CHINA MERCHANTS BANK

Loan Contract

 

CHINA MERCHANTS BANK

Loan Contract of Current Capital

No. 873411DLD00008

 

¨ This contract is bellow to No. Credit contract (If this contract is apply to,
please choose √

 

Lender (Full Name): CHINA MERCHANTS BANK, Kunming Jinxing Branch

Responsible person: Jinglan Yang

 

 

Borrower (Full Name): Kunming Shenghuo Pharmaceutical (Group) Co., Ltd.

Legal Representative: Guihua Lan

 

 

The Borrower apple for Current Capital Loan for current capital turnover .
Pursuant to the relevant PRC laws and regulations, the two parties, following
consultations, mutually agree to enter into this Contract (“Contract”) as
follows.

 

 1. Currency and amount of loan (in Capital):

RMB TWO MILLION SIX HUNDRED AND SIXTY THOUSAND

 

2. Type of Loan:

Lender provide loan as Ordinary Loan toward current capital to Borrower. This
loan can not change type without the Lender's written permission.

 

3. Term of loan:

The term of loan is half a year, from Dec.30th 2011 to June 30th 2012. If the
actual loan origination date is not above date,the loan origination date is
subject to the date on certificate of loan, and the payment date is put off.

 

4.Prerequisite of loan

To issue the loan under this contract (contain each loan of release separated)
,the Borrower shall meet conditions as below, if it do meet any of the following
condition, the Lender has the right to refuse issue the loan.

4.1 the Borrower offer related documents in this contract;

4.2 the Borrower accept the examination and supervisal according to this
contract;

4.3 the Borrower repay the the issuance of loans on time;

 

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4.4 the Borrower do not make any event of default in this contract;

4.5 the Borrower is not against any rules in this contract;

 

Note: the above conditions is protocoled for the purpose of protecting the
Lender, the Lender has right to reduce the conditions unilaterally.

 

5 Loan Interest Rate and Interest

5.1 Loan Interest Rate

5.1.1 The interest rate of loans in RMB is determined as Floating Interest Rate

5.1.2: The interest rate during the the contracted period: interest will float
by % based on the benchmark RMB interest rate for the same term announced by the
People’s Bank of China in accordance with the date of each withdrawal and each
term for single loan.Adjustment to the floating interest rate shall be made once
in every SIX-month period.

 

Above mentioned interest will float by 40 % based on the benchmark RMB interest
rate ,or add basic point. In case of adjustment made to benchmark RMB interest
rate by the People’s Bank of China at the time of sign this contract, the Lender
have the right to change the adjustment according to the related national
policy's change, the price change of domestic credit market and the policy
change of the Lender. As soon as the Lender decide to change, the Lender shall
written notice the Borrower 5 business day in advance.

Those change will take effect as soon as the Lender notice the Borrower, the
interest of new loan before or after the notice, is in according with the notice
which the Lender send to the Borrower. And the benchmark and the float period is
in accordance with this contract.

 

5.1.3 this loan if adopt flow interest rate, the float cycle is ONE day, and the
benchmark RMB interest rate is conform as 5.1.2

The date of issuing loan is the first float cycle's pricing day. And the first
day of each float cycle is its pricing day.

 

5.1.4 Where the Borrower fails to use the loan as per the prescribed purpose,
the Lender will collect a penalty interest at a rate of floating by 100% based
on the specified loan interest rate dated from the default period against the
wrong used loan, until the principal and interest been paid off.

 

Where the Borrower fails to return the principal on specified period as
prescribed in this Contract, the Lender will collect a penalty interest at the
rate of floating by 50% based on the specified loan interest rate dated from the
over due period against the matured loan.

 

For the loan both overdue and fails to be used according to the proposed purpose
as agreed in the Contract, the calculation of penalty interest rate will be
subject to the highest rate.

 

5.1.5 During the term of the loan, if the People's Bank of China adjust the
regulation on interest rates, this contract shall comply with the new
regulation.

 

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5.2 Method of Interest Calculation: The interest on the loan hereunder shall be
settled on a quarterly basis, with the date of settlement falling on the 20th
day of each quarter. The method of day interest calculation is according as the
same term announced by the People’s Bank of China or international conventions.

 

5.3 Interest Settlement: The Borrower shall pay up the interest on every
interest settlement day. The Lender can charge the interest through the
Borrower's account. if the Borrower do not pay the interest on time, the Lender
can charge Compound Interest which is calculated as the interest rate same as
the period of loan.

 

6 Guaranty

6.1 The method of guaranty for the loan under this Contract is the bank
acceptance bill which is owned by Kunming Shenghuo Pharmaceutical (Group)
Co.,Ltd., both parts shall sign mortgage [hold] contract.

 

7 Borrower's Rights and Obligations

7.1 Borrower's Rights

7.1.1 Withdraw and use the loan as agreed in this Contract;

7.1.2 Transfer debts to third part after achieving the agreement of Lenders

 

7.2 Borrower's Obligation:

7.2.1 Offer material and documents the Lender asked and all information of bank
of deposit, account number and balance of deposit and loan. Accept the
supervision and examination by the Lender;

7.2.2 Accept the supervision by the Lender over the Borrower's loan credit and
produce, financial activities, and adopt the suggestion and requirement of
Lender;

7.2.3 Shall use the loan by the purpose and method as prescribed in the
contract, conform to the related management regulation of loan payment;

7.2.4 Repay the principal and interest at full amount and in a timely manner;

7.2.5 If the Borrower will transfer all or part of the loan to third part, shall
obtain the written agreement of the Lender

7.2.6 If the bellow occur, the Borrower shall inform the Lender on time and put
activities into practice under the Lender's requirement to guarantee the on-time
payment of the loan and related fees:

7.2.6.1Deterioration of financial status, material difficulty in production and
operation or significant adverse dispute;

7.2.6.2 The Borrower issue loan or offer loan guarantee to third part for the
purpose of third part’s interest or avoiding third part’s lose, or offer
collateral mortgage with owned property,

7.2.6.3 Credit situation go down, or profitability of main business reduce

7.2.6.4 Stopping operation, canceling or canceled business licenses, applying or
applied for dissolving, bankrupting, etc.

 

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7.2.6.5 Major crisis has been occurred on operation or financing of controlling
shareholders, actual control person or other related companies;

7.2.6.6 elated transaction happened among with controlling shareholders or
related parties, which will make affect on operation;

7.2.6.7 Any litigation, arbitration, criminal punishment or administrative
penalty has been occur which will result in serious adverse effects on operation
or financing;

7.2.6.8 The Borrower’s legal representative, directors or offers has been
change, or restrict personal freedom because of contravention, which will make
effect on routing operation;

7.2.6.9 Other adverse conditions may cause significant change to the debt
relationship under this Contract or affect the realization of creditor’s right;

7.2.7 The Borrower shall not slack on the management and recourse of matured
debt, or the Borrower shall not dispose its properties as gratuitous or other
un-appropriate way.

7.2.8 The Borrower shall inform the Lender in writing and obtain its written
consent before engaging in the following: merger and acquisitions, spinoff,
restructuring, equity transferring, jointing ventures, property rights
transferring, shareholding reforming, investing abroad, material increasing debt
financing etc.

7.2.9 The Borrower shall insure its core assets and the Lender shall be its
first beneficiary.

 

8 The Lender’s Rights and Obligations

8.1 The lender’s Right:

8.1.1 Be entitled to ask the Borrower for the full payment of the loan and
interest on time;

8.1.2 Be entitled to ask the Borrower for the material and documents related on
the loan;

8.1.3 Be entitled to know the situation of operation and financial activities;

8.1.4 Be entitled to supervise or examine over the Borrower’s loan usage, as
agreed in this contract;

8.1.5 Be entitled to supervise or examine over the Borrower’s account, and
entrust other Bank except China Merchants Bank to supervise or examine the
Borrower’s account, and ne entitled to control the loan payment according to the
usage and the scope of payment of fund.

8.1.6 Be entitled to take charge loan principal and interest through the
Borrower’s account directly;

8.1.7 Be entitled to assign the claim of Borrower and adopt way which the Lender
think is suitable, include but not limit bellow way to inform the Borrower: fax,
mail. served by hand, announcement on public media etc., and be entitled to
overdue loan to the Borrower;

8.1.8 On the business of the buyer loan while the seller pay the interest or the
business of the seller loan while the buyer pay the interest, the Lender be
entitled to refuse issue loan to the Borrower before receive the interest
payment agreement from the buyer/seller.

8.1.9 Be entitled to recover loan advanced according to the Borrower’s funds
withdrawal.

8.1.10 Be entitled to adopt action if the Borrower fail to fulfill the contract;

8.1.11 other rights in this contracts

8.2 The Lender’s Obligations

8.2.1 Shall release the loan as agreed in this contract

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8.2.2 Shall bear its confidential obligation for the Borrower for trade secrets
including financing, producing and operating condition, unless otherwise
specified by laws and regulations;

 

9. The Borrower represents and warrants that:

9.1 The Borrower is a legal entity which is duly incorporated and registered
upon the approval of authorities concerned, or other organization. The Borrower
have full civil conduct capacity to sign and perform the contract.

9.2 Signing and performing this contract has been agreed by the board of
directors or other authorized agency, this contract will make effect since the
date of signing.

9.3 Loan project and its related affair conducts no illegal activity, the
Borrower shall not use the loan for the investment of fixed assets and equality
etc., neither use this loan to invest in securities, futures and real estate;
the Borrower shall not use to lending each other to seek illegal income; neither
use to the produce and operating area which the State abandon. The Borrower
shall use the loan as agreed in this contract;

9.4 If the loan issue way is according to the Borrower, the Borrower shall
regularly report to the Lender (at least on a quarterly basis). The Lender be
entitled to inspect if ht loan has been use to the usage in the contract
according to account analysis, certificate checking, on-the-spot investigation
etc

9.5 If the Borrower need to be issued loan through internet banking under the
agreement of the Lender, the Borrower shall accept the limitation of object
list, Single payment amount, and Stage pay limitation;

9.6 The documents, material and certificate offered by the Borrower related on
the Borrower, Guarantee Pledger (Sponsor), Mortgage is true, correct, complete
and effective, and not including any significant mistake and leaving out any
significant fact;

9.7 During the sign of this contract, there is no litigation, arbitration,
criminal punishment, Civil Penalty happened which may make great affect on the
Borrower or the main property of the Borrower, and it will not be happened
during the contract.

9.8 Operating according to the State’s Laws and Regulars and the Business rate
in the Business License, and making enterprise annual inspection on time;

9.9 Keeping and improving the operation to make sure the increase of property,
not giving up any mature debt, the Borrower shall not dispose its properties as
gratuitous or other un-appropriate way.

9.11 During signing the contract, there is no significant event happen which
will influent the Borrower to carry out obligations.

 

10 Loan Withdrawals and Use

10.1 The payment of the loan is

10.1.2 Entrusted Payment

Entrust payment means the Lender pay the loan funds to Borrower’s transaction
parties whose transaction contracts meet the condition described in this
contract and business contracts’ the agreed purpose according to the Borrower’s
authorization and withdrawal application.

If adopting the entrusted payment, the payment shall be approved by the Lender
after issue the loan, the Borrower shall not avoid the Lender’s supervise
through internet banking, revise drawing cash by check, by means of breaking up
the whole into parts, etc

 

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10.2 The Borrower shall submit an application for withdrawal, the receipt for a
loan and related material according to deferent payment to the Lender, other
wise, the Lender can refuse the application.

10.3 After receiving among material and approving the application, the Lender
shall record each loan issue date, due time, amount etc on certificate of
indebtedness

If adopting the entrusted payment, the payment shall be paid to the Borrower’s
transaction parties at the date of approving or next day.

 

11 Repayment ahead of Schedule

11.1The Borrower can apply for repayment ahead of schedule, but it shall be
approved by the Lender.

11.2 If the Borrower repay ahead of schedule, the interest rate shall be
calculated according this contract.

 

12. Term Extension

Where the Borrower of ordinary current capital fails to repay the loan in
specified date, the term extension application shall be submitted by written one
month prior to the maturity date and an agreement on term extension will be
executed upon the Lender’s consent. If the Lender do not agree term extension,
this contract shall remain be on effect. The loan and interest shall be repay as
agreed in this contract.

 

13. The Borrower shall be liable for expenditures on Credit Investigation
inspection, notarization, and legal service, legal cost, travel fees for
realizing creditor's rights where the Borrower will not repay on time as agreed
in this contract. The Lender will be entitled to take charge from the Borrower’s
account directly. If the amount in the Borrower’s account is not enough to pay,
the Borrower guarantee that will pay after receiving the notice from the Lender
without any certificate.

 

16. Breach of contract and handle

16.1 The following actions conducted by the Borrower shall constitute breach of
contract:

16.1.1Violate the Provision 7.2.1, offer false information or conceal
significant events; refuse the supervision and examination by the Lender, do not
correct wrong action after receiving the Lender’s reasonable suggestion.

16.1.2 Violate the provision 7.2.2, refuse or escape to the credit funs,
operation and financial situation supervision and examination by the Lender;

16.1.3 Violate the provision 7.2.3; fail in using the loan as agreed in this
contract;

16.1.4 Violate the provision 7.2.4, fail in repaying the loan and interest full
on time as agreed in this contract;

16.1.5 Violate the provision 7.2.5, transfer the debt to third part
unilaterally,, or violate the provision 7.2.7, slack on the management and
recourse of matured debt, or the Borrower dispose its properties as gratuitous
or other un-appropriate way.

 

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16.1.6 Violate the provision 7.2.6,when the case happened descript in this
provision, the Borrower fail in noticing the Lender timely, or the Lender ask
for more ensuring Measures for loan repaying, the Borrower refuse it, and the
Lender consider that the loan is hard to be repay;

16.1.7 Violate the provision 7.2.8, the Borrower fail in obtaining the Agreement
from the Lender when those significant events happen

16.1.8 Violate the provision 9.1, 9.2, 9.6, or violate the provision 9.3, 9.4,
9.5, 9.7, 9.8, 9.9, 9.10 and 9.11, fail in correcting according to the Lender’s
suggestion;

16.1.9 The Borrower fail in drawing, using, the loan or fail in using fund in
collecting account as agreed in this Contract, or refuse the supervision from
the Lender, and fail in correcting those actions,

16.1.10 A significant event of breach of contract happens on other contract with
other loaner, and it fail in solving,

16.1.11 Fails in performing or fulfilling other obligations in this contract, or
the Lender think the Borrower’s credit level reduce or other status which will
make affect on the loan repay;

16.1.12 Other conditions that the Lender think it affect its legitimate rights
and interests.

 

16.2 The following actions conducted by the Guarantor which the Lender could
think affect the ability of guarantee, and the Guarantor might be required
eliminating adverse effect, or the Borrower might be required adding or changing
Warranty Condition, the Guarantor and the Borrower refuse,

16.2.1 if the conditions happen described in the provision 7.2.6, 7.2.7, 7.2.8;

16.2.2 Conceal actual warranty ability or fail in obtaining authorization when
issue irrevocable book;

16.2.3 Fail in getting annual inspecting approval

16.2.4 Slack on the management and recourse of matured debt, or dispose its
properties as gratuitous or other un-appropriate way.

 

16.3 The following actions conducted by the Mortgagor (Pledgor) which the Lender
could think the mortgage (pledge) is false, or inadequate collateral value, and
the Mortgagor (Pledgor) might be required eliminating adverse effect, or the
Borrower might be required adding or changing Warranty Condition, the Guarantor
and the Borrower refuse,

16.3.1 The ownership of mortgage (pledge) is not bellow to the Mortgagor
(Pledgor) or the ownership is not clear

16.3.2 Conceal the mortgage (pledge) has been owned in common, hired, sealed,
supervised, or other priority which prior to mortgage;

16.3.3 Without agreement in written of Lender, sell, hire, remortgage or other
unsuitable act on the mortgage;

16.3.4 Mortgagor fail on keeping, maintaining the mortgage lead up to the
mortgage devaluate significant, or the Mortgagor’s act lead up to the
devaluating directly, or the Mortgagor fail on insuring for the mortgage.

16.3.5 The mortgage may be levied, taken down, or others which may affect on the
value of the mortgage.

 

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16.4 Once above 16.1, 16.2,16.3 happen, the Lender be entitled on adopting
bellow action:

16.4.1 Change the payment terms of Loan, cancel “Independent pay” way to use
loan,

16.4.2 Stop releasing the loan the Borrower not use yet;

16.4.3 Collect the already released loan and interest ahead of schedule and
related fees

16.4.4 Take charge from the Borrower’s balance account or other account or
authorize other bank take charge to pay off the debt.

16.4.5 Recourse according to the provision 19 in this contract.

 

17. Terminate or Change the contract

This contract can be changed or terminated after the agreement of both party.
Before reaching consensus, this contract will still hold, any of both part shall
not change, modify or terminate the contract.

 

18. Others

18.1 Condition Change or force majeure

18.1.1 The Lender may terminate this Contract the between the two parties and
announce all loan mature ahead of schedule, if applicable change of laws or
regulations occur the loan action is illegal. And the Borrower shall repay
immediately

18.1.2 If applicable laws or regulations change occur the Borrower’s obligation
add, the Borrower shall complement the additional obligation;

18.1.3 During the contract performance, if one part or both meet with force
majeure, the part who meet with force majeure shall not pay for the other part,
but have the obligation to notice the other part, and adopt reasonable measures
to prevent further loss, otherwise, it shall pay the further loss to the other
part.

 

18.2 Reservation of power

During the contract performance, any action of gracing, extending the contract
right of the Lender, shall not harm, damage, limit all of the Lender’s right and
interests in accordance with this contract and laws, neither be regard as any
permit and confirm to break this contract nor seems as the Lender giving up its
right to take action now or future.

 

18.3 Partially invalid

No matter why this contract be invalid in law, or partially invalid, the
Borrower shall carry out the obligations to repay loan. If happen, the Lender be
entitled on terminate the contract and recourse the loan and interest under this
contract immediately.

 

18.4 Notice

All notices and communication under this Contract shall be delivered to the
other party on written. If it is delivered through specially-assigned person,
the signature date of delivering is seem as its arriving date (if the receiver
refuse to receive it, the rejecting date is seem as its arriving date), if it is
delivered through mail, the 7th day after delivered is seems as its arriving
date; if it is delivered through fax, the receiver’s fax system receiving date
is seem as its arriving date. If it is noticed through public media, the notice
date is seem as its arriving date.

 

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The Lender’s address: Crossroad of Beijing road and Baiyun Road

The Borrower’s address: No. 2, Jinyou Road, Economic and Technological
Development Zone,

One party shall inform the other party timely for changes in method of contact,
otherwise it will be responsible for the loss.

 

18.5 The receipt for a loan of this contract, and supplemental agreement
including the unaccomplished matter or change matter will be part of this
contract.

 

19. Applicable law and dispute resolution

19.1 The conclusion, explanation and dispute resolution of this contract is
appropriate for laws of the People's Republic of China, both part’s rights and
interest are guaranteed by the laws of the People’s Republic of China.

19.2 If there is any dispute in the process of implementing this contract, the
two parties can negotiate to settle it, and also can settle it as

19.2.1. Lawsuit. The People’s Court in residence has the jurisdiction.

19.3 if the contract be notarized to having effect on compulsory execution, the
Lender be entitle on applying the People’s count which have authority to execute
mature debt compulsorily.

 

20 Contract Effectiveness

This Contract shall come into force as of the date of execution signing and
sealing by both parties, and lose efficacy after the loan and interest under
this contract be repaid.

 

21 Supplementary articles

This Contract shall be executed in two original copies, each for both parties,,
which shall have equal force and effect.

 

Special Instructions

All terms in this contract has been negotiated by all parts. The Lender has
remind the Borrower to pay attention to those terms about exemption or
restriction from liability of the Lender, the rights which only lender own,
those terms about increasing the Borrower’s responsibility or restricting the
Borrower’s right, and the Borrower has known those terms exactly and totally.
The Lender has explained the provisions as necessary. All parts have Understand
consistent.

 

Lender (Seal & Signature):

 

“CHINA MERCHANTS BANK” (Seal)

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Principal or Authorized Agent: Jinglan Yang (Signature)

 

Date: Dec. 26th 2011

 

Borrower (Seal & Signature):

 

“KUNMING SHENG HUO PHARMACEUTICS (GROUP) CO., LTD.” (Seal)

 

Legal Representative or Authorized Agent:

Date: Dec. 26th 2011

 

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