Document:

ASSET
      PURCHASE AGREEMENT

     

    dated
      as
      of July 14, 2006

     

    by
      and
      among

     

    MOMS
      PHARMACY OF BROOKLYN, INC.

    

    ALLION
      HEALTHCARE, INC.

    

    ST.
      JUDE
      PHARMACY & SURGICAL SUPPLY CORP.

    

    MILLIE
      CHERVIN

    

    and

    

    MITCHELL
      CHERVIN

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    
 

    ASSET
      PURCHASE AGREEMENT

     

    This
      ASSET PURCHASE AGREEMENT dated as of July 14, 2006, is by and between MOMS
      PHARMACY OF BROOKLYN, INC., a New York corporation (“Buyer”), ALLION HEALTHCARE,
      INC., a New York corporation (“Guarantor”), ST. JUDE PHARMACY & SURGICAL
      SUPPLY CORP., a New York corporation (“Seller”), MILLIE CHERVIN (the “Seller’s
      Shareholder”) and MITCHELL CHERVIN (the “Pharmacist-in-Charge”).

     

    Seller
      is
      a licensed New York pharmacy located at 122 St. Nicholas Avenue, Brooklyn,
      New
      York 11237 (the “Pharmacy”).

     

    Buyer
      desires to purchase and Seller desires to sell, transfer and deliver to Buyer
      Seller’s right, title and interest in and to the Acquired Assets (as defined
      below), on the terms and conditions set forth in this Agreement.

     

    Guarantor
      is the parent corporation of Buyer.

     

    The
      parties agree as follows:

     

    ARTICLE
      I

     

    DEFINITIONS

     

    The
      terms
      defined in this Article I, whenever used herein (including the schedules hereto,
      unless otherwise defined therein), shall have the following
      meanings:

     

    1.1  “Additional
      Payments”
shall
      have the meaning set forth in Section 2.2(a)(ii) of this Agreement.

     

    1.2  “Affiliate”
      shall
      mean any Person that directly or indirectly controls, is controlled by or is
      under common control with another Person.

     

    1.3  “Acquired
      Assets”
shall
      mean all of Seller’s business and assets related to the HIV/AIDS Business, which
      shall include but be limited to: (a) all of Seller's right, title and interest
      in and to the customer list for its HIV/AIDS Business (the “Customer
      List”),
      as
      well as all other information, including without limitation names, addresses,
      referring physicians, documents, Prescription Files, other files and records,
      and goodwill, in each case to the extent related to the customers listed on
      the
      Customer List, and (b) all of the Inventory.

     

    1.4  “Business
      Day”
      shall
      mean any day other than a Saturday, Sunday or other day on which banks are
      closed or are authorized to be closed in New York, New York.

     

    1.5  “Buyer
      Claimant”
      shall
      have the meaning set forth in Section 8.2 of this Agreement.

     

    1.6  “Closing”
shall
      have the meaning set forth in Section 3.1 of this Agreement.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    1.7  “Closing
      Date”
      shall
      have the meaning set forth in Section 3.1 of this Agreement.

     

    1.8  “Code”
      shall
      mean the Internal Revenue Code of 1986, as amended.

     

    1.9  “Contract”
      shall
      have the meaning set forth in Section 4.3 of this Agreement.

     

    1.10  “Employee
      Benefit Plan”
      means
      any “employee benefit plan” within the meaning of Section 3(3) of ERISA, and any
      other bonus, profit sharing, compensation, pension, severance, deferred
      compensation, fringe benefit, insurance, welfare, medical, post-retirement
      health or welfare benefit, medical reimbursement, health, life, stock option,
      stock purchase, tuition refund,
      service award, company car, scholarship, relocation, disability, accident,
      sick
      pay, sick leave, vacation, termination, individual employment, executive
      compensation, incentive, bonus, commission, payroll practices, retention or
      other plan, agreement, policy, trust fund or arrangement, whether written or
      unwritten, and whether maintained, sponsored or contributed to by Seller or
      any
      entity that would be deemed a “single employer” with Seller under Section
      414(b), (c), (m) or (o) of the Code or Section 4001(a)(14) of ERISA (an “ERISA
      Affiliate”) on behalf of any of the current, former or retired employees of
      Seller or its beneficiaries or with respect to which Seller or any ERISA
      Affiliate has or has had any obligation on behalf of any such employee or
      beneficiary. 

     

    1.11  “Encumbrance”
      shall
      mean any lien, charge, encumbrance, option, right of first refusal, security
      interest, easement, obligation or claim or other third party right of any
      kind.

     

    1.12  “Environment”
      shall
      mean any surface or subsurface physical medium or natural resource, including,
      air, land, soil, surface waters, ground waters, stream and river sediments,
      and
      biota.

     

    1.13  “Environmental
      Laws”
      shall
      mean any federal, state, local or foreign law, rule, regulation, ordinance,
      code, order or judgment (including the common law and any judicial or
      administrative interpretations, guidances, directives or opinions) relating
      to
      the injury to, or the pollution or protection of human health and safety or
      the
      Environment.

     

    1.14  “Environmental
      Liabilities”
      shall
      mean any claims, judgments, damages (including punitive damages), losses,
      penalties, fines, liabilities, encumbrances, liens, violations, costs and
      expenses (including attorneys and consultants fees) of investigation,
      remediation or defense of any matter relating to human health, safety or the
      Environment of whatever kind or nature by any party, entity or authority, (a)
      which are incurred as a result of (i) the existence of Hazardous Substances
      in,
      on, under, at or emanating from any real property presently or formerly owned
      or
      operated by Seller or any of its Affiliates, (ii) the offsite transportation,
      treatment, storage or disposal of Hazardous Substances generated by Seller
      or
      any of its Affiliates, or (iii) the violation of any Environmental Laws or
      (b)
      which arise under the Environmental Laws.

     

    1.15  “ERISA”
      shall
      mean the Employee Retirement Income Security Act of 1974, as amended, and the
      regulations thereunder.

     

    1.16  “ERISA
      Affiliate”
      shall
      have the meaning set forth in the definition of “Employee Benefit
      Plan”.

     

    
      
         

      

      
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    1.17  “Excluded
      Liabilities”
      shall
      have the meaning set forth in Section 2.1(c) of this
      Agreement.

     

    1.18  “GAAP”
shall
      mean generally accepted accounting principles.

     

    1.19  “Hazardous
      Discharge”
      shall
      mean any releasing, spilling, leaking, pumping, pouring, emitting, emptying,
      discharging, injecting, escaping, leaching, migrating, disposing or dumping
      (including the movement of any material through or in air, soil, surface or
      groundwater) of Hazardous Substances, whether on, off, under or from any real
      property owned, operated, leased or used at any time by Seller or its
      predecessors.

     

    1.20  “Hazardous
      Substances”
      shall
      mean petroleum, petroleum products, petroleum-derived substances, radioactive
      materials, hazardous wastes, polychlorinated biphenyls, lead based paint, urea
      formaldehyde, asbestos or any materials containing asbestos, and any materials,
      wastes or substances regulated or defined as or included in the definition
      of
“hazardous substances,” “hazardous materials,” “hazardous constituents,” “toxic
      substances,” “pollutants,” “contaminants” or any similar denomination intended
      to classify substances by reason of toxicity, carcinogenicity, ignitability,
      corrosivity or reactivity under any Environmental Laws.

     

    1.21  “HIV/AIDS
      Business”
shall
      mean Seller’s business and assets related to Seller’s HIV/AIDS
      business.

     

    1.22  “Indemnitee”
and
      “Indemnitor”
      shall
      have the meanings set forth in Section 8.4(a) of this
      Agreement.

     

    1.23  “Initial
      Payment”
shall
      have the meaning set forth in Section 2.2(a)(i) of this Agreement.

     

    1.24  “Inventory”
means
      all items of Seller’s inventory related to the HIV/AIDS Business, provided that
      an item shall be considered “Inventory” only if Seller has provided to Buyer at
      or prior to the Inventory Date the following information for such item: (a)
      the
      proprietary and established name of the item; (b) dosage; (c) container size;
      (d) number of containers; (e) the item’s lot or control number(s); (f) the
      business name and address of all parties to each prior transaction involving
      the
      item, starting with the manufacturer; and (g) the date of each previous
      transaction.

     

    1.25  “Inventory
      Date”
shall
      mean a date when representative of Buyer and Seller shall jointly make a
      physical inspection of the Inventory, at the offices of the Seller, and
      determine the amount of the Inventory Payment, which date shall be no later
      than
      five (5) days following the date on which Buyer notifies Seller that Seller
      may
      no longer sell inventory related to the HIV/AIDS Business, as provided in
      Section 6.5(c).

     

    1.26  “Inventory
      Payment”
shall
      have the meaning given such term in Section 2.2(b) of this
      Agreement.

     

    1.27  “IRS”
      shall
      mean the Internal Revenue Service.

     

    
      
         

      

      
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    1.28  “Licenses
      and Permits”
shall
      have the meaning set forth in Section 4.12 of this Agreement. 

     

    1.29  “Losses”
      shall
      have the meaning set forth in Section 8.2 of this Agreement.

     

    1.30  “Material
      Adverse Effect”
      shall
      mean any material adverse effect, individually or in the aggregate, on the
      condition (financial or otherwise), business, assets, operations or prospects
      of
      Seller or the Acquired Assets.

     

    1.31  “Payment
      Program”
shall
      have the meaning set forth in Section 4.14 of this Agreement.

     

    1.32  “Person”
      shall
      mean any natural person, corporation, professional corporation, limited or
      limited liability partnership, general partnership, joint venture, association,
      joint-stock company, limited liability company, company, trust, bank, trust
      company, land trust, business trust or other organization, whether or not a
      legal entity, and any governmental unit or agency or political subdivision
      thereof.

     

    1.33  “Prescription
      Files”
shall
      mean all prescription files owned or used by Seller that are associated with
      the
      HIV/AIDS Business, and all customer data and information derived from customer
      purchases from Seller.

     

    1.34  “Purchase
      Price”
      shall
      have the meaning set forth in Section 2.2(b) of this Agreement.

     

    1.35  “Real
      Property”
      shall
      mean the real property and interests in real property owned or leased by Seller
      and the plants, buildings, structures, storage tanks, erections and improvements
      of all kinds made to, located on or forming a part of the real property and
      interests in real property (including, without limitation, all fixtures),
      together with all easements, rights-of-way, appurtenances and tenements to,
      on
      or otherwise beneficial to the use of such real property or interests in real
      property.

     

    1.36  “Related
      Party”
      shall
      have the meaning set forth in Section 4.11 of this Agreement.

     

    1.37  “Seller
      Claimant”
      shall
      have the meaning set forth in Section 8.3 of this Agreement.

     

    1.38  “Taxes”
(or
      “Tax” where the context requires)
      shall
      mean all federal, state, local, foreign or other taxes, duties, or similar
      charges (including, without limitation, income (whether net or gross), profits,
      premium, estimated, excise, sales, use, environmental (including taxes under
      Code Section 59A), occupancy, franchise, license, value added stamp, windfall
      profits, social security, gross receipts, franchise, ad valorem, severance,
      capital levy, production, transfer, gains, withholding, occupation, employment
      and payroll related and property taxes, alternative or add-on, minimum or
      estimated, import and export duties and other governmental charges and
      assessments) imposed by any taxing or governmental authority on or payable
      by
      Seller or any other party with respect to the income, operations, products,
      assets or properties of Seller, whether attributable to statutory or
      nonstatutory rules and whether or not measured in whole or in part by net
      income, and including interest, additions to tax or interest, and penalties
      with
      respect thereto, and including expenses associated with contesting any proposed
      adjustment related to any of the foregoing.

     

    
      
         

      

      
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    ARTICLE
      II

     

    SALE
      AND PURCHASE OF THE ACQUIRED ASSETS

     

    2.1     Purchase
      of the Acquired Assets. 

     

    (a)  Upon
      the
      terms and subject to the conditions hereof, and upon the basis of the
      agreements, representations and warranties contained in, and the schedules
      to,
      this Agreement, (i) at the Closing, Seller shall sell, transfer, assign, convey
      and deliver to Buyer, and Buyer shall purchase and acquire from Seller, all
      of
      the Acquired Assets (other than the Inventory), and (ii) on the Inventory Date,
      Seller shall sell, transfer, assign, convey and deliver to Buyer, and Buyer
      shall purchase and acquire from Seller, all of the Inventory as of the Inventory
      Date, in each case free and clear of Encumbrances of any kind, which
      Encumbrances, if any, shall be discharged by Seller at or prior to the
      Closing.

     

    (b)  Notwithstanding
      anything contained in this Agreement, Seller shall not sell, transfer, assign,
      convey or deliver to Buyer, and Buyer shall not purchase or acquire from Seller,
      (i) any of Seller’s cash or accounts receivable, (ii) any of Seller’s equipment,
      agreements, furniture or fixtures, or (iii) any of Seller’s
      Contracts.

     

    (c)  Buyer
      shall not be required to assume, pay, fulfill, perform or otherwise discharge
      any liabilities or obligations of Seller, including of Seller’s business, of any
      kind whatsoever (the “Excluded Liabilities”), and Seller shall pay, fulfill,
      perform and discharge such Excluded Liabilities when due. The Excluded
      Liabilities include, without limitation:

     

    (i)  Legal,
      accounting, brokerage, finder’s fees, Taxes or other expenses incurred by Seller
      or any Affiliate, including, without limitation, in connection with this
      Agreement or the consummation of the transactions contemplated
      hereby;

     

    (ii)  Any
      intercompany debt or other liability or obligation of any nature between Seller
      and any past or present Related Party of Seller;

     

    (iii)  Liabilities
      or obligations incurred by Seller or any Affiliate of Seller after the
      Closing;

     

    (iv)  Any
      obligation or liability relating to any litigation or any claim arising out
      of
      any dispute, the elements of which occurred prior to the Closing, or any
      litigation or other claim against Seller, whether or not listed on any schedule
      hereto and regardless of whether accruing prior to or subsequent to the
      Closing;

     

    (v)  Any
      liability for any Taxes accrued to or incurred by Seller or any Affiliate of
      Seller or relating to operations, products or assets of Seller or any Affiliate
      of Seller or arising as a consequence of the transactions contemplated
      hereby;

     

    
      
         

      

      
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    (vi)  Any
      liability or costs (including, without limitation, costs of remediation) arising
      out of or relating to a Hazardous Discharge or the release, discharge or
      disposal of any solid wastes or the handling, storage, use, transportation
      or
      disposal of any of the foregoing, as these terms are defined by the
      Environmental Laws in, on, under or from facilities of Seller at any time prior
      to the Closing, regardless of whether such liability or costs arise before
      or
      after Closing and whether or not in breach of any representation or warranty
      under this Agreement;

     

    (vii)  Any
      liability or obligation to employees, government agencies or other third parties
      in connection with any option plan, pension plan, other ERISA plan or other
      Employee Benefit Plan, and any health, dental or life insurance benefits,
      whether or not insured and whether or not disclosed on any schedule
      hereto;

     

    (viii)  Any
      liability or obligation under any contract or commitment, and any liability
      or
      obligation which relates to any default in respect of such contract or other
      commitment or obligation of Seller;

     

    (ix)  Any
      liability or obligation to employees in the nature of accrued payroll, vacation,
      holiday or sick pay, worker’s compensation relating to the period prior to the
      Closing, whether or not listed on any schedule hereto and regardless of whether
      accruing prior or subsequent to the Closing;

     

    (x)  Any
      trade
      debt, accounts payable, notes payable and bank debts; or

     

    (xi)  Any
      other
      liability, debt or obligation of Seller or Seller’s Shareholder.

     

    2.2     Purchase
      Price.

     

    (a)  In
      consideration for the Acquired Assets (other than the Inventory), Buyer shall
      pay to Seller an amount in cash equal to Ten Million Dollars ($10,000,000),
      payable as follows:

     

    (i)  At
      the
      Closing, Buyer shall pay to Seller an amount in cash equal to Eight Million
      Dollars ($8,000,000) (the “Initial Payment”); and

     

    (ii)  In
      addition, on each of August 14, 2006, September 14, 2006 and October 14, 2006,
      Buyer shall pay to Seller an amount equal to Six Hundred Sixty-Six Thousand
      Six
      Hundred Sixty-Six Dollars and Sixty-Six Cents ($666,666.66) (the “Additional
      Payments”) if, and only if, Seller and Seller’s management, including Seller’s
      Shareholder and the Pharmacist-in-Charge, have during the three (3) month period
      from the Closing Date through October 14, 2006 provided during normal business
      hours such reasonable assistance to Buyer as Buyer from time to time has
      requested to transition the HIV/AIDS Business and the Acquired Assets to Buyer,
      by (A) writing a mutually satisfactory letter to Seller’s former HIV customers
      regarding the Buyer’s acquisition of the Acquired Assets (substantially in the
      form attached as Exhibit
      A),
      (B)
      contacting such customers by telephone to advise them of the transition to
      Buyer
      and assisting such customers with any questions they may have, (C) coordinating
      with Buyer’s information technology personnel the downloading of customer
      records and information, and (D) participating in meetings between Buyer and
      physicians, clinics and other referral sources; and

     

    
      
         

      

      
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    (b)  Within
      five (5) Business Days following the Inventory Date, in consideration for the
      Inventory, Buyer shall pay to Seller an amount equal to Seller’s acquisition
      cost of the Inventory (as calculated by Buyer and Seller based on documentation
      provided by Seller to Buyer) as of the Inventory Date, in each case only to
      the
      extent that such Inventory conforms to the representation contained in Section
      4.6 (the “Inventory Payment” and, collectively with the Initial Payment and the
      Additional Payments, the “Purchase Price”). Any Purchase Price payable under
      this Agreement shall be paid in cash, in immediately available funds, via bank
      wire transfer per Seller’s written instructions.

     

    (c)  Guarantor
      hereby absolutely, irrevocably and unconditionally guarantees the full and
      prompt performance of Buyer’s obligation under this Agreement to pay the
      Purchase Price. Guarantor’s liability under this Section 2.2(c) is unconditional
      and shall not in any manner whatsoever be deemed to be affected or impaired
      by
      any waiver, forbearance, extension of time, amendment, or modification of any
      of
      the provisions of this Agreement, provided that Guarantor may assert any and
      all
      defenses, counterclaims and set-offs that Buyer could assert under this
      Agreement. Seller may, upon notice to Guarantor, enforce this Section 2.2(c)
      against Guarantor and it shall not be necessary to enforce this Agreement
      against Buyer before proceeding under this Agreement against Guarantor. Demand,
      protest and presentment for payment are hereby waived. 

     

    2.3     Allocation
      of Purchase Price. The
      Purchase Price for the Acquired Assets shall be allocated for federal, state,
      local and foreign tax purposes by each party among the Acquired Assets as
      mutually determined by Seller and Buyer, in compliance with applicable laws
      and
      generally accepted accounting principles, and based upon the appraisal performed
      by The Mentor Group, Inc. (at Buyer’s sole cost and expense). Each of Buyer and
      Seller shall have access to information, and an opportunity to participate
      in
      discussions regarding the appraisal, in each case in a manner consistent with
      The Mentor Group, Inc.’s customary processes, procedures and guidelines for
      appraisals of this type. For all pertinent tax purposes, each party hereto
      shall
      report the purchase and sale provided for, and with the characterization given
      these transactions in this Agreement, to taxing authorities on a basis
      consistent with such allocation, and each party agrees not to take a position
      inconsistent with such allocation. After the Closing, Seller and Buyer each
      shall timely file form 8594 with the IRS detailing this allocation. In the
      event
      that Buyer determines, subject to Seller's reasonable approval, that any
      adjustments to such allocation are necessary, Seller shall make such
      modifications as are necessary, reporting the same on Seller's form 8594 (if
      required) or any tax report or return filed or to be filed by Seller in order
      to
      conform to Buyer's allocation as adjusted.

     

    ARTICLE
      III

     

    CLOSING

     

    3.1     The
      Closings.
      Subject
      to the terms and conditions of this Agreement, the Closing of the purchase
      and
      sale of the Acquired Assets (the “Closing”) shall occur on July 14, 2006
(the
      “Closing Date”), at the offices of Buyer’s counsel, Nixon Peabody LLP, 990
      Stewart Avenue, Garden City, New York, and shall be effective as of 12:01
      a.m. on July 15, 2006.

     

    
      
         

      

      
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    3.2     Obligations
      of Seller.At
      the
      Closing, Seller shall deliver to Buyer the following:

     

    (a)  A
      bill of
      sale, in customary form, duly executed by Seller.

     

    (b)  Copies
      of
      the resolutions of the Board of Directors and Shareholder of Seller certified
      by
      the secretary or assistant secretary of Seller, which resolutions shall approve
      and authorize the execution and delivery of this Agreement and the consummation
      of the transactions contemplated hereby.

     

    (c)  Any
      required consents to the assignment to Buyer of each of the Acquired
      Assets.

     

    (d)  Such
      other instruments of assignment and conveyance as may be necessary or
      appropriate to fully and effectively transfer to Buyer the Acquired
      Assets.

     

    (e)  All
      of
      the other documents and instruments required to be delivered by
      Seller.

     

    3.3     Obligations
      of Buyer. At
      the
      Closing, Buyer shall deliver to Seller the following:

     

    (a)  The
      Initial Payment.

     

    (b)  Copies
      of
      the resolutions of the Board of Directors of Buyer certified by the secretary
      or
      assistant secretary of Seller, which resolutions shall approve and authorize
      the
      execution and delivery of this Agreement and the consummation of the
      transactions contemplated hereby.

     

    (c)  All
      of
      the other documents and instruments required to be delivered by
      Buyer.

     

    ARTICLE
      IV

     

    REPRESENTATIONS
      AND WARRANTIES REGARDING SELLER
      AND
      SELLER’S BUSINESS

     

    Seller,
      Seller’s Shareholder and the Pharmacist-in-Charge hereby represent and warrant
      to Buyer, as of the date hereof and as of the Closing, as follows:

     

    4.1
      Organization
      and Qualification.
      Seller
      is a corporation duly organized, validly existing and in good standing under
      the
      laws of the State of New York, with full corporate power and authority to own,
      lease and operate its properties and assets and to conduct its business as
      it is
      now being conducted. Seller has no Affiliates, subsidiaries or equity interest
      in any other Person. Seller is duly qualified and in good standing as a New
      York
      corporation and has all requisite corporate power and authority to do business
      in the State of New York, which jurisdiction is the only jurisdiction wherein
      the character of the properties owned or leased or the nature of activities
      conducted by Seller make such qualification necessary. Seller’s Shareholder owns
      all the issued and outstanding capital stock of Seller. Neither Seller’s
      Shareholder nor the Pharmacist-in-Charge, directly or indirectly, owns any
      equity or other interest in any HIV/AIDS Business, other than Seller and other
      than passive investments in publicly-traded companies.

     

    
      
         

      

      
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    4.2
      Authority. Seller
      has all requisite power and authority to execute and deliver this Agreement
      and
      all documents, certificates, agreements, instruments and writings related hereto
      to which it is a party and to perform, carry out and consummate the transactions
      contemplated hereby and thereby. The execution, delivery and performance of
      this
      Agreement have been duly authorized by all necessary corporate action on the
      part of Seller. This Agreement has been duly and validly executed by Seller,
      Seller’s Shareholder and the Pharmacist-in-Charge and constitutes the legal,
      valid and binding obligations of Seller, Seller’s Shareholder and the
      Pharmacist-in-Charge, enforceable against Seller, Seller’s Shareholder and the
      Pharmacist-in-Charge in accordance with its terms.

     

    4.3
      No
      Breach. Neither
      the execution and delivery of this Agreement by Seller nor the consummation
      of
      the transactions contemplated hereby will: (a) violate any provision of the
      Certificate of Incorporation or Bylaws of Seller; (b) conflict with, result
      in a
      breach of or constitute a default (or an event which, with or without notice,
      lapse of time or both, would constitute a default) under any leases, agreements,
      instruments, arrangements, contracts, commitments or understandings, written
      or
      oral, to which Seller is a party or by which Seller or any of the Acquired
      Assets is bound (collectively, the “Contracts”); (c) result in the creation of,
      or give any party the right to create, any Encumbrance upon any of the Acquired
      Assets; (d) conflict with, violate, result in a breach of or constitute a
      default under any judgment, decree, order or process of any court or
      governmental authority; (e) to the best of Seller’s knowledge, conflict with or
      violate any statute, law or regulation applicable to Seller or any of the
      Acquired Assets; or (f) to the best of Seller’s knowledge, require Seller to
      obtain any authorization, consent, approval or waiver from, or to make any
      filing with, any governmental or regulatory authority,
      or
      other third party.

     

    4.4  Sales
      Information.
      In the
      four (4) month period ended June 30, 2006, Seller filled HIV/AIDS-related
      prescriptions for at least one thousand twenty (1,020) different HIV/AIDS
      patients.

     

    4.5  Absence
      of Certain
      Changes or Events.
      Since
      December 31, 2005: the HIV/AIDS Business has been conducted and the Acquired
      Assets have been acquired and operated only in the ordinary and usual course
      consistent with past practice; neither the HIV/AIDS Business nor the Acquired
      Assets have suffered any event or condition that has had a Material Adverse
      Effect; and Seller is not aware of any event or condition that has occurred
      or
      would reasonably be expected to occur that could result in a Material Adverse
      Effect.

     

    4.6  Acquired
      Assets.
      Seller
      has good and freely transferable title to all of the Acquired Assets, free
      and
      clear of all Encumbrances, and has the complete and unrestricted power and
      right
      to sell and transfer the Acquired Assets to Buyer in accordance with the terms
      hereof. All items included in the Inventory consist of a quality and quantity
      usable and saleable in the ordinary course of business of Seller, and are not
      slow moving, damaged, below-standard quality or in excessive
      quantities.

     

    
      
         

      

      
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    4.7
      Contracts
      and Commitments.
      Seller
      has no written Contracts relating to the HIV/AIDS Business.

     

    4.8
      Litigation,
      Etc.
      There
      has not been in the five (5) years prior to the date hereof, nor is there
      currently, any claim, action, suit, inquiry, proceeding or, to the best of
      Seller's knowledge, investigation of any kind or nature whatsoever, by or before
      any court or governmental or other regulatory or administrative agency,
      commission or tribunal brought, asserted or initiated by Seller, or pending
      or,
      to the best of Seller's knowledge, threatened against or involving Seller and
      relating to or affecting the HIV/AIDS Business. To the best of Seller’s
      knowledge, there is no valid basis for any such claim, action, suit, inquiry,
      proceeding or investigation. Seller is not subject to any judgment, order or
      decree.

     

    4.9
      Compliance
      with Law.
      To the
      best of Seller’s knowledge, Seller is and has been conducting the HIV/AIDS
      Business and owning and operating all of the Acquired Assets in compliance
      in
      all material respects with all applicable laws, rules, regulations, orders,
      codes, ordinances, authorizations, judgments and decrees, of all federal, state,
      local, foreign or other governmental or regulatory authorities.
      Seller
      and each of its employees or agents providing services at the pharmacy, as
      applicable, (a) hold all permits, licenses, registrations, franchises,
      certificates, concessions and other governmental approvals and authorizations
      (the “Licenses and Permits”) required for the operation of the HIV/AIDS
      Business, including, without limitation, all Licenses and Permits required
      by
      federal, state and local law and all applicable regulatory agencies, and (b)
      are
      in compliance in all material respects with all applicable laws, regulations
      and
      agreements, including without limitation the Health Insurance Portability and
      Accountability Act of 1996 as it relates to the maintenance of customer and
      patient lists and records of the HIV/AIDS Business. All such Licenses and
      Permits are in full force and effect and Seller is not in default in any respect
      with respect to any such Licenses and Permits. No notice from any authority
      with
      respect to the revocation, termination, suspension or limitation of any such
      Licenses and Permits has been issued or given, nor is Seller aware of the
      proposed or threatened issuance of any such notice.

     

    4.10
      Finders.
      Neither
      Seller, nor any of its Affiliates, nor any of Seller’s directors or officers,
      has taken any action that, directly or indirectly, would obligate Buyer or
      any
      of its Affiliates to anyone acting as broker, finder, financial advisor or
      in
      any similar capacity in connection with this Agreement or any of the
      transactions contemplated hereby.

     

    4.11
      Related
      Party Transactions; Intercompany Accounts. There
      are
      no Contracts between Seller, on one hand, and any shareholder, director,
      officer, employee, consultant or Affiliate of Seller (each, a “Related Party”),
      on the other, related to the HIV/AIDS Business. There have been no transactions
      during the prior eighteen (18) months between Seller, on one hand, and any
      Related Party, on the other, related to the HIV/AIDS Business.

     

    4.12
      Tax
      Matters.
      All
      Taxes that are due or payable by Seller, whether or not disputed by Seller,
      have
      been paid in full. All tax returns to be filed in connection with Taxes have
      been accurately prepared and duly and timely filed (it being understood that
      tax
      returns for 2005 are on extension). Attached as Schedule
      4.12
      are
      true, complete and accurate copies of Seller’s Federal and state income tax
      returns for 2002, 2003 and 2004.

     

    
      
         

      

      
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    4.13
      Improper
      Payments. Neither
      Seller, nor any of Seller’s officers and employees nor, to the best of Seller’s
      knowledge, Seller’s agents have made any illegal or improper payments to, or
      provided any illegal or improper benefit or inducement for, any governmental
      official, supplier, customer or other person, in an attempt to influence any
      such person to take or to refrain from taking any action relating to the
      HIV/AIDS Business.

     

    4.14 Payment
      Programs.
      Neither
      Seller, nor any of its officers or employees, nor, to the best knowledge of
      Seller, agents have received written notice that it is subject to any
      restriction or limitation on the receipt of payment under the Medicare program,
      any other federally funded health care program or any other third party payor
      (collectively, the “Payment Programs”). Seller has valid and current provider
      agreements with the Payment Programs. Seller is in compliance in all material
      respects with the conditions of participation for the Payment Programs. Neither
      Seller, nor any of Seller’s officers or employees, nor, to the best knowledge of
      Seller, agents have received written notice that a Payment Program has requested
      or threatened any recoupment, refund or set-off from Seller, or imposed any
      fine, penalty or other sanction on Seller, nor has Seller been excluded from
      participation in a payment program. Seller has not submitted to a Payment
      Program any false or fraudulent claim for payment, nor has Seller at any time
      violated in any material respect any condition for participation, or any
      published rule, regulation, policy or standard of a Payment
      Program.

     

    4.15
       
      Fraud
      and Abuse.
      Neither
      Seller, nor any of Seller’s officers or employees, nor, to the best knowledge of
      Seller, agents, have engaged in any activities that are prohibited under Federal
      Medicare and Medicaid statutes, 42 U.S.C. §§ 1320a-7, 1320a-7a, 1320a-7b or the
      Federal False Claims Act, 31 U.S.C. § 3729 et seq., the regulations promulgated
      pursuant to such statutes, or any related state or local statutes or
      regulations. 

     

    4.16 
      Physician
      Self-Referrals.
      Seller’s operations relating to the HIV/AIDS Business are in compliance in all
      material respects with and do not otherwise violate the Federal Medicare and
      Medicaid statutes regarding physician self-referrals, 42 U.S.C. §§ 1395nn and
      1396b(s), the regulations promulgated pursuant to such statutes, or any related
      state or local statutes or regulations.
      Neither
      Seller, nor any of Seller’s officers or employees, nor, to the best knowledge of
      Seller, agents, have engaged in any activities that may violate such statutes
      or
      regulations.

     

    4.17
      Controlled
      Substances.
      Seller
      has not engaged in any activities which are prohibited under the Federal
      Controlled Substances Act, 21 U.S.C. § 801 et seq., or the regulations
      promulgated pursuant to such statute or any related state or local statutes
      or
      regulations concerning the dispensing and sale of controlled
      substances.

     

    4.18
      Referrers
      and Suppliers. Schedule
      4.18
      hereto
      sets forth a list of Seller’s fifteen largest referral sources and suppliers of
      inventory in order of dollar volume of referrals and purchases, respectively,
      during its last three fiscal years, in each case related to the HIV/AIDS
      Business. There has not been any adverse change and there are no facts known
      to
      Seller which may reasonably be expected to indicate that any adverse change
      may
      occur in the business relationship of Seller or, after the Closing, Buyer with
      any supplier or referral source named on Schedule
      4.18.

     

    
      
         

      

      
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    4.19
      Disclosure. No
      representation, warranty or other statement by Seller, Seller’s Shareholder or
      the Pharmacist-in-Charge herein or made in writing in connection herewith
      contains or will contain an untrue statement of a material fact, or omits or
      will omit to state a material fact necessary to make the statements contained
      herein or therein not misleading.

     

    ARTICLE
      V

     

    REPRESENTATIONS
      AND WARRANTIES REGARDING BUYER

     

    Buyer
      hereby represents and warrants to Seller as follows:

     

    5.1     Organization
      and Qualification. Buyer
      is
      a corporation duly organized, validly existing and in good standing under the
      laws of the State of New York, with full corporate power and authority to own,
      lease and operate its properties and assets and to conduct its business as
      it is
      now being conducted.

     

    5.2     Authority. Buyer
      has
      all requisite power and authority to execute and deliver this Agreement and
      all
      documents, certificates, agreements, instruments and writings related hereto
      to
      which it is a party and to perform, carry out and consummate the transactions
      contemplated hereby and thereby. The execution, delivery and performance of
      this
      Agreement have been duly authorized by all necessary corporate action on the
      part of Buyer. This Agreement has been duly and validly executed by Buyer and
      constitutes the legal, valid and binding obligations of Buyer, enforceable
      against Buyer in accordance with its terms.

     

    5.3     No
      Breach.
      Neither
      the execution and delivery of this Agreement by Buyer nor the consummation
      of
      the transactions contemplated herein will: (a) violate any provision of the
      Certificate of Incorporation or Bylaws of Buyer; (b) conflict with, result
      in a
      breach of or constitute a default (or an event which, with or without notice,
      lapse of time or both, would constitute a default) under, or give any third
      party the right to terminate or modify, any material agreement or other
      instrument to which Buyer is a party or by which it or any of its assets is
      bound; (c) conflict with, violate, result in a breach of or constitute a default
      under any judgment, decree, order or process of any court or governmental
      authority; (d) conflict with or violate any material statute, law or regulation
      applicable to the business of Buyer; (e) require Buyer to obtain any
      authorization, consent, approval or waiver from, or to make any filing with,
      any
      governmental or regulatory authority; or (f) to the best of Buyer’s knowledge,
      require Buyer to obtain any authorization, consent, approval or waiver from,
      or
      to make any filing with, any governmental or regulatory authority, or other
      third party.

     

    5.4     Finders. Neither
      Buyer, nor any of its Affiliates, nor any of their respective directors or
      officers, has taken any action that, directly or indirectly, would obligate
      Seller or any of its Affiliates to anyone acting as a broker, finder, financial
      advisor or in any similar capacity in connection with this Agreement or any
      of
      the transactions contemplated hereby.

     

    5.5        
      Disclosure.
      The
      public filings of Guarantor made by Guarantor since January 1, 2006 under the
      Securities and Exchange Act of 1934, as amended, do not contain an untrue
      statement of a material fact, nor omit to state a material fact necessary to
      make the statements contained therein not misleading. No
      representation, warranty or other statement by Buyer herein or made in writing
      in connection herewith contains or will contain an untrue statement of a
      material fact, or omits or will omit to state a material fact necessary to
      make
      the statements contained herein or therein not misleading.

     

    
      
         

      

      
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    ARTICLE
      VI

     

    COVENANTS

     

    6.1     Obtaining
      Consents. Buyer
      and
      Seller shall use all reasonable efforts to obtain all consents, approvals and
      waivers, if any, from, and give all notices to, and make all declarations,
      filings and registrations with, any governmental and regulatory agencies and
      other third parties that are required to consummate or are otherwise related
      to
      the transactions contemplated hereby. Buyer and Seller shall coordinate and
      cooperate with one another and supply such assistance as may be reasonably
      requested by each in connection with the foregoing.

     

    6.2     Transfer
      and Retention of Records. Except
      as
      may be required for tax purposes or other regulatory purposes, neither Seller,
      nor any of its respective successors and assigns, will retain any document,
      databases or other media embodying any confidential or proprietary information
      relating to the HIV/AIDS Business or use, publish or disclose to any third
      person any such confidential or proprietary information relating to the HIV/AIDS
      business; provided,
      however,
      that
      Seller shall be entitled to retain copies of any of the foregoing (and have
      access to the same after the Closing) to the extent necessary in connection
      with
      prosecuting or defending any matter not assumed by Buyer or any other
      appropriate business purpose. Seller shall take all actions requested by Buyer
      to transfer records relating to Seller’s business to Buyer, which may include
      making duplicate copies of any records retained by Seller in the form of paper
      or electronic media.

     

    6.3     Employee
      Matters.
      Buyer
      shall not assume or be responsible in any way for the obligations, liabilities
      or responsibilities (a) of any Employee Benefit Plan of Seller, (b) of Seller,
      any Affiliate of Seller or any fiduciary under, arising from, or with respect
      to
      any Employee Benefit Plan of Seller or (c) to any of Seller's officers,
      directors, employees and agents, arising from
      or
      related to the transactions contemplated by this Agreement. Buyer shall not
      be
      deemed to be a successor employer with respect to the employment of any employee
      of Seller or with respect to any of Seller's Employee Benefit Plans.
      Buyer
      shall not be obligated to offer employment to any or all of Seller’s
      employees.

     

    6.4     Further
      Assurances.
      Buyer
      and Seller shall, and shall cause their respective Affiliates to, at the request
      and the expense of the other, execute and deliver such other instruments of
      conveyance and transfer and assumption and take such other action as may be
      reasonably requested so as to consummate the transactions contemplated hereby
      or
      otherwise to consummate the intent of this Agreement. Without limiting the
      generality of the foregoing, the Seller will, and will cause its management
      to,
      execute management representation letters, forms of which are attached as
Exhibit
      B,
      reasonably requested by Buyer’s outside auditors in connection with the audit of
      Seller or otherwise as is required by applicable securities laws.

     

    
      
         

      

      
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    6.5     Certain
      Covenants of Seller.
      Seller
      hereby covenants that (unless Buyer otherwise gives its written approval in
      its
      sole discretion) Seller shall at its sole cost and expense take the actions
      set
      forth below:

     

    (a)  Within
      thirty (30) days after the Closing, Seller shall pay or otherwise discharge
      (in
      full, without discount or compromise) all the Excluded Liabilities related
      to
      the HIV/AIDS Business.

     

    (b)  After
      the
      Closing, Seller shall afford Buyer, its attorneys, accountants, consultants
      and
      representatives, free and full access to the Acquired Assets and books and
      records of Seller relating thereto, at all reasonable times upon reasonable
      notice and during normal business hours, and shall provide to Buyer and its
      representatives such additional financial and operating data and other
      information as Buyer shall from time to time reasonably request. 

     

    (c)  After
      the
      Closing, Seller shall use its best efforts to preserve for Buyer the goodwill
      of
      its customers and suppliers, and shall do all things reasonably requested by
      Buyer for such purpose. Without limiting the generality of the foregoing, the
      parties acknowledge that, after the Closing, certain “walk-in” HIV customers of
      Seller shall continue to request that Seller fill their prescriptions for
      HIV/AIDS-related medications. Seller shall advise each such customer of the
      acquisition by Buyer of the HIV/AIDS Business. In addition, Seller agrees that
      it shall continue to fill such customers’ prescriptions for HIV/AIDS-related
      medications out of inventory on hand at the Closing, until such time as Buyer
      notifies Seller that Seller may no longer sell inventory related to the HIV/AIDS
      Business.

     

    (d)  After
      the
      Closing, Seller shall promptly advise Buyer in writing of the commencement
      or
      threat against Seller of any suit, litigation or legal proceeding that relates
      to or might affect the Acquired Assets.

     

    (e)  Within
      fifteen (15) days after the Closing Date, cause its legal counsel to deliver
      a
      legal opinion in customary form, covering the items set forth on Exhibit
      C.

     

    6.6     Financial
      Statements.
      After
      the Closing, upon Buyer’s request, Seller shall request its accountant to
      produce and deliver to Buyer, as soon as practicable, compiled financial
      statements for the HIV/AIDS Business for the years ending December 31, 2003,
      2004 and 2005, and the six months ended June 30, 2006. Seller shall request
      that
      the accountant use its reasonable efforts to produce them in accordance with
      GAAP. Seller shall request that such financial statements, when produced and
      delivered, (i) be prepared from the books and records of Seller, and completely
      and accurately reflect all financial transactions of Seller related to the
      HIV/AIDS Business, including, without limitation, the accounts receivable,
      accounts payable and revenue of Seller for the periods covered by and as at
      the
      dates of such financial statements; and (ii) be true and correct, and present
      fairly the financial condition of the HIV/AIDS Business and the results of
      its
      operation for the periods covered by, and as at the dates of, each of such
      financial statements. In addition, Seller shall request its accountants to
      assist McGladrey & Pullen in the timely preparation of audited financials
      for the HIV/AIDS Business. Buyer shall pay to Seller's accountants up to Thirty
      Thousand Dollars ($30,000) for such services. Buyer acknowledges that Seller
      has
      not historically kept separate books and records for the HIV/AIDS Business
      and
      its other businesses. For the sake of clarity, Buyer acknowledges that it shall
      have no claim that Seller has breached its obligations under this Section 6.6
      if
      its accountants or McGladrey & Pullen cannot prepare such financial
      statements, provided
      that
      Seller shall use its commercially reasonable efforts to assist its accountants
      and McGladrey & Pullen in this regard, including by provided them with
      access to its books and records and providing such other assistance and
      cooperation as may from time to time reasonably be requested of Seller by Buyer
      or such accountants.

     

    
      
         

      

      
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    ARTICLE
      VII

     

    RESTRICTIVE
      COVENANTS

     

    7.1     Non-Competition.
      Seller,
      Seller’s Shareholder and the Pharmacist-in-Charge hereby agree that as a
      material inducement to Buyer to enter into this Agreement, and for other good
      and valuable consideration, the receipt and sufficiency of which are hereby
      acknowledged, Seller, Seller’s Shareholder and the Pharmacist-in-Charge covenant
      and agree that it, and each of Seller’s officers, directors and Affiliates, and
      each of Seller’s Shareholder’s and the Pharmacist-in-Charge’s respective
      Affiliates and immediate family members, shall not, (a) for the period from
      the
      date hereof until five (5) years following the Closing Date (the “Restricted
      Period”), directly or indirectly, on its own behalf or in the service of or on
      the behalf of others, as a director, trustee, owner (except as the owner of
      less
      than two percent (2%) of the outstanding stock of a publicly held corporation),
      employee, consultant, advisor, independent contractor or in any other capacity,
      engage in the business of operating, within fifty (50) miles of Seller’s present
      pharmacy in Brooklyn, New York (the “Restricted Territory”) a pharmacy that
      services or treats, or markets or sells AIDS/HIV products to, AIDS/HIV patients,
      except as expressly permitted by Section 6.5(c), or (b) for the period from
      the
      date hereof until three (3) years following the Closing Date, directly or
      indirectly, permit a pharmacy that services or treats, or markets or sells
      AIDS/HIV products to, AIDS/HIV patients to operate at the location of Seller’s
      present or future pharmacy in Brooklyn, New York, or cooperate with or assist
      any Person to engage in any such activities, including without limitation by
      (i)
      selling or otherwise transferring its business and assets (which may include
      its
      real property interest or a license to use same) to any Person that may or
      is
      permitted to engage in any such activities and/or (ii) cooperating with or
      otherwise assisting any other Person to acquire a license to so engage in any
      such activities. For the sake of clarity, a pharmacy “services or treats, or
      markets or sells AIDS/HIV products to, AIDS/HIV patients” if it either derives
      more than one percent (1%) of its revenues from the sale of AIDS/HIV services
      or
      products or in any way is marketing its AIDS/HIV services or products
      specifically to the AIDS/HIV community.

     

    7.2     Non-Interference.
      Seller,
      Seller’s Shareholder and the Pharmacist-in-Charge further agree that, during the
      Restricted Period and within the Restricted Territory, Seller, Seller’s
      Shareholder and the Pharmacist-in-Charge will not, directly or indirectly;
      (a) induce any former customer of or referrer of customers to Seller or
      customer of or referrer of customers to Buyer to patronize any Person who
      competes with Buyer; (b) request or advise any former customer of or
      referrer of customers to Seller or customer of or referrer of customers to
      Buyer
      to withdraw, curtail or cancel such Person’s business with Buyer; (c) enter
      into any contract, the purpose or result of which would benefit such Seller
      if
      any former customer of or referrer of customers to Seller or customer of or
      referrer of customers to Buyer were to withdraw, curtail, or cancel such
      customer’s or referrer’s business with Buyer; or (d) disclose to any other
      Person the names or addresses of any former customer of or referrers of
      customers to the HIV/AIDS Business or customer of or referrers of customers
      to
      Buyer, either individually or collectively.

     

    
      
         

      

      
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    7.3
      Acknowledgements.
      If the
      provisions of this Article VII are violated, in whole or in part, Buyer shall
      be
      entitled, upon application to any court of proper jurisdiction, to a temporary
      restraining order or preliminary injunction to restrain and enjoin Seller,
      Seller’s Shareholder and the Pharmacist-in-Charge, and their respective
      Affiliates, from such violation without prejudice as to any other remedies
      Buyer
      may have at law or in equity. In the event of a violation, Seller, Seller’s
      Shareholder and the Pharmacist-in-Charge agree that it would be virtually
      impossible for Buyer to calculate its monetary damages and that Buyer would
      be
      irreparably harmed. If Buyer seeks such temporary restraining order or
      preliminary injunction, Buyer shall not be required to post any bond with
      respect thereto, or, if a bond is required, it may be posted without surety
      thereon. If any restriction contained in this Article VII is held by any court
      to be unenforceable, or unreasonable, as to time, geographic area or business
      limitation, Buyer, Seller, Seller’s Shareholder and the Pharmacist-in-Charge
      agree that such provisions shall be and are hereby reformed to the maximum
      time,
      geographic area or business limitation permitted by applicable laws. The parties
      further agree that the remaining restrictions contained in this Article VII
      shall be severable and shall remain in effect and shall be enforceable
      independently of each other. Seller, Seller’s Shareholder and the
      Pharmacist-in-Charge specifically acknowledge, represent and warrant that the
      covenants set forth in this Article VII are reasonable and necessary to protect
      the legitimate interests of Buyer, and that Buyer would not have entered into
      this Agreement or paid the Purchase Price in the absence of such
      covenants.
      The
      Pharmacist-in-Charge specifically acknowledges that he is Seller’s Shareholder’s
      spouse and will benefit financially from the transactions contemplated by this
      Agreement.

     

    ARTICLE
      VIII

     

    INDEMNIFICATION

     

    8.1     Survival
      of Representations and Warranties.  All
      representations and warranties contained in Articles IV and V of this Agreement
      shall survive the Closing for the applicable statute of
      limitations.

     

    8.2     Indemnification
      by Seller and Seller’s Shareholder.
      Seller
      and Seller’s Shareholder shall indemnify and save Buyer and its Affiliates,
      their respective directors, officers, employees, agents and representatives
      and
      all of their successors and assigns (collectively “Buyer Claimants” and
      individually a “Buyer Claimant”) harmless from and defend each of them from and
      against any and all demands, claims, actions, liabilities, losses, costs,
      damages or expenses whatsoever (including any reasonable attorneys' fees)
      (collectively, “Losses”) asserted against, imposed upon or incurred by Buyer
      Claimants resulting from or arising out of (a) any inaccuracy or breach of
      any
      representation or warranty of Seller, Seller’s Shareholder or the
      Pharmacist-in-Charge contained herein; (b) any breach of any covenant or
      obligation of Seller contained herein; (c) any liability of Seller arising
      out
      of events occurring, conditions existing, products sold or activities of Seller;
      (d) noncompliance with any applicable bulk sales or similar laws (including
      laws
      which may impose transferee liability on Buyer or an Affiliate of Buyer or
      create Encumbrances on the Acquired Assets relating to Seller's liability for
      sales, use or other taxes or withholdings arising out of the operations of
      Seller); and (e) any liability arising out of or related to Seller’s business
      prior to Closing, or the assertion against a Buyer Claimant of a claim which,
      if
      valid, would constitute a liability arising out of or related to Seller’s
      business prior to Closing.

     

    
      
         

      

      
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    8.3     Indemnification
      by Buyer.
      Buyer
      shall indemnify and save Seller and its respective Affiliates and their
      respective directors, officers, employees, agents and representatives
      (collectively “Seller Claimants” and individually a “Seller Claimant”) harmless
      from and defend each of them from and against any and all Losses asserted
      against, imposed upon or incurred by Seller Claimants resulting from or arising
      out of (a) any inaccuracy or breach of any representation or warranty of Buyer
      contained herein; (b) any breach of any covenant or obligation of Buyer
      contained herein; (c) any liability of Buyer arising out of events occurring,
      conditions exisiting, products sold or activities of Buyer; and (d) except
      as
      described in Section 8.2 above, Buyer's ownership of the Acquired Assets and
      operation of its business from and after the Closing Date.

     

    8.4     Indemnification
      Procedures.

     

    (a)  The
      rights and obligations of each party claiming a right to indemnification
      hereunder (“Indemnitee”) from the other party (“Indemnitor”) shall be governed
      by the following rules:

     

    (i)  The
      Indemnitee shall give prompt written notice to the Indemnitor of any state
      of
      facts which Indemnitee determines will give rise to a claim by the Indemnitee
      against the Indemnitor based on the indemnity agreements contained herein,
      stating the nature and basis of said claims and the amount thereof, to the
      extent known. No failure to give such notice shall affect the indemnification
      obligations of Indemnitor hereunder, except to the extent such failure
      materially prejudices such Indemnitor's ability successfully to defend the
      matter giving rise to the indemnification claim.

     

    (ii)  In
      the
      event any action, suit or proceeding is brought against the Indemnitee, with
      respect to which the Indemnitor may have liability under the indemnity
      agreements contained herein, then upon the written acknowledgment by the
      Indemnitor within thirty (30) days of the bringing of such action, suit or
      proceeding that it is undertaking and will prosecute the defense of the claim
      under such indemnity agreements and confirming that the claim is one with
      respect to which the Indemnitor is obligated to indemnify and that it will
      be
      able to pay the full amount of potential liability in connection with any such
      claim, the action, suit or proceeding (including all proceedings on appeal
      or
      for review which counsel for the Indemnitee shall deem appropriate) may be
      defended by the Indemnitor. However, in the event the Indemnitor shall not
      offer
      reasonable assurances as to its financial capacity to satisfy any final judgment
      or settlement, the Indemnitee may assume the defense and dispose of the claim,
      after thirty (30) days prior written notice to the Indemnitor. The Indemnitee
      shall have the right to employ its own counsel in any such case, but the fees
      and expenses of such counsel shall be at the Indemnitee's own expense unless
      (A)
      the employment of such counsel and the payment of such fees and expenses both
      shall have been specifically authorized by the Indemnitor in connection with
      the
      defense of such action, suit or proceeding or (B) the Indemnitee shall have
      reasonably concluded and specifically notified the Indemnitor that there may
      be
      specific defenses available to it which are different from or additional to
      those available to the Indemnitor.

     

    (iii)  In
      addition, in any event specified in clause (B) of the second sentence of
      subparagraph (ii) above, the Indemnitor, to the extent made necessary by such
      different or additional defenses, shall not have the right to direct the defense
      of such action, suit or proceeding on behalf of the Indemnitee. If Indemnitor
      and Indemnitee cannot agree on a mechanism to separate the defense of matters
      extending beyond the scope of indemnification, such matters shall be defended
      on
      the basis of joint consultation.

     

    
      
         

      

      
        17

        
          

        

      

      
         

      

    

    (iv)  The
      Indemnitee shall be kept fully informed by the Indemnitor of such action, suit
      or proceeding at all stages thereof, whether or not it is represented by
      counsel. The Indemnitor shall, at the Indemnitor's expense, make available
      to
      the Indemnitee and its attorneys and accountants all books and records of the
      Indemnitor relating to such proceedings or litigation, and the parties hereto
      agree to render to each other such assistance as they may reasonably require
      of
      each other in order to ensure the proper and adequate defense of any such
      action, suit or proceeding.

     

    (v)  The
      Indemnitor shall make no settlement of any claims which Indemnitor has
      undertaken to defend, without Indemnitee's consent, unless the Indemnitor fully
      indemnifies the Indemnitee for all losses, there is no finding or admission
      of
      violation of law by, or effect on any other claims that may be made against,
      the
      Indemnitee and the relief granted in connection therewith requires no action
      on
      the part of and has no effect on the Indemnitee.

     

    ARTICLE
      IX

     

    MISCELLANEOUS

     

    9.1     Expenses. Each
      party hereto shall pay its own expenses incurred in connection with this
      Agreement, except as otherwise specified in this Agreement and except that
      all
      sales, transfer and other similar taxes, levies and charges that may be imposed,
      levied or assessed in connection with the consummation of the transactions
      contemplated hereby shall be borne by Seller.

     

    9.2     Amendment. This
      Agreement may not be terminated, amended, altered or supplemented except by
      a
      written agreement executed by the parties hereto.

     

    9.3     Entire
      Agreement. This
      Agreement, including the schedules hereto, and the instruments and other
      documents delivered pursuant to this Agreement, contain the entire agreement
      of
      the parties relating to the subject matter of this Agreement and supersede
      all
      other agreements and understandings of any kind between the parties respecting
      such subject matter. Each and every representation, warranty and covenant shall
      be deemed to include the information contained in the schedules
      thereto.

     

    9.4     Waivers. Waiver
      by
      either party of either breach of or failure to comply with any provision of
      this
      Agreement by the other party shall not be construed as, or constitute, a
      continuing waiver of such provision, or a waiver of any other breach of, or
      failure to comply with, any other provision of this Agreement. No waiver of
      any
      such breach or failure or of any term or condition of this Agreement shall
      be
      effective unless in a written notice signed by the waiving party and delivered,
      in the manner required for notices generally, to each affected
      party.

     

    9.5     Notices. All
      notices, consents, directions, approvals, instructions, requests and other
      communications required or permitted by the terms of this Agreement to be given
      to any Person shall be in writing, and any such communication shall become
      effective five (5) Business Days after being deposited in the United States
      mails, certified or registered (return receipt requested), with appropriate
      postage prepaid for first class mail or, if delivered by hand or courier service
      or in the form of a telex, telecopy or telegram, when received (if received
      during normal business hours on a Business Day, or if not, then on the next
      Business Day thereafter), and shall be directed to the following address or
      telex or telecopy number:

     

    
      
         

      

      
        18

        
          

        

      

      
         

      

    

    If
      to
      Seller:

     

    St.
      Jude
      Pharmacy & Surgical Supply Corp.

    122
      St.
      Nicholas Avenue

    Brooklyn,
      New York 11237

    Telecopier:
      718-417-3621

    

    With
      a
      copy to:

     

    Danziger
      & Markhoff

    123
      Main
      Street

    White
      Plains, New York

    Attention:
      Gregory R. Tapfar, Esq.

    Telecopier:
      914-948-1706

    

    If
      to
      Buyer:

     

    MOMS
      Pharmacy of Brooklyn, Inc.

    c/o
      Allion Healthcare, Inc.

    1660
      Walt
      Whitman Road

    Melville,
      New York 11747

    Attention:
      Mr. Mike Moran

    Telecopier:
      631-249-5863

    

    With
      a
      copy to:

     

    Nixon
      Peabody LLP

    990
      Stewart Avenue

    Garden
      City, New York 11530

    Attention:
      Allan H. Cohen 

    Telecopier:
      866-947-2070

    

    or
      to
      such other address as a party may have furnished to the other parties in writing
      in accordance herewith, except that notices of change of address shall only
      be
      effective upon receipt.

     

    9.6     Counterparts.
      This
      Agreement may be executed in two or more counterparts, and by the different
      parties hereto in separate counterparts each of which when executed shall be
      deemed to be an original, but all of which together shall constitute one and
      the
      same document.

     

    9.7     Governing
      Law; Submission to Jurisdiction.
      This
      Agreement shall be governed by, and construed in accordance with, the law of
      the
      State of New York, without regard to applicable principles of conflict of laws
      that might otherwise govern.

     

    
      
         

      

      
        19

        
          

        

      

      
         

      

    

    9.8     Binding
      Effect; Assignment.
      This
      Agreement shall be binding upon and shall inure to the benefit of the parties
      hereto and their respective successors and assigns. Neither party shall assign
      or transfer this Agreement nor any right or obligation hereunder by operation
      of
      law or otherwise without the consent of the other party.

     

    9.9     Severability. If
      any
      provision of this Agreement or any part of any such provision is held under
      any
      circumstances to be invalid or unenforceable in any jurisdiction, then: (a)
      such
      provision or part thereof shall, with respect to such circumstances and in
      such
      jurisdiction, be deemed amended to conform to applicable laws so as to be valid
      and enforceable to the fullest possible extent; (b) the invalidity or
      unenforceability of such provision or part thereof under such circumstances
      and
      in such jurisdiction shall not affect the validity or enforceability of such
      provision or part thereof under any other circumstances or in any other
      jurisdiction; and (c) such invalidity or enforceability of such provision or
      part thereof shall not affect the validity or enforceability of the remainder
      of
      such provision or the validity or enforceability of any other provision of
      this
      Agreement. Each provision of this Agreement is separable from every other
      provision of this Agreement, and each part of each provision of this Agreement
      is separable from every other part of such provision.

     

    9.10     Headings.
      The
      headings contained in this Agreement (including the schedules) are for reference
      purposes only and shall not affect in any way the meaning or interpretation
      of
      this Agreement.

     

    9.11     No
      Agency.
      Neither
      party hereto shall be deemed hereunder to be an agent of, or partner or joint
      venture with, the other party hereto.

     

    9.12     Third
      Parties.
      Nothing
      herein is intended or shall be construed to confer upon or give to any person
      other than the parties hereto any rights or remedies under or by reason of
      this
      Agreement.

     

    9.13     Passage
      of Title and Risk of Loss.
      Legal
      title, equitable title and risk of loss with respect to the Acquired Assets
      will
      not pass to Buyer until the Acquired Assets are transferred at the
      Closing.

     

    
      
         

      

      
        20

        
          

        

      

      
         

      

    

    IN
      WITNESS WHEREOF, the parties hereto have executed this Agreement effective
      as of
      the date first above written.

     

    SELLER:

     

    ST.
      JUDE
      PHARMACY & SURGICAL SUPPLY CORP.

    

    

    By:______________________________________       

    Authorized
      Officer

    

    

    SELLER’S
      SHAREHOLDER:

    

    

                                 
________________________________________

    MILLIE
      CHERVIN

    

    

    PHARMACIST-IN-CHARGE:

    

    

                                    ________________________________________

    MITCHELL
      CHERVIN

    

    

    BUYER:

    

    MOMS
      PHARMACY OF BROOKLYN, INC.

    

    

    By:______________________________________       

    Michael
      Moran

    President
      and Chief Executive Officer

    

    

    GUARANTOR:

    

    ALLION
      HEALTHCARE, INC.

    

    

    By:______________________________________       

    Michael
      Moran

    President
      and Chief Executive Officer

    
      
         

      

      
        21

        
          

        

      

      
         

      

    

    EXHIBIT
      C

     

    1.  Seller
      has been duly organized and is validly existing and in good standing under
      the
      laws of the State of New York. Seller has the power and authority to own, lease
      and operate its properties and to conduct its business as it is presently
      conducted. Seller’s Shareholder are the only shareholders of
      Seller.

     

    2.  Seller,
      Seller’s Shareholder and the Pharmacist-in-Charge have the power and authority
      to execute, deliver and perform, and has taken all action necessary to execute,
      deliver and perform the Agreement. Seller, Seller’s Shareholder and the
      Pharmacist-in-Charge have duly executed and delivered the Agreement.

     

    3.  The
      Agreement constitutes the valid and binding obligation of Seller, Seller’s
      Shareholder and the Pharmacist-in-Charge, enforceable against such Person in
      accordance with its terms.

     

    4.  The
      execution and delivery of the Agreement, and the consummation by Seller,
      Seller’s Shareholder and the Pharmacist-in-Charge of the transactions
      contemplated by the Agreement, do not, with or without the giving of notice
      or
      the lapse of time or both, violate (a) the articles of incorporation or
      bylaws of Seller, or (b) any Federal or state law or regulation applicable
      to Seller, Seller’s Shareholder or the Pharmacist-in-Charge.

     

    5.  No
      registration, approval, authorization, consent, notice or other action by,
      or
      filing with, any Federal or state governmental authority is required on the
      part
      of Seller, Seller’s Shareholder or the Pharmacist-in-Charge in connection with
      the execution and delivery of the Agreement, or the consummation by Seller,
      Seller’s Shareholder or the Pharmacist-in-Charge of the transactions
      contemplated by the Agreement, or if required, such appropriate action has
      been
      taken.

     

    
      
         

      

      
        22EXHIBIT
      4.2

    

    ORIGIN
      AGRITECH LIMITED

    2005
      PERFORMANCE EQUITY PLAN

    EMPLOYEE
      SHARE OPTION AGREEMENT

     

    THIS
      EMPLOYEE SHARE OPTION AGREEMENT
      (this
“Option
      Agreement”)
      dated
      _____________________ by and between Origin Agritech Limited,
      an
      international business company formed under the laws of the British Virgin
      Islands (the “Corporation”),
      and
      ___________________________ (the “Grantee”)
      evidences the share option (the “Option”)
      granted
      by the Corporation to the Grantee as to the number of the Corporation’s ordinary
      shares (“Common
      Shares”)
      first
      set forth below.

     

    
      	
              Number
                of Common Shares:1 
                _______                
                Award
                Date:
                __________________

               

              Exercise
                Price per Common Share:1
                $________ Expiration
                Date:1,2 
                _____________

               

              Type
                of Option (check
                one):

              Nonqualified
                Option  [____]

              Incentive
                Stock Option  [____]

               

              Vesting1,2
                The
                Option shall become vested as to 20% of the total number of Common
                Shares
                subject to the Option on the one year anniversary of the Award Date.
                The
                remaining 80% of the total number of Common Shares subject to the
                Option
                shall vest in 16 substantially equal quarterly installments, with
                the
                first installment vesting on the last day of the third month after
                the
                month in which the Award Date occurs and an additional installment
                vesting
                on the last day of each of the 15 three-month periods
                thereafter.

            

    

     

    The
      Option is granted under the Chardan China Acquisition Corp. 2005 Performance
      Equity Plan, which became the Origin Agritech Limited 2005 Performance Equity
      Plan (the “Plan”)
      by
      operation of law under the terms of the merger of Chardan China Acquisition
      Corp. with and into the Corporation. The Option is subject to the Terms and
      Conditions of Employee Share Options (the “Terms”)
      attached to this Option Agreement (incorporated herein by this reference) and
      to
      the Plan. The Option has been granted to the Grantee in addition to, and not
      in
      lieu of, any other form of compensation otherwise payable or to be paid to
      the
      Grantee. Capitalized terms are defined in the Plan if not defined herein. The
      parties agree to the terms of the Option set forth herein. The Grantee
      acknowledges receipt of a copy of the Terms and the Plan, specifically
      acknowledges and agrees to Section 1 of the Terms, and agrees to maintain in
      confidence all information provided to him/her in connection with the
      Option.

     

    
      	
              “GRANTEE”

               

               

              ______________________________________

              Signature

               

               

              ______________________________________

              Print
                Name

               

               

              _________________________________

              Address

               

               

            	
              ORIGIN
                AGRITECH LIMITED

               

               

              By:__________________________________

               

              Print
                Name:___________________________

               

              Title:________________________________

            

    

    
      
        
          

        

        
          
            	1	
                    Subject
                      to adjustment under the Plan.

                  

          

        

        
          
            	
                    2

                  	
                    Subject
                      to early termination under Section 5 of the Terms and the
                      Plan.

                  

          

        

      

       

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

     

    CONSENT
      OF SPOUSE

    (optional)

     

    In
      consideration of the Corporation’s execution of this Option Agreement, the
      undersigned spouse of the Grantee agrees to be bound by all of the terms and
      provisions hereof and of the Plan.

     

    
      	   
              	 	       
	Signature of Spouse	 	Date

    

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    TERMS
      AND CONDITIONS OF EMPLOYEE SHARE OPTION

     

    
      	
              1.

            	
              Satisfaction
                of All Rights to Equity. 

            

    

     

    The
      Option is in complete satisfaction of any and all rights that the Grantee may
      have (under an employment, consulting, or other written or oral agreement with
      the Corporation or any of its affiliates, or otherwise) to receive (1) options
      or share awards with respect to the securities of the Corporation or any of
      its
      affiliates, and/or (2) any other equity or derivative security in or with
      respect to the Corporation or any of its affiliates. This Option Agreement
      supersedes the terms of all prior understandings and agreements, written or
      oral, of the parties with respect to such matters. The Grantee shall have no
      further rights or benefits under any prior agreement conveying any right with
      respect to any security or derivative security in or with respect to the
      Corporation or any of its affiliates. The foregoing notwithstanding, this
      Section 1 shall not adversely affect the Grantee’s rights under any prior option
      or share award agreement under the Plan (provided such agreement is expressly
      labeled as an option or share award agreement under the Plan and is similar
      in
      form to this Option Agreement) which has been signed by an authorized officer
      of
      the Corporation.

     

    
      	
              2.

            	
              Vesting;
                Limits on Exercise.

            

    

     

    The
      Option shall vest and become exercisable in percentage installments of the
      aggregate number of Common Shares subject to the Option as set forth on the
      cover page of this Option Agreement. The Option may be exercised only to the
      extent the Option is vested and exercisable.

     

    
      	 	
              ·

            	
              Cumulative
                Exercisability.
                To the extent that the Option is vested and exercisable, the Grantee
                has
                the right to exercise the Option (to the extent not previously exercised),
                and such right shall continue, until the expiration or earlier termination
                of the Option.

            

    

     

    
      	 	
              ·

            	
              No
                Fractional Shares.
                Fractional Common Share interests shall be disregarded, but may be
                cumulated subject to the Plan.

            

    

     

    
      	 	
              ·

            	
              Minimum
                Exercise.
                No fewer than 100 Common Shares (subject to adjustment under Section
                3.2
                of the Plan) may be purchased at any one time, unless the number
                purchased
                is the total number at the time exercisable under the Option.
                

            

    

     

    
      	 	
              ·

            	
              ISO
                Value Limit.
                If the Option
                is designated as an Incentive Stock Option (an “ISO”),
                as indicated on the cover page of this Option Agreement, and if
                the
                aggregate fair market value of the shares with respect to which ISOs
                (whether granted under the Option or otherwise) first become exercisable
                by the Grantee in any calendar year exceeds $100,000, as measured
                on the
                applicable Award Dates, taking into account both Common Shares subject
                to
                ISOs under the Plan and shares subject to ISOs under all other plans
                of
                the Company (or any parent or predecessor corporation to the extent
                required by and within the meaning of Section 422 of the Code and
                the
                regulations promulgated thereunder), such options shall be treated
                as
                nonqualified share options. In reducing the number of options treated
                as
                ISOs to meet the $100,000 limit,
                the

            

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    most
      recently granted options shall be reduced first. To the extent a reduction
      of
      simultaneously granted options is necessary to meet the $100,000 limit, the
      Board or the Committee may, in the manner and to the extent permitted by law,
      designate which Common Shares are to be treated as shares acquired pursuant
      to
      the exercise of an ISO. Any participant who exercises an ISO shall give prompt
      written notice to the Corporation of any sale or other transfer of the Common
      Shares acquired on such exercise if the sale or other transfer occurs within
      (a)
      one year after the exercise date of the Option, or (b) two years after the
      grant
      date of the Option.

     

    
      	
              3.

            	
              Continuance
                of Employment/Service Required; No Employment/Service
                Commitment.

            

    

     

    The
      vesting schedule requires continued employment or service through each
      applicable vesting date as a condition to the vesting of the applicable
      installment of the Option and the rights and benefits under this Option
      Agreement. Employment or service for only a portion of the vesting period,
      even
      if a substantial portion, will not entitle the Grantee to any proportionate
      vesting or avoid or mitigate a termination of rights and benefits upon or
      following a termination of employment or services as provided in Section 5
      below
      or under the Plan.

     

    Nothing
      contained in this Option Agreement or the Plan constitutes a continued
      employment or service commitment by the Corporation or any of its Subsidiaries,
      affects the Grantee’s status, if he or she is an employee, as an employee at
      will who is subject to termination without cause, confers upon the Grantee
      any
      right to remain employed by or in service to the Corporation or any Subsidiary,
      interferes in any way with the right of the Corporation or any Subsidiary at
      any
      time to terminate such employment or service, or affects the right of the
      Corporation or any Subsidiary to increase or decrease the Grantee’s other
      compensation.

     

    
      	
              4.

            	
              Method
                of Exercise of Option.

            

    

     

    The
      Option shall be exercisable by the delivery to the Secretary of the Corporation
      (or such other person as the Committee may require pursuant to such
      administrative exercise procedures as the Committee may implement from time
      to
      time) of:

     

    
      	 	
              ·

            	
              an
                executed Option Exercise and Common Share Purchase Agreement (stating
                the
                number of Common Shares to be purchased pursuant to the Option) in
                substantially the form attached hereto as Exhibit A or such other
                form as
                the Committee may require from time to time (the “Exercise
                Agreement”);

            

    

     

    
      	 	
              ·

            	
              payment
                in full for the Exercise Price of the shares to be purchased, in
                cash or
                by electronic funds transfer to the Corporation, or by certified
                or
                cashier’s check payable to the order of the Corporation subject to such
                specific procedures or directions as the Committee may
                establish;

            

    

     

    
      	 	
              ·

            	
              any
                written statements or agreements required in connection with fulfilling
                the obligations of the Corporation pursuant to Section 13.10 of the
                Plan;
                and

            

    

     

    
      	 	
              ·

            	
              satisfaction
                of the tax withholding provisions of Section 13.6 of the
                Plan.

            

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    The
      Committee also may, but is not required to, authorize a non-cash payment
      alternative specified below at or prior to the time of exercise. In which case,
      the Exercise Price and/or applicable withholding taxes, to the extent so
      authorized, may be paid in full or in part by delivery to the Corporation
      of:

     

    
      	 	
              ·

            	
              Common
                Shares already owned by the Grantee, valued at their Fair Market
                Value on
                the date prior to the exercise date, provided,
                however,
                that any shares acquired directly from the Corporation (upon exercise
                of
                an option or otherwise) must have been owned by the Grantee for at
                least
                six (6) months before the date of such exercise;
                and/or

            

    

     

    
      	 	
              ·

            	
              if
                the Common Shares are then registered under the Exchange Act and
                listed or
                quoted on a recognized national securities exchange or in the NASDAQ
                National Market Quotation System, irrevocable instructions to a broker
                to,
                upon exercise of the Option, promptly sell a sufficient number of
                Common
                Shares acquired upon exercise of the Option and deliver to the Corporation
                the amount necessary to pay the Exercise Price (and, if applicable,
                the
                amount of any related tax withholding
                obligations).

            

    

     

    An
      Option
      will qualify as an ISO only if it meets all of the applicable requirements
      of
      the Code. If the Option is designated as an ISO, the Option may be rendered
      a
      Nonqualified Option if the Committee permits the use of one or more of the
      non-cash payment alternatives referenced above.

     

    
      	
              5.

            	
              Early
                Termination of Option.

            

    

     

    5.1 Possible
      Termination of Option upon Change in Control.
      The
      Option is subject to termination in connection with a Change in Control Event
      or
      certain similar reorganization events.

     

    5.2 Termination
      of Option upon a Termination of Grantee’s Employment or
      Services.
      Subject
      to earlier termination on the Expiration Date of the Option or pursuant to
      Section 5.1 above, if the Grantee ceases to be employed by or ceases to provide
      services to the Corporation or a Subsidiary (other than in the capacity as
      a
      member of the board of directors of the Corporation as provided below), the
      following rules shall apply (the last day that the Grantee is employed by or
      provides services to the Corporation or a Subsidiary is referred to as the
      Grantee’s “Severance
      Date”):

     

    
      	 	
              ·

            	
              other
                than as expressly provided below in this Section 5.2, (a) the Grantee
                will
                have until the date that is 30 days after his or her Severance Date
                to
                exercise the Option (or portion thereof) to the extent that it was
                vested
                on the Severance Date, (b) the Option, to the extent not vested on
                the
                Severance Date, shall terminate on the Severance Date, and (c) the
                Option,
                to the extent exercisable for the 30-day period following the Severance
                Date and not exercised during such period, shall terminate at the
                close of
                business on the last day of the 30-day
                period;

            

    

     

    
      	 	
              ·

            	
              if
                the termination of the Grantee’s employment is the result of the Grantee’s
                voluntary Retirement (as defined below and other than a termination
                by
                the

            

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Corporation
      or a Subsidiary for cause as provided below), then (a) the Grantee will have
      until the date that is 3 years after his or her Severance Date to exercise
      the
      Option (or portion thereof) to the extent that it was vested on the Severance
      Date, (b) the Option, to the extent not vested on the Severance Date, shall
      terminate on the Severance Date, and (c) the Option, to the extent exercisable
      for the 3-year period following the Severance Date and not exercised during
      such
      period, shall terminate at the close of business on the last day of the 3-year
      period;

     

    
      	 	
              ·

            	
              if
                the termination of the Grantee’s employment is the result of the Grantee’s
                death or Disability (as defined below), then (a) the Grantee (or
                his
                beneficiary or personal representative, as the case may be) will
                have
                until the earlier of the date that is 1 year after the Grantee’s Severance
                Date or until the expiration of the dated term of such Stock Option
                to
                exercise the Option, (b) the Option, to the extent not vested on
                the
                Severance Date, shall terminate on the Severance Date, and (c) the
                Option,
                to the extent exercisable for the 1-year period following the Severance
                Date and not exercised during such period, shall terminate at the
                close of
                business on the last day of the 1-year
                period;

            

    

     

    
      	 	
              ·

            	
              if
                the termination of the Grantee’s employment is the result of a termination
                by the Corporation or a Subsidiary for Cause (as defined below),
                the
                Option (whether vested or not) shall terminate on the Severance
                Date.

            

    

     

    In
      the
      event a Grantee who is appointed by the holders of the preferred shares of
      the
      Corporation to serve on the board of directors of the Corporation (the
“Board”)
      terminates his service to the Corporation (other than in connection with a
      Change in Control Event or certain similar reorganization events), the Option
      shall not be subject to Section 5.2 herein but shall be subject to accelerated
      vesting in accordance with Section 10 of the Plan.

     

    For
      purposes of the Option, “Disability” means a permanent disability (within the
      meaning of Section 22(e)(3) of the Code or as otherwise determined by the
      Administrator). For purposes of the Option, “Retirement” means a termination of
      employment by the Grantee that occurs upon or after the Grantee’s attainment of
      age 65 and in accordance with the retirement policies of the Corporation (or
      the
      Subsidiary that employs the Grantee) then in effect. For purposes of the Option,
      “Cause” means that the Grantee: (a) has been repeatedly negligent in the
      discharge of his or her duties to the Corporation or a Subsidiary or has refused
      to perform stated or assigned duties (other than by reason of a disability
      or
      analogous condition); (b) has been dishonest or committed or engaged in an
      act
      of theft, embezzlement or fraud, a breach of confidentiality, an unauthorized
      disclosure or use of inside information, customer lists, trade secrets or other
      confidential information; (c)  has
      breached a fiduciary duty, or violated any other duty, law, rule, regulation
      or
      policy of the company or an affiliate; (d) has been convicted of, or plead
      guilty or nolo contendere to, a felony or misdemeanor (other than minor traffic
      violations or similar offenses); (e) has materially breached any of the
      provisions of any agreement with the Corporation or a Subsidiary; (f) has
      engaged in unfair competition with, or otherwise acted intentionally in a manner
      injurious to the reputation, business or assets of, the Corporation or a
      Subsidiary; or  has
      improperly induced a vendor or customer to break or terminate any contract
      with
      the Corporation or a Subsidiary or induced a principal for whom the Corporation
      or a Subsidiary acts as agent to terminate such agency
      relationship.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    In
      all
      events the Option is subject to earlier termination on the Expiration Date
      of
      the Option or as contemplated by Section 5.1. The Committee shall be the sole
      judge of whether the Grantee continues to render employment or services for
      purposes of this Option Agreement.

     

    
      	
              6.

            	
              Non-Transferability.

            

    

     

    The
      Option and any other rights of the Grantee under this Option Agreement or the
      Plan are nontransferable and exercisable only by the Grantee, except as set
      forth in Section 5.2(e) of the Plan. Any Common Shares issued on exercise of
      the
      Option are subject to substantial restrictions on transfer, and are subject
      to
      other rights in favor of the Corporation as set forth herein and in the Exercise
      Agreement.

     

    
      	
              7.

            	
              Securities
                Law Compliance.
                

            

    

     

    The
      Grantee acknowledges that the Option and the Common Shares are not being
      registered under the Securities Act, based, in part, in reliance upon an
      exemption from registration under Securities and Exchange Commission Rule 701
      promulgated under the Securities Act of 1933, and a comparable exemption from
      qualification under applicable state securities laws, as each may be amended
      from time to time. The Grantee, by executing this Option Agreement, hereby
      makes
      the following representations to the Corporation and acknowledges that the
      Corporation’s reliance on federal and state securities law exemptions from
      registration and qualification is predicated, in substantial part, upon the
      accuracy of these representations:

    

    
      	 	
              ·

            	
              The
                Grantee is acquiring the Option and, if and when he/she exercises
                the
                Option, will acquire the Common Shares solely for the Grantee’s own
                account, for investment purposes only, and not with a view to or
                an intent
                to sell, or to offer for resale in connection with any unregistered
                distribution, all or any portion of the Common Shares within the
                meaning
                of the Securities Act, or other applicable state securities
                laws.

            

    

    

    
      	 	
              ·

            	
              The
                Grantee has had an opportunity to ask questions and receive answers
                from
                the Corporation regarding the terms and conditions of the Option
                and the
                restrictions imposed on any Common Shares purchased upon exercise
                of the
                Option. The Grantee has been furnished with, and/or has access to,
                such
                information as he or she considers necessary or appropriate for deciding
                whether to exercise the Option and purchase Common Shares. However,
                in
                evaluating the merits and risks of an investment in the Common Shares,
                the
                Grantee has and will rely upon the advice of his/her own legal counsel,
                tax advisors, and/or investment
                advisors.

            

    

    

    
      	 	
              ·

            	
              The
                Grantee is aware that the Option may be of no practical value, that
                any
                value it may have depends on its vesting and exercisability as well
                as an
                increase in the Fair Market Value of the underlying Common Shares
                to an
                amount in excess of the Exercise Price, and that any investment in
                common
                shares of a closely held corporation such as the Corporation is
                non-marketable, non-transferable and could require capital to be
                invested
                for an indefinite period of time, possibly without return, and at
                substantial risk of loss.

            

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    
      	
            	·	
              The
                Grantee understands that any Common Shares acquired on exercise of
                the
                Option will be characterized as “restricted securities” under the federal
                securities laws, and that, under such laws and applicable regulations,
                such securities may be resold without registration under the Securities
                Act only in certain limited circumstances, including in accordance
                with
                the conditions of Rule 144 promulgated under the Securities Act,
                as
                presently in effect, with which the Grantee is
                familiar.

            

    

    

    
      	 	
              ·

            	
              The
                Grantee has read and understands the restrictions and limitations
                set
                forth in the Plan, this Option Agreement (including these Terms),
                which
                are imposed on the Option and any Common Shares which may be acquired
                upon
                exercise of the Option.

            

    

    

    
      	 	
              ·

            	
              At
                no time was an oral representation made to the Grantee relating to
                the
                Option or the purchase of Common Shares and the Grantee was not presented
                with or solicited by any promotional meeting or material relating
                to the
                Option or the Common Share.

            

    

    

    
      	
              8.

            	
              Lock-Up
                Agreement. 

            

    

     

    Grantee
      may not (nor may any permitted transferee), directly or indirectly, offer,
      sell
      or transfer or dispose of any of the Common Shares acquired upon exercise of
      the
      Option or any interest therein (or agree to do any thereof) (collectively,
      a
“Transfer”)
      during
      the period commencing as of 14 days prior to and ending one year, or such lesser
      period of time as the relevant underwriters may permit, after the effective
      date
      of a registration statement covering any public offering of the Corporation’s
      securities of which the Grantee has notice (The term “Grantee” includes, where
      the context so requires, any permitted direct or indirect transferee of the
      Grantee.) The Grantee shall agree and consent to the entry of stop transfer
      instructions with the Corporation’s transfer agent against the Transfer of the
      Corporation’s securities beneficially owned by the Grantee and shall conform the
      limitations hereunder by agreement with and for the benefit of the relevant
      underwriters by a lock-up agreement or other agreement in customary form.
      Notwithstanding anything else herein to the contrary, this Section 8 shall
      not
      be construed so as to prohibit the Grantee from participating in a registration
      or a public offering of the Common Shares with respect to any shares which
      he or
      she may hold at that time, provided, however, that such participation shall
      be
      at the sole discretion of the Board. 

    

    
      	
              9.

            	
              Notices. 

            

    

     

    Any
      notice to be given under the terms of this Option Agreement shall be in writing
      and addressed to the Corporation at its principal office to the attention of
      the
      Secretary, and to the Grantee at the address last reflected on the Corporation’s
      payroll records, or at such other address as either party may hereafter
      designate in writing to the other. Any such notice shall be given only when
      received, but if the Grantee is no longer employed by the Corporation or a
      Subsidiary, shall be deemed to have been duly given five business days after
      the
      date mailed in accordance with the foregoing provisions of this Section
      9.

     

    
      	
              10.

            	
              Plan. 

            

    

     

    The
      Option and all rights of the Grantee under this Option Agreement are subject
      to,
      and the Grantee agrees to be bound by, all of the terms and conditions of the
      Plan, incorporated

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    herein
      by
      this reference. 
      In the
      event of a conflict or inconsistency between the terms and conditions of this
      Option Agreement and of the Plan, the terms and conditions of the Plan shall
      govern. The Grantee agrees to be bound by the terms of the Plan and this Option
      Agreement (including these Terms). The Grantee acknowledges having read and
      understanding the Plan and this Option Agreement. Unless otherwise expressly
      provided in other sections of this Option Agreement, provisions of the Plan
      that
      confer discretionary authority on the Board or the Committee do not and shall
      not be deemed to create any rights in the Grantee unless such rights are
      expressly set forth herein or are otherwise in the sole discretion of the Board
      or the Committee so conferred by appropriate action of the Board or the
      Committee under the Plan after
      the date
      hereof.

     

    
      	
              11.

            	
              Entire
                Agreement. 

            

    

     

    This
      Option Agreement (including these Terms) and the Plan together constitute the
      entire agreement and supersede all prior understandings and agreements, written
      or oral, of the parties hereto with respect to the subject matter hereof. The
      Plan and this Option Agreement may be amended pursuant to Section 11 of the
      Plan. Such amendment must be in writing and signed by the Corporation. The
      Corporation may, however, unilaterally waive any provision hereof in writing
      to
      the extent such waiver does not adversely affect the interests of the Grantee
      hereunder, but no such waiver shall operate as or be construed to be a
      subsequent waiver of the same provision or a waiver of any other provision
      hereof.

     

    
      	
              12.

            	
              Governing
                Law; Limited Rights; Severability. 

            

    

     

    12.1 British
      Virgin Islands Laws; Construction.
      This
      Option Agreement and the Exercise Agreement shall be governed by and construed
      and enforced in accordance with the laws of the State of Delaware without regard
      to conflict of law principles thereunder. The terms of the Option grant have
      resulted from the negotiations of the parties and each of the parties has had
      an
      opportunity to obtain and consult with its own counsel. The language of all
      parts of the Plan, this Option Agreement (including these Terms) and the
      Exercise Agreement shall in all cases be construed as a whole, according to
      its
      fair meaning, and not strictly for or against either of the parties. 

     

    12.2 Limited
      Rights.
      Except
      as otherwise expressly authorized by the Committee or the Plan, a participant
      shall not be entitled to any privilege of share ownership as to any Common
      Shares not actually delivered to and held of record by the participant. No
      adjustment will be made for dividends or other rights as a shareholder for
      which
      a record date is prior to such date of delivery. The existence of the Plan,
      this
      award agreement and the awards granted hereunder shall not limit, affect or
      restrict in any way the right or power of the Board or the shareholders of
      the
      Corporation to make or authorize: (a) any adjustment, recapitalization,
      reorganization or other change in the capital structure or business of the
      Corporation or any subsidiary, (b) any merger, amalgamation, consolidation
      or
      change in the ownership of the Corporation or any subsidiary, (c) any issue
      of
      bonds, debentures, capital, preferred or prior preference share ahead of or
      affecting the capital share (or the rights thereof) of the Corporation or any
      subsidiary, (d) any dissolution or liquidation of the Corporation or any
      subsidiary, (e) any sale or transfer of all or any part of the assets or
      business of the Corporation or any subsidiary, or (f) any other corporate act
      or
      proceeding by the Corporation or any subsidiary. No participant, beneficiary
      or

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    any
      other
      person shall have any claim under any award or award agreement against any
      member of the Board or the Committee, or the Corporation or any employees,
      officers or agents of the Corporation or any subsidiary, as a result of any
      such
      action. 

     

    12.3 Severability.
      If the
      arbitrator selected in accordance with Section 13.2 or a court of competent
      jurisdiction determines that any portion of this Option Agreement, the Plan,
      or
      the Exercise Agreement is in violation of any statute or public policy, then
      only the portions of this Option Agreement, the Plan, or the Exercise Agreement,
      as applicable, which violate such statute or public policy shall be stricken,
      and all portions of this Option Agreement, the Plan, and the Exercise Agreement
      which do not violate any statute or public policy shall continue in full force
      and effect. Furthermore, it is the parties’ intent that any court order striking
      any portion of this Option Agreement, the Plan, and/or the Exercise Agreement
      should modify the stricken terms as narrowly as possible to give as much effect
      as possible to the intentions of the parties hereunder. 

     

    
      	
              13.

            	
              Arbitration. 

            

    

     

    13.1 Any
      dispute, controversy or claim arising out of or in connection with or relating
      to this Option Agreement, or the interpretation, breach, termination or validity
      hereof, shall be resolved through arbitration. A dispute may be submitted to
      arbitration upon the request of either party with written notice to the other
      (the “Notice”).
      The
      arbitration shall be conducted in Hong Kong under the auspices of the Hong
      Kong
      International Arbitration Centre (the “Centre”).
      There
      shall be three (3) arbitrators. Each party shall nominate one (1) arbitrator
      within thirty (30) days after the delivery of the Notice to the other party.
      The
      appointment of party nominated arbitrators shall be confirmed by the Centre.
      Both arbitrators shall agree on the third arbitrator within thirty (30) days
      of
      their confirmation by the Centre. Should either party fail to appoint an
      arbitrator or should the two arbitrators fail within thirty (30) days to reach
      agreement on the third arbitrator, such arbitrator shall be appointed by the
      Secretary General of the Centre. 

     

    13.2 The
      arbitration proceedings shall be conducted in English. The arbitration tribunal
      shall apply the UNCITRAL Arbitration Rules as administered by the Centre at
      the
      time of the arbitration. However, if such rules conflict with the provisions
      of
      this Section 13.2, including the provisions concerning the appointment of an
      arbitrator(s), the provisions of this Section 13.2 shall prevail. 

     

    13.3 The
      arbitrators shall decide any dispute submitted by the parties strictly in
      accordance with the substantive laws of the State of Delaware and shall not
      apply any other substantive law. 

     

    13.4 Each
      party shall cooperate with the other in making full disclosure of and providing
      complete access to all information and documents requested by the other in
      connection with such arbitration proceedings, subject only to any
      confidentiality obligations binding on such party. 

     

    13.5 The
      costs
      of arbitration shall be borne by the losing party, unless otherwise determined
      by the arbitration tribunal. 

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    13.6 When
      any
      dispute occurs and when any dispute is under arbitration, except for the matters
      in dispute, the parties shall continue to fulfill their respective obligations
      and shall be entitled to exercise their rights under this Agreement.

     

    13.7 The
      award
      of the arbitration tribunal shall be final and binding upon the parties, and
      the
      prevailing party may apply to a court of competent jurisdiction for enforcement
      of such award. 

     

    
      	
              14.

            	
              Shareholder
                Approval. 

            

    

     

    Notwithstanding
      anything else contained herein to the contrary, the Option and all rights of
      the
      Grantee under this Option Agreement are subject to approval of the Plan by
      the
      Corporation’s shareholders (such approval to be obtained in accordance with the
      terms of the Plan, the Corporation’s Memorandum and Articles of Association, and
      applicable law) within 12 months after the Effective Date of the Plan.

     

    
      	
              15.

            	
              Effect
                of this Agreement. 

            

    

     

    This
      Option Agreement shall be assumed by, be binding upon and inure to the benefit
      of any successor or successors to the Corporation.

     

    
      	
              16.

            	
              Counterparts. 

            

    

     

    This
      Option Agreement may be executed simultaneously in any number of counterparts,
      each of which shall be deemed an original but all of which together shall
      constitute one and the same instrument. 

     

    
      	
              17.

            	
              Section
                Headings. 

            

    

     

    The
      section headings of this Option Agreement are for convenience of reference
      only
      and shall not be deemed to alter or affect any provision hereof.

     

    [Remainder
      of page intentionally left blank]

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    EXHIBIT
      A

     

    ORIGIN
      AGRITECH LIMITED

    2005
      PERFORMANCE EQUITY PLAN

    OPTION
      EXERCISE AND COMMON SHARE PURCHASE AGREEMENT

     

    The
      undersigned (the “Purchaser”)
      hereby
      irrevocably elects to exercise his/her right, evidenced by that certain Option
      Agreement dated as of ____________________ (the “Option
      Agreement”)
      under
      the Origin Agritech Limited 2005 Performance Equity Plan (the “Plan”),
      as
      follows:

     

    
      	 	
              ·

            	
              the
                Purchaser hereby irrevocably elects to purchase __________________
                Common
                Shares (the “Shares”),
                of Origin Agritech Limited, an international business company formed
                under
                the laws of the British Virgin Islands (the “Corporation”),
                and

            

    

     

    
      	 	
              ·

            	
              such
                purchase shall be at the price of $__________________ per share,
                for an
                aggregate amount of $__________________ (subject to applicable withholding
                taxes pursuant to Section 13.6 of the
                Plan).

            

    

     

    Capitalized
      terms are defined in the Plan if not defined herein.

    

    1. Delivery
      of Share Certificate.
      The
      Purchaser requests that a certificate representing the Shares be registered
      to
      Purchaser and delivered to: ____________________________________________________________________________________________________.
      

    

    2. Investment
      Representations.
      The
      Purchaser acknowledges that the sale of the Shares by the Purchaser is
      restricted by Securities and Exchange Commission Rule 701. The Purchaser hereby
      affirms as made as of the date hereof the representations in Section 7 of the
      “Terms and Conditions of Option” (which are attached to and a part of the Option
      Agreement, the “Terms”)
      and
      such representations are incorporated herein by this reference. The Purchaser
      represents that he/she has no need for liquidity in this investment, has the
      ability to bear the economic risk of this investment, and can afford a complete
      loss of the purchase price for the Shares.

     

    The
      Purchaser acknowledges receipt of the Corporation’s condensed consolidated
      financial information.

     

    3. Limitation
      on Disposition and Other Restrictions.
      The
      Shares are subject to and the Purchaser hereby agrees to the following terms
      and
      conditions of the sale of the Shares to the Purchaser:

     

    
      	 	
              ·

            	
              any
                transfer of the Shares must comply with the restrictions on transfer
                set
                forth in Section 5.2(e) of the Plan and all applicable laws as set
                forth
                in Section 13.10 of the Plan;

            

    

     

    
      	 	
              ·

            	
              the
                Shares are subject to, and following any otherwise permitted transfer
                of
                the Shares, the Shares shall remain subject to and the transferee
                shall be
                bound by, the lock-up provisions set forth in Section 8 of the Terms,
                the
                foregoing provisions of this Section 3 and the arbitration provisions
                of
                Section 13 of the Terms; and

            

    

     

    
      	 	
              ·

            	
              as
                a condition to any otherwise permitted transfer of the Shares, the
                Corporation may require the transferee to execute a written agreement,
                in
                a form acceptable to the

            

    

     

    
      
         

         

      

      
         

        
          

        

      

      
         

      

    

    Committee,
      that the transferee acknowledges and agrees to the foregoing terms and
      restrictions imposed on the Shares.

     

    4. Plan
      and Option Agreement.
      The
      Purchaser acknowledges that all of his/her rights are subject to, and the
      Purchaser agrees to be bound by, all of the terms and conditions of the Plan
      and
      the Option Agreement (including the Terms), both of which are incorporated
      herein by this reference. If a conflict or inconsistency between the terms
      and
      conditions of this Option Exercise and Common Share Purchase Agreement and
      of
      the Plan or the Option Agreement shall arise, the terms and conditions of the
      Plan and/or the Option Agreement shall govern. The Purchaser acknowledges
      receipt of a copy of all documents referenced herein (including the Terms and
      a
      disclosure statement) and acknowledges reading and understanding these documents
      and having an opportunity to ask any questions that he/she may have had about
      them. Any controversy or claim arising out of or relating to this Option
      Exercise and Common Share Purchase Agreement shall be submitted to arbitration
      in accordance with Section 13.2 of the Terms, and the laws of the State of
      Delaware shall apply as provided in Section 12.1 of the Terms.

     

    5. Entire
      Agreement.
      This
      Option Exercise and Common Share Purchase Agreement, the Option Agreement
      (including the Terms), and the Plan together constitute the entire agreement
      and
      supersede all prior understandings and agreements, written or oral, of the
      parties hereto with respect to the subject matter hereof. The Plan, the Option
      Agreement and this Option Exercise and Common Share Purchase Agreement may
      be
      amended pursuant to Section 11of the Plan. Such amendment must be in writing
      and
      signed by the Corporation. The Corporation may, however, unilaterally waive
      any
      provision hereof or of the Option Agreement in writing to the extent such waiver
      does not adversely affect the interests of the Grantee hereunder, but no such
      waiver shall operate as or be construed to be a subsequent waiver of the same
      provision or a waiver of any other provision hereof.

     

    6. Notice
      of Sale of ISO Shares.
      If the
      Shares are being acquired upon exercise of an Option intended to qualify as
      an
      Incentive Stock Option, the Purchaser agrees that, upon any sale or other
      transfer of the Shares within either one year of the date that they are acquired
      by the Purchaser or two years after the Award Date set forth in the Option
      Agreement, the Purchaser shall provide the notice required under Section 2
      (“ISO
      Value Limit”) of the Terms.

     

    
      	
              “PURCHASER”

               

              _________________________________

              Signature

               

              _________________________________

              Print
                Name

               

              _________________________________

              Date

            	
              ACCEPTED
                BY:

              ORIGIN
                AGRITECH LIMITED, 

              an
                international business company formed under the laws of the British
                Virgin
                Island

               

              By:__________________________________

               

              Its:__________________________________

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