EXHIBIT 10.7



 Exhibit 10.7 

Make Good Escrow Agreement 

THIS MAKE GOOD ESCROW AGREEMENT (the “Make Good Agreement”), dated effective as of
                    , 2010, is entered into by and among Shangri-La Tibetan Pharmaceuticals, Inc., a British Virgin Islands corporation (the
“Company”); Anderson & Strudwick, Inc. (“A&S”); Ms. Hong Yu and Mr. Taylor Gao in their individual capacities (collectively the “Make Good Pledgors” and each individually a “Make Good
Pledgor”); and SunTrust Bank, N.A., as escrow agent (“Escrow Agent”). 
 WHEREAS, A&S has agreed,
pursuant to the terms of that Placement Agreement dated as of the date hereof (the “Placement Agreement”), to engage in a “best efforts, minimum/maximum” initial public offering of common shares (the “Offering”) of the
Company. As an inducement to A&S to assist with the Offering and as set forth in the Placement Agreement, each Make Good Pledgor has agreed to place certain shares of the Company’s common shares, par value $0.001 per share (the
“Shares”) into escrow for the benefit of the Company and investors in the Offering in the event the Company fails to satisfy certain After-Tax Net Income thresholds; provided, however, that the Shares will be returned to the Make Good
Pledgors if the Shares (i) meet the definition of covered securities under the Securities Act of 1933 and (ii) have a closing price of at least 2.5 times the Offering price for five trading days in any ten trading day period. 

WHEREAS, pursuant to the requirements of the Placement Agreement, the Company and Make Good Pledgors have agreed to establish an
escrow on the terms and conditions set forth in this Make Good Agreement; 
 WHEREAS, the Escrow Agent has agreed to act
as escrow agent pursuant to the terms and conditions of this Make Good Agreement; and 
 WHEREAS, all capitalized terms
used but not defined herein shall have the meanings assigned them in the Placement Agreement; 
 NOW, THEREFORE, in
consideration of the mutual promises of the parties and the terms and conditions hereof, the parties hereby agree as follows: 

1. Appointment of Escrow Agent. The Make Good Pledgors and the Company hereby appoint Escrow Agent to act in accordance with
the terms and conditions set forth in this Make Good Agreement, and Escrow Agent hereby accepts such appointment and agrees to act in accordance with such terms and conditions. 

2. Establishment of Escrow. Prior to the request of effectiveness for the Offering, the Make Good Pledgors shall deliver, or
cause to be delivered, to the Escrow Agent certificates evidencing an aggregate of 1,000,000 Shares (the “Escrow Shares”), along with bank signature stamped stock powers executed in blank (or such other signed instrument of transfer
acceptable to the Company’s Transfer Agent). The Escrow Shares shall be pledged to secure the Company’s commitment to achieve the 2010 Target EPS (as defined below); provided, however, that the Escrow Shares will be returned to the Make
Good Pledgors in accordance with Section 4(c) hereof in the event the Company meets the requirements of that section. As used in this Make Good Agreement, “Transfer Agent” means
                                         
       ., or such other entity hereafter retained by the Company as its stock transfer agent as specified in a writing from the Company to the Escrow Agent and A&S. 

3. Representations of Make Good Pledgors. Each Make Good Pledgor hereby represents and warrants to A&S as follows:

 a. All of the Escrow Shares are validly issued, fully paid and nonassessable shares of the Company, and free
and clear of all pledges, liens and encumbrances. 
 b. Performance of this Make Good Agreement and compliance
with the provisions hereof will not violate any provision of any applicable law and will not conflict with or result in any breach of any of the terms, conditions or provisions of, or constitute a default under, or result in the creation or
imposition of any lien, charge or encumbrance upon, any of the properties or assets of any Make Good Pledgor pursuant to the terms of any indenture, mortgage, deed of trust or other agreement or instrument binding upon such Make Good Pledgor, other
than such breaches, defaults or liens which would not have a material adverse effect taken as a whole. 







 4. Disbursement of Escrow Shares. 

a. Each Make Good Pledgor agrees that, upon the filing of the Company’s Annual Report on Form 10-K for the fiscal
year ending December 31, 2010 with the Commission (the “2010 Annual Report”), the Escrow Shares will be transferred to the Company and/or returned to each Make Good Pledgor, in order to cause the Company to achieve, to the extent
possible, After-Tax Net Earnings Per Share for the fiscal year ending December 31, 2010 of at least $0.9863 per Share (the “2010 Target EPS”): 

1. If the Company’s 2010 After-Tax Net Income divided by all issued and outstanding Shares (including the Escrow
Shares) is at least equal to the 2010 Target EPS, then all Escrow Shares will be returned to the respective Make Good Pledgors. In such case, A&S shall provide written instruction (with a copy to the Company) and direct the Escrow Agent to
return all such Escrow Shares to the respective Make Good Pledgors. 
 2. If the Company’s 2010 After-Tax
Net Income divided by all issued and outstanding Shares (including the Escrow Shares) is less than the 2010 Target EPS, then A&S shall provide written instruction (with a copy to the Company) and direct the Escrow Agent (a) to return to the
Make Good Pledgors (on a pro rata basis to each Make Good Pledgor) the number of Escrow Shares equal to: 
 Company’s
2010 After-Tax Net Income/2010 Target EPS) – all issued Shares other than Escrow Shares 
 and
(b) to instruct the Transfer Agent to transfer to the Company (on a pro rata basis from each Make Good Pledgor) for no additional consideration a number of Make Good Shares that is equal to: 

Escrow Shares – Escrow Shares returned to Make Good Pledgors 

In the event the formulas set forth in Section 4(a)(2) would result in a fractional number of Escrow Shares being returned to any
Make Good Pledgor, such fractional number shall be disregarded. In no event shall the failure by the Company to achieve the 2010 Target EPS result in the delivery by the Make Good Pledgors to the Company of a number of shares that is in excess of
the number of Escrow Shares pledged hereunder. Subject to the timing of the Transfer Agent, transfers required under this Section shall be made to the Company within 30 Business Days after the date which the 2010 Annual Report is filed with the
Commission, provided that Escrow Agent is given notice of the 2010 Annual Report’s filing and results. If the Company’s audited consolidated financial statements for the fiscal year ended December 31, 2010 specify that the 2010 Target
EPS shall have been achieved, no transfer of the Escrow Shares to the Company shall be required by this Section and A&S shall provide written instruction (with a copy to the Company) to the Escrow Agent to return all Escrow Shares deposited with
the Escrow Agent to the Make Good Pledgors within 30 Business Days after the date which the 2010 Annual Report is filed with the Commission, provided that Escrow Agent is given notice of the 2010 Annual Report’s filing and results. The Escrow
Agent need only rely on the letter of instruction from A&S in this regard and will disregard any contrary instructions. The Escrow Agent shall be entitled to rely on the calculations provided by A&S in releasing the Escrow Shares for
disbursement, with no further responsibility to calculate or confirm amounts. 
 b. Notwithstanding anything to
the contrary contained herein, in the event that the release of any of the Escrow Shares to the Company or the Make Good Pledgors or any other party is deemed to be an expense or deduction from revenues/income of the Company for the applicable year,
as required under GAAP, then such expense or deduction shall be excluded for purposes of determining whether or not the 2010 Target EPS has been achieved by the Company. The parties further acknowledge that the Company will account for (i) any
employee stock options granted under its stock incentive plan by expensing the value of such options as they become vested, beginning one year after the initial grant and (ii) any placement agent’s warrants granted in the Company’s
initial public offering of common shares by netting the value of such warrants against offering proceeds. 
 c.
Additionally, notwithstanding any other terms of the Make-Good Escrow, if our shares trade at or above 2.5 times the price of this offering for a period of five trading days within a ten day trading period, the Make-Good Escrow will terminate and
the Make-Good Shares will be released to the initial shareholders. Any delay in redeeming the Make-Good Shares will delay the release of such remaining Make-Good Shares from escrow. 

 

 2 








 5. Duration. This Make Good Agreement shall terminate upon the distribution of
all the Escrow Shares in accordance with the terms of this Make Good Agreement. The Company agrees to promptly provide the Escrow Agent written notice of the filing with the Commission of any financial statements or reports referenced herein.

 6. Escrow Shares. If any Escrow Shares are deliverable to the Company in accordance with this Make Good
Agreement, (i) each Make Good Pledgor covenants and agrees to execute all such instruments of transfer (including stock powers and assignment documents) as are customarily executed to evidence and consummate the transfer of the Escrow Shares
from Make Good Pledgor to the Company, to the extent not done so in accordance with Section 2; (ii) each Make Good Pledgor covenants and agrees not to sell any Escrow Shares for thirty (30) days after the release of the Escrow Shares;
and (iii) following its receipt of the documents referenced in Section 6(i), the Company and Escrow Agent covenant and agree to cooperate with the Transfer Agent so that the Transfer Agent promptly transfers such Escrow Shares to the
Company. Until such time as (if at all) the Escrow Shares are required to be delivered in accordance with this Make Good Agreement, any dividends payable in respect of the Escrow Shares and all voting rights applicable to the Escrow Shares shall be
retained by each Make Good Pledgor. Should the Escrow Agent receive dividends or voting materials, such items shall not be held by the Escrow Agent, but shall be passed immediately on to the Make Good Pledgor and shall not be invested or held for
any time longer than is needed to effectively re-route such items to the Make Good Pledgor. If the Escrow Agent receives a communication requiring the conversion of the Escrow Shares to cash or the exchange of the Escrow Shares for that of an
acquiring company, the Escrow Agent shall solicit and follow the written instructions of each Make Good Pledgor; provided that the cash or exchanged shares are instructed to be redeposited into the Escrow Account. Each Make Good Pledgor shall be
responsible for all taxes resulting from any such conversion or exchange. 
 7. Interpleader. Should any controversy
arise among the parties hereto with respect to this Make Good Agreement or with respect to the right to receive the Escrow Shares, Escrow Agent and/or A&S shall have the right to consult and hire counsel and/or to institute an appropriate
interpleader action to determine the rights of the parties. Escrow Agent and/or A&S are also each hereby authorized to institute an appropriate interpleader action upon receipt of a written letter of direction executed by the parties so
directing either Escrow Agent or A&S. If Escrow Agent or A&S is directed to institute an appropriate interpleader action, it shall institute such action not prior to thirty (30) days after receipt of such letter of direction and not
later than sixty (60) days after such date. Any interpleader action instituted in accordance with this Section 7 shall be filed in any court of competent jurisdiction in the Commonwealth of Virginia, and the Escrow Shares in dispute shall
be deposited with the court and in such event Escrow Agent and A&S shall be relieved of and discharged from any and all obligations and liabilities under and pursuant to this Make Good Agreement with respect to the Escrow Shares and any other
obligations hereunder. 
 8. Exculpation and Indemnification of Escrow Agent and A&S. 

a. Escrow Agent is not a party to, and is not bound by or charged with notice of any agreement out of which this escrow
may arise. Escrow Agent acts under this Make Good Agreement as a depositary only and is not responsible or liable in any manner whatsoever for the sufficiency, correctness, genuineness or validity of the subject matter of the escrow, or any part
thereof, or for the form or execution of any notice given by any other party hereunder, or for the identity or authority of any person executing any such notice. Escrow Agent will have no duties or responsibilities other than those expressly set
forth herein. Escrow Agent will be under no liability to anyone by reason of any failure on the part of any party hereto (other than Escrow Agent) or any maker, endorser or other signatory of any document to perform such person’s or
entity’s obligations hereunder or under any such document. Except for this Make Good Agreement and instructions to Escrow Agent pursuant to the terms of this Make Good Agreement, Escrow Agent will not be obligated to recognize any agreement
between or among any or all of the persons or entities referred to herein, notwithstanding its knowledge thereof. A&S’s sole obligation under this Make Good Agreement is to provide written instruction to Escrow Agent (following such time as
the Company files certain periodic financial reports as specified in Section 4 hereof) directing the distribution of the Escrow Shares. A&S will provide such written instructions upon review of the relevant After-Tax Net Earnings Per Share
amount reported in such periodic financial reports as specified in Section 4 hereof. A&S is not charged with any obligation to conduct any investigation into the financial reports or make any other investigation related thereto. In the
event of any actual or alleged mistake or fraud of the Company, its auditors or any other person (other than A&S) in connection with such financial reports of the Company, A&S shall have no obligation or liability to any party hereunder.

  

 3 








 b. Escrow Agent will not be liable for any action taken or omitted by it, or
any action suffered by it to be taken or omitted, absent gross negligence or willful misconduct. Escrow Agent may rely conclusively on, and will be protected in acting upon, any order, notice, demand, certificate, or opinion or advice of counsel
(including counsel chosen by Escrow Agent), statement, instrument, report or other paper or document (not only as to its due execution and the validity and effectiveness of its provisions, but also as to the truth and acceptability of any
information therein contained) which is reasonably believed by Escrow Agent to be genuine and to be signed or presented by the proper person or persons. The duties and responsibilities of the Escrow Agent hereunder shall be determined solely by the
express provisions of this Make Good Agreement and no other or further duties or responsibilities shall be implied, including, but not limited to, any obligation under or imposed by any laws of the Commonwealth of Virginia upon fiduciaries. THE
ESCROW AGENT SHALL NOT BE LIABLE, DIRECTLY OR INDIRECTLY, FOR ANY (I) DAMAGES, LOSSES OR EXPENSES ARISING OUT OF THE SERVICES PROVIDED HEREUNDER, OTHER THAN DAMAGES, LOSSES OR EXPENSES WHICH HAVE BEEN FINALLY ADJUDICATED TO HAVE DIRECTLY
RESULTED FROM THE ESCROW AGENT’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT, OR (II) SPECIAL, INDIRECT OR CONSEQUENTIAL DAMAGES OR LOSSES OF ANY KIND WHATSOEVER (INCLUDING, WITHOUT LIMITATION, LOST PROFITS), EVEN IF THE ESCROW AGENT HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH LOSSES OR DAMAGES AND REGARDLESS OF THE FORM OF ACTION. 
 c. The Company and
each Make Good Pledgor each hereby, jointly and severally, indemnify and hold harmless each of Escrow Agent, A&S and any of their principals, partners, agents, employees and affiliates from and against any expenses, including reasonable
attorneys’ fees and disbursements, damages or losses suffered by Escrow Agent or A&S in connection with any claim or demand, which, in any way, directly or indirectly, arises out of or relates to this Make Good Agreement or the services of
Escrow Agent or A&S hereunder; except, that if Escrow Agent or A&S is guilty of willful misconduct or gross negligence under this Make Good Agreement, then Escrow Agent or A&S, as the case may be, will bear all losses, damages and
expenses arising as a result of its own willful misconduct or gross negligence. Promptly after the receipt by Escrow Agent or A&S of notice of any such demand or claim or the commencement of any action, suit or proceeding relating to such demand
or claim, Escrow Agent or A&S, as the case may be, will notify the other parties hereto in writing. For the purposes hereof, the terms “expense” and “loss” will include all amounts paid or payable to satisfy any such claim or
demand, or in settlement of any such claim, demand, action, suit or proceeding settled with the express written consent of the parties hereto, and all costs and expenses, including, but not limited to, reasonable attorneys’ fees and
disbursements, paid or incurred in investigating or defending against any such claim, demand, action, suit or proceeding. The provisions of this Section 8 shall survive the termination of this Make Good Agreement, and the resignation or removal
of the Escrow Agent. 
 9. Compensation of Escrow Agent. Escrow Agent shall be entitled to compensation of $1,500 in
the aggregate for its services under this Agreement, which compensation shall be paid by the Company. The fee agreed upon for the services rendered hereunder is intended as full compensation for Escrow Agent’s services as contemplated by this
Make Good Agreement; provided, however, that in the event that Escrow Agent renders any material service not contemplated in this Make Good Agreement, or there is any assignment of interest in the subject matter of this Make
Good Agreement, or any material modification hereof, or if any material controversy arises hereunder, or Escrow Agent is made a party to any litigation pertaining to this Make Good Agreement, or the subject matter hereof, then Escrow Agent shall be
reasonably compensated by the Company for such extraordinary services and reimbursed for all costs and expenses, including reasonable attorney’s fees, occasioned by any delay, controversy, litigation or event, and the same shall be recoverable
from the Company. Prior to incurring any costs and/or expenses in connection with the foregoing sentence, Escrow Agent shall be required to provide written notice to the Company of such costs and/or expenses and the relevancy thereof and Escrow
Agent shall not be permitted to incur any such costs and/or expenses which are not related to litigation prior to receiving written approval from the Company, which approval shall not be unreasonably withheld. 

 

 4 








 10. Resignation of Escrow Agent. At any time, upon ten (10) days’
written notice to the Company, Escrow Agent may resign and be discharged from its duties as Escrow Agent hereunder. As soon as practicable after its resignation, Escrow Agent will promptly turn over to a successor escrow agent appointed by A&S
the Escrow Shares held hereunder upon presentation of a document appointing the new escrow agent and evidencing its acceptance thereof. If, by the end of the 10-day period following the giving of notice of resignation by Escrow Agent, A&S shall
have failed to appoint a successor escrow agent, Escrow Agent may interplead the Escrow Shares into the registry of any court having jurisdiction. 

11. Records. Escrow Agent shall maintain accurate records of all transactions hereunder. Promptly after the termination of
this Make Good Agreement or as may reasonably be requested by the parties hereto from time to time before such termination, Escrow Agent shall provide the parties hereto, as the case may be, with a complete copy of such records, certified by Escrow
Agent to be a complete and accurate account of all such transactions. The authorized representatives of each of the parties hereto shall have access to such books and records at all reasonable times during normal business hours upon reasonable
notice to Escrow Agent and at the requesting party’s expense. 
 12. Notice. All notices, communications and
instructions required or desired to be given under this Make Good Agreement must be in writing and shall be deemed to be duly given if sent by registered or certified mail, return receipt requested, or overnight courier, to the addresses listed on
the signature pages hereto. 
 13. Execution in Counterparts. This Make Good Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 

14. Assignment and Modification. This Make Good Agreement and the rights and obligations hereunder of any of the parties
hereto may not be assigned without the prior written consent of the other parties hereto. Subject to the foregoing, this Make Good Agreement will be binding upon and inure to the benefit of each of the parties hereto and their respective successors
and permitted assigns. No other person will acquire or have any rights under, or by virtue of, this Make Good Agreement. No portion of the Escrow Shares shall be subject to interference or control by any creditor of any party hereto, or be subject
to being taken or reached by any legal or equitable process in satisfaction of any debt or other liability of any such party hereto prior to the disbursement thereof to such party hereto in accordance with the provisions of this Make Good Agreement.
This Make Good Agreement may be amended or modified only in writing signed by all of the parties hereto. 
 15. Applicable
Law. This Make Good Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Virginia without giving effect to the principles of conflicts of laws thereof. 

16. Headings. The headings contained in this Make Good Agreement are for convenience of reference only and shall not affect
the construction of this Make Good Agreement. 
 17. Attorneys’ Fees. If any action at law or in equity,
including an action for declaratory relief, is brought to enforce or interpret the provisions of this Make Good Agreement, the prevailing party shall be entitled to recover reasonable attorneys’ fees from the other party (unless such other
party is the Escrow Agent), which fees may be set by the court in the trial of such action or may be enforced in a separate action brought for that purpose, and which fees shall be in addition to any other relief that may be awarded. 

18. Merger or Consolidation. Any corporation or association into which the Escrow Agent may be converted or merged, or with
which it may be consolidated, or to which it may sell or transfer all or substantially all of its corporate trust business and assets as a whole or substantially as a whole, or any corporation or association resulting from any such conversion, sale,
merger, consolidation or transfer to which the Escrow Agent is a party, shall be and become the successor escrow agent under this Make Good Agreement and shall have and succeed to the rights, powers, duties, immunities and privileges as its
predecessor, without the execution or filing of any instrument or paper or the performance of any further act. 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 
  


 5 








 IN WITNESS WHEREOF, the parties have duly executed this Make Good Agreement as of the
date set forth opposite their respective names. 
  

			
	 COMPANY:
  

Shangri-La Tibetan Pharmaceuticals, Inc.

		
	By:	 	 
	Name:	 	Taylor Z. Gao
	Title:	 	CEO
	
	MAKE GOOD PLEDGORS:
	
	 
	Hong Yu
	
	 
	Taylor Z. Gao (individually)
	
	 A&S:
  

Anderson & Strudwick, Incorporated

		
	By:	 	 
	Name:	 	L. McCarthy Downs III
	Its:	 	Senior Vice President
	
	 ESCROW AGENT:
  

SunTrust Bank, N.A.

		
	By:	 	 
	Name:	 	 
	Its:	 	Trust Officer, Escrow Services


  

 6