English translation of Loan Contract , dated April 19, 2012, by and between Kunming Shenghuo Pharmaceutical (Group) Co., Ltd. And Agricultural Bank of China

ABC[2012]1003-1

 

 

 

Borrower (Full Name): Kunming Sheng Huo Pharmaceutics (Group) Co., Ltd.

Unless otherwise provisioned, the terms included in this Contract will be defined as below:

1.1 Loan Term: includes the total term for all loans and single term for each loan. The total term indicates the period dated from the release of first loan to the pay off of all principals and interests as prescribed in the Contract; single term indicates the period from date of releasing of single loan out of separate withdrawals to paying off of such single loan.

1.2 Line of Credit: indicates the limited amount of principal provided by the Lender to the Borrower within the valid period of line of credit as prescribed in the Contract. The Borrower is permitted for the recycle use of loan within the valid period of line of credit and the permitted amount of loan. However, the total amount of applied loan and unpaid loan under this Contract should not exceed the line of credit. The unused line of credit will become invalid automatically upon the expiration of line of credit.

1.3 Electronic Self-service Channels: indicate the electronic channels of E-banking, Telephone banking or cash management channel be available for withdrawal provided by the Lender under the loan form of recycled self-service current capital.

1.4 Period: period is counted by date, month or year; where the last day of the period upon expiration falls on the public holiday or weekend, the date of period expiration will be extended to the first business day upon the end of public holiday or weekend.

1.5 LIBOR/HIBOR: indicates the interbank offered rate of London/Hong Kong announced by Reuters for the corresponding term two working days prior to the interest bearing date.

1.6 Laws and Regulations: including laws, administrative regulations, local code and regulation, judicial interpretation and rules with legal effect.

2.1 Submit loan application by law: The Borrower represents an enterprise legal person which has been incorporated by law and registered upon the approval of authorities concerned, or other organization meets the state requirements of being a Borrower; it possesses good credit, no material rotten record; it clearly states the legal purpose of loan and resource of repayment; it conducts no activity violated laws and regulations.

2.2 Conduct no defect in the course of contract execution: The Borrower has performed all necessary procedures according to law or articles of incorporation, in order to execute this Contract or fulfill its obligations under this Contract; it is the Borrower’s legal representative or authorized agent who signs this Contract; the Borrower will actively handle produces of obtaining contract approval, contract registration or filing, or assist the Lender for this purpose; there is no other conditions making the Loan Contract defect in effective due to the Borrower.

 

2.3 To provide legal and effective guarantee: The Borrower assures that the Guarantor has performed all necessary procedures according to law or articles of incorporation in order to sign the Guaranty Contract or fulfill its obligations under the Guaranty Contract; The Guarantor has the right to set up guaranty by secured property; it is the authorized person who will sign the Guaranty Contract; The Borrower will urge the Guarantor to actively handle all procedures relating to Guaranty Contract approval, registration and filing, or assist the Lender for this purpose; it assures of no other conditions making the contract defect in effectiveness or causing material adverse changes.

2.4 To perform rights and obligations under the Contract with good faith: The Borrower will use the loan as per prescribed term, purpose and method, conducting no activity violated laws or regulations; it will actively assist concerned state authorities and the Lender in management of loan payment, management after loan releasing and related examinations; it will repay the loan at full amount and in a timely manner as required by the Contract, no escaping of debts by any method; it will obtain the Lender’s consent on significant events of outbound investment, substantial increase of debt financing and conducts of merger, dismantlement and share transfer; the Lender may choose to withdraw the loan ahead of schedule according to the Borrower’s condition of capital collection; the Borrower shall inform the Lender timely for material adverse event which could affect its ability of debt repayment; there is no other conditions of violating the obligations under this Contract.

2.5 The Borrower shall not conceal any happened or happening issues could affect its financial situation or ability of debt repayment from the Lender, which includes but limited to litigation, arbitration, other administrative proceeding or claim.

2.6 The information relates to the Borrower, Guarantor and Shareholder provided by the Borrower are authentic, full, precise, legal and effective.

3.1.1   Currency and amount of loan (in Capital): RMB FOURTY MILLION YUAN

3.1.2  Term of loan: One year; Date of loan release: April 20, 2012

3.1.3  Amount and term for single loan: RMB40,000,000

 

3.3.1 Loan Interest Rate

3.3.1.1 The interest rate of loans in RMB is determined as per Method 1 below:

(1) Fixed Interest Rate: the interest will float by 5% based on the benchmark RMB interest rate for the same term announced by the People’s Bank of China in accordance with the date of each withdrawal and the term for entire loan.

3.3.2   Method of Interest Calculation, Interest Settlement

3.3.2.1 The interest on the loan hereunder shall be settled on a monthly basis, with the date of settlement falling on the 20th day of each month. The Borrower shall pay up the interest on every interest settlement day. If the last repayment day of the loan principal is not an interest settlement day, the outstanding interest shall be paid up immediately together with the principal.

3.3.2.2 For the loan being subject to fixed interest rate, the interest will be calculated as per agreed interest rate. For the loan being subject to floating interest rate, the interest will be calculated as per the interest rate determined on each floating period; if the interest rate floats frequently within a single period of interest settlement, it may calculate the interest for each floating period at first, and then calculate them in total. If the loan is subject to other interest rate, the interest shall be calculated as agreed method.

3.3.2.3 Where the date of loan maturity comes to the public holiday or weekend, the normal date of repayment shall be extended to the first business day after the public holiday or weekend, and the interest will be collected as per agreed method of interest calculation during the extension period.

 

 

3.3.3 Penalty Interest

3.3.3.1 Where the Borrower fails to return the principal on specified period as prescribed in this Contract, the Lender will collect a penalty interest at the rate of floating by 30% based on the specified loan interest rate dated from the over due period against the matured loan, until the principal and interest been paid off.

3.3.3.2 Where the Borrower fails to use the loan as per the prescribed purpose, the Lender will collect a penalty interest at a rate of floating by 50% based on the specified loan interest rate dated from the default period against the wrong used loan, until the principal and interest been paid off.

3.3.3.3 For the loan both overdue and fails to be used according to the proposed purpose as agreed in the Contract, the calculation of penalty interest rate will be subject to the highest rate.

3.3.4 Compound Interest

Where the Borrower fails to pay interest on due, the Lender will collect monthly compound interest for this purpose dated from the failure of paying interest matured. For those interests unpaid prior to the maturity of loan, a compound interest will be collected according to the loan interest rate as agreed in the Contract; for those interests afterwards, a compound interest will be collected according to the penalty interest rate as agreed in the Contract; Where the loan usage constitutes a breach of contract or the interests were not paid during the over due period, a compound interest will be collected according to correspondent penalty interest rate as agreed in the Contract.

  3.4.1.2 Shall the Borrower fail to practice the above provision within 6 months after signing this Contract, the Lender shall have the right to terminate this Contract. If the Contract is terminated by the Lender, the Borrower may raise a dispute within 7 days which is dated from the Lender informing the Borrower by written, oral or other methods.

 

3.4.3 Loan Payment

3.4.3.1.1 Have explicit object of payment and the amount of single withdrawal exceeds RMB 5 million (including the foreign currencies at equivalent value).

3.4.3.1.2 If adopting the entrusted payment, the Borrower shall submit an application for withdrawal and the notice on entrusted payment to the Lender two days earlier, who is also required to provide related materials, such as business contract corresponding to the withdrawal, invoices and other certificates. Upon confirmation, the Lender will pay the loan directly to the Borrower’s trading partner through the Borrower’s account. Where the application for withdrawal is inconsistent with the provisions for withdrawal as prescribed in the Contract, or the application for entrusted payment is inconsistent with the Contract, existing incomplete or false trading information, the Lender may choose not to release or pay the loan; and the Lender shall not be liable for breaching of contract by the Borrower to its trading partners or other damages hereunder. The Lender shall not bear responsibility for the delay of or failure in loan release due to incorrect and incomplete payment information provided by the Borrower.

3.4.3.1.3 If the Borrower applies for payment suspension or abandon the payment entrustment, it shall submit the application in written prior to the payment by the Lender. Upon the Lender’s confirmation, the entrusted payment will be suspended and the correspondent loan could be collected back; however, the interest for correspondent loan shall be collected pursuant to the Contract during this period. Where the Borrower applies to resume the entrusted payment afterward, it shall handle the procedures according to provision 3.4.3.1.2.

 

3.4.3.1.4 No condition shall be attached to the entrusted payment。If there is condition attached to the Notice of Entrusted Payment, no obligation shall be created to the Lender hereof. Unless otherwise specified in written, the Borrower is not obligated to inform the Lender for issues of payment entrustment, suspension, abandonment and resuming.

3.4.3.1.5 If adopting the entrusted payment, the Lender will be entitled to restrict the Borrower’s relevant account in functions of payments and automatic withdrawals through off-counter channels such as internet banking, telephone banking, cash management channel and etc.

 

3.4.4 Return of Withdrawal

1)  Request the Borrower providing the flow in and out conditions of the capital collection account from time to time.

1) If there are several debts matured between the Lender and Borrower, and the amount of repayment is not sufficient to pay off the entire debts on due, it will be the Lender to decide the order of loan repayment and offset;

2) Where the Lender exercises its right of offsetting according to law or contract, it will be the Lender to decide the order of offsetting; When the Lender exercises its right of subrogation, it will be the Lender to decide the order of secondary debtor paying off the debts.

3.7.2.2 Where the Borrower’s balance is not sufficient to pay off the loan on due, the Lender can choose to treat the repayment as principal, interest, penalty interest, compound interest or expenditure on the realization of creditor’s right.

 

Where the Borrower of ordinary current capital fails to repay the loan in specified date, it may apply for extension to the Lender. The application shall be submitted 15 days prior to the maturity date and an agreement on term extension will be executed upon the Lender’s consent.

 

 

1) Withdraw the loan as agreed in this Contract;

2) Repay the principal and interest at full amount and in a timely manner;

3) Shall use the loan by law or by the purpose and method as prescribed in the contract, and may neither use the loan for fixed assets or equity investment nor manufacturing or business operation prohibited by the state;

4) Accept the supervision and examination by the Lender or its trustee over the Borrower’s financial activities and loan usage; Submit materials related to the loan usage, financial information or other information as required by the Lender;

 

i. Activities about contracting, leasing, shareholding reform, jointing operation, merging, separating, registered capital reducing, jointing venture, assert transferring, major outbound investment, bond issuing, large amount of financing, material associated transaction, applying for stopping operation for correction, applying for dissolving, applying for bankrupting, etc.

ii. Provide large amount of guarantee or mortgage, pledge with its major asset to third party, which may affect the Borrower’s ability of loan repaying;

iii. Other adverse conditions may cause significant change to the debt relationship under this Contract or affect the realization of creditor’s right;

 

1) Shall release the loan at full amount and in timely manner, provided that the delay of loan release is caused by the Borrower itself or other causes beyond the Borrower’s fault;

2) Be entitled to supervise or examine over the Borrower’s conditions on production and operation, financial status, supplies storage and loan usage, also to request providing with relevant documents and information;

3) If the following events happen: i) the loan security or debt performance may be affected, or ii) the Guarantor encounters production or operation halts, cancellation of business license, bankruptcy, revocation or major loss in operation which could cause losing part of or entire ability of guaranty; or iii) the value reduce, accidental damage or loss of collateral which could jeopardizes the realization of guaranty. The Lender may request the Borrower to improve its protection on creditor’s right and provide other effective guaranty; the Lender may also reduce or cancel the line of credit, stop releasing the loan, announcing that the loan under this Contract and other contracts matures ahead of schedule, therefore needs to be collected in advance.

4) Other rights and obligations as regulated by law or as agreed by both parties.

 

3.10.3.1 Each party shall bear its confidential obligation for another party for trade secrets and other interest-related information during the course of contract execution and performance; Neither party shall disclose the above mentioned information to third party without obtaining consent from another party, unless otherwise specified by laws and regulations.

3.10.3.2 Upon the termination of rights and obligation under this Contract, each party is required to perform its duty of noticing and assisting as necessary as per the principle of good faith.

 

 

All notices and communication under this Contract shall be delivered to the other party as per the mailing address, telex No. or other ways of contact recorded in this Contract, and one party shall inform the other party timely for changes in method of contact.

The expense need to be paid to the third party for the performance of this Contract shall be born by both parties through negotiation. If fails, the expense shall be born by both parties according to laws and regulations or principle of justice.

6.3 The Lender or the Agricultural Bank of China may authorize or entrust other branches affiliated to it to perform the rights and obligations under this Contract or transfer the loan under this Contract to other branches for management, which is recognized by the Borrower. Therefore, the Lender will not take further consent from the Borrower for the practice of activities as above.

6.7.1 If there is any dispute in the process of implementing this contract, the two parties can negotiate to settle it, and also can settle it as per the method  1  below:

1. Lawsuit. The People’s Court in the Lender’s residence has the jurisdiction.

2. Arbitration. Submit the dispute to      /      （the name of the arbitration organization）and arbitrate it according to its arbitration rules.

6.7.2 During the lawsuit or the arbitration, the terms under this contract which have not been involved in the dispute still need to be executed.

6.8.1 This Contract shall come into force as of the date of execution and sealing by both parties.

6.8.2 Place of execution:Agricultural Bank of China Kunming Shuanglong Branch

6.8.3 Anything not covered in this Contract will be discussed separately by both parties.

6.8.4 This Contract shall be executed in four original copies, each for both parties, each for Guarantor, and each for Notary office, which shall have equal force and effect.