Document:

Exhibit
10.7

      ESCROW
AGREEMENT

       

      This
Agreement is dated as of the ___ day of May, 2010 among China Yongxin
Pharmaceuticals Inc., a Delaware corporation (the "Company"), the
subscriberslisted on Schedule I hereto
(“Subscribers”), and Grushko & Mittman, P.C. (the "Escrow
Agent"):

       

      WITNESSETH:

       

      WHEREAS,
the Company and Subscribers have entered into a Subscription Agreement calling
for the sale by the Company to the Subscribers of secured convertible Notes for
an aggregate purchase price of up to $250,000, in a third closing (“Third
Closing”) of the Company’s note and warrant financing; and

       

      WHEREAS,
the parties hereto require the Company to deliver the Notes against payment
therefor, with such Notes and the Escrowed Funds to be delivered to the Escrow
Agent, along with the other documents, instruments and payments hereinafter
described, to be held in escrow and released by the Escrow Agent in accordance
with the terms and conditions of this Agreement; and

       

                 WHEREAS,
the Escrow Agent is willing to serve as escrow agent pursuant to the terms and
conditions of this Agreement;

       

                 NOW
THEREFORE, the parties agree as follows:

       

      ARTICLE
I

       

      INTERPRETATION

       

                 1.1.           Definitions.  Capitalized
terms used and not otherwise defined herein that are defined in the Subscription
Agreement shall have the meanings given to such terms in the Subscription
Agreement.  Whenever used in this Agreement, the following terms shall
have the following respective meanings:

       

      §           "Agreement"
means this Agreement and all amendments made hereto and thereto by written
agreement between the parties;

       

      §           “Amended
and Restated Subsidiary Guaranty” shall have the meaning set forth in
Section 3 of the Modification and Consent Agreement;

       

      §           “Broker” shall
mean StreetCapital Corp.;

       

      §           “Broker’s
Fee” shall have the meaning set forth in Section 8(a) and on Schedule
8(a) of the Subscription Agreement;

       

      §           “Closing
Date” shall have the meaning set forth in Section 1 of the
Subscription Agreement;

       

      §            "Escrowed
Payment" means an aggregate cash payment of up
to $250,000;

       

      §           “Legal
Opinion” means the original signed legal opinion referred to in Section 6
of the Subscription Agreement;

       

      §           “Modification
and Consent Agreement” shall mean the Modification and Consent Agreement
among the Subscribers and the Copmany dated of even date with this Escrow
Agreement.

       

      §           “Note” shall
have the meaning set forth in the second recital to the Subscription
Agreement for the Third Closing;

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      §           “Principal
Amount” shall mean an aggregate of up to $250,000;

       

      §            “Subscriber
Legal Fees” shall have the meaning set forth in Section 14 of
the Modification and Consent Agreement;

       

      §           "Subscription
Agreement" means the Subscription Agreement (and the exhibits and schedules
thereto including fully executed Amended and Restated Lockup
Agreements referred to in Section 3 of the Modification and
Consent Agreement and Section 9(u) of the Subscription Agreement)
entered into or to be entered into by the Company and Subscribers in
reference to the sale and purchase of the Notes in the Third
Closing;

       

      §           “Warrants” shall
have the meaning set forth in Section 2(b) of the Subscription
Agreement for the Third Closing;

       

      §           Collectively, the Legal
Opinion, Notes, Amended and
Restated Subsidiary Guaranty, Amended and Restated Lockup
Agreements,Warrants, the executed Subscription Agreement, the
executed Modification and Consent Agreement, Broker’s
Fee and Subscriber Legal Fees are referred to as“Company
Documents”; and

       

      §           Collectively,
the Escrowed Payment and the Subscribers’ executed Subscription Agreements
for the Third Closing, and the executed Modification and Consent
Agreement are referred to as “Subscriber Documents”.

       

                 1.2.           Entire
Agreement.  This Agreement along with the Company Documents and
the Subscriber Documents to which the Subscriber and the Companyor
Subsidiary are a party constitute the entire agreement between the
parties hereto pertaining to the Company Documents and Subscriber Documents and
supersedes all prior agreements, understandings, negotiations and discussions,
whether oral or written, of the parties.  There are no warranties,
representations and other agreements made by the parties in connection with the
subject matter hereof, except as specifically set forth in this Agreement,
the Company Documents and the Subscriber Documents.

       

                 1.3.           Extended
Meanings.  In this Agreement words importing the
singular number include the plural and vice versa; words importing the
masculine gender include the feminine and neuter genders.  The word
"person" includes an individual, body corporate, partnership, trustee or trust
or unincorporated association, executor, administrator or legal
representative.

       

                 1.4.           Waivers and
Amendments.  This Agreement may be amended, modified,
superseded, cancelled, renewed or extended, and the terms and conditions hereof
may be waived, only by a written instrument signed by all parties, or, in
the case of a waiver, by the party waiving compliance.  Except as
expressly stated herein, no delay on the part of any party in exercising any
right, power or privilege hereunder shall operate as a waiver thereof, nor shall
any waiver on the part of any party of any right, power or privilege
hereunder preclude any other or future exercise of any other right, power or
privilege hereunder.

       

                  1.5.          Headings.  The
division of this Agreement into articles, sections, subsections and paragraphs
and the insertion of headings are for convenience of reference only and
shall not affect the construction or interpretation of this
Agreement.

       

                 1.6.           Law Governing this
Agreement.  This Agreement shall be governed by and construed
in accordance with the laws of the State of New York without regard
to conflicts of laws principles that would result in the application
of the substantive laws of another jurisdiction.  Any action brought
by either party against the other concerning the transactions contemplated by
this Agreement shall be brought only in the state courts of New York or in the
federal courts located in the state of New York.  Both parties and the
individuals executing this Agreement and other agreements on behalf of the
Company agree to submit to the jurisdiction of such courts and waive trial
by jury.  The prevailing party (which shall be the party which
receives an award most closely resembling the remedy or action sought)
shall be entitled to recover from the other party its reasonable attorney's fees
and costs.  In the event that any provision of this Agreement or any
other agreement delivered in connection herewith is invalid or unenforceable
under any applicable statute or rule of law, then such provision shall be deemed
inoperative to the extent that it may conflict therewith and shall be deemed
modified to conform with such statute or rule of law.  Any such
provision which may prove invalid or unenforceable under any law shall not
affect the validity or enforceability of any other provision of any
agreement.

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

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

       

      ARTICLE
II

       

      DELIVERIES
TO THE ESCROW AGENT

       

                 2.1.           Company
Deliveries.  On or before the Closing Date, the Company
shall execute and deliver the Company Documents to the Escrow
Agent.

       

      2.2.           Subscriber Deliveries.  On
or before the Closing Date, Subscribers shall execute and deliver
the Subscriber Documents, and shall deliver the Escrowed Payment in cash,
to the Escrow Agent.  The Escrowed Payment will be delivered pursuant
to the following wire transfer instructions:

      

      Citibank,
N.A.

      1155
6th Avenue

      New York,
NY 10036

      ABA
Number: 0210-00089

      For
Credit to: Grushko & Mittman, IOLA Trust Account

      Account
Number: 45208884

       

                  2.3.           Intention to Create Escrow
Over Company Documents and Subscriber Documents.  The
Subscribers and Company intend that the Company Documents and Subscriber
Documents shall be held in escrow by the Escrow Agent pursuant to this Agreement
for their benefit as set forth herein.

       

                 2.4.           Escrow Agent to Deliver
Company Documents and Subscriber
Documents.  The Escrow Agent shall hold and release the Company
Documents and Subscriber Documents only in accordance with the terms and
conditions of this Agreement.

       

      ARTICLE
III

       

      RELEASE
OF COMPANY DOCUMENTS AND SUBSCRIBER DOCUMENTS

       

                 3.1.           Release of
Escrow.  Subject to the provisions of Section 4.2, the Escrow
Agent shall release the Company Documents and Subscriber Documents as
follows:

       

                            (a)           On
the Closing Date, the Escrow Agent will simultaneously release the Company
Documents to the Subscribers and release the Subscriber Documents to the
Company, except that: (i) the Broker’s Fee will be released to the Broker; and
(ii) Subscriber Legal Fees will be released directly to the Subscriber’s
attorneys,

       

      (b)           Notwithstanding
the above, upon receipt by the Escrow Agent of joint written instructions
("Joint Instructions") signed by the Company and the Subscribers, it shall
deliver the Company Documents and Subscriber Documents in accordance with the
terms of the Joint Instructions.

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

                            (c)           Anything
herein to the contrary notwithstanding, upon receipt by the
Escrow Agent of a final and non-appealable judgment, order, decree or award of a
court of competent jurisdiction (a "Court Order"), the Escrow Agent shall
deliver the Company Documents and Subscriber Documents in accordance with the
Court Order.  Any Court Order shall be accompanied by an opinion of
counsel for the party presenting the Court Order to the Escrow Agent (which
opinion shall be satisfactory to the Escrow Agent) to the effect that the court
issuing the Court Order has competent jurisdiction and that the Court Order
is final and non-appealable.

       

                 3.2.           If
a Closing does not take place on or before May 15, 2010, the Escrow
Agent will promptly return the applicable Company Documents to the
Company and return the Subscriber Documents to the Subscriber.

      

      3.3.           Acknowledgement of Company
and Subscriber; Disputes.  The Company and the Subscribers
acknowledge that the only terms and conditions upon which the Company Documents
and Subscriber Documents are to be released are set forth in Sections 3 and 4 of
this Agreement.  The Company and the Subscribers reaffirm their
agreement to abide by the terms and conditions of this Agreement with
respect to the release of the Company Documents and Subscriber
Documents.  Any dispute with respect to the release of the Company
Documents and Subscriber Documents shall be resolved pursuant to Section 4.2 or
by agreement between the Company and Subscribers.

      

       ARTICLE IV

       

      CONCERNING
THE ESCROW AGENT

      

      4.1.           Duties and Responsibilities
of the Escrow Agent.  The Escrow Agent's duties and
responsibilities shall be subject to the following terms and
conditions:

       

                            (a)           The
Subscribers and Company acknowledge and agree that the Escrow Agent (i)
shall not be responsible for or bound by, and shall not be required to
inquire into whether either the Subscribers or Company is entitled to
receipt of the Company Documents and Subscriber Documents pursuant
to any other agreement or otherwise; (ii) shall be obligated only for the
performance of such duties as are specifically assumed by the Escrow Agent
pursuant to this Agreement; (iii) may rely on and shall be protected in acting
or refraining from acting upon any written notice, instruction, instrument,
statement, request or document furnished to it hereunder and believed by the
Escrow Agent in good faith to be genuine and to have been signed or
presented by the proper person or party, without being required to determine the
authenticity or correctness of any fact stated therein or the propriety or
validity or the service thereof; (iv) may assume that any person believed
by the Escrow Agent in good faith to be authorized to give notice or make
any statement or execute any document in connection with the provisions hereof
is so authorized; (v) shall not be under any duty to give the property held
by Escrow Agent hereunder any greater degree of care than Escrow Agent
gives its own similar property; and (vi) may consult counsel satisfactory to
Escrow Agent, the opinion of such counsel to be full and
complete authorization and protection in respect of any action taken,
suffered or omitted by Escrow Agent hereunder in good faith and in accordance
with the opinion of such counsel.

       

      (b)           The
Subscribers and Company acknowledge that the Escrow Agent is acting solely
as a stakeholder at their request and that the Escrow Agent shall not be liable
for any action taken by Escrow Agent in good faith and believed by Escrow Agent
to be authorized or within the rights or powers conferred upon Escrow Agent by
this Agreement.  The Subscribers and Company, jointly and
severally, agree to indemnify and hold harmless the Escrow Agent and any of
Escrow Agent's partners, employees, agents and representatives for any action
taken or omitted to be taken by Escrow Agent or any of them hereunder, including
the fees of outside counsel and other costs and expenses of defending itself
against any claim or liability under this Agreement, except in the case of gross
negligence or willful misconduct on Escrow Agent's part committed in its
capacity as Escrow Agent under this Agreement.  The Escrow
Agent shall owe a duty only to the Subscribers and Company under this
Agreement and to no other person.

       

                            (c)           The
Subscribers and Company jointly and severally agree to reimburse the Escrow
Agent for outside counsel fees, to the extent authorized hereunder and incurred
in connection with the performance of its duties and responsibilities
hereunder.

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      

                            (d)           The
Escrow Agent may at any time resign as Escrow Agent hereunder by giving five (5)
days prior written notice of resignation to the Subscribers and the
Company.  Prior to the effective date of the resignation as specified
in such notice, the Subscribers and Company will issue to the Escrow Agent
a Joint Instruction authorizing delivery of the Company Documents and Subscriber
Documents to a substitute Escrow Agent selected by the Subscribers and
Company.  If no successor Escrow Agent is named by the
Subscribers and Company, the Escrow Agent may apply to a court of competent
jurisdiction in the State of New York for appointment of a successor
Escrow Agent, and to deposit the Company Documents and Subscriber Documents with
the clerk of any such court.

       

                            (e)           Other
than in connection with the Subscriber Legal Fees, the Escrow Agent does
not have and will not have any interest in the Company Documents and Subscriber
Documents, but is serving only as escrow agent, having only possession
thereof.  The Escrow Agent shall not be liable for any loss resulting
from the making or retention of any investment in accordance with this
Escrow Agreement.

       

                            (f)           This
Agreement sets forth exclusively the duties of the Escrow Agent with respect to
any and all matters pertinent thereto and no implied duties or obligations shall
be read into this Agreement.

       

                            (g)          The
Escrow Agent shall be permitted to act as counsel for
the Subscribers in any dispute as to the disposition of the Company
Documents and Subscriber Documents, in any other dispute between the
Subscribers and Company, whether or not the Escrow Agent is then holding
the Company Documents and Subscriber Documents and continues to act as the
Escrow Agent hereunder.

       

                            (h)          The
provisions of this Section 4.1 shall
survive the resignation of the Escrow Agent or the termination of this
Agreement.

       

                 4.2.           Dispute Resolution:
Judgments.  Resolution of disputes arising under this Agreement
shall be subject to the following terms and conditions:

       

                            (a)           If
any dispute shall arise with respect to the delivery, ownership, right of
possession or disposition of the Company Documents and Subscriber Documents, or
if the Escrow Agent shall in good faith be uncertain as to its duties or rights
hereunder, the Escrow Agent shall be authorized, without liability to anyone, to
(i) refrain from taking any action other than to continue to hold the
Company Documents and Subscriber Documents pending receipt of a Joint
Instruction from the Subscribers and Company, or (ii) deposit the Company
Documents and Subscriber Documents with any court of competent jurisdiction in
the State of New York, in which event the Escrow Agent shall give written
notice thereof to the Subscribers and the Company and shall thereupon be
relieved and discharged from all further obligations pursuant to this
Agreement.  The Escrow Agent may, but shall be under no duty to,
institute or defend any legal proceedings which relate to the Company Documents
and Subscriber Documents.  The Escrow Agent shall have the right to
retain counsel if it becomes involved in any disagreement, dispute or litigation
on account of this Agreement or otherwise determines that it is necessary
to consult counsel.

       

                            (b)           The
Escrow Agent is hereby expressly authorized to comply with and obey any Court
Order.  In case the Escrow Agent obeys or complies with a Court Order,
the Escrow Agent shall not be liable to the Subscribers and Company or to
any other person, firm, corporation or entity by reason of such
compliance.

       

      ARTICLE
V

       

      GENERAL
MATTERS

       

                 5.1.           Termination.  This
escrow shall terminate upon the release of all of the Company Documents and
Subscriber Documents or at any time upon the agreement in writing of the
Subscribers and Company.

      
        
           

        

        
           

          
            

          

        

        
           

        

      

                 5.2.           Notices.   All
notices, demands, requests, consents, approvals, and other communications
required or permitted hereunder shall be in writing and, unless otherwise
specified herein, shall be (i) personally served, (ii) deposited in the mail,
registered or certified, return receipt requested, postage prepaid, (iii)
delivered by reputable air courier service with charges prepaid, or (iv)
transmitted by hand delivery, telegram, or facsimile, addressed as set
forth below or to such other address as such party shall have specified most
recently by written notice.  Any notice or other communication
required or permitted to be given hereunder shall be deemed effective (a) upon
hand delivery or delivery by facsimile, with accurate confirmation generated by
the transmitting facsimile machine, at the address or number designated below
(if delivered on a business day during normal business hours where such notice
is to be received), or the first business day following such delivery (if
delivered other than on a business day during normal business hours where such
notice is to be received) or (b) on the second business day following the date
of mailing by express courier service, fully prepaid, addressed to
such address, or upon actual receipt of such mailing, whichever shall first
occur.  The addresses for such communications shall be:

       

      (a)           If
to the Company, to:

       

      China Yongxin Pharmaceuticals,
Inc.

      927
Canada Court

      City of
Industry, CA 91748

      Attn: Yongxin Liu,
CEO

      Fax:
(626) 581-9138

      

      With a
copy by facsimile only to:

      

      Richardson
& Patel, LLP

      10900
Wilshire Blvd., Suite 500

      Los
Angeles, CA 90024

      Attn:
Ryan Hong, Esq.

      Fax:
(310) 208-1154

      

      (b)           If
to the Subscribers: to the addresses set forth on Schedule I

      

      With a
copy by facsimile only to:

       

      Grushko
& Mittman, P.C.

      551 Fifth
Avenue, Suite 1601

      New York,
New York 10176

      Fax:
212-697-3575

      

      (c)           If
to the Broker, to:

      

      StreetCapital
Corp.

      300
Colonial Center Parkway, Suite 260

      Roswell,
GA 30076

      Attn:
Vince Sbarra

      Fax:
(678) 353-2188

       

      (d)           If
to the Escrow Agent, to:

       

      Grushko
& Mittman, P.C.

      551 Fifth
Avenue, Suite 1601

      New York,
New York 10176

      Fax:
212-697-3575

       

      or to
such other address as any of them shall give to the others by notice made
pursuant to this Section
5.2.

       

                 5.3.           Interest.  The
Escrowed Payment shall not be held in an interest bearing account nor will
interest be payable in connection therewith.  In the event the
Escrowed Payment is deposited in an interest bearing account, the Subscribers
shall be entitled to receive any accrued interest thereon, but only if the
Escrow Agent receives from the Subscriber the Subscribers’ United States
taxpayer identification number and other requested information and
forms.

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

                 5.4.           Assignment; Binding
Agreement.  Neither this Agreement nor any right or obligation
hereunder shall be assignable by any party without the prior written consent of
the other parties hereto.  This Agreement shall enure to the benefit
of and be binding upon the parties hereto and their respective legal
representatives, successors and assigns.

       

                  5.5.           Invalidity.  In
the event that any one or more of the provisions contained herein, or the
application thereof in any circumstance, is held invalid, illegal, or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be in any way impaired thereby, it being
intended that all of the rights and privileges of the parties hereto shall be
enforceable to the fullest extent permitted by law.

       

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

       

                 5.7.           Agreement.  Each
of the undersigned states that he has read the foregoing Escrow Agreement and
understands and agrees to it.

      

       [THE
BALANCE OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      

      IN WITNESS WHEREOF, the
udersigned have executed and delivered this Escrow Agreement, as of the date
first written above.

      

      
        
          
            
              	 
      	
                      “COMPANY”

                      CHINA
      YONGXIN

                      PHARMACEUTICALS
      INC.

                      a Delaware corporation

                    	 
      
	 
      	 
      	 
      	 
      
	 
      	
                      By:

                    	 
      	 
      
	 
      	 
      	
                      Yongxin
      Liu

                    	 
      
	 
      	 
      	
                      Chief
      Executive Officer

                    	 
      

            

          

        

      

       

      
        
          
            
              
                	 
      	
                        ESCROW
      AGENT:

                         

                        GRUSHKO
      & MITTMAN, P.C.

                      	 
      
	 
      	 
      	 
      	 
      
	 
      	
                        By:

                      	 
      	 
      
	 
      	 
      	
                        Name:

                      	 
      

              

            

          

        

      

       

      
        
          
            
              
                
                  	 
      	
                          SUBSCRIBERS:

                        	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
                          Pring
      Name of Subscriber

                        	 
      
	 
      	 
      	 
      	 
      
	 
      	
                          By:

                        	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	
                          Name:

                        	
                            

                        	 
      
	 
      	 
      	 
      	 
      
	 
      	
                          Title:

                        	
                            

                        	 
      

                

              

            

          

        

      

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      Schedule

       

      Schedule
prepared in accordance with Instruction 2 to Item 601 of Regulation
S-K

       

      The
Escrow Agreements dated May 3, 2010 are substantially identical in all material
respects except as to the subscribers.

       

      
        
          
            	
                    Subscribers

                  
	
                    Excalibur
      Special Opportunities LP

                  
	
                    Dana
      Katzenmeier

                  
	
                    Fourth
      Street Holdings, LP

                  
	
                    Robert
      B. Prag

                  
	
                    Peter
      B. Tentler

                  
	
                    Paul
      T. Mannion Jr.

                  

          

        

      

      

      The text
of the Escrow Agreements is incorporated by reference from Exhibit 10.7 to the
Company’s Current Report on Form 8-K filed with the Securities and Exchange
Commission on May 4, 2010.Exhibit
10.8

    

    SECURITY
AGREEMENT

    

    
      	
              1.

            	
              Identification.

            

    

    

    This
Security Agreement (the “Agreement”), dated as
of January 22, 2010, is entered into by and among China Yongxin
Pharmaceuticals, Inc., a Delaware corporation (“Parent”), and the entities
identified on Schedule 1 hereto (each a “Guarantor” and together with
Parent, each a “Debtor”
and collectively the “Debtors”), the
Subscribers identified on Schedule 2 hereto (the “Subscribers”), who are parties
to the Subscription Agreement dated as of January 22, 2010  (the
“Subscription
Agreement”), by and among Parent, and such Subscribers, and Collateral
Agents, LLC (“Collateral
Agent”).

    

    
      	
              2.

            	
              Recitals.

            

    

    

    2.1          At
or about the date hereof, each of the Subscribers is making a loan (the
“Loan”) to
Parent.  Guarantor is a direct or indirect Subsidiary (as defined in
Section 6.12 hereof) of Parent.  It is beneficial to each Debtor that
the Loan is made.  Guarantor has delivered or will deliver a
“Guaranty” of Parent’s obligations to Subscribers.

    

    2.2          The
Loan will be evidenced by one or more promissory notes (each a “Note”) issued by
Parent on or about the date of this Agreement pursuant to the
Subscription Agreement.  The Note was or will be executed by
Parent as “Borrower” or
“Debtor” for the benefit
of each Subscriber as the “Holder” or “Subscriber”
thereof.

    

    2.3          In
consideration of the Loans made and to be made by Subscribers to Parent and for
other good and valuable consideration, and as security for the performance by
Parent of its obligations under the Note, by Guarantor of its obligations under
the Guaranty, and as security for the repayment of the Loan and all other sums
due from Debtor to Subscribers arising under the Transaction Documents (as
defined in the Subscription Agreement) and any other agreement between or
among them (collectively, the “Obligations”), each Debtor,
for good and valuable consideration, receipt of which is acknowledged, has
agreed to grant to the Subscribers and to the Collateral Agent on behalf of the
Subscribers a security interest in the Collateral (as such term is hereinafter
defined), on the terms and conditions hereinafter set forth.

    

    2.4          The
following defined terms which are defined in the Uniform Commercial Code in
effect in the State of New York on the date hereof are used herein as so
defined:  Accounts, Chattel Paper, Documents, Equipment, General
Intangibles, Instruments, Inventory and Proceeds.  Other capitalized
terms employed herein shall have the meanings attributed to them in the
Subscription Agreement.

    

    
      	
              3.

            	
              Grant of
      General Security Interest in
      Collateral.

            

    

    

    3.1          As
security for the Obligations of Debtors, each Debtor hereby grants each of the
Subscribers, a security interest in the Collateral.

    

    3.2          “Collateral” shall mean all of
the following property of Debtors:

    

    (A)           All
now owned and hereafter acquired right, title and interest of Debtors in, to and
in respect of all Accounts, Goods, real or personal property, all present and
future books and records relating to the foregoing and all products and Proceeds
of the foregoing, and as set forth below:

     

    
      
         

      

      
        1

        
          

        

      

      
         

      

    

    (i)           Including
but not limited to the items described on Schedule 9(l) to the Subscription
Agreement, all now owned and hereafter acquired right, title and interest of
Debtors in, to and in respect of all: Accounts, interests in goods represented
by Accounts, returned, reclaimed or repossessed goods with respect thereto and
rights as an unpaid vendor; contract rights; Chattel Paper; investment property;
General Intangibles (including but not limited to, tax and duty claims and
refunds, registered and unregistered patents, trademarks, service marks,
certificates, copyrights, trade names, applications for the foregoing, trade
secrets, goodwill, processes, drawings, blueprints, customer lists, licenses,
whether as licensor or licensee, choses in action and other claims, and existing
and future leasehold interests and claims in and to equipment, real estate and
fixtures); Documents; Instruments; letters of credit, bankers’ acceptances
or guaranties; cash moneys, deposits including but not limited to the deposit
accounts identified on Schedule 3; securities, bank
accounts, deposit accounts, credits and other property now or hereafter owned or
held in any capacity by Debtors, as well as agreements or property securing or
relating to any of the items referred to above;

    

    (ii)          Goods:  All
now owned and hereafter acquired right, title and interest of Debtors in, to and
in respect of goods, including, but not limited to:

    

    (a)           All
Inventory, wherever located, whether now owned or hereafter acquired, of
whatever kind, nature or description, including all raw materials,
work-in-process, finished goods, and materials to be used or consumed in
Debtors’ business; finished goods, timber cut or to be cut, oil, gas,
hydrocarbons, and minerals extracted or to be extracted, and all names or marks
affixed to or to be affixed thereto for purposes of selling same by the seller,
manufacturer, lessor or licensor thereof and all Inventory which may be returned
to any Debtor by its customers or repossessed by any Debtor and all of Debtors’
right, title and interest in and to the foregoing (including all of a Debtor’s
rights as a seller of goods);

    

    (b)           All
Equipment and fixtures, wherever located, whether now owned or hereafter
acquired, including, without limitation, all machinery, furniture and fixtures,
and any and all additions, substitutions, replacements (including spare parts),
and accessions thereof and thereto (including, but not limited to Debtors’
rights to acquire any of the foregoing, whether by exercise of a purchase option
or otherwise);

    

    (iii)         Property:  All
now owned and hereafter acquired right, title and interests of Debtors in, to
and in respect of any other personal property in or upon which a Debtor has or
may hereafter have a security interest, lien or right of setoff;

    

    (iv)         Books and
Records:  All present and future books and records relating to
any of the above including, without limitation, all computer programs, printed
output and computer readable data in the possession or control of the Debtors,
any computer service bureau or other third party; and

    

    (v)          Products and
Proceeds:  All products and Proceeds of the foregoing in
whatever form and wherever located, including, without limitation, all insurance
proceeds and all claims against third parties for loss or destruction of or
damage to any of the foregoing.

    

    (B)         All
now owned and hereafter acquired right, title and interest of Debtors in, to and
in respect of the following:

    

    (i)           the
shares of stock of each Guarantor [excluding these Subsidiaries organized
under the laws of the People’s Republic of China (“Excluded Subsidiary”)], which
the Debtor represents, equals not less than the equity ownership and right to
receive equity of Guarantor as set forth on Schedule 1hereto, the certificates
representing such shares together with an executed stock power, and other
rights, contractual or otherwise, in respect thereof and all dividends,
distributions, cash, instruments, investment property and other property from
time to time received, receivable or otherwise distributed in respect of or in
exchange for any or all of such shares;

     

    (ii)          all
additional shares of stock, partnership interests, member interests or other
equity interests from time to time acquired by Debtor, in any Subsidiary that is
not a Subsidiary of the Debtor on the date hereof except for an Excluded
Subsidiary (“Future
Subsidiaries”),
the certificates representing such additional shares, and other rights,
contractual or otherwise, in respect thereof and all dividends, distributions,
cash, instruments, investment property and other property from time to time
received, receivable or otherwise distributed in respect of or in exchange for
any or all of such additional shares, interests or equity; and

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    (iii)         all
security entitlements of Debtor in, and all Proceeds of any and all of the
foregoing in each case, whether now owned or hereafter acquired by Debtor and
howsoever its interest therein may arise or appear (whether by ownership,
security interest, lien, claim or otherwise).

    

    Notwithstanding
anything to the contrary set forth in Section 3.2 above, the types or items of
Collateral described in such Section shall not include any rights or interests
in any contract, lease, permit, license, charter or license agreement covering
real or personal property, as such, if under the terms of such contract, lease,
permit, license, charter or license agreement, or applicable law with respect
thereto, the valid grant of a security interest or lien therein to the
Subscribers is prohibited or would result in a breach and such prohibition or
breach has not been or is not waived or the consent of the other party to such
contract, lease, permit, license, charter or license agreement has not been or
is not otherwise obtained or under applicable law such prohibition or breach
cannot be waived. 

    

    Notwithstanding
anything to the contrary set forth in Section 3.2 above, the types or items of
Collateral described in such Section shall not include any Equipment which is,
or at the time of any Debtor’s acquisition thereof shall be, subject to a
purchase money mortgage or other purchase money lien or security interest
(including capitalized or finance leases) permitted hereunder if: (a) the valid
grant of a security interest or lien therein to the Subscribers in such
Equipment is prohibited by the terms of the agreement between such Debtor and
the holder of such purchase money mortgage or other purchase money lien or
security interest or under applicable law and such prohibition has not been or
is not waived, or the consent of the holder of the purchase money mortgage or
other purchase money lien or security interest has not been or is not otherwise
obtained, or under applicable law such prohibition cannot be waived and (b) the
purchase money mortgage or other purchase money lien or security interest on
such item of Equipment is or shall become valid and perfected.  To the
extent each of the foregoing conditions is satisfied, Subscribers shall, at the
request of Debtor and at Debtor’s expense, execute and deliver a UCC-3 Partial
Release with respect to any such Equipment subject to such a purchase money
security interest or lien, provided, that, such Partial Release shall be in form
and substance satisfactory to the Subscribers.

    

    “Equipment” shall mean all of
Debtor's now owned and hereafter acquired equipment, machinery, laboratory and
research equipment and tools, computers and computer hardware and software
(whether owned or licensed), vehicles, tools, furniture, fixtures, all
attachments, accessions and property now or hereafter affixed thereto or used in
connection therewith, and substitutions and replacements thereof, wherever
located.

    

    Notwithstanding
anything to the contrary set forth in Section 3.2 above, “Collateral” shall
exclude accounts receivable of the Debtor or and Subsidiary that have been
pledged prior to the date of this Agreement to third parties in connection with
debt financings of the Company and also exclude items which would otherwise be
Collateral but for their location or presence in the People’s Republic of China
and also excludes Excluded Subsidiaries.

    

    3.3           The
Subscriber and Collateral Agent are hereby specifically authorized, after the
Maturity Date (defined in the Note) accelerated or otherwise, and after the
occurrence of an Event of Default (as defined herein) and the expiration of any
applicable cure period, to transfer any Collateral into the name of the
Collateral Agent and to take any and all action deemed advisable to the
Subscriber to remove any transfer restrictions affecting the
Collateral.

    

    
      	
              4.

            	
              Perfection of Security
      Interest.

            

    

    

    4.1           Each
Debtor shall prepare, execute and deliver to the Subscribers UCC-1 Financing
Statements in form and substance acceptable to Subscribers.  The
Subscribers are instructed to prepare and file at each Debtor’s cost and
expense, financing statements in such United States and foreign
jurisdictions deemed advisable to Subscribers, including but not limited to
Washington, D.C., and the States of California, Delaware and New York and the
People’s Republic of China.

    

    4.2           Upon
the execution of this Agreement, Parent shall deliver to Collateral Agent stock
certificates representing all of the shares of outstanding capital stock of
Guarantor (the “Securities”).  All
such certificates shall be held by or on behalf of Subscribers pursuant hereto
and shall be delivered in suitable form for transfer by delivery, and shall be
accompanied by duly executed instruments of transfer or assignment or undated
stock powers executed in blank, all in form and substance satisfactory to
Subscribers.

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

     

    4.3           All
other certificates and instruments constituting Collateral from time to time
required to be pledged to Subscribers pursuant to the terms hereof (the
“Additional Collateral”) shall be delivered to Collateral Agent promptly upon
receipt thereof by or on behalf of Debtors.  All such certificates and
instruments shall be held by or on behalf of Subscribers pursuant hereto and
shall be delivered in suitable form for transfer by delivery, or shall be
accompanied by duly executed instruments of transfer or assignment or undated
stock powers executed in blank, all in form and substance satisfactory to
Subscribers.  If any Collateral consists of uncertificated securities,
unless the immediately following sentence is applicable thereto, Debtors shall
cause Subscribers (or its custodian, nominee or other designee) to become the
registered holder thereof, or cause each issuer of such securities to agree that
it will comply with instructions originated by Subscribers with respect to such
securities without further consent by Debtors.  If any Collateral
consists of security entitlements, Debtors shall transfer such security
entitlements to Subscribers (or its custodian, nominee or other designee) or
cause the applicable securities intermediary to agree that it will comply with
entitlement orders by Subscribers without further consent by
Debtors.

    

    4.4           Within
five (5) business days after the receipt by a Debtor of any Additional
Collateral, a Pledge Amendment, duly executed by such Debtor, in substantially
the form of Exhibit
A hereto (a “Pledge Amendment”), shall be
delivered to Subscribers in respect of the Additional Collateral to be pledged
pursuant to this Agreement. Each Debtor hereby authorizes Subscribers to attach
each Pledge Amendment to this Agreement and agrees that all certificates or
instruments listed on any Pledge Amendment delivered to Subscribers shall for
all purposes hereunder constitute Collateral.

    

    4.5           If
Debtor shall receive, by virtue of Debtor being or having been an owner of any
Collateral, any (i) stock certificate (including, without limitation, any
certificate representing a stock dividend or distribution in connection with any
increase or reduction of capital, reclassification, merger, consolidation, sale
of assets, combination of shares, stock split, spin-off or split-off),
promissory note or other instrument, (ii) option or right, whether as an
addition to, substitution for, or in exchange for, any Collateral, or otherwise,
(iii) dividends payable in cash (except such dividends permitted to be
retained by Debtor pursuant to Section 5.2 hereof) or in securities or
other property or (iv) dividends or other distributions in connection with
a partial or total liquidation or dissolution or in connection with a reduction
of capital, capital surplus or paid-in surplus, Debtor shall receive such
stock certificate, promissory note, instrument, option, right, payment or
distribution in trust for the benefit of Subscribers, shall segregate it from
Debtor’s other property and shall deliver it forthwith to Subscribers, in the
exact form received, with any necessary endorsement and/or appropriate stock
powers duly executed in blank, to be held by Subscribers as Collateral and as
further collateral security for the Obligations.

    

    
      	
              5.

            	
              Distribution.

            

    

    

    5.1           So
long as an Event of Default does not exist, Debtors shall be entitled to
exercise all voting power pertaining to any of the Collateral, provided such
exercise is not contrary to the interests of the Subscribers and does
not impair the Collateral.

    

    5.2.          At
any time an Event of Default exists or has occurred and is continuing, all
rights of Debtors, upon notice given by Subscribers, to exercise the voting
power and receive payments, which it would otherwise be entitled to pursuant to
Section 5.1, shall cease and all such rights shall thereupon become vested in
Subscribers, which shall thereupon have the sole right to exercise such voting
power and receive such payments.

    

    5.3           All
dividends, distributions, interest and other payments which are received by
Debtors contrary to the provisions of Section 5.2 shall be received in trust for
the benefit of Subscribers as security and Collateral for payment of the
Obligations shall be segregated from other funds of Debtors, and shall be
forthwith paid over to Subscribers as Collateral in the exact form received
with any necessary endorsement and/or appropriate stock powers duly executed in
blank, to be held by Subscribers as Collateral and as further collateral
security for the Obligations.

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

    

    
      	
              6.

            	
              Further
      Action By
      Debtors; Covenants and
Warranties.

            

    

    

    6.1          Subscribers at
all times shall have a perfected security interest in the
Collateral.  Each Debtor represents that other than the security
interests described on Schedule 6.1, it has and
will continue to have full title to the Collateral free from any liens, leases,
encumbrances, judgments or other claims, except for “Permitted Liens” (defined
below).  The Subscribers’ security interest in the Collateral
constitutes and will continue to constitute a first, prior and indefeasible
security interest in favor of Subscribers, subject only to the security
interests described on Schedule 6.1.  Each
Debtor will do all acts and things, and will execute and file all instruments
(including, but not limited to, security agreements, financing statements,
continuation statements, etc.) reasonably requested by Subscribers to establish,
maintain and continue the perfected security interest of Subscribers in the
perfected Collateral, and will promptly on demand, pay all costs and expenses of
filing and recording, including the costs of any searches reasonably deemed
necessary by Subscribers from time to time to establish and determine the
validity and the continuing priority of the security interest of Subscribers,
and also pay all other claims and charges that, in the opinion of
Subscribers are reasonably likely to materially prejudice, imperil or
otherwise affect the Collateral or Subscribers’ security interests
therein.   For purposes of this Agreement, “Permitted Liens” shall
include:

     

    
      	
               
      

            	
              (a)

            	
              liens  for  the  payment  of  taxes  which  are  not  yet  due  and
      payable;

            

    

    

    
      	
               
      

            	
              (b)

            	
              liens  arising  by  statute  in  connection  with  worker’s
      compensation, unemployment insurance, old age benefits, social security
      obligations, taxes, assessments, statutory obligations or other similar
      charges (other than Liens arising under ERISA), good faith cash deposits
      in connection with tenders, contracts or leases to which the Debtor or any
      Guarantor is a party or other cash deposits required to be made in the
      ordinary course of business, provided in each case that the obligation is
      not for borrowed money and that the obligation secured is not overdue or,
      if overdue, is being contested in good faith by appropriate proceedings
      which prevent enforcement of the matter under contest and adequate
      reserves have been established
therefor;

            

    

    

    
      	
               
      

            	
              (c)

            	
              mechanics’, workmen’s,
      materialmen’s, landlords’, carriers’ or other similar liens arising in the
      ordinary course of business with respect to obligations which are not due
      or which are being contested in good faith by appropriate proceedings
      which prevent enforcement of the matter under
    contest;

            

    

    

    
      	
               
      

            	
              (d)

            	
              any interest or title of a lessor
      under any operating lease or capital lease;
  and

            

    

    

    
      	
               
      

            	
              (e)

            	
              liens on real property of the
      Debtor or any Guarantor created solely for the purpose of securing
      indebtedness incurred to finance the purchase price of such real
      property;

            

    

    

    
      	
               
      

            	
              (f)

            	
              cash deposits to secure
      performance bonds and other obligations of a like nature (in each case,
      other than for Indebtedness) incurred in the ordinary course of business
      for obligations not yet due or which are being contested in good faith by
      appropriate proceedings which prevent enforcement of the matter under
      contest and adequate reserves have been established
      therefor;

            

    

    

    
      	
               
      

            	
              (g)

            	
              easements, rights-of-way, zoning
      and similar restrictions, building codes,
      reservations,  covenants,  conditions,  waivers,  survey  exceptions  and  other  similar
      encumbrances or title defects and, with respect to any interests in real
      property held or leased by the Debtor or any of its subsidiaries,
      mortgages, deeds of trust and other encumbrances incurred, created,
      assumed or permitted to exist and arising by, through or
      under  a  landlord  or  owner  of  such  property  encumbering  solely  such  landlord’s
      or owner’s interest in such real property, with or without the consent of
      the lessee;

            

    

    

    
      	
               
      

            	
              (h)

            	
              liens in existence on the date
      hereof;

            

    

    

    
      	
               
      

            	
              (i)

            	
              any  interest  of  a  licensor  under  a  license  entered  into  in  the  ordinary
      course of the Debtor’s or the applicable Guarantor’s business;
      and

            

    

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

    
      	
               
      

            	
              (j)

            	
              any  lien  existing  on  any  part  of  any  business
      acquired by the Debtor or any
      Guarantor,  prior  to  the
      acquisition  thereof  by  the  Debtor  or  any  Guarantor.

            

    

    

    6.2          Except
in connection with sales of Collateral, in the ordinary course of business, for
fair value and in cash, and except for Collateral which is substituted by assets
of identical or greater value (subject to the consent of the Subscribers) or
which is not material to the Debtor’s business, each Debtor will not sell,
transfer, assign or pledge those items of Collateral (or allow any such items to
be sold, transferred, assigned or pledged), without the prior written consent of
Subscribers other than a transfer of the Collateral to a wholly-owned
United States formed and located subsidiary or to another Debtor on prior notice
to Subscribers, and provided the Collateral remains subject to the security
interest herein described.  Although Proceeds of Collateral are
covered by this Agreement, this shall not be construed to mean that
Subscribers consent to any sale of the Collateral, except as provided
herein.  Sales of Collateral in the ordinary course of business as
described above shall be free of the security interest of Subscribers and
Subscribers shall promptly execute such documents (including without limitation
releases and termination statements) as may be required by Debtors to evidence
or effectuate the same.

    

    6.3          Each
Debtor will, at all reasonable times during regular business hours and upon
reasonable notice, allow Subscribers or their representatives free and
complete access to the Collateral and all of such Debtor’s records that in any
way relate to the Collateral, for such inspection and examination
as Subscribers reasonably deem necessary.

    

    6.4          Each
Debtor, at its sole cost and expense, will protect and defend the
Collateral against the claims and demands of all persons other than the
Subscribers.

    

    6.5          Debtors
will promptly notify Subscribers of any levy, distraint or other seizure by
legal process or otherwise of any part of the Collateral, and of any threatened
or filed claims or proceedings that are reasonably likely to affect or impair
any of the rights of Subscribers under this Security Agreement in any
material respect.

    

    6.6          Each
Debtor, at its own expense, will obtain and maintain in force insurance policies
covering losses or damage to those items of Collateral which constitute physical
personal property, which insurance shall be of the types customarily insured
against by companies in the same or similar business, similarly situated, in
such amounts (with such deductible amounts) as is customary for such companies
under the same or similar circumstances, similarly situated.  Debtors
shall make the Subscribers loss payee thereon to the extent of its interest
in the Collateral. Subscribers are hereby irrevocably (until the
Obligations are indefeasibly paid in full) appointed each Debtor’s
attorney-in-fact to endorse any check or draft that may be payable to such
Debtor so that Subscribers may collect the proceeds payable for any loss
under such insurance.  The proceeds of such insurance, less any costs
and expenses incurred or paid by Subscribers in the collection thereof,
shall be applied either toward the cost of the repair or replacement of the
items damaged or destroyed, or on account of any sums secured hereby, whether or
not then due or payable.

    

    6.7          In
order to protect the Collateral and Subscribers’ interest therein,
Subscribers may, at Subscribers’ option, and without any obligation to
do so, pay, perform and discharge any and all amounts, costs, expenses and
liabilities herein agreed to be paid or performed by Debtor upon Debtor’s
failure to do so provided Subscribers have given Debtor any written notice
otherwise required to be given as described herein in connection
therewith.  All amounts expended by Subscribers in so doing shall
become part of the Obligations secured hereby, and shall be immediately due and
payable by Debtor to Subscribers upon demand and shall bear interest at the
lesser of 15% per annum or the highest legal amount allowed from the dates of
such expenditures until paid.

    

    6.8          Upon
the request of Subscribers, Debtors will furnish to Subscribers within five
(5) business days thereafter, or to any proposed assignee of this Security
Agreement, a written statement in form reasonably satisfactory to Subscribers,
duly acknowledged, certifying the amount of the principal and interest and any
other sum then owing under the Obligations, whether to its knowledge any claims,
offsets or defenses exist against the Obligations or against this Security
Agreement, or any of the terms and provisions of any other agreement of Debtors
securing the Obligations.  In connection with any assignment by
Subscribers of this Security Agreement, each Debtor hereby agrees to cause
the insurance policies required hereby to be carried by such Debtor, if any, to
be endorsed in form satisfactory to Subscribers or to such assignee,
with loss payable clauses in favor of such assignee, and to cause such
endorsements to be delivered to Subscribers within ten (10) calendar days
after request therefor by Subscribers.

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

    

    6.9          Each
Debtor will, at its own expense, make, execute, endorse, acknowledge, file
and/or deliver to the Subscribers from time to time such vouchers,
invoices, schedules, confirmatory assignments, conveyances, financing
statements, transfer endorsements, powers of attorney, certificates, reports
and other reasonable assurances or instruments and take further steps
relating to the Collateral and other property or rights covered by the security
interest hereby granted, as the Subscribers may reasonably require to
perfect its security interest hereunder.

    

    6.10        Debtors
represent and warrant that they are the true and lawful exclusive owners of the
Collateral, free and clear of any liens, encumbrances and claims other than
those listed on Schedule 6.1.

    

    6.11        Each
Debtor shall cause each Subsidiary of such Debtor in existence on the date
hereof and each future Subsidiary to execute and deliver to
Subscribers promptly and in any event within ten (10) days after the
formation, acquisition or change in status thereof (A) a guaranty guaranteeing
the Obligations and (B) if requested by Subscribers, a security and pledge
agreement substantially in the form of this Agreement together with (x)
certificates evidencing all of the capital stock of each Subsidiary of and any
entity owned by such Subsidiary, (y) undated stock powers executed in blank with
signatures guaranteed, and (z) such opinion of counsel and such approving
certificate of such Subsidiary as Subscribers may reasonably request in respect
of complying with any legend on any such certificate or any other matter
relating to such shares and (C) such other agreements, instruments, approvals,
legal opinions or other documents reasonably requested by Subscribers in order
to create, perfect, establish the first priority of or otherwise
protect any lien purported to be covered by any such pledge and security
agreement or otherwise to effect the intent that all property and assets of such
Subsidiary shall become Collateral for the Obligations.  For purposes
of this Agreement, “Subsidiary” means,
with respect to any entity at any date, any corporation, limited or general
partnership, limited liability company, trust, estate, association, joint
venture or other business entity) of which more than 40% of (A) the
outstanding capital stock having (in the absence of contingencies) ordinary
voting power to elect a majority of the board of directors or other managing
body of such entity, (B) in the case of a partnership or limited liability
company, the interest in the capital or profits of such partnership or limited
liability company or (C) in the case of a trust, estate, association,
joint venture or other entity, the beneficial interest in such trust,
estate, association or other entity business is, at the time of determination,
owned or controlled directly or indirectly through one or more intermediaries,
by such entity.  Schedule 1 annexed hereto contains a list of all
Subsidiaries of the Debtors as of the date of this
Agreement.  This Section 6.11 shall not apply to items not
included in the definition of Collateral.

    

    6.12        Debtor
will notify Subscribers within ten days of the occurrence of any change of
Debtor’s name, domicile, address or jurisdiction of
incorporation.  The timely giving of this notice is a material
obligation of Debtor.

    

    
      	
              7.

            	
              Power of
      Attorney.

            

    

    

    At any
time an Event of Default has occurred, and only after the applicable cure period
as set forth in this Agreement and the other Transaction Documents, and is
continuing, each Debtor hereby irrevocably constitutes and appoints Subscribers
as the true and lawful attorney of such Debtor, with full power of substitution,
in the place and stead of such Debtor and in the name of such Debtor or
otherwise, at any time or times, in the discretion of the Subscribers, to take
any action and to execute any instrument or document which is reasonably
and prudently necessary to protect the Subscribers’ rights in the
Collateral as set forth in this Agreement.  This power of attorney is
coupled with an interest and is irrevocable until the Obligations are
satisfied.

     

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

    
      	
              8.

            	
              Performance By The
      Subscribers.

            

    

    

    If a
Debtor fails to perform any material covenant, agreement, duty or obligation of
such Debtor under this Agreement, Subscribers may, after any applicable cure
period and notice required hereunder, at any time or times in its discretion,
take action to effect performance of such obligation.  All reasonable
expenses of the Subscribers incurred in connection with the foregoing
authorization shall be payable by Debtors as provided in Paragraph 12.1
hereof.  No discretionary right, remedy or power granted to the
Subscribers under any part of this Agreement shall be deemed to impose any
obligation whatsoever on the Subscribers with respect thereto, such rights,
remedies and powers being solely for the protection of the
Subscribers.

    

    
      	
              9.

            	
              Event of
      Default.

            

    

    

    An event
of default (“Event of
Default”) shall be deemed to have occurred hereunder upon the occurrence
of any event of default as defined and described in this Agreement, in the Note,
the Subscription Agreement, Transaction Documents (as defined in the
Subscription Agreement), and any other agreement to which one or more Debtors
and Subscribers are parties.   Upon and after any Event of
Default, after the applicable cure period, if any, any or all of the Obligations
shall become immediately due and payable at the option of the Subscribers, and
the Subscribers may dispose of Collateral as provided herein.  A
default by Debtor of any of its material obligations pursuant to this Agreement
and any of the Transaction Documents shall be an Event of Default hereunder and
an “Event of Default” as defined in the Note, and Subscription
Agreement.

    

    
      	
              10.

            	
              Disposition of
      Collateral.

            

    

    

    Upon and
after any Event of Default which is then continuing,

    

    10.1      The
Subscribers may exercise its rights with respect to each and every component of
the Collateral, without regard to the existence of any other security or source
of payment for, in order to satisfy the Obligations.  In addition to
other rights and remedies provided for herein or otherwise available to it, the
Subscribers shall have all of the rights and remedies of a secured party on
default under the Uniform Commercial Code then in effect in the State of New
York.

    

    10.2      If
any notice to Debtors of the sale or other disposition of Collateral is required
by then applicable law, five (5) business days prior written notice (which
Debtors agree is reasonable notice within the meaning of Section 9.612(a) of the
Uniform Commercial Code) shall be given to Debtors of the time and place of any
sale of Collateral which Debtors hereby agree may be by private
sale.  The rights granted in this Section are in addition to any and
all rights available to Subscribers under the Uniform Commercial
Code.

    

    10.3      The
Subscribers is authorized, at any such sale, if the Subscribers deems it
advisable to do so, in order to comply with any applicable securities laws, to
restrict the prospective bidders or purchasers to persons who will represent and
agree, among other things, that they are purchasing the Collateral for their own
account for investment, and not with a view to the distribution or resale
thereof, or otherwise to restrict such sale in such other manner as the
Subscribers deem advisable to ensure such compliance.  Sales made
subject to such restrictions shall be deemed to have been made in a
commercially reasonable manner.

    

    10.4      All
proceeds received by the Subscribers in respect of any sale, collection or other
enforcement or disposition of Collateral, shall be applied (after deduction of
any amounts payable to the Subscribers pursuant to Paragraph 12.1 hereof)
against the Obligations.   Upon payment in full of all
Obligations, Debtors shall be entitled to the return of all Collateral,
including cash, which has not been used or applied toward the payment of
Obligations or used or applied to any and all costs or expenses of the
Subscribers incurred in connection with the liquidation of the Collateral
(unless another person is legally entitled thereto).  Any assignment
of Collateral by the Subscribers to Debtors shall be without representation or
warranty of any nature whatsoever and wholly without recourse.  To the
extent allowed by law, Subscribers may purchase the Collateral and pay for such
purchase by offsetting the purchase price with sums owed to Subscribers by
Debtors arising under the Obligations or any other source.

    

    10.5      Without
limiting, and in addition to, any other rights, options and remedies
Subscribers have under the Transaction Documents, the UCC, at law or in
equity, or otherwise, upon the occurrence and continuation of an Event of
Default, Subscribers shall have the right to apply for and have a receiver
appointed by a court of competent jurisdiction.  Debtors expressly
agree that such a receiver will be able to manage, protect and preserve the
Collateral and continue the operation of the business of Debtors to the extent
necessary to collect all revenues and profits thereof and to apply the same to
the payment of all expenses and other charges of such receivership, including
the compensation of the receiver, until a sale or other disposition of such
Collateral shall be finally made and consummated.  Debtors waive any
right to require a bond to be posted by or on behalf of any such
receiver.

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

    

    10.6      Provided
an Event of Default or an event, which with the passage of time or the giving of
notice could become an Event of Default is not pending, then from and after the
date a Lender has exercised its conversion rights with respect to not less than
one-half of the initial principal of such Lender’s Note and the Company has
complied with its obligations with respect to all such conversions, then such
Lender’s security interest granted pursuant to this Agreement shall be
automatically released.

    

    11.         Waiver of Automatic
Stay.   Debtor acknowledges and agrees that should a
proceeding under any bankruptcy or insolvency law be commenced by or against
Debtor, or if any of the Collateral should become the subject of any bankruptcy
or insolvency proceeding, then the Subscribers should be entitled to, among
other relief to which the Subscribers may be entitled under the Note,
Subscription Agreement, Transaction Documents, and any other agreement to which
the Debtor and Subscribers are parties, (collectively “Loan Documents”) and/or
applicable law, an order from the court granting immediate relief from the
automatic stay pursuant to 11 U.S.C. Section 362 to permit the Subscribers to
exercise all of its rights and remedies pursuant to the Loan Documents and/or
applicable law.  DEBTOR EXPRESSLY WAIVES THE BENEFIT OF THE
AUTOMATIC STAY IMPOSED BY 11 U.S.C. SECTION 362.  FURTHERMORE, DEBTOR
EXPRESSLY ACKNOWLEDGES AND AGREES THAT NEITHER 11 U.S.C. SECTION 362 NOR ANY
OTHER SECTION OF THE BANKRUPTCY CODE OR OTHER STATUTE OR RULE (INCLUDING,
WITHOUT LIMITATION, 11 U.S.C. SECTION 105) SHALL STAY, INTERDICT, CONDITION,
REDUCE OR INHIBIT IN ANY WAY THE ABILITY OF THE SUBSCRIBERS TO ENFORCE ANY OF
ITS RIGHTS AND REMEDIES UNDER THE LOAN DOCUMENTS AND/OR APPLICABLE
LAW.   Debtor
hereby consents to any motion for relief from stay which may be filed by the
Subscribers in any bankruptcy or insolvency proceeding initiated by or against
Debtor, and further agrees not to file any opposition to any motion for relief
from stay filed by the Subscribers.  Debtor represents, acknowledges
and agrees that this provision is a specific and material aspect of this
Agreement, and that the Subscribers would not agree to the terms of this
Agreement if this waiver were not a part of this
Agreement.  Debtor further represents, acknowledges and agrees
that this waiver is knowingly, intelligently and voluntarily made, that neither
the Subscribers nor any person acting on behalf of the Subscribers has made any
representations to induce this waiver, that Debtor has been represented (or has
had the opportunity to be represented) in the signing of this Agreement and in
the making of this waiver by independent legal counsel selected by Debtor and
that Debtor has had the opportunity to discuss this waiver with
counsel.   Debtor further agrees that any bankruptcy or
insolvency proceeding initiated by Debtor will only be brought in the Federal
Court within the Southern District of New York.

    

    
      	
              12.

            	
              Miscellaneous.

            

    

    

    12.1  
     Expenses.  Debtors
shall pay to the Subscribers, on demand, the amount of any and all reasonable
expenses, including, without limitation, attorneys’ fees, legal expenses and
brokers’ fees, which the Subscribers may incur in connection with (a) sale,
collection or other enforcement or disposition of Collateral; (b) exercise or
enforcement of any the rights, remedies or powers of the Subscribers hereunder
or with respect to any or all of the Obligations upon breach or threatened
breach; or (c) failure by Debtors to perform and observe any agreements of
Debtors contained herein which are performed by Subscribers.

     

    12.2   
    Waivers, Amendment and
Remedies.  No course of dealing by the Subscribers and no
failure by the Subscribers to exercise, or delay by the Subscribers in
exercising, any right, remedy or power hereunder shall operate as a waiver
thereof, and no single or partial exercise thereof shall preclude any other or
further exercise thereof or the exercise of any other right, remedy or power of
the Subscribers.  No amendment, modification or waiver of any
provision of this Agreement and no consent to any departure by Debtors therefrom
shall, in any event, be effective unless contained in a writing signed by the
Subscribers, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given. The rights,
remedies and powers of the Subscribers, not only hereunder, but also under any
instruments and agreements evidencing or securing the Obligations and under
applicable law are cumulative, and may be exercised by the Subscribers from time
to time in such order as the Subscribers may elect.

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

    

    12.3    
   Notices.  All
notices or other communications given or made hereunder shall be in writing and
shall be personally delivered or deemed delivered the first business day after
being faxed (provided that a copy is delivered by first class mail) to the party
to receive the same at its address set forth below or to such other address as
either party shall hereafter give to the other by notice duly made under this
Section:

     

    
      
        
          	
                  To
      Debtors:

                	
                  China
      Yongxin Pharmaceuticals, Inc.

                
	 
      	
                  927
      Canada Court

                
	 
      	
                  City
      of Industry, CA 91748

                
	 
      	
                  Attn:
      Yongxin Liu, CEO

                
	 
      	
                  Fax:
      (626) 581-9138

                
	 
      	 
      
	
                  With
      a copy by facsimile only to:

                	 
      
	 
      	 
      
	 
      	
                  Richardson
      & Patel, LLP

                
	 
      	
                  10900
      Wilshire Blvd., Suite 500

                
	 
      	
                  Los
      Angeles, CA 90024

                
	 
      	
                  Attn:
      Ryan Hong, Esq.

                
	 
      	
                  Fax:
      (310) 208-1154

                
	 
      	 
      
	
                  To
      Subscribers:

                	
                  As
      specified in the Subscription Agreement

                
	 
      	 
      
	
                  To
      Collateral Agent:

                	
                  Collateral
      Agents, LLC

                
	 
      	
                  111
      West 57th Street,
      Suite 1416

                
	 
      	
                  New
      York, NY 10019

                
	 
      	
                  Attn:
      General Counsel

                
	 
      	
                  Fax:
      (212) 245-9101

                
	 
      	 
      
	
                  If
      to Debtors or Subscribers,

                	 
      
	
                  or
      Collateral Agent

                	 
      
	
                  with
      a copy by telecopier only to:

                	 
      
	 
      	 
      
	 
      	
                  Grushko
      & Mittman, P.C.

                
	 
      	
                  551
      Fifth Avenue, Suite 1601

                
	 
      	
                  New
      York, New York 10176

                
	 
      	
                  Fax:
      (212) 697-3575

                

        

      

    

    

    Any party
may change its address by written notice in accordance with this
paragraph.

    

    12.4        Term; Binding
Effect.  This Agreement shall (a) remain in full force and
effect until payment and satisfaction in full of all of the Obligations; (b) be
binding upon each Debtor, and its successors and permitted assigns; and (c)
inure to the benefit of the Subscribers and its successors and
assigns.

    

    12.5        Captions.  The
captions of Paragraphs, Articles and Sections in this Agreement have been
included for convenience of reference only, and shall not define or limit the
provisions of this agreement and have no legal or other significance
whatsoever.

    

    12.6        Governing Law; Venue;
Severability.  This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without regard to
conflicts of laws principles that would result in the application of the
substantive laws of another jurisdiction, except to the extent that the
perfection of the security interest granted hereby in respect of any item of
Collateral may be governed by the law of another jurisdiction.  Any
legal action or proceeding against a Debtor with respect to this Agreement must
be brought only in the courts in the State of New York or of the United States
for the Southern District of New York, and, by execution and delivery of this
Agreement, each Debtor hereby irrevocably accepts for itself and in respect of
its property, generally and unconditionally, the jurisdiction of the aforesaid
courts.  Each Debtor hereby irrevocably waives any objection which
they may now or hereafter have to the laying of venue of any of the aforesaid
actions or proceedings arising out of or in connection with this Agreement
brought in the aforesaid courts and hereby further irrevocably waives and agrees
not to plead or claim in any such court that any such action or proceeding
brought in any such court has been brought in an inconvenient
forum.  If any provision of this Agreement, or the application thereof
to any person or circumstance, is held invalid, such invalidity shall not affect
any other provisions which can be given effect without the invalid provision or
application, and to this end the provisions hereof shall be severable and the
remaining, valid provisions shall remain of full force and
effect.

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

    

    12.7        Entire
Agreement.  This Agreement contains the entire agreement of the
parties and supersedes all other agreements and understandings, oral or written,
with respect to the matters contained herein.

    

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

    

    13.          Termination;
Release.  When the Obligations have been indefeasibly paid and
performed in full or all outstanding Note have been converted to common stock
pursuant to the terms of the Note and the Subscription Agreements, this
Agreement shall terminated, and the Subscribers, at the request and sole expense
of the Debtors, will execute and deliver to the Debtors the proper instruments
(including UCC termination statements) acknowledging the termination of the
Security Agreement, and duly assign, transfer and deliver to the Debtors,
without recourse, representation or warranty of any kind whatsoever, such of the
Collateral, including, without limitation, Securities and any Additional
Collateral, as may be in the possession of the Subscribers.

    

    
      	
              14.

            	
              Subscribers Powers.

            

    

    

    14.1        Subscribers Powers.  The
powers conferred on the Subscribers hereunder are solely to protect
Subscribers’ interest in the Collateral and shall not impose any duty on it
to exercise any such powers.

    

    14.2        Reasonable
Care.  The Subscribers is required to exercise reasonable
care in the custody and preservation of any Collateral in its possession;
provided, however, that the Subscribers shall be deemed to have exercised
reasonable care in the custody and preservation of any of the Collateral if it
takes such action for that purposes as any owner thereof reasonably requests in
writing at times other than upon the occurrence and during the continuance of
any Event of Default, but failure of the Subscribers, to comply with any such
request at any time shall not in itself be deemed a failure to exercise
reasonable care.

    

    14.3        Majority in
Interest.   The rights of the Subscribers hereunder,
except as otherwise set forth herein shall be exercised upon the approval of
Subscribers holding 75% of the outstanding Obligations (“Majority in Interest”)
at the time such approval is sought or given.  Any tangible or
physical Collateral shall be delivered to and be held by the Collateral Agent
pursuant to this Agreement and on behalf of all Subscribers as to their
respective rights.

    

    14.4        Authority of Collateral
Agent.  The Collateral Agent was appointed by the Subscribers
pursuant to a Collateral Agent Agreement of even date herewith.  All
of the rights and benefits granted to the Subscribers pursuant to this
Agreement, including the security interest and enforcement rights are also
granted to the Collateral Agent and will be exercised by Collateral Agent on
behalf of Subscribers pursuant to the Collateral Agent Agreement.  All
deliveries required to be made by Debtors hereunder shall be made to the
Collateral Agent.  UCC-1 and other financing statements may identify
the Collateral Agent as the secured party.

    

    [THIS
SPACE INTENTIONALLY LEFT BLANK]

    

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

    IN WITNESS WHEREOF, the undersigned have
executed and delivered this Security Agreement, as of the date first written
above.

     

    
      
        
          
            
              
                	
                        “DEBTOR”

                      
	 
      	 
      
	
                        CHINA
      YONGXIN PHARMACEUTICALS, INC.

                      
	
                        a
      Delaware corporation

                      
	 
      	
                          

                      
	
                        By:

                      	
                          

                      
	 
      	
                        Yongxin
      Liu

                      
	 
      	
                        Chief
      Executive Officer

                      
	 
      	 
      
	
                        Agreed
      and Accepted by:

                      
	 
      
	
                        COLLATERAL
      AGENT:

                      
	 
      
	
                        COLLATERAL
      AGENTS, LLC

                      
	 
      	 
      
	
                        By:

                      	
                          

                      
	
                        Name:

                      	 
      
	
                        Title:

                      	 
      

              

            

          

        

      

    

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

    Schedule

     

    Schedule
prepared in accordance with Instruction 2 to Item 601 of Regulation
S-K

     

    The
Security Agreements dated January 22, 2010 are substantially identical in all
material respects except as to the subscribers.

     

    
      
        
          
            
              
                
                  
                    	 	
                            Subscribers

                          	 
	 	
                            Excalibur
      Special Opportunities LP

                          	 
	 	
                            Dana
      Katzenmeier

                          	 
	 	
                            Fourth
      Street Holdings, LP

                          	 
	 	
                            Robert
      B. Prag

                          	 
	 	
                            Peter
      B. Tentler

                          	 
	 	
                            Richardson
      & Patel LLP

                          	 

                  

                

              

            

          

        

      

    

     

    The text
of the Security Agreements is incorporated by reference from Exhibit 10.4 to the
Company’s Current Report on Form 8-K filed with the Securities and Exchange
Commission on January 26, 2010.

     

    
      
         

      

      
        13

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