Document:

MAXIMUM PLEDGE CONTRACT

[Seal: Hubei Minkang Pharmaceutical Co. Ltd Administration Department,]

YICHANG CITY COMMERCIAL BANK

First used in July 2010

	
Translator's Declaration:

	  
	
I, Certify that I have carefully read the original Simplified Chinese document AND I confirm that this translation is a true and accurate English version of such original to the best of my knowledge and belief.

	
 

	    Nancy Law   /s/ Nancy Law                          
	
Certified Translator (Canada)

	
Certified Member in good standing Status: Society of Translators and Interpreters of British Columbia (S.T.I.B.C. www.stibc.org),

	
Membership Number No: 04-10-0674

 

  

  

  

MAXIMUM PLEDGE CONTRACT

Document No.:YSSY (Ying) SD 2010 No. 19

Pledgee: Yichang City Commercial Bank Co. Ltd. ______ (hereinafter referred to as “Party A”)

Legal Representative (Principal): CHEN Shixin                                                                                                      

Pledgor: Hubei Minkang Pharmaceutical Co. Ltd.       (hereinafter referred to as “Party B”)

Legal Representative: GU Shuhua                                                                                                                             

WHEREAS:

1.  Party A has signed the Credit Agreement, , Document No.:YSSY (Ying) SD 2010 No. 19, (hereinafter, the Credit Agreement) with Party B (also the Credit Applicant) on 23 December, 2010. In the Credit Agreement, Party A agrees to provide Party B with a line of credit (hereinafter, the Line of Credit) of (in written form) RMB TEN MILLION YUAN ONLY (including other currencies of equivalent value) during the credit period (hereinafter, the Credit Period) of 23 December, 2010 to 23 December, 2012.

2.  Party A has signed the Credit Agreement, Doc. No. YSSY [N/A] S [N/A] No. [N/A], (hereinafter, the Credit Agreement) with [N/A] (hereinafter, the Credit Applicant) on [date N/A]. In the Credit Agreement, Party A agrees to provide the Credit Applicant with a line of credit (hereinafter, the Line of Credit) of (in written form) [currency N/A] [amount N/A] (including other currencies of equivalent value) during the credit period (hereinafter, the Credit Period) of [date N/A] to [date N/A].

To assure that Party B (or the Credit Applicant) will fully repay all debts owed to Party A under the Credit Agreement in a timely manner, Party B is willing to offer its owned or legally disposable assets as collateral. Party A, upon inspection, agrees to accept assets owned or legally disposable by Party B as collateral. Now therefore, Party A and Party B have signed this Contract, having reached consensus on the following terms and conditions through equitable consultation according to relevant laws and regulations.

Article 1  Collaterals used for pledge by Party B (a separate list of collateral may be made as an addendum of this Contract).

1.1     Name: Real estate

1.2     Quantity or area: Two lots, area: 7944.01 m2

1.3     Location: 50 Xibei Road and 51 Binjiang Road, Yichang City

1.4     Estimated value: RMB 16.5654 million Yuan

 

Translator’s Declaration: Refer to the title page of this 10 page document “Maximum Pledge Contract”

 

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1.5  Period: 23 December, 2010 to 23 December, 2012

1.6  Proof of Ownership:

  Yichang City Property Certificate Xiling District No. 0244289

  Yichang City Property Certificate Xiling District No. 0244307

  Land Certificates:

  04-03-01-0185-37

  04-03-01-0185-41

Article 2  This pledge is a maximum pledge.

2.1  During the Credit Period, Party A may disburse loan funds or provide alternative credit from the Line of Credit in instalments to Party B (or the Credit Applicant). Party B (or the Credit Applicant) may revolve the Line of Credit based on credit category. The amount, period and actual purpose of each loan or alternative credit may be set out in specific contracts.

The due dates of these specific contracts may be later than the Line of Credit due date, but must comply with the provisions of Article 3.3 in the Credit Agreement. Both Parties have no objection in this regards.

2.2  When the Credit Period expires, if the loans, advances or alternative credits provided by Party A to Party B under the Credit Agreement still have a balance left, Party B shall undertake its pledge obligations through its collaterals within the pledge limit specified in Article 3 of this Contract. Before the Credit Period expires, if Party A demands advanced repayment from Party B (or its Credit Applicant) under the provisions of the Credit Agreement or specific contracts, Party B shall also undertake its pledge obligations through its collaterals.

2.3  For credit services (such as commercial bill acceptance, and issuance of letters of credit, letters of guarantee, and letters of guarantee for the release of goods) provided by Party A to Party B (or the Credit Applicant) during the Credit Period, even if an advance has not been paid by Party A before the end of the Credit Period, if any actual foreign advance has been paid by Party A under the aforesaid credit services after the end of the Credit Period, Party B still has to undertake its pledge obligations through its collaterals within the pledge limit specified in Article 3 of this Contract.

2.4  Party A may adjust interest rates during the pledge period according to the provisions of the Credit Agreement and/or specific contracts without seeking approval of or notifying Party B. The rate adjustments shall be recognized by Party B, and shall not affect the pledge obligations undertaken by Party B under this Contract.

2.5  If, in providing the letter of credit service specified under the Credit Agreement, Party A receives documents found to have discrepancies upon examination, and the Credit Applicant accepts such discrepancies, Party B shall still undertake pledge obligations with its collaterals for principals and interests paid by Party A for foreign acceptance or payment. No contention shall be raised for accepting such discrepancies without seeking approval of or notifying Party B.

Article 3  Pledge Limit

3.1  The pledge limit of this Contract is the sum of the principal balance of loans and alternative credits provided by Party A to Party B (or the Credit Applicant) from the Line of Credit under the Credit Agreement: RMB TEN MILLION YUAN ONLY (The maximum pledge amount is the Line of Credit amount.) as well as its interest, penalty interest, compound interest, default penalty, factoring fee, handling fee, insurance fee, and other relevant fees for the realization of creditor's rights. These include, but are not limited to:

3.1.1  The principal balance of loans provided under specific contracts by Party A according to the Credit Agreement, and its relevant interest, penalty interest, compound interest, default penalty and related fees;

 

Translator’s Declaration: Refer to the title page of this 10 page document “Maximum Pledge Contract”

 

[P.2]

 

  

  

  

3.1.2  The principal balance of advances paid for Party B (or the Credit Applicant) by Party A under its obligation for commercial bills, letters of credit, letters of guarantee, and letters of guarantee for the release of goods according to the Credit Agreement, as well as its interest, penalty interest, compound interest, default penalty and related fees;

3.1.3  The principal balance of foreign payments by the bank as requested under trade financing service according to the Credit Agreement, as well as its interest, penalty interest, compound interest, default penalty and related fees;

3.1.4  Creditor's right and relevant overdue default penalty (late fee) of accounts receivable against Party B (or the Credit Applicant) assigned to Party A, and/or funds paid to Party B (or the Credit Applicant) by Party A for the purchase of financing and associated factoring fees, under the terms of factoring service;

x 3.1.5  The unpaid balance of services specified in the original credit agreement, document number YSSY [N/A] S [N/A] No. [N/A], signed between Party A and Party B (or the Credit Applicant), starting from the date on which this Contract comes into effect. (Please put a "X" in the o if this term is not applicable.)

3.1.6  Fees incurred by Party A due to debt collection and pledge realization against Party B (or the Credit Applicant), including, but not limited to, litigation fee, lawyer's fee, affiche fee, delivery fee, and business travel expenses.

3.2  If the principal balance of loans and alternative credits provided to Party B (or the Credit Applicant) by Party A exceeds the Line of Credit limit, Party B will not undertake pledge obligation on the principal balance of credit in excess of the Line of Credit, and will only undertake pledge obligation on the principal balance of loans and alternative credits not in excess of the Line of Credit, as well as the interest, penalty interest, compound interest, default penalty and other associated fees thereof.

3.3  In spite of the provisions of Article 3.2, both Parties affirm that: even if at a certain point during the Credit Period, the principal balance of loans or alternative credits provided by Party A to the Credit Applicant exceeds the Line of Credit limit, yet if the sum of the principal balance of credits do not exceed the sum of the Line of Credit when Party A demands that Party B undertake pledge obligations, Party B may not contest the issue citing Article 3.2, and shall undertake pledge obligations through its collaterals against all principal balances of credits and the interest, penalty interest, compound interest, default penalty and associated fees thereof (as specified in the terms under Article 3.1).

Article 4  Independence of the Contract

This is an independent and unconditional Contract. Its effectiveness shall neither be affected by the effectiveness of the Credit Agreement and specific contracts, nor by the effectiveness of any agreement or document signed by Party B (or the Credit Applicant) with any unit/individual. There shall be no change to the Contract due to various changes in Party B, such as fraud, restructuring, closure, dissolution, settlement, bankruptcy, merger (acquisition), separation and system reform. Neither shall the Contract be affected in any way by your bank's [sic] offer of time limit extension or postponement to Party B (or the Credit Applicant), or of your bank's [sic] deferral in exercising its rights under the relevant agreement to collect funds owed by the Credit Applicant.

Article 5  Safekeeping and Obligations regarding Collaterals and their Proof of Ownership

5.1  During the pledge period, collaterals are kept by Party B or its appointed agent. Party B and its agent shall safeguard the collaterals, and are obliged to maintain, upkeep, and keep intact the collaterals. Collaterals may be subjected to inspections by Party A at any time.

 

Translator’s Declaration: Refer to the title page of this 10 page document “Maximum Pledge Contract”

 

[P.3]

 

  

  

  

   

The pledge period starts from the day on which this Contract takes effect, and lasts until the full principal and interest repayment of credit provided under the Credit Agreement and all other relevant fees.

5.2  During the pledge period, Party B may not do anything that will reduce the value of the collaterals. In case of such behaviours, Party A has the right to demand that Party B either cease such behaviours and restore the collaterals' value, or offer new collaterals approved by Party A. Party B shall undertake to pay any fees incurred to restore the collaterals to their original condition or set up a new pledge.

5.3  The day on which this Contract is signed, Party B shall deliver the collaterals' certificates of rights and other relevant certification documents to Party A for safekeeping. Party A shall properly safeguard the collaterals' certificates of rights. If these documents were destroyed or lost due to improper safekeeping, Party A shall pay for the cost of document reissuance.

Article 6  Registration of Collaterals

For collaterals that require registration by law, Party B shall take this Contract and relevant information to a collateral registration agency with Party A to complete the collateral registration procedure within 3 days after this contract's signing day. Party B shall provide indemnity if, as a result of its failure to complete this procedure by the aforesaid time, it causes Party A to incur losses.

Article 7  Insurance

7.1  Party B shall arrange for sufficient property insurance coverage under the insurance category required by Party A, and list Party A as the primary beneficiary. The insurance certificate shall be given to Party A for safekeeping. The insurance period shall be longer than the Credit Period specified in the Credit Agreement. If the Credit Period is extended, or the debt has not been fully repaid after the Credit Period expires, Party B shall arrange for an extension of the insurance period. If the insured properties suffer any losses, Party A may first recover the principal and interest of credits provided under the Credit Agreement and all other relevant fees from the insurance benefit.

7.2  If Party B has not arranged for insurance or extended insurance of its collaterals as required by Article 7.1, Party A may make these arrangements directly on behalf of Party B. Any fees arising thereof shall be paid by Party B.

7.3  If Party B (or the Credit Applicant) has not fully repaid all debts under the Credit Agreement after the insurance period expires, it must arrange for extended insurance of the collaterals. If Party B fails to do so, Party A may make such arrangements directly on behalf of Party B, with relevant fees paid by Party B.

Article 8  Restrictions on the Disposal of Collaterals during the Pledge Period

8.1  During the pledge period, Party B may not decide on its own to transfer collaterals under this Contract through sale, exchange or endowment. If it is necessary for Party B to make a remunerative transfer of collaterals under this Contract, it may only do so under the following conditions:

8.1.1  It must have the written approval of Party A, and the transferee must be notified that the transferred property is subject to a pledge. A transfer is invalid without such written approval or notification.

 

Translator’s Declaration: Refer to the title page of this 10 page document “Maximum Pledge Contract”

 

[P.4]

 

  

  

  

  

8.1.2  If the transfer price of Party B's collaterals is clearly lower than its value, and insufficient to fully offset the Line of Credit amount and any other costs, Party A may demand that Party B provide other properties as collateral. The transfer will not be allowed if Party B refuses to comply.

8.1.3  The transfer price of Party B's collaterals must be directly deposited to an account specified by Party A, to be applied to all debt principals and interests and all other relevant fees for due date or advanced settlement under the Credit Agreement. Once the full transfer price has been deposited to the specified account, Party A may assist Party B in cancelling the collateral registration, and return the collaterals' proof of ownership to Party B.

8.2  Party B may not transfer, lease, arrange for repledge, or dispose of collaterals under this Contract in any other improper ways without Party A's written approval.

Article 9  Fees associated with insurance, notarization and registration under this Contract shall be paid by Party B.

Article 10  Once this Contract comes into effect, neither Party may change or dissolve this Contract on its own without the other Party's approval. If this Contract has to be changed or dissolved, both Parties should make a written agreement by consensus reached through consultation. The terms of this Contract shall remain in effect until such an agreement is made.

Article 11  If Party B undergoes changes such as separation or merger (acquisition) while this Contract is in effect, the organization resulting from such changes shall undertake or separately undertake obligations under this Contract.

Article 12  In case of any of the following conditions, Party A may legally dispose of the collaterals:

12.1  Party A conducts debt collection according to the Credit Agreement and specific contracts for any default event specified under Article 10.1 of the Credit Agreement occurring on the part of Party B (or the Credit Applicant);

12.2  A default event specified under Article 10.3 of the Credit Agreement occurs on the part of Party B, or Party B's failure to fulfill its obligations under this Contract is construed as any of the default events under this Contract;

12.3  As a natural person, Party B passes away without an heir or legatee;

12.4  If Party B is a natural person, and his/her heir or legatee renounces their inheritance or bequest, refusing to fulfill their obligation to repay debt principal and interest;

12.5  Party B is a legal person or another type of organization, and finds itself in such situations as closure, having its business licence suspended or rescinded, applies for bankruptcy or has bankruptcy applied against it, or dissolution;

12.6  Other causes sufficient enough to threaten creditor's right realization under the Credit Agreement.

Article 13  Default Obligations

13.1  In the event that Party B causes the collateral value to be reduced through improper maintenance or management of the collaterals in violation of Article 5 of this Contract, or Party B behaves in a manner that directly endangers the collaterals and causes the collateral value to be reduced, Party A may demand that Party B restores the collateral value or provides other assets acceptable to Party A as pledge. If Party B refuses to restore the value or provide such assets, Party A may legally disposed of the collaterals before the pledge period expires.

 

Translator’s Declaration: Refer to the title page of this 10 page document “Maximum Pledge Contract”

 

[P.5] 

  

  

  

  

13.2  In the event that Party B disposes of the pledged assets on its own in violation of this Contract, its action shall be considered invalid; Party A may demand that Party B ceases infringement to its right of pledge, restore the collaterals to their original conditions, and require that Party B provides other assets acceptable to Party A as pledge according to actual circumstances, or legally dispose of the collaterals before the pledge period expires.

13.3  Party B causes Party A to suffer economic losses through its failure to disclose that the collaterals have been co-owned, disputed, sequestered, seized, rented, already pledged, have liens (including but not limited to construction liens), or because Party B has no ownership or disposal rights to the collaterals. In such events, Party B shall provide new pledges as Party A requires.

13.4  If any of the above default events occur, and Party B fails to provide a new pledge as required by Party A, Party B shall pay 50% of the Line of Credit under the Credit Agreement as default penalty. If Party A suffers economic losses as a result, Party B shall fully recompensate Party A for such losses.

Article 14  If Party B (or the Credit Applicant) cannot repay the principal and interest of loans, advances and alternative credits, and all other relevant fees owed to Party A in a timely manner, Party A may claim right of pledge and cause the collaterals to be legally sequestered or detained by a People's Court. Party A may collect natural interest severed from the collaterals, and collect legal interest that are collectable by Party B for the collaterals.

Article 15  Pledge Realization

15.1  If any one or more situations specified in Articles 12, 13.1 and 13.2 of this Contract occur, the pledge can be realized in the following manner:

15.1.1  Party A and Party B reaches an agreement to directly convert the collaterals into cash, or auction or sell the collaterals;

15.1.2  Dispose of the collaterals according to legal procedures;

15.2  Party A may receive compensation first from proceeds of the collaterals disposed in the aforesaid manner. If the proceeds exceed the principal and interest of loans, advances and alternative credits and all relevant fees owed by Party B (or the Credit Applicant) under the Credit Agreement, Party B may keep the excess amount. If the proceeds are insufficient, Party A may collect the amount difference in another manner.

Article 16  Pledge Dissolution

Once the Credit Period expires, the right of pledge will automatically dissolve when the principal and interest of debts owed to Party A under the Credit Agreement has been fully repaid by Party B in a timely manner. Certificates of ownership, certification documents and property insurance policies of Party B's assets being held by Party A shall be returned to Party B. At the request of Party B, Party A may assist in cancelling the collateral registration.

Article 17  While this Contract is in effect, any leniency, extension or deferral granted by Party A in exercising due rights and privileges under the Credit Agreement towards Party B's default or delay, shall in no way impair, affect or limit any and all due rights and privileges of Party A as a creditor under relevant laws and this Contract, and shall not be deemed as Party A's renunciation of its rights to take action against current or future default behaviours.

 

Translator’s Declaration: Refer to the title page of this 10 page document “Maximum Pledge Contract”

 

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Article 18  Correspondence between Party A and Party B, such as notices and demands related to this agreement, shall be delivered in writing to the contact address or permanent residence address listed in this Contract. Any teletyping or telegraph issued to Party B from Party A is considered to have been delivered when sent, and post letters are deemed to have been delivered when posted at a post office.

Any Party changing its contact address shall give timely notification to the other Party in writing. Otherwise, it shall have to be solely responsible for any possible resulting losses.

Article 19  Unless otherwise stated, terms used in this Contract have the same meaning as those specified in the Credit Agreement.

Article 20  Applicable Laws and Methods of Dispute Resolution

20.1  The laws of the People's Republic of China shall apply in the making, interpretation and dispute resolution of this Contract.

20.2  Both Parties agree to resolve disputes arising during the course of Contract fulfillment in a manner specified in the Credit Agreement.

Article 21  Other Matters

The maximum pledge period lasts from 23 December, 2010 to 23 June, 2013.                        

The maximum pledge confirmation period lasts from 23 December, 2010 to 23 June, 2013. 

                                                                                                                                                       

Article 22  Effectiveness of the Pledge Contract

This Contract comes into effect the day on which the authorized signatories of Party A and B sign or stamp their personal seal, as well as affix their official seal on the document. (If Party B is a natural person, the Contract comes into effect when the authorized signatory of Party A signs or stamps his/her personal seal and affix the official seal, and Party B signs his/her name.) The Contract expires when the principal and interest of all debts, as well as all relevant fees, owed by Party B (or the Credit Applicant) to Party A under the Credit Agreement have been fully repaid.

Article 23  This Contract is executed in triplicates, one copy each for Party A, Party B and the real estate registration department. Each copy has the same legal effectiveness.

Article 24  Reminder

The Pledgee has reminded the Pledgor that they should fully and accurately understand the terms and conditions printed in this Contract, and has explained relevant terms and conditions at the Pledgor's request. The signatories of both Parties have reached consensus on the meanings of this Contract.

 

Translator’s Declaration: Refer to the title page of this 10 page document “Maximum Pledge Contract”

 

[P.7]

  

  

  

 

	
Party A:

	
(Official Seal)

	
Authorized signatory (signature or personal seal):

	  
	
[Seal: CHEN Shixin's Seal]

	  
	
Contact address:

	  
	  	  
	  	
23 December, 2010

	  	  
	  	  
	
Pledgor as legal person, sign here

	  
	
Party B:

	  
	
Authorized signatory (signature or personal seal):

	  
	
Contact address:

	  
	  	
 [Signature]

	  	
[Stamp: Hubei Minkang Pharmaceutical Co. Ltd.]

	  	
23 December, 2010

	  	  
	  	  
	
Pledgor as natural person, sign here

	  
	
Party B (signature):

	  
	
ID No.:

	  
	
Permanent residence address:

	  
	  	
Date [N/A]

 

Translator’s Declaration: Refer to the title page of this 10 page document “Maximum Pledge Contract”

 

[P.8]

  

  

  

	
Pledgor: Hubei Minkang Pharmaceutical Co. Ltd.

	
Document No.: YSSY (Ying) SD 2010 No. 19

	
Pledgee: Yichang City Commercial Bank Co. Ltd.

	
Units: m2, Yuan, sets, units, tons, ships, bldgs.

	
Item 

Name

	
Location

(Units for storage, 

safekeeping & use)

	
Period 

of Usage

	
Spec.

	
Amounts 

& Units

	
Purchase 

Price

	
Est. Value & 

Mortgage Rate

	
Source of 

Ownership

	
Proof of Ownership

	
Real 

Estate

	
50 Xibei Road & 51 Binjiang Road, Yichang

	
Until 2054

	
Bldg.

	
4038.88

	  	
7.6888 million

	
Purchase

	
Yichang City Property Certificate Xiling District No. 0244289

	
Right of Land Use

	
50 Xibei Road & 51 Binjiang Road, Yichang

	
Until 2054

	
Lot

	
1307.24

	  	
0.7570 million

	
Sale

	
040301185-37

	
Real Estate

	
50 Xibei Road & 51 Binjiang Road, Yichang

	
Until 2054

	
Bldg.

	
3905.13

	  	
7.4342 million

	
Purchase

	
Yichang City Property Certificate Xiling District No. 0244307

	
Right of Land Use

	
50 Xibei Road & 51 Binjiang Road, Yichang

	
Until 2054

	
Lot

	
1183.58

	  	
0.6854 million

	
Sale

	
040301185-41

	
Total

	  	  	  	  	  	
16.5654 million

	  	  
	
This list, being an addendum to YSSY (Ying) SD 2010 No. 19, "Maximum Pledge Contract", has been verified to be correct by both Parties.

	
Pledgor: (official seal)

 

[Seal: Hubei Minkang Pharmaceutical CO. Ltd.]

 

Authorized signatory:

(Signature or personal seal)

[Signature]

 

23 December, 2010

	
Department in charge: (official seal)

 

 

 

 

Authorized signatory:

(Signature or personal seal)

 

 

 

Date

	
Property Co-owner: (signature)

 

 

 

 

 

 

 

 

 

Date

	
Pledgee: (official seal)

 

[Seal: Yichang City Commercial Bank]

 

 

Authorized signatory:

(Signature or personal seal)

[Seal: CHEN Shixin's seal]

 

 

23 December, 2010

 

Translator’s Declaration: Refer to the title page of this 10 page document “Maximum Pledge Contract”Document No.: DA101A110025-1

Maximum Pledge Contract

(Applicable to Non-Quota Contracts)

[Seal Hubei Minkang Pharmaceutical Co., Ltd. Department of Administration]

Bank of Communications Co., Ltd

October, 2007

 

	
Translator’s Declaration:

 

I, Certify that I have carefully read the original Simplified Chinese document AND I confirm that this translation is a true and accurate English version of such original to the best of my knowledge and belief.

 

Zhao Zheng           /s/ Zhao Zheng                       

Certified Translator (Canada)

Certified Member in good standing Status: Society of Translators and Interpreters of British Columbia (S.T.I.B.C. www.stibc.org),

Membership Number No: 04-10-2471    

  

  

  

Document No.: DA101A110025-1

Maximum Pledge Contract

	
IMPORTANT NOTICE

PLEDGOR PLEASE CAREFULLY READ ALL ARTICLES IN THIS CONTRACT, ESPECIALLY ARTICLES MARKED WITH ▲▲. FOR ANY QUESTION, PLEASE REFER TO PLEDGEE FOR EXPLANATIONS IN A TIMELY MANNER.

Pledgor: Hubei Minkang Pharmaceutical Co., Ltd

Legal representative (Principal): GU Shuhua

ID type: Institutional Code Certificate  ID No.: 75700395-9

Statutory (Household) address: No.51 Bingjiang Road, Xiba, Yichang City

Mailing address: Same as above              Postal code: 443000

Contact Phone: 13687275276

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

Principal: YE Fenggao

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

Whereas, Pledgee (Creditor) has offered or will offer to Hubei Minkang Pharmaceutical Co., Ltd (hereinafter referred to as the “Debtor”) a series of credit facilities, in order to ensure the realization of Creditor’s right of the Pledgee, the Pledgor is willing to create a maximum pledge against assets which it has rights to dispose of for the Creditor’s right of the Pledgee on the basis of such credit facilities to the Debtor.

Translator’s Declaration: Refer to the title page of this 11 page document “Maximum Pledge Contract”

  

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To clarify the rights and obligations of both parties, the Pledgor and Pledgee hereby enter into this Contract on the basis of mutual consent.

Article 1         Pledged assets

	
  

	
1.1

	
The Pledged assets provided by Pledgor shall be: real estate property (hereinafter referred to as “collateral”).

	
  

	
1.2

	
Details of pledged properties shall be subject to Schedule of Collateral attached hereto.

	
  

	
1.3

	
The effect of right to pledge shall extend to collateral and ancillary components, accessory rights, attachments, adhesions, processed items, interests and substitutes.

Article 2         Guarantee liabilities

2.1 The Pledgor shall provide maximum pledge guarantee for all master contracts entered into between the Pledgee and Debtor during the period from January 13, 2011 to January 13, 2013.

The master contract referred to in the preceding paragraph shall mean the credit facility contract entered into between the Pledgee and Debtor in connection with loan for issuance of bank accepted bill of exchange. The currency, principal amount, interest rate of Creditor’s right of the Pledgee as well as the performance period of the debt for the Debtor shall be governed by the terms and conditions of the master contract.

2.2 The maximum Creditor’s right guaranteed by the collateral shall be (currency and amount in written form) RMB THREE MILLION AND TWO HUNDRED THOUSAND ONLY.

2.3 The scope guaranteed by the pledge shall include the principal amount of Creditor’s right and interest thereof, compound interest, default interest, breach of contract penalty, compensations, and costs for the realization of Creditor’s right and right to pledge under each master contract. The costs for realization of Creditor’s right and right to pledge include, without limitation to costs and expenses for recovering accounts receivable, litigation (or arbitration), disposition of collateral, transfer, preservation, proclamation, execution, legal, business travel and other fees.

▲▲2.4 Both parties hereto specifically agree that the effect of this Contract shall be independent of each master contract, and the ineffectiveness of any master contract or any relevant provisions under this contract shall not affect the effect of this Contract. The Pledgor shall be jointly responsible for the return or indemnification of the Debtor in the event of the invalidation of applicable master contract.

Translator’s Declaration: Refer to the title page of this 11 page document “Maximum Pledge Contract”

  

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Article 3         Determination of Creditor’s right Guaranteed

3.1 The principal Creditor’s right guaranteed under this contract shall be determined on the earliest occurrence date among the following dates (the “determination date”):

(1)     The occurrence date of last principal Creditor’s right under all the master contracts;

(2)     Where the collateral are suspended or seized during the pledged period, the date on which the Pledgee receives notice from the authority executing the suspension or seizure;

(3)     The date on which the Debtor or Pledgor is declared bankrupt or revoked;

(4)     The time when the Pledgee exercises its right to pledge in accordance with Article 8 under this contract.

3.2 Principal Creditor’s right that occurs on or before the determination date and the interest (including compound interest, overdue and penalty interest for non-compliance) accrued thereof until the assumption of liabilities by the Pledgor as well as costs for realization of Creditor’s right and right to pledge by the Pledgee specified under Article 2.3 shall all fall within the scope guaranteed under this contract.

Occurrence of principal Creditor’s right shall mean the issuance of loan, financing or issuance of bank accepted bill of exchange, letter of credit, letter of guarantee (including standby letter of credit, similarly hereinafter).

3.3 Where the Pledgee assigns part of the Creditor’s right under the master contract before the determination of principal Creditor’s right, whether the maximum right to pledge will be assigned or not and how the rights will be assigned shall be subject to a written notice by the Pledgee to Pledgor at the time.

Article 4         Registration of Collateral

After the execution of this Contract, the Pledgor shall immediately carry out the pledge registration procedures with registration authority for the collateral under this contract, and deliver, within three days after the completion of the registration procedures, the Certificate of another Party’s Right, Original Pledge Registration Certificate and Original Title Certificate of Collateral to the Pledgee for its safekeeping.

Translator’s Declaration: Refer to the title page of this 11 page document “Maximum Pledge Contract”

  

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Article 5         Insurance

5.1 The Pledgor shall have the collateral insured in the amount and term requested by the Pledgee, and shall designate the Pledgee as the first beneficiary of insured benefits.

The Pledgor shall deliver the Original Insurance Policy to the Pledgee for its safekeeping after completing the insurance procedures.

5.2 During the term of this Contract, the Pledgor shall pay all the premiums on time and perform other duties necessary for maintaining the valid continuation of the insurance.

5.3 Where the Pledgor fails to effect or renew the insurance, the Pledgee shall, at its own discretion, have the right to effect and renew insurance, pay premiums on pledgor’s behalf or take other measures necessary for maintaining insurance. The Pledgor shall provide all necessary assistance and be responsible for the premiums and relevant costs thus incurred by the Pledgee.

▲▲Article 6      Representations and warranties by Pledgor

6.1 The Pledgor has the legal civil capacity and full capacity for civil conduct (where the Pledgor is a natural person). The Pledgor is duly incorporated and exists with all necessary capacity for rights (where the Pledgor is not a natural person), and is able to perform its debts under this contract and assume civil liabilities in its own name.

6.2 Execution and performance of this Contract shall reflect the truthful intentions of the Pledgor and all necessary consent, approvals and authorizations have been obtained lawfully.

6.3 All the documents, materials and information provided by the Pledgor to the Pledgee during the execution and performance of this Contract are true, correct, complete and valid.

6.4 Pledgor has full rights of disposition of the collateral; where the collateral are jointly owned, all necessary consent and approvals for the disposition thereof have been acquired.

6.5 There is no defect in the collateral and the collateral have not been suspended,, seized, under scrutiny and controlled in accordance with the law and there are no disputes, pledge, , litigation (arbitration) with respect to the collateral.

6.6 When this Contract is signed, the Debtor is not pledgor’s shareholder or the “actual controller” within the definition under the Company Law.

Translator’s Declaration: Refer to the title page of this 11 page document “Maximum Pledge Contract”

  

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▲▲Article 7    Obligations of the Pledgor

7.1 The Pledgor shall be liable for costs in connection with the evaluation, registration, notarization, appraisal, insurance, safekeeping, preservation and care of the collateral under this contract.

7.2 The Pledgor shall use and keep the collateral in a reasonable manner, refrain from using the collateral in any irregular way, maintain and take care to ensure the collateral are in good condition on a regular basis, and have the collateral insured as requested by the Pledgee.

7.3 Without written consent of the Pledgee, the Pledgor shall not act in any way to impair or possibly impair the value of the collateral, dispose of the collateral by assignment, gift, renting, to set up guarantee rights or in any other ways.

7.4 The Pledgor shall cooperate with the Pledgee in the inspection of use, safekeeping, preservation conditions and title of the collateral.

7.5 The Pledgor shall immediately notify Pledgee and provide new guarantee as requested by the Pledgee in the event of any of the following circumstances:

(1) The collateral may be damaged or its value may be obviously impaired;

(2) The sound and good conditions of the collateral are affected or may be affected adversely;

(3) The title to the collateral is disputed;

(4) During the pledged period, the collateral are subject to property maintetenance or enforcement measures or other mandatory measures such as closure and seizure;

(5) Rights to the pledge are infringed or may be infringed by any third party;

(6) Significant changes to the job or income of the Pledgor (where the Pledgor is a natural person);

(7) The Pledgor (where the Pledgor is not a natural person) is shut down, dissolved, suspended for reorganization of the business; its business license is revoked or cancelled; the Pledgor applies for or is being applied for bankruptcy.

Translator’s Declaration: Refer to the title page of this 11 page document “Maximum Pledge Contract”

  

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7.6 Before the Debtor repays all the debts under all the master contracts to the Pledgee, the Pledgor shall not exercise its recovery rights available as a result of performance of this Contract with respect to the Debtor or other guarantors.

7.7 If the Debtor becomes the shareholder or actual controller of the Pledgor before the Debtor repays all the debts under each master contract in full, the Pledgor shall immediately notify the Pledgee, and provide the resolution of shareholder’s meeting (general meeting of shareholders) that approves such provision of guarantee.

7.8 The Pledgor shall assist the Pledgee with the realization of the right to pledge and shall not set up any obstructions.

▲▲Article 8     Realization of the right to pledge

8.1 The Pledgee shall have the right to have the collateral auctioned or sold off in accordance with law in the event of any of the following circumstances:

(1) The Debtor fails to repay in full the principal of loan or financing funds, amounts advanced by the Pledgee or applicable interest under any master contract in a timely manner;

(2) The Pledgor fails to otherwise provide guarantee as specified under Article 7.5.

8.2 Money obtained from auction or sale of the collateral in accordance with law shall be used to:

(1) Repay Debtor’s debts due;

(2) For any Debtor’s debts not due, the balance after repayment will be deposited into a security account designated by the Pledgee; if the Debtor fails to repay applicable debt when it becomes due, then the Pledgee shall have the right to deduct such amount from the security account for repayment of such debt.

8.3 The Pledgor shall agree that where the Creditor’s right guaranteed under this contract is also guaranteed by other guarantee contracts at the same time, the Pledgee shall have the right to, at his own discretion, decide the sequence of the exercise of the rights, and the Pledgee shall have the right to directly exercise the right to pledge without claiming right to other guarantors first; where Pledgee waives its security rights under other guarantee contracts or priority of rights, or changes its security rights, the Pledgor shall still assume guarantee liabilities under this contract without any exemptions.

Translator’s Declaration: Refer to the title page of this 11 page document “Maximum Pledge Contract”

  

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▲▲Article 9      Guarantee clause

9.1 Where the right to pledge is made invalid or ineffective for any of the following reasons, the Pledgor shall provide maximum guarantee for the debts of Debtor under each master contract:

(1) The Pledgor fails to carry out registration procedures for the collateral in accordance with the provisions under Article 4;

(2) Representations and warranties made by the Pledgor under Article 6 are not true;

(3) Other reasons on account of the Pledgor.

9.2 The Maximum Creditor’s right guaranteed by Pledgor shall be (currency and amount in written form) RMB THREE MILLION TWO HUNDRED THOUSAND ONLY and the mode of guarantee shall be joint liability guarantee.

9.3 The scope of the master contract guaranteed by the maximum guarantee is consistent with that of the master contract guaranteed by pledge under this contract, namely, the master contract guaranteed by the Pledgor is the master contract specified under Article 2.1 of this contract. The scope guaranteed by the Pledgor shall include the principal and interest, compound interest, default interest, breach of contract penalty, damage compensations, and costs for the realization of Creditor’s right under each master contact. The costs for realization of Creditor’s right include without limitation to the costs and expenses for recovering accounts receivable, litigation (or arbitration), preservation, proclamation, execution, legal, business travel and other fees.

9.4 The term of guarantee shall be calculated respectively in accordance with the term for the performance of the debts (under issuance of bank accepted bill of exchange/letter of credit/letter of guarantee, in accordance with the date on which the Creditor advances payments, similarly hereinafter) agreed to under each master contract. The term of guarantee under each master contract shall be counted from the date on which the term for the performance of the debts agreed to under such master contract expires (or the date on which the Creditor advances payments), until two years after the date on which the term for the performance of the debts agreed to under such master contract as expires last among the expiration of all the master contracts (or the date on which the Creditor advances payments).

Where the master contract provides for the performance of debts in installment by the Debtor, then the term of guarantee for each installment debt under such master contract shall be calculated respectively, and the term of guarantee for each installment debt shall be counted from the date on which the term for performance of such installment debts expires, till two years after the date on which the term for performance of last installment debts under such master contract expires (or the date on which the Creditor advances payments).

Translator’s Declaration: Refer to the title page of this 11 page document “Maximum Pledge Contract”

  

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Where the Creditor declares early expiry for debts under the master contract, then the early expiry date declared shall be the date on which the term for performance of debts expires.

9.5 This guarantee clause shall be valid independently of the remaining clauses under this contract, and the entry into force of this guarantee clause shall be conditional upon the invalidation or annulment of the right to pledge under this contract as a result of reasons listed under Article 9.1.

▲▲Article 10   Dispute settlement

Disputes in connection with this contract shall be settled through lawsuit filed with a competent Court of Pledgee’s domicile. During the dispute period, both parties shall continue to perform other clauses not involved in the dispute.

Article 11      Miscellaneous

▲▲11.1 The Pledgee shall not assume any obligations to provide the Debtor with credit facilities as a result of this Contract.

11.2 The attached Schedule of collateral shall constitute an integral part of this Contract.

11.3 This Contract shall go into effect on the date on which all following conditions have been satisfied: 1) the legal representative (principal) or authorized representative of the Pledgor signs (or stamps) and affixes official seal on this Contract; where the Pledgor is a natural person, the Pledgor signs this Contract; and 2) the principal or authorized representative of Pledgee signs (or stamps) and affixes official seal on this Contract.

 

11.4 This Contract shall be executed in three original copies with the Pledgor and Pledgee each holding one original copy and the registration authority of collateral, holding another original copy.

Article 12 Other matters in agreement

	
/

	
/

	
/

 

Translator’s Declaration: Refer to the title page of this 11 page document “Maximum Pledge Contract”

  

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The pledgor has carefully read the foregoing articles and the Pledgee has made explanations as per pledgor. The pledgor agrees with all the content under this Contract.

 

	
Pledgor (Official seal /signature)

[Seal] Hubei Minkang Pharmaceutical Co., Ltd.

Legal representative (principal) or authorized representative

(Signature /stamp)

[Seal] Seal of Gu Shuhua

Execution date: January 13, 2011

	
Pledgee (Official stamp)

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

Principal or authorized representative

(Signature /stamp)

[Seal] Seal of Ye Fenggao

Execution date: January 13, 2011

Articles of joint owner statement (Applicable to circumstances in which collateral are jointly owned):

As the joint owner of the collateral, I (name:       /               ID type:            /           ID No.:                 /               ) have carefully read and confirmed all the articles under this Contract. I acknowledge and agree to Pledgor’s provision of guarantee to Pledgee on the collateral provided.

Signature of the joint owner

MM/DD/YYYY

Translator’s Declaration: Refer to the title page of this 11 page document “Maximum Pledge Contract”

  

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Schedule of Collateral of Bank of Communications Yichang Branch

January 13, 2011

	
Pledgor

Title/name: Hubei Minkang Pharmaceutical Co., Ltd

 

	
Name of Debtor: Hubei Minkang Pharmaceutical Co., Ltd.

	
Pledge Contract No.: DA101A110025-1

	
Name

	
Unit of

measurement

	
Quantity

	
Title

certificate

number

	
Location

	
Insurance

certificate

number

	
Real estate property

	
Square meter

	
4680.21

	  	
Within the factory zone

	  
	
Assessment value

	
RMB 4,523,555

	  	  	  	  
	  	  	  	  	  	  
	
Building number

	
Name of building

	
Structures and stories

	
Year built

	
Coverage

	
Property certificate number

	
1

	
Scientific research and quality assurance building

	
Mixed structures with four stories

	
1975

	
1534.84

	
YCREPCXLD No.0244288

	
3

	
Office building

	
Mixed structures with four stories

	
1985

	
1113.20

	
YCREPCXLD No.0244291

	
5

	
Office building of Chairman

	
Mixed structures with four stories

	
1965

	
1236.00

	
YCREPCXLD No.0244295

	
8

	
Warehouse for returned products

	
One-story house made of bricks and wood

	
1955

	
313.81

	
YCREPCXLD No.0244301

	
16

	
Dinning hall and warehouse

	
One-story house made of bricks and wood

	
1975

	
482.36

	
YCREPCXLD No.0244312

	  	
Total

	  	
4680.21

	  
	  	  	  	  	  
	  	  	  	  	  

 

	
Official seal/signature of the Pledgor:

[seal] Hubei Minkang Pharmaceutical Co., Ltd.

Case worker:

[seal] Seal of GU Shuhua

	
Official seal of the Pledgee:

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

Case worker: ZOU Jie

 

Translator’s Declaration: Refer to the title page of this 11 page document “Maximum Pledge Contract”

  

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