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):HepingBranch, 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 IUnless
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 isRMB 28,800,000at
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 IIIThe
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 XIIWhere 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 XVIIIIn
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 XXIIParty 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 XXVIIIBoth 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 XXXIParty 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 XXXVIIParty 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.





ArticleXLII 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.





ArticleXLIV  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





ArticleXLIX  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 LIFor 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 LIIIParty 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 LVUnless 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.





ArticleLVII  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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