Factoring Agreement

No.: HPBL201000001           
 
Transferor（Party A）：Kunming Shenghuo Pharmaceutical (group) Co., Ltd.
 
Place of Residence: No.2 Jing You Road, Kunming Economic and Technological
Development Zone
 
Post Code：650217
 
Legal Representative（person-in-charge）：Gui Hua Lan
 
Fax：+86-871-7282620
 
Tel：+86-871-7282628
 
Contact Person: Qiong Hua Gao
 
Fax：+86-871-7282620
 
Tel：+86-871-7282608
 
Transferee（Party B）: Heping Branch, China Construction Bank
 
Place of Residence：No. 300 South Ring Road
 
Post Code：650000
 
Person-in-charge: Tao Yang
 
Fax：+86-871-3541015
 
Tel：+86-871-3577038
 
Contact Person: Yan Qiu Zhang
 
Fax：+86-871-3541015
 
Tel：+86-871-3577038

 
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Whereas:
Party A sells products or provides service in the term of credit sale, and
applies for the factoring service provided by Party B. According to relevant
laws and rules, after the fully amicable negotiation between the two parties,
the two parties entered into this contract to comply with it jointly.

Chapter I   Definition of Terms

Article I  Unless otherwise stipulated by both parties, the definition of all
those terms described under this Contract are as below:

1. Recourse Factoring indicates that Party B, as the factor, will provide Party
A with comprehensive financing services based on the transfer of accounts
receivable under business contract from Party A to Party B, and those services
consist of cash advance from factoring and management of accounts receivable.
The so-called recourse means that if the accounts receivable transferred to
Party B could not be collected for any reason, Party B is entitle to claim a
recourse against Party A, who shall pay back the cash advance to Party B under
no conditions. Party A is also required to pay all those fees such as interest
of cash advance, process of invoices and management of accounts receivable, etc.

2. Business Contract means a sales or service contract giving rise to accounts
receivable which has been signed between Party A and its customer.

3. Customer means a party under the Business Contract who purchases goods or
services from Party A and is liable for the payment of purchase.

4. Credit to Accounts Receivable is abbreviated as Accounts Receivable.  It
means the legal and valid rights of credit and other rights and interests that
Party A has against its Customer and/or Third Party arising from Party A’s sale
of goods or provision of service in terms of credit sale, which include but not
limited to the principal of accounts receivable, interest, penalty, liquidated
damages, and all of those credits related to the principal credits of guaranty
and insurance, and other interests related to the principal credits.

5. The Maximum Amount of Factoring Cash Advance indicates the maximum amount of
factoring cash advance accepted and provided by Party B to Party A upon its
application.

6.  Factoring Cash Advance indicates that under Party A’s application, Party B
provides a certain percentage of cash advance to it before the expiration date
of accounts receivable, as prescribed in this Contract, to the qualified
accounts receivable which have been transferred to Party B.

 
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7.  Percentage of Factoring Cash Advance indicates the ratio of amount of
factoring cash advance agreed to provide to Party A regarding to the single
qualified account receivable which has been transferred to Party B to the amount
of this account receivable.

8.  Interest of Factoring Cash Advance indicates Party B collects fees on use of
funds from Party A for the provided factoring cash advance.

9.  Qualified Accounts Receivable indicates those accounts receivable
transferred from Party A to Party B and satisfy such conditions as below: 1)
arising from normal and legal trade; 2) be valuated at and paid by RMB as a
general rule, where both Party A and its Customers (or one of those customers)
registered in Chinese free trade zone, the accounts receivable could be valuated
at and paid by foreign currencies; 3) legally owned by Party A and could be
transferred according to law, have not been pledged, trusted or transferred to
any third party, without any defects in rights; 4) Party A has performed its
responsibility for shipment of goods as prescribed in the Business Contract and
will continue to perform its responsibilities hereunder; 5) other conditions as
required by Party B. Party B could provide factoring cash advance for those
qualified accounts receivable as prescribed in this Contract.

10. Unqualified Accounts Receivable indicates those accounts receivable fail to
satisfy certain conditions, or /and those accounts receivable have been
reassigned when situations prescribed in this Contract happened (no matter
whether those reassigned accounts receivable be determined as qualified accounts
receivable or not).

11. Business Invoice indicates a written notice delivered from Party A to Party
B, describing the amount of accounts receivable and expiration date and
requiring a payment at maturity.

12. Management of Accounts Receivable indicates the activities of Party B to
provide related information and other materials concerning the accounts
receivable on fixed days or from time to time, and to assist Party A in the
management of accounts receivable under this Contract.

13. Indirect Payment indicates situations that the Customer fails to make
payment to the account designated or accepted by Party B regarding to any
accounts receivable which have been transferred to Party B.

14. Dispute under this Contract indicates situations that the Customer refuses
to accept the goods/service or invoices for any reason, or raises a defense,
anti-recourse or setoff against related accounts receivable for any reason; or
the Customer fails to make a timely and full payment to the accounts receivable
for any reason; or the appearance of third person claiming his right to the
accounts receivable.

 
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15. Shipment of Goods indicates the delivering of goods or services from Party A
to the Customer as prescribed in the Business Contract or by commonly used means
of delivering.

16. Repurchase of Accounts Receivable is also called as reassignment of accounts
receivable, indicating that when situations as prescribed in this Contract
happened, Party A is liable for the repurchase of those accounts receivable
transferred to Party B at the price as described under no conditions.

17. Expiration date of Accounts Receivable indicates the date as determined by
the Business Contract or invoices which are corresponding to those accounts
receivable or the date of payment which has been changed as agreed by Party B.

18. Working Day indicates public business day excluding legal holidays and rest
day.

19. Day indicates natural day.

Chapter II  The Effectiveness, Change and Cancellation of the Maximum Amount of
the Factoring Cash Advance

Article II  The maximum amount of factoring advance ratified by party B to party
A is RMB 28,800,000 at one time, with an effective period from the effective
date of this contract to May 4, 2011.

Detail information such as the percentage of cash advance to different Customers
will be subject to the enclosed List of Recourse Factoring Amount. This list
constitutes a part of this Contract and shall be amended as agreed by both
parties. Those amendments will be subject to additional contract reached by both
parties.

Article III  The maximum amount of factoring cash advance verified by Party B is
a revolving amount, under which, Party A could continue to do the recourse
factoring business within valid period, and the date on which Party B provides
Party A with factoring cash advance shall remain in force until the valid period
expires.

Article IV  Party B is entitled to unilaterally change (include but not limited
to increase or decrease the quota, extend or shorten the valid period of quota
or cancel the quota, etc.) the verified maximum amount of factoring cash advance
depending on the varied conditions of the Customer or Party A’s credit standing
and records of customer’s payment. Party B shall inform Party A in written upon
it made the decision of change. The decision of change the maximum amount of
factoring cash advance will take force upon its delivering to Party A.

 
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Article V  Party A could submit a written application to Party A if it intends
to adjust the maximum amount of factoring cash advance. If Party B agrees to do
so, it will inform Party A in written for the decision of change.

Chapter III   Choice of Service Type of Factoring Business and the Transfer of
Accounts Receivable

Article VI  Under this Contract, both parties agree to choose the undisclosed
recourse factoring, indicating that prior to the delivery of factoring cash
advance from Party B to Party A, Party B will not send the Notice on the
Transfer of Accounts Receivable to the Customer temporarily, however, it retains
the right of sending the Notice at any time according to its own judgment.

Article VII  Within the valid period of this Contract, both parties agree that
Party A shall transfer all of those accounts receivable arising from the sale of
goods/provision of services to certain customer (as defined in Appendix I,
including the amendments to Appendix I) in the term of credit sale to Party B at
any time. At the termination of this Contract, even if Party B stops providing
Party A with factoring cash advance, as long as Party B haven’t get back the
factoring cash advance, interest for cash advance, fees on invoice processing
and accounts receivable management, Party A still is liable for transferring the
accounts receivable to Party B.

Article VIII  Unless otherwise stipulated by both parties, at the transferring
of accounts receivable, Party A shall submit such documents as below to Party B
and responsible to finish the transferring:

1. In terms of the undisclosed recourse factoring where all of Party’s accounts
receivable from certain customer shall be transferred to Party B, Party A shall:
    1) Provide Party B with a Notice on the Transfer of Accounts Receivable
(All) which is acceptable to Party B and signed and sealed by Party A;
    2) Send the Customer with a Notice on Change of Account Number, ordering
customer to make the payment to designated account for factoring collection;
    3) Every time after making a shipment to the customer shall provide Party B
with a Confirmation Letter on the Transfer of Accounts Receivable and enclose
the list of confirmation;
    4) Every time after making a shipment to the customer, shall provide Party B
with a Notice of Confirmation on Transferred Accounts Receivable which is
acceptable by Party B and signed and sealed by Party A.

2. Party A shall provide Party B with such documents as below regardless of any
type of recourse factoring:
    1) Business Contract;
    2) Invoices which are identical with the original (include but not limited
to VAT invoice or other types of invoice regulated by the State or other
proforma invoice acceptable by Party B);

 
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    3) Certificate of transport, inspection certificate or other certificates
proving the performance of Business Contract, such as the copy of bill of
lading, etc;
4) Other documents required by Party B.

Article IX  In terms of the undisclosed recourse factoring, Party could choose
not to send the Notice on the Transfer of Accounts Receivable (All) and Notice
of Confirmation on Transferred Accounts Receivable, or the Notice on the
Transfer of Accounts Receivable (Certain) which provided by Party A for Party
B’s reservation to the customer temporarily, however, Party B retains its right
of requiring Party A to inform its customer at any time or send the above
notices directly to the customer depending on its own judgment.

Article X If Party A has the duty to have its full accounts receivable from
certain customer transfer to Party B, when this Contract comes into force, all
of those accounts receivable from the customer as listed in Appendix I shall be
transferred to Party B; if both parties sign an additional contract to add new
customers into the Appendix I, when this additional contract comes into force,
Party A shall transfer the newly added accounts receivable from the customer to
Party B. The transfer of accounts receivable shall be registered by Party B in
the accounts receivable Pledge Registration Publicity System of People’s Bank of
China and Party A shall promise to provide assistance for the registration
(include but not limited to sign related registration contracts as per the
requirement of Party B).

Article XI  After the accounts receivable have been transferred to Party B, it
shall enjoy all the rights formerly enjoyed by Party A prior to the transfer,
which include but not limited to rights to all principals of those accounts
receivable and the full interest, penalty interest, compound interest,
liquidated damages related to those accounts receivable and right to other fees
payable, right of compulsory collection, right of action, right of detain, right
of stopping transit, right of endorsing negotiable bills, right of transferring
those accounts receivable and all the other rights owned by Party A in case the
goods or services were rejected. Under no condition should the transfer of
accounts receivable be explained as Party B has taken any duty between Party A
and its customer under the Business Contract. Party A shall continue to
performance all of its duties under the Business Contract.

Chapter IV  Management of Accounts Receivable

Article XII Where Party B accepts Party’s application and agrees to provide
service of accounts receivable management, its shall provide Party B with China
Construction Bank accounts receivable Management Statements (Appendix 2) at
fixed date in order that related accounts could be reviewed between Party A and
its customer. Details on the time and type of providing the statements will be
subject to the provisions in Appendix 2, which constitutes a part of this
Contract. Both parties agree to amend the Appendix 2 under negotiation.

 
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Article XIII  Party A shall propose any of its disagreements on the statements
provided by Party B within 5 wording days after receiving the statements. Party
A agrees that even if it has no disagreement on the statements provided by Party
B, Party B still is entitled to perform accounting treatment according to
provisions under this Contract (include but not limited to Article XVII, XIX).

Article XIV  Where Party A proposes any disagreement on the statements provided
by Party A within the period as stipulated in Article XIII, both parties shall
cooperate with other and do the work of account checking.

Chapter V  Factoring Cash Advance

Article XV  Considering its own financial situation, Party A is allowed to
submit an application for factoring cash advance within the limit of maximum
amount for its premature and qualified accounts receivable which have been
transferred to Party B and agreed by whom to provide factoring cash advance
service.

Article XVI  Party A agrees that Party B is entitled to decide whether it will
accept the application for factoring cash advance and provide it or not. If
Party decides to accept the application, it will confirm the application
according to the terms, percentage, interest rate and time of measuring and
collecting the interest as prescribed in this Contract. After that, the
factoring cash advance will be put into Party A’s account which is opened at
Party B’s place, and the Factoring Cash Advance Acknowledgement will be issued
to Party A. The currency, amount, executive interest rate, correspondent invoice
and other information related to the factoring cash advance provided by Party B
will be subject to the Factoring Cash Advance Acknowledgement, which constitutes
a part of this Contract.

Chapter VI  Disbursement of Payments from Customer

Article XVII  In terms of Party B’s payments received from the customer, no
matter whether the customer has designated the account receivable to be paid off
or not, Party B is entitled to use the payment to deal with the account
receivable it considers need to be paid off at first.

To avoid doubts, no matter the accounts receivable designated by the customer’s
payment to be paid off are qualified accounts receivable or not (even if the
customer ordered to pay off the unqualified AR when making the payment), and no
matter whether Party B has provided Party A with the factoring cash advance to
the AR which has been designated by the payment to be paid off or not, Party B
is entitled (but has no responsibility) to this payment to setoff the factoring
cash advance it has provided to Party A for any customer’s any account
receivable and corresponding unpaid interest on factoring cash advance, fees on
accounts receivable management (if any), fees on invoice processing (if any),
overdue penalties (if any) and other fees Party B is entitled to collect. Any
remaining money will be put into Party A’s account which is opened at Party B’s
place. In addition, in terms of the account receivable disagreed by the
customer, even if Party B has done accounting treatment as above mentioned, it
is entitled to do it again and reassign this account receivable to Party A as it
remains to be paid off, requiring Party A to repurchase this account receivable.

 
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Party A agrees that, in terms of the factoring cash advance has provided by
Party B for any customer’s any account receivable and the interest and overdue
penalty arising from the factoring cash advance, Party B is entitled to require
Party A to pay them back and promise not to propose any disagreement provided
that the above mentioned payments hadn’t been paid in time and full amount.

Article XVIII  In terms of any accounts receivable have been transferred to
Party B, Party A shall inform Party B immediately after it received any cash,
check, bank draft, bank note or other payment instrument designated to pay off
those accounts receivable. At the time when Party A receives an indirect
payment, the fiduciary relationship is formed immediately between both parties,
in which Party B becomes the consignor and beneficiary and Party A becomes the
consignee without payment, Party A holds the above mentioned cash or payment
instrument for Party B’s benefit. At the time when Party A receives the account
receivable paid in cash or bill from the debtor, such cash or bill turns to be
the property of Party B automatically, and Party A shall immediately deliver
related funds to Party B or transfer corresponding bill endorsement to Party B.

When the trust property is influenced by situations of Party A’s file (or force
to file) for bankruptcy, claim of rights by third person or enforcement of
compulsory measures by judicial authorities before it is transferred to Party B,
Party A shall inform Party B immediately and actively suggest that the trust
property and related rights shall be owned by Party B; it shall also provide
other assistance as per Party B’s requirement for which to realize its right to
the trust property.

Any damage to the trust property caused by Party A’s failure in performing its
duty as a consignee, Party A shall be liable for the full compensation to Party
B; Where Party A fails to transfer the trust property to Party B in time, Party
B is entitled to require Party A to repurchase the account receivable as
prescribed in this Contract.

Those other trust matters not clearly described in this article will be handled
according to regulations of Trust Law of People’s Republic of China.

Article XIX  In case that the same customer has made the indirect payment over
three times (include three times), then Party B is entitled to declare that all
of such customer’s accounts receivable are unqualified accounts receivable (no
matter whether they were qualified accounts receivable or not), and it is also
entitled to require Party A to repurchase immediately all of those accounts
receivable which have been transferred to it.

 
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Chapter VII  The Adjustment, Dispute over and Repurchase of Accounts Receivable

Article XX  If Party A intends to do any form of deduction to the accounts
receivable which have been transferred to Party B for reasons of discount, price
reduction of goods, error correction, it shall submit an Application on the
Adjustment of Accounts Receivable to Party B for approval, and remain Party B to
make correspondent deduction to the transferred accounts receivable.

Article XXI  When the Application of Adjusting Account Receivable is submitted,
if the cash advance has been made to this account receivable, then Party A shall
pay back corresponding factoring cash advance and related unpaid interest as
prescribed below:

    1) If the cash advance was made according to the percentage of factoring
cash advance, then the amount shall be paid back will be the product of deducted
account receivable and percentage of factoring cash advance;
    2) if the cash advance was not made according to the percentage of factoring
cash advance, then the amount shall be paid back will be the difference of
amount of the factoring cash advance have been made by Party minus the product
of remaining account receivable after deduction and the percentage of factoring
cash advance.

The amount in Party A’s deposit account which is opened at Party B’s place shall
be sufficient to pay back the factoring cash advance and related unpaid
interest, and Party B is entitled to directly deduct them in this account.

Article XXII Party B shall send Party A a Notice of Dispute within a reasonable
term after it received the written notice of dispute from the customer; if the
customer directly proposes a dispute or submits a written notice of dispute to
Party A or Party A acknowledges that the customer may propose a dispute, it
shall notice Party B within one working day after it acknowledges a dispute or
received a written notice of dispute.

Article XXIII  No matter for what reason the customer proposes a dispute, and no
matter whether the resolution of dispute benefits Party A or not, Party B is
entitled to require Party A to repurchase the accounts receivable involved in
the dispute.

 
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Prior to the resolution of dispute, Party B is entitled to postpone providing
factoring cash advance to all of this customer’s accounts receivable involved in
the dispute. If Party B accepts the dispute proposed by the customer as
reasonable, then Party B is entitled to decide when to resume
providing factoring cash advance to the customer’s rest qualified accounts
receivable which have been transferred to it; if Party B considers the dispute
proposed by the customer as unreasonable, then Party B is entitled to terminate
providing factoring cash advance to the customer’s all accounts receivable which
have been transferred to it. If one customer proposes unreasonable disputes over
three times (include three times), then Party B is entitled to declare all of
this customer’s accounts receivable as unqualified accounts receivable (no
matter whether those accounts receivable have been confirmed as qualified
accounts receivable or not), it is also entitled to require Party A to
repurchase all of this customer’s accounts receivable which have been
transferred to it.

Article XXIV If Party B receives the reasonable dispute against Party A from the
customer (include one customer or several customers) over three times (include
three times), it is entitled to terminate providing Party A with factoring cash
advance and to require Party A to repurchase all of those accounts receivable
which have been transferred to it.

Article XXV  Should any following situation occur, Party B is entitled to
declare those accounts receivable involved as unqualified accounts receivable
(no matter whether those accounts receivable have been confirmed as qualified
accounts receivable or not), and it is also entitled to require Party A to
reassign those accounts receivable, repurchasing them under no condition:
    1. If the customer proposes a dispute over the account receivable, then
Party B is entitled to immediately require Party A to repurchase the account
receivable.
    2. No mater what caused Party B can not collect all the payments on the
expiration rate of transferred accounts receivable (include but not limited to
the customer proposes a dispute, or the customer did not make the payment for
any reason, etc.), Party B is entitled to require Party A to repurchase the
accounts receivable and to promise waiving any defense as well as performing its
duty of repurchasing.

    3. Where the situation of indirect payment as prescribed in Article XVIII
under this Contract happens and Party A fails to perform its duty.

    4. Where the situation of repurchasing as prescribed in this Contract
happens (includes but not limited to the situations as prescribed in Article
XIX, XXIII and XXIV).
    5. Where Party A breaches any provision of this Contract and Party B
requires a reassignment of the accounts receivable.

When the above mentioned situation of repurchasing happens, Party B is entitled
to decide whether to extend the repurchasing period for Party A or not. Deadline
of the extended repurchasing term is the fifteenth date after the date of
accounts receivable expires. However, Party B will not offer Party A with an
extended term on condition that the interest of factoring cash advance were paid
at a discount.

 
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Article XXVI  On condition that Party B requires Party A to repurchase the
accounts receivable according to this Contract, Party A is liable to do so
immediately at the price of the difference of factoring cash advance already
provided by Party B and part of the accounts receivable already collected from
the customer in addition to the sum of unpaid interest of factoring cash
advance, unpaid fees on accounts receivable management, unpaid fees on invoice
processing, overdue penalty and other fees for which Party B is entitled to
collect (include but not limited to the actual expenses on recourse occurred to
Party B). Party A agrees that, Party B is entitled to collect the above
mentioned amounts in any of Party A’s account which is opened within the system
of China Contraction Bank; In case that funds in Party A’s account are
insufficient for deduction, Party B is entitled to take any measure for
recourse, and Party promises not to defense for any reason and to bear all the
expenses occurred herein for Party B. Prior to Party A fulfills the above
mentioned payment or perform its duty of repurchasing, Party B remains to be the
creditor for those accounts receivable, enjoying all the rights related to them.
Party B will give back correspond accounts receivable to Party A once it has
fully performed its duty.

Chapter VIII  Fees on Factoring Services and Ways of Collection

Article XXVII  Party B is entitled to collect fees related to factoring services
according to the standard of collection as prescribed in this Contract or
accepted by both parties. Details of collection are as following:

   1. Fees on Accounts Receivable Management: Party B will collect the fees on
accounts receivable management from Party A at the rate of 5‰ of the face value
of each account receivable. It will be collected every time Party B sends Party
A with a Notice on the Transfer of Accounts Receivable or Confirmation Letter on
the Transfer of Accounts Receivable.
   2. Interest of Factoring Cash Advance: Party B will collect the interest
(include overdue penalty) of factoring cash advance already provided from the
date when the factoring cash advance is issued till the date when the accounts
receivable have been fully collected (exclude current date); on the occurrence
of reassignment of accounts receivable as prescribed in this Contract, the
interest shall be measured till the date when Party A makes a full payment for
the repurchase. Both parties choose following method to pay the interest and
determine the interest rate:

   1) At first, off the factoring cash advance, then collect interest on the
20th day of each month. The interest rate will be measured by day and will float
0% based on the benchmark interest rate to those loans of same term and at
similar level as published by People’s Bank of China on the date when each
factoring cash advance is issued.

        a) On condition that the factoring cash advance is issued in foreign
currency, the interest rate will be subject to the one described in the Drawing
of Factoring Cash Advance verified by Party B.

 
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The LIBOR and HIBOR indicate the London interbank offered rate and Hongkong
interbank offered rate, respectively.

   3. Fees on Invoice Processing: it charges RMB 200 for each invoice and will
be collected each time Party B sends Party A with a Notice on the Transfer of
Accounts Receivable or Confirmation Letter on the Transfer of Accounts
Receivable.
   4. Overdue Penalty: when performing this Contract, where Party A fails to
make full relevant payment to Party B as prescribed in this Contract, or fails
to make full payment for the repurchase in prescribed time, then Party A shall
pay the overdue penalty from the date of expiration. The overdue penalty will be
measured by day and collected by month, and its rate will be determined by:
    1) The rate of RMB overdue penalty will float by 50% based on the interest
rate of factoring cash advance.

Chapter IX  General Statements and Warranties

Both parties make following statements and warranties for each other:

Article XXVIII Both parties are duly organized and validly existing legal
entities and possess the full rights and authorizations necessary to sign and
perform those duties under this Contract.

Article XXIX  The signing and performance of this Contract between both parties
neither have violated any rules of laws and regulations nor have breached any
contracts.

Article XXX  This Contract constitutes the lawful, valid and legally bonding
duties for both parties.

Chapter X  Special Statements and Warranties of Party A

Party A hereby makes the following special statements and warranties to Party B:

Article XXXI Party A will timely provide Party B with all relevant materials,
documents and information as per the requirement of Party B, and promises that
all of those materials, documents and information provided are valid, true,
accurate and complete, no omission of any material fact; no existing of any
fraud, intention or fault causing Party B to make false or incomplete judgment
to Party A or the customer or underlying transaction.

 
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Article XXXII Party A promises to do business activities under the Business
Contract within the scope of normal operation. Each account receivable
transferred to Party B represents a true, lawful and goodwill sale of goods (or
services) and such a sale is not performed in methods of a sale on approval,
sale on a commission basis and sale on consignment or other methods. Party A
promises that those accounts receivable transferred to Party B are normal and
premature.

Article XXXIII  In the disclosed recourse factoring, Party A promised has sent
the Notice on the Change of Account Number to its customers, indicating and
assuring that customers will make payment to the exclusive account for factoring
collection.

Article XXXIV  Prior to the entering into of this Contract, there exists no such
dispute related to the Business Contract or this Contract or other dispute
between Party A and its Customer, and Party A has no unpaid debt or contingent
liabilities to its Customer. Any future dispute between Party A and its Customer
shall not affect the normal performance of this Contract.

Article XXXV  Party A has no association relationship with its Customer.
Association relationship include but not limited to affiliated relationship,
parent and subsidiary company, relationship of controlling and controlled,
sharing and shared, or controlled or managed by the same
company/person/management/group.

Article XXXVI  Party A promises to transfer all the rights to each account
receivable to Party B, including any right relevant to this account receivable
and rights of collecting interest, penalty or other fees from the customer.
Party A agrees that Party B enjoys all the rights formerly enjoyed by Party A
prior to the transfer, which include but not limited to rights of compulsory
collection, right of action, right of detain, right of stopping transit, right
of endorsing negotiable bills, right of transferring those accounts receivable
and all the other rights owned by Party A in case the goods or services were
rejected. Meanwhile, Party A promises that there exists no such duty
incompletely performed by any customer involved in this Contract; or even if
such duty exists, it is performing by Party A or will be performed as prescribed
in the Business Contract (include but not limited to pay transportation expenses
to its Customer and provide technical support, etc.) Party A promises that such
account receivable constitutes a duty bonding to its Customer and shall be paid
actually without intention of using it as offset, cross action, damage
indemnity, counter account, retention or other use of deduction.

Article XXXVII Party A promises that, the accounts receivable transferred to
Party B constitutes a valid transfer. Validity of the transfer of accounts
receivable include the effect of transfer that could confront against the claim
of right by third person, and will not be affected by Party A’s bankruptcy.

 
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Article XXXVIII  There exists no right defect in the right of credit to accounts
receivable transferred by Party A, include but not limited to: there exists no
limitation (include but not limited to legal, contract prescribed limitation) in
the right of credit to such accounts receivable transferred by Party A; Except
for Party B, Party A has never transferred and will never transfer such accounts
receivable to any third person; the accounts receivable is not set as mortgage,
pledge or other types of guaranty, or the property belonging to any trust; the
accounts receivable will not result in offset, cross action, damage indemnity,
counter account, retention or other use of deduction; after those accounts
receivable have been transferred to Party B, Party A has not right to dispose
them in any way (include but not limited to transfer, set as mortgage, pledge or
other types of guaranty, set as trust, etc.)

Article XXXIX There exists no right defect in the goods (or services) under the
Business Contract, include but not limited to: has not and will not be set as
mortgage, pledge or other types of guaranty; has not and will not be set as the
property belonging to any trust; has not and will not be detained or sealed up
by any party.

Chapter XI  Promises of Party A

Article XL  Where Party A shall transfer all of its certain customer’s accounts
receivable to Party B as prescribed in Article VII under this Contract, it is
required to do so after signing this Contract.

Article XLI  Party A may not suspend, terminate or change the Business Contract
or transfer this Contract or the rights arising from this Contract without the
consent of Party B. In terms of those accounts receivable have been transferred
to Party B, Party A has not right to dispose them in any way without the consent
of Party B, include but not limited to disposal, transfer and pledge, etc. Party
A shall inform Party B regarding to its transaction with certain customer and
provide detailed materials as per the requirement of Party B.

Article XLII On the occurrence of deterioration of the Customer’s financial
situation or the happening of merge, separation, reorganization and seal up of
property which could materially or maybe affect the collection of accounts
receivable, shall inform Party B in written immediately as of the date of
acknowledgement and assist Party B in remedies.

Article XLIII  Party A shall inform Party B immediately on condition that it has
changed the place of residence, mailing address, license of business, legal
representative or other matters. Party A shall inform Party B after it
acknowledges that its customer has changed those matters as above mentioned.

Article XLIV  Whether or not within the valid period of this Contract, if Party
B faces the recourse of customer or third person, or asked by which to bear any
duty or liability resulting from the accounts receivable transferred to it as
prescribed in this Contract, Party A agrees to bear all the liabilities and
indemnify all the damages suffered by Party B.

 
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Article XLV  Party A promises that anytime it receives any payment or bill
directly from any of its customer or any other party for those accounts
receivable that have been transferred to Party B, that is, on the occurrence of
indirect payment, Party A shall inform Party B immediately and deliver or
endorse it to Party B. Otherwise, Party B is entitled to ask Party A to
repurchase the accounts receivable, refuse to continue to provide factoring cash
advance to Party A, decrease even cancel the maximum amount of the factoring
cash advance, it is also entitled to setoff any of its duty to make payment to
Party A by the above mentioned amounts.

Article XLVI  If Party B performs its legal and/or contract prescribed right of
recourse to the customer, the method of recourse includes but not limited to
action, arbitration or application of compulsory enforcement, Party A must take
any necessary measures to assist Party B, include but not limited to initiates
an lawsuit, applies for an arbitration or a compulsory enforcement in its name,
or assist Party B in the lawsuit or arbitration, or assist Party B in the
application of compulsory enforcement, and bear relevant expenses actually
incurred to Party B.

Chapter XII  Event of Default and Its Treatment

Article XLVII  Should any of following situations occur, Party A shall be deemed
as violation of this Contract:
    1. Party A violates Chapter III under this Contract, regarding to relevant
provisions on the transfer of accounts receivable;
    2. Party A violates its duty of making statements and warranties as
prescribed in Chapter IX and X under this Contract, or violates its duty of
making promises as prescribed in Chapter XI;
    3. Party A refuses to perform relevant duty as prescribed in Chapter VII and
VIII under this Contract;
    4. Without the consent of Party B, Party A takes the following activities
which deemed by Party A could resulting in the decrease of financial status,
include but not limited to: any types of separation, merge and contract
operation in the course of restructuring of enterprise; dispose the assets in
methods of rent, sell, contracting, transfer or mortgage; decrease the
registered capital, restructuring or reorganization, change shareholders or the
affiliated relationship; provide guaranty for the benefit of third person or
bear any liability for the debt of third person;
    5. Any of following situations happened to Party A: fraud, dismiss,
bankruptcy, reorganization, in trust, external material violation of contract,
failure in performing mature debt or material infringing act; all or part of
property are damaged, or facing seal up, detaining, freeze, confiscate, auction,
sell off, acquisition, or have been occupied legally or illegally by other
person; be accused, claimed for indemnity, sanction or the debt has been
declared accelerating the maturity;
    6. Any of following conditions happened to Party A: deterioration of
financial status; transfer the assets and remove the funds to escape the
liabilities; loss of business reputation; possibility of losing the ability of
performing the liabilities;

 
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    7. The customer takes the following activities which deemed by Party A could
resulting in the decrease of financial status, include but not limited to: any
types of separation, merge and contract operation in the course of restructuring
of enterprise; dispose the assets in methods of rent, sell, contracting,
transfer or mortgage; decrease the registered capital, restructuring or
reorganization, change shareholders or the affiliated relationship; provide
guaranty for the benefit of third person or bear any liability for the debt of
third person;
    8. Any of following situations happened to the customer: fraud, dismiss,
bankruptcy, reorganization, in trust, external material violation of contract,
failure in performing mature debt or material infringing act; all or part of
property are damaged, or facing seal up, detaining, freeze, confiscate, auction,
sell off, acquisition, or have been occupied legally or illegally by other
person; be accused, claimed for indemnity, sanction or the debt has been
declared accelerating the maturity;
    9. Any of following conditions happened to the customer: deterioration of
financial status; significant change of main business or sources of income;
transfer the assets and remove the funds to escape the liabilities; loss of
business reputation; other conditions that could affect Party B’s ability of
timely collection of full accounts receivable;
    10. Party A violates the laws and regulations or other duties as prescribed
in this Contract.

Article XLVIII  Under conditions that Party A breaches the contract, Party B is
entitled to take following one or one more measures:
    1. Decrease or cancel the maximum amount of factoring cash advance, or
refuse to provide Party A with factoring cash advance, or immediately declare
those qualified accounts receivable as unqualified ones.
    2. Ask Party A to repurchase all or part of those accounts receivable that
have been transferred to Party B according to Article XXV and XXVI under this
Contract, also ask Party A to bear the damages suffered by Party B. Prior to
Party A makes a full payment to Party B, Party B remains to enjoy all the rights
to those accounts receivable as the creditor.
    3. Cancel the Contract unilaterally, suspend or terminate the Contract ahead
of schedule, and Party A shall pay back all or part of factoring cash advance
provided by Party B under this Contract as per Party B’s requirement; it shall
also pay Party B on expenses such as interest of factoring cash advance, fees on
accounts receivable management, fees on invoice processing and overdue penalty;
    4. Dispose the guaranteed property, and get the prior compensation from the
proceeds obtained from the disposal or take recourse against the guarantor.
    5.  Ask Party A to indemnify all the damages suffered by Party B due to
Party A’s breach of contract.
    6. Other indemnities permitted by law.

 
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Chapter XIII  Communication

Article XLIX  Unless otherwise stipulated by this Contract, any party shall make
written notice and/or document and send them to related parties’ addresses as
listed in the preamble of this Contract. Any party has changed its mailing
address shall inform another party in written as prescribed in this article.
Those communications of notices and documents between both parties shall be
deemed as delivered by hand delivery; or they shall be deemed as delivered three
days after express or registered mail delivery; or they shall be deemed as
delivered by fax after receiving the confirmation signal.

Chapter XIV  Effectiveness of Contract

Article L This Contract comes into force after the signing or sealing of legal
representatives, person-in-charge or authorized agent of both parties.

Chapter XV  Settlement of Dispute

Article LI For any dispute arising from the execution of this Contract, both
parties shall settle the dispute through friendly negotiation. Should the
dispute could not be settled by negotiation, the following method shall be
taken:
    1. File a suit with the people’s court where Party B’s place of residence
located and settle the dispute by litigation.

Article LII This Contract shall be applicable to the laws of People’s Republic
of China.

Chapter XVI  Other Matters

Article LIII  Party A will pay off Party B’s right of credit in following steps
without consideration of whether it is Party A to make active payment, or it is
Party B to collect the payment from the customer as prescribed in this Contract
or deduct the payment from Party A’s account or practice the right of offset:
    1. Expenses incurred to Party B for its realization of right of credit;
    2. Fees on invoice processing (if any) , fees on accounts receivable
management (if any) and other unpaid fees which should be paid by Party A to
Party B;
    3. Interest of factoring cash advance (include overdue penalty);
    4. Factoring cash advance.

Article LIV  Unless otherwise stipulated by this Contract, neither single party
is permitted to change the provisions of this Contract without the consent of
another party. One party shall inform another party in written for its intention
of amending any provision of this Contract and may make the amendment by getting
a written consent from another party.

 
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Article LV Unless otherwise stipulated by both parties, all of those expenses
related to this Contract and provisions under this Contract such as legal
service, insurance, evaluation, registration, custody, identification and public
notarization will be borne by Party A. All of those expenses incurred to Party B
for its realization of right of credit (include but not limited to fees on
litigation, arbitration, property security, business travel, execution,
evaluation, auction, public notarization, delivery, announcement, legal service,
etc.) will be borne by Party A.

Article LVI  Party A agrees that, Party B is entitled to query about Party A’s
credit status in the credit database which is established at the approval of
People’s Bank of China and credit information authorities or query to related
units and departments; Party A also permits Party B to provide the information
relating to itself to the credit database. Party A also agrees, Party B may
reasonably use and disclose the information relating to Party A for business
needs. The above mention reasonable utility and disclosure include but not
limited to: Party B is entitled to provide the information it get from Party A
to its headquarter, any branch under its headquarter, association or subsidiary
affiliated to its headquarter, including any employee, senior officer, director
and agent; and/or provide the information to third party in charge of broker,
trust, accounting, administration, computer or of other service or facility; and
deliver the information to any person who is accessible to the above mentioned
methods of data transmission.

Article LVII  Should any situation of breach of this Contract happen to Party A,
Party B is entitled to report this matter to relevant departments or units and
also entitled to practice public collection through news media.

Article LVIII  Unless there is reliable and definite evidence to the contrary,
any internal financial record relevant to Party B describing the amount of
factoring cash advance, interest of factoring cash advance, expenditure, payment
from the customer, distribution between the payment from customer and the
accounts receivable, and those documents and vouchers generated from the
transaction processing made or kept by Party B constitutes definite evidence to
effectively certify the relationship of right and duty between both parties.
Party A promises not to raise any disagreement due to the above mentioned
records, documents and vouchers are made or kept by Party B.

Article LIX  Those rights enjoyed by Party B under this Contract will not affect
and expel it from enjoying any right by laws and rules, and other contracts and
agreements. Any tolerant or concession to activities of breach of Contract or
delay of performance or any delay of exercising any right under this Contract
may not be deemed as waiving the rights or interests under this Contract or
permission to any activity of breach of Contract; neither would it limit or
prevent the continuing exercise of this right or any other right, nor would it
result in Party B’s bearing of duties and responsibilities to Party A.

 
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Article LX  Party A shall inform Party B in written for the change of mailing
address or way of contact, otherwise any damage due to failure in informing on
time shall be borne by Party A.

Article LXI  In terms of all of those accounts receivable belonging to Party A
under this Contract, Party B is entitled to deduct the correspondent payments in
RMB or other currencies from Party A’s account which is opened within the system
of China Contraction Bank, without informing Party in advance. Those premature
payments shall be deemed as mature ahead of schedule. Where the account currency
is different from the quote currency used by Party B, it will be translated
according to fixed exchange rate on the day when the money is deducted. Party A
is liable for assisting Party B in handling necessary procedures for foreign
exchange and purchase business, and the exchange rate risk will be borne by
Party A.

Article LXII  Any document involved in this Contract or document signed or
submitted according to this Contract ,such as list, appendix, bill and notice,
constitutes a part of this Contract and has the same legal force.

Article LXIII  This Contract is made out in four copies, two copies for each
party and each copy has the same legal force.

Article LXIV  Party A states that it has read through provisions of this
Contract. Party B has made relevant explanation to this Contract as per the
requirement of Party A. Party A has had a full understanding of the meaning of
provisions under this Contract as well as relevant legal effects.

Party A: Kunming Shenghuo Pharmaceutical (group) Co, Ltd.
 
Legal Representative or Authorized Representative (signature)：Qiong Hua Gao
 
Seal:
 
Date: May 14, 2010
 
Party B：Heping Branch, China Construction Bank
 
Person-in-charge or authorized representative (signature): Tao Yang
 
Seal:

Date: May 14, 2010

 
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