FORMOF INDEPENDENT DIRECTOR AGREEMENT

THIS INDEPENDENT DIRECTOR AGREEMENT (the “Agreement”) is made as of the _____ day of July, 2010 and is by and between Bohai Pharmaceuticals Group, Inc., a Nevada corporation (the “Company”), and _________(the “Director”).

WHEREAS, the Board of Directors of the Company (the “Board of Directors”) desires to appoint the Director to perform the duties of an “independent” director (within the meaning of the rules of the U.S. Securities and Exchange Commission (the “SEC”)), and the Director desires to be so appointed for such position and to perform the duties required of such position in accordance with the terms and conditions of this Agreement.

NOW, THEREFORE, in consideration for the above recited promises and the mutual promises, agreements and covenants of the Company and the Director contained herein, the adequacy and sufficiency of which are hereby acknowledged, the Company and the Director hereby agree as follows:

1.           DUTIES.  The Company requires that the Director be available to perform the duties of an independent director customarily related to this function as may be determined and assigned by the Board of Directors of the Company and as may be required by the Company’s constituent instruments, including its certificate or articles of incorporation, bylaws and its corporate governance and board committee charters, each as amended or modified from time to time, and by applicable law, including, without limitation, the Nevada Revised Statutes (the “NRS”) and the rules and regulations of the SEC and any exchange or quotation system on which the Company’s securities may be traded from time to time.  The Director agrees to devote as much time as is necessary to perform completely the duties as an independent director of the Company, including duties as a member of the Audit Committee and such other committees as the Director may hereafter be appointed to.  The Director will perform such duties described herein in accordance with the general fiduciary duty of directors arising under the NRS.

2.           TERM.

(a)           Except as provided for in Section 2(b), the term of this Agreement shall commence as of the date of the Director’s appointment by the Board of Directors of the Company and shall continue until the expiration of the Director’s term or his death, incapacity, removal or resignation.

(b)           It is acknowledged and agreed that the Director shall serve for an initial period ending on three months after date first written above, (the “Initial Period”).  At any time prior to the conclusion of the Initial Period, the Chairman of the Board of Directors may, on behalf of the Company and in his discretion, request that the Director tender his resignation from the Board of Directors, effective immediately, and if so requested, the Director shall offer such resignation immediately.  If the Director’s service on the Board of Directors is terminated in accordance with this Section 2(b), the Director shall forfeit his rights hereunder to receive any compensation from the Company and this Agreement shall terminate (expect for those provisions which expressly survive termination).

 

3.           COMPENSATION.  For all services to be rendered by the Director in any capacity hereunder, the Company agrees to: (i) pay the Director a cash fee of $[    ] per annum with the first year’s payment due quarterly in arrears on the last day of each fiscal quarter of the Company (i.e., March 31, June 30, September 30 and December 31) commencing September 30, 2010, and (ii) following the conclusion of the Initial Period, and provided this Agreement is not terminated pursuant to the Section 2(b), issue to the Director a 5 year non-qualified option to purchase [    ] shares of resticted common stock of the Company at a price equal to $[    ] per share, which option shall contain a cashless exercise feature.  Such fee and any other compensation of the Director may be adjusted from time to time as agreed by the parties or as determined by the Compensation or other similar committee of the Board of Directors.

4.           EXPENSES.  In addition to the compensation provided in paragraph 3 hereof, the Company will reimburse the Director for pre-approved reasonable business related expenses incurred in good faith in the performance of the Director’s duties for the Company, including, without limitation, the cost of round trip business class airfare to China from the United States and back at least one time per year for an in person board meeting.  Such payments shall be made by the Company upon submission by the Director of a signed statement itemizing the expenses incurred.  Such statement shall be accompanied by sufficient documentary matter to support the expenditures.

5.           CONFIDENTIALITY.  The Company and the Director each acknowledge that, in order for the intents and purposes of this Agreement to be accomplished, the Director shall necessarily be obtaining access to certain confidential information concerning the Company and its affairs, including, but not limited to, business methods, information systems, financial data and strategic plans which are unique assets of the Company (as further defined below, the “Confidential Information”) and that the communication of such Confidential Information to third parties could irreparably injure the Company and its business.  Accordingly, Director agrees that, during his association with the Company and thereafter, he will treat and safeguard as confidential and secret all Confidential Information received by him at any time and that, without the prior written consent of the Company, he will not disclose or reveal any of the Confidential Information to any third party whatsoever or use the same in any manner except in connection with the business of the Company and in any event in no way harmful to or competitive with the Company or its business.  For purposes of this Agreement, “Confidential Information” means any information not generally known to the public or recognized as standard industry practice, any trade secrets, know-how, development, manufacturing, marketing and distribution plans and information, inventions, formulas, methods or processes, whether or not patented or patentable, pricing policies and records of the Company (and such other information normally understood to be confidential or otherwise designated as such in writing by the Company), all of which Director expressly acknowledges and agrees shall be confidential and proprietary information belonging to the Company.  Upon termination of his association with the Company, Director shall return to the Company all documents and papers relating to the Company, including any Confidential Information, together with any copies thereof, or certify that he has destroyed all such documents and papers.  Furthermore, Director recognizes that the Company has received and in the future will receive confidential or proprietary information from third parties subject to a duty on the Company’s part to maintain the confidentiality of such information and, in some cases, to use it only for certain limited purposes.  Director agrees that Director owes the Company and such third parties, both during the term of Directors association with the Company and thereafter, a duty to hold all such confidential or proprietary information in the strictest confidence and not to, except as is consistent with the Company’s agreement with the third party, disclose it to any person or entity or use it for the benefit of anyone other than the Company or such third party, unless expressly authorized to act otherwise by an officer of the Company.  Director agrees that his obligations under this Section 5 are necessary and reasonable in order to protect the Company and its business, and expressly agrees that monetary damages would be inadequate to compensate the Company for any breach of this Section 5.  Accordingly, Director agrees and acknowledges that any such violation or threatened violation will cause irreparable injury to the Company and that, in addition to any other remedies that may be available, in law, in equity or otherwise, the Company shall be entitled to seek injunctive relief against the threatened breach of this Agreement or the continuation of any such breach, without the necessity of proving actual damages and without the necessity of posting bond or other security.

 

6.           TERMINATION.  With or without cause, the Company and the Director may each terminate this Agreement at any time upon thirty (30) days written notice, and, provided that such termination is following the Initial Period, the Company shall be obligated to pay to the Director the compensation and expenses due up to the date of the termination.  Nothing contained herein or omitted herefrom shall prevent the shareholders of the Company from removing the Director with immediate effect at any time for any reason.

7.           INDEMNIFICATION; INSURANCE.

(a)           The Company shall indemnify, defend and hold harmless the Director, to the full extent allowed by the law of the State of Nevada, and as provided by, or granted pursuant to, any charter provision, bylaw provision, agreement (including, without limitation, the Indemnification Agreement executed herewith), vote of stockholders or disinterested directors or otherwise, both as to action in the Director’s official capacity and as to action in another capacity relating to the Company’s business while holding such office.  The Company and the Director are executing an indemnification agreement in the form attached hereto as Exhibit A.

(b)           During the term of this Agreement the Company shall at all times obtain and maintain a policy or policies of director and officer liability insurance, in an amount not less than $3,000,000, of which the Independent Director will be named as an insured, providing the Independent Director with coverage for all amounts and expenses arising in any way as a result of Independent Director’s service or appointment as a director of the Company. The Company shall promptly (and in any event within 2 business days) notify the Independent Director of any lapse in coverage under such policy or policies or any material change or modification to such policy or policies. It being agreed that the Company shall use commercially reasonable efforts to increase such coverage to $5,000,000 if: (i) the Company lists on a national exchange or (ii) the Company raises material capital with third parties through the issuance of securities

8.           AMENDMENTS; WAIVERS.  No provision of this Agreement may be waived or amended except in a written instrument signed, in the case of an amendment, by the Company and the Director or, in the case of a waiver, by the party against whom enforcement of any such waiver is sought.  No waiver of any breach with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent breach or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right.

9.           NOTICES.  All notices, requests, demands and other communications provided in connection with this Agreement shall be in writing and shall be deemed to have been duly given at the time when hand delivered, delivered by express courier, or sent by facsimile (with receipt confirmed by the sender’s transmitting device) in accordance with the contact information provided on the signature page hereto or such other contact information as the parties may have duly provided by notice.

10.        GOVERNING LAW.  This Agreement shall be interpreted in accordance with, and the rights of the parties hereto shall be determined by, the laws of the State of Nevada without reference to that state’s conflicts of laws principles.

11.        ASSIGNMENT.  The rights and benefits of the Company under this Agreement shall be transferable, and all the covenants and agreements hereunder shall inure to the benefit of, and be enforceable by or against, its successors and assigns.  The duties and obligations of the Director under this Agreement are personal and therefore the Director may not assign any right or duty under this Agreement without the prior written consent of the Company.

12.        MISCELLANEOUS.  If any provision of this Agreement shall be declared invalid or illegal, for any reason whatsoever, then, notwithstanding such invalidity or illegality, the remaining terms and provisions of the this Agreement shall remain in full force and effect in the same manner as if the invalid or illegal provision had not been contained herein.

13.        HEADINGS; CONSTRUCTION.  The section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.  The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party.

14.        NO THIRD-PARTY BENEFICIARIES.  This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other person or entity.

15.        SEVERABILITY.  If any provision of this Agreement is held to be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Agreement shall not in any way be affected or impaired thereby and the parties will attempt to agree upon a valid and enforceable provision that is a reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Agreement.

 

16.        ENTIRE AGREEMENT.  Subject to the provisions of the NRS and the Company’s articles of association and bylaws, this Agreement and the exhibit hereto sets forth the entire agreement of the parties with respect to its subject matter and supersedes all prior agreements, promises, covenants, arrangements, communications, representations or warranties, whether oral or written, by any officer, employee or representative of any party to this Agreement with respect to such subject matter.

17.        COUNTERPARTS. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one instrument.  Execution and delivery of this Agreement by facsimile or other electronic signature is legal, valid and binding for all purposes.

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IN WITNESS WHEREOF, the parties hereto have caused this Independent Director Agreement to be duly executed and signed as of the day and year first above written.

 

This INDEMNIFICATION AGREEMENT is made as of the _____ day of July, 2010 and is by and between Bohai Pharmaceuticals Group Inc., a Nevada corporation (the “Company”), and [                 ] (hereinafter referred to as the “Indemnitee”).

WHEREAS, Section 78.7502 of the Nevada Revised Statutes and the Bylaws of the Company empower the Company to indemnify its officers and directors and do not, by themselves, limit the extent to which the Company may indemnify persons serving as its officers and directors;

WHEREAS, the Indemnitee has agreed to serve as an independent director of the Company, provided, and on the expressed condition, that he is furnished with the indemnification provided for herein;

WHEREAS, the Company believes that the interest of the Company and its current and future shareholders would be best served by a combination of: (i) such director and officer liability insurance as the Company may obtain pursuant to the Company’s obligations hereunder and (ii) a contract with Indemnitee to indemnify him to the fullest extent permitted by law (as in effect on the date hereof, or, to the extent any amendment may expand such permitted indemnification, as hereafter in effect) against personal liability for actions taken in the performance of his duties to the Company; and

WHEREAS, the Company and the Indemnitee desire to enter into this Agreement in order to satisfy the foregoing premises.

NOW, THEREFORE, in consideration for the above recited promises and the mutual promises, agreements and covenants of the Company and the Indemnitee contained herein, the adequacy and sufficiency of which are hereby acknowledged, the Company and the Indemnitee hereby agree as follows:

1.           CERTAIN DEFINITIONS. In addition to the other capitalized terms defined herein, the following capitalized terms shall have the following meanings:

(a)           “Expenses” means, for the purposes of this Agreement, all direct and indirect costs of any type or nature whatsoever (including, without limitation, any reasonable and customary fees and expenses of Indemnitee’s counsel, accountants and other experts and other reasonable and customary out-of-pocket costs) actually and reasonably incurred by the Indemnitee in connection with the investigation, preparation, defense or appeal of a Proceeding; provided, however, that Expenses shall not include judgments, fines, penalties or amounts paid in settlement of a Proceeding.

(b)           “Proceeding” means, for the purposes of this Agreement, any threatened, pending or completed action or proceeding, whether civil, criminal, administrative or investigative (including an action brought by or in the right of the Company) in which Indemnitee may be or may have been involved as a party or otherwise, by reason of the fact that Indemnitee is or was a director of the Company, by reason of any action taken by him or of any inaction on his part while acting as such director or by reason of the fact that he is or was serving at the request of the Company as a director, officer, employee or agent of another foreign or domestic corporation, partnership, joint venture, trust or other enterprise, or was a director or officer of the foreign or domestic corporation which was a predecessor corporation to the Company or of another enterprise at the request of such predecessor corporation, whether or not he is serving in such capacity at the time any liability or expense is incurred for which indemnification or reimbursement can be provided under this Agreement.

2.           INDEMNIFICATION.

(a)           THIRD PARTY PROCEEDINGS.  The Company shall indemnify Indemnitee against Expenses, judgments, fines, penalties or amounts paid in settlement (if the settlement is approved in advance by the Company) actually and reasonably incurred by Indemnitee in connection with a Proceeding (other than a Proceeding by or in the right of the Company) if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in the best interests of the Company, and, with respect to any criminal action or proceeding, had no reasonable cause to believe Indemnitee’s conduct was unlawful.  The termination of any Proceeding by judgment, order, settlement, conviction, or upon a plea of NOLO CONTENDERE or its equivalent, shall not, of itself, create a presumption that Indemnitee did not act in good faith and in a manner which Indemnitee reasonably believed to be in the best interests of the Company, or, with respect to any criminal Proceeding, had no reasonable cause to believe that Indemnitee’s conduct was unlawful.