transaction or
series of related transactions will, immediately after such transaction or
series of related transactions hold at least a majority of the voting power of
the surviving or acquiring entity; or
	 
	 	(ii)	 	a sale of all or substantially all of the assets of the
Company.




3. DELIVERY OF STOCK CERTIFICATE UPON EXERCISE. As soon as practicable after the exercise of this
Warrant and payment of the Exercise Price (which payment shall be deemed to have occurred when
funds are immediately available to the Company without provisions), but in no event more than three
Business Days (as defined below) after such exercise, the Company will cause to be issued in the
name of and delivered to the registered Holder hereof or its assigns, or such Holder’s nominee or
nominees, a certificate or certificates for the number of full shares of Stock of the Company to
which such Holder shall be entitled upon such exercise (and in the case of a partial exercise, a
Warrant of like tenor for the unexercised portion remaining subject to exercise prior to the
expiration of the Exercise Period set forth herein). For all corporate purposes, such certificate
or certificates shall be deemed to have been issued and such Holder or such Holder’s designee to be
named therein shall be deemed to have become a holder of record of such shares of Stock as of the
date the duly executed exercise form pursuant to this Warrant, together with full payment of the
Exercise Price, is received by the Company as aforesaid. No fraction of a share or scrip
certificate for such fraction shall be issued upon the exercise of this Warrant; in lieu thereof,
the Company will pay or cause to be paid to such Holder cash equal to a like fraction at the
prevailing fair market price for such share as determined in good faith by the Company.




4. ADJUSTMENTS.




     a. Dividends. In the event that a dividend shall be declared upon the Stock of the Company payable
in shares of Stock, the number of shares of Stock covered by this Warrant shall be adjusted by
adding thereto the number of shares that would have been distributable thereon if such shares had
been outstanding on the date fixed for determining the stockholders entitled to receive such stock
dividend, and the Per Share Exercise Price shall be adjusted by multiplying the Per Share Exercise
Price by a fraction (i) the numerator of which is the number of shares of Stock issued and
outstanding immediately prior to the payment of such stock dividend and (ii) the denominator of
which is the number of shares of Stock issued and outstanding immediately after the payment of such
stock dividend.



     b. Reorganizations, Consolidations, Mergers. Except as otherwise set forth herein, in the event
that the outstanding shares of Stock of the Company shall be changed into or exchanged for a
different number or kind of shares of stock or other securities of the Company or of another
corporation, whether through reorganization, recapitalization, stock split-up, combination of
shares, merger or consolidation, then upon exercise of this Warrant there shall be substituted for
the shares of Stock covered by this Warrant, the number and kind of shares of stock or other
securities that would have been substituted therefor if such shares of Stock had been outstanding
on the date



 









 







fixed for determining the stockholders entitled to receive such changed or substituted stock or
other securities and the exercise price shall be proportionately adjusted.



     c. Other Changes. In the event there shall be any change, other than specified above, in the
number or kind of outstanding shares of Stock of the Company or of any stock or other securities
into which such Stock shall be changed or for which it shall have been exchanged, then if the Board
of Directors shall determine, in good faith, that such change equitably requires an adjustment in
the number or kind of shares covered by this Warrant, such adjustment shall be made by the Board of
Directors and shall be effective and binding for all purposes on this Warrant.



     d. Registration Default (i). The Company and the Holder agree that the Holder will suffer
damages if the Company fails to fulfill its obligations pursuant to Section 11 of the Agreement and
that it would not be possible to ascertain the extent of such damages with precision. Accordingly,
the Company hereby agrees to provide liquidated damages to the Investor, in the form of an
adjustment to the Per Share Exercise Price, under the following circumstances (each such event a
“Registration Default”) if the Registration Statement (as defined in the Agreement):




	 	(ii)	 	is not filed by the Company on or prior to the 120th day after
the Closing Date; or
	 
	 	(iii)	 	is not declared effective by the Securities and Exchange
Commission (“SEC”) on or prior to the 90th day after the date the Registration
Statement is first filed with the SEC.




In the event that there shall occur a Registration Default, then the Per Share Exercise Price shall
be reduced by $0.25 for each full thirty (30) day period for which such Registration Default exists
and is continuing unless waived by the holders of Warrants exercisable for a majority of the shares
of Stock issuable upon exercise of the then outstanding Warrants issued in the Offering.



5. LOST, STOLEN, DESTROYED OR MUTILATED WARRANT. Upon receipt by the Company of evidence
reasonably satisfactory to it of the ownership of and the loss, theft or destruction or mutilation
of this Warrant, and (in the case of loss, theft or destruction) of indemnity reasonably
satisfactory to it, and (in the case of mutilation) upon the surrender and cancellation thereof,
the Company will issue and deliver, in lieu thereof, a new Warrant of like tenor.



6. TRANSFER.




     a. Owner of Warrant. The Company may deem and treat the person in whose name this Warrant is
registered as the Holder and owner hereof (notwithstanding any notations of ownership or writing
hereon made by anyone other than the Company) for all purposes and shall not be affected by any
notice to the contrary until presentation of this Warrant for registration of transfer as provided
below.



     b. Transfer of Warrant. The Company agrees to maintain, at its then principal place of business,
books for the registration of the Warrant and transfers thereof, and this Warrant and all rights
hereunder are transferable, in whole or in part, on said books at said office, upon surrender of
this Warrant at said office, together with a written assignment of this Warrant duly executed by
the Holder hereof or his duly authorized agent or attorney and funds sufficient to pay any transfer
taxes payable upon the making of such transfer. Upon such surrender and payment, the Company shall
execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in the
denominations specified in such instrument of assignment, and this Warrant shall promptly be
canceled.



7. COVENANTS.




     a. Reservation of Common Stock. The Company covenants that, so long as this Warrant is
exercisable, the Company will reserve from its authorized and unissued Stock a sufficient number of
shares to provide for the delivery of Stock pursuant to the exercise of this Warrant. The Company
further covenants that all



 









 







shares of Stock that shall be so deliverable upon exercise of this Warrant shall be duly and
validly issued and fully paid and nonassessable.



     b. Notice of Certain Events. In the event that:




	 	(i)	 	the Company shall declare a dividend (or any other
distribution) on its Common Stock that would require an adjustment pursuant to
paragraphs (a), (b) or (c) of Section 4; or
	 
	 	(ii)	 	the Company shall authorize the granting to the holders of all
or substantially all of its Common Stock of rights or warrants to subscribe for
or purchase any share of any class or any other rights or warrants; or
	 
	 	(iii)	 	of any reclassification or reorganization of the Common Stock
of the Company (other than a subdivision or combination of its outstanding
Common Stock, or a change in par value, or from par value to no par value, or
from no par value to par value), or of any consolidation or merger to which the
Company is a party and for which approval of any shareholders of the Company is
required, or of the sale or transfer of all or substantially all of the assets
of the Company; or
	 
	 	(iv)	 	of the voluntary or involuntary dissolution, liquidation or
winding-up of the Company;




the Company shall cause to be mailed to the Holder as promptly as possible but in any event at
least five (5) days prior to the applicable date hereinafter specified, a notice stating (x) the
date on which a record is to be taken for the purpose of such dividend, distribution or rights or
warrants, or, if a record is not to be taken, the date as of which the holders of Common Stock of
record to be entitled to such dividend, distribution or rights are to be determined, or (y) the
date on which such reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding-up is expected to become effective or occur, and the date as of which it is
expected that holders of Common Stock of record shall be entitled to exchange their Common Stock
for securities or other property deliverable upon such reclassification, consolidation, merger,
sale, transfer, dissolution, liquidation or winding-up. Failure to give such notice, or any defect
therein, shall not affect the legality or validity of such dividend, distribution,
reclassification, consolidation, merger, sale, transfer, dissolution, liquidation or winding-up.




8. CASHLESS EXERCISE RIGHTS.




     a. Cashless Exercise Provisions. Notwithstanding anything to the contrary contained herein, if, at
any time upon the occurrence and during the continuance of a Registration Default, the sale of all
the Warrant Shares is not covered by an effective Registration Statement registering such sale with
the SEC (a “Delinquency Period”), then the Holder shall have the right, with respect to any Notice
of Exercise of Warrant delivered during such Delinquency Period to pay the Exercise Price through a
“cashless exercise,” in which event the Company shall issue to the Holder, without the requirement
that the Holder pay any portion of the Exercise Price in cash or other consideration, the number of
shares of Stock determined as follows:



          X = Y [(A-B)/A], where:




          X = the number of shares of Stock to be issued to the Holder upon exercise.




          Y = the number of shares of Stock with respect to which this Warrant is being exercised.




          A = the arithmetic average of the VWAP of the Stock for the five Trading Days immediately
prior to (but not including) the Exercise Date.




          B = the Exercise Price.




     b. Certain Definitions. For purposes of this Section 8, the following definitions shall apply:



 









 






	 	(i)	 	“Business Day” means any day except Saturday, Sunday and any
day which shall be a federal legal holiday or a day on which banking
institutions in the Commonwealth of Pennsylvania are authorized or required by
law or other governmental action to close.
	 
	 	(ii)	 	“Trading Day” means (a) any day on which the Stock is listed or
quoted and traded on its primary Trading Market, or (b) if the Stock is not
then listed or quoted and traded on any Trading Market, then any Business Day.
	 
	 	(iii)	 	“Trading Market” means the Nasdaq Global Market or any other
national securities exchange, market or trading or quotation facility on which
the Stock is then listed or quoted.
	 
	 	(iv)	 	“VWAP” means on any particular Trading Day or for any
particular period the volume weighted average trading price per share of Stock
on such date or for such period on the primary Trading Market as reported by
Bloomberg L.P., or any successor performing similar functions.





9. MISCELLANEOUS.




     a. No Rights as Shareholder. This Warrant does not confer upon the Holder any rights of a
stockholder of the Company, including, without limitation, any right to vote or to consent to or
receive notice as a stockholder of the Company.



     b. Notices. Any notices required or permitted to be given under the terms of this Warrant shall be
written in the English language and shall be sent by certified or registered mail (return receipt
requested) or delivered personally or by courier or by confirmed telecopy, and shall be effective
three (3) days after being placed in the mail, if mailed, or upon receipt or refusal of receipt, if
delivered personally or by courier, or by confirmed telecopy, in each case addressed as follow: If
to the Company to: at 600 W. Germantown Pike, Suite 400, Plymouth Meeting, Pennsylvania 19462,
Attn: President, facsimile number (610) 940-1676 and if to the Holder to the address shown therefor
on the books and records of the Company. Any party may change its address for notice and the
address to which copies must be sent by giving notice of the new addresses to the other parties in
accordance with this Section 9, except that any such change of address notice shall not be
effective unless and until received.



     c. Governing Law. All questions concerning the construction, validity, enforcement and
interpretation of this Warrant shall be governed by and construed and enforced in accordance with
the laws of the State of Delaware without regard to principles of conflicts of laws.



     d. Amendment. This Warrant and any provision hereof may be amended solely by an instrument in
writing signed by the Company and Holder.



     e. Severability. In case any one or more of the provisions of this Warrant shall be determined by
a court of competent jurisdiction to be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Warrant shall not in any way be
affected or impaired thereby.



     f. Assignment. This Warrant shall be binding on and inure to the benefit of the parties hereto and
their respective permitted successors and assigns. Subject to the preceding sentence, nothing in
this Warrant shall be construed to give to any Person other than the Company and Holder any legal
or equitable right, remedy or cause of action under this Warrant.



     g. Headings. The headings in this Warrant are for purposes of reference only and shall not limit or
otherwise affect the meaning hereof.



 









 







IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its duly authorized
officer, and the undersigned Holder has executed this Warrant, effective as of the date set forth
below.



	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	Dated: __________ __, 2007	 	BEIJING MED-PHARM CORPORATION	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 






 












 







NOTICE OF EXERCISE OF WARRANT




To: BEIJING MED-PHARM CORPORATION



The undersigned Holder hereby exercises the right to purchase                      shares of Common Stock,
$.001 par value, of Beijing Med-Pharm Corporation, a Delaware corporation (the “Company”), and
delivers to the Company herewith the Exercise Price.



You will kindly forward a certificate or certificates for the shares purchased hereby and, if such
shares shall not include all of the shares provided in this Warrant, a new Warrant of like tenor
and date for the balance of the shares issuable thereunder shall be delivered to the undersigned at
the address set forth below.




	 	 	 	 	 	 	 	 	 
	Date:                                         
	 	 	 	 	 	 	 	 
	 	 	 	 	 
	 	 	Name of Holder	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:	 	 	 	 
	 

	 	 	 	 	 	 

	 	 
	 	 	 	 	Address:	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 





 









 





Exhibit B-2




Form of Class B Warrant




Beijing med-pharm corporation




Class B warrant for common stock



THIS WARRANT HAS BEEN ACQUIRED FOR INVESTMENT AND HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE “ACT”). THIS WARRANT MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO IT STATING
THAT SUCH SALE OR TRANSFER IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF
THE ACT.



Right to purchase                      (                    ) shares (subject to adjustment) of the common stock, $.001
par value (the “Stock”), of BEIJING MED-PHARM CORPORATION, a Delaware corporation (the “Company”).



The Company hereby certifies that, for value received,




[WARRANT HOLDER]



or registered assigns (the “Holder”) is entitled to purchase from the Company at any time or from
time to time during the Exercise Period (as hereinafter defined) an aggregate of                      fully paid
and nonassessable shares, subject to adjustment as provided below, of the Stock, on the payment
therefor of the exercise price which shall be $12.43 per share (subject to adjustment) (the “Per
Share Exercise Price”) multiplied by the number of shares of Stock to be issued (the “Exercise
Price”), upon the surrender of this Warrant duly signed by the registered Holder hereof at the time
of exercise, accompanied by payment of the Exercise Price, upon the terms and subject to the
conditions hereinafter set forth.



The Warrant represented hereby is delivered pursuant to and is subject to that certain
[Subscription Agreement] accepted by the Company as of                      ___, 2007 by and between the
Company and the Holder (the “Agreement”). Capitalized terms used herein without definition shall
have the meanings set forth in the Agreement.



1. EXERCISE OF WARRANT. This Warrant shall be exercisable commencing on the date hereof and shall
expire at the times specified herein under the heading “EXPIRATION OF WARRANT” (the “Exercise
Period”). Subject to the foregoing restrictions, the Holder may, at its option, elect to exercise
this Warrant, in whole or in part and at any time or from time to time during the Exercise Period,
by surrendering this Warrant, with the Notice of Exercise appended hereto duly executed by or on
behalf of the Holder, at the principal office of the Company, or at such other office or agency as
the Company may designate, accompanied by payment in full, in lawful money of the United States, of
the Exercise Price payable in respect of the number of shares of Stock purchased upon such
exercise.



2. EXPIRATION OF WARRANT. This Warrant shall expire and shall no longer be exercisable upon the
earlier to occur of:





	 	(i)	 	5:00 p.m., Philadelphia local time, on                      ___, 2012; or
	 
	 	(ii)	 	a Change of Control (as defined below).






In the event of a proposed Change of Control, the Company shall give the Holder ten (10)
days prior notice of the proposed closing date of the Change of Control and, to the extent
the Warrant has not been exercised by such date, then this Warrant shall terminate. “Change
of Control” shall mean:




	 	(i)	 	the acquisition of the Company by another entity by means of
any transaction or series of related transactions (including, without
limitation, any merger, consolidation or other




 









 






	 	 	 	form of reorganization in which outstanding shares of the Company are
exchanged for securities or other consideration issued, or caused to be
issued, by the acquiring entity or its subsidiary, but excluding any
transaction effected primarily for the purpose of changing the Company’s
jurisdiction of incorporation), unless the Company’s stockholders of record
as constituted immediately prior to such transaction or series of related
transactions will, immediately after such transaction or series of related
transactions hold at least a majority of the voting power of the surviving
or acquiring entity; or
	 
	 	(ii)	 	a sale of all or substantially all of the assets of the
Company.




3. DELIVERY OF STOCK CERTIFICATE UPON EXERCISE. As soon as practicable after the exercise of this
Warrant and payment of the Exercise Price (which payment shall be deemed to have occurred when
funds are immediately available to the Company without provisions), but in no event more than three
Business Days (as defined below) after such exercise, the Company will cause to be issued in the
name of and delivered to the registered Holder hereof or its assigns, or such Holder’s nominee or
nominees, a certificate or certificates for the number of full shares of Stock of the Company to
which such Holder shall be entitled upon such exercise (and in the case of a partial exercise, a
Warrant of like tenor for the unexercised portion remaining subject to exercise prior to the
expiration of the Exercise Period set forth herein). For all corporate purposes, such certificate
or certificates shall be deemed to have been issued and such Holder or such Holder’s designee to be
named therein shall be deemed to have become a holder of record of such shares of Stock as of the
date the duly executed exercise form pursuant to this Warrant, together with full payment of the
Exercise Price, is received by the Company as aforesaid. No fraction of a share or scrip
certificate for such fraction shall be issued upon the exercise of this Warrant; in lieu thereof,
the Company will pay or cause to be paid to such Holder cash equal to a like fraction at the
prevailing fair market price for such share as determined in good faith by the Company.



4. ADJUSTMENTS.




     a. Dividends. In the event that a dividend shall be declared upon the Stock of the Company payable
in shares of Stock, the number of shares of Stock covered by this Warrant shall be adjusted by
adding thereto the number of shares that would have been distributable thereon if such shares had
been outstanding on the date fixed for determining the stockholders entitled to receive such stock
dividend, and the Per Share Exercise Price shall be adjusted by multiplying the Per Share Exercise
Price by a fraction (i) the numerator of which is the number of shares of Stock issued and
outstanding immediately prior to the payment of such stock dividend and (ii) the denominator of
which is the number of shares of Stock issued and outstanding immediately after the payment of such
stock dividend.



     b. Reorganizations, Consolidations, Mergers. Except as otherwise set forth herein, in the event
that the outstanding shares of Stock of the Company shall be changed into or exchanged for a
different number or kind of shares of stock or other securities of the Company or of another
corporation, whether through reorganization, recapitalization, stock split-up, combination of
shares, merger or consolidation, then upon exercise of this Warrant there shall be substituted for
the shares of Stock covered by this Warrant, the number and kind of shares of stock or other
securities that would have been substituted therefor if such shares of Stock had been outstanding
on the date fixed for determining the stockholders entitled to receive such changed or substituted
stock or other securities and the exercise price shall be proportionately adjusted.



     c. Other Changes. In the event there shall be any change, other than specified above, in the
number or kind of outstanding shares of Stock of the Company or of any stock or other securities
into which such Stock shall be changed or for which it shall have been exchanged, then if the Board
of Directors shall determine, in good faith, that such change equitably requires an adjustment in
the number or kind of shares covered by this Warrant, such adjustment shall be made by the Board of
Directors and shall be effective and binding for all purposes on this Warrant.



 









 





     d. Registration Default (i). The Company and the Holder agree that the Holder will suffer
damages if the Company fails to fulfill its obligations pursuant to Section 11 of the Agreement and
that it would not be possible to ascertain the extent of such damages with precision. Accordingly,
the Company hereby agrees to provide liquidated damages to the Investor, in the form of an
adjustment to the Per Share Exercise Price, under the following circumstances (each such event a
“Registration Default”) if the Registration Statement (as defined in the Agreement):




	 	(ii)	 	is not filed by the Company on or prior to the 120th day after
the Closing Date; or
	 
	 	(iii)	 	is not declared effective by the Securities and Exchange
Commission (“SEC”) on or prior to the 90th day after the date the Registration
Statement is first filed with the SEC.




In the event that there shall occur a Registration Default, then the Per Share Exercise Price shall
be reduced by $0.25 for each full thirty (30) day period for which such Registration Default exists
and is continuing unless waived by the holders of Warrants exercisable for a majority of the shares
of Stock issuable upon exercise of the then outstanding Warrants issued in the Offering.



5. LOST, STOLEN, DESTROYED OR MUTILATED WARRANT. Upon receipt by the Company of evidence
reasonably satisfactory to it of the ownership of and the loss, theft or destruction or mutilation
of this Warrant, and (in the case of loss, theft or destruction) of indemnity reasonably
satisfactory to it, and (in the case of mutilation) upon the surrender and cancellation thereof,
the Company will issue and deliver, in lieu thereof, a new Warrant of like tenor.



6. TRANSFER.




     a. Owner of Warrant. The Company may deem and treat the person in whose name this Warrant is
registered as the Holder and owner hereof (notwithstanding any notations of ownership or writing
hereon made by anyone other than the Company) for all purposes and shall not be affected by any
notice to the contrary until presentation of this Warrant for registration of transfer as provided
below.



     b. Transfer of Warrant. The Company agrees to maintain, at its then principal place of business,
books for the registration of the Warrant and transfers thereof, and this Warrant and all rights
hereunder are transferable, in whole or in part, on said books at said office, upon surrender of
this Warrant at said office, together with a written assignment of this Warrant duly executed by
the Holder hereof or his duly authorized agent or attorney and funds sufficient to pay any transfer
taxes payable upon the making of such transfer. Upon such surrender and payment, the Company shall
execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in the
denominations specified in such instrument of assignment, and this Warrant shall promptly be
canceled.


7. COVENANTS.




     a. Reservation of Common Stock. The Company covenants that, so long as this Warrant is
exercisable, the Company will reserve from its authorized and unissued Stock a sufficient number of
shares to provide for the delivery of Stock pursuant to the exercise of this Warrant. The Company
further covenants that all shares of Stock that shall be so deliverable upon exercise of this
Warrant shall be duly and validly issued and fully paid and nonassessable



     b. Notice of Certain Events. In the event that:




	 	(i)	 	the Company shall declare a dividend (or any other
distribution) on its Common Stock that would require an adjustment pursuant to
paragraphs (a), (b) or (c) of Section 4; or
	 
	 	(ii)	 	the Company shall authorize the granting to the holders of all
or substantially all of its Common Stock of rights or warrants to subscribe for
or purchase any share of any class or any other rights or warrants; or




 









 






	 	(iii)	 	of any reclassification or reorganization of the Common Stock
of the Company (other than a subdivision or combination of its outstanding
Common Stock, or a change in par value, or from par value to no par value, or
from no par value to par value), or of any consolidation or merger to which the
Company is a party and for which approval of any shareholders of the Company is
required, or of the sale or transfer of all or substantially all of the assets
of the Company; or
	 
	 	(iv)	 	of the voluntary or involuntary dissolution, liquidation or
winding-up of the Company;




the Company shall cause to be mailed to the Holder as promptly as possible but in any event at
least five (5) days prior to the applicable date hereinafter specified, a notice stating (x) the
date on which a record is to be taken for the purpose of such dividend, distribution or rights or
warrants, or, if a record is not to be taken, the date as of which the holders of Common Stock of
record to be entitled to such dividend, distribution or rights are to be determined, or (y) the
date on which such reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding-up is expected to become effective or occur, and the date as of which it is
expected that holders of Common Stock of record shall be entitled to exchange their Common Stock
for securities or other property deliverable upon such reclassification, consolidation, merger,
sale, transfer, dissolution, liquidation or winding-up. Failure to give such notice, or any defect
therein, shall not affect the legality or validity of such dividend, distribution,
reclassification, consolidation, merger, sale, transfer, dissolution, liquidation or winding-up.




8. CASHLESS EXERCISE RIGHTS.




     a. Cashless Exercise Provisions. Notwithstanding anything to the contrary contained herein, if, at
any time after the date that is two years after the Closing Date, the sale of all the Warrant
Shares is not covered by an effective registration statement registering such sale with the SEC (a
“Delinquency Period”), then the Holder shall have the right, with respect to any Notice of Exercise
of Warrant delivered during such Delinquency Period to pay the Exercise Price through a “cashless
exercise,” in which event the Company shall issue to the Holder, without the requirement that the
Holder pay any portion of the Exercise Price in cash or other consideration, the number of shares
of Stock determined as follows:



          X = Y [(A-B)/A], where:




          X = the number of shares of Stock to be issued to the Holder upon exercise.




          Y = the number of shares of Stock with respect to which this Warrant is being exercised.




          A = the arithmetic average of the VWAP of the Stock for the five Trading Days immediately
prior to (but not including) the Exercise Date.




     B = the Exercise Price.



     b. Certain Definitions. For purposes of this Section 8, the following definitions shall apply:




	 	(i)	 	“Business Day” means any day except Saturday, Sunday and any
day which shall be a federal legal holiday or a day on which banking
institutions in the Commonwealth of Pennsylvania are authorized or required by
law or other governmental action to close.
	 
	 	(ii)	 	“Trading Day” means (a) any day on which the Stock is listed or
quoted and traded on its primary Trading Market, or (b) if the Stock is not
then listed or quoted and traded on any Trading Market, then any Business Day.
	 
	 	(iii)	 	“Trading Market” means the Nasdaq Global Market or any other
national securities exchange, market or trading or quotation facility on which
the Stock is then listed or quoted.




 









 






	 	(iv)	 	“VWAP” means on any particular Trading Day or for any
particular period the volume weighted average trading price per share of Stock
on such date or for such period on the primary Trading Market as reported by
Bloomberg L.P., or any successor performing similar functions.





9. MISCELLANEOUS.




     a. No Rights as Shareholder. This Warrant does not confer upon the Holder any rights of a
stockholder of the Company, including, without limitation, any right to vote or to consent to or
receive notice as a stockholder of the Company.



     b. Notices. Any notices required or permitted to be given under the terms of this Warrant shall be
written in the English language and shall be sent by certified or registered mail (return receipt
requested) or delivered personally or by courier or by confirmed telecopy, and shall be effective
three (3) days after being placed in the mail, if mailed, or upon receipt or refusal of receipt, if
delivered personally or by courier, or by confirmed telecopy, in each case addressed as follow: If
to the Company to: at 600 W. Germantown Pike, Suite 400, Plymouth Meeting, Pennsylvania 19462,
Attn: President, facsimile number (610) 940-1676 and if to the Holder to the address shown therefor
on the books and records of the Company. Any party may change its address for notice and the
address to which copies must be sent by giving notice of the new addresses to the other parties in
accordance with this Section 9, except that any such change of address notice shall not be
effective unless and until received.



     c. Governing Law. All questions concerning the construction, validity, enforcement and
interpretation of this Warrant shall be governed by and construed and enforced in accordance with
the laws of the State of Delaware without regard to principles of conflicts of laws.



     d. Amendment. This Warrant and any provision hereof may be amended solely by an instrument in
writing signed by the Company and Holder.



     e. Severability. In case any one or more of the provisions of this Warrant shall be determined by
a court of competent jurisdiction to be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Warrant shall not in any way be
affected or impaired thereby.



     f. Assignment. This Warrant shall be binding on and inure to the benefit of the parties hereto and
their respective permitted successors and assigns. Subject to the preceding sentence, nothing in
this Warrant shall be construed to give to any Person other than the Company and Holder any legal
or equitable right, remedy or cause of action under this Warrant.



     g. Headings. The headings in this Warrant are for purposes of reference only and shall not limit or
otherwise affect the meaning hereof.


IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its duly authorized
officer, and the undersigned Holder has executed this Warrant, effective as of the date set forth
below.




	 	 	 	 	 	 	 
	Dated:                      __, 2007	 	BEIJING MED-PHARM CORPORATION	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Name:
	 	 

	 	 
	 

	 	Title:
	 	 

	 	 
	 

	 	 	 	 

	 	 






 









 





NOTICE OF EXERCISE OF WARRANT




To:      BEIJING MED-PHARM CORPORATION



The undersigned Holder hereby exercises the right to purchase                      shares of Common Stock,
$.001 par value, of Beijing Med-Pharm Corporation, a Delaware corporation (the “Company”), and
delivers to the Company herewith the Exercise Price.



You will kindly forward a certificate or certificates for the shares purchased hereby and, if such
shares shall not include all of the shares provided in this Warrant, a new Warrant of like tenor
and date for the balance of the shares issuable thereunder shall be delivered to the undersigned at
the address set forth below.




	 	 	 	 	 	 	 	 	 
	Date:                                         
	 	 	 	 	 	 	 	 
	 	 	 	 	 
	 	 	Name of Holder	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:	 	 	 	 
	 

	 	 	 	 	 	 

	 	 
	 	 	 	 	Address:	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 





 









 





PLEDGE AGREEMENT



This PLEDGE AGREEMENT, dated as of November 1, 2007 (the “Agreement”), is by and among Beijing
Med-Pharm Corporation, a corporation duly organized and validly existing under the laws of the
State of Delaware (the “Company”), the Purchasers identified on the signature pages hereto (each, a
“Purchaser” and collectively, the “Purchasers”) and Les Baledge, as agent for the Purchasers (in
such capacity, together with its successors in such capacity, the “Agent”).



The Company and each of the Purchasers are parties to a Subscription Agreement dated as of October
31, 2007 (as modified and supplemented and in effect from time to time, the “Subscription
Agreement”), that provides, subject to the terms and conditions thereof, for the issuance and sale
by the Company to each of the Purchasers, severally and not jointly, of Notes and Warrants as more
fully described in the Subscription Agreement.



To induce each of the Purchasers to enter into the Subscription Agreement, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company
has agreed to pledge and grant a security interest in the Collateral (as hereinafter defined) as
security for the Secured Obligations (as hereinafter defined). Accordingly, the parties hereto
agree as follows:





	1.	 	Definitions. Each capitalized term used herein and not otherwise defined shall have
the meaning assigned to such term in the Subscription Agreement. In addition, as used herein:





     “Collateral” shall have the meaning ascribed thereto in Section 3 hereof.



     “Event of Default” shall have the meaning ascribed thereto in Section 7 of the Notes.



     “Escrow Agent” shall mean Bryn Mawr Trust Company, as escrow agent under the Escrow
Agreement.



     “Escrow Agreement” shall mean the Escrow Agreement dated as of November 1, 2007 by and
among the Company, the Agent and the Escrow Agent.



     “Lien” shall mean any mortgage or deed of trust, pledge, hypothecation, assignment,
deposit arrangement, lien, charge, claim, security interest, easement or encumbrance, or
preference, priority or other security agreement or preferential arrangement of any kind or nature
whatsoever (including any lease or title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing, and the filing of, or agreement to
give, any financing statement perfecting a security interest under the Uniform Commercial Code or
comparable law of any jurisdiction).



     “Permitted Indebtedness” shall mean any future capitalized leases or purchase money
indebtedness and the Notes.



     “Pledged Stock” shall have the meaning ascribed thereto in Section 3(a) hereof.



     “Secured Obligations” shall mean, collectively, the principal of and interest on and
all other amounts due and payable under the Notes issued or issuable (as applicable) by the
Company.



     “Stock Collateral” shall mean, collectively, the Collateral described in clauses (a)
through (c) of Section 3 hereof and the proceeds of and to any such property and, to the extent
related to any such property or such proceeds, all books, correspondence, credit files, records,
invoices and other papers.



     “Uniform Commercial Code” or “UCC” shall mean the Uniform Commercial Code as in effect
in the Commonwealth of Pennsylvania assuming applicable financing statements are being duly and
properly filed time to time.




	2.	 	Representations and Warranties. The Company represents and warrants to each of the
Purchasers that:




 









 












	 	a.	 	the Company is, or as and when additional Collateral is later acquired the
Company will be, the sole beneficial owner of the Collateral and no Lien exists or will
exist upon any Collateral at any time (and, with respect to the Stock Collateral, no
right or option to acquire the same exists in favor of any other Person), except for
the pledge and security interest in favor of each of the Purchasers created or provided
for herein which pledge and security interest constitutes a first priority perfected
pledge and security interest in and to all of the Collateral assuming applicable
financing statements are been duly and properly filed; and
	 
	 	b.	 	the Pledged Stock is, or as and when acquired by the Company will be, duly
authorized, validly issued, fully paid and nonassessable, free and clear of all Liens
and none of such Pledged Stock is or will be subject to any contractual restriction,
preemptive and similar rights, or any restriction under the charter or by-laws or other
governing or organizational documents or agreements of the respective Issuer of such
Pledged Stock, upon the transfer of such Pledged Stock (except for any such restriction
contained herein).






	3.	 	Collateral. As collateral security for the prompt payment in full when due (whether
at stated maturity, by acceleration or otherwise) of the Secured Obligations, the Company
hereby pledges, grants, assigns, hypothecates and transfers to the Agent on behalf of the
Purchasers as hereinafter provided, a security interest in and Lien upon all of the Company’s
right, title and interest in the following (all being collectively referred to herein as
“Collateral”):






	 	a.	 	the Company’s direct or indirect ownership interest in 49% of the issued and
outstanding shares of capital stock or equity securities of Hong Kong Fly
International Health Care Limited, a Hong Kong corporation (“HK Fly”), together with
the certificates evidencing the same (the “Initial Pledged Stock”) and, as and to the
extent the Company acquires additional shares of capital stock or equity securities of
HK Fly, such additional shares directly or indirectly owned by the Company as shall in
the aggregate constitute 51% of the then issued and outstanding shares of capital stock
of HK Fly , together with the certificates evidencing the same (the “Additional Pledged
Stock” and, collectively with the Initial Pledged Stock, the “Pledged Stock”);
	 
	 	b.	 	other than as contemplated by Sections 4(d)(ii) and 4(d)(iii), all shares,
securities, moneys or property representing a dividend on any of the Pledged Stock, or
representing a distribution or return of capital upon or in respect of the Pledged
Stock, or resulting from a split-up, revision, reclassification or other like change of
the Pledged Stock or otherwise received in exchange therefor, and any subscription
warrants, rights or options issued to the holders of, or otherwise in respect of, the
Pledged Stock;
	 
	 	c.	 	without affecting the obligations of the Company under any provision
prohibiting such action hereunder or under the Subscription Agreement or the Notes, in
the event of any consolidation or merger in which HK Fly is not the surviving
corporation, the shares of each class of the capital stock of the successor corporation
(unless such successor corporation is the Company itself) formed by or resulting from
such consolidation or merger and received by the Company in exchange for the Pledged
Stock (the Pledged Stock, together with all other certificates, shares, securities,
properties or moneys as may from time to time be pledged hereunder pursuant to clause
(a) or (b) above and this clause (c) being herein collectively called the “Stock
Collateral”); and
	 
	 	d.	 	other than as contemplated by Sections 4(d)(ii) and 4(d)(iii), all proceeds,
products and accessions of and to any of the property of the Company described in
clauses (a) through (c) above in this Section 3.






	4.	 	Further Assurances; Remedies. In furtherance of the grant of the pledge and security
interest pursuant to Section 3 hereof, the Company hereby agrees with the Agent and each of
the Purchasers as follows:






	 	a.	 	Delivery and Other Perfection. The Company shall:




 









 












	 	(i)	 	as, if and when the Stock Collateral is received by the Company
(or on behalf of the Company by its agents or representative), (x) transfer and
deliver to the Escrow Agent for maintaining in escrow pursuant to the Escrow
Agreement such shares or securities so received by the Company (together with
the certificates for any such shares and securities duly endorsed in blank or
accompanied by undated stock powers duly executed in blank) into possession of
the Escrow Agent as soon as reasonably practicable but in no event later than
ten (10) Business Days (as defined in the Notes) after receipt of such Stock
Collateral by the Company, all of which thereafter shall be held by the Escrow
Agent, pursuant to the terms of this Agreement and the Escrow Agreement, as
part of the Collateral and (y) take such other action as the Agent shall
reasonably deem necessary or appropriate to duly record the Lien created
hereunder in such Stock Collateral; the Company hereby acknowledges and agrees
that time shall be of the essence with respect to its obligations under this
Section 4(a)(i), and the failure to timely deliver the Stock Collateral into
the possession of the Escrow Agent in the time required by clause 4(a)(i)(x)
shall be specific breach of this Agreement by the Company; and
	 
	 	(ii)	 	give, execute, deliver, file and/or record any financing
statement, notice, instrument, document, agreement or other papers that may be
necessary or desirable (in the reasonable judgment of the Agent) to create,
preserve, perfect or validate any security interest granted pursuant hereto or
to enable the Agent to exercise and enforce their rights hereunder with respect
to such security interest, provided however that this shall not include causing
any or all of the Stock Collateral to be transferred of record into the name of
the Agent or its nominee;






	 	b.	 	Other Financing Statements and Liens. The Company shall not file or
suffer to be on file, or authorize or permit to be filed or to be on file, in any
jurisdiction, any financing statement or like instrument with respect to the Collateral
in which the Agent is not named as the sole secured party for the benefit of each of
the Purchasers.
	 
	 	c.	 	Preservation of Rights. The Agent shall not be required to take steps
necessary to preserve any rights against prior parties to any of the Collateral.
	 
	 	d.	 	Special Provisions Relating to the Stock Collateral.






	 	(i)	 	So long as no Event of Default shall have occurred and be
continuing, the Company shall have the right to exercise all voting, consensual
and other powers of ownership pertaining to the Stock Collateral for all
purposes not inconsistent with the terms of this Agreement, the Subscription
Agreement, the Notes or any other instrument or agreement referred to herein or
therein; and the Agent shall execute and deliver to the Company or cause to be
executed and delivered to the Company all such proxies, powers of attorney,
dividend and other orders, and all such instruments, without recourse, as the
Company may reasonably request for the purpose of enabling the Company to
exercise the rights and powers which it is entitled to exercise pursuant to
this Section 4(d)(i).
	 
	 	(ii)	 	Unless and until an Event of Default has occurred and is
continuing, the Company shall be entitled to receive and retain any dividends
on the Stock Collateral paid in cash out of earned surplus.
	 
	 	(iii)	 	If any Event of Default shall have occurred, then so long as
such Event of Default shall continue, and whether or not the Agent exercises
any available right to declare any Secured Obligations due and payable or seeks
or pursues any other relief or remedy available to it under applicable law or
under this Agreement, the Subscription Agreement, the Notes or any other
agreement relating to such Secured Obligations, all dividends and other
distributions on the Stock Collateral shall be paid directly to the Escrow
Agent and retained by it as part of the Stock Collateral, subject to the terms
of this Agreement and the Escrow Agreement, and, if the Agent shall so request
in writing, the Company agrees




 









 






	 	 	 	to execute and deliver to the Escrow Agent appropriate additional dividend,
distribution and other orders and documents to that end, provided that if
such Event of Default is cured, any such dividend or distribution
theretofore paid to the Agent or the Escrow Agent shall, upon request of the
Company (except to the extent theretofore applied to the Secured
Obligations) be returned by the Escrow Agent to the Company.






	 	e.	 	Events of Default, etc. During the period during which an Event of
Default shall have occurred and be continuing:






	 	(i)	 	the Agent may make any reasonable compromise or settlement
deemed desirable with respect to any of the Collateral and may extend the time
of payment, arrange for payment in installments, or otherwise modify the terms
of, any of the Collateral;
	 
	 	(ii)	 	subject to the terms of the Escrow Agreement, the Agent shall
have all of the rights and remedies with respect to the Collateral of a secured
party under the Uniform Commercial Code (whether or not said Code is in effect
in the jurisdiction where the rights and remedies are asserted) and such
additional rights and remedies to which a secured party is entitled under the
laws in effect in any jurisdiction where any rights and remedies hereunder may
be asserted, including, without limitation, the right, to the maximum extent
permitted by law, to exercise all voting, consensual and other powers of
ownership pertaining to the Collateral as if the Agent were the sole and
absolute owner thereof (and the Company agrees to take all such action as may
be appropriate to give effect to such right);
	 
	 	(iii)	 	the Agent in its discretion may, in its name or in the name of
the Company or otherwise, demand, sue for, collect or receive any money or
property at any time payable or receivable on account of or in exchange for any
of the Collateral, but shall be under no obligation to do so; and
	 
	 	(iv)	 	subject to the terms of the Escrow Agreement, the Agent may,
upon 10 Business Days prior written notice to the Company of the time and place
and in compliance with applicable law, including, without limitation, the
Securities Act of 1933, as amended, with respect to the Collateral or any part
thereof which shall then be or shall thereafter come into the possession,
custody or control of the Agent, or any of its respective agents, sell, lease,
assign or otherwise dispose of all or any of such Collateral, at such place or
places as the Agent deems best, and for cash or on credit or for future
delivery (without thereby assuming any credit risk), at public or private sale,
without demand of performance or notice of intention to effect any such
disposition or of time or place thereof (except such notice as is required
above or by applicable statute and cannot be waived) and the Agent or anyone
else may be the purchaser, lessee, assignee or recipient of any or all of the
Collateral so disposed of at any public sale (or, to the extent permitted by
law, at any private sale), and thereafter hold the same absolutely, free from
any claim or right of whatsoever kind, including any right or equity of
redemption (statutory or otherwise), of the Company, any such demand, notice or
right and equity being hereby expressly waived and released. Subject to the
terms of the Escrow Agreement, the Agent 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 the sale, and such sale
may be made at any time or place to which the same may be so adjourned.




The proceeds of each collection, sale or other disposition under this Section 4(e) shall be applied
in accordance with Section 4(i) hereof.



The Company recognizes that, by reason of certain prohibitions contained in the Securities Act of
1933, as amended, and applicable state securities laws, the Agent may be compelled, with respect to
any sale of all or any part of the Collateral, to limit purchasers to those who will agree, among
other things, to acquire the Collateral for their own


 









 






account, for investment and not with a view to the distribution or resale thereof. The Company
acknowledges that any such private sales to an unrelated third party in an arm’s length transaction
may be at prices and on terms less favorable to the Agent than those obtainable through a public
sale without such restrictions, and, notwithstanding such circumstances, agrees that any such
private sale shall be deemed to have been made in a commercially reasonable manner and that the
Agent shall have no obligation to engage in public sales and no obligation to delay the sale of any
Collateral for the period of time necessary to permit the respective Issuer thereof to register it
for public sale.





	 	f.	 	Deficiency. If the proceeds of sale, collection or other realization
of or upon the Collateral pursuant to Section 4(e) hereof are insufficient to cover the
costs and expenses of such realization and the payment in full of the Secured
Obligations, the Company shall remain liable for any deficiency.
	 
	 	g.	 	Removals, etc. Without at least 30 days’ prior written notice to the
Agent, the Company shall not (i) maintain any of its books or records with respect to
the Collateral at any office or maintain its chief executive office or its principal
place of business at any place other than at the address indicated for the Company in
Section 21 of the Subscription Agreement or (ii) change its corporate name to any name
or the name under which it does business, in each case, other than to BMP Sunstone
Corporation, from the name shown on the signature page hereto.
	 
	 	h.	 	Private Sale. The Agent shall incur no liability as a result of the
sale of the Collateral, or any part thereof, at any private sale to an unrelated third
party in an arm’s length transaction pursuant to Section 4(e) hereof conducted in a
commercially reasonable manner and in compliance with applicable law, including,
without limitation, the Securities Act of 1933, as amended. The Company hereby waives
any claims against the Agent arising by reason of the fact that the price at which the
Collateral may have been sold at such a private sale was less than the price which
might have been obtained at a public sale or was less than the aggregate amount of the
Secured Obligations, even if the Agent accepts the first offer received and does not
offer the Collateral to more than one offeree.
	 
	 	i.	 	Application of Proceeds. Except as otherwise herein expressly
provided, the proceeds of any collection, sale or other realization of all or any part
of the Collateral pursuant hereto, and any other cash at the time held by the Agent
under this Section 4, shall be applied by the Agent:






	 	(i)	 	First, to the payment of the costs and expenses of such
collection, sale or other realization, including accrued but unpaid fees of the
Escrow Agent and reasonable out-of-pocket costs and expenses of the Agent and
the reasonable fees and expenses of its agents and counsel, and all expenses
and advances made or incurred by the Agent in connection therewith;
	 
	 	(ii)	 	Next, to the payment in full of the Secured Obligations in each
case equally and ratably in accordance with the respective amounts thereof then
due and owing to each of the Purchasers; and
	 
	 	(iii)	 	Finally, to the payment to the Company, or its successors or
assigns, or as a court of competent jurisdiction may direct, of any surplus
then remaining.




As used in this Section 4, “proceeds” of Collateral shall mean cash, securities and other property
realized in respect of, and distributions in kind of, Collateral, including any thereof received
under any reorganization, liquidation or adjustment of debt of the Company or any issuer of or
obligor on any of the Collateral.





	 	j.	 	Attorney-in-Fact. Without limiting any rights or powers granted by
this Agreement to the Agent while no Event of Default has occurred and is continuing,
upon the occurrence and during the continuance of any Event of Default, the Agent is
hereby appointed the attorney-in-fact of the Company for the purpose of carrying out
the provisions of this Section 4 and taking any action and




 









 






	 	 	 	executing any instruments which the Agent may deem necessary or advisable to
accomplish the purposes hereof, which appointment as attorney-in-fact is irrevocable
and coupled with an interest. Without limiting the generality of the foregoing, so
long as the Purchasers shall be entitled under this Section 4 to make collections in
respect of the Collateral, the Agent shall have the right and power to receive,
endorse and collect all checks made payable to the order of the Company representing
any dividend, payment, or other distribution in respect of the Collateral or any
part thereof and to give full discharge for the same.
	 
	 	k.	 	Perfection. The Company shall file or deliver to Agent for filing such
financing statements and other documents in such offices as the Agent may request to
perfect the security interests granted by Section 3 of this Agreement.
	 
	 	l.	 	Termination. When all Secured Obligations shall have been paid in full
under the Notes, this Agreement shall terminate, and the Agent shall forthwith cause to
be assigned, transferred and delivered, against receipt but without any recourse,
warranty or representation whatsoever, any remaining Collateral and money received in
respect thereof, to or on the order of the Company. The Agent shall also execute and
deliver to the Company upon such termination such Uniform Commercial Code termination
statements and such other documentation as shall be reasonably requested by the Company
to effect the termination and release of the Liens on the Collateral.
	 
	 	m.	 	Expenses. The Company agrees to pay to the Agent all out-of-pocket
expenses (including reasonable expenses for legal services of every kind) of, or
incident to, the enforcement of any of the provisions of this Section 4, or performance
by the Agent of any obligations of the Company in respect of the Collateral which the
Company has failed or refused to perform upon reasonable notice, or any actual or
attempted sale, or any exchange, enforcement, collection, compromise or settlement in
respect of any of the Collateral, and for the care of the Collateral and defending or
asserting rights and claims of the Agent in respect thereof, by litigation or
otherwise, including expenses of insurance, and all such expenses shall be Secured
Obligations to the Agent secured under Section 3 hereof. The Company shall pay the
fees of the Escrow Agent under the Escrow Agreement.
	 
	 	n.	 	Further Assurances. The Company agrees that, from time to time upon
the written request of the Agent, the Company will execute and deliver such further
documents and do such other acts and things as the Agent may reasonably request in
order fully to effect the purposes of this Agreement.
	 
	 	o.	 	Indemnity. Each of the Purchasers hereby jointly and severally
covenants and agrees to reimburse, indemnify and hold the Escrow Agent and the Agent
harmless from and against any and all claims, actions, judgments, damages, losses,
liabilities, costs, transfer or other taxes, and expenses (including, without
limitation, reasonable attorneys’ fees and expenses) incurred or suffered without any
bad faith or willful misconduct by the Escrow Agent or the Agent, respectively, arising
out of or incident to this Agreement or the administration of the Escrow Agent’s duties
under the Escrow Agreement and the Agent’s duties hereunder, respectively, or resulting
from its actions or inactions as Escrow Agent or Agent, respectively.
	 
	 	p.	 	Borrowing of Pledged Stock Certificates. The Agent and the Purchasers
hereby agree that upon receipt by Escrow Agent and the Agent from the Company of an
affidavit (a “Borrowing Notice”) that the Company is required to provide the
certificates representing the Pledged Shares either (i) for review by the auditors of
the Company and/or HK Fly, (ii) in connection with the purchase by the Company of
additional shares of common stock of HK Fly or (iii) as required by law or regulatory
authority, which affidavit shall contain an undertaking for the specific benefit of the
Agent and the Purchasers to return the certificates representing the Pledged Shares to
Escrow Agent as soon as reasonably practicable but in no event more than fifteen (15)
Business Days after receipt of such certificates from Escrow Agent, Escrow Agent shall
(A) provide a copy of such Borrowing Notice to the Agent by facsimile and overnight
courier as provided in Section 21 of the Subscription Agreement within one (1) Business
Day of receipt of such Borrowing Notice and (ii) deliver to the Company the
certificates representing the Pledged Shares to the Company on the




 









 






	 	 	 	fifth (5th) Business Day after the date Escrow Agent receives such
Borrowing Notice, or sooner as agreed to by the Agent in writing. The Company
hereby convenants to cause the certificates representing the Pledged Shares to be
returned to the Escrow Agent not later than the fifteenth (15th) Business Day after
the receipt thereof by the Company






	5.	 	Miscellaneous.






	 	a.	 	No Waiver. No failure on the part of the Agent or any of its agents to
exercise, and no course of dealing with respect to, and no delay in exercising, any
right, power or remedy hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise by the Agent or any of its agents of any right, power or
remedy hereunder preclude any other or further exercise thereof or the exercise of any
other right, power or remedy. The remedies herein are cumulative and are not exclusive
of any remedies provided by law.
	 
	 	b.	 	Governing Law. This Agreement shall be governed by, and construed in
accordance with, the internal laws of the Commonwealth of Pennsylvania, without giving
effect to the principles of conflicts of law that would require the application of the
laws of any other jurisdiction.
	 
	 	c.	 	Notices. All notices, requests, consents and demands hereunder shall
be in writing and facsimile (facsimile confirmation required) or delivered to the
intended recipient at its address or facsimile number specified pursuant to Section 21
of the Subscription Agreement and shall be deemed to have been given at the times
specified in said Section 21.
	 
	 	d.	 	Waivers, etc. The terms of this Agreement may be waived, altered or
amended only by an instrument in writing duly executed by the Company and the Agent.
Any such amendment or waiver shall be binding upon each of the Purchasers and the
Company.
	 
	 	e.	 	Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the respective successors and assigns of the Company and each of the
Purchasers (provided, however, that the Company shall not assign or transfer its rights
hereunder without the prior written consent of the Agent).
	 
	 	f.	 	Counterparts. This Agreement may be executed in any number of
counterparts (delivery of which can occur by facsimile or as a “pdf” or similar
attachment to an electronic communication), all of which together shall constitute one
and the same instrument and any of the parties hereto may execute this Agreement by
signing any such counterpart.
	 
	 	g.	 	Agent. Each Purchaser agrees to appoint Les Baledge as its Agent for
purposes of this Agreement. The Agent may employ agents and attorneys-in-fact in
connection herewith and shall not be responsible for the negligence or misconduct of
any such agents or attorneys-in-fact selected by it in good faith.
	 
	 	h.	 	Severability. If any provision hereof is invalid and unenforceable in
any jurisdiction, then, to the fullest extent permitted by law, (i) the other
provisions hereof shall remain in full force and effect in such jurisdiction and shall
be liberally construed in favor of the Purchasers in order to carry out the intentions
of the parties hereto as nearly as may be possible and (ii) the invalidity or
unenforceability of any provision hereof in any jurisdiction shall not affect the
validity or enforceability of such provision in any other jurisdiction.





[Signature Page Follows]




 









 







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




	 	 	 	 	 
	COMPANY: 	BEIJING MED-PHARM CORPORATION

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	 	 
	AGENT: 	
 	 
	 	Les Baledge 	 
	 	 	 
	 



[PLEDGE AGREEMENT SIGNATURE PAGE]




 









 








	 	 	 	 	 
	PURCHASER: 	 	 
	 	 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 




 











 





Exhibit D




Representations and Warranties of the Company



The Company represents and warrants to the Investor as of the date hereof and as of the Closing
Date, and agrees with the Investor, as follows:




          a. Due Incorporation. The Company has been duly organized and is validly existing as a
corporation or other legal entity in good standing (or the foreign equivalent thereof) under the
laws of its jurisdiction of organization, with the corporate power and authority to own its
properties and to conduct its business as currently being conducted and as described in the
Company’s periodic reports and other information filed with the Securities and Exchange Commission
and is duly qualified to transact business and is in good standing as a foreign corporation or
other legal entity in each other jurisdiction in which its ownership or leasing of property or the
conduct of its business requires such qualification, except where the failure to be so qualified
and in good standing or have such power or authority (i) would not have, individually or in the
aggregate, a material adverse effect upon, the general affairs, business, operations, properties,
financial condition or results of operations of the Company and its Subsidiaries (as defined
below), taken as a whole, or (ii) impair in any material respect the power or ability of the
Company to perform its obligations under this Agreement or to consummate any transactions
contemplated by the Agreement and the Subscription Agreements, including the issuance and sale of
the Securities (any such effect as described in clauses (i) or (ii), a “Material Adverse Effect”).




          b. Subsidiaries. The Company has no significant subsidiaries (as such term is defined in Rule
1-02 of Regulation S-X promulgated by the Commission) other than Beijing Medpharm Co. Ltd., Beijing
Wanwei Pharmaceutical Co., Ltd. and Beijing Med-Pharm Hong Kong Company Ltd. (each, a “Subsidiary”
and collectively, the “Subsidiaries”). Each Subsidiary has been duly organized and is validly
existing as a corporation or other legal entity in good standing (or the foreign equivalent
thereof) under the laws of its jurisdiction of organization, with the corporate power and authority
to own its properties and to conduct its business as currently being conducted and as described in
the Company’s periodic reports and other information filed with the Securities and Exchange
Commission. All of the issued and outstanding capital stock (or similar equity interests) of each
Subsidiary has been duly authorized and validly issued and is fully paid and nonassessable and,
except as described in the Company’s periodic reports and other information filed with the
Securities and Exchange Commission, are owned by the Company, directly or through Subsidiaries,
free from liens, encumbrances and defects.




          c. Due Authorization and Enforceability. The Company has the full right, power and authority
to enter into this Agreement, each of the Subscription Agreements and the Escrow Agreement, and to
perform and discharge its obligations hereunder and thereunder; and each of this Agreement, the
Escrow Agreement and each Subscription Agreement has been duly authorized, executed and delivered
by the Company, and constitutes a valid, legal and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except as rights to indemnity hereunder may be
limited by federal or state securities laws and except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization or similar laws affecting the rights of creditors
generally and subject to general principles of equity.




          d. The Securities. The issuance of the Securities has been duly and validly authorized by the
Company and, when issued, delivered and paid for in accordance with the terms of this Agreement and
the Subscription Agreements, will have been duly and validly issued and will be fully paid and
nonassessable. Except as otherwise stated in the Company’s periodic reports and other information
filed with the Securities and Exchange Commission, there are no statutory or contractual preemptive
rights or other rights to subscribe for or purchase or acquire any shares of Common Stock of the
Company, which have not been waived or complied with and will conform in all material respects to
the description thereof contained in the Company’s periodic reports and other information filed
with the Securities and Exchange Commission.




          e. Capitalization. As of October 26, 2007, the authorized capital stock of the Company
consists of (i) 50,000,000 shares of Common Stock, par value $.001 per share, of which 30,494,290
shares are issued and outstanding, 2,876,147 shares are reserved for issuance upon exercise of
stock options outstanding under the Company’s employee and director stock option plans, 2,057,000
shares are reserved for grants of rights to purchase under the Company’s stock option plans, and
1,938,341 shares are reserved for issuance under warrants;




 









 




and (ii) 20,000,000 shares of preferred stock, par value $.001 per share, none of which are
issued and outstanding. The authorized capital stock of the Company conforms as to legal matters
to the description thereof contained in the prospectus under the caption “Description of common
stock” (and any similar sections or information, if any, contained in the Company’s periodic
reports and other information filed with the Securities and Exchange Commission). The issued and
outstanding shares of capital stock of the Company have been duly authorized and validly issued,
are fully paid and nonassessable, and have been issued in compliance with all federal and state
securities laws. None of the outstanding shares of capital stock was issued in violation of any
preemptive rights, rights of first refusal or other similar rights to subscribe for or purchase or
acquire any securities of the Company. There are no authorized or outstanding shares of capital
stock, options, warrants, preemptive rights, rights of first refusal or other rights to purchase,
or equity or debt securities convertible into or exchangeable for, any capital stock of the Company
or any of its Subsidiaries other than those described in the Company’s periodic reports and other
information filed with the Securities and Exchange Commission. The description of the Company’s
stock option, stock bonus and other stock plans or arrangements, and the options or other rights
granted thereunder, as described in the Company’s periodic reports and other information filed with
the Securities and Exchange Commission, accurately and fairly present the information required to
be shown with respect to such plans, arrangements, options and rights.




          f. No Conflict. The execution, delivery and performance by the Company of this Agreement, the
Subscription Agreements and the Escrow Agreement and the consummation of the transactions
contemplated hereby and thereby, including the issuance and sale by the Company of the Securities,
will not (i) conflict with or result in a breach or violation of, or constitute a default under
(nor constitute any event which with notice, lapse of time or both would result in any breach or
violation of or constitute a default under), give rise to any right of termination or other right
or the cancellation or acceleration of any right or obligation or loss of a benefit under, or give
rise to the creation or imposition of any lien, encumbrance, security interest, claim or charge
upon any property or assets of the Company or any Subsidiary pursuant to any indenture, mortgage,
deed of trust, loan agreement or other agreement or instrument to which the Company or any
Subsidiary is a party or by which any of them or any of their respective properties may be bound or
to which any of the property or assets of the Company or any of its Subsidiaries is subject, (ii)
result in any violation of the provisions of the charter or by-laws (or analogous governing
instrument, as applicable) of the Company or any Subsidiary, or (iii) result in any violation of
any law, statute, rule, regulation, judgment, order or decree of any court or governmental agency
or body, domestic or foreign, having jurisdiction over the Company or its Subsidiaries or any of
their properties or assets, except, in the case of each of clauses (i) and (iii) above, for any
such conflict, breach, violation, default, lien, charge or encumbrance that would not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect.




          g. No Consents Required. No approval, authorization, consent or order of or filing,
qualification or registration with, any court or governmental agency or body, foreign or domestic,
which has not been made, obtained or taken and is not in full force and effect, is required in
connection with the execution, delivery and performance of this Agreement, the Subscription
Agreements and the Escrow Agreement by the Company, the issuance and sale of the Securities or the
consummation by the Company of the transactions contemplated hereby or thereby other than (i) as
may be required under the Securities Act or the Exchange Act, (ii) any necessary qualification of
the Securities under the securities or blue sky laws of the various jurisdictions in which the
Securities are being offered by the Placement Agent, (iii) under the rules and regulations of the
National Association of Securities Dealers, Inc. (“NASD”) or (iv) The Nasdaq Global Market in
connection with the distribution of the Securities by the Placement Agent.




          h. Registration Rights. Except pursuant to the transactions contemplated by this Agreement,
as described in the due diligence materials provided by the Company to the Placement Agent or as
otherwise described in the Company’s periodic reports and other information filed with the
Securities and Exchange Commission, there are no contracts, agreements or understandings between
the Company and any person granting such person the right (other than rights which have been waived
in writing in connection with the transactions contemplated by this Agreement or otherwise
satisfied) to require the Company to register any securities with the Commission.




          i. Independent Accountants. Grant Thornton, Hong Kong, are independent public accountants
with respect to the Company as required by the Securities Act, and the applicable published
Securities




 









 




Act Rules and Regulations thereunder and Rule 3600T of the Public Company Accounting Oversight
Board (“PCAOB”).




          j. Commission Reports. Since June 30, 2004, the Company has timely filed all reports,
schedules, forms, statements and other documents required to be filed by it with the Commission
pursuant to the reporting requirements of the Exchange Act (all of the foregoing filed prior to the
date hereof and all exhibits included therein and financial statements and schedules thereto and
documents (other than exhibits) incorporated by reference therein, being hereinafter referred to
herein as the “Exchange Act Filings”). As of their respective dates, the Exchange Act Filings
complied in all material respects with the requirements of the Exchange Act or the Securities Act,
as the case may be, and the Securities Act Rules and Regulations or rules and regulations of the
Commission promulgated under the Exchange Act (the “Exchange Act Rules and Regulations”), as the
case may be, applicable to the Exchange Act Filings.




          k. Financial Statements. The consolidated financial statements of the Company, together with
the related schedules and notes thereto, set forth in the Company’s Form 10-K for the fiscal year
ended December 31, 2006 and Form 10-Q for the fiscal quarter ending June 30, 2007, as each may have
been amended from time to time, comply in all material respects with the applicable requirements of
the Securities Act and the Exchange Act, as applicable, and present fairly in all material respects
(i) the financial condition of the Company and the Subsidiaries, taken as a whole, as of the dates
indicated and (ii) the consolidated results of operations, stockholders’ equity and changes in cash
flows of the Company and the Subsidiaries, taken as a whole, for the periods therein specified; and
such financial statements and related schedules and notes thereto have been prepared in conformity
with United States generally accepted accounting principles, consistently applied throughout the
periods involved (except as otherwise stated therein and subject, in the case of unaudited
financial statements, to the absence of footnotes and normal year-end adjustments).




          l. Absence of Material Changes. Subsequent to June 30, 2007, and except as may be otherwise
stated in this Agreement or in the Company’s periodic reports and other information filed with the
Securities and Exchange Commission, (i) there has not been any change in the capital stock of the
Company (except for changes in the number of outstanding shares of Common Stock of the Company due
to the issuance of shares upon the exercise or conversion of securities exercisable for, or
convertible into, shares of Common Stock outstanding on the date hereof) or long-term debt of the
Company or any of its Subsidiaries or any dividend or distribution of any kind declared, set aside
for payment, paid or made by the Company on any class of capital stock; (ii) there has not been any
material adverse change or development that would result in a material adverse change in or
affecting the general affairs, business, properties, management, consolidated financial position,
stockholders’ equity or results of operations of the Company and its Subsidiaries taken as a whole
(a “Material Adverse Change”); and (iii) neither the Company nor any of its Subsidiaries have
entered or will enter into any transaction or agreement, not in the ordinary course of business,
that is material to the Company and its Subsidiaries taken as a whole or incurred or will incur any
liability or obligation, direct or contingent, not in the ordinary course of business, that is
material to the Company and its Subsidiaries taken as a whole.




          m. Legal Proceedings. There are no legal or governmental actions, suits, claims or
proceedings pending to which the Company or any Subsidiary is or would be a party or of which any
of their respective properties is or would be subject at law or in equity, which are required to be
described in the Company’s periodic reports and other information filed with the Securities and
Exchange Commission and are not so described therein, or which, singularly or in the aggregate, if
resolved adversely to the Company or any Subsidiary, would reasonably be likely to result in a
Material Adverse Change. To the Company’s knowledge, no such proceedings are threatened or
contemplated by governmental authorities or threatened by others.




          n. No Violation. Neither the Company nor any Subsidiary is in breach or violation of or in
default (nor has any event occurred which with notice, lapse of time or both would result in any
breach or violation of, or constitute a default) (i) under the provisions of its charter or bylaws
(or analogous governing instrument, as applicable) or (ii) in the performance or observance of any
term, covenant, obligation, agreement or condition contained in any indenture, mortgage, deed of
trust, bank loan or credit agreement or other evidence of indebtedness, or any license, lease,
contract or other agreement or instrument to which the Company or any Subsidiary is a party or by
which any of them or any of their properties may be bound or affected, or (iii) in the performance
or observance of any statute, law, rule, regulation, ordinance, judgment, order or decree of any
court, regulatory body,




 









 




administrative agency, governmental body, arbitrator or other authority having jurisdiction
over the Company, the Subsidiaries or any of their respective properties, as applicable, except,
with respect to clauses (ii) and (iii) above, to the extent any such contravention has been waived
or would not result in a Material Adverse Effect.




          o. Permits. The Company and each Subsidiary has made all filings, applications and
submissions required by, and owns or possesses all approvals, licenses, certificates,
certifications, clearances, consents, exemptions, marks, notifications, orders, permits and other
authorizations issued by, the appropriate federal, state or foreign regulatory authorities
necessary to conduct its business as described in the Company’s periodic reports and other
information filed with the Securities and Exchange Commission (collectively, “Permits”), except for
such Permits which the failure to obtain would not have a Material Adverse Effect (the “Immaterial
Permits”), and is in compliance with the terms and conditions of all such Permits other than the
Immaterial Permits (the “Required Permits”) except for such failure to comply that would not have a
Material Adverse Effect. Neither the Company nor any Subsidiary has received notice of any
proceedings relating to revocation or modification of, any such Required Permit, which,
individually or in the aggregate, if the subject of an unfavorable decision, ruling or finding,
would have a Material Adverse Effect.




          p. Not an Investment Company. Neither the Company nor any Subsidiary is an “investment
company” or an “affiliated person” of, or “promoter” or “principal underwriter” for, an “investment
company,” as such terms are defined in the Investment Company Act of 1940, as amended (the
“Investment Company Act”), and, after giving effect to the offering and sale of the Securities and
the application of the proceeds thereof as described in the Term Sheet, neither the Company nor any
Subsidiary will an “investment company” or an “affiliated person” of, or “promoter” or “principal
underwriter” for, an “investment company,” as such terms are defined in the Investment Company Act.




          q. No Price Stabilization. Neither the Company nor any Subsidiary nor, to the Company’s
knowledge, any of their respective officers, directors, affiliates or controlling persons has taken
or will take, directly or indirectly, any action designed to or that might be reasonably expected
to cause or result in, or which has constituted or which might reasonably be expected to constitute
the stabilization or manipulation of the price of any security of the Company to facilitate the
sale or resale of the Securities.




          r. Good Title to Property. The Company and each Subsidiary has good and valid title to all
property (whether real or personal) described in the Company’s periodic reports and other
information filed with the Securities and Exchange Commission as being owned by each of them, in
each case free and clear of all liens, claims, security interests, other encumbrances or defects
(collectively, “Liens”), except such as are described in the Company’s periodic reports and other
information filed with the Securities and Exchange Commission or those that would not have a
Material Adverse Effect. All of the property described in the Company’s periodic reports and other
information filed with the Securities and Exchange Commission as being held under lease by the
Company or any Subsidiary is held thereby under valid, subsisting and enforceable leases, without
any liens, restrictions, encumbrances or claims, except those that would not have a Material
Adverse Effect or do not materially interfere with the use made and proposed to be made of such
property by the Company and the Subsidiaries.




          s. Intellectual Property Rights. Except as set forth in the Company’s periodic reports and
other information filed with the Securities and Exchange Commission, the Company and the
Subsidiaries own or possess the right to use all patents, trademarks, trademark registrations,
service marks, service mark registrations, trade names, copyrights, licenses, inventions, software,
databases, know-how, Internet domain names, trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures, and other intellectual property
(collectively, “Intellectual Property”) necessary to carry on their respective businesses as
currently conducted, and as proposed to be conducted and described in the Company’s periodic
reports and other information filed with the Securities and Exchange Commission except where the
failure to own or possess the right to use would not have a Material Adverse Effect, and the
Company is not aware of any claim to the contrary or any challenge by any other person to the
rights of the Company and the Subsidiaries with respect to the foregoing except for those that
would not have a Material Adverse Effect. The Intellectual Property licenses described in the
Company’s periodic reports and other information filed with the Securities and Exchange Commission
are valid, binding upon, and enforceable by or against the parties thereto in accordance to its
terms. The Company and each Subsidiary has complied in all material respects with, and is not in
breach nor has received any asserted or threatened claim of breach of, any Intellectual Property
license described in the Company’s periodic reports and




 









 




other information filed with the Securities and Exchange Commission except for such breaches
or asserted or threatened claims of breach that would not have a Material Adverse Effect, and the
Company has no knowledge of any breach or anticipated breach by any other person to any
Intellectual Property license. To the knowledge of the Company, the Company’s and each
Subsidiary’s businesses as now conducted and as proposed to be conducted as set forth in the
Company’s periodic reports and other information filed with the Securities and Exchange Commission
do not and will not infringe or conflict with any patents, trademarks, service marks, trade names,
copyrights, trade secrets, licenses or other Intellectual Property or franchise right of any
person. The Company has not received written notice of any material claim against the Company or
any Subsidiary alleging the infringement by the Company or any of its Subsidiary of any patent,
trademark, service mark, trade name, copyright, trade secret, license in or other intellectual
property right or franchise right of any person. The Company and each Subsidiary has taken all
reasonable steps to protect, maintain and safeguard its rights in all Intellectual Property. The
consummation of the transactions contemplated by this Agreement will not result in the loss or
impairment of or payment of any additional amounts with respect to, nor require the consent of any
other person in respect of, the Company’s or any of Subsidiary’s right to own, use, or hold for use
any of the Intellectual Property as owned, used or held for use in the conduct of the businesses as
currently conducted. The Company and each Subsidiary has duly and properly filed or caused to be
filed with the United States Patent and Trademark Office (the “PTO”) and applicable foreign and
international patent authorities all patent applications owned by the Company and the Subsidiaries
(the “Company Patent Applications”). To the knowledge of the Company, the Company and each
Subsidiary has complied with the PTO’s duty of candor and disclosure for the Company Patent
Applications and has made no material misrepresentation in the Company Patent Applications. The
Company is not aware of any information material to a determination of patentability regarding the
Company Patent Applications not called to the attention of the PTO or similar foreign authority.
The Company is not aware of any information not called to the attention of the PTO or similar
foreign authority that would preclude the grant of a patent for the Company Patent Applications.
The Company has no knowledge of any information that would preclude the Company, or as applicable,
any Subsidiary, from having clear title to the Company Patent Applications.




          t. No Labor Disputes. No labor problem or dispute with the employees of the Company exists,
or, to the Company’s knowledge, is threatened or imminent, which would reasonably be expected to
result in a Material Adverse Effect. The Company is not aware that any key employee or significant
group of employees of the Company plans to terminate employment with the Company.




          u. Taxes. The Company and each Subsidiary (i) has timely filed all necessary federal, state,
local and foreign income and franchise tax returns (or timely filed applicable extensions
therefore) that have been required to be filed and (ii) is not in default in the payment of any
taxes which were payable pursuant to said returns or any assessments with respect thereto, other
than any which the Company or any Subsidiary is contesting in good faith and for which adequate
reserves have been provided.




          v. ERISA. The Company has fulfilled its obligations, if any, under the minimum funding
standards of Section 302 of the Employee Retirement Income Security Act of 1974, as amended
(“ERISA”) and the regulations and published interpretations thereunder with respect to each “plan”
(as defined in Section 3(3) of ERISA and such regulations and published interpretations) in which
employees of the Company are eligible to participate and each such plan is in compliance in all
material respects with the presently applicable provisions of ERISA and such regulations and
published interpretations. No “prohibited transaction” (as defined in Section 406 of ERISA, or
Section 4975 of the Internal Revenue Code of 1986, as amended from time to time (the “Code”)) or
“accumulated funding deficiency” (as defined in Section 302 of ERISA) or any of the events set
forth in Section 4043(b) of ERISA (other than events with respect to which the thirty (30)-day
notice requirements under Section 4043 of ERISA has been waived) has occurred or could reasonably
be expected to occur with respect to any employee benefit plan of the Company or any Subsidiary,
which could, singularly or in the aggregate, have a Material Adverse Effect.




          w. Compliance with Environmental Laws. The Company and its Subsidiaries (i) are in compliance
with any and all applicable foreign, federal, state and local laws, orders, rules, regulations,
directives, decrees and judgments relating to the use, treatment, storage and disposal of hazardous
or toxic substances or waste and protection of the environment which are applicable to their
businesses (“Environmental Laws”), (ii) have received and are in compliance with all permits,
licenses or other approvals required of them under applicable Environmental Laws to conduct its
business; and (iii) have not received notice of any actual or potential liability for




 









 




the investigation or remediation of any disposal or release of hazardous or toxic substances
or wastes, pollutants or contaminants, except in the case of subsections (i), (ii) and (ii) of this
subsection (ff) as would not, individually or in the aggregate, have a Material Adverse Effect.




          x. Insurance. The Company and each Subsidiary maintains or is covered by insurance provided
by recognized, financially sound and reputable institutions with policies in such amounts and
covering such risks as is adequate for the conduct of its business and the value of its properties
and as is customary for companies engaged in similar businesses in similar industries. All such
insurance is fully in force on the date hereof and will be fully in force as of the Closing Date.
Neither the Company nor any Subsidiary has any reason to believe that it will not be able to renew
its existing insurance coverage as and when such coverage expires or to obtain similar coverage
from similar insurers as may be necessary to continue its business at a cost that would not have a
Material Adverse Effect.




          y. Accounting Controls. The Company and each Subsidiary maintains a system of internal
accounting controls sufficient to provide reasonable assurances that (i) transactions are executed
in accordance with management’s general or specific authorization; (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with generally accepted
accounting principles and to maintain accountability for assets; (iii) access to assets is
permitted only in accordance with management’s general or specific authorization; and (iv) the
recorded accountability for assets is compared with existing assets at reasonable intervals and
appropriate action is taken with respect to any differences. Except as described in the due
diligence materials provided by the Company to the Placement Agent or as set forth in the Company’s
periodic reports and other information filed with the Securities and Exchange Commission, since
January 1, 2006, (i) Grant Thornton, Hong Kong has not identified any material weakness in the
Company’s internal control over financial reporting (whether or not remediated), and (ii) there has
been no change in the Company’s internal control over financial reporting that has materially
affected, or is reasonably likely to materially affect, the Company’s internal control over
financial reporting. The Company is not aware of any fraud, whether or not material, that involves
management or other employees who have a role in the Company’s internal controls.




          z. Disclosure Controls. The Company has established, maintains and evaluates “disclosure
controls and procedures” (as such term is defined in Rule 13a-15e and 15d-15e under the Exchange
Act) that (i) are designed to ensure that material information relating to the Company is made
known to the Company’s principal executive officer and its principal financial officer by others
within those entities, particularly during the periods in which the periodic reports required under
the Exchange Act are being prepared, (ii) have been evaluated for effectiveness as of the end of
the Company’s last fiscal quarter; and (iii) are effective to perform the functions for which they
were established. Since the date of the most recent evaluation of such disclosure controls and
procedures, there have been no significant changes in internal controls or in other factors that
could significantly affect internal controls, including any corrective actions with regard to
significant deficiencies and material weakness.




          aa. Contracts; Off-Balance Sheet Interests. There is no document, contract, permit or
instrument, or off-balance sheet transaction (including without limitation, any “variable
interests” in “variable interest entities,” as such terms are defined in Financial Accounting
Standards Board Interpretation No. 46) of a character required by the Securities Act or the
Securities Act Rules and Regulations to be described in the Company’s periodic reports and other
information filed with the Securities and Exchange Commission, which is not described or filed as
required. The contracts described in the immediately preceding sentence to which the Company is a
party have been duly authorized, executed and delivered by the Company, constitute valid and
binding agreements of the Company, are enforceable against and by the Company in accordance with
the terms thereof and are in full force and effect on the date hereof.




          bb. No Undisclosed Relationships. No relationship, direct or indirect, exists between or
among the Company and any of its Subsidiaries on the one hand and the directors, officers,
stockholders, customers or suppliers of the Company or any of its Subsidiaries or any of their
affiliates on the other hand, which is required to be described in the Company’s periodic reports
and other information filed with the Securities and Exchange Commission and which has not been so
described.




 









 






          cc. Brokers Fees. Except as described in the due diligence materials provided by the Company
to the Placement Agent or as disclosed in the Company’s periodic reports and other information
filed with the Securities and Exchange Commission, there are no contracts, agreements or
understandings between the Company and any person (other than this Agreement) that would give rise
to a valid claim against the Company, the Subsidiaries or the Placement Agent for a brokerage
commission, finder’s fee or other like payment in connection with the offering and sale of the
Securities.




          dd. Forward-Looking Statements. No forward-looking statements (within the meaning of Section
27A of the Securities Act and Section 21E of the Exchange Act) contained in the Company’s periodic
reports and other information filed with the Securities and Exchange Commission has been made or
reaffirmed without a reasonable basis or has been disclosed other than in good faith.




          ee. Nasdaq; Exchange Act Registration. The Common Stock is registered pursuant to Section
12(b) or 12(g) of the Exchange Act and is listed on The Nasdaq Global Market, and the Company has
taken no action designed to terminate, or any action reasonably likely to have the effect of
terminating, the registration of the Common Stock under the Exchange Act or delisting the Common
Stock from The Nasdaq Global Market, nor has the Company received any notification that the
Commission or Nasdaq is contemplating terminating such registration or listing. The Company has
complied in all material respects with the applicable requirements of Nasdaq for the maintenance of
inclusion of the Common Stock on The Nasdaq Global Market. The Company has filed an application to
include the Shares on The Nasdaq Global Market.




          ff. Sarbanes-Oxley Act. The Company, and to its knowledge, all of the Company’s directors or
officers, in their capacities as such, is in compliance in all material respects with all
applicable effective provisions of the Sarbanes-Oxley Act of 2002, as amended and any related rules
and regulations promulgated by the Commission. Each of the principal executive officer and the
principal financial officer of the Company (or each former principal executive officer of the
Company and each former principal financial officer of the Company as applicable) has made all
certifications required by Sections 302 and 906 of the Sarbanes-Oxley Act with respect to all
reports, schedules, forms, statements and other documents required to be filed by it with the
Commission. For purposes of the preceding sentence, “principal executive officer” and “principal
financial officer” shall have the meanings given to such terms in the Sarbanes-Oxley Act.




          gg. Foreign Corrupt Practices. Neither the Company nor, to the Company’s knowledge, any other
person associated with or acting on behalf of the Company, including without limitation any
director, officer, agent or employee of the Company or its Subsidiaries has, directly or
indirectly, during the last five years, while acting on behalf of the Company or on behalf of the
Company’s Subsidiaries after the Subsidiary was acquired by the Company (i) used any corporate
funds for unlawful contributions, gifts, entertainment or other unlawful expenses relating to
political activity or failed to disclose fully any contribution in violation of law, (ii) made any
payment to any federal or state governmental officer or official, or other person charged with
similar public or quasi-public duties, other than payments required or permitted by the laws of the
United States or any jurisdiction thereof, (iii) violated or is in violation of any provision of
the U.S. Foreign Corrupt Practices Act of 1977, as amended or (iv) made any bribe, rebate, payoff,
influence payment, kickback or other unlawful payment.




          hh. Currency and Foreign Transactions. The operations of the Company and its Subsidiaries are
and have been conducted at all times in compliance with applicable financial recordkeeping and
reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended,
the money laundering statutes of all jurisdictions, the rules and regulations thereunder and any
related or similar rules, regulations or guidelines, issued, administered or enforced by any
governmental agency (collectively, the “Money Laundering Laws”), except where a failure to comply
with such requirements, statutes, rules, regulations or guidelines could not reasonably be expected
to have a Material Adverse Effect, and no action, suit or proceeding by or before any court or
governmental agency, authority or body or any arbitrator involving the Company or any of its
Subsidiaries with respect to the Money Laundering Laws is pending or, to the Company’s knowledge,
threatened.




          ii. No Sanctioned Employees. Neither the Company nor any Subsidiary nor, to the Company’s
knowledge, any director, officer, agent, employee or affiliate of the Company or its Subsidiaries
is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of
the U.S. Treasury Department (“OFAC”); and the Company will not directly or indirectly use the
proceeds of the offering, or lend,




 









 





contribute or otherwise make available such proceeds to any subsidiary, joint venture partner
or other person or entity, for the purpose of financing the activities of any person currently
subject to any U.S. sanctions administered by OFAC.




          jj. NASD Affiliations. Except as described in the due diligence materials provided by the
Company to the Placement Agent, neither the Company nor any Subsidiary nor any of their affiliates
(within the meaning of NASD Conduct Rule 2720(b)(1)(a)) directly or indirectly controls, is
controlled by, or is under common control with, or is an associated person (within the meaning of
Article I, Section 1(e)(e) of the By-laws of the NASD) of, any member firm of the NASD.




          kk. Trading Market . Assuming the accuracy of the representations of the Investors in the
Subscription Agreements, no approval of the shareholders of the Company under the rules and
regulations of any trading market (including Rule 4350 of The Nasdaq Global Marketplace Rules) is
required for the Company to issue and deliver to the Investors the Securities.