ABCS(2007)2002

       

      Mortgage
Contract

       

      Contract
No.: ( Shuanglong Sub-branch)

      Nong Ying
Di Zi (2008) No. (003 )

      


      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
loan agreement as above mentioned.

      


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

       

      The
creditor’s principal claim guaranteed is the loan borrowed for medium-term
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 stock right, as to the details of
collateral please find the List
of Mortgage of Real Estate No.: (
Shuanglong Sub-branch) Nong Ying Qing Zi (2008) No. (002) 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, 429,808 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 Administration for Industry and Commerce, Ministry of Commerce and the
Public Notary Office. Each copy has same legal force and effect.

       

      17. 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: Zuo Wu
Zhou

       

      Mortgagor:

       

      Kunming
Shenghuo Pharmaceutical (Group) Co., Ltd.

       

      Signature: Gui Hua
Lan

      


      Date: March
2008           


       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      List
of Mortgage of Real Estate

       

      No.: (Shuanglong
Sub-branch)

       

      Nong Ying
Qing Zi (2008) No. (002)

       

      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, 429,808

      


      This List
constitutes an integral part of the Mortgage Contract, No.: (Shuanglong
Sub-branch) Nong Ying Di Zi (2008) No. (003).

      


      Mortgagee:

       

      Agricultural
Bank of China, Kunming Shuanglong Branch

       

      Signature: Zuo Wu
Zhou

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      Mortgagor:

       

      Kunming
Shenghuo Pharmaceutical (Group) Co., Ltd.

       

      Signature: Gui Hua
Lan

      


      Date: