ABCS(2007)2002

Mortgage Contract

Mortagee (full name): Agricultural Bank of China, Kunming Shuanglong Branch

Mortgagor: Kunming Shenghuo Pharmaceutical (group) Co., Ltd

This Mortgage Contract is entered into by and between the two parties in
accordance with relevant Chinese laws and regulations for purpose of ensuring
that Kunming Shenghuo Pharmaceutical (group) Co., Ltd. will repay the loan under
the Loan Contract, dated May 11, 2010 between the above two parties.

1. Type and Amount of the Creditor’s Principal Claim

The creditor’s principal claim guaranteed is the loan borrowed for liquid
capital in the amount of RMB 17.6 Million.

2. The Scope of Guaranty of Mortgage

The scope of this guaranty of mortgage includes the amount of creditor’s
principal claim and the interest thereof, default fine, compensation for damage
and all kinds of relevant expenses on for the mortgagee to realize the
creditor’s claim and the mortgaged right.

3. Collateral

The mortgagor agrees on the mortgagor of Real estate and its land use right, as
to the details of collateral please find the List of Mortgage of Real Estate as
attached, which constitutes the integral part of this Contract and has same
legal force and effect as in the Contract; and
 
 
 

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The provisional price of the above mentioned collateral is RMB26.16
million while the terminal value will be determined by its actual disposing
price.

4. Covenants of the Mortgagor

4.1 The Mortgagor has obtained authorization necessary to enter into this
Contract pursuant to relevant regulations and procedures.

4.2 The full and undisputed ownership or disposition right of the collateral is
entitled to the mortgagor.

4.3 The collateral is negotiable or transferable according to law.

4.4 Such cases as the collateral has been sealed up, distrained or supervised
would not happen.

4.5 The mortgagor shall make a full and accurate disclosure to the extent that
the money and collateral such as tax in default, construction mortgages have
been mortgaged or rented.

4.6 The Mortgagor has obtained approval from co-owners of the right to be
pledged under this Contract.

4.7 During the term of mortgage, the mortgagor shall notify the mortgagee in
written for any of following cases:

4.7.1 The collateral has been sealed up, distrained, supervised or has been
taken other enforcement actions.

4.7.2 The mortgagor changed the capital structure or operation system, include
but not limited to contract operation, leasing, shareholding system
transformation, joint operation, merger, separation, partnership, asset
transferring, and etc.

4.7.3 The business licenses of the mortgagor has been cancelled or revoked, or
he is ordered to close down or was terminated for other causes.

 
 

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4.7.4 The mortgagor applies for bankruptcy, reorganization, reconciliation or is
the subject of bankruptcy and reorganization applications.

4.8 There is no existence of other cases that would affect the realization of
collateral.

5. Effect of the Collateral

The effect of collateral is extended to the ancillary component, incidental
right, subrogation of mortgage or other property and rights associated with the
collateral according to laws and regulations.

6. Management and Utility of the Collateral

6.1 The collateral under this Contract shall be kept by the mortgagor; the
mortgagor shall be liable for the management of utility of the collateral. And
the mortgagee shall be entitled to supervise and review how the collateral is
managed and used.

6.2 During the term of mortgage, the mortgagor may not grant or transfer, rent,
remortgage the collateral or dispose it in other ways without the written
approval of the mortgagee. Where the written approval is available, the proceeds
from the collateral disposition shall firstly be used to liquidate the secured
creditor’s principal claim and the escrow.

6.3 Where the collateral was damaged, lost, expropriated, or was owned by the
third party resulted from the affiliation, mixture or process of the collateral,
the mortgagor shall take active measures to prevent the loss from increasing,
meanwhile shall notify the mortgagee in written. The mortgagee is entitled to
obtain the indemnity at first priority. Where the performance term of the
secured creditor’s claim has not elapsed, the mortgagee is entitled to liquidate
the debt or to escrow in advance.

6.4 During the term of mortgage, where the value of collateral is decreased, the
mortgagee is entitled to ask the mortgagor resuming original value of the
collateral or offering a guaranty which is equivalent to the decreased value and
needs to be recognized by the mortgagee.

 
 

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7. Insurance of the Collateral

 
 7.1 The mortgagor shall effect the insurance for the collateral at the request
of the mortgagee and designate the mortgagee as the first beneficiary. The
original insurance document shall be delivered to the mortgagee for storage.

 
 7.2 The mortgagor shall be liable for the insurance premiums and pay it in full
amount and on time, and also shall perform other obligations under the insurance
contract (including the insurance document or other insurance certificate).
During the term of mortgage, where the mortgagor doesn’t pay the insurance
premiums or effect (or renew) the insurance contract on time, the mortgagee is
entitled to make advance payment of the insurance premiums or effect the
insurance contract on behalf of the mortgagor, while the mortgagor shall be
liable for those expenses. The mortgagor agrees that the mortgagee could collect
the above mentioned expenses from its account opened at the mortgagee.

 
 7.3 During the term of mortgage, the mortgagor may not unilaterally or
negotiate with the insurer to change or terminate the insurance contract without
the written approval of mortgagee; neither should he waive the right to
insurance claims nor the right to claim compensation against the third party.

 
 7.4 During the term of mortgage, where an insurance incident incurred to the
collateral, the mortgagor shall immediately inform the insurer and mortgagee,
and shall be responsible for claiming compensation. Where the mortgagee doesn’t
perform his obligation of notification or claiming compensation, causing the
loss of the mortgagee, the mortgagor shall be liable for indemnity.

 
 

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8. Registration of Mortgage

 
 8.1 The mortgagor shall register this Mortgage Contract with relevant
registration authorities within 5 days from the date of its execution; all of
those certificates, mortgage registration document associated with the
collateral shall be kept by the mortgagee.

 
 8.2 During the term of mortgage, where the registration needs to be changed,
the mortgagor shall be liable to do so.

 
 8.3 During the term of mortgage, where the mortgaged right is transferred by
the mortgagor according to this Contract; the mortgagor shall be in assistance
with the mortgagee and transferee on the change of registration.

9. Transfer of Mortgaged Right

Where part of the creditor’s claim is transferred by the mortgagee, he is
entitled not to transfer the corresponding mortgaged right.

10. Realization of Mortgaged Right

10.1 Under any of the following circumstances, the mortgagee has the right to
exercise the mortgaged right and is entitled to obtain the payment at first
priority by the agreed value of collateral with mortgagor  or by the funds of
auction, and sale of the collateral.  If the funds are not sufficient to cover
all mortgage right according to this contract, the Mortgagee can use the funds
to recover the loan principal, interest, penalty, compound interests and fees,
etc.

10.1.1 The mortgagee is not paid at the maturity of the obligation under the
principal contract.

10.1.2 The business licenses of the debtor or mortgagor has been cancelled or
revoked, or he is ordered to close down or was terminated for other causes.

10.1.3 The People’s Court has accepted the bankruptcy application of the debtor
or mortgagor or has made the determination of a settlement.

10.1.4 The debtor or mortgagor was dead or was declared lost or dead.

 
 

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10.1.5 The collateral has been sealed up, distrained, supervised or has been
taken other enforcement actions.

10.1.6 The collateral was damaged, lost or expropriated.

10.1.7 The mortgagor didn’t resume the value of the collateral or offer the
corresponding guaranty at the request of mortgagee.

10.1.8 The mortgagor violates those obligations under this Contract.

10.1.9 Other circumstances that have material effect on the realization of
mortgaged right.

10.2 Where more than two material guarantors for the creditor’s claim  (
including creditor’s material guarantor)  under this Contract exist in the mean
time, the mortgagee is entitled to exercise the security right to any one of the
collateral or both of them.

10.3 Where the mortgagor is the third person other than the debtor, meanwhile
the debtor has offered material guaranty for the creditor’s claim under the
principal contract, and the mortgagor has waived this security right, the
mortgagor agrees to offer a guaranty of mortgage for the creditor’s claim under
the principal contract.

11. Liability for Breach of Contract

11.1 After this Contract takes effect, where the mortgagee doesn’t perform his
obligations, resulting in the loss of mortgagor, the mortgagee shall be liable
for the indemnity.

11.2 The mortgagor shall indemnify the mortgagee in case of committing any of
the following acts:

11.2.1 Didn’t obtain legal and effect authorization which is necessary for the
guaranty under this Contract.

11.2.2 Didn’t perform his obligation of making a full and accurate disclosure to
the extent that there is a existence of tax in default, construction mortgage,
co-ownership of the collateral and a dispute over the collateral, or the
collateral was mortgaged or rented, or the collateral has been sealed up,
distrained or supervised.

 
 

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11.2.3 Didn’t register the Mortgage Contract according to the provisions herein.

11.2.4 Disposed the collateral without the written approval of the mortgagee.

11.2.5 Didn’t resume the value of the collateral or offer the corresponding
guaranty at the request of the mortgagee.

11.2.6 Other activities that have violated the agreement under this Contract or
affected the realization of mortgaged right.

12. Liability for Expenses

The mortgagor shall be liable for incurred costs in the course of collateral
appraisement, evaluation, storage, registration, notarization and escrow.

13. Resolution of Disputes

Any dispute arising from this Contract shall be resolved by both parties through
friendly discussion, and also can be solved as per the method  1 below

13.1 Lawsuit. The litigation falls within the jurisdiction of People’s Court in
the mortgagee’s place of residence.

13.2  Arbitration.  Submit the dispute to  _____________ (the name of the
arbitration organization) and arbitrate it according to its arbitration rules.

During the course of the litigation or arbitration, this Contract shall be
performed except for the part under dispute.

14. Other Matters

14.1 The mortgagor hereby acknowledged the receipt of the principal contract and
have read and understood this contract secured by the mortgagor.

 
 

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15.  Effect of the Contract

This Contract shall take effect from the date of signing or sealing by both
parties.

16. This Contract is made out in Five copies and each one for the Mortgagee, the
Mortgagor, the Debtor, the Authority of Land Registration and the Public Notary
Office. Each copy has same legal force and effect.

17. Reminder

The mortgagee has notified the mortgagor to make a complete and accurate
understanding for each provision under this Contract and have made explanations
for corresponding provisions as per the requirement of the mortgagor. Both
parties have reached an agreement on this Contract.

Mortgagee(Seal):

Agricultural Bank of China, Kunming Shuanglong Branch

Legal Representative and Signature: Zuowu Zhou

Mortgagor (Seal):

Kunming Shenghuo Pharmaceutical (group) Co., Ltd.

Legal Representative and Signature: Qionghua Gao

Date of signing: May 11, 2010

Place of signing: Agricultural Bank of China, Kunming Shuanglong Branch

 
 

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List of Mortgage of Real Estate

Mortgagee (full name):

Agricultural Bank of China, Kunming Shuanglong Branch

Mortgagor:

Kunming Shenghuo Pharmaceutical (group) Co., Ltd.

Collateral:  land use right

Owner of the Land: Kunming Shenghuo Pharmaceutical (group) Co., Ltd.

Certificate No.: Kun Guo Yong (2006) 00206

Location: Kunming Economic Technology Development Zone land 11-2

Type of land: for transfer

Housing Ownership Certificate: Kunming Housing Ownership 200705823

Valid terms: from 2006 until August 2048

Year it was built: March 2007

Land use: industryial

Housing use: non-residential

Total square meters of the land: 13,338.23

Total square meters of the house: 5,303

Total square meters of the land for collateral: 13,338.23

Total square meters of the house for collateral: 5,303

 
 

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Provisional price of the collateral: RMB 26,160,000

This List constitutes an integral part of the Mortgage Contract.

Mortgagee:

Agricultural Bank of China, Kunming Shuanglong Branch

Signature: Zuowu Zhou

Mortgagor:

Kunming Shenghuo Pharmaceutical (group) Co., Ltd.

Signature: Qionghua Gao

Date: May 11, 2010

 
 

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