Share Pledge Agreement

EXH. 10.8



DIRECTOR SHARE PLEDGE AGREEMENT



DIRECTOR SHARE PLEDGE AGREEMENT (this " Agreement "), dated as of February 12, 2007, made by Song Zhenghong, an individual with a principal place of residence at __________________________________ (the " Pledgor "), in favor of S. Michael Rudolph, in his capacity as collateral agent (in such capacity, the " Collateral Agent ") for the "Buyers" (as defined below) party to the Subscription Agreement, dated as of even date herewith (as amended, restated or otherwise modified from time to time, the " Subscription Agreement ").



WITNESSETH :





WHEREAS, Lotus Pharmaceuticals, Inc. (the " Company ") and each party listed as a "Buyer" on the Schedule of Buyers attached thereto (collectively, the " Buyers ") are parties to a Subscription Agreement, pursuant to which the Company shall be required to sell, and the Buyers shall purchase or have the right to purchase the "Notes" (as defined therein);



WHEREAS, the Pledgor has executed and delivered to the Buyers a Letter Agreement dated the date hereof (the " Letter Agreement ") requiring the Pledgor to deliver to the Collateral Agent, 6,708,000 (as adjusted for stock splits, stock dividends, reverse stock splits, reclassifications, recapitalizations and similar events) shares of the common stock of the Company owned by the Pledgor in the event of a payment default under the Notes (an " Event of Default ");



WHEREAS, it is a condition precedent to the Buyers entering into the Subscription Agreement that the Pledgor shall have executed and delivered to the Collateral Agent for the benefit of itself and the Buyers this Agreement to secure all of the Pledgor's obligations under the Letter Agreement;



NOW, THEREFORE, in consideration of the premises and the agreements herein and in order to induce the Collateral Agent to perform under the Subscription Agreement, the Pledgor agrees with the Collateral Agent as follows:



SECTION 1. Definitions and Rules of Interpretation .



(a) Definitions . Reference is made to the Subscription Agreement, and for a statement of terms thereof. All terms used in this Agreement which are defined in the Subscription Agreement or in Article 8 or Article 9 of the Uniform Commercial Code (the " Code ") as in effect from time to time in the State of New York and which are not otherwise defined herein shall have the same meanings herein as set forth therein; provided , that terms used herein which are defined in the Code as in effect in the State of New York on the date hereof shall continue to have the same meaning notwithstanding any replacement or amendment of such statute except as the Collateral Agent may otherwise determine. In the event that any such term is defined in both the Subscription Agreement and the Code, the definition of such term in the Subscription Agreement shall control.






(b) Rules of Interpretation . Except as otherwise expressly provided in this Agreement, the following rules of interpretation apply to this Agreement: (i) the singular includes the plural and the plural includes the singular; (ii) "or" and "any" are not exclusive and "include" and "including" are not limiting; (iii) a reference to any agreement or other contract includes permitted supplements and amendments; (iv) a reference to a law includes any amendment or modification to such law and any rules or regulations issued thereunder; (v) a reference to a person includes its permitted successors and assigns; and (vi) a reference in this Agreement to an Article, Section, Annex, Exhibit or Schedule is to the Article, Section, Annex, Exhibit or Schedule of this Agreement.



SECTION 2. Pledge and Grant of Security Interest . As collateral security for all of the Obligations (as defined in Section 3 hereof), the Pledgor hereby pledges and assigns and grants to the Collateral Agent a continuing security interest in, and Lien on, all of his right, title and interest in and to the following (collectively, the " Pledged Collateral "):



(a) The Pledgor's shares of common stock of the Company as set forth in Schedule I , and all future, issued and outstanding shares of capital stock, or other equity or investment securities of, or partnership, membership, or joint venture interests in, the Company, whether now owned or hereafter acquired by the Pledgor and whether or not evidenced or represented by any stock certificate, certificated security or other instrument, together with the certificates representing such equity interests, all options and other rights, contractual or otherwise, in respect thereof and all dividends, distributions, cash, instruments, investment property and any other property (including, but not limited to, any stock dividend and any distribution in connection with a stock split) from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the foregoing and all cash and noncash proceeds thereof (collectively, the " Pledged Shares ");



(b) all present and future increases, profits, combinations, reclassifications, and substitutes and replacements for all or part of the foregoing Collateral heretofore described;



(c) all investment property, financial assets, securities, capital stock, other equity interests, stock options and commodity contracts of the Pledgor, all notes, debentures, bonds, promissory notes or other evidences of indebtedness payable or owing to the Pledgor, and all other assets now or hereafter received or receivable with respect to the foregoing;



(d) all securities entitlements of the Pledgor in any and all of the foregoing; and



(e) all proceeds (including proceeds of proceeds) of any and all of the foregoing;



in each case, whether now owned or hereafter acquired by the Pledgor and howsoever his interest therein may arise or appear (whether by ownership, security interest, Lien, claim or otherwise).



SECTION 3. Security for Obligations . The security interest created hereby in the Pledged Collateral constitutes continuing collateral security for the due performance and observance by the Pledgor of any and all of his obligations under the Letter Agreement (the " Obligations "):





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SECTION 4. Delivery of the Pledged Collateral .



(a) All other Pledged Collateral from time to time or required to be pledged to the Collateral Agent pursuant to the terms of this Agreement or the Subscription Agreement (the " Additional Collateral ") shall be delivered to the Collateral Agent promptly upon receipt thereof by or on behalf of the Pledgor. All such certificates and instruments shall be held by the Collateral Agent 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 reasonably satisfactory to the Collateral Agent. If any Pledged Collateral consists of uncertificated securities, unless the immediately following sentence is applicable thereto, the Pledgor shall cause the Collateral Agent (or its designated 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 the Collateral Agent (or its designated custodian, nominee or other designee) with respect to such securities without further consent by the Pledgor. If any Pledged Collateral consists of securities entitlements, the Pledgor shall transfer such securities entitlements to the Collateral Agent (or its designated custodian, nominee or other designee) or cause the applicable securities intermediary to agree that it will comply with entitlement orders by the Collateral Agent (or its designated custodian, nominee or other designee) without further consent by the Pledgor.



(b) Promptly upon the receipt by the Pledgor of any Additional Collateral, a Pledge Amendment, duly executed by the Pledgor, in substantially the form of Annex I hereto (a " Pledge Amendment "), shall be delivered to the Collateral Agent, in respect of the Additional Collateral which is or are to be pledged pursuant to this Agreement and the Subscription Agreement, which Pledge Amendment shall from and after delivery thereof constitute part of Schedules I hereto. The Pledgor hereby authorizes the Collateral Agent to attach each Pledge Amendment to this Agreement and agrees that all certificates listed on any Pledge Amendment shall for all purposes hereunder constitute Pledged Collateral and the Pledgor shall be deemed upon delivery thereof to have made the representations and warranties set forth in Section 5 with respect to such Additional Collateral.



(c) If the Pledgor shall receive, by virtue of the Pledgor's being or having been an owner of any Pledged 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 Pledged Collateral, or otherwise, (iii) dividends payable in cash (except such dividends permitted to be retained by the Pledgor pursuant to Section 7 hereof) or in securities or other property or (iv) dividends, distributions, cash, instruments, investment property and other property in connection with a partial or total liquidation or dissolution or in connection with a reduction of capital, capital surplus or paid-in surplus, the Pledgor shall receive such stock certificate, promissory note, instrument, option, right, payment or distribution in trust for the benefit of the Collateral Agent, shall segregate it from the Pledgor ?s other property and shall deliver it forthwith to the Collateral Agent in the exact form received, with any necessary endorsement and/or appropriate stock powers duly executed in blank, to be held by the Collateral Agent as Pledged Collateral and as further collateral security for the Obligations.





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SECTION 5. Representations and Warranties . The Pledgor represents and warrants as follows:



(a) The Pledged Shares have been duly authorized and validly issued, are fully paid and nonassessable and the holders thereof are not entitled to any preemptive first refusal or other similar rights. All other shares of stock constituting Pledged Collateral will be, when issued, duly authorized and validly issued, fully paid and nonassessable.



(b) The Pledgor is and will be at all times the legal and beneficial owner of the Pledged Collateral free and clear of any Lien, security interest, option or other charge or encumbrance except for the security interest and Lien created by this Agreement or any Permitted Liens.



(c) The exercise by the Collateral Agent of any of its rights and remedies hereunder will not contravene any law or any contractual restriction binding on or affecting the Pledgor or any of the properties of the Pledgor and will not result in or require the creation of any Lien, security interest or other charge or encumbrance upon or with respect to any of the properties of the Pledgor other than pursuant to this Agreement and the other Transaction Documents, as defined in the Subscription Agreement, the " Transaction Documents ").



(d) No authorization or approval or other action by, and no notice to or filing with, any governmental authority is required to be obtained or made by the Pledgor for (i) the due execution, delivery and performance by the Pledgor of this Agreement, (ii) the grant by the Pledgor, or the perfection, of the security interest and Lien purported to be created hereby in the Pledged Collateral or (iii) the exercise by the Collateral Agent of any of its rights and remedies hereunder, except as may be required in connection with any sale of any Pledged Collateral by laws affecting the offering and sale of securities generally.



(e) This Agreement creates a valid security interest and Lien in favor of the Collateral Agent in the Pledged Collateral, as security for the Obligations. The Collateral Agent ?s having possession of the certificates representing the Pledged Shares and all other certificates, instruments and cash constituting Pledged Collateral from time to time results in the perfection of such security interest and Lien. Such security interest and Lien is, or in the case of Pledged Collateral in which the Pledgor obtains rights after the date hereof, will be, a perfected Lien, subject only to the Permitted Liens. All action necessary or desirable to perfect and protect such security interest and Lien has been duly taken, except for the Collateral Agent's having possession of certificates, instruments and cash constituting Pledged Collateral after the date hereof.





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SECTION 6. Covenants as to the Pledged Collateral . So long as any Obligations shall remain outstanding, the Pledgor will, unless the Collateral Agent shall otherwise consent in writing:



(a) keep adequate records concerning the Pledged Collateral and permit the Collateral Agent, or any designees or representatives thereof at any time or from time to time to examine and make copies of and abstracts from such records;



(b) at the Pledgor's expense, promptly deliver to the Collateral Agent a copy of each material notice or other material communication received by the Pledgor in respect of the Pledged Collateral;



(c) at the Pledgor's expense, defend the Collateral Agent's right, title and security interest in and to the Pledged Collateral against the claims of any Person;



(d) at the Pledgor's expense, at any time and from time to time, promptly execute and deliver all further instruments and documents and take all further action that may be necessary or desirable or that the Collateral Agent may reasonably request in order to (i) perfect and protect, or maintain the perfection of, the security interest and Lien purported to be created hereby, (ii) enable the Collateral Agent to exercise and enforce its rights and remedies hereunder in respect of the Pledged Collateral or (iii) otherwise effect the purposes of this Agreement, including, without limitation, delivering to the Collateral Agent irrevocable proxies in respect of the Pledged Collateral;



(e) not sell, assign (by operation of law or otherwise), exchange or otherwise dispose of any Pledged Collateral or any interest therein except as expressly permitted by the Subscription Agreement;

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