Dong-A Pharmaceutical Co Ltd (000640 KS) Calls on Kang-Korea Alcohol Nominees at October 31 EGM to Disclose Any Agreements or Understandings They Have Regarding Their Possible Service as Dong-A Directors





    --  M.S. Kang Had Personally Borrowed 2bn Won In 2004 And Committed To
Make His Lender A Director And A Priority Supplier To Dong-A

    --  Dong-A Labels Such Conduct "Reprehensible -- A Breathtaking Breach"
Of Mr. Kang's Fiduciary Responsibilities

    SEOUL, SOUTH KOREA, October 18 /CNW/ - Dong-A Pharmaceuticals Co Ltd
(000640 KS), the largest Korean pharmaceutical company, issued the following
open letter to the Kang-Korea Alcohol nominees seeking control of Dong-A's
Board of Directors at the October 31, 2007 EGM:

    October 18, 2007

    AN OPEN LETTER TO MOON-SEOK KANG, KOREA ALCOHOL INDUSTRIES AND THEIR
DIRECTOR NOMINEES AT THE OCTOBER 31 EGM: YONG SEOK JEE, SUN KEUN PARK, EUN-SUB
JUNG, JOON-HAENG LEE AND JEONG SAM PARK:

    Gentlemen:

    We were stunned to discover that Moon-Seok Kang, the former CEO and
current Director of Dong-A Pharmaceutical, who, with Korea Alcohol Industries,
is attempting to seize control of Dong-A Pharmaceutical's Board of Directors,
entered into a loan agreement on September 22, 2004 under which he personally
borrowed 2 billion Won, interest-free, from the CEO of a Dong-A supplier. As
part of the loan, Mr. Kang committed to make his lender a registered director
of Dong-A Pharmaceutical as well as of one of its subsidiaries and to make his
lender's company a priority supplier to Dong-A.

    This loan document, executed while Mr. Kang was still formally CEO of
Dong-A, provides that all amounts due, plus a penalty of 600 million Won, will
be immediately payable if Mr. Kang fails to meet the commitments described
above or is late in making an installment payment.

    Mr. Kang committed to making his lender a Director of the subsidiary by
September 22, 2006 and of Dong-A Pharmaceutical itself by September 22, 2008.
The lender was not made a director of the subsidiary and we do not know what
effect that had on the loan.

    In our view, Mr. Kang's loan arrangements are reprehensible -- a
breath-taking breach of his fiduciary responsibilities to Dong-A
Pharmaceutical, its shareholders, employees, customers and suppliers. By
committing to put someone on the Board and make his company a priority
supplier or face significant personal liability, Mr. Kang put his own
interests ahead of those of everyone else to whom he owed loyalty.

    We believe that the commitment to make his lender a Director of Dong-A
explains why Mr. Kang sought the October 31 EGM - to seize control of the
Board in order to ensure he would be able to nominate his lender for election
at next year's AGM.

    Messrs. Jee, Park, Jung, Lee and Park: given these circumstances, you
must answer the following questions for our shareholders who will be voting on
the very important issue of turning over control of the Board to you, Korea
Alcohol and Mr. Kang at the October 31 EGM:

    --  Do you have any arrangements, agreements or understandings with Mr.
Kang or anyone else regarding your service as a possible Board member of
Dong-A Pharmaceutical?

    --  Do you believe that your honor is served by continuing to serve as
one of Mr. Kang's nominees?

    Korea Alcohol Industries, its other Directors and management: given these
circumstances you also must tell our shareholders before the October 31 EGM:

    --  What arrangements, agreements or understandings do you have with Mr.
Kang regarding your joint efforts to seize control of Dong-A's Board of
Directors?

    --  Would Mr. Kang's conduct be acceptable at Korea Alcohol? What steps
would you take if one of your employees had entered into such a loan?

    --  Do you believe that your honor is served by working with Mr. Kang?

    Please provide let our shareholders know as soon as possible the answers
to these vitally important questions.

    A copy of the loan agreement is attached for your information.

    Sincerely,

    Won Bae Kim Representative Director & CEO

    
    ENGLISH TRANSLATION OF KOREAN LANGUAGE ORIGINAL

                 NOTARY ATTORNEY'S OFFICE XXXX (LETTER HEAD)

                                CERTIFICATION

                            PROMISSORY NOTE (IOU)

    In The Sum of money twenty billion Won (In the amount of 2,000,000,000
     Won)

    I borrow the aforementioned amount in accordance with the conditions,
     as stated in the attached agreement.

                           September 22, 2004

        Borrower:          Moon Seok Kang (Resident I.D. No. (xxxxxx)-
                            (xxxxxxx))
                           744-5 Hannam-Dong, Yongsan-Ku, Seoul
                           /sealed/

        To (xxx) (Creditor's Name)

                                  AGREEMENT

    Creditor:              (xxx) (Resident I.D. No. ...)
                           Address

    Debtor:                Moon Seok Kang (Resident I.D. No. (xxxxxx)-
                            (xxxxxxx))
                           744-5 Hannam-Dong, Yongsan-Ku, Seoul

    (xxxxxxxx) ("Creditor" hereafter) and Moon Seok Kang ("Debtor"
     hereafter) agree to the following terms on the credit and debt:

    1. On September 22, 2004, Creditor lends two billion (2,000,000,000)
     Won to the Debtor and Debtor acknowledges his obligation for the
     debt.

    2. Interest on the above loan is interest-free.

    3. Debtor shall repay the loan in 5 installments through September 22,
     2009 in accordance with the attached schedule "Loan Repayment
     Promise."

    4. Debtor, in compensation for the interest-free debt, shall commit
     himself to make Creditor a registered director by September 22, 2006
     of a subsidiary of Dong-A Pharmaceutical Co., Ltd and to commit
     himself to make Creditor a registered director of Dong-A
     Pharmaceutical Co., Ltd. by September 22, 2008. Also, Debtor shall
     cooperate so that Creditor's (company) can become a priority supplier
     of its products to Dong-A Pharmaceutical Co., Ltd.

    5. Debtor promises to faithfully perform the aforementioned items on
     paragraphs 3 and 4, and, in collateral of such, agrees to register
     Collateral Security Rights in the amount of 2.6 billion
     (2,600,000,000) Won at the maximum, on Debtor's forest land property
     located at 111 Weolmoon-Ri San, Wabu-Eup, Namyangjoo-City.

    6. If Debtor is late in his payment of the debt, as stated on
     paragraph 3, even once, or does not perform even 1 condition, as
     stated on paragraph 4, Debtor shall be forfeited the privileges of
     installment payment on the debt as described on paragraph 3.

    7. If Debtor loses his privileges of installment payment as a result
     of his violation of terms on paragraph 3 and 4, Debtor shall be
     liable for the penalty of 6 hundred million (600,000,000) Won to
     Creditor. In such case, without Debtor's consent, Creditor shall
     exercise the aforementioned Collateral Security Rights in order to
     obtain the credit of 2.6 billion (2,600,000,000) Won, which is the
     total of the aforementioned loan and the aforementioned penalty.

    8. Creditor and Debtor agree that Seoul Central District Court shall
     be the competent court if there is any dispute arising out of this
     Agreement.

    9. For the proof of this Agreement, Creditor and Debtor shall each
     keep 1 copy of the Agreement.

                           September 22, 2004
                           Creditor: (xxx) /seal/
                           Debtor: Moon Seok Kang /seal/
    

    
                            LOAN REPAYMENT PROMISE
                                                      (Unit: thousand Won)
    Dates               Items                Repayment    Cumulative Total
                                              Amounts
    ----------------------------------------------------------------------
    September 22, 2004  Debt                              2,000,000
    ----------------------------------------------------------------------
    September 22, 2005  1st Installment
                         Repayment           200,000      1,800,000
    ----------------------------------------------------------------------
    September 21, 2006  2nd Installment
                         Repayment           300,000      1,500,000
    ----------------------------------------------------------------------
    September 21, 2007  3rd Installment
                         Repayment           500,000      1,000,000
    ----------------------------------------------------------------------
    September 22, 2007  4th Installment
                         Repayment           500,000      500,000
    ----------------------------------------------------------------------
    September 22, 2009  5th Installment
                         Repayment           500,000      0
    ----------------------------------------------------------------------
    

    CERTIFICATION

    I ((xxxxxx)) (Notary Attorney) witnessed Debtor Moon Seok Kang, stated on
the above Promissory Note, signing or sealing and verified the individual's
identity with his Resident Identification Card/Driver's License (Passport).

    Dated September 20, 2004 Notary Attorney ((xxxxx)) /s/ & /seal/

    Additional information regarding the October 31, 2007 EGM can be found at
www.protectdonga.com.




For further information:

For further information: Dong-A Pharm. Co., Ltd. Theodore Kim,
+82-2-920-8061

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