Domestic Factoring Financing Contract

 

(With Recourse)

 

(No. (2013) DF26)

 

(Unofficial Selective Summary Translation)

 

Party A:Inner Mongolia Yongye Nongfeng Biotechnology Co., Ltd.

Legal Representative:SUN Xiaofeng

 

Party B:China International Trust and Investment Corporation (CITIC), Hohhot
Branch

Legal Representative:HA Si

 

Place of Execution: Hohhot Branch Date of Execution: May 27, 2013

 

Whereas, Party A has signed Sales Contract with its Debtor and Party A desires
to transfer such creditor claims derived from such contracts to Party B in
exchange for Party B’s domestic factoring business; therefore, Party A and Party
B have entered into the following contract.

 

Article1Definitions

 

1.Terms used herein have the following definitions:

 

This “Contract” means this contract and all of its supplements and appendices.

 

“Sales Contract” means purchase contract to which Party A is the seller with its
trading partners acknowledged by Party B.

 

“Original Creditor” means Party A, i.e., the seller in Sales Contract.

 

“Debtor” means the buyer in Sales Contract.

 

“Transfer Date” means the transfer date specified in “Accounts Receivable
Transfer Application” in the format of Appendix 1.

 

“Follow-up Period” means the period starting from the Transfer Date to the date
when Party B as the creditor has been fully repaid.

 

“Expected Due Date” means, with regard to any amount of account receivable, the
date when Party A in its reasonable expectation is entitled to have collected
such amount.

 

“Business Day” means bank business day.

 

 

 

 

“Designated Account” means the account set up by Party A under its name with
China International Trust and Investment Corporation (CITIC) (“Account-Holding
Bank”), Hohhot Branch (Account number: 7271310182600077331).

 

Article 2Target of the Transfer

 

2.            Pursuant to the provisions herein, Party A transfers to Party B
the principal balance of all the accounts receivable not yet due owed by the
Debtor under the Sales Contract along with all interest, past-due interest,
penalty interest, compound interest accruable starting from the Transfer Date,
security, insurance, default penalty and other liquidated damages. 

To avoid any discrepancy, Party A and Party B hereby confirm that Party A’s
obligations and responsibilities under the Sales Contract will not be
transferred to Party B and Party A must still bear such obligations and
responsibilities.

 

Article 3Transfer Credit

 

3.            Pursuant to the provisions herein, Party B agrees to provide to
Party A maximum amount not exceeding RMB 70,000,000.00 (hereinafter “Transfer
Credit”); and such amount can be used on a revolving basis during the valid use
period specified in Section 3.4 herein.

 

4.            The valid use period for the Transfer Credit is one year, starting
from the date when this Contract becomes effective; i.e., the expiration date of
this period is May 27, 2014 (hereinafter “Transfer Credit Use Period”). Party A
may submit written application to Party B if Party A desires to use such
Transfer Credit beyond the expiration date.

 

Article 4Transfer Price

 

5.            Party A and Party B agree that the sole price for the transfer
(“Transfer Price”) is equal to the net value after applying the discount to the
principal balance of the accounts receivable not yet due as of the Transfer Date
under the Sales Contract; such discount is based on the RMB benchmark lending
rate (floating upward/downward by __%) published by People’s Bank of China.

 

Article 5Transfer Procedures

 

6.            Party A must submit to Party B, at least 5 business days prior to
the expected Transfer Date, an “Accounts Receivable Transfer Application” and
the following documents in connection with the claims from its trades in the
proposed transfer (hereinafter “Transfer Documents”):

 

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Copies of the Sales Contract, the auditor report for the last fiscal year before
the effective date of this Contract issued by Party A’s auditor, the valid
business license, Party A’s business entity code document, Party A’s Articles of
Incorporation, Party A’s capital verification report issued by Party A’s
auditor, resolution of Party A’s board approving the transfer and other relevant
company documents if the buyers of the Sales Contract are enterprise legal
persons.

 

7.            Party B has the right to review such Transfer Documents within 5
business days after receiving them for authenticity, completeness and validity.

 

8.            If Party B agrees to accept the transfer and if Party A satisfies
the following conditions before the Transfer Date, Party B must deliver the
Transfer Price to Party A’s account specified in the “Accounts Receivable
Transfer Application”:

 

All the Transfer Documents are still truthful and valid;

 

Party A has performed its obligation for notification regarding the transfer in
accordance with Section 5.9;

 

Party A has provided copies of the value added tax invoices related to the
claims under the Sales Contract;

 

There has been no occurrence of insolvency or other situations that will affect
negatively the performance of the Sales Contract or this Contract on the part of
the Debtor or Party A, including ceasing or suspension of operation, revocation
of business licenses, bankruptcy or liquidation, litigation or arbitration or
administrative sanction, or material deterioration of financial conditions.

 

9.            If Party B agrees to accept the transfer, Party B has the right to
request that Party A notify the Debtor.

 

10.          In the Follow-up Period after the transfer, Party A must be
responsible for the safe-keeping of the original copy of the Sales Contract, and
provide such original copy to Party B at Party B’s request.

 

11.          In the Follow-up Period after the transfer, Party A must provide to
Party B any other documents related to the Claims from the Sales Contract to
Party B or notify Party B of any breaches of the Sales Contract by the Debtor.

 

Article 6Compensatory Interest and Additional Amount

 

12.         If, during the effective period of this Contract, the People’s Bank
of China adjusts the statutory RMB loan benchmark interest rate applicable to
this Contract, Party A or Party B, depending on the situation, has the right to
demand the other party to pay compensatory interest.

 

Party A and Party B agrees that the compensatory interest will be calculated
according to the formula below:

 

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  m   Si = S  Fj x (Ri – Ri – 1) x Tj/360   J=1

 

Of which, Si represents compensatory interest at the ith time of interest rate
adjustment; m represents the amount of accounts receivable not yet due at the
time Party B adjusts interest rate; Fj represents the principal balance of
accounts receivable of various stages not yet due at the time Party B adjusts
interest rate; Ri represents the statutory RMB loan benchmark interest rate (as
annual rate) after the People’s Bank of China’s ith time of interest rate
adjustment; Ri – 1 represents the statutory RMB loan benchmark interest rate (as
annual rate) as of the Transfer Date after the People’s Bank of China’s i-1th
time of interest rate adjustment, with R0 being the applicable annual rate in
accordance with the standard specified in Section 5 herein; Tj represents the
number of days between the date when the People’s Bank of China announces the
adjustment of the statutory RMB loan benchmark interest rate and the expected
due date of the accounts receivable of various stages not yet due.

 

If Si >0, Party A will pay compensatory interest to Party B; if Si <0, Party B
will pay compensatory interest to Party A.

 

13.          In the Follow-up Period, if, due to reasons on the part of Party A,
the Debtoris unable to repay the accounts receivable under the claims hereunder
at the expected pay-off date, Party A must notify Party B in writing at least 5
business days in advance for Party B to make corresponding extension of the
expected due date for such accounts receivable. If Party B agrees to make such
extension, the due date for such accounts receivable will be the extended due
date approved by Party B and Party B has the right to demand that Party Apay the
additional amount (“Additional Amount”) based on the following formula:

 

P1= F2 x R1 x D1/360

 

Of which P represents the additional amount paid by Party A to Party B; F2
represents the balance of accounts receivable not yet received by Party B at the
original expected due date; R1 represents the interest rate applicable to this
Contract at the time of the expected due date; D1 represents the number of days
between the original expected due date and the extended due date for such
accounts receivable.

 

14.         In the Follow-up Period, if, due to the early repayment by the
Debtor of the net amount of accounts receivable ahead of the expected due date,
Party A has the right to demand that Party B pay the additional amount based on
the following formula:

 

P2= F3 x R2 x D2/360

 

Of which P represents the additional amount paid by Party B to Party A; F3
represents the net amount of accounts receivable paid by the Debtorin advance of
the expected due date; R2 represents the interest rate applicable to this
Contract; D2 represents the number of days between the original expected due
date and the date when such accounts receivable are actually paid.

 

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Article 7Agent for Receiving Debt Payment

 

15.          Party A and Party B agree on the following regarding the agent for
receiving debt payment:

 

Party B hereby authorizes Party A to be the agent for receiving debt payment,
and Party A will make all reasonable efforts to collect the payment for the
accounts receivable transferred to Party B hereunder;

 

Party A must provide assistance in case of any litigation or arbitration;

 

Party B has the right to terminate such agent relationship if Party B believes
that Party A has failed in performing its responsibilities;

 

Such authorization of Party A as agent does not constitute waiver or transfer of
Party B’s rights to the claims under the Sales Contract, nor authorization of
Party A to make any changes to the Sales Contract;

 

Any amount received from the Debtor must be applied toward the repayment of the
loan under this Contract;

 

During the Follow-up Period, Party A cannot ask the Debtor to Party A’s other
bank account to any other party;

 

During the Follow-up Period, Party Acannot consolidate, transfer or close the
Designated Account for receiving the payment toward accounts receivable;

 

During the Follow-up Period, Party A cannot use any balance in the Designated
Account for any other purposes;

 

Party A agrees that Party B has the right to deduct any amount at any time as
repayment of the loan hereunder to Party B;

 

During the Follow-up Period, if any amount in the Designated Account is seized
or frozen by regulatory authorities in China, Party A must pay a corresponding
amount to Party B, unless such seizure or freeze is due to any reason on Party
B’s part.

 

Article 8Party A’s Representations and Warranties

 

16.          Party A represents, warrants and covenants to Party B as follows:

 

Party A has provided all the documents and disclosures related to the Sales
Contract claims and such documents and disclosures are true, complete and valid;

 

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Party A warrants the authenticity, completeness and validity of the transfer
documents;

 

Party A has obtained all internal authorization or government approval as of the
Transfer Date necessary for such transfer; and such transfer will not violate
any laws or regulations or provisions of any contracts to which Party A is
bound;

 

As of the Transfer Date, all the accounts receivable transferred hereunder have
been recognized as authentic in accordance with the relevant law, regulation and
accounting principles and there are no defects about the claims related to such
accounts receivable;

 

Party A has performed its obligation regarding notifying the Debtor of the
transfer;

 

As of the Transfer Date, there has been no delinquency nor any violation of
Sales Contract on the part of the Debtor;

 

As of the Transfer Date, the Debtor does not have any claims against Party A
that are superior to any claims under the Sales Contract;

 

After submitting to Party B the “Accounts Receivable Transfer Application”,
Party A must not make any changes to the Sales Contract without Party B’s prior
written approval.

 

Article 9Party A’s Rights and Responsibilities

 

17.          Party A has the following rights and responsibilities hereunder:

 

Party A has the right to withdraw and use the Transfer Credit within the limit
and in the amount specified herein;

 

Party A must repay the debts due or buy back the un-paid portion of the claims
under the Sales Contract in accordance with this Contract;

 

Party A must truthful provide reports, at Party B’s request or from time to
time, to Party B on the financial situation of the Debtor and its performance of
the Sales Contract;

 

During the effective period of this Contract, Party A must notify Party B in
writing at 30 days in advance for approval if Party A or the Debtor engages in
any major corporate actions including but not limited to equity transfer,
restructuring, merger or spin-off, change of scope of operation or registered
capital;

 

Party A must assist Party B in its investigation of the performance of the Sales
Contract;

 

Party A must not transfer any loan obligations hereunder without Party B’s prior
written approval;

 

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Party A must notify Party B within 3 days of the occurrence of any adverse
events such as litigation, arbitration, criminal investigation, administrative
sanction, ceasing or suspending operation, bankruptcy, revocation of business
license or material deterioration of its financial situation;

 

Party A must notify Party B of any change to the address, contact phone numbers,
business name, legal representative within 7 days of such change;

 

Other rights and responsibilities under the law.

 

Article 10Party B’s Rights and Responsibilities

 

18.          Party B has the following rights and responsibilities hereunder:

 

Party B has the right to monitor and review the operation situation of Party A
and the Debtor and to request that Party A provide all necessary assistance;

 

Party B must issue the Transfer Credit after Party A has fulfilled its
obligations hereunder and satisfied the conditions set forth in Section 8
herein;

 

Party B has the right to request that Party A provide other relevant documents,
depending on the review of the accounts receivable documents, but Party B must
keep all such documents confidential, except where disclosures are required by
law;

 

Party B has the right to exercise right of recourse in accordance with the
provisions herein;

 

Other rights and responsibilities under the law.

 

Article 11Right of Recourse

 

19.          Starting from the Transfer Date, Party B has the right of recourse
upon the occurrence of any of the following:

 

Party A fails to perform its promises, obligations and responsibilities
hereunder;

 

Party A violates any of the representations, warranties and covenants made in
Section 16 herein, or any of such representations, warranties and covenants
turns out to be false, untruthful, incomplete or materially misleading;

 

All or some of the claims under the Sales Contract have not been repaid on the
expected due date.

 

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20.          Upon the occurrence of any of the above, Party A has the right to
take some or all of the actions below:

 

Reduce or terminate the Transfer Credit;

 

Adjust the Transfer Credit Use Period;

 

Demand that Party A immediately buy back the unpaid portion of the claims under
the Sales Contract;

 

Demand that Party A be responsible for all the reasonable fees incurred in the
course of exercising its rights hereunder (including but not limited to
litigation and arbitration fees, travelling expenses and attorney fees).

 

Article 12Fees

 

21.          Party A and Party B will each be responsible for the fees in
connection with the drafting and execution of this Contract.

 

Article 13Liabilities for Breach

 

22.         If either party fails to perform its obligations hereunder, such
party must bear liability for breach.

 

Article 14Continuity of Obligations

 

23.         Party A’s obligations hereunder are continuous and are binding to
its successor, receiver, assignee and all surviving entity of its merger or
restructuring.

 

Article 15Applicable Law

 

24.         This Contract is governed by the laws of the People’s Republic of
China.

 

Article 16Resolution of Dispute

 

25.         All disputes arising from this Contract must be resolved through
consultation between the two parties; if such consultation fails, such disputes
can be submitted to the people’s court at Party B’s location.

 

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Article 17Cumulative Nature of Party B’s Rights

 

26.         Party B’s rights hereunder are cumulative and shall not affect Party
B’s other rights available under the law or other contracts. Any non-exercise or
delay in the exercise of such rights does not constitute waiver of such rights,
nor should it affect its future exercise of such rights.

 

Article 18Contract Effectuation, Amendment and Dissolution

 

27.         This Contract becomes effective upon execution by the respective
representatives of the two parties.

 

28.         Neither party can amend to dissolve this Contract, unless written
agreement is reached between the two parties.

 

Article 19Miscellaneous

 

29.         All notices regarding this Contract must be in Chinese and be sent
to the address listed on the first page of this Contract.

 

30.         The invalidity of any provision herein must not affect the validity
of other provisions.

 

31.         The appendices to this Contract are its component parts and have the
same legal effect.

 

32.         This contract has three counterparts.

 

33.         [None].

 

34.         Party B has already taken all reasonable measure to provide Party A
full explanation of the provisions herein regarding its responsibilities; there
is no discrepancy in the understanding of the contents herein between the two
parties.

 

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Party A: (Seal or Special Business Seal)   /seal/     Inner Mongolia Yongye
Nongfeng Biotechnology Co., Ltd. Legal Representative:  /s/ WU Zishen     Party
B: (Seal or Special Business Seal)   /seal/ China International Trust and
Investment Corporation (CITIC),   Hohhot Branch Legal Representative:  /s/ HA Si

 

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Appendix 1 Accounts Receivable Transfer Application (No. 20130527-1)    
Summary:   To: China International Trust and Investment Corporation (CITIC),
Hohhot Branch From: Inner Mongolia Yongye Nongfeng Biotechnology Co., Ltd.
Transfer Date: May 27, 2013 RE: Transfer the creditor’s claims to accounts
receivable in the amount of RMB ¥70,000,000.00

 

Details of the Sales Contract underlying such accounts receivable:

Contract No. S1006 Name of the Buyer Anhui Danong Trading Co., Ltd. Buyer’s
Address Anhui Contact Person and Method   Contract Value ¥109,500,000.00 Payment
Condition   Accounts Receivable Amount ¥70,000,000.00 Expected Due Date for
Accounts Receivable  

 

Appendix 2 Creditor’s Claims Transfer Notice

 

[From Inner Mongolia Yongye Nongfeng Biotechnology Co., Ltd. to Anhui Danong
Trading Co., Ltd. regarding the transfer to CITIC of the accounts receivable in
the amount of ¥70,000,000.00 that are not yet due].

 

Appendix 3 Creditor’s Claims Transfer Notice Acknowledgement

 

[From Anhui Danong Trading Co., Ltd. to CITIC regarding the transfer to CITIC of
the accounts receivable in the amount of ¥70,000,000.00 that are not yet due.]

 

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