Document:

Exhibit 10.38

Exhibit 10.38

PROXY AGREEMENT 

This Proxy Agreement (the “Agreement”) is entered into effective as of May 9, 2011 between the
following parties in Dongping County, People’s Republic of China (the “PRC”).

			
	Party A:	 	Mr. Wang Xuchun

Mr. Huang Lingfa

Mr. Qiao Binglong

Mr. Wang Guo

			
		 	

Party B: Taian Yisheng Management & Consulting Co., Ltd., a wholly foreign-owned enterprise duly
established and valid existing under the laws of the People’s Republic of China (“PRC”). Registered
Address: Ruixing industry park, Dongping County, Shandong Province, China.

			
	Party C:	 	Shandong Xiangrui Pharmacy Co., Ltd

Address: Pengji Town, Dongping County, Shandong Province

Legal Representative: Mr. Huang Lingfa

			
		 	

WHEREAS, Party A is the current legal shareholders of Party C and holds a 100% interest
collectively in Party C;

WHEREAS, Party C and Party B, have entered into an Exclusive Technical and Consulting Service
Agreement and other agreements. In order to perform the above agreements, Party A is willing to
entrust the person designated by Party B (the “Proxy”) with its shareholder’s rights in Party C
under PRC laws.

 

 

 

NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the Parties agree as follows:

	1.	 	Party A hereby agrees to irrevocably entrust the Proxy with all of its shareholder’s rights
in Party C,
including, but not limited to, the right to attend shareholders’ meetings, the right to
execute shareholders’ resolutions, the right to sell, assign, transfer or pledge all or any
of Party A’s equity interests in Party C, and the right to vote such equity interests for
all matters including, but not limited to, the appointment of legal representative, board
members, executive directors, inspectors, chief managers and other senior management
officers.

	1.	 	

	2.	 	Party B agrees to designate the Proxy who shall be entrusted by Party A, and such person
shall represent Party A in all matters relating to the exercise of its shareholder’s rights
pursuant to this Agreement.

	2.	 	

	3.	 	Party A and Party B hereby acknowledge that if Party B withdraws the appointment of the
Proxy, Party A will withdraw the authorization of the Proxy and shall authorize another
person(s) designated by Party B to exercise the rights of Party A relating to its equity
interest in Party C.

	3.	 	

	4.	 	This Agreement has been duly executed by all of the Parties and/or their authorized
representatives as of the date first set forth above and shall be effective simultaneously.

	4.	 	

	5.	 	This Agreement shall be executed and come into effect as of the date first set forth above.
This Agreement shall expire on the date that is twenty-five (25) years following the date
hereof, and this Agreement may be extended prior to termination upon written agreement by each
Party.

	5.	 	

	6.	 	Any amendment and/or rescission of this Agreement shall be in writing and executed upon all
of the Parties hereto.

	6.	 	

	7	 	If any of the terms of this Agreement is invalid, illegal or unenforceable due to its
non-compliance with applicable law, the validity and enforceability of the other terms hereof
shall nevertheless remain unaffected.

	7	 	

 

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	8	 	This Agreement shall be governed by, construed in all respects and performed in accordance
with the laws of the PRC.

	8	 	

	9	 	This Agreement is executed both in Chinese and English in one or more original or facsimile
counterparts. The Chinese version will prevail in the event of any inconsistency between the
English and any Chinese translations thereof.

	9	 	

	10	 	The Parties shall strive to settle any dispute arising from the interpretation or
performance, or in connection with this Agreement through mutual agreement and negotiation. In
case no settlement can be reached through consultation, each Party may submit such matter to
the Shanghai Sub-commission of China International Economic and Trade Arbitration Committee
for arbitration. The arbitration shall be held in Shanghai. The arbitration proceedings shall
be conducted in Chinese. The arbitration award shall be final and binding upon the Parties.
The arbitration award may be submitted to any court with jurisdiction for enforcement.

	10	 	

[Remainder of Page Left Intentionally Blank — Signature Page Follows]

 

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[Proxy Agreement —Signature Page]

IN WITNESS WHEREOF, the Parties have executed this Agreement on the date first above written.

	 	 	 	 	 	 	 	 	 
	 	 	Part A:	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	By:	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	Name:
	 	Mr. Wang Xuchun	 	 
	 	 	 	 		 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	By:	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	Name:
	 	Mr. Huang Lingfa	 	 
	 	 	 	 		 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	By:	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	Name:
	 	Mr. Qiao Binglong	 	 
	 	 	 	 		 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	By:	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	Name:
	 	Mr. Wang Guo	 	 
	 	 	 	 		 	 
	 
	 	 	 	 	 	 	 	 
	 	 	Part B: Taian Yisheng Management & Consulting Co., Ltd.	 	 
	 	 		 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	By:	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 

	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	Part C: Shandong Xiangrui Pharmacy Co., Ltd	 	 
	 	 		 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	By:	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 

	 	 

 

4Exhibit 10.39

Exhibit 10.39

EXECUTION VERSION

OPTION AGREEMENT

THIS OPTION AGREEMENT (this “Agreement”), dated as of May 13, 2011 (the “Effective Date”), by
and between (i) Mr. Chongxin Xu, an individual citizen of Australia (the “Grantor”); and (ii) Mr.
Binglong Qiao, an individual citizen of the People’s Republic of China (the “Optionee”) (each of
the foregoing, a “Party” and together, the “Parties”) with respect to shares of Xiangrui
Pharmaceutical International Limited, a company organized under the laws of the British Virgin
Islands (“Xiangrui”). Capitalized terms not otherwise defined have the meanings assigned to them in
Exhibit A to this Agreement.

RECITALS

	A.	 	The Grantor is the sole shareholder of Xiangrui.

	B.	 	Xiangrui is the sole equity holder of a wholly foreign-owned enterprise organized and
existing under the laws of the People’s Republic of China (“WFOE”).

	C.	 	The Grantor intends to enter into a share exchange agreement (the “Exchange Agreement”) with
a United States-domiciled public reporting shell company SMSA Freemont Acquisition Corp. (the
“Shell Company”) whose securities are quoted on the over-the-counter bulletin board. Upon
consummation of the transactions contemplated by the Exchange Agreement (the “Exchange
Transaction”), the Shell Company will acquire 100% of the issued and outstanding capital stock
of Xiangrui, and, indirectly, sole ownership of the WFOE, in exchange for the issuance of
12,363,885 shares of the common stock of the Shell Company to the Grantor (the “Exchange
Shares”) representing 93% of the issued and outstanding shares of the Shell Company.

	D.	 	The Grantor desires to grant to the Optionee, and the Optionee desires to accept from the
Grantor, an option to purchase certain number of shares of the Company currently held by the
Grantor, on the terms and subject to the conditions set forth in this Agreement.

AGREEMENT

NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein, and
for other good and valuable consideration, the receipt and sufficiency of which is acknowledged by
the Parties, the Parties agree as follows:

Article I. OPTION RIGHT

	1.1	 	Option Right. The Grantor hereby grants to the Optionee the right and option (the “Option
Right”), during the Option Period (as defined below), to purchase from the Grantor, and upon
the exercise of such right and option the Grantor will have the obligation to sell to the
Optionee, Two Hundred Forty Seven Thousand Two Hundred Seventy Seven (247,277) shares of the
capital stock of Xiangrui currently held by the Grantor representing Two percent (2.0)% of the
issued and outstanding capital stock of Xiangrui, and, upon consummation of the share exchange
under the Exchange Agreement in accordance with the provisions of this Agreement, Two Hundred
Forty Seven Thousand Two Hundred Seventy Seven (247,277) of the shares of the capital stock of
the Shell Company in exchange therefore (the “Option Shares”).

	1.2	 	Option Period. The Option Right will be effective during the period (the “Option Period”)
commencing on the date which is three months after the date hereof and ending on the second
anniversary of the date hereof (such date or the earlier expiration of the Option Right is
referred to herein as the “Expiration Date”).

 

 

 

	1.3	 	Exercise Process. In order to exercise its Option Right during the Option Period, the
Optionee must deliver to the Grantor a written notice of such exercise substantially in the
form attached hereto as Exhibit B (the
“Exercise Notice”) to the address or
facsimile number set forth therein.
Provided the Exercise Notice is
delivered in accordance with SECTION
5.2. to the Grantor on or prior to
5:00 p.m. (Hong Kong time) on a
Business Day, the date of exercise
(the “Exercise Date”) of the Option
Right will be the date of such
delivery of such Exercise Notice. In
the event the Exercise Notice is
delivered after 5:00 p.m. (Hong Kong
time) on any day or on a date which is
not a Business Day, the Exercise Date
will be deemed to be the first
Business Day after the date of such
delivery of such Exercise Notice. The
delivery of an Exercise Notice in
accordance herewith will constitute a
binding obligation (a) on the part of
the Optionee to purchase and (b) on
the part of the Grantor to sell, the
Option Shares which are the subject of
such Exercise Notice in accordance
with the terms of this Agreement. The
Option Right shall be exercisable only
in compliance with all applicable
Laws. The Optionee shall undertake
any and all approval or registration
procedures with the relevant
Governmental Bodies that may arise out
of or in connection with the exercise
of the Option Right in accordance with
applicable Laws.

	1.4	 	Option Price.

	 	(a)	 	The aggregate price (the “Option Price”) for all of the Option Shares
will be equal to Four Hundred U.S. Dollars (US$ 400).

	 
	 	(b)	 	The payment of any Option Price will be in accordance with written
instructions delivered by the Grantor to the Optionee within five (5)
days of delivery of the Exercise Notice.

	1.5	 	Delivery of the Shares. Upon the receipt of an Exercise Notice and the payment of the Option
Price, the Grantor will deliver, or take all steps necessary to cause to be delivered, the
Option Shares being purchased pursuant to such Exercise Notice.

Article II. ENCUMBRANCES; TRANSFERS, SET-OFF

	2.1	 	Encumbrances. Upon exercise of the Option Right, the Option Shares being purchased will be
sold, transferred and delivered to the Optionee free and clear of any claim, pledge, charge,
lien, preemptive rights, restrictions on transfers (except as required by securities laws of
the United States), proxies, voting agreements and/or any other Encumbrance.

	2.2	 	Lock-up; Transfers. Prior to the Expiration Date, the Grantor will not transfer to any other
Person and will continue to own, free and clear of any Encumbrance, the Option Shares.

	2.3	 	Legend. The certificates evidencing the Option Shares will bear a legend in substantially the
form as follows:

“THE SHARES REGISTERED IN THE NAME OF [ • ] OR REPRESENTED BY THIS CERTIFICATE,
AS THE CASE MAY BE, ARE SUBJECT TO AN OPTION RIGHT WHICH PROHIBITS THEIR
TRANSFER TO ANY PERSON OTHER THAN THE HOLDER OF THAT RIGHT PRIOR TO THE
EXERCISE OF THE RIGHT OR ITS EXPIRATION. ANY PERSON ACCEPTING ANY INTEREST IN
THE SHARES WILL BE DEEMED TO AGREE TO AND WILL BECOME BOUND BY ALL THE
PROVISIONS OF THE OPTION AGREEMENT IN WHICH THAT OPTION RIGHT IS SET FORTH, AND
THE SHARES WILL REMAIN SUBJECT TO THE OPTION RIGHT AS PROVIDED THEREIN. A COPY
OF THE OPTION AGREEMENT WILL BE FURNISHED TO THE RECORD HOLDER OF THIS
CERTIFICATE WITHOUT CHARGE UPON WRITTEN REQUEST TO THE COMPANY AT ITS PRINCIPAL
PLACE OF BUSINESS.”

	2.4	 	Set-off. The Optionee will be absolutely entitled to receive all the Option Shares to which
it is entitled pursuant to the exercise of an Option Right, and for the purposes of this
Agreement, the Grantor hereby
waives, as against the Optionee, all rights of set-off
or counterclaim that would or might otherwise be
available to the Grantor.

 

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Article III. REPRESENTATIONS AND WARRANTIES

	3.1	 	Representations and Warranties of the Grantor. The Grantor represents and warrants to the
Optionee, that:

	 	(a)	 	Due Authorization. This Agreement, and all agreements and documents
executed and delivered pursuant to this Agreement, constitute valid
and binding obligations of the Grantor, enforceable against the
Grantor in accordance with their terms, subject to applicable
Bankruptcy Laws and other laws or equitable principles of general
application affecting the rights of creditors generally.

	 
	 	(b)	 	No Conflicts. Neither the execution or delivery of this Agreement by
the Grantor nor the fulfillment or compliance by the Grantor with or
of any of the terms hereof will, with or without the giving of notice
and/or the passage of time, (i) conflict with, or result in a breach
of the terms, conditions or provisions of, or constitute a default
under, any contract or any judgment, decree or order to which the
Grantor is subject or by which the Grantor is bound, or (ii) require
any consent, license, permit, authorization, approval or other action
by any Person or Governmental Body which has not yet been obtained or
received. The execution, delivery and performance of this Agreement by
the Grantor or compliance with the provisions hereof by the Grantor
does not, and will not, violate any provision of any Law to which the
Grantor is subject or by which it is bound.

	 
	 	(c)	 	No Actions. There are no lawsuits, actions or, to the best knowledge
of the Grantor, investigations, claims or demands or other proceedings
pending or, to the best knowledge of the Grantor, threatened against
the Grantor that, if resolved in a manner adverse to the Grantor,
would adversely affect the right or ability of the Grantor to carry
out its obligations set forth in this Agreement.

	 
	 	(d)	 	Title. The Grantor owns the Option Shares free and clear of any
Encumbrance whatsoever, except as contemplated by this Agreement. The
Grantor has not entered into nor is a party to any agreement that
would cause the Grantor to not own the Option Shares free and clear of
any Encumbrance, except as contemplated by this Agreement.

	3.2	 	Representations and Warranties of the Optionee. The Optionee represents and warrants to the
Grantor, that:

	 	(a)	 	Due Authorization. This Agreement, and all agreements and documents
executed and delivered pursuant to this Agreement, constitute valid
and binding obligations of the Optionee, enforceable against the
Optionee in accordance with their terms, subject to applicable
Bankruptcy Laws and other laws or equitable principles of general
application affecting the rights of creditors generally.

	 
	 	(b)	 	No Conflicts. Neither the execution or delivery of this Agreement by
the Optionee nor the fulfillment or compliance by the Optionee with or
of any of the terms hereof will, with or without the giving of notice
and/or the passage of time, (i) conflict with, or result in a breach
of the terms, conditions or provisions of, or constitute a default
under, any contract or any judgment, decree or order to which the
Optionee is subject or by which the Optionee is bound, or (ii) require
any consent, license, permit, authorization, approval or other action
by any Person or Governmental Body which has not yet been obtained or
received. The execution, delivery and performance of this Agreement by
the Optionee or compliance with the provisions hereof by the Optionee
does not, and will not, violate any provision of any Law to which the
Optionee is subject or by which it is bound.

	 
	 	(c)	 	
 No Actions. There are no lawsuits, actions or, to the best knowledge
of the Optionee, investigations, claims or demands or other
proceedings pending or, to the best knowledge of the Optionee,
threatened against the Optionee that, if resolved in a manner adverse
to the Optionee, would adversely affect the right or ability of the
Optionee to carry out its obligations set forth in this Agreement.

 

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NEGATIVE COVENANTS

	3.3	 	Covenants of the Grantor. The Grantor agrees that, prior to the termination of this
Agreement, the Grantor will not transfer, sell, or assign to any other Person, or otherwise
dispose of, pledge, encumber, or suffer any Encumbrance upon, any shares of capital stock of
Xiangrui which the Grantor owns, including the Option Shares. The Grantor further agrees that,
prior to the termination of this Agreement, the Grantor will not, without the prior written
approval of the Optionee, vote (in person, by proxy or by action by written consent, as
applicable) any of the Option Shares in favor of, or to adopt or approve any of the following
actions with regard to Xiangrui or any direct or indirect subsidiary or affiliate of Xiangrui
(referred to individually and collectively as the “Company”):

	 	(a)	 	Any increase of the number of authorized shares of capital stock of the Company;

	 
	 	(b)	 	Any transfer, sale, assignment, or other disposition of, or pledge or encumbrance of, any of the
Company’s material assets except as contemplated by SECTION 3.1. (e);

	 	(c)	 	Any Change of Control with regard to the Company. “Change of Control” means the first to occur of any
of the following events:

	 	(i)	 	An acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or
14(d)(2) of the United States Securities Exchange Act of 1934 (the “Exchange Act”)) (a “Person”) of
beneficial ownership (within the meaning of Rule 13(d)(3) promulgated under the Exchange Act) of twenty
percent (20%) or more of either (A) the then outstanding shares of the common or ordinary stock of the
Company (the “Outstanding Common Stock”) or (B) the combined voting power of the then outstanding
voting securities of the Company entitled to vote generally in the election of directors (the
“Outstanding Voting Securities”); excluding, however, the following: (1) any acquisition directly from
the Company, other than an acquisition by virtue of the exercise of a conversion privilege unless the
security being so converted was itself acquired directly from the Company, (2) any acquisition by the
Company, (3) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by
the Company or any entity controlled by the Company, or (4) any acquisition pursuant to a transaction
which complies with clauses (A), (B) and (C) of paragraph (iii) of this definition;

	 
	 	(ii)	 	A change in the composition of the Board of Directors of the Company (the “Board”) such that the
individuals who, as of the date of this Agreement, constitute such board of directors (such Board will
be hereinafter referred to as the “Incumbent Board”) cease for any reason to constitute at least a
majority of the Board; provided, however, for purposes of this definition any individual who becomes a
member of the Board subsequent to the date of this Agreement, whose election, or nomination for
election by the Company’s stockholders, was approved by a vote of at least a majority of those
individuals who are members of the Board and who were also members of the Incumbent Board (or deemed to
be such pursuant to this proviso) will be considered as though such individual were a member of the
Incumbent Board; and provided further, that any such individual whose initial assumption of office
occurs as a result of either an actual or threatened election contest (as such terms are used in Rule
14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation
of proxies or consents by or on behalf of a Person other than the Board will not be so considered as a
member of the Incumbent Board;

 

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	 	(iii)	 	Consummation of a reorganization, merger or consolidation or sale or other disposition of all or
substantially all of the assets of the Company or the acquisition by the Company of assets or stock of
another entity (“Corporate Transaction”); excluding, however, such a Corporate Transaction following
which (A) all or substantially all of the individuals and entities who are the beneficial owners,
respectively, of the Outstanding Common Stock and Outstanding Voting Securities immediately prior to
such Corporate Transaction beneficially own, directly or indirectly, more than fifty percent (50%) of,
respectively, the outstanding shares of Common Stock, and the combined voting power of the then
outstanding voting securities entitled to vote generally in the election of directors, as the case may
be, of the corporation resulting from such Corporate Transaction (including, without limitation, a
corporation which as a result of such transaction owns the Company or all or substantially all of the
Company’s assets either directly or through one or more subsidiaries) in substantially the same
proportions, as their ownership immediately prior to such Corporate Transaction, of the Outstanding
Common Stock and Outstanding Company Securities, as the case may be, (B) no Person (other than the
Company, or any employee benefit plan (or related trust) of the Company or such corporation resulting
from such Corporate Transaction) beneficially owns, directly or indirectly, twenty percent (20%) or
more of, respectively, the outstanding shares of common stock of the corporation resulting from such
Corporate Transaction or the combined voting power of the outstanding voting securities of such
corporation entitled to vote generally in the election of directors except to the extent that such
ownership existed prior to the Corporate Transaction, and (C) individuals who were members of the
Incumbent Board at the time of the execution of the initial agreement or of the Board action providing
for such Corporate Transaction constitute at least a majority of the members of the board of directors
of the corporation resulting from such Corporate Transaction; or

	 
	 	(iv)	 	The approval by the stockholders of the Company of a complete liquidation or dissolution of the
Company;

	 	(d)	 	Any sale or other issuance of any equity interest, shares of capital or other securities of the Company;

	 
	 	(e)	 	Any declaration, accrual, set aside or payment of any dividend or other distribution in respect of any
equity interest or any shares of capital stock or other securities of the Company or any repurchase or
redemption of any equity interest or any shares of capital stock or other securities of the Company; or

	 
	 	(f)	 	Any agreement, commitment or offers of the Company, whether or not in writing, to take any of the
actions prohibited by clauses (a) through (e);

provided however, that neither the consummation of the transactions
contemplated by this Agreement, the Exchange Transaction, nor any of the other
transactions contemplated hereby will be deemed to be a “Change of Control” or
otherwise prohibited by the covenants contained in this SECTION 3.3..

	3.4	 	The Grantor will cause Xiangrui and each of its subsidiaries to preserve intact the
business and management organization of Xiangrui and all of its subsidiaries.

	 

Article IV. EVENTS OF DEFAULT AND TERMINATION

	4.1	 	Events of Default. The occurrence at any time with respect to a Party (the “Defaulting
Party”) of any of the following events will constitute an event of default (an “Event of
Default”) with respect to such Party:

	 	(a)	 	Failure to Pay or Deliver. The failure by a Party to make, when due,
any payment under this Agreement or deliver the Option Shares in
accordance with this Agreement, if such failure is not remedied on or
before the third (3rd ) Business Day after notice of such
failure is given to the Defaulting Party.

	 	(b)	 	 Breach of Agreement. The failure by a Party to comply with or perform
any agreement, covenant or obligation (other than a failure described
in SECTION 4.1. (a), which will be governed by SECTION 4.1. (a)) to be
complied with or performed by such Party in accordance with this
Agreement if such failure is not remedied on or before the tenth
(10th ) Business Day after notice of such failure is given
to the Defaulting Party.

 

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	 	(c)	 	Bankruptcy. A Party (1) is dissolved (other than pursuant to a
consolidation, amalgamation or merger); (2) becomes insolvent or is
unable to pay its debts or fails or admits in writing its inability
generally to pay its debts as they become due; (3) makes a general
assignment, arrangement or composition with or for the benefit of its
creditors; (4) institutes or has instituted against it a proceeding
seeking a judgment of insolvency or bankruptcy or any relief under any
Bankruptcy Law, or a petition is presented for its winding-up or
liquidation, and in the case of any such proceeding or petition
instituted or presented against it, such proceeding or petition (A)
results in a judgment of insolvency or bankruptcy or the entry of an
order for relief or the making of an order for its winding-up or
liquidation or (B) is not dismissed, discharged, stayed or restrained
in each case within thirty (30) days of the institution or
presentation thereof; (5) has a resolution passed for its winding-up,
official management or liquidation (other than pursuant to a
consolidation, amalgamation or merger); (6) seeks or becomes subject
to the appointment of an administrator, provisional liquidator,
conservator, receiver, trustee, custodian or other similar official
for it or for all or substantially all of its assets; (7) has a
secured party take possession of all or substantially all of its
assets or has a distress, execution, attachment, sequestration or
other legal process levied, enforced or sued on or against all or
substantially all of its assets and such secured party maintains
possession, or any such process is not dismissed, discharged, stayed
or rescinded, in each case within thirty (30) days thereafter; (8)
causes or is subject to any event with respect to it that, under
applicable Law, has an analogous effect to any of the events described
in clauses (1) through (7); or (9) takes any action in furtherance of,
or indicating its consent to, approval of, or acquiescence in, any of
the foregoing acts.

	4.2	 	Termination.

	 	(a)	 	If at any time an Event of Default with respect to a Party has
occurred and is continuing, the other Party may terminate this
Agreement and deem the Expiration Date to have occurred by giving
written notice to the Defaulting Party specifying the relevant Event
of Default.

	 
	 	(b)	 	Unless otherwise terminated pursuant to SECTION 4.2. (a), this
Agreement will terminate on the earlier of the Expiration Date and the
date on which one hundred percent (100%) of the Option Shares have
been transferred and conveyed to the Optionee hereunder.

Article V. MISCELLANEOUS PROVISIONS

	5.1	 	Further Assurances. Each Party will execute and/or cause to be delivered to the other Party
such instruments and other documents, and will take such other actions, as such other Party
may reasonably request for the purpose of carrying out or evidencing any of the transactions
contemplated by this Agreement.

	5.2	 	Notices. Any notice or other communication required or permitted to be delivered to any Party
will be in writing and will be deemed properly delivered, given and received upon dispatch by
hand, courier or express delivery service with receipt confirmed by signature of the
addressee, to the address set forth beneath the name of such Party below (or to such other
address as such Party may specify in a written notice given to the other Party):

	 	 	 
	If to the Grantor to:

	 	Ruixing Industry Park
	 

	 	Room 206, Building #6, Unit #3,
	 

	 	#17 Pengjizhen Guodao,
	 

	 	Dongping County, Shandong Province, 271509
	 

	 	Attention: Guangxiang Meng
	 

	 	c/o Chongxin Xu
	 
	 	 
	If to the Optionee to:

	 	Shandong Xiangrui Pharmacy Co., Ltd.
	 

	 	Pengji Town, Dongping County, Shandong Province
	 

	 	Attention: Huang Lingfa

 

6

 

	5.3	 	Time of The Essence. Time is of the essence of this Agreement.

	5.4	 	Headings, Gender and Usage. The headings contained in this Agreement are for convenience of
reference only, will not be deemed to be a part of this Agreement and will not be referred to
in connection with the construction or interpretation of this Agreement. For purposes of this
Agreement: (a) the words “include” and “including” will be taken to include the words,
“without limitation;” and (b) whenever the context requires, the singular number will include
the plural, and vice versa; and each of the masculine, feminine and neuter genders will refer
to the others.

	5.5	 	Governing Law and Language. This Agreement, including all matters of construction, validity
and performance, will in all respects be governed by, and construed in accordance with, the
laws of the State of New York (without giving effect to principles relating to conflict of
laws). This Agreement is written in English and the English language will govern any
interpretation of this Agreement.

	5.6	 	Venue and Jurisdiction. If any legal proceeding or other legal action relating to this
Agreement is brought or otherwise initiated, the venue therefore will be in Hong Kong, which
will be deemed to be a convenient forum. Each of the Parties hereby expressly and irrevocably
consents and submits to the jurisdiction of the courts in Hong Kong.

	5.7	 	Interpretation. Each Party acknowledges that it has participated in the drafting of this
Agreement, and any applicable rule of construction to the effect that ambiguities are to be
resolved against the drafting party may not be applied in connection with the construction or
interpretation of this Agreement.

	5.8	 	Successors and Assigns. Each of the Parties may assign this Agreement or any rights or
obligations hereunder without the prior written consent of each other Party. This Agreement is
binding upon, inures to the benefit of and is enforceable by the Optionee, the Grantor and
their respective successors and assigns.

	5.9	 	Waiver.

	 	(a)	 	No failure on the part of any Person to exercise any power, right,
privilege or remedy under this Agreement, and no delay on the part of
any Person in exercising any power, right, privilege or remedy under
this Agreement, will operate as a waiver of such power, right,
privilege or remedy; and no single or partial exercise of any such
power, right, privilege or remedy will preclude any other or further
exercise thereof or of any other power, right, privilege or remedy.

	 
	 	(b)	 	No Person will be deemed to have waived any claim arising out of this
Agreement, or any power, right, privilege or remedy under this
Agreement, unless the waiver of such claim, power, right, privilege or
remedy is expressly set forth in a written instrument duly executed
and delivered on behalf of such Person; and any such waiver will not
be applicable or have any effect except in the specific instance in
which it is given.

	5.10	 	Entire Agreement; Amendment. This Agreement sets forth the entire understanding of the
Parties relating to the subject matter hereof and supersedes all prior agreements and
understandings among or between any of the parties relating to the subject matter thereof. Any
term of this Agreement may be amended only with the written consent of each Party.

	5.11	 	Severability. In the event that any provision of this Agreement, or the application of any
such provision to any Person or set of circumstances, will be determined to be invalid,
unlawful, void or unenforceable to any extent, the remainder of this Agreement, and the
application of such provision to Persons or circumstances
other than those as to which it is determined to be invalid, unlawful, void or
unenforceable, will not be impaired or otherwise affected and will continue to be valid and
enforceable to the fullest extent permitted by law.

	5.12	 	Counterparts. This Agreement may be executed in several counterparts, each of which will
constitute an original and all of which, when taken together, will constitute one agreement.

[Signature Page to Follow]

 

7

 

IN WITNESS WHEREOF, the Parties have caused this Option Agreement to be executed and delivered
as of the date first set forth above.

	 	 	 	 	 
	“GRANTOR”

	 	“OPTIONEE”	 	 
	CHONGXIN XU

	 	BINGLONG QIAO	 	 
	 
	 	 	 	 
	/s/

	 	/s/	 	 
	 

Name: Chongxin Xu

	 	 

Name: Binglong Qiao
	 	 

	 	 	 
	Attachments:
	 	 
	 
	Exhibit A

	 	Certain Definitions
	Exhibit B

	 	Form of Option Exercise Notice

 

8

 

EXHIBIT A

CERTAIN DEFINITIONS

For purposes of this Agreement (including this Exhibit A):

“Bankruptcy Law” means any Law of any jurisdiction relating to bankruptcy, insolvency, corporate
reorganization, company arrangement, civil rehabilitation, special liquidation, moratorium,
readjustment of debt, appointment of a conservator, trustee or receiver, or similar debtor relief.

“Board” is defined in SECTION 3.3. (c)(ii).

“Business Day” means a day on which the commercial banks located in Hong Kong are open for regular
business.

“Change of Control” is defined in SECTION 3.3. (c).

“Company” is defined in SECTION 3.3.

“Corporate Transaction” is defined in SECTION 3.3. (c)(iii).

“Effective Date” is defined in the Preamble.

“Encumbrance” means any lien, pledge, hypothecation, charge, mortgage, security interest,
encumbrance, equity, trust, equitable interest, claim, preference, right of possession, lease,
tenancy, license, encroachment, covenant, infringement, interference, order, proxy, option, right
of first refusal, preemptive right, community property interest, legend, defect, impediment,
exception, reservation, limitation, impairment, imperfection of title, condition or restriction of
any nature (including any restriction on the transfer of any asset, any restriction on the receipt
of any income derived from any asset, any restriction on the use of any asset and any restriction
on the possession, exercise or transfer of any other attribute of ownership of any asset).

“Exchange Act” is defined in SECTION 3.3. (c)(i).

“Exchange Agreement” is defined in the Recitals.

“Exchange Shares” is defined in the Recitals.

“Exchange Transaction” is defined in the Recitals.

“Exercise Date” is defined in SECTION 1.3.

“Exercise Notice” is defined in SECTION 1.3.

“Expiration Date” is defined in SECTION 1.2.

“Governmental Body” means any: (a) nation, principality, state, commonwealth, province,
territory, county, municipality, district or other jurisdiction of any nature; (b) federal, state,
local, municipal, foreign or other government; (c) governmental or quasi-Governmental Body of any
nature (including any governmental division, subdivision, department, agency, bureau, branch,
office, commission, council, board, instrumentality, officer, official, representative,
organization, unit, body or Entity and any court or other tribunal); (d) multi-national
organization or body; or (e) individual, Entity or body exercising, or entitled to exercise, any
executive, legislative, judicial, administrative, regulatory, police, military or taxing authority
or power of any nature.

 

9

 

“Grantor” is defined in the Preamble.

“Incumbent Board” is defined in SECTION 3.3. (c)(ii).

“Law” means any national, federal, state, local, municipal, foreign or other law, statute,
legislation, constitution, principle of common law, resolution, ordinance, code, edict, decree,
proclamation, treaty, convention, rule, regulation, ruling, directive, pronouncement, requirement,
specification, determination, decision, opinion or interpretation issued, enacted, adopted, passed,
approved, promulgated, made, implemented or otherwise put into effect by or under the authority of
any Governmental Body.

“Option Period” is defined in SECTION 1.2.

“Option Price” is defined in SECTION 1.4. (a).

“Option Right” is defined in SECTION 1.1.

“Option Shares” is defined in SECTION 1.1.

“Optionee” is defined in the Preamble.

“Outstanding Common Stock” is defined in SECTION 3.3. (c)(i).

“Outstanding Voting Securities” is defined in SECTION 3.3. (c)(i).

“Party” and “Parties” are defined in the Preamble.

“Person” means an individual, a corporation, a partnership, an association, a trust or other entity
or organization, including a government or political subdivision or an agency or instrumentality
thereof, except as used in SECTION 3.3(c)(i), (ii) and (iii), where its meaning is defined
in SECTION 3.3. (c)(i).

“Shell Company” is defined in the Recitals.

“WFOE” is defined in the Recitals.

“Xiangrui” is defined in the Preamble.

 

10

 

EXHIBIT B

FORM OF OPTION EXERCISE NOTICE

[Date]

Ruixing Industry Park

Room 206, Building #6, Unit #3,

#17 Pengjizhen Guodao,

Dongping County, Shandong Province, 271509

Attention: Guangxiang Meng

	 	 	 
	Re:

	 	Option Agreement dated May 13,2011 (the “Option Agreement”), between
Binglong Qioa (the “Optionee”) and Chongxin Xu (the “Grantor”)

Dear Sir:

In accordance with SECTION 1.3 of the Option Agreement, the Optionee hereby provides this
notice of exercise of the Option Right in the manner specified below:

	 	(a)	 	The Optionee hereby exercises his Option Right with respect to the
Option Shares pursuant to the Option Agreement.

	 
	 	(b)	 	The Optionee will pay the sum of US$ 400 to the Grantor.

	 
	 	(d)	 	Pursuant to this exercise, the Grantor will deliver to
                    
the Option Shares in accordance with the instructions
attached hereto.

Dated:                     , ______

	 	 	 
	 

	 	 
	 

	 	[Optionee]

 

11

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