Document:

exhibit_4-21.htm

Exhibit 4.21

 

Orckit Communications Ltd.

Summary Terms and Conditions of

Series B Convertible Notes Issued June 6, 2011

As proposed to be amended pursuant to the Arrangement

 

 

1.        Type of Offering

 

On June 6, 2011, Orckit Communications Ltd. (the “Company”) issued Series B convertible notes (the “Notes”) in a public offering pursuant to a prospectus dated April 15, 2011 (as amended on May 15, 2011 and May 29, 2011) and Trust Deed, dated April 13, 2011 (as amend on May 11, 2011 and May 26, 2011), with Ziv Haft Trusts Company Ltd., as trustee for the holders of Notes.  The Trust Deed is proposed to be amended pursuant to an arrangement with the holders of the Notes and the holders of the Company's Series A convertible notes (together referred to as "notes" and "note holders", as the case may be) under Section 350 of the Israeli Companies Law, 5759-1999 (the "Arrangement"), provided that all conditions precedent are satisfied or waived and the Arrangement comes into effect by June 30, 2012.

 

Pursuant to Regulation S under the Securities Act of 1933, as amended, the Notes offering was made solely in Israel to residents thereof.  The Notes are listed for trade on the Tel Aviv Stock Exchange.

 

2.        Amount of Issuance, Denomination and Issuance Price

 

The Company issued Notes with an aggregate principal amount of 30,779,000 New Israeli Shekels (“NIS”) (approximately $9.0 million at the time).  The Notes were issued at a purchase price equal to 94% of their nominal value, or NIS 940 per unit (each unit comprised of NIS 1,000 principal amount).  

 

3.        Repayment of Principal

 

The principal is repayable in one installment on December 31, 2017. Each Note holder that requests partial early redemption of its Notes would be entitled to its pro rata portion of the payments with respect to the Notes listed below (includes accrued interest):

 

	
Payment Date

	
Payment Amount

	
 
July/August 2012*

	
$441,000 (or $573,000)**

	
October 2, 2012

	
$191,000 (or $382,000)**

	
March 29, 2013

	
$153,000

	
July 1, 2014

	
$204,000

 

	
________________

	
*

	
This is an estimated date.  The payment date will between seven and 60 days following the end of the second conversion period set forth in the next section below.

 

	
**

	
The amount in parentheses would be due if, by the applicable payment date, less than an aggregate of approximately $3 million of the outstanding principal amount of the notes was converted into our ordinary shares (not including conversions by our founders, Messrs. Izhak Tamir and Eric Paneth).

 

4.        Interest

 

The Notes bear interest at an annual rate of eight percent (8%).  The interest is payable semi-annually on June 30th and December 31st of each of the years 2011 through 2017 (inclusive) commencing June 30, 2011.

 

  

  

  

 

5.        Linkage

 

The principal of the Notes, and the interest that shall accrue thereon, are not linked to the Israeli Consumer Price Index.

 

6.        Security

 

The Company deposited cash and/or securities equal to an aggregate amount of approximately $10.3 million in a trust account held jointly by the respective trustees of the notes, which is required to be secured by a first ranking fixed charge, to ensure the first payment scheduled to be made to the note holders pursuant to the Arrangement. If the Arrangement does not come into effect by June 30, 2012, the charge is required to be removed and the account released to us.

 

7.        Conversion at the Option of each Note Holder

 

During the initial ten-day period following the effective date of the Arrangement, the Notes would be convertible into Ordinary Shares of the Company, at the option of the holder thereof, at a conversion price of approximately $2.04 per share and approximately $0.49 per share during the subsequent 25-day period, after which time the conversion price would revert back to approximately $2.04 per share.

 

The Ordinary Shares issued upon conversion of the Notes will be listed on the Tel Aviv Stock Exchange and the Nasdaq Stock Market, to the extent that the Company's Ordinary Shares are generally listed thereon at the time of conversion.

 

The conversion price is subject to adjustment in the event that the Company effects a share split or reverse share split, a distribution of bonus shares or cash dividend, or performs a rights offering.

 

8.        Conversion at the Option of the Company

 

The Company is entitled to force the conversion of all or a portion of the Notes at any time, at the price of $3.00 per share, by notice to the Note holders if, out of 30 consecutive trading days (prior to the date of the Company’s notice of forced conversion), there were 20 trading days in which the price of the Company’s Ordinary Shares on the Tel Aviv Stock Exchange is at least $3.00 per share.

 

Notice of such forced conversion is required to be provided between 21 and 45 days prior the forced conversion.

 

9.        Repurchase Right of the Company

 

Until January 1, 2014, the Company will not be permitted, directly or indirectly, to repurchase any Notes, unless the price per NIS 1.00 principal amount of the Notes is not more than NIS 0.60. Subject to the foregoing, the Company is entitled to repurchase any Notes, at any time and from time to time, in private transactions or in transactions on the Tel Aviv Stock Exchange. Any Notes repurchased by the Company will be canceled and may not be reissued.  Notes purchased by a subsidiary of the Company will continue to be deemed outstanding and subject to transfer.

 

10.      Undertakings in Connection with the Arrangement

 

The Company is required to use its best efforts to raise an aggregate amount of $10 million of equity by September 30, 2012.

 

Each of Mr. Tamir and Mr. Paneth undertook to invest in the Company's equity financings that take place by April 2, 2013 at least 10% of each such financing, up to an aggregate amount of $1.0 million each, if the aggregate amount raised from other investors in such offerings is not less than $7.0 million.

 

  

- 2 -

  

 

Messrs. Tamir and Paneth undertook to provide a subordinated loan to the Company in the amount of $200,000, which would be converted into Ordinary Shares in an equity offering as part of the satisfaction of their commitments described in the immediately preceding paragraph.

 

The monthly salary of each of Mr. Tamir and Mr. Paneth will be reduced by 33% for the period between January 1, 2012 and October 2, 2013.

 

The Company will be permitted to incur debt that is senior to the Notes, subject to the following principal conditions: (i) the amount of our senior debt outstanding may not exceed $5 million; (ii) senior debt may be incurred no earlier than August 1, 2012 and only after the Company has used its best efforts to effect an equity financing; and (iii) the Company must ensure that its early redemption payments to the note holders that would be due on October 2, 2012 in accordance with the Arrangement will be timely made.

 

The Company will not be permitted to distribute dividends or to engage in transactions with controlling shareholders (if any), in each case until the fourth early redemption payment date of July 1, 2014.

 

The note holders, the Company and its office holders undertook to waive any claims against each other related to the period ending on the effective date of the Arrangement. However, such waiver (except with respect to vice presidents of the Company or of any of its subsidiaries) would retroactively expire on October 15, 2012 unless at least one of the following events has occurred by that date: (i) the payments to the note holders of the amounts payable to them on October 2, 2012 pursuant to the Arrangement and no incurrence of any senior debt or other debt or credit in excess of $134,000 having a maturity date earlier than April 15, 2013; (ii) an investment in the Company of at least $2 million in consideration for the Company's securities or in the form of subordinated loans; or (iii) an investment in the Company of at least $1.75 million in consideration for the Company's Ordinary Shares or options or subordinated loans, and the conversion by Mr. Tamir and Mr. Paneth of the Notes held by each of them in the principal amount of approximately $1.8 million and $146,000, respectively. If the waiver expires, then the period from February 15, 2012 until the date the waiver expires would not be counted for purpose of the statute of limitations on claims.

 

The parties to the waiver also agreed that no claim or demand would be made against the Company or its officers and directors in connection with the Arrangement or the approval thereof, to the extent it becomes effective.

 

During the period from the effective date of the Arrangement until November 1, 2012, subject to the Company  making the payments required of the Company pursuant to the Arrangement, the note holders will not be permitted to demand the acceleration of their notes out of a foreseeable concern that the Company will not be able to meet its payment obligations towards them, unless the Company enters into insolvency proceedings that were not initiated by its note holders or the respective trustees thereof and such proceedings are not cancelled within 45 days.

 

- 3 -EX10-1

Contract No.: A101A120280

Cash Flow Loan Contract 

 

	
IMPORTANT NOTICE

BORROWER: PLEASE CAREFULLY READ ALL ARTICLES IN THIS CONTRACT, ESPECIALLY ARTICLES MARKED WITH ▲▲. FOR ANY QUESTION, PLEASE REFER TO THE LENDER FOR EXPLANATIONS IN A TIMELY MANNER.

Borrower: Hubei Minkang Pharmaceutical Co., Ltd.

Legal representative (Principal): GU Shuhua

Statutory address: No.50 Xiba Road, Yichang City

Mailing address:  Same as above 

Lender: Bank of Communications Co., Ltd, Yichang Branch

Principal: YE Fenggao

Mailing address: No.22 Fourth Shengli Road, Yichang City

Whereas, the Borrower wishes to apply for a cash flow loan from the Lender; to define the rights and obligations of both parties, the Borrower and Lender hereby enter into this Contract on the basis of mutual consent.

Article 1       Loan

        1.1   Currency: Renminbi.

        1.2   Amount (in capital letters): TEN MILLION RMB ONLY.

        1.3   Loan under this Contract shall only be used for the purpose of cash flow.

        1.4   The term of this loan shall not exceed 12 months, starting from the date of first issu

          ance of loan funds, and shall expire on June 21, 2013.

Article 2       Interest Rate and Calculation of Interest

        2.1     The provision of (1) below shall apply to the interest rate under this Contract:

            (1) With respect to fixed interest rate for RMB loans, the interest rate shall adopt the □ benchmark interest rate ☑  20%  upward adjusted benchmark interest rate □ / downward adjusted benchmark interest rate, at the time □ this Contract comes into effect □ first loan issuance date ☑ actual loan issuance date (where the loan is issued in installments, the actual issuance date shall be the issuance date for each installment loan) (term), and during the term of this Contract the interest rate shall not be adjusted.

            (2) With respect to floating interest rate for RMB loans, the following specific terms shall apply:

            �
 The interest rate shall adopt the □ benchmark interest rate □  /  upward adjusted benchmark interest rate □  /  downward adjusted benchmark interest rate, at the time □ this Contract comes into effect □ first loan issuance date □ actual loan issuance date (where the loan is issued in installments, the actual issuance date shall be the issuance date for each installment loan).

            ‚
 Where the benchmark interest rate is adjusted by the People's Bank of China during the term of this Contract, the  /  method below shall be adopted to determine the adjustment date for the interest rate under this Contract. As from the adjustment date for the interest rate under this Contract, the Lender shall have the right to implement the adjusted interest rate in accordance with the applicable interest rate level on the adjustment date for interest rate under this Contract, and the upward (downward) adjustment range shall remain the same.
a.     The date on which the People's Bank of China adjusts interest rate shall be the adjustment date for the interest rate under this Contract;

1

b.     The date on which it has been a whole □ month □ quarter □ half a year □ one year from the actual loan issuance date (where the loan is issued in installments, □ first loan □ the issuance date for each installment loan, shall apply) shall be the adjustment date for the interest rate under this Contract;

c.                                           /                                                                 .

            ƒ
 Where the benchmark interest rate after adjustment by the People's Bank of China becomes floating interest rate or the benchmark interest rate is cancelled, both parties shall conduct consultations to agree on the adjustment of the loan interest rate under this Contract; however, the adjusted interest rate shall not be lower than the applicable interest rate at that time; if both parties fail to agree on the adjusted interest rate more than  /  month after the adjustment date of interest rate by the People's Bank of China, the Lender shall have the right to declare early expiry for all loans under this Contract.

            (3). _____ /_____ (foreign currency) interest rate           /          ;

        2.2Daily interest rate = monthly interest rate /30, and monthly interest rate = annual interest rate/12.

        2.3 Calculation of interest

        2.3.1 Normal interest = agreed interest rate under this Contract x issued loan amount x number of days that have elapsed. Number of days that have elapsed shall be counted from the loan issuance date to the expiry date.

        2.3.2 The penalty interest for overdue loans and misappropriated loans shall be calculated on the basis of amount overdue or misappropriated and actual number of days (counting from the day when the loan becomes overdue or is misappropriated until the day when principal and interest thereof are repaid). Where the loan is denominated in Renminbi, the penalty interest rate for overdue loans shall be upward adjusted 50% on the basis of agreed-upon interest rate under this Contract, and the penalty interest rate for misappropriated loans shall be upward adjusted 100% on the basis of agreed-upon interest rate under this Contract; where the People's Bank of China adjusts benchmark interest rate after the floating interest rate loan becomes overdue or is misappropriated, the Lender shall have the right to adjust the penalty interest rate under this Contract accordingly, and the new penalty interest rate shall apply from the adjustment date of interest rate by the People's Bank of China. Where the loan is denominated in foreign currencies, the penalty interest rate shall be upward adjusted     /     on the basis of agreed-upon interest rate under this Contract.

        2.4 The interest of loans under this Contract shall be settled in accordance with the method (2) below, and the principal as well as any interest accrued thereof shall be repaid together when the loan expires in the end. The interest settlement date shall be the interest payment date:
(1) The interest shall be settled on the 20th day of the last month of each quarter;

(2) The interest shall be settled on the 20th day of each month;

(3)          /            .

        2.5 Where the Borrower repays loans or the Lender recovers loans in advance in accordance with the terms and conditions under this contract, the applicable interest rate level shall not be adjusted and the agreed-upon interest rate under this Contract shall continue to apply.

        2.6 Other agreements on interest rate

                                              /                                                    

                                               /                                                    

Article 3       Issuance and Payment of Loans

        3.1 The Borrower may draw on loan funds in installments; however, the sum of the loan funds drawn each time shall not exceed the agreed-upon amount under Article 1 of this Contract. The loan funds drawn by the Borrower shall comply with the terms of the following loan issuance plan.

2

	
   Issuance Date
	
Issuance Amount

	
May 7, 2012;
	
TEN MILLION RMB ONLY (amount in capital letters)

	
MM/DD/YYYY
	
       /          (amount in capital letters)

	
MM/DD/ YYYY
	
         /         (amount in capital letters)

	
MM/DD/ YYYY
	
         /         (amount in capital letters)

▲▲3.2 The Lender shall have the right to refuse to issue loans before all the following conditions have been met:

          (1) The Borrower has completed applicable statutory procedures such as governmental permit, approval, registration and other procedures required by the Lender; and the foregoing permit, approval or registration continue to be in effect;

          (2) The guarantee contract (if any) under this Contract has come into effect and continues to be in effect; where the guarantee contract is a mortgage contract and/or pledge contract, security interest has been created and continues to be in effect;

          (3) No significant adverse changes have occurred to the business and financial status of the Borrower;

          (4) No breach of agreements under this Contract by the Borrower;

          (5) The payment method of loan funds conforms with the terms and conditions under this Contract; where the loan funds are paid by the Lender in trust, the Lender agrees to pay;

          (6) Where the loan drawn-on is denominated in foreign currencies, the Borrower has opened applicable accounts in accordance with foreign exchange control regulations and has provided documents proving that the loan in question complies with relevant foreign exchange policies, including but not limited to, valid certificate of use of foreign exchange, registration, verification and approval documents;

          (7) The Borrower has designated accounts for return of funds as required by the Lender and signed an account management agreement.

        3.3 The Borrower hereby designates the account below as the loan account, which □ is ☑ is not the special loan account opened with the Lender by the Borrower.

	
Account name:
	
Hubei Minkang Pharmaceutical Co., Ltd

	
Account number:
	
425070001018170065750

	
Bank:
	
Bank of Communications, Gezhouba Branch

Where a special loan account is opened, the issuance and payment of loan shall be conducted through this account. This account shall only be used to issue funds of loans and make external payments, and only vouchers of "Application Form for Settlement Services" shall be sold with respect to this account. No business transactions such as check, bill of exchange, bank accepted bill of exchange may be processed with respect to this account; neither may this account be used for other settlements. When the Borrower transfers loan funds from this account at its own discretion, the business transaction must be done at the counter of the branch where the account is opened. The deposit interest of this account shall be entered into the repayment account of the Borrower.

       3.4 Before each withdrawal, the Borrower shall proceed with relevant withdrawal procedures at least three bank working days in advance and specify a payment method (payment by the Lender in trust or payment by the Borrower at its own discretion); only one method may be applied to each withdrawal.

        3.5 Payment by the Lender in trust shall mean that the Lender, in accordance with the "Authorization Letter for Payment in trust" of the Borrower, directly pays the loan funds to the Borrower's transaction counterpart which is consistent with the use of loans agreed to under this Contract through Borrower's loan account after the loan funds are issued in accordance with the terms and conditions under this Contract.

3

Where any of the conditions below is satisfied, method of payment by the Lender in trust shall be adopted:

(1) The amount of single payment exceeds FOUR MILLION RMB ONLY (this amount shall be the limit for payment by the Borrower at its own discretion).

                                  /                                            

                                  /                                            

Where the method of payment by the Lender in trust is adopted, the Borrower shall provide the Lender with an "Application Letter for Withdrawal", "Authorization Letter for Payment in Trust" according to Lender's format, loan vouchers, applicable payment vouchers and other materials required by the Lender (including but not limited to transaction materials such as commercial contracts, invoices, and receipts of goods), specify the amount of loan drawn-on and payee as well as the amount of payment; the amount of loan drawn-on shall be equal to the total amount that needs to be paid.

Where the Borrower's proposed payment is not in compliance with the terms and conditions under this Contract or applicable commercial contracts or is non-conforming in any other way, the Lender shall have the right to refuse the payment and return the "Authorization Letter for Payment in Trust" submitted by the Borrower.

Where the Lender consents to the payment, if the external payment fails or returns back due to incorrect information provided by the Borrower, the Borrower shall re-submit relevant documents and materials with correct information within a period specified by the Lender. The Lender shall not be responsible for losses incurred by the Borrower as a result of failed payments.

         3.6 Payment by the Borrower at its own discretion shall mean that after the Lender issues the loan funds to the loan account of the Borrower in accordance with the terms and conditions under this Contract, the Borrower will, at its own discretion, pay the loan funds to Borrower's transaction counterpart which is consistent with the use of loan agreed to under this Contract.

Where the method of payment by the Borrower at its own discretion is adopted, the Borrower shall provide the Lender with an "Application Letter for Withdrawal", loan vouchers, description of use of funds and other materials required by the Lender. The Borrower shall, within fifteen days after the issuance of the loan, summarize the payment of loan funds and report the information to the Lender. The Lender shall have the right to verify whether the payment of loan funds is in compliance with the agreed-upon purpose, not through analysis of the account, inspection and verification of documents, but on-site investigation and the Borrower shall cooperate with the Lender's verification efforts.

        3.7 The actual issuance date of loan funds and the issuance amount shall be based on the records on the Loan Voucher.

Article 4        Repayment of Loan

        4.1 The Borrower shall repay the loan in a timely manner in accordance with the due date agreed to under Article 1.4 of this Contract and the plan below; if the due date recorded on the Loan Voucher is inconsistent with the terms and conditions under this Contract, the records on the Loan Voucher shall prevail:

	
Repayment Date
	
Repayment Amount

	
May 7, 2013
	
TEN MILLION RMB ONLY (amount in capital letters)

	
MM/DD/YYYY/;
	
             /          (amount in capital letters)

	
MM/DD/YYYY/;
	
             /          (amount in capital letters)

	
MM/DD/YYYY/;
	
             /          (amount in capital letters)

▲▲4.2 Without written consent of the Lender, the Borrower shall not make any prepayment of the loan.

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        4.3The Borrower shall designate: 

          (1) The following account as the repayment account:

	
Account name: 
	
Hubei Minkang Pharmaceutical Co., Ltd

	
Account number: 
	
425070001018170065750

	
Bank: 
	
Bank of Communications, Gezhouba Branch

          (2) The following account as the account for the return of funds:

	
Account name: 
	
Hubei Minkang Pharmaceutical Co., Ltd

	
Account number: 
	
425070001018170065750

	
Bank: 
	
Bank of Communications Gezhouba Branch

▲▲Article 5 Representations and warranties by the Borrower

        5.1 The Borrower is duly incorporated and exists with all necessary capacity for rights, and is able to perform its obligations under this Contract and assume civil liabilities in its own name.

          5.2 Execution and performance of this Contract shall reflect the real intentions of the Borrower and all necessary consent, approvals and authorization have been obtained without any contravention in law.

          5.3 The production and business operations of the Borrower comply with legal and regulatory provisions and the Borrower has the capacity to operate continuously; the Borrower has legitimate repayment sources and is free of major adverse credit history. The senior management of the Borrower is free of adverse history.

          5.4 All the documents, statements, materials and information provided by the Borrower to the Lender during the execution and performance of this Contract are true, correct, complete and valid; the Borrower has not hidden any information that may affect its financial status and repayment capabilities from the Lender and no significant adverse change has happened to the financial status of the Borrower since the latest report date for financial statements.

          5.5 When this Contract is signed, the Borrower is not guarantor's shareholder or the "beneficial controller" within the definition under the Company Law, and the Borrower has no plan to become a shareholder or beneficial controller of the guarantor.

Article 6        Rights and Obligations of the Lender

          6.1 The Lender shall have the right to recover the principal of loan, interest (including compound interest, penalty interest for overdue and misappropriated loan) in accordance with the terms and conditions under this Contract, charge fees payable by the Borrower. The Lender shall, at its own discretion, have the right to recover the loans in advance in consideration of the return of funds of the Borrower, and exercise other rights provided by law or agreed to under this Contract.

          6.2 During the performance of this Contract, the Lender shall only carry out preliminary inspection of the materials provided by the Borrower. Where the Lender fails to complete the payment in trust in a timely manner as a result of untrue, incorrect or incomplete materials provided by the Borrower, or the Borrower makes payment in contravention of agreements under this Contract, the Lender shall not be required to assume any liability.

          6.3 Where the issuance of loan funds or payment fails as a result of the loan account or payees' account designated by the Borrower being frozen or any other reason, the Lender shall not be required to assume any liability.

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Article 7        Obligations of the Borrower

          7.1 The Borrower shall repay the principal of loan under this Contract and pay interest in accordance with the time, amount and currency agreed to under this Contract.

The account for the return of the funds designated by the Borrower shall be used to receive corresponding sales incomes or planned repayment funds; where the corresponding sales incomes are settled by non-cash method, the Borrower shall ensure timely transfer of the income funds to the account for the return of funds after receipt thereof. The Borrower shall provide information about the inflow and outflow of the account for return of funds as required by the Lender.

          7.2 The Borrower shall use the loan as agreed to under this Contract and shall not divert the loan under this Contract to other uses, or use the loan for fixed asset investment, equity investment or for production, operation fields and purposes forbidden by the state.

The Borrower shall draw on the loan funds as agreed to and shall not evade the method of payment by the Lender in trust by breaking a single large amount payment into several lower amount payments; where the method of payment by the Borrower at its own discretion is adopted, the payment of loan funds shall comply with the terms and conditions under this Contract.

  

▲▲7.3 The Borrower shall be responsible for costs and expenses under this Contract, including but not limited to costs and expenses for notarization, appraisal, evaluation and registration.

The Borrower shall bear settlement fees for payment of loan funds (including payment by the Lender in trust and payment by the Borrower at its own discretion) and pay in full applicable fees in a timely manner in accordance with charged items, rate and time stipulated by the Lender.

Where the loan account is a special loan issuance account, when the loan funds is paid (including payment by the Lender in trust and payment by the Borrower at its own discretion) and if the funds receipt account is not an account opened with the Bank of Communications, then the payment of funds may be processed through the payment system of the People's Bank of China or the same city interchange system.

Where the loan account is not a special loan issuance account, when the loan funds is paid (including payment by the Lender in trust and payment by the Borrower at its own discretion) and if the funds receipt account is an account opened with another bank in a different place, then the payment of funds shall all be processed through the payment system of the People's Bank of China.

▲▲7.4 The Borrower shall follow the Lender's business policies and operation practices related to the process of loan business, including but not limited to, cooperation with the Lender in the management of loan payments, supervision and inspection of the use of loan and the business operations of the Borrower, timely provision of all financial statements, records and materials about the use of loan funds, information about related parties and transaction with related parties, other materials and information as required by the Lender. The Borrower shall guarantee that the documents, materials and information provided are true, complete and correct.

▲▲7.5 In the event of any of the following circumstances, the Borrower shall notify the Lender in writing at least 30 days in advance, and before repaying principal and interest of loan under this Contract or providing a repayment plan and guarantee acceptable to the Lender, the Borrower shall refrain from taking any of the following actions:

             (1) Sell, give as a gift, rent, lend, transfer, mortgage, pledge or dispose of all or significant portions of assets or important assets in any other ways;

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             (2) Significant changes may occur to the operation system or organization's form of property rights, including but not limited to, contracting, lease, joint operation, corporate system reform, joint stock cooperative system reform, sale of businesses, consolidation (merger), joint venture (cooperation), dismantlement, establishment of subsidiary, transfer of equity, transfer of property rights and reduction of registered capital;

             (3) External investment exceeds RMB     /     or debts financing increases by RMB      /      .

▲▲7.6 The Borrower shall notify the Lender in writing within 7 days from the date on which any of the following events transpire or may happen:

             (1) The Borrower or its related party modifies articles of association, change registration information for industrial and commercial enterprises such as company name, legal representative (principal), domicile, mailing address or business scope, and etc.; makes decision that has important impact on its financial status and personnel;

             (2) The Borrower, its related party or guarantor plans to apply for bankruptcy or may be applied for or has been applied for bankruptcy by creditors;

             (3) The Borrower or its related party is involved in any major lawsuit, arbitration, administrative measures, or its main assets under this Contract are subject to property preservation or other mandatory measures, or its main assets or the safety and good conditions of collateral under this Contract are affected or may be affected, or impaired in value or may be impaired in value;

             (4)The Borrower or its related party provides guarantee for a third party and its own economic condition, financial status or capabilities to perform obligations under this Contract are thus significantly and adversely affected;

             (5)The Borrower or its related party signs a contract that has significant impact on its operations and financial status;

             (6)The Borrower, its related party or guarantor is shut down, discontinued, dissolved, suspended for adjustment of business; dismissed or its business license is revoked;

             (7)The Borrower or its related party, individual person as major investor of the Borrower or its related party, the legal representative (principal), director or major management personnel of the Borrower or its related party is missing, involved in illegal or irregular activities, or violates applicable stock exchange rules or abnormal changes take place;

             (8)The operation of the Borrower or its related party falls into serious difficulties; its financial status deteriorates; or occurrence of any other events that negatively affect the operation, financial status or debt-paying ability of the Borrower or its related party;

             (9)Occurrence of related transaction and the amount of the transaction reaches or exceeds 10% of the recently-audited net assets;

             (10)Before repayment of all debts under this Contract, the Borrower becomes or may become the shareholder or the "beneficial controller" of the guarantor within the definition under the Company Law;

             (11)The Borrower or its related party causes accidents by violation of laws and regulations, regulatory provisions, state policies or industry standards; or its violations are exposed by the media;

             (12)The relationship of control between the Borrower and its related party changes;

             (13)Occurrence of other major adverse events that affect the repayment ability of the Borrower or its related party.

▲▲7.7 If any change that affects the Creditor's right adversely happens to the guarantee under this Contract, the Borrower shall provide other guarantees acceptable to the Lender in a timely manner as required.

The "change" referred to under this article shall include, without limitation: consolidation, dismantlement, shutdown, closedown, dissolution of guarantor; suspension for adjustment of business; the guarantor is cancelled; its business license is revoked; the guarantor applies for or is applied for bankruptcy; significant changes to the operation or financial status of the guarantor; the guarantor is involved in major lawsuit, arbitration, administrative measures, or its main assets are subject to property preservation or other mandatory measures; the value of the guaranty is reduced or may be reduced or the guaranty is subject to mandatory measures such as property maintenance; the safety and goods condition of the guaranty is affected or may be affected; guarantor or its legal representative (principal), director or major management personnel is involved in illegal or irregular activities, or violates applicable stock exchange rules; where the guarantor is an individual person, the guarantor is missing, deceased (declared deceased); the guarantor breaches the guaranteed contract; disputes between the guarantor and the Borrower; the guarantor demands dissolution of the guarantee contract; the guarantee contract fails to enter into force or is annulled or cancelled; security interest is not created or is annulled; or any other events that affect the security of the Creditor's right of the Lender.

7

             7.8 The Borrower undertakes that before all the principal and interest of loans as well as relevant costs and expenses under this Contract are repaid in full, the financial indicators of the Borrower shall comply with agreements below at all times:

(1)                               /                                         

(2)                               /                                         

(3)                               /                                         

Article 8        Other Matters in Agreement

The Borrower promises to use the loan within the payment limit in prescribed manner. Article 7.3 under the original contract shall be amended to "The Borrower shall bear settlement fees for payment of loan funds (including payment by the Lender in trust and payment by the Borrower at its own discretion) and pay in full applicable fees in a timely manner in accordance with charged items, rate and time stipulated by the Lender."

▲▲Article 9 Early Expiry of the Loan

          9.1 Occurrence of any of the following circumstances shall be deemed to be "early expiry event" under this Contract:

             (1) Representations and warranties made by the Borrower under Article 5 are not true;

             (2) The Borrower breaches any terms and conditions under this Contract;

             (3) Any circumstance listed under Article 7.6 that needs to be notified actually takes place and the Lender believes such circumstance will affect the security of its Creditor's right;

             (4) Where the Lender, in consideration of the return of funds of the Borrower, believes that the Borrower needs to repay the principal and interest of the loan ahead of schedule;

             (5) Where the Lender's issuance of loan in accordance with the terms and conditions under this Contract constitutes or may constitute violation of regulatory provisions due to changes to regulatory policies;

             (6)The Borrower breaches contract during its performance of other contracts entered into between the Borrower and the Lender or contract entered into between the Borrower and a third party; early expiry has been or may be declared for the debts.

          9.2 The Lender shall have the right to take one, several or all of the following measures upon occurrence of any "early expiry event":

             (1) Suspend issuance of loan yet to be drawn-on by the Borrower;

             (2) Suspend payment of loan which has been drawn-on by the Borrower but yet to be used;

             (3) Require the Borrower to consult with the Lender on supplemental conditions for issuance and payment of loan within stipulated time period;

             (4) Require the Borrower to change the method of payment as required by the Lender;

             (5) Declare unilaterally early expiry for all principal of loan already issued under this Contract and demand immediate repayment of all principal of loan due and settlement of interest in full.

▲▲Article 10     Breach of Contract

          10.1 Where the Borrower fails to repay the principal of the loan and pay interest in full in a timely manner, or fails to use the loan for agreed-upon purposes, the Lender shall calculate and charge interest in accordance with the penalty interest rate for overdue loan or misappropriated loan and shall calculate and charge compound interest on unpaid interest due.

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          10.2 Where the Borrower fails to repay the principal of loan and pay interest in full in a timely manner, it shall be liable for costs and expenses for the recovery, lawsuit (or arbitration), preservation, announcement, enforcement, attorney, travel and other fees paid by the Lender for realization of the Creditor's right.

          10.3 If the Borrower evades supervision of the Lender, defaults on repayment of the principal of the loan and interest, or maliciously evades performance of debts, the Lender shall have the right to report such acts of the Borrower to competent authorities and have it publicized in the media.

▲▲Article 11   Deduction Agreement

          11.1 The Borrower shall authorize the Lender to deduct funds from any of the Borrower's accounts opened with the Bank of Communications for repayment if any principal of the loan, interest, penalty interest, compound interest or other fees fall due or become payable.

          11.2 After deduction, the Lender shall notify the Borrower of account number, loan contract number, Loan Voucher number involved in the deduction, amount deducted and the amount of remaining debts.

          11.3 If the amount obtained from the deduction is not sufficient to repay all debts of the Borrower, it shall be used to pay unpaid fees due first. Where the principal and interest are overdue for less than 90 days, the balance after payment of fees shall be used to pay due interest or penalty interest, compound interest unpaid first, and then repay the due principal unpaid; where the principal or interest are overdue for more than 90 days, the balance after payment of fees shall be used to repay the due principal unpaid first and then pay due interest or penalty interest, compound interest unpaid.

          11.4 Where the currency of funds obtained from the deduction is different from that of the debts that need to be repaid, it shall be converted in accordance with the exchange rate quoted by the Bank of Communications at the time of the deduction.

Article 12   Notice

          12.1 The contact information (including mailing address, contact telephone, fax number, and etc.) filled in this Contract by the Borrower shall all be true and valid. If any of the contact information changes, the Borrower shall immediately mail/deliver the changed information in writing to the mailing address filled in this Contract by the Lender. Such change of information shall only be valid if the notice of change is actually received and relevant records are revised accordingly by the Lender.

          12.2 Except that this Contract expressly provides for otherwise, the Lender shall have the right to adopt any of the following methods with respect to any notice by the Lender to the Borrower. The Lender shall have the right to choose any method of notice it deems appropriate and in no event shall the Lender be responsible whatsoever for any delivery mistake, omission or delay with respect to the mail, fax, telephone or any other communication systems. Where the Lender chooses multiple methods of notice, the one that reaches the Borrower first shall prevail.

             (1) Announcement, the date on which the Lender publishes the announcement on its website, online banking, telephone banking or business branches shall be deemed as the date served;

             (2) Delivery in person, the date on which the Borrower signs and receives shall be deemed as the date served;

             (3) Mail delivery (including express mail, regular mail, registered mail ) to the Lender's last-known mailing address of the Borrower, the third day (same city)/fifth day(different cities)(even though the mail may be returned back) after the date on which the mail is posted shall be deemed as the date served;

             (4) Delivery by fax or other electronic communication methods to the Lender's last-known fax number or electronic communication address of the Borrower, the delivery date shall be deemed as the date served.

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▲▲Article 13   Disclosure and Confidentiality of Information

          13.1 The Lender shall be responsible for keeping confidential the trade secrets or other information and materials of the Borrower which are marked with confidentiality requirements in writing, except for the following circumstances:

             (1) Where the disclosure is required by applicable laws and regulations or listing rules;

             (2) Where the disclosure is required by judicial authority or governmental authority;

             (3) Disclosure to external professional advisor of the Lender;

             (4) Disclosure by the Lender with the consent or authorization of the Borrower.

          13.2 The Borrower shall agree that the Bank of Communications may use or disclose all the information and materials related to the Borrower in the following circumstances, including without limitation to, basic information about the Borrower, information about the credit facilities transaction, other relevant information and materials, and the Borrower shall be willing to assume all consequences thus incurred:

             (1) Disclose to the outsourcing entities, third party service providers, other financial institutions and other institutions or individuals to whom the disclosure is deemed necessary by the Lender, including but not limited to, other affiliates of the Bank of Communications or wholly-owned or partly-owned subsidiaries of the Bank of Communications, and allow them to use such information and materials for the following purposes: for the purpose of conducting loan business or in connection with loan business, such as promotion of loan of the Bank of Communications, recovery of default payment of the Borrower, assignment of Creditor right to the loan and etc.; for the purpose of provision or possible provision of new product or service, or furtherance of provision of service to the Borrower by the Lender; for the purpose of better preservation, management and enhancement of customer relations;

             (2) Provide such information and materials to the Credit Reference Centre under the People's Bank of China and other credit institutions or credit information database approved to be established by the People's Bank of China;

             (3) Use for the purpose of business operation, management, statistics, analytics and risk control or allow a third party to use such information and materials on the basis of confidentiality.

Article 14        Governing Law and Dispute Settlement

This Contract shall be governed by the law of the People's Republic of China. Any disputes under this Contract shall be settled through lawsuit filed with a competent court of the Lender's domicile. During the dispute period, both parties shall continue to perform other clauses not involved in the dispute.

Article 15       Miscellaneous

▲▲15.1 The Borrower shall agree that the Lender may check and keep records of the credit information about the Borrower for the purpose of loan application and post-loan management.

▲▲15.2 Where the issuance or payment of loan fails to be conducted in a timely manner due to Force Majeure, communication or network malfunction, system malfunction of the Lender and etc, the Lender shall not be required to assume any liabilities; however, it shall notify the Borrower of the situation in a timely manner.

          15.3 The format of Application Letter for Withdrawal, Application Letter for Withdrawal, Authorization Letter for Payment in Trust and Loan Voucher signed by both parties, and relevant documents and materials confirmed by both parties shall all constitute an integral part of this Contract.

          15.4 Terms such as "related party", "related transaction" and "individual as major investor" referred to under this Contract shall have the same meanings as in the No.36 Accounting Standards for Enterprises--Disclosure of Related Party (Caikuai [2006] No.3) enacted by the Ministry of Finance and subsequent amendments of such Standards.

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          15.5 This Contract shall go into effect after the legal representative (principal) or authorized representative of the Borrower signs (or stamps) and affixes official seal, and the principal or authorized representative of the Lender signs (or stamps) and affixes official seal on this Contract.

          15.6 This Contract shall be executed in three originals with each party holding one copy and the guarantor (if any) holding another copy.

Attachment: Format of Application Letter for Withdrawal

(Intentionally left blank)

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The Borrower has carefully read the foregoing articles and the Lender has made explanations as per the Borrower's request. The Borrower agrees with all the content under this Contract.

 

	
Borrower (Official seal)

[seal] Hubei Minkang Pharmaceutical Co., Ltd.

Legal representative (principal) or authorized representative

(Signature /stamp)

[seal] GU Shuhua

Execution date: May 7, 2012
	
Lender (Official stamp)

[seal] Special Seal for Contracts of Bank of Communications Co., Ltd. Yichang Branch

Principal or authorized representative 

(Signature /stamp)

[seal] YE Fenggao

Execution date: May 7, 2012

 

 

 

 

 

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Attachment:                                                                   Document Number: TKA101A120280

	
Application Letter for Withdrawal

To Bank of Communications Co., Ltd. Yichang Branch (hereinafter referred to as the "Bank"),

In accordance with the terms and conditions under the Loan Contract (hereinafter referred to as the "Contract") numbered A101A120280 entered into between both parties, we now apply for drawing-on the credit facilities under the Contract as follows:

	
1.     Currency: Renminbi; Amount (in capital letters): TEN MILLION RMB ONLY.

2.     Payment method:

☑ Payment in trust. For details please refer to "Authorization Letter for Payment in trust" numbered WTA101A120280.

□ Payment at one's own discretion. The purpose of use         /          .

	
1.     This Application Letter supplements the Contract. Unless agreed to otherwise under this Application Letter, the rights and obligations of both parties as well as relevant matters shall be implemented in accordance with the terms and conditions under the Contract.

2.     We guarantee that the representations and warranties under the Contract shall continue to be in effect; where the method of payment at one's own discretion is adopted, the amount of each payment shall be the limit for payment under one's own discretion. As of the application date, there is no such "early expiry event" as agreed to under the Contract with respect to us.

 

                                     Borrower/Applicant (official seal)

                                [seal] Hubei Minkang Pharmaceutical Co., Ltd.

                            Legal representative (principal) or authorized representative

(Signature /stamp)

[seal] GU Shuhua

Application date: May 7, 2012

	
Approved: Issue the loan within three bank working days from the execution date in accordance with the above conditions.

Bank (official stamp)

      [seal] Special Seal for Contracts of Bank of Communications Co., Ltd. Yichang Branch

  Principal or authorized representative

(Signature /stamp)

[seal] YE Fenggao

Execution date: May 7, 2012

Note: This Application Letter shall be executed in two sets with the Borrower/Applicant and the Bank each holding one copy.

 

 

 

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