ABCS(2007)2002

     

    Mortgage
Contract

     

    Mortagee (full name): Agricultural Bank of China,
Kunming Shuanglong Sub-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 pay back the loan
under 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 RMB6.23
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 mortgage of machinery and
equipment, 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 RMB31, 155,310 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.

     

    12.2
During the course of the litigation, 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. This
Contract shall take effect from the date of its execution.

     

    16. This
Contract is made out in 5 copies and each one
for the Mortgagee,
the Mortgagor, the Debtor,
Administration of Industry and Commerce 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 Sub-Branch

     

    Signature: Zuowu
Zhou

     

     

    Mortgagor:

     

    Kunming
Shenghuo Pharmaceutical (Group) Co., Ltd.

     

    Signature: Guihua
Lan

     

     

    Date:
March 31, 2010

     

    Place of
Execution: Agricultural Bank of China,
Kunming Shuanglong Sub-branch