Document:

Unassociated Document

    Exhibit
10.4

     

    SUBSCRIPTION
AGREEMENT

     

    THIS SUBSCRIPTION AGREEMENT
(this “Agreement”), is
dated as of January 22, 2010, by and between China Yongxin Pharmaceuticals, Inc.
(formerly FreePCSQuote), a Delaware corporation (the “Company”), and the subscribers
listed on Schedule
I
hereto (the “Subscribers”).

    

    WHEREAS, the Company and the
Subscribers are executing and delivering this Agreement in reliance upon an
exemption from securities registration afforded by the provisions of Section
4(2), Section 4(6) and/or Regulation D (“Regulation D”) as promulgated
by the United States Securities and Exchange Commission (the “Commission”) under the
Securities Act of 1933, as amended (the “1933 Act”);

     

    WHEREAS, the parties desire
that, upon the terms and subject to the conditions contained herein, the Company
shall issue and sell to the Subscribers, as provided herein, and the Subscribers
shall purchase, in the aggregate, purchase: (i) not less than $350,000 nor
more than $1,500,000 of principal amount (“Principal Amount”) of
secured  promissory notes of the Company (“Note” or “Notes”), a form of which is
annexed hereto as Exhibit
A, convertible into shares of the Company’s Common Stock, $0.001 par
value (the “Common
Stock”) at a per share conversion price set forth in the Notes (“Conversion Price”); and (ii)
share purchase warrants (the “Warrants”) in the form
attached hereto as Exhibit B,
to purchase shares of the Company’s Common Stock (the “Warrant Shares”) (the “Offering”).  The
Notes, shares of Common Stock issuable upon conversion of the Notes (the “Conversion Shares”), the
Warrants and the Warrant Shares are collectively referred to herein as the
“Securities.”;
and

     

    WHEREAS, the aggregate
proceeds of the sale of the Notes and the Warrants contemplated hereby (“Purchase Price”) shall be held
in escrow by Grushko & Mittman, P.C., 551 Fifth Avenue, Suite 1601, New
York, New York 10176 (the “Escrow Agent”) pursuant to the
terms of an Escrow Agreement to be executed by the parties substantially in the
form attached hereto as Exhibit
C (the “Escrow
Agreement”).

     

    NOW, THEREFORE, in
consideration of the mutual covenants and other agreements contained in this
Agreement the Company and the Subscribers hereby agree as follows:

     

    1.        Closing
Date.   The “Closing Date” shall be the
date that the Purchase Price is transmitted by wire transfer or otherwise
credited to or for the benefit of the Company. The consummation of the
transactions contemplated herein shall take place at the offices of Grushko
& Mittman, P.C., 551 Fifth Avenue, Suite 1601, New York, New York 10176,
upon the satisfaction or waiver of all conditions to closing set forth in this
Agreement.   Subject to the satisfaction or waiver of the terms
and conditions of this Agreement, on the Closing Date, Subscribers shall
purchase and the Company shall sell to Subscribers the Notes and Warrants as
described in Section 2 of this Agreement.  The transactions
contemplated herein may be conducted in one or more closings until the maximum
Principal Amount has been subscribed for, on such dates as mutually agreed
between the Company and subsequent Subscribers, with each such closing date
referred to as a “Closing Date” hereunder.

    

    2.        Notes and
Warrants.

    

    (a)           Notes.   Subject
to the satisfaction or waiver of the terms and conditions of this Agreement, on
the Closing Date, each Subscriber shall purchase from the Company, and the
Company shall sell to each such Subscriber a Note in the Principal Amount set
forth on Schedule
I hereto for each such Subscriber’s Purchase Price indicated
thereon.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    (b)           Warrants.  On
the Closing Date, the Company will issue and deliver the Warrants to the
Subscribers.  Warrants to purchase five Shares will be issued for each
one dollar of Purchase Price as set forth on Schedule I.  The
exercise price to acquire a Warrant Share upon exercise of a Warrant shall be
the lesser of $0.50, or 110% of the average closing bid price of the Common
Stock as reported by Bloomberg L.P. for the Principal Market as defined in
Section 9(b) for the five (5) trading days immediately preceding the Closing
Date, subject to reduction as described in the Warrants.  The Warrants
shall be exercisable until three years after the Closing Date.

    

    (c)           Allocation of Purchase
Price.   The Purchase Price will be allocated by each
Subscriber, among the components of the Securities so that each component of the
Securities will be fully paid and non-assessable.

    

    3.        Security
Interest.   Subject to agreed upon exclusions, the
Subscribers will be granted a security interest in the assets of the Company
including ownership of the Subsidiaries, and in the assets of the Subsidiaries,
which security interest will be memorialized in a “Security Agreement,” a form of
which is annexed hereto as Exhibit
D.   The Subsidiaries will guaranty the Company’s
obligations under the Transaction Documents as defined in Section
5(c).   Such guaranties will be memorialized in a “Subsidiary Guaranty”, the form
of which is annexed hereto as Exhibit E.  The
holders, identified on Schedule
3 hereto (“Pledgors”), of the Company’s
outstanding Common Stock (the “Pledged Stock”) will pledge
the Pledged Stock as set forth on Schedule 3, as further
security for the Company’s obligations.  The pledge will be
memorialized in a “Stock Pledge
Agreement”, the form of which is annexed hereto as Exhibit
F.   The Company will acknowledge the appointment of a
collateral agent (the “Collateral Agent”) to act on
behalf of the Subscribers as memorialized in a “Collateral Agent Agreement”, a
form of which is annexed hereto as Exhibit G. The Company,
Subsidiaries and Pledgors will execute such other agreements, documents and
financing statements reasonably requested by the Subscribers and Collateral
Agent, which may be filed at the Company’s expense with the jurisdictions,
states and counties designated by the Subscribers. The Company will also execute
all such documents reasonably necessary in the opinion of the Subscribers and
Collateral Agent to memorialize and further protect the security interest
described herein which will be prepared and filed at the Company’s expense with
the jurisdictions, states and filing offices designated by the Subscribers and
Collateral Agent.

    

    4.        Subscriber Representations
and Warranties.  Each of the Subscribers hereby represents and
warrants to and agrees with the Company with respect only to such Subscriber
that:

    

    (a)           Organization and Standing of
the Subscriber.  Subscriber, to the extent applicable, is a
corporation duly incorporated, validly existing and in good standing under the
laws of the jurisdiction of its incorporation.

    

    (b)           Authorization and
Power.  Subscriber has the requisite power and authority to
enter into and perform this Agreement and the other Transaction Documents and to
purchase the Note and Warrants being sold to it hereunder.  The
execution, delivery and performance of this Agreement and the other Transaction
Documents by Subscriber and the consummation by it of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action, and no further consent or authorization of Subscriber or its
Board of Directors or stockholders, if applicable, is required.  This
Agreement and the other Transaction Documents have been duly authorized,
executed and when delivered by Subscriber and constitute, or shall constitute
when executed and delivered, a valid and binding obligation of Subscriber,
enforceable against Subscriber in accordance with the terms
thereof.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    (c)           No
Conflicts.  The execution, delivery and performance of this
Agreement and the other Transaction Documents and the consummation by Subscriber
of the transactions contemplated hereby and thereby or relating hereto do not
and will not (i) result in a violation of Subscriber’s charter documents, bylaws
or other organizational documents, if applicable, (ii) conflict with nor
constitute a default (or an event which with notice or lapse of time or both
would become a default) under any agreement to which Subscriber is a party, nor
(iii) result in a violation of any law, rule, or regulation, or any order,
judgment or decree of any court or governmental agency applicable to Subscriber
or its properties (except for such conflicts, defaults and violations as would
not, individually or in the aggregate, have a material adverse effect on
Subscriber).  Subscriber is not required to obtain any consent,
authorization or order of, or make any filing or registration with, any court or
governmental agency in order for it to execute, deliver or perform any of its
obligations under this Agreement and the other Transaction
Documents  nor to purchase the Securities in accordance with the terms
hereof, provided that for purposes of the representation made in this sentence,
Subscriber is assuming and relying upon the accuracy of the relevant
representations and agreements of the Company herein.

    

    (d)           Information on
Company.   Subscriber has been furnished with or has had
access at the EDGAR Website of the Commission to the Company's filings made with
the Commission through the fifth business day preceding the Closing Date
(hereinafter referred to collectively as the "Reports").  In
addition, Subscriber may have received in writing from the Company such other
information concerning its operations, financial condition and other matters as
Subscriber has requested in writing, identified thereon as OTHER WRITTEN
INFORMATION (such other information is collectively, the "Other Written Information"),
and considered all factors Subscriber deems material in deciding on the
advisability of investing in the Securities.

    

    (e)           Information on
Subscriber.   Subscriber is, and will be at the time of
the conversion of the Notes and exercise of the Warrants, an "accredited investor", as such
term is defined in Regulation D promulgated by the Commission under the 1933
Act, is experienced in investments and business matters, has made investments of
a speculative nature and has purchased securities of United States
publicly-owned companies in private placements in the past and, with its
representatives, has such knowledge and experience in financial, tax and other
business matters as to enable Subscriber to utilize the information made
available by the Company to evaluate the merits and risks of and to make an
informed investment decision with respect to the proposed purchase, which
represents a speculative investment.  Subscriber has the authority and
is duly and legally qualified to purchase and own the
Securities.  Subscriber is able to bear the risk of such investment
for an indefinite period and to afford a complete loss thereof.  The
information set forth on Schedule
I hereto
regarding Subscriber is accurate.

    

    (f)           Purchase of
Notes  and Warrants.  On the Closing Date, Subscriber
will purchase a Note and Warrants as principal for its own account for
investment only and not with a view toward, or for resale in connection with,
the public sale or any distribution thereof.

    

    (g)           Compliance with Securities
Act.   Subscriber understands and agrees that the
Securities have not been registered under the 1933 Act or any applicable state
securities laws, by reason of their issuance in a transaction that does not
require registration under the 1933 Act (based in part on the accuracy of the
representations and warranties of the Subscriber contained herein), and that
such Securities must be held indefinitely unless  the Securities are
registered under the 1933 Act or any applicable state securities laws or is
exempt from such registration.

    

    (h)           Conversion Shares and
Warrant Shares Legend.  The Conversion Shares and Warrant
Shares shall bear the following or similar legend:

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    "THE ISSUANCE AND SALE OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, NOR APPLICABLE STATE SECURITIES
LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION
OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY
ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS
SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID
ACT.  NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
ARRANGEMENT SECURED BY THE SECURITIES."

    

    (i)           Notes and
Warrants
Legend.  The Notes and Warrants shall bear the following
legend:

     

    "NEITHER THE ISSUANCE AND SALE OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE [CONVERTIBLE –OR-EXERCISABLE] HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION
OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY
ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS
SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID
ACT.  NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
ARRANGEMENT SECURED BY THE SECURITIES."

     

    (j)           Communication of
Offer.  The offer to sell the Securities was directly
communicated to Subscriber by the Company.  At no time was Subscriber
presented with or solicited by any leaflet, newspaper or magazine article, radio
or television advertisement, or any other form of general advertising or
solicited or invited to attend a promotional meeting otherwise than in
connection and concurrently with such communicated offer.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    (k)           Restricted
Securities.   Subscriber understands that the Securities
have not been registered under the 1933 Act and Subscriber will not sell, offer
to sell, assign, pledge, hypothecate or otherwise transfer any of the Securities
unless pursuant to an effective registration statement under the 1933 Act, or
unless an exemption from registration is available.  Notwithstanding
anything to the contrary contained in this Agreement, Subscriber may transfer
(without restriction and without the need for an opinion of counsel) the
Securities to its Affiliates (as defined below) provided that each such
Affiliate is an “accredited investor” under Regulation D and such Affiliate
agrees to be bound by the terms and conditions of this Agreement. For the
purposes of this Agreement, an “Affiliate” of any person or
entity means any other person or entity directly or indirectly controlling,
controlled by or under direct or indirect common control with such person or
entity.  Affiliate includes each Subsidiary of the
Company.  For purposes of this definition, “control” means the power to
direct the management and policies of such person or firm, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise.

    

    (l)          
 No Governmental
Review.  Subscriber understands that no United States federal
or state agency or any other governmental or state agency has passed on or made
recommendations or endorsement of the Securities or the suitability of the
investment in the Securities nor have such authorities passed upon or endorsed
the merits of the offering of the Securities.

    

    (m)          Correctness of
Representations.  Subscriber represents that the foregoing
representations and warranties are true and correct as of the date hereof and,
unless Subscriber otherwise notifies the Company prior to the Closing Date,
shall be true and correct as of the Closing Date.

    

    (n)           Survival.  The
foregoing representations and warranties shall survive the Closing
Date.

     

    5.        Company Representations and
Warranties.  Except as set forth in the Schedules, the Company
represents and warrants to and agrees with each Subscriber that:

     

    (a)           Due
Incorporation.  The Company is a corporation duly incorporated,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation and has the requisite corporate power to own its properties and to
carry on its business as presently conducted.  The Company is duly
qualified as a foreign corporation to do business and is in good standing in
each jurisdiction where the nature of the business conducted or property owned
by it makes such qualification necessary, other than those jurisdictions in
which the failure to so qualify would not have a Material Adverse
Effect.  For purposes of this Agreement, a “Material Adverse Effect” shall
mean a material adverse effect on the financial condition, results of
operations, prospects, properties or business of the Company and its
Subsidiaries taken as a whole.  For purposes of this Agreement, “Subsidiary” means, with
respect to any entity at any date, any direct or indirect corporation, limited
or general partnership, limited liability company, trust, estate, association,
joint venture or other business entity of which (A) more than 40% of
(i) the outstanding capital stock having ordinary voting power to elect a
majority of the board of directors or other managing body of such entity,
(ii) in the case of a partnership or limited liability company, the
interest in the capital or profits of such partnership or limited liability
company or (iii) in the case of a trust, estate, association, joint venture
or other entity, the beneficial interest in such trust, estate, association or
other entity business is, at the time of determination, owned or controlled
directly or indirectly through one or more intermediaries, by such entity, or
(B) is under the actual control of the Company.  As of the Closing
Date, all of the Company’s Subsidiaries and the Company’s all other ownership
interests therein are set forth on Schedule
5(a). The Company represents that it owns all of the equity of the
Subsidiaries and rights to receive equity of the Subsidiaries set forth on Schedule
5(a), free and clear of all liens, encumbrances and claims, except as set
forth on Schedule
5(a).  No person or entity other than the Company has the right
to receive any equity interest in the Subsidiaries.  The Company
further represents that the Subsidiaries have not been known by any other names
for the prior five years.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    (b)           Outstanding
Stock.  All issued and outstanding shares of capital stock and
equity interests in the Company have been duly authorized and validly issued and
are fully paid and non-assessable.

     

    (c)           Authority;
Enforceability.  This Agreement, the Notes, Warrants, Security
Agreement, Subsidiary Guaranty, Stock Pledge Agreement, Collateral Agent
Agreement, the Escrow Agreement, and any other agreements required to be
delivered pursuant to this Agreement (collectively “Transaction Documents”) have
been duly authorized, executed and delivered by the Company, Subsidiaries and
Pledgors, as the case may be, and are valid and binding agreements of the
Company, Subsidiaries and Pledgors, as the case may be, enforceable in
accordance with their terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights generally and to general principles
of equity.  The Company, Subsidiaries and Pledgors, as the case may
be, have full corporate power and authority necessary to enter into and deliver
the Transaction Documents and to perform their obligations
thereunder.

     

    (d)           Capitalization and
Additional
Issuances.   The authorized and outstanding capital stock
of the Company and Subsidiaries on a fully diluted basis as of the date of
this Agreement and the Closing Date (not including the Securities) are set forth
on Schedule
5(d).  Except as set forth on Schedule
5(d), there are no options, warrants, or rights to subscribe to,
securities, rights, understandings or obligations convertible into or
exchangeable for or giving any right to subscribe for any shares of capital
stock or other equity interest of the Company or any of the
Subsidiaries.  The only officer, director, employee and consultant
stock option or stock incentive plan or similar plan currently in effect or
contemplated by the Company is described on Schedule
5(d).  There are no outstanding agreements or preemptive or
similar rights affecting the Company's Common Stock.

     

    (e)           Consents.  No
consent, approval, authorization or order of any court, governmental agency or
body or arbitrator having jurisdiction over the Company, Subsidiaries, Pledgors,
or any of their Affiliates, OTC Bulletin Board (“Bulletin Board”), any other
Principal Market, or the Company's stockholders is required for the execution by
the Company of the Transaction Documents and compliance and performance by the
Company, Subsidiaries and Pledgors of their obligations under the Transaction
Documents, including, without limitation, the issuance and sale of the
Securities.  The Transaction Documents and the Company’s performance
of its obligations thereunder has been approved by the Company’s Board of
Directors in accordance with the Company’s Certificate of Incorporation and
applicable law.  Any such qualifications and filings will, in the case
of qualifications, be effective upon Closing and will, in the case of filings,
be made within the time prescribed by law. Under the Regulations on the
Acquisitions by Foreign Investors of Domestic Enterprises jointly promulgated by
the PRC Ministry of Commerce (“MOFCOM”), the China Securities
Regulatory Commission (“CSRC”), the State Owned Assets
Supervision and Management Commission, the General Administration of Taxation
and the State Administration of Foreign Exchange in effect on the Closing Date,
neither the Company nor any Subsidiary is required, as of the date of this
Agreement and as of the Closing, to obtain any approvals of the CSRC in
connection with the transactions contemplated by the Transaction Documents. No
further approval by, or registration or filing with State Administration of
Foreign Exchange (“SAFE”) other than typical SAFE
foreign exchange processing procedural registrations are expressly required
under the current effective and applicable governing regulations for matters
including but not limited to the payment by any Subsidiary of dividends to the
Company in foreign currency, such as U.S. Dollars. The Company has or will have
obtained or made all necessary consents, approvals, registrations and filings
with relevant governmental authorities in the PRC on or before the Closing Date
in accordance with the then effective and applicable PRC regulations to complete
the transactions contemplated in the Transaction Documents, except as would not
have a Material Adverse Effect.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    (f)           No Violation or
Conflict.  Assuming the representations and warranties of the
Subscriber in Section 4 are true and correct, neither the issuance and sale of
the Securities nor the performance of the Company’s obligations under this
Agreement and all other agreements entered into by the Company relating thereto
by the Company will:

     

    (i)           violate,
conflict with, result in a breach of, or constitute a default (or an event which
with the giving of notice or the lapse of time or both would be reasonably
likely to constitute a default) under (A) the articles or certificate of
incorporation, charter or bylaws of the Company, (B) to the Company's knowledge,
any decree, judgment, order, law, treaty, rule, regulation or determination
applicable to the Company of any court, governmental agency or body, or
arbitrator having jurisdiction over the Company or over the properties or assets
of the Company or any of its Affiliates, (C) the terms of any bond, debenture,
note or any other evidence of indebtedness, or any agreement, stock option or
other similar plan, indenture, lease, mortgage, deed of trust or other
instrument to which the Company or any of its Affiliates is a party, by which
the Company or any of its Affiliates is bound, or to which any of the properties
of the Company or any of its Affiliates is subject, or (D) the terms of any
"lock-up" or similar provision of any underwriting or similar agreement to which
the Company, or any of its Affiliates is a party except the violation, conflict,
breach, or default of which would not have a Material Adverse Effect;
or

     

    (ii)         
result in the creation or imposition of any lien, charge or encumbrance upon the
Securities or any of the assets of the Company or any of its Affiliates except
in favor of Subscribers as described herein; or

     

    (iii)         result
in the activation of any anti-dilution rights or a reset or repricing of any
debt, equity or security instrument of any creditor or equity holder of the
Company, or the holder of the right to receive any debt, equity or security
instrument of the Company nor result in the acceleration of the due date of any
obligation of the Company; or

     

    (iv)        result
in the triggering of any piggy-back or other registration rights of any person
or entity holding securities of the Company or having the right to receive
securities of the Company.

     

    (g)          The
Securities.  The Securities upon issuance:

     

    (i)           are,
or will be, free and clear of any security interests, liens, claims or other
encumbrances, subject only to restrictions upon transfer under the 1933 Act and
any applicable state securities laws;

    

    (ii)          have
been, or will be, duly and validly authorized and on the dates of issuance,
conversion or exercise, as the case may be, of the Notes, Warrants, Conversion
Shares upon conversion of the Notes, and the Warrant Shares upon exercise of the
Warrants, such Notes, Warrants, Conversion Shares and Warrant Shares will be
duly and validly issued, fully paid and non-assessable and if registered
pursuant to the 1933 Act and resold pursuant to an effective registration
statement or exempt from registration will be free trading, unrestricted and
unlegended;

     

    (iii)         will
not have been issued or sold in violation of any preemptive or other similar
rights of the holders of any securities of the Company or rights to acquire
securities of the Company;

     

    (iv)        will
not subject the holders thereof to personal liability by reason of being such
holders; and

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    (v)         assuming
the representations and warranties of the Subscribers as set forth in Section 4
hereof are true and correct, will not result in a violation of Section 5 under
the 1933 Act.

     

    (h)           Litigation.  There
is no pending or, to the best knowledge of the Company, threatened action, suit,
proceeding or investigation before any court, governmental agency or body, or
arbitrator having jurisdiction over the Company, or any of its Affiliates that
would affect the execution by the Company or the complete and timely performance
by the Company of its obligations under the Transaction
Documents.  Except as disclosed in the Reports, there is no pending
or, to the best knowledge of the Company, basis for or threatened action, suit,
proceeding or investigation before any court, governmental agency or body, or
arbitrator having jurisdiction over the Company, or any of its Affiliates which
litigation if adversely determined would have a Material Adverse
Effect.

     

    (i)           Reserved.

     

    (j)           Information Concerning
Company.  The Reports and Other Written Information contain all
material information relating to the Company and its operations and financial
condition as of their respective dates which information is required to be
disclosed therein.   Since December 31, 2008 and except as
disclosed in the Reports or modified in the Other Written Information or in the
Schedules hereto, there has been no Material Adverse Event relating to the
Company's business, financial condition or affairs. The Reports and Other
Written Information including the financial statements included therein do not
contain any 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, taken
as a whole, not misleading in light of the circumstances and when
made.

     

    (k)           Solvency.  Based
on the financial condition of the Company as of the Closing Date, (i) the
Company’s fair saleable value of its assets exceeds the amount that will be
required to be paid on or in respect of the Company’s existing debts and other
liabilities (including known contingent liabilities) as they mature; (ii) to the
Company’s best knowledge, the Company’s assets do not constitute unreasonably
small capital to carry on its business for the current fiscal year as now
conducted and as proposed to be conducted including its capital needs taking
into account the particular capital requirements of the business conducted by
the Company, and projected capital requirements and capital availability
thereof; and (iii) the current cash flow of the Company, together with the
proceeds the Company would receive, were it to liquidate all of its assets,
after taking into account all anticipated uses of the cash, would be sufficient
to pay all amounts on or in respect of its debt when such amounts are required
to be paid.  The Company does not intend to incur debts beyond its
ability to pay such debts as they mature (taking into account the timing and
amounts of cash to be payable on or in respect of its debt).

     

    (l)           Defaults.  The
Company is not in violation of its articles of incorporation or
bylaws.   The Company is (i) not in default under or in violation
of any other material agreement or instrument to which it is a party or by which
it or any of its properties are bound or affected, which default or violation
would have a Material Adverse Effect, (ii) not in default with respect to any
order of any court, arbitrator or governmental body or subject to or party to
any order of any court or governmental authority arising out of any action, suit
or proceeding under any statute or other law respecting antitrust, monopoly,
restraint of trade, unfair competition or similar matters, or (iii) not in
violation of any statute, rule or regulation of any governmental authority which
violation would have a Material Adverse Effect.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    (m)           No Integrated
Offering. Neither the Company, nor any of its Affiliates, nor any
person acting on its or their behalf, has directly or indirectly made any offers
or sales of any security of the Company nor solicited any offers to buy any
security of the Company under circumstances that would cause the offer of the
Securities pursuant to this Agreement to be integrated with prior offerings by
the Company for purposes of the 1933 Act or any applicable stockholder approval
provisions, including, without limitation, under the rules and regulations of
the Bulletin Board.  No prior offering will impair the exemptions
relied upon in this Offering or the Company’s ability to timely comply with its
obligations hereunder.  Neither the Company nor any of its Affiliates
will take any action or steps that would cause the offer or issuance of the
Securities to be integrated with other offerings which would impair the
exemptions relied upon in this Offering or the Company’s ability to timely
comply with its obligations hereunder.  The Company will not conduct
any offering other than the transactions contemplated hereby that may be
integrated with the offer or issuance of the Securities or that would impair the
exemptions relied upon in this Offering or the Company’s ability to timely
comply with its obligations hereunder.

     

    (n)           No General
Solicitation.  Neither the Company, nor any of its Affiliates,
nor to its knowledge, any person acting on its or their behalf, has engaged in
any form of general solicitation or general advertising (within the meaning of
Regulation D under the 1933 Act) in connection with the offer or sale of the
Securities.

     

    (o)           No Undisclosed
Liabilities.  The Company has no liabilities or obligations
which are material, individually or in the aggregate, other than those incurred
in the ordinary course of the Company businesses since December 31, 2008 and
which, individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect, except as disclosed in the Reports or on Schedule
5(o).

     

    (p)           No Undisclosed Events or
Circumstances.  Since December 31, 2008, except as disclosed in
the Reports, no event or circumstance has occurred or exists with respect to the
Company or its businesses, properties, operations or financial condition, that,
under applicable law, rule or regulation, requires public disclosure or
announcement prior to the date hereof by the Company but which has not been so
publicly announced or disclosed in the Reports.

     

    (q)           Banking.  Schedule
5(q) contains a list of all financial institutions at which the Company
and Subsidiaries maintain deposit, checking and other accounts. The list
includes the accurate addresses of such financial institutions and account
numbers of such accounts.

     

    (r)           Dilution.   The
Company's executive officers and directors understand the nature of the
Securities being sold hereby and recognize that the issuance of the Securities
will have a potential dilutive effect on the equity holdings of other holders of
the Company’s equity or rights to receive equity of the Company.  The
board of directors of the Company has concluded, in its good faith business
judgment, that the issuance of the Securities is in the best interests of the
Company.  The Company specifically acknowledges that its obligation to
issue the Conversion Shares upon conversion of the Notes and the Warrant Shares
upon exercise of the Warrants is binding upon the Company and enforceable
regardless of the dilution such issuance may have on the ownership interests of
other stockholders of the Company or parties entitled to receive equity of the
Company.

     

    (s)           No Disagreements with
Accountants and Lawyers. There are no material disagreements of any
kind presently existing, or reasonably anticipated by the Company to arise
between the Company and the accountants and lawyers previously and presently
employed by the Company, including but not limited to disputes or conflicts over
payment owed to such accountants and lawyers, nor have there been any such
disagreements during the two years prior to the Closing Date.  The
Company’s regularly engaged auditors and contact information are set forth on
Schedule
5(s).

    

    (t)           Investment
Company.   Neither the Company nor any Affiliate of the
Company is an “investment company” within the meaning of the Investment Company
Act of 1940, as amended.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    (u)           Foreign Corrupt
Practices.  Neither the Company, nor to the knowledge of the
Company, any agent or other person acting on behalf of the Company, has (i)
directly or indirectly, used any funds for unlawful contributions, gifts,
entertainment or other unlawful expenses related to foreign or domestic
political activity, (ii) made any unlawful payment to foreign or domestic
government officials or employees or to any foreign or domestic political
parties or campaigns from corporate funds, (iii) failed to disclose fully any
contribution made by the Company (or made by any person acting on its behalf of
which the Company is aware) which is  in violation of law, or (iv)
violated in any material respect any provision of the Foreign Corrupt Practices
Act of 1977, as amended.

    

    (v)           Reporting Company/Shell
Company.  The Company is a publicly-held company subject to
reporting obligations pursuant to Section 13 of the Securities Exchange Act of
1934, as amended (the "1934
Act") and has a class of Common Stock registered pursuant to Section
12(g) of the 1934 Act.  Pursuant to the provisions of the 1934 Act,
the Company has timely filed all reports and other materials required to be
filed thereunder with the Commission during the preceding twelve
months.  As of the Closing Date, the Company is not a “shell company”
nor a “former shell company” as those terms are employed in Rule 144 under the
1933 Act.

    

    (w)           Listing.  The
Company's Common Stock is quoted on the Bulletin Board under the symbol
CYXN.  The Company has not received any pending oral or written notice
that its Common Stock is not eligible nor will become ineligible for quotation
on the Bulletin Board nor that its Common Stock does not meet all requirements
for the continuation of such quotation and (ii) the Company satisfies all the
requirements for the continued quotation of its Common Stock on the Bulletin
Board.

    

    (x)           DTC
Status.   The Company’s transfer agent is a participant
in, and the Common Stock is eligible for transfer pursuant to, the Depository
Trust Company Automated Securities Transfer Program. The name, address,
telephone number, fax number, contact person and email address of the Company
transfer agent is set forth on Schedule
5(x)
hereto.

    

    (y)           Company Predecessor and
Subsidiaries.  The Company makes each of the representations
contained in Sections 5(a), (b), (c), (d), (e), (f), (h), (j), (k), (l), (o),
(p), (q), (s), (t) and (u) of this Agreement, as same relate or could be
applicable to each Subsidiary.  All representations made by or
relating to the Company of a historical or prospective nature and all
undertakings described in Sections 9(g) through 9(l) shall relate, apply and
refer to the Company and its predecessors and successors.

    

    (z)           Correctness of
Representations.  The Company represents that the foregoing
representations and warranties are true and correct as of the date hereof in all
material respects, and, unless the Company otherwise notifies the Subscribers
prior to the Closing Date, shall be true and correct in all material respects as
of the Closing Date; provided, that, if such representation or warranty is made
as of a different date, in which case such representation or warranty shall be
true as of such date.

     

    (AA)      Survival.  The
foregoing representations and warranties shall survive the Closing
Date.

     

    6.        Regulation D Offering/Legal
Opinion.  The offer and issuance of the Securities to the
Subscribers is being made pursuant to the exemption from the registration
provisions of the 1933 Act afforded by Section 4(2) or Section 4(6) of the 1933
Act and/or Rule 506 of Regulation D promulgated thereunder.  On the
Closing Date, the Company will provide an opinion reasonably acceptable to the
Subscribers from the Company's legal counsel opining on the availability of an
exemption from registration under the 1933 Act as it relates to the offer and
issuance of the Securities and other matters reasonably requested by
Subscribers.  A form of the legal opinion is annexed hereto as Exhibit H.  The
Company will provide, at the Company's expense, to the Subscribers, such other
legal opinions, if any, as are reasonably necessary in each Subscriber’s opinion
for the issuance and resale of the Notes, Warrants, Conversion Shares and
Warrant Shares pursuant to an effective registration statement, Rule 144 under
the 1933 Act or an exemption from registration.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    7.1.         Conversion of
Notes.

    

    (a)           Upon
the conversion of a Note or part thereof, the Company shall, at its own cost and
expense, take all necessary action, including obtaining and delivering an
opinion of counsel if necessary, to assure that the Company's transfer agent
shall issue stock certificates in the name of a Subscriber (or its permitted
nominee) or such other persons as designated by Subscriber and in such
denominations to be specified at conversion representing the number of shares of
Common Stock issuable upon such conversion.  The Company warrants that
no instructions other than these instructions have been or will be given to the
transfer agent of the Company's Common Stock and that the certificates
representing such shares shall contain no legend other than the legend set forth
in Section 4(h).  If and when a Subscriber sells the Conversion
Shares, assuming (i) a registration statement including such Conversion Shares
for registration has been filed with the Commission, is effective and the
prospectus, as supplemented or amended, contained therein is current and (ii)
Subscriber or its agent confirms in writing to the transfer agent that
Subscriber has complied with the prospectus delivery requirements, the Company
will reissue the Conversion Shares without restrictive legend and the Conversion
Shares will be free-trading, and freely transferable.  In the event
that the Conversion Shares are sold in a manner that complies with an exemption
from registration, the Company will promptly instruct its counsel to issue to
the transfer agent an opinion permitting removal of the legend indefinitely
if such sale is pursuant to Rule 144(b)(1)(i) of the 1933 Act, provided that
Subscriber delivers reasonably requested representations in support of such
opinion.

    

    (b)           Each
Subscriber will give notice of its decision to exercise its right to convert its
Note, interest, or part thereof by telecopying or otherwise delivering a
completed Notice of Conversion (a form of which is annexed as Exhibit A to the Note) to the
Company via confirmed telecopier transmission or otherwise pursuant to Section
13(a) of this Agreement.  Subscriber will not be required to surrender
the Note until the Note has been fully converted or satisfied.  Each
date on which a Notice of Conversion is telecopied to the Company in accordance
with the provisions hereof by 6 PM Eastern Time (“ET”) (or if received by the
Company after 6 PM ET, then the next business day) shall be deemed a “Conversion
Date.”  The Company will itself or cause the Company’s transfer
agent to transmit the Company's Common Stock certificates representing the
Conversion Shares issuable upon conversion of the Note to Subscriber via express
courier for receipt by Subscriber within three (3) business days after the
Conversion Date (such third day being the "Delivery Date").  In
the event the Conversion Shares are electronically transferable, then delivery
of the Shares must be made by
electronic transfer provided request for such electronic transfer has been made
by the Subscriber.   A Note representing the balance of the Note
not so converted will be provided by the Company to Subscriber if requested by
Subscriber, provided Subscriber delivers the original Note to the
Company.

    

    (c)           The
Company understands that a delay in the delivery of the Conversion Shares in the
form required pursuant to Section 7.1 hereof later than the Delivery Date could
result in economic loss to the Subscribers.  As compensation to
Subscribers for such loss, the Company agrees to pay (as liquidated damages and
not as a penalty) to each applicable Subscriber for late issuance of Conversion
Shares in the form required pursuant to Section 7.1 hereof upon Conversion of
the Note, the amount of $100 per business day after the Delivery Date for each
$10,000 of Note principal amount and interest (and proportionately for other
amounts) being converted of the corresponding Conversion Shares which are not
timely delivered.  The Company shall pay any payments incurred under
this Section upon demand.  Furthermore, in addition to any other
remedies which may be available to the Subscribers, in the event that the
Company fails for any reason to effect delivery of the Conversion Shares on or
before the Delivery Date, the Subscriber will be entitled to revoke all or part
of the relevant Notice of Conversion by delivery of a notice to such effect to
the Company whereupon the Company and Subscriber shall each be restored to their
respective positions immediately prior to the delivery of such notice, so long
as such notice is received prior to Subscriber’s actual receipt of the
Conversion Shares, except that the damages payable in connection with the
Company’s default shall be payable through the date notice of revocation or
rescission is given to the Company.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    7.2.         Mandatory Redemption at
Subscriber’s Election.  In the event (i) the Company is
prohibited from issuing Conversion Shares, (ii) upon the occurrence of any other
Event of Default (as defined in the Note, this Agreement or any other
Transaction Document), that continues for more than thirty (30) business days,
(iii) a Change in Control (as defined below), or (iv) of the liquidation,
dissolution or winding up of the Company or any Subsidiary, then at the
Subscriber's election, the Company must pay to each Subscriber not later than
ten (10) business days after request by such Subscriber, a sum of money
determined by multiplying up to the outstanding principal amount of the Note
designated by each such Subscriber by 115%, plus accrued but unpaid interest and
any other amounts due under the Transaction Documents ("Mandatory Redemption
Payment"). The Mandatory Redemption Payment must be received by each
Subscriber on the same date as the Conversion Shares otherwise deliverable or
within ten (10) business days after request, whichever is sooner ("Mandatory Redemption Payment
Date"). Upon receipt of the Mandatory Redemption Payment, the
corresponding Note principal, interest and other amounts will be deemed paid and
no longer outstanding.  The Subscriber may rescind the election to
receive a Mandatory Redemption Payment at any time until such payment is
actually received.  Liquidated damages calculated pursuant to Section
7.1(c) hereof, that have been paid or accrued for the ten day period prior to
the actual receipt of the Mandatory Redemption Payment by such Subscriber shall
be credited against the Mandatory Redemption Payment.  For purposes of
this Section 7.2, “Change in
Control” shall mean (i) the Company  becoming a Subsidiary of
another entity (other than a corporation formed by the Company for purposes of
reincorporation in another U.S. jurisdiction), (ii) the sale, lease or transfer
of substantially all the assets of the Company or its Subsidiaries, or (iii) a
majority of the members of the Company’s board of directors as of the Closing
Date no longer serving as directors of the Company, except as a result of
natural causes or as a result of hiring additional outside directors in order to
meet appropriate stock exchange requirements or with the prior written consent
of the Subscribers.

    

               7.3.          Maximum
Conversion.  A Subscriber shall not be entitled to convert on a
Conversion Date that amount of a Note nor may the Company make any payment
including principal, interest, or liquidated or other damages by delivery of
Conversion Shares in connection with that number of Conversion Shares which
would be in excess of the sum of (i) the number of shares of Common Stock
beneficially owned by such Subscriber and its Affiliates on a Conversion Date or
payment date, and (ii) the number of Conversion Shares issuable upon the
conversion of the Note with respect to which the determination of this provision
is being made on a calculation date, which would result in beneficial ownership
by Subscriber and its Affiliates of more than 4.99% of the outstanding shares of
Common Stock of the Company on such Conversion Date.  Subscriber shall
notify Company if any conversion less than 4.99% of the outstanding shares of
Common Stock will cause an issuance of Conversion Shares that breaches the prior
sentence and the Company shall be deemed not to have breached the covenant of
the prior sentence if it does not receive such notice.  For the
purposes of the immediately preceding sentence, beneficial ownership shall be
determined in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended, and Rule 13d-3 thereunder.  Subject to the
foregoing, the Subscriber shall not be limited to aggregate conversions of only
4.99% and aggregate conversions by the Subscriber may exceed
4.99%.  The Subscriber may increase the permitted beneficial ownership
amount up to 9.99% upon and effective after 61 days prior written notice to the
Company.  Subscriber may allocate which of the equity of the Company
deemed beneficially owned by Subscriber shall be included in the 4.99% amount
described above and which shall be allocated to the excess above
4.99%.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    7.4.     Injunction Posting of
Bond.  In the event a Subscriber shall elect to convert a Note
or part thereof, the Company may not refuse conversion based on any claim that
Subscriber or any one associated or affiliated with Subscriber has been engaged
in any violation of law, or for any other reason, unless, a final non-appealable
injunction from a court made on notice to Subscriber, restraining and or
enjoining conversion of all or part of such Note shall have been sought and
obtained by the Company and the Company has posted a surety bond for the benefit
of Subscriber equal to the greater of (i) 120% of the outstanding principal and
accrued but unpaid interest of the Note, and the aggregate purchase price of the
Conversion Shares which are sought to be subject to the injunction, or (ii) the
closing price of the Common Stock on the trading day before the issue date of
the injunction multiplied by the number of Conversion Shares issuable upon
conversion of the Note, which bond shall remain in effect until the completion
of arbitration/litigation of the dispute and the proceeds of which shall be
payable to Subscriber to the extent the judgment or decision is in Subscriber’s
favor.

    

    7.5.     Buy-In.   In
addition to any other rights available to Subscribers, if the Company fails to
deliver to a Subscriber Conversion Shares by the Delivery Date and if after the
Delivery Date Subscriber or a broker on Subscriber’s behalf purchases (in an
open market transaction or otherwise) shares of Common Stock to deliver in
satisfaction of a sale by Subscriber of the Common Stock which Subscriber was
entitled to receive upon such conversion (a "Buy-In"), then the Company
shall pay to Subscriber (in addition to any remedies available to or elected by
the Subscriber) the amount by which (A) Subscriber's total purchase price
(including brokerage commissions, if any) for the shares of Common Stock so
purchased exceeds (B) the aggregate principal and/or interest amount of the Note
for which such conversion request was not timely honored together with interest
thereon at a rate of 10% per annum, accruing until such amount and any accrued
interest thereon is paid in full (which amount shall be paid as liquidated
damages and not as a penalty).  For example, if a Subscriber purchases
shares of Common Stock having a total purchase price of $11,000 to cover a
Buy-In with respect to an attempted conversion of $10,000 of Note principal
and/or interest, the Company shall be required to pay Subscriber $1,000 plus
interest. Subscriber shall provide the Company written notice and evidence
indicating the amounts payable to Subscriber in respect of the
Buy-In.

     

    7.6.     Redemption.    The
Note shall not be redeemable or callable by the Company, except as described in
the Note.

    

    8.        Fees.

     

    (a)           Broker’s
Commission.  The Company on the one hand, and each Subscriber
(for himself only) on the other hand, agrees to indemnify the other against and
hold the other harmless from any and all liabilities to any persons claiming
brokerage commissions or similar fees other than other than StreetCapital Corp.
(“Broker”) on account of
services purported to have been rendered on behalf of the indemnifying party in
connection with this Agreement or the transactions contemplated hereby and
arising out of such party’s actions.  Anything in this Agreement to
the contrary notwithstanding, each Subscriber is providing indemnification only
for such Subscriber’s own actions and not for any action of any other
Subscriber.  The liability of the Company and each Subscriber’s
liability hereunder is several and not joint.  The Company agrees that
it will pay the Broker the fees set forth on Schedule 8(a) hereto (“Broker’s
Fees”).  The Company represents that to the best of its
knowledge there are no other parties entitled to receive fees, commissions, or
similar payments in connection with the offering described in this Agreement
except the Broker.

    

    (b)           Collateral Agent
Fee.   Upon Closing, the Company will pay the Collateral
Agent the fee designated in the Collateral Agent Agreement (“Collateral Agent
Fee”).  Such fee will be paid out of the funds held pursuant to
the Escrow Agreement.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    (c)           Subscriber’s Legal
Fees.   The Company shall pay to Grushko & Mittman,
P.C., a cash fee of $20,000 (“Legal Fees”) of which $2,490
has been received, as reimbursement for services rendered in connection with the
transactions described in the Transaction Documents. The Legal Fees will be
payable out of funds held pursuant to the Escrow Agreement.  Grushko
& Mittman, P.C. will be reimbursed at Closing by Subscribers for all lien
searches, filing fees, and reasonable printing and shipping costs for the
closing statements to be delivered to Subscribers.

    

    9.        Covenants of the
Company.  The Company covenants and agrees with the Subscribers
as follows:

    

    (a)           Stop
Orders.  Subject to the prior notice requirement described in
Section 9(n), the Company will advise the Subscribers, within twenty-four hours
after it receives notice of issuance by the Commission, any state securities
commission or any other regulatory authority of any stop order or of any order
preventing or suspending any offering of any securities of the Company, or of
the suspension of the qualification of the Common Stock of the Company for
offering or sale in any jurisdiction, or the initiation of any proceeding for
any such purpose.  The Company will not issue any stop transfer order
or other order impeding the sale, resale or delivery of any of the Securities,
except as may be required by any applicable federal or state securities laws and
unless contemporaneous notice of such instruction is given to the
Subscribers.

     

    (b)           Listing/Quotation.  The
Company shall promptly secure the quotation or listing of the Conversion Shares
and Warrant Shares upon each national securities exchange, or automated
quotation system upon which the Company’s Common Stock is quoted or listed and
upon which such Conversion Shares and Warrant Shares are or become eligible for
quotation or listing (subject to official notice of issuance) and shall maintain
same so long as any Notes and Warrants are outstanding.  The Company
will maintain the quotation or listing of its Common Stock on the American Stock
Exchange, Nasdaq Capital Market, Nasdaq Global Market, Nasdaq Global Select
Market, Bulletin Board, or New York Stock Exchange (whichever of the foregoing
is at the time the principal trading exchange or market for the Common Stock
(the “Principal
Market”), and will comply in all respects with the Company's reporting,
filing and other obligations under the bylaws or rules of the Principal Market,
as applicable. The Company will provide Subscribers with copies of all notices
it receives notifying the Company of the threatened and actual delisting of the
Common Stock from any Principal Market.  As of the date of this
Agreement and the Closing Date, the Bulletin Board is and will be the Principal
Market.

     

    (c)           Market
Regulations.  If required, the Company shall notify the
Commission, the Principal Market and applicable state authorities, in accordance
with their requirements, of the transactions contemplated by this Agreement, and
shall take all other necessary action and proceedings as may be required and
permitted by applicable law, rule and regulation, for the legal and valid
issuance of the Securities to the Subscribers and promptly provide copies
thereof to the Subscribers.

     

    (d)           Filing
Requirements.  From the date of this Agreement and until the
last to occur of (i) all the Conversion Shares have been resold or transferred
by the Subscribers pursuant to a registration statement or pursuant to Rule
144(b)(1)(i), or (ii) the Notes and Warrants are no longer outstanding (the date
of such latest occurrence being the “End Date”), the Company will
(A) cause its Common Stock to continue to be registered under Section 12(b) or
12(g) of the 1934 Act, (B) comply in all respects with its reporting and filing
obligations under the 1934 Act, (C) voluntarily comply with all reporting
requirements that are applicable to an issuer with a class of shares registered
pursuant to Section 12(g) of the 1934 Act, if the Company is not subject to such
reporting requirements, and (D) comply with all requirements related to any
registration statement filed pursuant to this Agreement.  The Company
will use its best efforts not to take any action or file any document (whether
or not permitted by the 1933 Act or the 1934 Act or the rules thereunder) to
terminate or suspend such registration or to terminate or suspend its reporting
and filing obligations under said acts until the End Date.  Until the
End Date, the Company will continue the listing or quotation of the Common Stock
on a Principal Market and will comply in all respects with the Company’s
reporting, filing and other obligations under the bylaws or rules of the
Principal Market.  The Company agrees to timely file a Form D with
respect to the Securities if required under Regulation D and to provide a copy
thereof to Subscribers promptly after such filing.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    (e)           Use of
Proceeds.   The proceeds of the Offering will be
substantially employed by the Company for the purposes set forth on Schedule 9(e)
hereto.  Except as described on Schedule
9(e), the Purchase Price may not and will not be used for accrued and
unpaid officer and director salaries, nor payment of financing related debt nor
redemption of outstanding notes or equity instruments of the Company nor
non-trade payables outstanding on the Closing Date.  For so long as
any Note is outstanding, the Company will not prepay any financing related debt
obligations, except equipment payments, nor redeem any equity instruments of the
Company without the prior consent of the Subscribers.

     

    (f)           Reservation.   Prior
to the Closing, the Company undertakes to reserve on behalf of Subscribers
from its authorized but unissued Common Stock, a number of shares of Common
Stock equal to 130% of the amount of Common Stock necessary to allow Subscribers
to be able to convert the entire Notes and 100% of the amount of Warrant Shares
issuable upon exercise of the Warrants (“Required
Reservation”).   Failure to have sufficient shares
reserved pursuant to this Section 9(f) at any time shall be a material default
of the Company’s obligations under this Agreement and an Event of Default under
the Notes.  Without waiving the foregoing requirement, if at any time
Notes and Warrants are outstanding the Company has reserved on behalf of the
Subscribers less than 125% of the amount necessary for full conversion of the
outstanding Note principal and interest at the conversion price in effect on
every such date and 100% of the Warrant Shares issuable upon exercise of
outstanding Warrants (“Minimum
Required Reservation”), the Company will promptly reserve the Minimum
Required Reservation, or if there are insufficient authorized and available
shares of Common Stock to do so, the Company will take all action necessary to
increase its authorized capital to be able to fully satisfy its reservation
requirements hereunder, including the filing of a preliminary proxy with the
Commission not later than fifteen business days after the first day the Company
has reserved less than the Minimum Required Reservation.  The Company
agrees to provide notice to the Subscribers not later than three days after the
date the Company has less than the Minimum Required Reservation reserved on
behalf of the Subscribers.

     

    (g)           DTC
Program.  At all times that Notes or Warrants are outstanding,
the Company will employ as the transfer agent for the Common Stock, Conversion
Shares and Warrant Shares a participant in the Depository Trust Company
Automated Securities Transfer Program.

     

    (h)           Taxes.  From
the date of this Agreement and until the End Date, the Company will promptly pay
and discharge, or cause to be paid and discharged, when due and payable, all
lawful taxes, assessments and governmental charges or levies imposed upon the
income, profits, property or business of the Company; provided, however, that
any such tax, assessment, charge or levy need not be paid if the validity
thereof shall currently be contested in good faith by appropriate proceedings
and if the Company shall have set aside on its books adequate reserves with
respect thereto, and provided, further, that the Company will pay all such
taxes, assessments, charges or levies forthwith upon the commencement of
proceedings to foreclose any lien which may have attached as security
therefore.

     

    (i)           Insurance.  From
the date of this Agreement and until the End Date, the Company will keep its
assets which are of an insurable character insured by financially sound and
reputable insurers against loss or damage by fire, explosion and other risks
customarily insured against by companies in the Company’s line of business and
location, in amounts and to the extent and in the manner customary for companies
in similar businesses similarly situated and located and to the extent available
on commercially reasonable terms.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    (j)           Books and
Records.  From the date of this Agreement and until the End
Date, the Company will keep true records and books of account in which full,
true and correct entries will be made of all dealings or transactions in
relation to its business and affairs in accordance with generally accepted
accounting principles applied on a consistent basis.

     

    (k)           Governmental
Authorities.   From the date of this Agreement and until
the End Date, the Company shall duly observe and conform in all material
respects to all valid requirements of governmental authorities relating to the
conduct of its business or to its properties or assets.

     

    (l)           Intellectual
Property.  From the date of this Agreement and until the End
Date, the Company shall maintain in full force and effect its corporate
existence, rights and franchises and all licenses and other rights to use
intellectual property owned or possessed by it and reasonably deemed to be
necessary to the conduct of its business, unless it is sold for
value. Schedule
9(l) hereto identifies all of the intellectual property owned by the
Company and Subsidiaries, which schedule includes but is not limited to patents,
patents pending, patent applications, trademarks, tradenames, service marks and
copyrights.

     

    (m)           Properties.  From
the date of this Agreement and until the End Date, the Company will keep its
properties in good repair, working order and condition, reasonable wear and tear
excepted, and from time to time make all necessary and proper repairs, renewals,
replacements, additions and improvements thereto; and the Company will at all
times comply with each provision of all leases and claims to which it is a party
or under which it occupies or has rights to property if the breach of such
provision could reasonably be expected to have a Material Adverse
Effect.  The Company will not abandon any of its assets except for
those assets which have negligible or marginal value or for which it is prudent
to do so under the circumstances.

     

    (n)           Confidentiality/Public
Announcement.   From the date of this Agreement and until
the End Date, the Company agrees that except in connection with a Form 8-K, Form
10-Q, Form 10-K and the registration statement or statements regarding the
Subscribers’ Securities or in correspondence with the Commission regarding same,
it will not disclose publicly or privately the identity of the Subscribers
unless expressly agreed to in writing by Subscribers or only to the extent
required by law and then only upon not less than three days prior notice to
Subscribers.  In any event and subject to the foregoing, the Company
undertakes to file a Form 8-K describing the Offering not later than the second
(2nd)
business day after the Closing Date.  Prior to the filing date of such
Form 8-K, a draft in the final form will be provided to Subscribers for
Subscribers’ review and reasonable approval.  In the Form 8-K, the
Company will specifically disclose the amount of Common Stock outstanding
immediately after the Closing.  Upon  delivery by the
Company to the Subscribers after the Closing Date of any notice or information,
in writing, electronically or otherwise, and while a Note, Conversion Shares or
Warrants are held by Subscribers, unless the  Company has in good
faith determined that the matters relating to such notice do not
constitute material, nonpublic information relating to
the Company or Subsidiaries, the Company  shall within one
business day after any such delivery publicly disclose such 
material,  nonpublic  information on a
Report on Form 8-K.  In the event that
the Company believes that a notice or communication to
Subscribers contains material, nonpublic information relating to the Company or
Subsidiaries, except as required to be delivered in connection with this
Agreement, the Company shall so indicate to Subscribers prior to delivery of
such notice or information.  Subscribers will be granted three (3)
business days to notify the Company that Subscriber elects not to receive such
information.   In the case that Subscriber elects not to receive
such information, the Company will not deliver such information to
Subscribers.  If the Subscriber does not provide any affirmative
election, it will be deemed as an election to receive such
information.  In the absence of any such Company
indication, Subscribers shall be allowed to presume that all matters
relating to such notice and information do not constitute material,
nonpublic information relating to the Company or Subsidiaries.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    (o)           Non-Public
Information.  The Company covenants and agrees that except for
the Reports, Other Written Information and schedules and exhibits to this
Agreement and the Transaction Documents, which information the Company
undertakes to publicly disclose on the Form 8-K described in Section 9(n) above,
neither it nor any other person acting on its behalf will at any time provide a
Subscriber or its agents or counsel with any information that the Company
believes constitutes material non-public information, unless prior thereto such
Subscriber, its agent or counsel shall have agreed in writing to accept such
information as described in Section 9(n) above.  The Company
understands and confirms that the Subscribers shall be relying on the foregoing
representations in effecting transactions in securities of the
Company.  The Company agrees that any information known to Subscriber
not already made public by the Company, may be made public and disclosed by the
Subscriber.

    

    (p)           Negative
Covenants.   So long as a Note is outstanding, without the
consent of the Subscribers, the Company will not and will not permit any of its
Subsidiaries to directly or indirectly:

    

    (i)           create,
incur, assume or suffer to exist any pledge, hypothecation, assignment, deposit
arrangement, lien, charge, claim, security interest, security title, mortgage,
security deed or deed of trust, 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) (each, a “Lien”) upon any of its
property, whether now owned or hereafter acquired except for:  (A) the
Excepted Issuances (as defined in Section 12 hereof), and (B) Permitted Liens
(as defined in the Security Agreement);

    

    (ii)          amend
its certificate of incorporation, bylaws or its charter documents so as to
materially and adversely affect any rights of the Subscribers (an increase in
the amount of authorized shares, name change, transactions solely to change of
domicile of the Company, or a change in capitalization such as a forward or
reverse stock split which applies evenly to all holders of capital stock, will
not be deemed adverse to the rights of the Subscribers);

    

    (iii)         repay,
repurchase or offer to repay, repurchase or otherwise acquire or make any
dividend or distribution in respect of any of its Common Stock, preferred stock,
or other equity securities other than to the extent permitted or required under
the Transaction Documents;

    

    (iv)         engage
in any transactions with any officer, director, employee or any Affiliate of the
Company, including any contract, agreement or other arrangement providing for
the furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any entity in
which any officer, director, or any such employee has a substantial interest or
is an officer, director, trustee or partner, in each case in excess of $100,000
other than (i) for payment of salary, or fees for services rendered, (ii)
reimbursement for expenses incurred on behalf of the Company, (iii) for other
employee benefits, including stock option agreements under any stock option plan
of the Company or (iv) other transactions disclosed on the Reports;
or

    

    (v)          prepay
or redeem any financing related debt or past due obligations or securities
outstanding as of the Closing Date, or past due obligations (except with respect
to vendor obligations, or any such obligations which in management’s good faith,
reasonable judgment must be repaid to avoid disruption of the Company’s
businesses).

     

    (q)           Reserved.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    (r)           Seniority.   Except
for Permitted Liens, until the Notes are fully satisfied or converted, the
Company shall not grant nor allow any security interest to be taken in any
assets of the Company or any Subsidiary or any Subsidiary’s assets; nor issue or
amend any debt, equity or other instrument which would give the holder thereof
directly or indirectly, a right in any assets of the Company or any Subsidiary
or any right to payment equal to or superior to any right of the Subscribers as
holders of the Notes in or to such assets or payment, nor issue or incur any
debt not in the ordinary course of business.

     

    (s)           Notices.   For
so long as the Subscribers hold any Notes or Warrants, the Company will maintain
a United States address and United States fax number for notice purposes under
the Transaction Documents.

     

    (t)           Transactions With
Insiders.  So long as the Notes are outstanding, the Company
shall not, and shall cause each of its Subsidiaries not to, enter into,
materially amend, materially modify or materially supplement, or permit any
Subsidiary to enter into, materially amend, materially modify or materially
supplement, any agreement, transaction, commitment, or arrangement relating to
the sale, transfer or assignment of any of the Company’s tangible or intangible
assets with any of its Insiders (as defined below)(or any persons who were
Insiders at any time during the previous two (2) years), or any Affiliates (as
defined below) thereof, or with any individual related by blood, marriage, or
adoption to any such individual; provided that this provision shall not restrict
the Company or Subsidiary from amending or modifying any existing agreement or
transaction for the benefit of the Company or Subsidiary (e.g. extension of
maturity date).  “Affiliate” for purposes of this Section 9(u) means,
with respect to any person or entity, another person or entity that, directly or
indirectly, (i) has a ten percent (10%) or more equity interest in that person
or entity, (ii) has ten percent (10%) or more common ownership with that person
or entity, (iii) controls that person or entity, or (iv) shares common control
with that person or entity.  “Control” or “Controls” for purposes of
the Transaction Documents means that a person or entity has the power, direct or
indirect, to conduct or govern the policies of another person or
entity.  For purposes hereof, “Insiders” shall mean any officer,
director or manager of the Company, including but not limited to the Company’s
president, chief executive officer, chief financial officer and chief operations
officer, and any of their affiliates or family members.

     

    (u)           Lockup Agreement.   The
Company will deliver to the Subscribers on or before the Closing Date and
enforce the provisions of irrevocable lockup agreements (“Lockup Agreement”) in the
forms annexed hereto as Exhibit
I and Exhibit J,
with the persons identified on Schedule 9(u) with respect to
the Common Stock identified on Schedule 9(u).

     

    (v)           No Change in Transfer
Agent.  So long as the Notes are outstanding, the Company shall
not take any action to cause a change in the Company’s transfer agent of record,
without prior written consent to take such action from the Collateral
Agent.

     

    10.      Covenants of the Company
Regarding Indemnification.  The Company agrees to indemnify,
hold harmless, reimburse and defend the Subscribers, the Subscribers’ officers,
directors, agents, counsel, Affiliates, members, managers, control persons, and
principal stockholders, against any claim, cost, expense, liability, obligation,
loss or damage (including reasonable legal fees) of any nature, incurred by or
imposed upon the Subscribers or any such person which results, arises out of or
is based upon (i) any material misrepresentation by Company or breach of any
representation or warranty by Company in this Agreement or in any Exhibits or
Schedules attached hereto in any Transaction Document, or other agreement
delivered pursuant hereto or in connection herewith, now or after the date
hereof; or (ii) after any applicable notice and/or cure periods, any breach or
default in performance by the Company of any covenant or undertaking to be
performed by the Company hereunder, or any other agreement entered into by the
Company and Subscribers relating hereto.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    11.      Unlegended Shares and 144
Sales.

     

    (a)           Delivery of Unlegended
Shares.  Within five (5) business days (such fifth business day
being the “Unlegended Shares
Delivery Date”) after the day on which the Company has received (i) a
notice that Conversion Shares, Warrant Shares or any other Common Stock held by
Subscriber has been sold pursuant to a registration statement or Rule 144 under
the 1933 Act, (ii) a representation that the prospectus delivery requirements,
or the requirements of Rule 144, as applicable and if required, have been
satisfied, (iii) the original share certificates representing the shares of
Common Stock that have been sold, and (iv) in the case of sales under Rule 144,
customary representation letters of the Subscriber and, if required,
Subscriber’s broker regarding compliance with the requirements of Rule 144, the
Company at its expense, (y) shall deliver, and shall cause legal counsel
selected by the Company to deliver to its transfer agent (with copies to
Subscriber) an appropriate instruction and opinion of such counsel, directing
the delivery of shares of Common Stock without any legends including the legend
set forth in Section 4(h) above (the “Unlegended Shares”); and (z)
cause the transmission of the certificates representing the Unlegended Shares
together with a legended certificate representing the balance of the submitted
Common Stock certificate, if any, to the Subscriber at the address specified in
the notice of sale, via express courier, by electronic transfer or otherwise on
or before the Unlegended Shares Delivery Date.

     

    (b)           DWAC.   In
lieu of delivering physical certificates representing the Unlegended Shares,
upon request of Subscribers, so long as the certificates therefor do not bear a
legend and the Subscriber is not obligated to return such certificate for the
placement of a legend thereon, the Company shall cause its transfer agent to
electronically transmit the Unlegended Shares by crediting the account of
Subscriber’s prime broker with the Depository Trust Company through its Deposit
Withdrawal Agent Commission system, if such transfer agent participates in such
DWAC system.  Such delivery must be made on or before the Unlegended
Shares Delivery Date.

    

    (c)           Late Delivery of Unlegended
Shares.   The Company understands that a delay in the
delivery of the Unlegended Shares pursuant to Section 11 hereof later than the
Unlegended Shares Delivery Date could result in economic loss to a
Subscriber.  As compensation to a Subscriber for such loss, the
Company agrees to pay late payment fees (as liquidated damages and not as a
penalty) to the Subscriber for late delivery of Unlegended Shares in the amount
of $100 per business day after the Unlegended Shares Delivery Date for each
$10,000 of purchase price of the Unlegended Shares subject to the delivery
default.  If during any 360 day period, the Company fails to deliver
Unlegended Shares as required by this Section 11 for an aggregate of thirty
days, then each Subscriber or assignee holding Securities subject to such
default may, at its option, require the Company to redeem all or any portion of
the Unlegended Shares subject to such default at a price per share equal to the
greater of (i) 115% of the Purchase Price paid by the Subscriber for the
Unlegended Shares that were not timely delivered, or (ii) a fraction in which
the numerator is the highest closing price of the Common Stock during the
aforedescribed thirty day period and the denominator of which is the lowest
conversion price or exercise price, as the case may be, during such thirty day
period, multiplied by the price paid by Subscriber for such Common Stock (“Unlegended Redemption
Amount”).  The Company shall pay any payments incurred under
this Section in immediately available funds upon demand.

    

    (d)           Injunction.  In
the event a Subscriber shall request delivery of Unlegended Shares as described
in Section 11 and the Company is required to deliver such Unlegended Shares
pursuant to Section 11, the Company may not refuse to deliver Unlegended Shares
based on any claim that such Subscriber or any one associated or affiliated with
such Subscriber has been engaged in any violation of law, or for any other
reason, unless, an injunction or temporary restraining order from a court, on
notice, restraining and or enjoining delivery of such Unlegended Shares shall
have been sought and obtained by the Company and the Company has posted a surety
bond for the benefit of such Subscriber in the amount of the greater of (i) 120%
of the amount of the aggregate purchase price of the Common Stock which is
subject to the injunction or temporary restraining order, (ii) the closing price
of the Common Stock on the trading day before the issue date of the injunction
multiplied by the number of Unlegended Shares to be subject to the injunction,
which bond shall remain in effect until the completion of arbitration/litigation
of the dispute and the proceeds of which shall be payable to such Subscriber to
the extent Subscriber obtains judgment in Subscriber’s favor.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    (e)           Buy-In.   In
addition to any other rights available to Subscriber, if the Company fails to
deliver to a Subscriber Unlegended Shares as required pursuant to this Agreement
and after the Unlegended Shares Delivery Date the Subscriber, or a broker on the
Subscriber’s behalf, purchases (in an open market transaction or otherwise)
shares of common stock to deliver in satisfaction of a sale by such Subscriber
of the shares of Common Stock which the Subscriber was entitled to receive from
the Company (a "Buy-In"), then the Company
shall promptly pay in cash to the Subscriber (in addition to any remedies
available to or elected by the Subscriber) the amount by which (A) the
Subscriber's total purchase price (including brokerage commissions, if any) for
the shares of common stock so purchased exceeds (B) the aggregate purchase price
of the shares of Common Stock delivered to the Company for reissuance as
Unlegended Shares together with interest thereon at a rate of 15% per annum
accruing until such amount and any accrued interest thereon is paid in full
(which amount shall be paid as liquidated damages and not as a
penalty).  For example, if a Subscriber purchases shares of Common
Stock having a total purchase price of $11,000 to cover a Buy-In with respect to
$10,000 of purchase price of shares of Common Stock delivered to the Company for
reissuance as Unlegended Shares, the Company shall be required to pay the
Subscriber $1,000, plus interest. The Subscriber shall provide the Company
written notice indicating the amounts payable to the Subscriber in respect of
the Buy-In.

    

    (f)        
  144
Default.   At any time commencing six months after the
Closing Date, in the event the Subscriber is not permitted to sell any of the
Conversion Shares or Warrant Shares without any restrictive legend or if such
sales are permitted but subject to volume limitations or further restrictions on
resale as a result of the unavailability to Subscriber of Rule 144(b)(1)(i)
under the 1933 Act or any successor rule (a “144 Default”), for any reason
including but not limited to failure by the Company to file quarterly, annual or
any other filings required to be made by the Company by the required filing
dates, or the Company’s failure to make information publicly available which
would allow Subscriber’s reliance on Rule 144 in connection with sales of
Conversion Shares or Warrant Shares, except due to a change in current
applicable securities laws or because the Subscriber is an Affiliate (as defined
under Rule 144) of the Company, then the Company shall pay such Subscriber as
liquidated damages and not as a penalty for each thirty days (or such lesser
pro-rata amount for any period less than thirty days) an amount equal to two
percent (2%) of the purchase price of the Conversion Shares and Warrant Shares
subject to such 144 Default but no more than 30% of such purchase
price.  Liquidated Damages shall not be payable pursuant to this
Section 11(f) in connection with Shares for such times as such Shares may be
sold by the holder thereof without any legend or volume or other restrictions
pursuant to Section 144(b)(1)(i) of the 1933 Act or pursuant to an effective
registration statement.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    12.          (a)           Favored Nations
Provision.  Other than in connection with (i) full or partial
consideration in connection with a strategic merger, acquisition, consolidation
or purchase of substantially all of the securities or assets of a corporation or
other entity so long as such issuances are not for the purpose of raising
capital and which holders of such securities or debt are not at any time granted
registration rights, (ii) the Company’s issuance of securities in connection
with strategic license agreements and other partnering arrangements so long as
such issuances are not for the purpose of raising capital and which holders of
such securities or debt are not at any time granted registration rights, (iii)
the Company’s issuance of Common Stock or the issuances or grants of options to
purchase Common Stock to employees, directors, and consultants for compensation
pursuant to plans approved by the independent members of the Company’s board of
directors, or if there are no independent members, approved by the board of
directors as a whole, provided the holders thereof are not granted registration
or registration rights, and which, in the aggregate, do not exceed 10,000,000
shares of Common Stock, (iv) securities upon the exercise or exchange of or
conversion of any securities exercisable or exchangeable for or convertible into
shares of Common Stock issued and outstanding on the date of this Agreement on
the terms disclosed in the Reports or described on Schedule
12(a),
(v) as a result of the conversion of Notes which are granted or issued pursuant
to this Agreement, and (vi) the Company’s issuance of securities in connection
with stock dividends, stock splits, or similar events (collectively, the
foregoing (i) through (v) are “Excepted Issuances”), if at
any time the Notes are outstanding, the Company shall agree to or issue (the
“Lower Price Issuance”)
any Common Stock or securities convertible into or exercisable for shares of
Common Stock (or modify any of the foregoing which may be outstanding) to any
person or entity at a price per share or conversion or exercise price per share
which shall be less than the Conversion Price in effect at such time, or if
less than the Warrant exercise price in effect at such time, without the consent
of the Subscribers, then the Conversion Price shall automatically be
reduced to such other lower price. The average Conversion Price of the
Conversion Shares and average exercise price in relation to the Warrant Shares
shall be calculated separately for the Conversion Shares and Warrant
Shares.  Common Stock issued or issuable by the Company for no
consideration will be deemed issuable or to have been issued for $0.001 per
share of Common Stock.  For purposes of the issuance and adjustments
described in this paragraph, the issuance of any security of the Company
carrying the right to convert such security into shares of Common Stock or any
warrant, right or option to purchase Common Stock shall result in the issuance
of the additional shares of Common Stock upon the sooner of the agreement to or
actual issuance of such convertible security, warrant, right or options and
again at any time upon any subsequent issuances of shares of Common Stock upon
exercise of such conversion or purchase rights if such issuance is at a price
lower than the Conversion Price or Warrant exercise price in effect upon such
issuance.  The rights of Subscribers set forth in this Section 12 are
in addition to any other rights the Subscribers have pursuant to this Agreement,
the Notes, Warrants any other Transaction Document, and any other agreement
referred to or entered into in connection herewith or to which Subscribers and
Company are parties.

    

    (b)           Maximum Exercise of
Rights.   In the event the exercise of the rights
described in Section 12(a) would or could result in the issuance of an amount of
Common Stock of the Company that would exceed the maximum amount that may be
issued to Subscribers calculated in the manner described in Section 7.3 of this
Agreement, then the issuance of such additional shares of Common Stock of the
Company to Subscribers will be deferred in whole or in part until such time as
Subscribers are able to beneficially own such Common Stock without
exceeding the applicable maximum amount set forth calculated in the manner
described in Section 7.3 of this Agreement and notifies the Company
accordingly.

     

    13.          Miscellaneous.

     

    (a)           Notices.  All
notices, demands, requests, consents, approvals, and other communications
required or permitted hereunder shall be in writing and, unless otherwise
specified herein, shall be (i) personally served, (ii) deposited in the mail,
registered or certified, return receipt requested, postage prepaid, (iii)
delivered by reputable air courier service with charges prepaid, or (iv)
transmitted by hand delivery, telegram, or facsimile, addressed as set forth
below or to such other address as such party shall have specified most recently
by written notice.  Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be: (i) if to the Company, to: China Yongxin
Pharmaceuticals, Inc., 927 Canada Court, City of Industry, CA 91748, Attn:
Yongxin Liu, CEO, facsimile: (626) 581-9138, with a copy to: Richardson &
Patel, LLP, 10900 Wilshire Blvd., Suite 500, Los Angeles, CA 90024, Attn: Ryan
Hong, Esq., facsimile: (310) 208-1154, (ii) if to the Subscribers, to: the
addresses and fax numbers indicated on Schedule
I hereto, with an additional copy by fax only to: Grushko & Mittman,
P.C., 551 Fifth Avenue, Suite 1601, New York, New York 10176, facsimile: (212)
697-3575, and (iii) if to the Broker, to: StreetCapital Corp., 300 Colonial
Center Parkway, Suite 260, Roswell, GA 30076, Attn: Vince Sbarra, facsimile:
(678) 353-2188.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

     (b)           Entire Agreement;
Assignment.  This Agreement and other documents delivered in
connection herewith represent the entire agreement between the parties hereto
with respect to the subject matter hereof and may be amended only by a writing
executed by both parties.  Neither the Company nor the Subscribers has
relied on any representations not contained or referred to in this Agreement and
the documents delivered herewith.   No right or obligation of the
Company shall be assigned without prior notice to and the written consent of the
Subscribers.

     

    (c)           Counterparts/Execution.  This
Agreement may be executed in any number of counterparts and by the different
signatories hereto on separate counterparts, each of which, when so executed,
shall be deemed an original, but all such counterparts shall constitute but one
and the same instrument.  This Agreement may be executed by facsimile
signature and delivered by electronic transmission.

     

    (d)           Law Governing this
Agreement.  This Agreement shall be governed by and construed
in accordance with the laws of the State of New York without regard to
principles of conflicts of laws. Any action brought by either party against the
other concerning the transactions contemplated by this Agreement shall be
brought only in the state courts of New York or in the federal courts located in
the state and county of New York.  The parties to this Agreement
hereby irrevocably waive any objection to jurisdiction and venue of any action
instituted hereunder and shall not assert any defense based on lack of
jurisdiction or venue or based upon forum non
conveniens.  The parties executing this Agreement
and other agreements referred to herein or delivered in connection herewith on
behalf of the Company agree to submit to the in personam jurisdiction of such
courts and hereby irrevocably waive trial by jury.  The
prevailing party shall be entitled to recover from the other party its
reasonable attorney's fees and costs.  In the event that any provision
of this Agreement or any other agreement delivered in connection herewith is
invalid or unenforceable under any applicable statute or rule of law, then such
provision shall be deemed inoperative to the extent that it may conflict
therewith and shall be deemed modified to conform with such statute or rule of
law.  Any such provision which may prove invalid or unenforceable
under any law shall not affect the validity or enforceability of any other
provision of any agreement.  Each party hereby irrevocably waives
personal service of process and consents to process being served in any suit,
action or proceeding in connection with this Agreement or any other Transaction
Document 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 Agreement 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 other manner permitted by law.

     

    (e)           Specific Enforcement,
Consent to Jurisdiction.  The Company and Subscribers
acknowledge and agree that irreparable damage would occur in the event that any
of the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached.  It is accordingly agreed
that the parties shall be entitled to seek an injunction or injunctions to
prevent or cure breaches of the provisions of this Agreement and to enforce
specifically the terms and provisions hereof, this being in addition to any
other remedy to which any of them may be entitled by law or
equity.  Subject to Section 13(d) hereof, the Company and each
Subscriber hereby irrevocably waives, and agrees not to assert in any such suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction in New York of such court, that the suit, action or proceeding is
brought in an inconvenient forum or that the venue of the suit, action or
proceeding is improper.  Nothing in this Section shall affect or limit
any right to serve process in any other manner permitted by law.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    (f)           Damages.   In
the event the Subscriber is entitled to receive any liquidated damages pursuant
to the Transactions Documents, the Subscriber may elect to receive the greater
of actual damages or such liquidated damages.

     

    (g)           Maximum
Payments.   Nothing contained herein or in any document
referred to herein or delivered in connection herewith shall be deemed to
establish or require the payment of a rate of interest or other charges in
excess of the maximum permitted by applicable law.  In the event that
the rate of interest or dividends required to be paid or other charges hereunder
exceed the maximum permitted by such law, any payments in excess of such maximum
shall be credited against amounts owed by the Company to the Subscribers and
thus refunded to the Company.  The Company agrees that it may not and
actually waives any right to challenge the effectiveness or applicability of
this Section 13(g).

     

    (h)           Calendar
Days.   All references to “days” in the Transaction
Documents shall mean calendar days unless otherwise stated.  The terms
“business days” and “trading days” shall mean days that the New York Stock
Exchange is open for trading for three or more hours.  Time periods
shall be determined as if the relevant action, calculation or time period were
occurring in New York City.  Any deadline that falls on a non-business
day in any of the Transaction Documents shall be automatically extended to the
next business day and interest, if any, shall be calculated and payable through
such extended period.

     

    (i)           Captions: Certain
Definitions.  The captions of the various sections and
paragraphs of this Agreement have been inserted only for the purposes of
convenience; such captions are not a part of this Agreement and shall not be
deemed in any manner to modify, explain, enlarge or restrict any of the
provisions of this Agreement.  As used in this Agreement the term
“person” shall
mean and include an individual, a partnership, a joint venture, a corporation, a
limited liability company, a trust, an unincorporated organization and a
government or any department or agency thereof.

     

    (j)           Consent.   As
used in this Agreement and the Transaction Documents and any other agreement
delivered in connection herewith, “consent of the Subscribers” or similar
language means the consent of holders of not less than 75% of the outstanding
principal amount of the Notes on the date consent is requested (such amount
being a “Majority in
Interest”).  A Majority in Interest may consent to take or
forebear from any action permitted under or in connection with the Transaction
Documents, modify any Transaction Documents or waive any default or requirement
applicable to the Company, Subsidiaries or Subscribers under the Transaction
Documents provided the effect of such action does not waive any accrued interest
or damages and further provided that the relative rights of the Subscribers to
each other remains unchanged.

     

    (k)           Severability.  In
the event that any term or provision of this Agreement shall be finally
determined to be superseded, invalid, illegal or otherwise unenforceable
pursuant to applicable law by an authority having jurisdiction and venue, that
determination shall not impair or otherwise affect the validity, legality
or enforceability: (i) by or before that authority of the remaining terms and
provisions of this Agreement, which shall be enforced as if the unenforceable
term or provision were deleted, or (ii) by or before any other authority of any
of the terms and provisions of this Agreement.

     

    (l)           Successor
Laws.  References in the Transaction Documents to laws, rules,
regulations and forms shall also include successors to and functionally
equivalent replacements of such laws, rules, regulations and forms.  A
successor rule to Rule 144(b)(1)(i) shall include any rule that would be
available to a non-Affiliate of the Company for the sale of Common Stock not
subject to volume restrictions and after a six month holding
period.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    (m)           Maximum
Liability.   In no event shall the liability of the
Subscribers or permitted successor hereunder or under any Transaction Document
or other agreement delivered in connection herewith be greater in amount than
the dollar amount of the net proceeds actually received by such Subscriber or
successor upon the sale of Conversion Shares.

     

    (n)           Independent Nature of
Subscribers.     The Company acknowledges that the
obligations of each Subscriber under the Transaction Documents are several and
not joint with the obligations of any other Subscriber, and no Subscriber shall
be responsible in any way for the performance of the obligations of any other
Subscriber under the Transaction Documents. The Company acknowledges that each
Subscriber has represented that the decision of each Subscriber to purchase
Securities has been made by such Subscriber independently of any other
Subscriber and independently of any information, materials, statements or
opinions as to the business, affairs, operations, assets, properties,
liabilities, results of operations, condition (financial or otherwise) or
prospects of the Company which may have been made or given by any other
Subscriber or by any agent or employee of any other Subscriber, and no
Subscriber or any of its agents or employees shall have any liability to any
other Subscriber (or any other person) relating to or arising from any such
information, materials, statements or opinions.  The Company acknowledges
that nothing contained in any Transaction Document, and no action taken by any
Subscriber pursuant hereto or thereto shall be deemed to constitute the
Subscribers as a partnership, an association, a joint venture or any other kind
of entity, or create a presumption that the Subscribers are in any way acting in
concert or as a group with respect to such obligations or the transactions
contemplated by the Transaction Documents.  The Company acknowledges that
it has elected to provide all Subscribers with the same terms and Transaction
Documents for the convenience of the Company and not because Company was
required or requested to do so by the Subscribers.  The Company
acknowledges that such procedure with respect to the Transaction Documents in no
way creates a presumption that the Subscribers are in any way acting in concert
or as a group with respect to the Transaction Documents or the transactions
contemplated thereby.

     

    (o)           Equal
Treatment.   No consideration shall be offered or paid to
any person to amend or consent to a waiver or modification of any provision of
the Transaction Documents unless the same consideration is also offered and paid
to all the Subscribers and their permitted successors and assigns.

     

    [SIGNATURE
PAGE FOLLOWS]

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    SIGNATURE PAGE TO
SUBSCRIPTION AGREEMENT

     

    Please
acknowledge your acceptance of the foregoing Subscription Agreement by signing
and returning a copy to the undersigned whereupon it shall become a binding
agreement between us.

    

    
      
        
          	
                  CHINA
      YONGXIN PHARMACEUTICALS,

                  INC.,
      a Delaware corporation

                
	 
      	 
      
	
                  By:

                	  
      
	 
      	
                  Name:
      Yongxin Liu

                
	 
      	
                  Title:
      Chief Executive Officer

                
	 
      	 
      
	
                  Dated:
      January ___, 2010

                

        

      

    

     

    
      
        	
                SUBSCRIBER

              	 
      	
                PRINCIPAL

                AMOUNT

              	 
      	
                WARRANTS

              
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	
                  

              	 
      	
                  

              	 
      

      

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    LIST OF EXHIBITS AND
SCHEDULES

     

    
      	
              Exhibit
      A

            	
              Form
      of Note (Included as separate document filed with the
  SEC)

            
	 
      	 
      
	
              Exhibit
      B

            	
              Form
      of Warrant (Included as separate document filed with the
    SEC)

            
	 
      	 
      
	
              Exhibit
      C

            	
              Escrow
      Agreement (Included as separate document filed with the
    SEC)

            
	 
      	 
      
	
              Exhibit
      D

            	
              Form
      of Security Agreement (Included as separate document filed with the
      SEC)

            
	 
      	 
      
	
              Exhibit
      E

            	
              Form
      of Subsidiary Guaranty (Included as separate document filed with the
      SEC)

            
	 
      	 
      
	
              Exhibit
      F

            	
              Form
      of Stock Pledge Agreement (Included as separate document filed with the
      SEC)

            
	 
      	 
      
	
              Exhibit
      G

            	
              Collateral
      Agent Agreement (Included as separate document filed with the
      SEC)

            
	 
      	 
      
	
              Exhibit
      H

            	
              Form
      of Legal Opinion

            
	 
      	 
      
	
              Exhibit
      I

            	
              Form
      of Lockup Agreement (Included as separate document filed with the
      SEC)

            
	 
      	 
      
	
              Exhibit
      J

            	
              Form
      of Lockup Agreement from Umesh Patel (Included as separate document filed
      with the SEC)

            
	 
      	 
      
	
              Schedule
      I

            	
              List
      of Subscribers

            
	 
      	 
      
	
              Schedule
      3

            	
              Pledgors
      and Pledged Stock

            
	 
      	 
      
	
              Schedule
      5(a)

            	
              Subsidiaries

            
	 
      	 
      
	
              Schedule
      5(d)

            	
              Capitalization
      and Additional Issuances

            
	 
      	 
      
	
              Schedule
      5(o)

            	
              Undisclosed
      Liabilities

            
	 
      	 
      
	
              Schedule
      5(q)

            	
              Banking

            
	 
      	 
      
	
              Schedule
      5(s)

            	
              Auditors

            
	 
      	 
      
	
              Schedule
      5(x)

            	
              Transfer
      Agent

            
	 
      	 
      
	
              Schedule
      8(a)

            	
              Broker’s
      Commission

            
	 
      	 
      
	
              Schedule
      9(e)

            	
              Use
      of Proceeds

            
	 
      	 
      
	
              Schedule
      9(l)

            	
              Intellectual
      Property

            
	 
      	 
      
	
              Schedule
      9(u)

            	
              Lockup
      Providers

            
	 
      	 
      
	
              Schedule
      12(a)

            	
              Excepted
      Issuances

            

    

     

    Exhibit
H

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    
      To the
Subscribers identified on Schedule A hereto:

    

    

    Re:           China Yongxin
Pharmaceuticals, Inc. $1,500,000 Note and Warrant Financing

    

    We have
acted as counsel to China Yongxin Pharmaceuticals, Inc., a Delaware corporation
(the “Company”), in
connection with the offer and sale by the Company of secured promissory notes in
the principal amount of up to $1,500,000 (the “Notes”), and common
stock purchase warrants (“Warrants”) to the
Subscribers identified on Schedule A hereto (each a “Subscriber”), in the
amounts designated thereon, for an aggregate purchase price of up to $1,500,000
pursuant to the exemption from registration under the Securities Act of 1933, as
amended (the “Act”) as set forth in
Regulation D (“Regulation D”)
promulgated thereunder. Capitalized terms used herein and not otherwise defined
shall have the meaning assigned to them in the subscription agreement (the
“Agreement”) by
and between the Company and Subscriber entered into at or about the date
hereof.  The Agreement, and the agreements described below are
sometimes hereinafter referred to collectively as the “Documents”.

    

    In
connection with the opinions expressed herein, we have made such examination of
law as we considered appropriate or advisable for purposes hereof.  As
to matters of fact material to the opinions expressed herein, we have relied,
with your permission, upon the representations and warranties as to factual
matters contained in and made by the Company and each Subscriber pursuant to the
Documents and upon certificates and statements of certain government officials
and of officers of the Company as described below.  We have also
examined originals or copies of certain corporate documents or records of the
Company as described below:

    

    
      	
               

            	
              (a) 

            	
              Bylaws
      of the Company;

            

    

    
      	 	
              (b) 

            	
              Certificate
      of Incorporation of the Company, as
amended;

            

    

    
      	 	
              (c) 

            	
              Collateral
      Agent Agreement;

            

    

    
      	 	
              (d) 

            	
              Escrow
      Agreement;

            

    

    
      	 	
              (e) 

            	
              Form
      of Agreement;

            

    

    
      	 	
              (f) 

            	
              Form
      of Common Stock Purchase Warrant (the “Warrants”);

            

    

    
      	 	
              (g) 

            	
              Form
      of Note;

            

    

    
      	
               
      

            	
              (h)

            	
              Resolutions
      of the Company’s Board of Directors, including unanimous Board of
      Directors approval of the Documents, a copy of which is annexed
      hereto;

            

    

    
      	
               
      

            	
              (i)

            	
              Security
      Agreement;

            

    

    
      	 	
              (j) 

            	
              Stock
      Pledge Agreement;

            

    

    
      	 	
              (k) 

            	
              Subsidiary
      Guaranty;

            

    

    
      	 	
              (l) 

            	
              Form
      of Lockup Agreement with certain Company shareholders;
  and

            

    

    
      	 	
              (m) 

            	
              Leakout
      Agreement between the Company and Umesh Patel dated
    1/15/2010.

            

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    In
rendering this opinion, we have, with your permission, assumed: (a) the
authenticity of all documents submitted to us as originals; (b) the conformity
to the originals of all documents submitted to us as copies; (c) the genuineness
of all signatures; (d) the legal capacity of natural persons; (e) the truth,
accuracy and completeness of the information, factual matters, representations
and warranties contained in all of such documents; (f) the due authorization,
execution and delivery of all such documents by the Subscribers, and the legal,
valid and binding effect thereof on the Subscribers; and (g) that the Company
and the Subscribers will act in accordance with their respective representations
and warranties as set forth in the Documents.  In rendering this
opinion, we also have assumed, with your permission, (A) that the
representations and warranties made in the Agreement by you are true and
correct; (B) that any wire transfers, drafts or checks tendered by you will be
honored; and (C) if you are a corporation or other entity, that you have filed
any required state franchise, income or similar tax returns and have paid any
required state franchise, income or similar taxes.

    

    We are
members of the bar of the State of California.  Our opinions hereafter
expressed are limited to the General Corporation Law of the State of California
and Federal law, and we express no opinion as to the laws of any other
jurisdiction.  We express no opinion with respect to the effect or
application of any other laws.  To the extent the Documents provide
that they are to be governed by the laws of any jurisdiction other than the
State of California, our opinions regarding the Documents are being rendered,
with your concurrence, as if only the internal laws of the State of California
were applicable thereto, notwithstanding the governing law provisions of the
Documents to the contrary.  Furthermore, we invite your attention to
the fact that the Documents state that they are governed by the laws of the
State of New York, that one or more Subscribers may have a mailing address in
certain foreign jurisdictions, and that the Company has wholly owned
subsidiaries located in the People’s Republic of China (PRC) (each, a “Subsidiary” and
collectively, the “Subsidiaries”).  We
have made no investigation of laws in New York, the PRC or any other foreign
jurisdiction. Special rulings of authorities administering any of such laws or
opinions of other counsel have not been sought or obtained by us in connection
with rendering the opinions expressed herein.

     

    As used
in this opinion letter, the expression “we are not aware” or the phrase “to our
knowledge,” or any similar expression or phrase with respect to our knowledge of
matters of fact, means as to matters of fact that, based on the actual knowledge
of individual attorneys within the firm principally responsible for handling
current matters for the Company (and not including any constructive or imputed
notice of any information), and after an examination of documents referred to
herein and after inquiries of the Chief Executive Officer of the Company, no
facts have been disclosed to us that have caused us to conclude that the
opinions expressed are factually incorrect; but beyond that we have made no
factual investigation for the purposes of rendering this opinion
letter.  Specifically, but without limitation, we have not searched
the dockets of any courts and we have made no inquiries of securities holders or
employees of the Company, other than the Chief Executive Officer.

     

    1.           The
Company and each Subsidiary is duly incorporated, validly existing and in good
standing in the jurisdictions of their formation; have qualified to do business
in each state and jurisdiction where required unless the failure to do so would
not have a material impact on their operations; and have the requisite corporate
power and authority to conduct their businesses, and to own, lease and operate
their properties.

     

    
      
        
        

      

      
        28

        
          

        

      

      
        
        

      

       

    

    2.           The
Company and each Subsidiary has the requisite corporate power and authority to
execute, deliver and perform its obligations under the Documents.  The
Documents, and the issuance of the Notes, and Warrants and the reservation and
issuance of Common Stock issuable upon conversion of the Notes and exercise of
the Warrants have been (a) duly approved by the Board of Directors of the
Company and each Subsidiary, as required, and (b) the Securities, when issued
pursuant to the Agreement and upon delivery, shall be validly issued and
outstanding, fully paid and non assessable.

     

    3.           The
execution, delivery and performance of the Documents by the Company and each
Subsidiary and the consummation of the transactions contemplated thereby, will
not, with or without the giving of notice or the passage of time or
both:

     

    (a)           Violate
the provisions of the Certificate of Incorporation or bylaws of the Company or
each Subsidiary; or

     

    (b)           To
the best of counsel's knowledge, violate any judgment, decree, order or award of
any court binding upon the Company or each Subsidiary.

     

    4.           The
Documents constitute the valid and legally binding obligations of the Company
and each Subsidiary and are enforceable against the Company and each Subsidiary
in accordance with their respective terms.

     

    5.           The
Securities have not been registered under the Securities Act of 1933, as amended
(the “Act”) or
under the laws of any state or other jurisdiction, and are or will be issued
pursuant to a valid exemption from registration.

     

    6.           The
holders of the Securities will not be subject to the provisions of the
anti-takeover statutes of Delaware.

     

    7.           The
Company and each Subsidiary has either obtained the approval of the transactions
described in the Documents from its Principal Market and stockholders, or no
such approval is required.

     

    8.           The
Subscriber has been granted valid security interests in the Collateral and
Pledged Stock (as defined in the Security Agreement and Stock Pledge Agreement,
respectively) pursuant to the Documents, enforceable against the Company, and
each Subsidiary and each Pledgor in accordance with their respective terms and
provisions, and to the extent such security interest may be perfected under the
Uniform Commercial Code by the filing of financing statements, then upon the due
and timely filing of Uniform Commercial Code financing statements respecting the
Company, with the Secretary of State of the State of Delaware, those security
interests will be perfected in such Collateral to the extent described in those
statements and the Security Agreement.

     

    
      
        
        

      

      
        29

        
          

        

      

      
        
        

      

       

    

    9.           The
Company, Subsidiaries and their Boards of Directors have taken all necessary
action, if any, in order to render inapplicable any control share acquisition,
business combination, poison pill (including any distribution under a rights
agreement) or other similar anti-takeover provision under the Company’s and
Subsidiaries’ Certificate of Incorporation (or similar charter documents) or the
laws of their respective jurisdictions of incorporation that is or could become
applicable to the Subscriber as a result of the Subscriber, the Company and
Subsidiaries fulfilling their obligations or exercising their rights under the
Documents, including without limitation as a result of the Company’s issuance of
the Notes, Warrants and Common Stock issuable upon conversion of the Notes and
exercise of the Warrants and the Subscriber’ ownership of the Notes, Warrants
and Common Stock issuable upon conversion of the Notes and exercise of the
Warrants.

     

    Our
opinions expressed above are specifically subject to the following limitations,
exceptions, qualifications and assumptions:

     

    A.          The
effect of bankruptcy, insolvency, reorganization, moratorium and other similar
laws relating to or affecting the relief of debtors or the rights and remedies
of creditors generally, including without limitation the effect of statutory or
other law regarding fraudulent conveyances and preferential
transfers.

     

    B.          Limitations
imposed by state law, federal law or general equitable principles upon the
specific enforceability of any of the remedies, covenants or other provisions of
any applicable agreement and upon the availability of injunctive relief or other
equitable remedies, regardless of whether enforcement of any such agreement is
considered in a proceeding in equity or at law.

     

    C.          For
purposes of this opinion, we are assuming that the Subscribers have all
requisite power and authority, and have taken any and all necessary corporate or
partnership action, to execute and deliver the Documents, and we are assuming
that the representations and warranties made by each Subscriber in the Documents
and pursuant thereto are true and correct.

     

    D.          The
legality, validity, binding nature and enforceability of the Company’s
obligations under the Documents may be subject to or limited by (a) principles
requiring the consideration of the impracticability or impossibility of
performance of the Company’s obligations at the time of the attempted
enforcement of such obligations, and (b) the effect of California or other state
court decisions and statutes which indicate that provisions of the Documents
which permit any of you to take action or make determinations may be subject to
a requirement that such action be taken or such determinations be made on a
reasonable basis in good faith or that it be shown that such action is
reasonably necessary for your protection.

     

    E.          We
express no opinion as to the Company’s or this transaction’s compliance or
noncompliance with applicable federal or state antifraud or antitrust statutes,
laws, rules and regulations, or the Exon-Florio Amendment, or usury
laws.

     

    F.          We
express no opinion concerning the past, present or future fair market value of
any securities.

     

    G.          With
respect to our opinions, we have assumed full disclosure to the Subscribers of
all material facts and, with respect to performance by the Company of its
obligations under the Documents, compliance by the Company at such time with the
requirements to file documents pursuant to Exchange Act of 1934 (the “Exchange Act”), with
applicable state securities laws and with any rules, regulations or
pronouncements issued or promulgated pursuant to such laws.

     

    
      
        
        

      

      
        30

        
          

        

      

      
        
        

      

       

    

    H.          We
express no opinion as to the enforceability under certain circumstances of any
provisions indemnifying a party against, or requiring contributions toward, that
party’s liability for its own wrongful or negligent acts, or where
indemnification or contribution is contrary to public policy or prohibited by
law.  In this regard, we advise you that in the opinion of the
Securities and Exchange Commission, indemnification of directors, officers and
controlling persons of an issuer against liabilities arising under the
Securities Act of 1933, as amended, is against public policy and is therefore
unenforceable.

     

    I.            We
express no opinion as to the enforceability under certain circumstances of any
provisions prohibiting waivers of any terms of the Documents other than in
writing, or prohibiting oral modifications thereof or modification by course of
dealing.  In addition, our opinions are subject to the effect of
judicial decisions which may permit the introduction of extrinsic evidence to
interpret the terms of written contracts.

     

    J.            The
enforceability under certain circumstances of provisions to the effect that
rights or remedies may be exercised without notice, that failure to exercise or
delay in exercising rights or remedies will not operate as a waiver of any such
right or remedy, that rights or remedies are not exclusive, that every right or
remedy is cumulative and may be exercised in addition to or with any other right
or remedy, or that election of a particular remedy or remedies does not preclude
recourse to one or more remedies.

     

    K.          Any
provision providing for the exclusive jurisdiction of a particular court or
purporting to waive rights to trial by jury, service of process or objections to
the laying of venue or to forum on the basis of forum non conveniens, in
connection with any litigation arising out of or pertaining to the
Documents.

     

    L.          The
effect of any governing state law, federal law or equitable principles which
limit the amount of attorneys’ fees that can be recovered under certain
circumstances.

     

    M.         We
express no opinion as to the effect of subsequent issuances of securities of the
Company, to the extent that (i) further issuances which may be integrated with
the Closing may include Subscribers that do not meet the definition of
“accredited investors” under Rule 501 of Regulation D and equivalent definitions
under state securities or “blue sky” laws and (ii) to the extent that
notwithstanding its reservation of shares the Company may issue an excessive
number of shares of Common Stock such that there are insufficient remaining
authorized but unissued shares of Common Stock for the conversion of the
Notes.  For purposes of our opinion in paragraph 6, we note that
stockholder approval is required in order to amend the Company’s Certificate of
Incorporation to increase the authorized number of shares that can be issued by
the Company.  We express no opinion as to whether the Company will or
will not obtain stockholder approval for this purpose.

     

    N.          With
respect to our opinion in Paragraph 1 that the Company is duly incorporated,
validly existing under the laws of the state of its incorporation, is in good
standing in its jurisdiction of incorporation, we have relied solely upon
written representations made to us in a certificate furnished by the Chief
Executive Officer of the Company and the certificates of public officials
including a certificate of good standing issued by the Delaware Secretary of
State, dated January 22, 2010 attesting to the Company’s good standing in such
jurisdiction.

     

    
      
        
        

      

      
        31

        
          

        

      

      
        
        

      

       

    

    O.          This
opinion letter is governed by, and shall be interpreted in accordance with, the
Legal Opinion Accord (the “Accord”) of the ABA
Section of Business Law (1991). As a consequence, it is subject to a number of
qualifications, exceptions, definitions, limitations on coverage and other
limitations, all as more particularly described in the Accord, including the
General Qualifications and the Equitable Principles Limitation, and this opinion
letter should be read in conjunction therewith.

     

    This
opinion is rendered as of the date first written above, is solely for your
benefit in connection with the Agreement and may not be relief upon or used by,
circulated, quoted, or referred to nor may any copies hereof by delivered to any
other person without our prior written consent.  We disclaim any
obligation to update this opinion letter or to advise you of facts,
circumstances, events or developments which hereafter may be brought to our
attention and which may alter, affect or modify the opinions expressed
herein.

     

    
      
        
          	
                  Very
      truly yours,

                
	 
      
	
                  Richardson
      & Patel LLP

                

        

      

    

     

    
      
        
        

      

      
        32

        
          

        

      

      
        
        

      

    

     

    SCHEDULE A TO LEGAL
OPINION

     

    
      
        
          
            
              
                
                  
                    
                      	
                              SUBSCRIBER AND ADDRESS

                            	 	
                              NOTE PRINCIPAL

                              AMOUNT

                            	 	 	
                              WARRANTS

                            	 
	
                              EXCALIBUR
      SPECIAL OPPORTUNITIES LP

                            	 	$	300,000.00	 	 	 	1,500,000	 
	 	 	 	 	 	 	 	 	 
	
                              DANA
      KATZENMEIER

                            	 	$	50,000.00	 	 	 	250,000	 
	 	 	 	 	 	 	 	 	 
	
                              FOURTH
      STREET HOLDINGS, LP

                            	 	$	100,000.00	 	 	 	500,000	 
	 	 	 	 	 	 	 	 	 
	
                              ROBERT
      B. PRAG

                            	 	$	100,000.00	 	 	 	500,000	 
	 	 	 	 	 	 	 	 	 
	
                              PETER
      B. TENTLER

                            	 	$	50,000.00	 	 	 	250,000	 
	 	 	 	 	 	 	 	 	 
	
                              TOTAL

                            	 	$	600,000.00	 	 	 	3,000,000	 

                    

                  

                

              

            

          

        

      

    

     

    
      
        
        

      

      
        33

        
          

        

      

      
        
        

      

    

     

    SCHEDULE
I

     

    
      
        
          
            
              
                
                  
                    
                      	
                              SUBSCRIBER AND ADDRESS

                            	 	
                              NOTE PRINCIPAL

                              AMOUNT

                            	 	 	
                              WARRANTS

                            	 
	
                              EXCALIBUR
      SPECIAL OPPORTUNITIES LP

                            	 	$	300,000.00	 	 	 	1,500,000	 
	 	 	 	 	 	 	 	 	 
	
                              DANA
      KATZENMEIER

                            	 	$	50,000.00	 	 	 	250,000	 
	 	 	 	 	 	 	 	 	 
	
                              FOURTH
      STREET HOLDINGS, LP

                            	 	$	100,000.00	 	 	 	500,000	 
	 	 	 	 	 	 	 	 	 
	
                              ROBERT
      B. PRAG

                            	 	$	100,000.00	 	 	 	500,000	 
	 	 	 	 	 	 	 	 	 
	
                              PETER
      B. TENTLER

                            	 	$	50,000.00	 	 	 	250,000	 
	 	 	 	 	 	 	 	 	 
	
                              TOTAL

                            	 	$	600,000.00	 	 	 	3,000,000	 

                    

                  

                

              

            

          

        

      

    

    

    
      
        
        

      

      
        34

        
          

        

      

      
        
        

      

       

    

    Schedule
3

    

    (Pledgors
and Pledged Stock)

    

    
      
        	
                Pledgors

              	 
      	
                Pledged Stock

              
	 
      	 
      	 
      
	
                MISALA
      HOLDINGS INC. (BVI)

              	 
      	
                12,000,000
      shares of common stock

              
	 
      	 
      	 
      
	
                BOOM
      DAY INVESTMENTS LTD. (BVI)

              	 
      	
                7,999,998
      shares of common stock

              
	 
      	 
      	
                5,400,000
      shares of common stock

              
	 
      	 
      	 
      
	
                PERFECT
      SUM INVESTMENTS LTD (BVI)

              	
                  

              	
                1,200,000
      shares of common stock

              

      

    

    

    
      
        
        

      

      
        35

        
          

        

      

      
        
        

      

       

    

    Schedule
5(a)

    

    (Subsidiaries)

    

    Changchun
Yongxin Dirui Medical Co., Ltd., a company organized under the laws of the
People’s Republic of China

    

    Jilin
Province Yongxin Chain Drugstore Ltd., a company organized under the laws of the
People’s Republic of China

    

    Jilin
Dingjian Natural & Health Products Co., Ltd., a company organized under the
laws of the People’s Republic of China

    

    Tianjin
Jingyongxin Chain Drugstore Ltd., a company organized under the laws of the
People’s Republic of China

    

    Baishan
Caoantang Chain Drugstore Ltd., a company organized under the laws of the
People’s Republic of China

    

    Digital
Learning Institute Inc., a Delaware corporation

    

    Software
Education of America, Inc., a California corporation

    

    McKinley
Educational Services, Inc., a California corporation

    

    Digital
Knowledge Works, Inc., a Delaware corporation

    

    Coursemate,
Inc., a California corporation.

    

    
      
        
        

      

      
        36

        
          

        

      

      
        
        

      

    

     

    Schedule
5(d)

     

    (Capitalization
and Additional Issuances)

    

    Common
Stock

    

    Authorized:
75,000,000 shares

    Issued
and Outstanding:  56,448,923 shares

    

    Preferred
Stock

    

    Authorized:
5,000,000 shares

    Issued
and Outstanding:  1,666,667 shares

    

    
      
        
        

      

      
        37

        
          

        

      

      
        
        

      

    

     

    Schedule
5(o)

     

    (Undisclosed
Liabilities)

    

    Even
though the $219,000 judgment in relation to a legal proceeding called Wells Fargo Bank. N.A. v. Software
Education for America Inc. has been previously disclosed, the
Subscribers are advised that the Company contemplates settling the judgment at a
later time by issuance of corporate stock, but it is still subject to
negotiation.

    

    
      
        
        

      

      
        38

        
          

        

      

      
        
        

      

       

    

    Schedule
5(q)

    

    (Banking
Information)

     

    
      
        
          	
                  Bank

                	 
      	
                   

                	 
      	
                  Bank Address

                
	 
      	 
      	 
      	 
      	 
      
	
                  Changchun
      Yongxin Dirui Medical Co., Ltd.

                	 
      	 
      	 
      	 
      
	
                  ICBC,
      branch of Changchun Development District

                	 
      	
                   

                	 
      	
                  1
      Shen Zhen St.,

                  Changchun

                
	 
      	 
      	 
      	 
      	 
      
	
                  Jilin
      Province Yongxin Chain Drugstore Ltd.

                	 
      	 
      	 
      	 
      
	
                  Bank
      of Jilin, branch of Gaoxin Development District

                	 
      	
                   

                	 
      	
                  3258
      Gui Gu Blvd., Gao Xin District,

                  Changchun

                
	 
      	 
      	 
      	 
      	 
      
	
                  Tianjin
      Jinyongxin Charin Drugstore Ltd.

                	 
      	 
      	 
      	 
      
	
                  Agricultural
      Bank of China, branch of West Bing Shui Blvd.

                	 
      	
                   

                	 
      	
                  26
      W Bing Shui Blvd.,

                  Nan
      Kai District,

                  Changchun

                
	 
      	 
      	 
      	 
      	 
      
	
                  Baishan
      Caoantang Chain Drugstore Ltd.

                	 
      	 
      	 
      	 
      
	
                  ICBC,
      branch of Ba Dao Jiang

                	 
      	
                   

                	 
      	
                  47
      Hun Jiang Blvd.,

                  Changchun

                
	 
      	 
      	 
      	 
      	 
      
	
                  Jilin
      Dingjian Natural & Health Products Co., Ltd.

                	 
      	 
      	 
      	 
      
	
                  ICBC,
      branch of Changchun Development District

                	
                    

                	
                   

                	
                    

                	
                  1
      Shen Zhen St.,

                  Changchun

                

        

      

    

     

    
      
        
        

      

      
        39

        
          

        

      

      
        
        

      

       

    

    Schedule
5(s)

     

    (Auditors)

     

    Wendy
Lee

    Kabani
& Company Inc.

    6033 West
Century Boulevard

    Los
Angeles, CA 90045-6410

    (310)
410-0371

    

    
      
        
        

      

      
        40

        
          

        

      

      
        
        

      

    

     

    Schedule
5(x)

    

    (Transfer
Agent)

     

    Joanna
DiBella

    Pacific
Stock Transfer Company

    500 E.
Warm Springs Road, Suite 240

    Las
Vegas, NV 89119

    Email:
joanna@pacificstocktransfer.com

    Telephone:
702-361-3033

    Fax:
702-433-1979

    Web:
 www.pacificstocktransfer.com

    

    
      
        
        

      

      
        41

        
          

        

      

      
        
        

      

       

    

    Schedule
8(a)

    

    (Broker’s
Commission)

     

    
      
        	
                BROKER:

              	
                STREETCAPITAL
      CORP.

              
	 
      	
                300
      Colonial Center Parkway, Suite 260

              
	 
      	
                Roswell,
      GA 30076

              
	 
      	
                Attn:
      Vince Sbarra

              
	 
      	
                Fax:
      (678) 353-2188

              

      

    

     

    The total
amount of compensation to the Broker in connection with the Closing of the
Offering shall be as follows:

     

    Cash
Fee.   The Company agrees that it will pay the Broker, on
the Closing Date a fee of eight percent (8%) of the Purchase Price (“Broker’s Cash
Fee”).  The Company represents that there are no other parties
entitled to receive fees, commissions, or similar payments in connection with
the Offering except the Broker.

     

    Warrant Exercise
Compensation.  The Broker will also be paid by the Company four
percent (4%) of the cash proceeds received by the Company from exercise of the
Warrants (“Warrant Exercise
Compensation”), upon receipt of such proceeds.

    

    Broker’s
Warrants.  On the Closing Date, the Company will issue to the
Broker a warrant for the purchase of up to 225,000 shares of common stock (or an
amount equal to 3% of the total number of shares of common stock into which the
Notes are convertible at the Closing Date, if less) of the Company with an
exercise price of $0.50 per share (“Broker’s Warrant”).  The Broker’s
Warrant will be similar to and carrying the same rights as the Warrants issuable
to the Subscribers except that Warrant Exercise Compensation will not be payable
in connection with such Broker’s Warrant.

    

    The
Broker agrees to execute and deliver to the Company written representations,
warranties and covenants which are reasonably acceptable to the Company and
substantially similar to those made by the Subscribers in the Agreement, in
connection with the Broker’s acquisition of the Broker’s Warrants.

     

    
      
        
        

      

      
        42

        
          

        

      

      
        
        

      

       

    

    Schedule
9(e)

    

    (Use of
Proceeds)

    

    The use
of proceeds shall include, but not limited to, the
following:  auditing expenses, legal fees, operating expenses, payment
for suppliers, and general working capital.

    

    
      
        
        

      

      
        43

        
          

        

      

      
        
        

      

       

    

    Schedule
9(l)

    

    (Intellectual
Property)

     

    
      	
              Type

            	 
      	
              Name

            	 
      	
              Category Number and

              Description

            	 
      	
              Issued By

            	 
      	
              Duration

            	 
      	
              Description

            
	
              Trademark

            	 
      	
              朗莱孚
      Longlife

            	 
      	
              5
      (Pharmaceutical and veterinary preparations; sanitary preparations for
      medical purposes; dietetic substances adapted for medical use, food for
      babies; plasters, materials for dressings; material for stopping teeth,
      dental wax; disinfectants; preparations for destroying vermin; fungicides,
      herbicides)

            	 
      	
              Trademark
      Administration of the National Administration of Industry and Commerce
      (the “PRC Trademark Bureau”)

            	 
      	
              May
      16, 2007 to May 16, 2017

              (10
      years)

            	 
      	
              Logo,
      brand name used in our products

               

              Registration
      No.: ZC5747465SL

               

            
	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	
              Trademark

            	 
      	
              姿諾Zinuo

            	 
      	
              3
      (Bleaching preparations and other substances for laundry use; cleaning,
      polishing, scouring and abrasive preparations; soaps; perfumery, essential
      oils, cosmetics, hair lotions; dentifrices)

            	 
      	
              PRC
      Trademark Bureau

            	 
      	
              May
      16, 2007 to May 16, 2017

               (10
      years)

            	 
      	
              Logo,
      brand name used in our products

               

              Registration
      No.: ZC5747467SL

            
	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	
              Trademark

            	 
      	
              永新堂
      Yongxintang

            	 
      	
              5
      (Pharmaceutical and veterinary preparations; sanitary preparations for
      medical purposes; dietetic substances adapted for medical use, food for
      babies; plasters, materials for dressings; material for stopping teeth,
      dental wax; disinfectants; preparations for destroying vermin; fungicides,
      herbicides)

            	 
      	
              PRC
      Trademark Bureau

            	 
      	
              October
      10, 2007 to October 10, 2017

               (10
      years)

            	 
      	
              Logo,
      brand name used in our products

               

              Registration
      No.: ZC6205067SL

            

    

     

    
      
        
        

      

      
        44

        
          

        

      

      
        
        

      

    

     

    
      
        	
                Trademark

              	 
      	
                永新堂
      Yongxintang

              	 
      	
                29
      (Meat, fish, poultry and game; meat extracts; preserved, dried and cooked
      fruits and vegetables; jellies, jams, fruit sauces; eggs, milk and milk
      products; edible oils and fats)

              	 
      	
                PRC
      Trademark Bureau

              	 
      	
                October
      10, 2007 to October 10, 2017

                 (10
      years)

              	 
      	
                Logo,
      brand name used in our products

                 

                Registration
      No.: ZC6205065SL

              
	
                   

              	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	
                Trademark

              	 
      	
                永新堂
      Yongxintang

              	 
      	
                30
      (Coffee, tea, cocoa, sugar, rice, tapioca, sago, artificial coffee; flour
      and preparations made from cereals, bread, pastry and confectionery, ices;
      honey, treacle; yeast, baking-powder; salt, mustard; vinegar, sauces
      (condiments); spices; ice)

              	 
      	
                PRC
      Trademark Bureau

              	 
      	
                October
      10, 2007 to October 10, 2017

                 (10
      years)

              	 
      	
                Logo,
      brand name used in our products

                 

                Registration
      No.: ZC6205066SL

              
	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	
                Trademark

              	 
      	
                永新堂
      Yongxintang

              	 
      	
                32
      (Beers; mineral and aerated waters and other non-alcoholic drinks; fruit
      drinks and fruit juices; syrups and other preparations for making
      beverages)

              	 
      	
                PRC
      Trademark Bureau

              	 
      	
                October
      10, 2007 to October 10, 2017

                 (10
      years)

              	 
      	
                Logo,
      brand name used in our products

                 

                Registration
      No.: ZC6205064SL

              
	
                  

              	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	
                Trademark

              	 
      	
                永新堂
      Yongxintang

              	 
      	
                33
      (Alcoholic beverages (except beers))

              	 
      	
                PRC
      Trademark Bureau

              	 
      	
                October
      10, 2007 to October 10, 2017

                 (10
      years)

              	 
      	
                Logo,
      brand name used in our products

                 

                Registration
      No.: ZC6205063SL

              
	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	
                Trademark

              	
                  

              	
                高麗元Gaoliyuan

              	
                  

              	
                30
      (Coffee, tea, cocoa, sugar, rice, tapioca, sago, artificial coffee; flour
      and preparations made from cereals, bread, pastry and confectionery, ices;
      honey, treacle; yeast, baking-powder; salt, mustard; vinegar, sauces
      (condiments); spices; ice)

              	
                  

              	
                PRC
      Trademark Bureau

              	
                  

              	
                October
      25, 2006 to October 25, 2016

                 (10
      years)

              	
                  

              	
                Logo,
      brand name used in our products

                 

                Registration
      No.: ZC5410005SL

              

      

    

    

    
      
        
        

      

      
        45

        
          

        

      

      
        
        

      

       

    

    Schedule
9(u)

    

    (Lockup
Providers)

    

    
      	
              Misala
      Holdings Inc. (BVI)

            	
              12,000,000
      shares of common stock

            
	
              Yongxin
      Liu

            	 
      
	 
      	 
      
	
              Boom
      Day Investments Ltd. (BVI)

            	
              7,
      999,998 shares of common stock; and

            
	
              Yongkui
      Liu

            	
              5,400,000
      shares of common stock

            
	 
      	 
      
	
              Perfect
      Sum Investments Ltd. (BVI)

            	
              1,200,000
      shares of common stock

            
	
              Yongmei
      Wang (spouse of Yongkui Liu)

            	 
      
	 
      	 
      
	
              Accord
      Success Ltd. (BVI)

            	
              5,400,000
      shares of common stock

            
	 
      	 
      
	
              Full
      Spring Group Ltd. (BVI)

            	
              1,800,000
      shares of common stock

            
	 
      	 
      
	
              Umesh
      Patel

            	
              2,638,099
      shares of common stock

            
	 
      	
              (Mr.
      Patel is signing an agreement that permits the sale of a limited number of
      shares in the form attached as Exhibit
J)

            

    

     

    
      
        
        

      

      
        46

        
          

        

      

      
        
        

      

    

     

    
      Schedule
12(a)

    

    

    (Excepted
Issuances)

     

    On the
Closing Date, Richardson & Patel LLP (counsel to the Company) is converting
$100,000 in past legal fees into notes and warrants on the same terms as the
Subscribers under the Subscription Agreement dated January 22,
2010.

     

    
      
        
        

      

      
        47Unassociated Document

    
      NEITHER THE ISSUANCE
AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES
INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS.  THE SECURITIES MAY NOT BE
OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED
BY THE HOLDER), IN A
GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
(II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID
ACT.  NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR
OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

      

      
        	 
      	
                Right
      to Purchase __________ shares of Common Stock of China Yongxin
      Pharmaceuticals, Inc. (subject to adjustment as provided
      herein)

              

      

      

      COMMON
STOCK PURCHASE WARRANT

      

      No.
2010-A-001                                                                                     Issue
Date: January ___, 2010

      CHINA
YONGXIN PHARMACEUTICALS, INC., a corporation organized under the laws of the
State of Delaware (the “Company”), hereby certifies
that, for value received, _______________________________,
____________________________________________, or its assigns (the “Holder”), is entitled, subject
to the terms set forth below, to purchase from the Company at any time after the
Issue Date until 5:00 p.m., E.S.T on three years after the Issue Date (the
“Expiration Date”), up
to __________ fully paid and non-assessable shares of Common Stock at a per
share purchase price of $0.50.  The
aforedescribed purchase price per share, as adjusted from time to time as herein
provided, is referred to herein as the “Purchase
Price.”  The number and character of such shares of Common
Stock and the Purchase Price are subject to adjustment as provided
herein.  The Company may reduce the Purchase Price for some or all of
the Warrants, temporarily or permanently, provided such reduction is made as to
all outstanding Warrants for all Holders of such
Warrants.  Capitalized terms used and not otherwise defined herein
shall have the meanings set forth in that certain Subscription Agreement (the
“Subscription
Agreement”), dated as of January ___, 2010, entered into by the Company,
the Holder and the other signatories thereto.

      

      As used
herein the following terms, unless the context otherwise requires, have the
following respective meanings:

       

      (A)           The
term “Company” shall
mean China Yongxin Pharmaceuticals, Inc., a Delaware corporation, and any
corporation which shall succeed or assume the obligations of China Yongxin
Pharmaceuticals, Inc. hereunder.

       

      (B)           The
term “Common Stock”
includes (i) the Company's Common Stock, $0.001 par value per share, as
authorized on the date of the Subscription Agreement, and (ii) any other
securities into which or for which any of the securities described in
(i) may be converted or exchanged pursuant to a plan of recapitalization,
reorganization, merger, sale of assets or otherwise.

       

      (C)           For
purposes of this Warrant, the “Fair Market Value” of a share
of Common Stock as of a particular date (the “Determination Date”) shall
mean:

       

      (a)           If
the Company's Common Stock is traded on an exchange or is quoted on the NASDAQ
Global Market, NASDAQ Global Select Market, the NASDAQ Capital Market, the New
York Stock Exchange or the American Stock Exchange, LLC, then the average of the closing sale prices of
the Common Stock for the five (5) Trading Days immediately prior to (but not
including) the
Determination Date;

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      (b)           If
the Company's Common Stock is not traded on an exchange or on the NASDAQ Global
Market, NASDAQ Global Select Market, the NASDAQ Capital Market, the New York
Stock Exchange or the American Stock Exchange, Inc., but is traded on the OTC
Bulletin Board or in the over-the-counter market or Pink Sheets, then the
average of the closing bid and ask prices reported for the five (5) Trading Days immediately
prior to (but not including) the Determination Date;

       

      (c)           Except
as provided in clause (d)  below and Section 3.1, if the
Company's Common Stock is not publicly traded, then as the Holder and the
Company agree, or in the absence of such an agreement, by arbitration in
accordance with the rules then standing of the American Arbitration Association,
before a single arbitrator to be chosen from a panel of persons qualified by
education and training to pass on the matter to be decided; or

       

      (d)           If
the Determination Date is the date of a liquidation, dissolution or winding up,
or any event deemed to be a liquidation, dissolution or winding up pursuant to
the Company's charter, then all amounts to be payable per share to holders of
the Common Stock pursuant to the charter in the event of such liquidation,
dissolution or winding up, plus all other amounts to be payable per share in
respect of the Common Stock in liquidation under the charter, assuming for the
purposes of this clause (d) that all of the shares of Common Stock then
issuable upon exercise of all of the Warrants are outstanding at the
Determination Date.

       

      (D)           The
term “Other Securities”
refers to any stock (other than Common Stock) and other securities of the
Company or any other person (corporate or otherwise) which the holder of the
Warrant at any time shall be entitled to receive, or shall have received, on the
exercise of the Warrant, in lieu of or in addition to Common Stock, or which at
any time shall be issuable or shall have been issued in exchange for or in
replacement of Common Stock or Other Securities pursuant to Section 4 or
otherwise.

       

      (E)           The term “Warrant
Shares” shall mean the Common Stock issuable
upon exercise of this Warrant.

       

      1.           Exercise of
Warrant.

       

      1.1.           Number of Shares Issuable
upon Exercise.  From and after the Issue Date through and
including the Expiration Date, the Holder hereof shall be entitled to receive,
upon exercise of this Warrant in whole in accordance with the terms of Section 1.2 or
upon exercise of this Warrant in part in accordance with Section 1.3,
shares of Common Stock of the Company, subject to adjustment pursuant to Section 4 below
and Section
12(b) of the Subscription Agreement.

       

      1.2.           Full
Exercise.  This
Warrant may be exercised in full by the Holder hereof by delivery to the Company of an original or facsimile copy of the
form of subscription
attached as Exhibit A hereto (the “Subscription
Form”) duly executed by such Holder and
delivery within two days thereafter of payment, in cash, wire transfer or by
certified or official bank check payable to the order of the Company, in the
amount obtained by
multiplying the number of shares of Common Stock for which this Warrant is then
exercisable by the Purchase Price then in effect.  The original
Warrant is not required to be surrendered to the Company until it has been fully
exercised.

       

      1.3.           Partial
Exercise.  This
Warrant may be exercised in part (but not for a fractional share) by delivery of
a Subscription Form in the manner and at the place provided in Section 1.2, except that the amount payable by the
Holder on such partial exercise shall be the amount obtained by multiplying
(a) the number of whole shares of Common Stock designated by the Holder in
the Subscription Form by (b) the Purchase Price then in
effect.  On any such partial exercise, provided the Holder has surrendered the
original Warrant, the
Company, at its expense, will forthwith issue and deliver to or upon the order
of the Holder hereof a new Warrant of like tenor, in the name of the Holder
hereof or as such Holder (upon payment by such Holder of any applicable transfer
taxes) may request, the whole number of shares
of Common Stock for which such Warrant may still be
exercised.

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      1.4.           Automatic
Exercise.   In the event this Warrant is exercisable
pursuant to the provisions of Section 2 hereof on a cashless basis as of the
close of the last trading day on or before the Expiration Date, then this
Warrant, to the extent not previously unexercised and subject to the limitation
in Section 10 of this Warrant shall be deemed to have been automatically
exercised without the requirement of any notice or delivery of the Subscription
Form, pursuant to the terms of Section 2.  Such Expiration Date will
be deemed the exercise date for purposes of determining the Warrant Share
Delivery Date and similar terms hereof.

       

      1.5.           Company
Acknowledgment.  The Company will, at the time of the exercise
of the Warrant, upon the request of the Holder hereof, acknowledge in writing
its continuing obligation to afford to such Holder any rights to which such
Holder shall continue to be entitled after such exercise in accordance with the
provisions of this Warrant. If the Holder shall fail to make any such request,
such failure shall not affect the continuing obligation of the Company to afford
to such Holder any such rights.

       

      1.6.           Delivery of
Stock Certificates, etc. on
Exercise. The Company
agrees that, provided the full purchase price listed in the Subscription Form is
received as specified in Section
1.2, the shares of Common
Stock purchased upon exercise of this Warrant shall be deemed to be issued to
the Holder hereof as the
record owner of such shares as of the close of business on the date on which
delivery of a Subscription Form shall have occurred and payment made for such
shares as aforesaid. As soon as practicable after the exercise of this Warrant
in full or in part, and in any event within
five (5) business days thereafter (“Warrant Share
Delivery Date”), the Company at its expense (including
the payment by it of any applicable issue taxes) will cause to be issued in the
name of and delivered to the Holder hereof, or as such Holder (upon payment
by such Holder of any applicable transfer taxes) may direct in compliance with
applicable securities laws, a certificate or certificates for the number of duly
and validly issued, fully paid and non-assessable shares of Common Stock (or Other Securities)
to which such Holder shall be entitled on such exercise, plus, in lieu of any
fractional share to which such Holder would otherwise be entitled, cash equal to
such fraction multiplied by the then Fair Market Value of one full share of Common Stock, together
with any other stock or other securities and property (including cash, where
applicable) to which such Holder is entitled upon such exercise pursuant to
Section 1 or otherwise.  The Company
understands that a delay in
the delivery of the Warrant Shares after the Warrant Share Delivery Date could
result in economic loss to the Holder.  As compensation to the Holder for such
loss, the Company agrees to pay (as liquidated damages and not as a penalty) to
the Holder for late
issuance of Warrant Shares upon exercise of this Warrant the proportionate
amount of $100 per business day after the Warrant Share Delivery Date for each
$10,000 of Purchase Price of Warrant Shares for which this Warrant is exercised
which are not timely delivered.  The Company
shall pay any payments incurred under this Section in immediately available
funds upon demand.  Furthermore, in addition to any other remedies
which may be available to the Holder, in the event that the Company fails for
any reason to effect delivery of the Warrant
Shares by the Warrant Share Delivery Date, the Holder may revoke all or part of
the relevant Warrant exercise by delivery of a notice to such effect to the
Company, whereupon the Company and the Holder shall each be restored to their respective positions
immediately prior to the exercise of the relevant portion of this Warrant,
except that the liquidated damages described above shall be payable through the
date notice of revocation or rescission is given to the Company.

       

      1.7.           Buy-In.   In addition to any
other rights available to the Holder, if the Company fails to deliver to a
Holder the Warrant Shares as required pursuant to this Warrant after the Warrant
Share Delivery Date and the Holder or a broker on the Holder’s behalf, purchases (in an open market
transaction or otherwise) shares of common stock to deliver in satisfaction of a
sale by such Holder of the Warrant Shares which the Holder was entitled to
receive from the Company (a “Buy-In”), then the Company shall
pay in cash to the Holder
(in addition to any remedies available to or elected by the Holder) the amount
by which (A) the Holder's total purchase price (including brokerage commissions,
if any) for the shares of common stock so purchased exceeds (B) the
aggregate Purchase Price of the Warrant
Shares required to have
been delivered together with interest thereon at a rate of 15% per annum,
accruing until such amount and any accrued interest thereon is paid in full
(which amount shall be paid as liquidated damages and not as a
penalty).  For example,
if a Holder purchases shares of Common Stock having a total purchase price of
$11,000 to cover a Buy-In with respect to $10,000 of Purchase Price of Warrant
Shares to have been received upon exercise of this Warrant, the Company shall be required to pay
the Holder $1,000, plus
interest. The Holder shall
provide the Company written notice indicating the amounts payable to the Holder
in respect of the Buy-In.

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      2.           Cashless
Exercise.

       

      (a)           Payment
upon exercise may be made at the option of the Holder either in (i) cash, wire
transfer or by certified or official bank check payable to the order of the
Company equal to the applicable aggregate Purchase Price, (ii) by delivery of
Common Stock issuable upon exercise of the Warrants in accordance with
Section (b) below or (iii) by a combination of any of the
foregoing methods, for the number of Common Stock specified in such form (as
such exercise number shall be adjusted to reflect any adjustment in the total
number of shares of Common Stock issuable to the holder per the terms of this
Warrant) and the holder shall thereupon be entitled to receive the number of
duly authorized, validly issued, fully-paid and non-assessable shares of Common
Stock (or Other Securities) determined as provided
herein.  Notwithstanding the immediately preceding sentence, payment
upon exercise may be made in the manner described in Section 2(b) below
commencing one hundred and eighty (180) days after the Issue Date, only with
respect to Warrant Shares not included for
unrestricted public resale in an effective Registration Statement on the date
notice of exercise is given by the Holder.

       

      (b)           Subject
to the provisions herein to the contrary, if the Fair Market Value of one share
of Common Stock is greater than the Purchase Price (at the date of calculation
as set forth below), in lieu of exercising this Warrant for cash, the holder may
elect to receive shares equal to the value (as determined below) of this Warrant
(or the portion thereof being cancelled) by delivery of a properly endorsed
Subscription Form delivered to the Company by any means described in Section 13, in which
event the Company shall issue to the holder a number of shares of Common Stock
computed using the following formula:

       

      X=           Y (A-B)

                      A

      

      Where                      X=           the
number of shares of Common Stock to be issued to the Holder

      

      
        	
                 
      

              	
                Y=

              	
                the
      number of shares of Common Stock purchasable under the Warrant or, if only
      a portion of the Warrant is being exercised, the portion of the Warrant
      being exercised (at the date of such
  calculation)

              

      

       

      
        	
                 
      

              	
                A=

              	
                Fair Market
      Value

              

      

       

      
        	
                 
      

              	
                B=

              	
                Purchase
      Price (as adjusted to the date of such
  calculation)

              

      

       

      For
purposes of Rule 144 promulgated under the 1933 Act, it is intended, understood
and acknowledged that the Warrant Shares issued in a cashless exercise
transaction in the manner described above shall be deemed to have been acquired
by the Holder, and the holding period for the Warrant Shares shall be deemed to
have commenced, on the date this Warrant was originally issued pursuant to the
Subscription Agreement.

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      3.           Adjustment for
Reorganization, Consolidation, Merger, etc.

       

      3.1.           Fundamental Transaction. 
If, at any time while this Warrant is outstanding, (A) the Company 
effects any merger or  consolidation  of the Company with or into
another entity, (B) the Company effects any sale of all or
substantially all of its assets in one or
a series of related transactions,  (C)
any tender offer or exchange offer (whether by the
Company or another entity) is completed pursuant to which holders of Common
Stock are permitted to tender or exchange their
shares for other securities, cash or property, (D) the Company
consummates a stock purchase agreement or other business combination (including,
without limitation, a reorganization, recapitalization, or spin-off) with one or
more persons or entities whereby such other persons or entities acquire more
than the 50% of the outstanding shares of Common Stock (not including any shares
of Common Stock held by such other persons or entities making or party to, or
associated or affiliated with the other persons or entities making or party to,
such stock purchase agreement or other business combination), (E) any “person”
or “group” (as these terms are used for purposes of Sections 13(d) and 14(d) of
the 1934 Act) is or shall become the “beneficial owner” (as defined in Rule
13d-3 under the 1934 Act), directly or indirectly, of 50% of the aggregate
Common Stock of the Company, or (F) the Company effects any
reclassification of the Common Stock or any compulsory share exchange
pursuant to which the Common Stock is effectively converted into or
exchanged for other securities, cash or property (in any such
case, a “Fundamental 
Transaction”), then, upon any subsequent exercise of this
Warrant, the Holder shall have the right to receive, for each Warrant Share that
would have been issuable upon such exercise immediately prior to the occurrence
of such Fundamental Transaction, at the option of the Holder, (a) upon
exercise of this Warrant, the number of shares of Common Stock of the
successor or acquiring corporation or of the Company, if it is the
surviving corporation, and any additional consideration (the “Alternate
Consideration”) receivable upon or as a result of
such reorganization, reclassification, merger,
consolidation or disposition of assets by a Holder of the
number of shares of Common Stock for which this Warrant is exercisable
immediately prior to such event.  For purposes of any such
exercise, the determination of the Purchase Price shall
be appropriately adjusted to apply to such Alternate
Consideration based on the amount of
Alternate Consideration issuable in respect of one share of Common
Stock in such Fundamental Transaction, and the Company shall
apportion the Purchase Price among the Alternate Consideration in
a reasonable manner reflecting the relative value of any different components of
the Alternate Consideration.  If holders of Common Stock are given any
choice as to the securities, cash or property to be received in a
Fundamental Transaction, then the Holder shall be given the same choice as to
the Alternate Consideration it receives upon any exercise of this Warrant
following such Fundamental Transaction.  To the extent necessary to
effectuate the foregoing provisions, any successor to the Company or
surviving entity in such Fundamental Transaction shall issue to the Holder a
new warrant consistent with
the foregoing provisions and evidencing the
Holder's right to exercise such warrant into Alternate
Consideration.  The terms of any agreement pursuant to which a
Fundamental Transaction is effected shall include terms requiring any such
successor or surviving entity to comply with the provisions of
this Section
3.1 and insuring that this Warrant (or any such replacement
security) will be similarly adjusted upon any subsequent transaction
analogous to a Fundamental Transaction.  “Black-Scholes Value” shall be
determined in accordance with the Black-Scholes Option Pricing Model obtained
from the “OV” function on Bloomberg L.P. using (i) a price per share of Common
Stock equal to the VWAP of the Common Stock for the Trading Day immediately
preceding the date of consummation of the applicable Fundamental Transaction,
(ii) a risk-free interest rate corresponding to the U.S. Treasury rate for a
period equal to the remaining term of this Warrant as of the date of such
request and (iii) an expected volatility equal to the 100 day volatility
obtained from the HVT function on Bloomberg L.P. determined as of the Trading
Day immediately following the public announcement of the applicable Fundamental
Transaction.

      

      3.2.           Continuation of
Terms.  Upon any reorganization, consolidation, merger or
transfer (and any dissolution following any transfer) referred to in this Section 3, this
Warrant shall continue in full force and effect and the terms hereof shall be
applicable to the Other Securities and property receivable on the exercise of
this Warrant after the consummation of such reorganization, consolidation or
merger or the effective date of dissolution following any such transfer, as the
case may be, and shall be binding upon the issuer of any Other Securities,
including, in the case of any such transfer, the person acquiring all or
substantially all of the properties or assets of the Company, whether or not
such person shall have expressly assumed the terms of this Warrant as provided
in Section 4.

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      3.3           Share
Issuance.  Until
the Expiration Date, if the Company shall issue any Common Stock except for the
Excepted Issuances (as defined in the Subscription Agreement), prior to the complete exercise of this
Warrant for a consideration less than the Purchase Price then in effect at the
time of such issuance then, and thereafter successively upon each such issuance,
the Purchase Price shall be reduced to such other lower price for then outstanding
Warrants.  For purposes of this adjustment, the issuance of any
security or debt instrument of the Company carrying the right to convert such
security or debt instrument into Common Stock or of any warrant, right or option
to purchase Common Stock shall result in an
adjustment to the Purchase Price upon the issuance of the above-described
security, debt instrument, warrant, right, or option if such issuance is at a
price lower than the Purchase Price in effect upon such issuance and again at any time upon any actual,
permitted, optional, or allowed issuances of shares of Common Stock upon any
actual, permitted, optional, or allowed exercise of such conversion or purchase
rights if such issuance is at a price lower than the Purchase Price in effect upon any actual,
permitted, optional, or allowed issuance.  Common Stock issued or
issuable by the Company for no consideration will be deemed issuable or to have
been issued for $0.001 per share of Common Stock.  The reduction of
the Purchase Price described in this Section 3.3 is
in addition to the other rights of the Holder described in the Subscription
Agreement.

       

      4.           Extraordinary Events
Regarding Common Stock.  In the event that the Company shall
(a) issue additional shares of Common Stock as a dividend or other
distribution on outstanding Common Stock, (b) subdivide its outstanding
shares of Common Stock, or (c) combine its outstanding shares of the Common
Stock into a smaller number of shares of Common Stock, then, in each such event,
the Purchase Price shall, simultaneously with the happening of such event, be
adjusted by multiplying the then Purchase Price by a fraction, the numerator of
which shall be the number of shares of Common Stock outstanding immediately
prior to such event and the denominator of which shall be the number of shares
of Common Stock outstanding immediately after such event, and the product so
obtained shall thereafter be the Purchase Price then in effect. The Purchase
Price, as so adjusted, shall be readjusted in the same manner upon the happening
of any successive event or events described herein in this Section 4. The
number of shares of Common Stock that the Holder of this Warrant shall
thereafter, on the exercise hereof, be entitled to receive shall be adjusted to
a number determined by multiplying the number of shares of Common Stock that
would otherwise (but for the provisions of this Section 4) be
issuable on such exercise by a fraction of which (a) the numerator is the
Purchase Price that would otherwise (but for the provisions of this Section 4) be in
effect, and (b) the denominator is the Purchase Price in effect on the date of
such exercise.

       

      5.           Certificate as to
Adjustments.  In each case of any adjustment or readjustment in
the shares of Common Stock (or Other Securities) issuable on the exercise of the
Warrants, the Company at its expense will promptly cause its Chief Financial
Officer or other appropriate designee to compute such adjustment or readjustment
in accordance with the terms of the Warrant and prepare a certificate setting
forth such adjustment or readjustment and showing in detail the facts upon which
such adjustment or readjustment is based, including a statement of (a) the
consideration received or receivable by the Company for any additional shares of
Common Stock (or Other Securities) issued or sold or deemed to have been issued
or sold, (b) the number of shares of Common Stock (or Other Securities)
outstanding or deemed to be outstanding, and (c) the Purchase Price and the
number of shares of Common Stock to be received upon exercise of this Warrant,
in effect immediately prior to such adjustment or readjustment and as adjusted
or readjusted as provided in this Warrant. The Company will forthwith mail a
copy of each such certificate to the Holder of the Warrant and any Warrant Agent
of the Company (appointed pursuant to Section 10
hereof).

       

      6.           Reservation of Stock, etc.
Issuable on Exercise of Warrant; Financial
Statements.   The Company will at all times reserve and
keep available, solely for issuance and delivery on the exercise of the
Warrants, all shares of Common Stock (or Other Securities) from time to time
issuable on the exercise of the Warrant.  This Warrant entitles the
Holder hereof, upon written request, to receive copies of all financial and
other information distributed or required to be distributed to the holders of
the Company's Common Stock.

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      7.           Assignment; Exchange of
Warrant.  Subject to compliance with applicable securities
laws, this Warrant, and the rights evidenced hereby, may be transferred by any
registered holder hereof (a "Transferor"). On the surrender
for exchange of this Warrant, with the Transferor's endorsement in the form of
Exhibit B attached hereto (the “Transferor Endorsement Form")
and together with an opinion of counsel reasonably satisfactory to the Company
that the transfer of this Warrant will be in compliance with applicable
securities laws, the Company will issue and deliver to or on the order of the
Transferor thereof a new Warrant or Warrants of like tenor, in the name of the
Transferor and/or the transferee(s) specified in such Transferor Endorsement
Form (each a "Transferee"), calling in the
aggregate on the face or faces thereof for the number of shares of Common Stock
called for on the face or faces of the Warrant so surrendered by the
Transferor.

       

      8.           Replacement of
Warrant.  On receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant and, in
the case of any such loss, theft or destruction of this Warrant, on delivery of
an indemnity agreement or security reasonably satisfactory in form and amount to
the Company or, in the case of any such mutilation, on surrender and
cancellation of this Warrant, the Company at its expense, twice only, will
execute and deliver, in lieu thereof, a new Warrant of like tenor.

       

      9.           Maximum
Exercise.  The
Holder shall not be entitled to exercise this Warrant on an exercise
date, in connection with
that number of shares of Common Stock which would be in excess of
the sum of (i) the
number of shares of Common Stock beneficially owned by the Holder and its
affiliates on an exercise date, and (ii) the number of shares of Common
Stock issuable upon the exercise of this Warrant with respect to which the
determination of this limitation is being made on an
exercise date, which would result in beneficial ownership by the Holder and its
affiliates of more than 4.99% of the outstanding shares of Common Stock on such
date.  For the purposes of the immediately preceding
sentence, beneficial ownership shall be
determined in accordance with Section 13(d) of the 1934 Act and Rule
13d-3 thereunder.  Subject to the foregoing, the Holder shall not be
limited to aggregate exercises which would result in the issuance of more than
4.99%.  The
restriction described in this paragraph may be waived, in whole or in part,
upon sixty-one (61) days prior notice from the Holder to the Company to increase
such percentage to up to 9.99%, but not in excess of 9.99%.  The
Holder may decide whether to convert a Convertible Note or exercise this Warrant
to achieve an actual 4.99% or up to 9.99% ownership position as described above,
but not in excess of 9.99%.

       

      10.           Warrant
Agent.  The Company may, by written notice to the Holder of the
Warrant, appoint an agent (a “Warrant Agent”) for the
purpose of issuing Common Stock (or Other Securities) on the exercise of this
Warrant pursuant to Section 1,
exchanging this Warrant pursuant to Section 7, and
replacing this Warrant pursuant to Section 8, or
any of the foregoing, and thereafter any such issuance, exchange or replacement,
as the case may be, shall be made at such office by such Warrant
Agent.

       

      11.           Transfer on the Company's
Books.  Until this Warrant is transferred on the books of the
Company, the Company may treat the registered holder hereof as the absolute
owner hereof for all purposes, notwithstanding any notice to the
contrary.

       

      12.           Warrant Exercise
Compensation.   The Company has agreed to pay to
StreetCapital Corp., the Broker identified in the Subscription Agreement (“Broker”) Warrant Exercise
Compensation as described in the Subscription Agreement, equal to four percent
(4%) of the cash proceeds payable to the Company upon exercise of the
Warrant.  The Holder of the Warrant has no obligation or
responsibility to pay Warrant Exercise Compensation.

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      13.           Notices.   All
notices, demands, requests, consents, approvals, and other communications
required or permitted hereunder shall be in writing and, unless otherwise
specified herein, shall be (i) personally served, (ii) deposited in the mail,
registered or certified, return receipt requested, postage prepaid, (iii)
delivered by reputable air courier service with charges prepaid, or (iv)
transmitted by hand delivery, telegram, or facsimile, addressed as set forth
below or to such other address as such party shall have specified most recently
by written notice.  Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur.  The
addresses for such communications shall be:  if to the Company, to:
China Yongxin Pharmaceuticals, Inc., 927 Canada
Court, City of Industry, CA 91748, Attn: Yongxin Liu, CEO, facsimile: (626)
581-9138, with a copy to: Richardson & Patel, LLP, 10900 Wilshire Blvd.,
Suite 500, Los Angeles, CA 90024, Attn: Ryan Hong, Esq., facsimile: (310)
208-1154, (ii) if to the Holder, to the address and facsimile number listed on
the first paragraph of this Warrant, with a copy by fax only to: Grushko &
Mittman, P.C., 551 Fifth Avenue, Suite 1601, New York, New York 10176,
facsimile: (212) 697-3575, and (iii) if to the Broker, to: StreetCapital Corp.,
300 Colonial Center Parkway, Suite 260, Roswell, GA 30076, Attn: Vince Sbarra,
facsimile: (678) 353-2188.

       

      14.           Law Governing This
Warrant.  This Warrant shall be governed by and construed in
accordance with the laws of the State of New York without regard to principles
of conflicts of laws.  Any action brought by either party against the
other concerning the transactions contemplated by this Warrant shall be brought
only in the state courts of New York or in the federal courts located in the
state and county of New York.  The parties to this Warrant hereby
irrevocably waive any objection to jurisdiction and venue of any action
instituted hereunder and shall not assert any defense based on lack of
jurisdiction or venue or based upon forum non
conveniens.  The Company and Holder waive trial by
jury.  The prevailing party shall be entitled to recover from the
other party its reasonable attorney's fees and costs.  In the event
that any provision of this Warrant or any other agreement delivered in
connection herewith is invalid or unenforceable under any applicable statute or
rule of law, then such provision shall be deemed inoperative to the extent that
it may conflict therewith and shall be deemed modified to conform with such
statute or rule of law.  Any such provision which may prove invalid or
unenforceable under any law shall not affect the validity or enforceability of
any other provision of any agreement.   Each party hereby
irrevocably waives personal service of process and consents to process being
served in any suit, action or proceeding in connection with this Agreement or
any other Transaction Document 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 Agreement 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 other manner permitted by law.

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      IN
WITNESS WHEREOF, the Company has executed this Warrant as of the date first
written above.

       

      
        
          	 	
                  CHINA
      YONGXIN PHARMACEUTICALS, INC.

                	 
	 	 	 	 
	
                	
                  By:
      

                	  	 
	 	 	Name:	 
	 	 	Title:	 

        

      

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      
      

       

      Exhibit
A

      

      FORM OF
SUBSCRIPTION

      (to be
signed only on exercise of Warrant)

      

      TO:
CHINAYONGXIN PHARMACEUTICALS, INC.

      

      The
undersigned, pursuant to the provisions set forth in the attached Warrant (No.
2009-A-001), hereby irrevocably elects to purchase (check applicable
box):

      

      ___        
__________ shares of the Common Stock covered by such Warrant; or

      

      
        	
                ___

              	
                the
      maximum number of shares of Common Stock covered by such Warrant pursuant
      to the cashless exercise procedure set forth in Section 2 of the
      Warrant.

              

      

      

      The
undersigned herewith makes payment of the full purchase price for such shares at
the price per share provided for in such Warrant, which is $ ___________. Such
payment takes the form of (check applicable box or boxes):

      

      ___         $__________
in lawful money of the United States; and/or

      

      ___         the
cancellation of such portion of the attached Warrant as is exercisable for a
total of ___

      shares of
Common Stock (using a Fair Market Value of $_____ per share for purposes of this
calculation); and/or

      

      
        	
                ___

              	
                the
      cancellation of such number of shares of Common Stock as is necessary, in
      accordance with the formula set forth in Section 2 of the Warrant, to
      exercise this Warrant with respect to the maximum number of shares of
      Common Stock purchasable pursuant to the cashless exercise procedure set
      forth in Section 2.

              

      

      

      The
undersigned requests that the certificates for such shares be issued in the name
of, and delivered pursuant to the DTC instructions below or to
___________________________ whose address
is
____________________________________________________________________

      ____________________________________________________________________________.

      

      The
undersigned represents and warrants that all offers and sales by the undersigned
of the securities issuable upon exercise of the within Warrant shall be made
pursuant to registration of the Common Stock under the Securities Act of 1933,
as amended (the "Securities Act"), or pursuant to an exemption from registration
under the Securities Act.

      

      DTC
Instructions:
_______________________________________________________________

      ______________________________________________________________________________

      ______________________________________________________________________________

       

      
        
          	Dated: 
      	
                       
      

                	 	
                	     	 
	 	 	 	 	(Signature
      must conform to name of holder	 
	 	 	 	 	as
      specified on the face of the Warrant)	 
	 	 	 	 	 	 
	 	 	 	 	  	 
	 	 	 	 	  	 
	 	 	 	 	(Address)	 

        

         

      

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      

      Exhibit
B

      

      FORM OF
TRANSFEROR ENDORSEMENT

      (To be
signed only on transfer of Warrant)

      

      For value
received, the undersigned hereby sells, assigns, and transfers unto the
person(s) named below under the heading "Transferees" the right represented by
the within Warrant to purchase the percentage and number of shares of Common
Stock of CHINA YONGXIN PHARMACEUTICALS, INC. to which the within Warrant relates
specified under the headings "Percentage Transferred" and "Number Transferred,"
respectively, opposite the name(s) of such person(s) and appoints each such
person Attorney to transfer its respective right on the books of CHINA YONGXIN
PHARMACEUTICALS, INC. with full power of substitution in the
premises.

      

      
        	
                Transferees

              	
                Percentage
      Transferred

              	
                Number
      Transferred

              
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      

      

      

      
         

        
          
            	Dated: 
      	
                         
      

                  	 	
                  	     	 
	 	 	 	 	(Signature
      must conform to name of holder	 
	 	 	 	 	as
      specified on the face of the Warrant)	 
	 	 	 	 	 	 
	Signed
      in the presence of:	 	 	 	 
	 	 	 	 	 	 
	  
      	 	 	  	 
	(Name) 	 	 	  	 
	 	 	 	 	(Address)	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	ACCEPTED
      AND AGREED:	 	 	 	 
	[TRANSFEREE]	 	 	 	 
	 	 	 	  	 
	 
      	 	 	 	 
	(Name)   	 	 	  	 
	 	 	 	      
                    (address)

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