Stock Code : 600141 Stock Abbreviation : Xingfa Group Announcement

Number : L i n 2018-009

Hubei Xingfa Chemical Group Co., Ltd.

Announcement on the acquisition of
100% equity of Inner Mongolia Tenglong
Biofine Chemical Co., Ltd.

The company's board of directors and all directors guarantee that there are no false records, misleading
statements or major omissions in the content of this announcement , and assume joint and several
responsibilities for the authenticity, accuracy and completeness of its content.

Important content reminder:

●Hubei Xingfa Chemical Group Co., Ltd. ( hereinafter referred to as
the "Company" ) intends to acquire Hubei Xianlong Chemical Co., Ltd. (
hereinafter referred to as "Xianlong Chemical" ) and Jiangsu Tenglong
Biopharmaceutical Co., Ltd. ( hereinafter referred to as "" Jiangsu
Tenglong" ) holds a total of 100% equity of Inner Mongolia Tenglong
Biofine Chemical Co., Ltd. ( hereinafter referred to as "Inner Mongolia
Tenglong" ) . The funds come from its own funds, and the transaction amount
i s 239.7482 million yuan. After the completion of this acquisition, Inner
Mongolia Tenglong will become a wholly-owned subsidiary of the company.
●This transaction does not constitute a related party transaction
●This transaction does not constitute a major asset restructuring
●There are no major legal obstacles to the implementation of the
transaction
●This transaction was reviewed and approved by the 30th meeting of
the eighth board of directors of the company on February 8 , 2018 , and
does not need to be submitted to the general meeting of
shareholders for consideration.
1. Transaction overview
(1) Basic information of this transaction
In order to optimize the company's glyphosate production layout, make the
glyphosate industry bigger and stronger, and further consolidate the
company's position in this area
The leading position in the industry enhances the company's sustainable
development capabilities. On September 27 , 2017 , the company signed
the " Equity Acquisition Agreement" with Xianlong Chemical, the controlling
shareholder of Inner Mongolia Tenglong. The company intends to acquire Inner
Mongolia Tenglong in cash . 51% of the shares. The letter of intent signed
this time is mainly to agree on matters related to work communication in the
equity acquisition. The acquisition of this equity still needs to be further
negotiated and negotiated based on the results of due diligence, audits and
evaluations, to sign a formal agreement or contract, and to perform
corresponding decision-making and approval procedures before it can be
implemented. During the due diligence process, Jiangsu Tenglong intends to
transfer its 30 % stake in Inner Mongolia Tenglong to the company , and the
company immediately started negotiations with Jiangsu Tenglong.
On February 8 , 2018 , the company signed the "Equity Transfer
Agreement" with Xianlong Chemical and Jiangsu Tenglong respectively on the
acquisition of 100% equity of Inner Mongolia Tenglong , and the valuation
value determined by the "Asset Evaluation Report" was based on the
transaction , agreeing that the company will pay in cash in RMB to acquire
70 % equity of Inner Mongolia Tenglong held by Xianlong Chemical at a
transaction price of 167.8237 million yuan , and to acquire 30 % equity of
Inner Mongolia Tenglong held by Jiangsu Tenglong at a transaction price
of 71.92446 million yuan . The transaction funds come from the company's
own funds . After the completion of this acquisition, Inner
Mongolia Tenglong will become a wholly-owned subsidiary of the
company.
(II) Deliberations of the Board of Directors
On February 8 , 2018 , the 30th meeting of the company's 8th board
of directors deliberated and approved the " Proposal on the Acquisition of
100 % Equity in Inner Mongolia Tenglong Co., Ltd. " with 13 votes in
favor, 0 votes against , and 0 abstentions. Independent directors
have issued independent opinions in agreement.
(3) Other information
This transaction does not involve related party transactions, and does not
constitute a major asset reorganization as stipulated in the "Administrative
Measures for Major Asset Reorganization of Listed Companies". According to the
relevant provisions of the "Company Law", "Stock Listing Rules" and "Articles of
Association" , this external investment is within the scope of decision-making by
the board of directors and does not need to be submitted to the company's
shareholders' meeting for consideration.
2. Introduction of counterparty
The company's board of directors has conducted necessary reviews of the
basic conditions of the parties to the transaction and their
transaction performance capabilities.
required due diligence.
(1) Hubei Xianlong Chemical Co., Ltd.
1. Company Name: Hubei Xianlong Chemical Co., Ltd.
2. Company Type: Limited by Share Ltd
3. No. 1 , Xianhe Avenue, Chemical Industrial Park, Xiliuhe Town,
Xiantao City, Hubei Province
4. Date of establishment: February 2 , 2000
5. Legal representative: Qin Jun
6. Registered capital: 50 million yuan
7. 80% of the shares , and Yichang Chixing Chemical Trading Co., Ltd.
holds 20% of the shares
8. Business scope: R&D, production and sales of pesticides and fine chemical
products; export business of self-produced products and related technologies; raw
and auxiliary materials, mechanical equipment, instruments, spare parts and related
products required for production and scientific research of the company Import and
export of technology; carry out the processing of imported materials and "three to
one compensation" of the enterprise business; export of pesticides produced by the
company; logistics information services; chemical consulting services; chemical
fertilizer product sales; Mercury catalyst sales.
9. There is no other relationship in terms of property rights,
business, assets, creditor's rights and debts, personnel, etc.
between the counterparty of the transaction and the listed
company.
10. financial situation. As of September 30 , 2017 , the total
assets of Xianlong Chemical were 1,036.81 million yuan, Net assets of
383.17 million yuan; from January to September 2017 , realized
operating income of 475.65 million yuan and net profit of 9.8 million
yuan ten thousand yuan. As of December 31 , 2016 , Xianlong Chemical had
total assets of RMB 1,158.65 million and net assets of RMB 373.37 million;
in 2016 , it realized operating income of RMB 692.62 million and net
profit of RMB 21.04 million. ( The above data has not been audited)
(2) Jiangsu Tenglong Biological Pharmaceutical Co., Ltd.
 1. Company Name: Jiangsu Tenglong Biological Pharmaceutical Co., Ltd.
2. Company Type: Limited Liability Company
3. Company Address: South Head of Wanggang Gate, Dafeng District,
Yancheng City, Jiangsu Province
4. Date of establishment: December 17 , 1992
5. Legal representative: Xiao Jianzhong
6. Registered capital: 30 million yuan
7. Actual controller: Xiao Jianzhong
8. Business scope: Pesticide manufacturing (operated in accordance with
the approval documents for pesticide production ); sales of OO dimethyl
phosphorodithioate and OO dimethyl- S -methyl acetate dithiophosphate (
phosphorothioate ); new technologies for pesticides Development, consultation,
communication, transfer, and promotion services; self-management and agency of
import and export business of various commodities and technologies (except for
commodities and technologies that are restricted by the state to be operated by
enterprises or prohibited from import and export).
9. There is no other relationship in terms of property rights,
business, assets, creditor's rights and debts, personnel, etc.
between the counterparty of the transaction and the listed
company.
10. financial situation. As of December 31 , 2017 , Jiangsu Tenglong's
total assets were 902.2487 million yuan, Net assets of 525,244,600
yuan ; operating income of 1,063,743,000 yuan in 2017, net profit
126.4798 million yuan. (The above data has not been audited )
3. Basic information of the transaction object
(1) Transaction target
1. Company Name: Inner Mongolia Tenglong Biofine Chemical Co., Ltd.
2. Company nature: limited liability company
3. Registered Address: Wuda Industrial Park, Economic Development Zone,
Wuhai City, Inner Mongolia Province
4. Legal Representative: Li Fahua
5. Date of establishment: September 28 , 2010
 6. Shareholding structure before acquisition:
seri shareholder name Capital Sharehold
al contribution ( ing ratio
numb 10,000 yuan )
er
1 Hubei Xianlong Chemical 4666 70%
Co., Ltd.
2 Jiangsu Tenglong 2000 30%
Biopharmaceutical Co., Ltd.
tota 6666 100%
l

7. Post-acquisition shareholding structure:

seri shareholder name Capital Sharehold
al contribution ( ing ratio
numb 10,000 yuan )
er
1 Hubei Xingfa Chemical Group 6666 100%
Co., Ltd.
tota 6666 100%
l
(2) Description of ownership status
Xianlong Chemical holds 70% of the equity of Inner Mongolia
Tenglong, which is currently under pledge. Xianlong Chemical promises to
release the pledge within 10 working days after the equity transfer
agreement takes effect. Jiangsu Tenglong 's 30 % stake in Inner Mongolia
Tenglong is clear and there is no pledge. Xianlong Chemical and Jiangsu
Tenglong jointly hold 100% of Inner Mongolia Tenglong The equity
does not involve litigation, arbitration matters, or judicial
measures such as seizure and freezing, and there are no other
circumstances that hinder the transfer of ownership .
(3) The financial situation of the transaction object in the last year and the last period
2017 ] No. 11957 "Audit Report" issued by Zhongqin Wanxin Certified
Public Accountants ( special general partnership, qualified to engage in
securities and futures business ) , the main financial data of Inner
Mongolia Tenglong are as follows:
Unit: ten thousand yuan
project 2017 Year 8 2016 Y e a r 12
month 31 day / m o n t h 31 day /
2017 Years 1-8 2016 year
 moon
total assets 66,129.81 128,130.59
total liabilities 72,708.99 131,774.28
Net assets -6,579.18 -3,643.69
operating income 37,642.86 65,410.68
net profit -2,992.12 -5,850.71
(4) Evaluation of transaction objects
The company hired Zhonglian Assets Appraisal Co., Ltd., which is qualified to
engage in securities and futures-related businesses, to issue
 The number is Zhonglian Pingbaozi [ 2017 ] No. 1063 "Assessment
Report", and the parties to the transaction negotiate and determine the
consideration for the equity transfer transaction based on the
assessed value. The assessment is as follows:
1. Evaluation object: the value of all shareholders' equity of Inner
Mongolia Tenglong
2. Evaluation scope: all assets and related liabilities listed on the
audited books of Inner Mongolia Tenglong
3. Evaluation base date : August 31 , 2017
4. Appraisal methods: asset-based approach and income approach.
5. Value type: The value type of this asset appraisal is the investment
value type.
6. Valuation conclusion: The total book assets of Inner Mongolia Tenglong
on the appraisal base date are 661,298,100 yuan, and the liabilities are
727,089,900 yuan, net assets -65,791,800 yuan, the value of all
shareholders' equity after evaluation using the income method is
239,748,200 yuan, the value-added is 305,540,000 yuan, and the value-
added rate is 464.43% .
assumptions, determination of important evaluation parameters, calculation
and analysis process and evaluation conclusions adopted by the evaluation
agency in this evaluation . Based on the specific analysis of historical
operating data, business environment, macro economy and industry of the
subject of appraisal, the appraisal agency has fully and comprehensively
considered the assumptions of the appraisal, and the important appraisal
basis and appraisal parameters adopted are normal and reasonable.
range, the assessment conclusion is reasonable.
(🖂) Pricing and rationality analysis of transaction targets
1. asset based approach
The total book assets of Inner Mongolia Tenglong on the evaluation base
date are 661.2981 million yuan, and the liabilities are 727.0899
million yuan RMB 10,000, net assets -65,791,800 yuan, total assets
assessed by the asset-based method are 696,534,800 yuan , value-added
35,236,700 yuan, and value-added rate 5.33% ; total liability evaluation
value is 693,297,500 yuan, depreciation 33,792,400 yuan, depreciation
rate 4.65% ; net assets ( owner's equity) worth 3.2373 million yuan, The
value-added was 69.0291 million yuan, and the value-added rate was 104.92
%. Please refer to the table below for a summary of specific assessments:
current assets 1 24,403.93 24,594.02 190.09 0.78
Non-current assets 2 41,725.88 45,059.46 3,333.58 7.99
fixed assets 8 36,929.53 40,042.43 3,112.90 8.43
Construction in progress 9 1,024.28 1,039.58 15.30 1.49
intangible assets 14 2,272.07 2,477.45 205.38 9.04
Of which: land use rights 15 2,272.07 2,477.45 205.38 9.04
Other non-current assets 20 1,500.00 1,500.00 - -
total assets tw 66,129.81 69,653.48 3,523.67 5.33
ent
y
on
e
Current liabilities tw 65,896.41 65,896.41 - -
ent
y
tw
o
Non-current liabilities tw 6,812.57 3,433.33 -3,379.24 -49.60
ent
y
thr
ee
total liabilities tw 72,708.99 69,329.75 -3,379.24 -4.65
ent
y
fou
r
Net assets 25 -6,579.18 323.73 6,902.91 104.92

2. Income Approach
The total book assets of Inner Mongolia Tenglong on the evaluation base
date are 661.2981 million yuan, and the liabilities are 727.0899
million yuan
Ten thousand yuan, net assets -65.7918 million yuan, the value of all
shareholders' equity after valuation using the income method is 23,974.82
yuan RMB 10,000, with an added value of RMB 305.54 million.
3. This evaluation takes the evaluation results of the income approach
as the evaluation conclusion of this evaluation report.
The evaluation agency believes that the asset-based method cannot
objectively measure the profits brought by the intangible assets of Inner
Mongolia Tenglong to the enterprise, and it cannot reflect the impact of the
synergy effect of investors. The evaluation results of the income method are more
reliable than the results of the asset- based method. High, which can more
objectively and reasonably reflect the excess returns that may be brought
about by Inner Mongolia Tenglong’s operating qualifications, management
team , scale advantages, and geographical advantages, and can more objectively
and reasonably reflect the value of all equity interests of Inner Mongolia
Tenglong shareholders on the evaluation base date. The valuation result of the
income method is taken as the final valuation result of the target asset.
That is: Inner Mongolia Tenglong's value of all shareholders' equity
after evaluation is 239.7482 million yuan.
4. This acquisition refers to the valuation value of the target equity as of
the base date determined in the "Asset Evaluation Report"
239,748,200 yuan, with an appraised value-added of 305,540,000 yuan, an
increase of 464.43% . The transaction price of the underlying equity is
239.7482 million yuan. The main reason for this premium acquisition is to
comprehensively consider the overall value of intangible assets such as Inner
Mongolia Tenglong's business qualifications, sales channels, management
team and geographical advantages. mainly reflects in:
（1） Advantages of scale. Inner Mongolia Tenglong currently has a
glyphosate production capacity of 50,000 tons per year, ranking
first in the country in terms of scale.
In the top five in China, after the company acquires Inner Mongolia Tenglong,
the production capacity of glyphosate will increase to 180,000 tons per
year, which can significantly enhance the company's market influence in the
glyphosate industry and further consolidate the company's leading position
in the glyphosate field. Significantly enhance the profitability
and sustainable development of glyphosate business.
（2） Market Advantage. As the largest and most well-known glyphosate
manufacturer in northern China, Inner Mongolia Tenglong has stable sales
channels and high-quality customer resources, which will help the company
expand the pesticide market in northern China in the future.
（3） geographical advantage. Inner Mongolia Tenglong is located in Wuda
Industrial Park, a provincial industrial park in Inner Mongolia, and there are
8 industrial parks above the provincial level within 300 kilometers of
the surrounding area . There are many chemical companies in this area,
the basic conditions for the development of fine chemicals are good, the advantages
of basic raw materials and energy supporting are obvious, and the price of
resources and energy is relatively low. The company's acquisition of Inner
Mongolia Tenglong is conducive to expanding the company's strategic
development space and enhancing the company's sustainable development
capabilities.
5. A Brief Introduction to the Calculation Process of Income Appraisal
Value
（1） Description of the evaluation model
🕔Evaluation model: This income method evaluation model uses the
enterprise free cash flow model. That is, the value of all shareholders'
equity = the overall value of the enterprise - the value of interest-
paying debts. The overall value of the enterprise = the discounted value
of free cash flow of the enterprise + the value of surplus
assets + other assets + non-operating assets - non-operating
liabilities
Interest-paying debt: refers to the debt that needs to pay interest on the
books on the assessment base date.
the discounted value of free cash flow of the enterprise during the
specified forecast period + the discounted present value of free cash flow of
the enterprise after the specified forecast period
② Clear forecast period
The glyphosate business is in a mature and stable operating cycle, and
according to the Inner Mongolia Tenglong business development plan, The
next five years belong to a period of stable production and operation, so
the forecast period is set to 2021 .
③Revenue period
 Since the operation of the enterprise is relatively stable, the assets
and personnel mainly relied on for the operation of the enterprise are
stable. In terms of assets , through regular maintenance and reinvestment,
real estate and equipment can be kept in operation for a long time. Others
have not found any insurmountable barriers in the operating period in
terms of business operation, so the income period is determined on the
basis of perpetuity.
（2） Business Free Cash Flow Forecast

(Annual during the forecast period) Enterprise free cash flow =

net profit after tax + depreciation and amortization + interest
expense (after deducting tax impact) - capital expenditure - change in
net working capital = ( operating income - operating cost - business tax
+ Other business profits - period expenses (management expenses,
operating expenses) + investment income + non-operating income - Non-
operating expenses ) × (1 - income tax rate) + depreciation and
amortization + interest expense (net of tax impact ) - capital
expenditure - change in net working capital
According to the development plan and business plan of Inner Mongolia
Tenglong, combined with market, policy and other changing factors, the
company's free cash flow forecast results are as follows:
Unit: RMB ten thousand
report item 2017 Years perpetual
9-12 2018 Year 2019 Year 2020 Year 2021 Year
year
moon
I. Operating income 24,503.63 111,788.13 124,215.61 130,951.99 128,883.32 128,883.32
Less: operating costs 23,595.98 98,818.37 107,391.70 113,824.10 112,203.78 112,203.78
Business tax and 38.93 419.44 438.17 448.86 445.68 445.68
surcharges
sales expense 600.05 2,775.50 3,063.93 3,314.07 3,353.95 3,353.95
Management costs 789.10 2,419.64 2,742.41 2,858.65 2,980.95 2,980.95
Financial expenses 1,219.89 2,464.16 2,476.86 2,482.60 2,477.65 2,477.65
Asset impairment loss
Add: Income from
changes in
investment value
beneficial
 Add: investment
income
2. Operating profit -1,740.34 4,891.02 8,102.54 8,023.72 7,421.31 7,421.31
Add: non-operating
income
Less: Non-operating
expenses
3. Total profit -1,740.34 4,891.02 8,102.54 8,023.72 7,421.31 7,421.31
Deduct: income tax - - 199.80 2,005.93 1,855.33 1,855.33
expense
4. Net profit -1,740.34 4,891.02 7,902.74 6,017.79 5,565.98 5,565.98
Add: Depreciation 897.27 2,807.66 2,936.28 2,936.28 2,936.28 2,590.87
and Amortization
Interest expense ( net
1,187.50 2,349.00 1,761.75 1,761.75 1,761.75 1,761.75
of tax effects
sound )
 Less: capital 4,544.70 - - 15.00 14.14 1,642.57
expenditure
Change in net 3,551.03 2,811.32 769.18 311.33 -116.61 -
working capital
Plus / Minus: Other
5. Enterprise free cash
-7,751.30 7,236.36 11,831.59 10,389.49 10,366.49 8,276.03
flow
quantity

（3） Determination of Appraised Value of Income Approach

🕔Determination of discount rate
According to the weighted average cost model (WACC), the discount rate
is 12.3% .
② Determination of discount period
The discount period is divided into two stages. The first stage is
from the assessment base date to the production and operation and income
stabilization period in 2021 . The second paragraph is the
perpetuity period for each year after 2021 .
③ Determination of the discounted present value of free cash flow of
the enterprise
The annual discounted value of the enterprise's free cash flow is
determined according to the following formula:

After calculation, the total amount is 657.8645 million yuan. The

calculation results are detailed in the table below
Unit: RMB ten thousand
project September - 2018 Year 2019 Year 2020 Year 2021 Year perpetual
December year
2017
corporate free cash -7,751.30 7,236.36 11,831.59 10,389.49 10,366.49 8,276.03
flow
Discount Rate 12.30% 12.30% 12.30% 12.30% 12.30% 12.30%
discount period 0.17 0.83 1.83 2.83 3.83
discount factor 0.9809 0.9079 0.8084 0.7199 0.6410 5.2115
discounted value -7,603.25 6,569.89 9,564.66 7,479.40 6,644.92 43,130.84
2017 Year 9 January 22,655.61
to 2021 Year
2021 years later 43,130.84
corporate free cash
flow 65,786.45
Present value

④ Determination of surplus asset value

 As of the assessment base date, the surplus assets of Inner Mongolia
Tenglong are mainly idle land, with an assessment value of 887.09 ten
thousand yuan.
⑤ Determination of non-operating assets and liabilities
As of the evaluation base date, Inner Mongolia Tenglong's non-operating
assets totaled 140.5538 million yuan. As a shareholder
The value of all equity is listed as an addition; non-operating
liabilities totaling 174,277,500 yuan are listed as a deduction of
the value of all shareholders' equity.
⑥ Interest-paying debt
After analyzing the debt items of Inner Mongolia Tenglong, as
of the evaluation base date, the balance of long-term and short-
term loans was 393.2635 million yuan.
⑦ Appraisal value of all shareholders' equity
The value of all shareholders' equity = the overall value of the
enterprise - the value of interest-paying debts
= Total discounted present value of corporate free cash flow +
surplus asset value + other assets + non-operating assets - Non-
operating liabilities - value of interest-bearing debt
= 65,786.45 + 887.09 +0+ 14,055.38 - 17,427.75 -39,326.35
=23,974.82 (ten thousand yuan)
4. Main content of the agreement
On February 8 , 2018 , the company signed the "Equity Transfer
Agreement" with Xianlong Chemical and Jiangsu Tenglong, Its main contents
are as follows:
(1) Main contents of the "Equity Transfer Agreement" with Xianlong Chemical
1. Agreement subject
Party A (transferr): Hubei Xianlong Chemical Co., Ltd.
Party B (transferee): Hubei Xingfa Chemical Group Co., Ltd.
Xianlong Chemical holds a 70% stake in Inner Mongolia Tenglong and is
the controlling shareholder of Inner Mongolia Tenglong.
 2. Target of equity transfer
The target of this equity transfer is the equity of the target
company held by Party A ( with a capital contribution of RMB 46.66
million, accounting for 70% of the paid-in capital of the
target company, hereinafter referred to as "target equity").
3. Equity transfer price and payment

（1） Equity transfer price

price of the target equity transfer is based on the net asset value
and estimated net value determined by the audit report and evaluation
report issued by the audit and evaluation agency ( base d a t e : August
31 , 2017 , hereinafter referred to as "audit report" and "evaluation report
") . After friendly consultation and consensus between Party A and Party
B, it is determined to be RMB 167,823,740 million.
（2） Payment method of equity transfer price

Both parties agree that within one month after this agreement takes
effect, Party B shall, in accordance with Party A's requirements, pay the
full amount of the equity transfer payment to Party A's
designated payment method and payment account.
4. Equity Transfer Closing Date

3 days after this agreement takes effect , Party A shall complete

the industrial and commercial registration of this equity transfer. The delivery
date of this equity transfer is the registration date of the industrial and
commercial change of equity transfer. After the completion date of the equity
transfer, Party B shall enjoy the rights and obligations of the shareholders
of the target company. Party A shall be fully liable for the losses incurred
or formed by the target company before the completion date of the equity
transfer, which have not been confirmed by the audit report, evaluation report,
and not confirmed by Party B in writing. Party A shall compensate the
target company within ten days.
 ’s profit and loss treatment plan between the evaluation base date and
the equity transfer delivery date (that is, the transition period ) :
The profits and losses of the target company during the transition period
shall be borne by Party B according to the shareholding ratio after the
equity transfer
Examples of ownership and responsibility.
5. The rights and obligations of the parties to the agreement
（1） Party A's rights and obligations
🕔Party A guarantees to have all the rights to sign this agreement and
perform the obligations under this agreement;
 ②Party A guarantees that it has legal and complete ownership of the
transferred equity, and guarantees that the equity can be legally
transferred;
for completing the standardization of capital transactions between
the target company and other shareholders before this agreement takes
effect , and signing relevant legal documents;
④The external liabilities and compensation of the target company whose
audit report or evaluation report has not been confirmed during the
holding period of Party A
( breach of contract ) responsibility and guarantee responsibility shall be
borne by Party A, and if the target company undertakes the repayment,
compensation and guarantee responsibility , Party A shall make full
compensation or compensation to the target company;
⑤ Party A shall be responsible for the payable taxes,
administrative penalties, fines, infringement compensation or breach of
contract caused by the behavior of the target company that has not been
confirmed by the audit report or evaluation report before the equity
transfer delivery date . If the target company is liable for
this, Party A shall make full compensation or compensation to
the target company.
（2） Party B's rights and obligations

🕔Party B guarantees to have all the rights to sign this agreement and
perform the obligations under this agreement;
②Party B promises to cooperate with the industrial
and commercial change registration procedures for this
equity transfer. 6. Taxes
Both Party A and Party B agree that all taxes and fees arising from this
equity transfer shall be borne by Party A and Party B according to
law.
7. Liability for breach of contract
 If any party to this agreement violates the provisions of this agreement
and the annexes of the agreement and causes losses to the other party, the
breaching party shall compensate the non-defaulting party for liquidated
damages, which shall be 10% of the total price of this equity
transfer.
8. Conditions for the agreement to take effect

After signed by both parties, this agreement will come into effect after
Party B performs the deliberation and approval procedures in accordance with
its internal business decision-making management system, and both parties
perform external approval procedures.
 (2) Main contents of the "Equity Transfer Agreement" with Jiangsu Tenglong
1. Agreement subject
Party A (transferr): Jiangsu Tenglong Biological Pharmaceutical Co.,
Ltd.
Party B (transferee): Hubei Xingfa Chemical
Group Co., Ltd. Jiangsu Tenglong holds 30%
equity of Inner Mongolia Tenglong.
2. Target of equity transfer

The target of this equity transfer is the equity of the target

company held by Party A ( with a capital contribution of 20 million
yuan , accounting for 30% of the paid-in capital of the target
company, hereinafter referred to as "target equity").
3. Equity transfer price and payment

（1） Equity transfer price

price of the target equity transfer is based on the net asset value
and estimated net value determined by the audit report and evaluation
report issued by the audit and evaluation agency ( base d a t e : August
31 , 2017 , hereinafter referred to as "audit report" and "evaluation report
") . After friendly negotiation and consensus between Party A and Party B,
it was determined to be RMB 71.92446 million.
（2） Payment method of equity transfer price

5 working days after the equity transfer is completed , Party B

shall pay all the equity transfer funds to the account
designated by Party A in accordance with the requirements of
Party A.
4. Equity Transfer Closing Date

Within ten working days after this agreement takes effect, both parties
shall actively cooperate with the target company to complete the industrial and
commercial registration of this equity transfer. The delivery date of this
equity transfer is the registration date of the industrial and commercial
change of equity transfer. After the equity transfer delivery date, Party
B shall enjoy the shareholder rights of the target company and undertake
the shareholder rights of the target company. service.
’s profit and loss treatment plan between the evaluation base date and
the equity transfer delivery date ( that is, the transition period ) :
The profits and losses of the target company during the transition period
shall be borne by Party B according to the shareholding ratio after the
equity transfer
Examples of ownership and responsibility.
5. The rights and obligations of the parties to the agreement
（1） Party A's rights and obligations
🕔Party A guarantees to have all the rights to sign this agreement and
perform the obligations under this agreement;
②Party A guarantees that it has legal and complete ownership of the
transferred equity, and guarantees that the equity can be legally
transferred;
③ If the audit report or evaluation report is not confirmed, Party A
shall bear the corresponding responsibility for the guarantee and other
liabilities formed by the target company's written approval by Party A before
the evaluation base date . If the target company is liable for this, Party A
shall compensate or compensate the target company according to
its shareholding ratio in the target company at the time of
this equity transfer.
④ It has been confirmed that Party A owed the bid company 4.92 million
yuan in payment when signing this agreement. Party A and Party B confirm
Confirmation, on the premise that Party B submits to Party A the premise
that the target company agrees to Party B withholding the arrears of 4.92
million yuan in written form
of 4.92 million yuan from Party A's equity transfer payment of 71.92446
million yuan and then transfer the payment
to the target company. After deducting the above arrears, Party B
should actually pay Party A the equity transfer payment of 6,700.446
ten thousand yuan.
（2） Party B's rights and obligations

🕔Party B guarantees that it has gone through the necessary internal

decision-making and approval procedures when signing this agreement, and has
all the rights to sign this agreement and perform its
obligations under this agreement;
②Party B promises to cooperate with the industrial
 and commercial change registration procedures for this
equity transfer. 6. Changes and termination of
the agreement
This Agreement may be changed or terminated in writing upon mutual
agreement of both parties; this Agreement shall not be changed or terminated
without mutual agreement , except as otherwise provided by law.
7. Liability for breach of contract
 （1） Either party to this agreement violates the provisions of this
agreement and the annexes of the agreement, causing damage to the other
party In case of failure, the breaching party shall compensate the non-
defaulting party for liquidated damages, which shall be 10% of the total
price of this equity transfer .
（2） If Party B overdue payment of the equity transfer payment, the
overdue interest shall be paid to Party A at a monthly rate of 1 %. .
8. Conditions for the agreement to take effect
After the agreement is signed and sealed by both parties, it will come
into effect after being reviewed and approved by the decision-making
body of Party B.
V. Other arrangements involving the acquisition and sale of assets
This transaction does not involve personnel resettlement, land lease,
transfer of debts and creditor's rights, etc. After the transaction is
completed, there will be no related transactions or horizontal competition
with related parties, nor will it have a major adverse impact on the
company's independence.
6. The purpose of this transaction and its impact on the company
(1 ) Purpose of this transaction
Inner Mongolia Tenglong is located in Wuda Industrial Park, a provincial-
level industrial park in the Economic Development Zone of Wuhai City, which
has good basic conditions for the development of fine chemicals. Inner
Mongolia Tenglong currently has an annual production capacity of 50,000
tons of glyphosate technical. This acquisition is conducive to optimizing the
company's glyphosate production layout, enhancing industrial synergy, making
the glyphosate industry bigger and stronger , further consolidating the
company's leading position in the industry, and enhancing the company's
sustainable development capabilities.
(2) Impact on the company
1. impact on business management. According to the previous due diligence,
the main reasons for Inner Mongolia Tenglong’s negative net assets and
operating losses in recent years are: First, the production capacity of
glyphosate raw materials such as glycine, dimethyl ester, and yellow
phosphorus is not matched, and it is greatly affected by market
price fluctuations , 50,000 tons/year of glyphosate production
capacity is insufficient
( the output in 2017 was about 24,000 tons ), the fixed cost cannot be
amortized; the second is the lack of experience in glyphosate production,
The management level is relatively backward, the phenomenon of "running,
emitting, dripping and leaking" is serious, the consumption of materials and
energy is high, and the benefits of by-products are not fully reflected,
resulting in high production costs; thirdly, the financial pressure is high and
the financial costs are high. After the completion of this acquisition, the
company will integrate the excellent technology and management teams of both
parties
We will carry out technological transformation of the equipment, quickly start
the construction of new supporting equipment, and at the same time share high-
quality customers, give full play to the synergistic advantages, and rapidly
expand the glyphosate market, thereby expanding the company's business scope
and improving the company's overall competitiveness. In addition, after the
completion of this acquisition, the company will incorporate Inner Mongolia
Tenglong into the company's operation and management system, optimize the
management and business operation mechanism of Inner Mongolia Tenglong with
the company's advanced management concepts, systems and systems, and enhance
the profitability of Inner Mongolia Tenglong's glyphosate business At the same
time, the company's investment and financing capabilities, development
potential and competitiveness can be effectively improved.
2. Impact on financial status. After the completion of this acquisition,
Inner Mongolia Tenglong will become a wholly-owned subsidiary of the company
and be incorporated into the scope of the company's consolidated financial
statements. In the future, the company's operating income and net profit will
further increase, and its profitability will be further enhanced. After the
acquisition is completed, if the relevant business is carried out smoothly, it
will have a positive impact on the company's future
performance.
3. Impact on strategy development. Wuda Industrial Park, where Inner
Mongolia Tenglong is located, has good conditions for the development of fine
chemicals, with obvious advantages in basic raw materials and energy supporting
facilities, and the price of resources and energy is relatively low. After the
completion of this acquisition , it will help the company cultivate new
strategic development space and enhance the company's sustainable development
capabilities.
7. Guarantee and financial management of Inner Mongolia Tenglong
As of the audit assessment base date, Inner Mongolia Tenglong has no
external guarantee and financial management.
 8. Risks that may arise from the transaction
1. Post-acquisition operation management integration risk. After the
completion of this acquisition, there are certain uncertainties in whether
the company can achieve the desired effect of integration of Inner Mongolia
Tenglong's business, finance and human resources. After the acquisition is
completed , the company will optimize the management and business operation
mechanism of Inner Mongolia Tenglong with its own advanced management concepts,
systems and systems, increase the integration of all aspects of Inner Mongolia
Tenglong's resources, give full play to the synergy advantages, and release
the integration benefits as soon as possible.
2. Risk of volatility in profitability. The counterparty of the transaction
has not made a commitment to the profitability of Inner Mongolia Tenglong, and
the actual profitability of Inner Mongolia Tenglong will depend on the actual
profitability of the company itself, the overall business environment, etc.
There are certain uncertainties in profitability. The company will strengthen the
docking of technology, production, sales, procurement, financial and other
personnel with Inner Mongolia Tenglong, carry out technological transformation
and upgrading of Inner Mongolia Tenglong's existing equipment, strengthen
safety and environmental protection management, promote the construction of new
supporting equipment, and strengthen the management and control of costs and
expenses. Supervision, actively develop the market, and accelerate the
improvement of profitability.
9. Independent opinions of independent directors
( 1 ) The acquisition of 100% equity of Inner Mongolia Tenglong Biofine
Chemical Co., Ltd. jointly held by Xianlong Chemical and Jiangsu
Tenglong is conducive to strengthening the company's market position in
glyphosate. By integrating the excellent technology and management teams
of both parties , it aims to In strengthening the company's main business
profitability and improving the company's overall economic benefits , it is in
line with the development needs of national policies and company strategies. The
price of this transaction is based on the "Asset Appraisal Report" as a
reference, and is determined after negotiation between the parties to the
agreement. The transaction pricing method is reasonable. The decision-making
procedures complied with the provisions of relevant laws and regulations such as
the Company Law and the Articles of Association of the Company, and there was no
circumstance that harmed the interests of the company and investors .
( 2 ) Zhonglian Assets Appraisal Co., Ltd., the appraisal agency
hired this time, is qualified to engage in securities and futures business
. The appraisal agency and its asset appraisers have no conflict of interests or
conflicts with the parties to the company's transactions that affect the reality
and expectations of the services they provide , and are fully independent.
Special announcement.

Hubei Xingfa Chemical Group

 Co., Ltd. Board
of Directors
February 8 , 2018 _ _
 ● filing documents
( 1 ) Equity Transfer Agreement
( 2 ) Resolutions of the board of directors and opinions of
independent directors signed and confirmed by the attending directors
( 3 ) Resolutions of the board of supervisors signed and confirmed by
the attending supervisors
( 4 ) Asset appraisal report
(5) Audit report