ABCS(2007)2002

     

    Mortgage
Contract

    


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

     

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

    


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

    


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

     

    The
creditor’s principal claim guaranteed is the loan borrowed for current capital
in the amount of RMB10 million.

     

    2.
The Scope of Guaranty of Mortgage

     

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

     

    3.
Collateral

     

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

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    The
provisional price of the above mentioned collateral is RMB14, 994,259 while the
terminal value will be determined by its actual disposing price.

     

    4.
Covenants of the Mortgagor

     

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

     

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

     

    4.3 The
collateral is negotiable or transferable according to law.

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

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

     

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

     

    5.
Effect of the Collateral

     

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

     

    6.
Management and Utility of the Collateral

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      7.
Insurance of the Collateral

       

    

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

       

    

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

       

    

    
      7.3
During the term of mortgage, the mortgagor may not unilaterally or negotiate
with the insurer to change or terminated the insurance contract without the
written approval of mortgagee; neither should he waive the right to insurance
claims or the right to claim compensation against the third party.

       

    

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

       

    

    
       
8.
Registration of Mortgage

       

    

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

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

    

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

       

    

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

       

    

    
      9.
Transfer of Mortgaged Right

       

    

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

       

    

    
       
10.
Realization of Mortgaged Right

       

    

    10.1
Under any of the following circumstances, the mortgagee has the right to
exercise the mortgaged right:

     

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

     

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

     

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

     

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

     

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

     

    10.1.6
The collateral was damaged, lost or expropriated.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

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

     

    10.1.8
The mortgagor violated those obligations under this Contract.

     

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

     

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

     

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

     

    11.
Liability for Breach of Contract

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

    12.
Liability for Expenses

     

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

     

    13.
Resolution of Disputes

     

    Any
dispute arising from this Contract shall be resolved by both parties through
friendly discussion, or

     

    12.1
Shall be resolved by litigation which falls within the jurisdiction of People’s
Court in the mortgagee’s place of residence or by arbitration.

     

    12.2
During the course of the litigation or arbitration, this Contract shall be
performed except for the part under dispute.

     

    14.
Other Matters

     

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

     

    15.
Effect of the Contract

     

    This
Contract shall take effect from the date of its execution.

     

    16. This
Contract is made out in 4 copies and each one for the Mortgagee, the Mortgagor,
the Authority of Mortgage and the Public Notary Office. Each copy has same legal
force and effect.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    17.
Reminder

     

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

     

    Mortgagee:

     

    Agricultural
Bank of China, Kunming Shuanglong Branch

     

    Signature: Zuowu
Zhou


    


    Mortgagor:

     

    Kunming
Shenghuo Pharmaceutical (group) Co., Ltd.

     

    Signature: Guihua
Lan


     

    Date of
Execution: January 2010

     

    Place of
Execution: Kunming

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    List
of Mortgage of Real Estate

    


    Mortgagee
(full name):

     

    Agricultural
Bank of China, Kunming Shuanglong Branch

    


    Mortgagor:

     

    Kunming
Shenghuo Pharmaceutical (group) Co., Ltd.

    


    Collateral:  land and its
attachments

    


    Provisional price of the collateral: RMB14,
994,259

    


    This List
constitutes an integral part of the Mortgage Contract.

    


    Mortgagee:

     

    Agricultural
Bank of China, Kunming Shuanglong Branch

     

    Signature: Zuowu
Zhou

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Mortgagor:

     

    Kunming
Shenghuo Pharmaceutical (group) Co., Ltd.

     

    Signature: Guihua
Lan

    


    Date: January
2010

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      Notary
Certificate

       

    

    
      (2010)
Yun Kun Zhen Yuan Zi No.:1986

       

    

    
      Applicant:

       

    

    Mortgagee: Agricultural Bank
of China, Kunming Shuanglong Branch

     

    Place of Residence: No.199
Tang Shuang Road, Kunming City

     

    Person-in-charge: Zuowu
Zhou

     

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

     

    
      Place of residence: No.2 Jing
You Road, Kunming National Economy

       

    

    
      And
Technology Developing District

       

    

    
      Legal representative: Guihua
Lan

       

    

    
      Business License No.:
530100400000723

    

    


    
      Notarization: The Mortgage
Contract

       

    

    
      Both
parties agree on the notarization application for the above mentioned
Contract on January 26, 2010.

    

     

    
      We hereby
prove that both parties have signed the above mentioned Mortgage
Contract upon consensus. The mortgagee is a qualified financial institution
engaging in RMB loan business and its governor is entitled
to sign this Contract on behalf of his bank; while the Mortgagor is a
qualified entity to sign this Contract.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

    

    This
mortgage Contract is entered into by those two parties according to
relevant laws and regulations of China for purpose of ensuring that Kunming
Shenghuo Pharmaceutical (group) Co., Ltd. will repay the loan under the Loan
Contract as above mentioned. This Contract is secured by the land located in
No.11-2, Kunming National Economy and Technology Developing Zone held by Kunming
Shenghuo Pharmaceutical Co., Ltd., with an amount of guaranty of RMB10 million.
Upon examination, the mortgagee agrees to accept the guaranty of mortgage
offered by the mortgagor. Specific provisions such as Amount of Guaranty, Term
of Guaranty, Way of Payment, Rights and Obligations of Both Parties, Liability
for Breach of Contract have been clarified therein.

    


    Based
upon the above mentioned facts, we hereby certify that the above Mortgage
Contract is dated January 26, 2010, and is entered into at Kunming City, Yunnan
Province by and among Zuowu Zhou, the governor of Agricultural Bank of China,
Kunming Shuanglong Branch and Guihua Lan, the legal representative of Kunming
Shenghuo Pharmaceutical (group) Co., Ltd. This Contract entered into by both
parties is in compliance with Article 55 of The General Principles of the Civil
Law of the People’s Republic of China; the signatures and seals of both parties
are found to be authentic; the contents of this Contract are in compliance with
regulations of The Contract Law of the People’s Republic of China and The
Property Law of the People’s Republic of China, respectively.

    


    Pursuant
to Article 187 of The Property Law of the People’s Republic of China, where the
real estate is mortgaged, the collateral is established from the date of
registration with the local authorities.

    


    Issued
by:

     

    
      Juming
Feng,

    

    Zhenyuan
Public Notary Office, Kunming City,

    Yunnan
Province, P.R.C.

    Date:
January 26, 2010