Unassociated Document


    
      EXECUTION
COPY



    


    


    


    Dated
this September 21, 2009

    


    


    


    


    


    BY:

    


    CHINA-BIOTICS,
INC.

    


    


    IN   FAVOUR
OF:

    


    POPE
INVESTMENTS II LLC

    


    


    


    


    


    


    
      
        

      



    


    SHARE
CHARGE

    


    
      
 


    


    


    


    


    


    


    


    


    


    


    


    


    Conyers
Dill & Pearman

    Road
Town, Tortola

    British
Virgin Islands

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    THIS
SHARE CHARGE is made on September 21, 2009

    


    BY:

    


    China-Biotics,
Inc., a company incorporated under the laws of Delaware and having its principal
office at No. 999 Ningqiao Road, Jinqiao Export Processing Zone, Pudong,
Shanghai 201206, People’s Republic of China (the “Chargor”).

    


    IN
FAVOUR OF:

    


    Pope
Investments II LLC, a company incorporated under the laws of Delaware and having
its principal office at 5100 Poplar Avenue, Suite 805, Memphis, Tennessee 38137,
U.S.A. (the “Chargee”).

    


    WHEREAS:

    


    
      	
              (A)

            	
              By
      an investment agreement dated December 11, 2007 (the “Agreement”) made
      between the Chargor and the Chargee, the Chargor agreed to issue 4%
      senior, guaranteed convertible promissory note (the “Note”) in the
      original aggregate principal amount of
  US$25,000,000.

            


    

    


    
      	
              (B)

            	
              As
      security for the obligations of the Chargee under the Note, the Chargor
      has agreed to charge, inter alia, its interest in all of the shares
      beneficially owned by the Chargor in Sinosmart Group Inc., a company
      incorporated under the laws of the British Virgin Islands (the
      “Company”).

            


    

    


    
      	
              (C)

            	
              The
      Company is authorised to issue 50,000 shares having a par value of US$1.00
      each of which 14,287
      shares have been issued, credited as fully paid to, beneficially
      owned by, and registered in the name of the
  Chargor.

            


    

    


    NOW THIS CHARGE WITNESSETH as
follows:

    


    
      	
              1.

            	
              INTERPRETATION

            


    

     

    
      	
              1.1.

            	
              In
      this Charge, unless the context otherwise requires, the following words
      and expressions shall have the following
  meanings:

            


    

    


    
      	
              “Business
      Day”

            	
              has
      the same meaning as in the Agreement;

               

            
	
              “Charge”

            	
              means
      this share charge;

               

            
	
              “Charged
      Property”

            	
              means
      all of the issued shares of the Company as described in Recital (C) and all
      other shares in the Company from time to time legally or beneficially
      owned by the Chargor during the Security Period (together the “Charged
      Shares”) and all and any other property that may at any time be received
      or receivable by or otherwise distributed to the Chargor in substitution
      for, or in exchange for, any of the foregoing, including, without
      limitation, any shares or other securities resulting from the division,
      consolidation, change, conversion or reclassification of any of the
      Charged Shares, or the reorganization, merger or consolidation of the
      Company with any other body corporate, or the occurrence of any event
      which results in the substitution or exchange of the Charged
      Shares;

               

            


    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
              “Charged
      Shares”

            	
              has
      the meaning assigned thereto in the definition of Charged
      Property;

               

            
	
              “Event
      of Default”

            	
              has
      the meaning set out in the Note;

               

            
	
              “Parties”

            	
              means
      the parties to this Charge collectively and “Party” means any one of
      them;

               

            
	
              “Secured
      Obligations”

            	
              means
      all of the present and future payments and other obligations of the
      Chargor to the Chargee under the Security Documents;

               

            
	
              “Security
      Documents”

               

            	
              means
      the Agreement and the Note;

            
	
              “Security
      Interest”

            	
              means
      any charge, mortgage, pledge, lien, security interest or other
      encumbrance;

               

            
	
              “Security
      Period”

            	
              means
      the period commencing on January 24, 2008 and terminating upon discharge
      of the security created by this Charge by payment in full of the Secured
      Obligations.

               

            


    

    


    
      	
              1.2.

            	
              In
      this Charge unless the context otherwise
  requires:

            


    

     

    
      	
                      
      1.2.1.

            	
              references
      to statutory provisions shall be construed as references to those
      provisions as amended or re-enacted or as their application is modified by
      other provisions from time to time and shall include references to any
      provisions of which they are re-enactments (whether with or without
      modification);

            


    

    


    
      	
                             
      1.2.2.

            	
              references
      to clauses and schedules are references to clauses hereof and schedules
      hereto; references to sub-clauses or paragraphs are, unless otherwise
      stated, references to sub-clauses of the clauses hereof or paragraphs of
      the schedule in which the reference
appears;

            


    

    


    
      	
                       
      1.2.3.

            	
              references
      to the singular shall include the plural and vice versa and references to
      the masculine shall include the feminine and/or neuter and vice versa;
      and

            


    

    


    
      	
                        
      1.2.4.

            	
              references
      to persons shall include companies, partnerships, associations and bodies
      of persons, whether incorporated or
  unincorporated;

            


    

    


    
      	
                        
      1.2.5.

            	
              references
      to assets include property, rights and assets of every description;
      and

            


    

    


    
      	
                        
      1.2.6.

            	
              references
      to any document are to be construed as references to such document as
      amended or supplemented from time to
time.

            


    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
              2.

            	
              CHARGOR'S
      REPRESENTATIONS AND WARRANTIES

            


    

    


    The
Chargor hereby represents and warrants to the Chargee that:

    


    
      	
              2.1.

            	
              the
      shares of the Company are described in recital (C) hereof and such shares
      are beneficially owned and registered as described in the said
      recital;

            


    

    


    
      	
              2.2.

            	
              the
      Chargor is a company duly organised, validly existing and in good standing
      under the laws of Delaware;

            


    

    


    
      	
              2.3.

            	
              the
      Company is under no obligation, nor is it liable to become under any
      obligation, to issue any further shares nor, without limiting the
      generality of the foregoing, has the Company created any option to acquire
      shares in the Company or any securities exchangeable for or convertible
      into shares of the Company;

            


    

    


    
      	
              2.4.

            	
              entry
      into this Charge by the Chargor and enforcement hereof by the Chargee will
      not contravene the terms of any agreement to which the Chargor is bound or
      to which the Charged Shares are subject or the memorandum of association
      or articles of the Company;

            


    

    


    
      	
              2.5.

            	
              the
      Chargor is the legal and beneficial owner of all of the Charged Property
      free from any Security Interest (other than those created by this Charge)
      and any options or rights of
pre-emption;

            


    

    


    
      	
              2.6.

            	
              the
      Chargor has full power and authority (i) to be the legal and beneficial
      owner of the Charged Property, (ii) to execute and deliver this Charge and
      (iii) to comply with the provisions of, and perform all its obligations
      under, this Charge;

            


    

    


    
      	
              2.7.

            	
              this
      Charge constitutes the Chargor's legal, valid and binding obligations
      enforceable against the Chargor in accordance with its terms except as
      such enforcement may be limited by any relevant bankruptcy, insolvency,
      administration or similar laws affecting creditors' rights
      generally;

            


    

    


    
      	
              2.8.

            	
              the
      entry into and performance by the Chargor of this Charge does not violate
      (i) any law or regulation of any governmental or official authority, or
      (ii) any agreement, contract or other undertaking to which the Chargor is
      a party or which is binding upon the Chargor or any of its
      assets;

            


    

    


    
      	
              2.9.

            	
              all
      consents, licences, approvals and authorisations required in connection
      with the entry into, performance, validity and enforceability of this
      Charge have been obtained and are in full force and effect;
      and

            


    

    


    
      	
              2.10.

            	
              the
      Chargor has taken all corporate and other action required to approve its
      execution, delivery and performance of this
  Charge.

            


    

    


    
      	
              3.

            	
              CHARGOR’S
      COVENANTS

            


    

    


    The
Chargor hereby covenants with the Chargee:

     

    
      	
              3.1.

            	
              to
      pay all amounts, interests, expenses, claims, liabilities, losses, costs,
      duties, fees, charges or other moneys as are stated in the Security
      Documents and this Charge to be payable by the Chargor or to be
      recoverable from the Chargor by the Chargee (or in respect of which the
      Chargor agrees in the Security Documents and this Charge to indemnify the
      Chargee) at the times and in the manner specified in the Security
      Documents and this Charge provided that the liability of the Chargor under
      this clause shall be limited to the amount realised by a disposal of the
      Charged Property by or on behalf of or with the consent of the
      Chargee;

            


    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
              3.2.

            	
              to
      pay interest on any such amounts, interests, expenses, claims,
      liabilities, losses, costs, duties, fees, charges or other moneys referred
      to in Clause 3.1
      from the date on which the relevant amount, interest, expense, liability,
      loss, cost, duty, fee, charge or other money is paid or discharged by the
      Chargee until the date of reimbursement thereof to the Chargee (both
      before and after any relevant judgment) at the rate described in the Note
      and payable on demand;

            


    

    


    
      	
              3.3.

            	
              that
      the Chargor will on demand of the Chargee and at the expense of the
      Chargor, execute and deliver to the Chargee or to such person or persons
      as the Chargee may nominate such additional charge or charges of the
      Charged Property (or any part thereof) for the purpose of further securing
      the payment and discharge of all Secured Obligations, each such additional
      charge to be in such form as the Chargee may reasonably
      require;

            


    

    


    
      	
              3.4.

            	
              that
      the Chargor will not without the prior written consent of the
      Chargee:

            


    

    


    
      	
                      
      3.4.1.

            	
              permit
      any person other than the Chargor, the Chargee or any transferee nominated
      by the Chargee on enforcement of this Charge to be the registered holder
      of any of the Charged Shares;

            


    

    


    
      	
                       3.4.2.

            	
              permit
      any variation of the rights attaching to the Charged
    Shares;

            


    

    


    
      	
                    
        3.4.3.

            	
              take
      or permit any action which might result in an increase or reduction in the
      number of shares that the Company is authorised to issue or the issued
      shares of the Company;

            


    

    


    
      	
                       3.4.4.

            	
              permit
      the Company to be continued to another jurisdiction outside of the British
      Virgin Islands;

            


    

    


    
      	
                      
      3.4.5.

            	
              permit
      any scheme of arrangement, merger, amalgamation or other reorganisation
      applicable to the Company; or

            


    

    


    
      	
                      
      3.4.6.

            	
              save
      in accordance with Clause
      8.2, permit any amendment to the memorandum of association or
      articles of association of the
Company.

            


    

    


    
      	
              4.

            	
              SECURITY

            


    

    


    
      	
              4.1.

            	
              In
      consideration of the Chargee agreeing to acquire the Note and as
      continuing security for the Secured Obligations subject to Section 5
      hereof, the Chargor as legal and beneficial owner hereby assigns and
      agrees to assign to the Chargee all benefits present and future, actual
      and contingent accruing in respect of the Charged Property and all the
      Chargor’s right, title and interest to and in the Charged Property
      including (without limitation) all voting and other consensual powers
      pertaining to the Charged Shares and hereby charges and agrees to charge
      in favour of  the Chargee all of its interest in the Charged
      Property by way of a first fixed
charge.

            


    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
              4.2.

            	
              The
      Chargor hereby agrees to deliver, or cause to be delivered, to the
      Chargee:

            


    

    


    
      	
                      
      4.2.1.

            	
              duly
      executed undated share transfer in respect of the Charged Shares in favour
      of the Chargee or its nominees in the form set out in Schedule
    A;

            


    

    


    
      	
                       
      4.2.2.

            	
              all
      share certificates representing the Charged
  Shares;

            


    

    


    
      	
                        4.2.3.

            	
              subject
      to Section 5 hereof, upon an Event of Default, an executed irrevocable
      proxy made in respect of the Charged Shares in favour of the Chargee in
      respect of all general meetings of the Company in the form set out in
      Schedule B;
      and

            


    

    


    
      	
                      
      4.2.4.

            	
              an
      undertaking from the Company to register transfers of the Charged Shares
      to the Chargee or its nominee in the form set out in Schedule
    C.

            


    

    


    
      	
              4.3.

            	
              If
      consent is given in accordance with Clause 3.4.3, the
      Chargor will deliver, or cause to be delivered, to the Chargee immediately
      upon  the issue of any further Charged Shares, the items listed
      in Clauses 4.2.1, 4.2.2,
      4.2.3, and 4.2.4 in respect of all such further Charged
      Shares.

            


    

    


    
      	
              4.4.

            	
              The
      Chargor hereby covenants that during the Security Period it will remain
      the legal and the beneficial owner of the Charged Property (subject only
      to the Security Interests hereby created) and that it will
      not:

            


    

    


    
      	
                      
      4.4.1.

            	
              create
      or suffer the creation of any Security Interests (other than those created
      by this Charge) on or in respect of the whole of any part of the Charged
      Property or any of its interest
  therein;  or

            


    

    


    
      	
                    
        4.4.2.

            	
              sell,
      assign, transfer or otherwise dispose of any of its interest in the
      Charged Property (other than with respect to the dividend or distribution
      payments described in Clause
      5.1.2),

            


    

    


    in any
such case without the prior consent in writing of the Chargee.

    


    
      	
              4.5.

            	
              The
      Chargor shall remain liable to perform all the obligations assumed by it
      in relation to the Charged Property and the Chargee shall be under no
      obligation of any kind whatsoever in respect thereof or be under any
      liability whatsoever in the event of any failure by the Chargor to perform
      its obligations in respect thereof.

            


    

    


    
      	
              4.6.

            	
              Upon
      the Chargee being satisfied that upon the earlier of (a) the Secured
      Obligations have been unconditionally and irrevocably paid and discharged
      in full or (b) the conversion of all of the Note into equity of
      Chargor (either of which, for purposes of this Share Charge shall be
      deemed to be unconditional and irrevocable payment and discharge in full
      of the Secured Obligations), and following a written request therefor from
      the Chargor, the Chargee will, subject to being indemnified to its
      reasonable satisfaction for the costs and expenses incurred by the Chargee
      in connection therewith, release the security constituted by this
      Charge.

            


    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
              5.

            	
              DEALINGS
      WITH CHARGED PROPERTY

            


    

    


    
      	
              5.1.

            	
              Unless
      and until an Event of Default has
occurred:

            


    

    


    
      	
                     
        5.1.1.

            	
              the
      Chargor shall be entitled to exercise all voting and/or consensual powers
      pertaining to the Charged Property or any part thereof for all purposes
      not inconsistent with the terms of this Charge and/or the
      Note;

            


    

    


    
      	
                        5.1.2.

            	
              the
      Chargor shall be entitled to receive and retain any distributions,
      interest or other moneys or assets accruing on or in respect of the
      Charged Property or any part thereof;
and

            


    

    


    
      	
                       
      5.1.3.

            	
              the
      Chargor shall be entitled to receive all notices pertaining to the Charged
      Shares.

            


    

    


    
      	
              5.2.

            	
              The
      Chargor shall pay all calls, installments or other payments, and shall
      discharge all other obligations, which may become due in respect of any of
      the Charged Property and, in an Event of Default, the Chargee may if it
      thinks fit make such payments or discharge such obligations on behalf of
      the Chargor.  Any sums so paid by the Chargee in respect thereof
      shall be repayable on demand and pending such repayment shall constitute
      part of the Secured Obligations.

            


    

    


    
      	
              5.3.

            	
              The
      Chargee shall not have any duty to ensure that any distributions, interest
      or other moneys and assets receivable in respect of the Charged Property
      are duly and punctually paid, received or collected as and when the same
      become due and payable or to ensure that the correct amounts (if any) are
      paid or received on or in respect of the Charged Property or to ensure the
      taking up of any (or any offer of any), shares, rights, moneys or other
      property paid, distributed, accruing or offered at any time by way of
      redemption bonus, rights, preference, or otherwise on or in respect of,
      any of the Charged Property.

            


    

    


    
      	
              5.4.

            	
              The
      Chargor hereby authorises the Chargee to arrange at any time and from time
      to time after the occurrence of an Event of Default for the Charged
      Property or any part thereof to be registered in the name of the Chargee
      (or its nominee) thereupon to be held as so registered subject to the
      terms of this Charge.

            


    

    


    
      	
              6.

            	
              PRESERVATION
      OF SECURITY

            


    

    


    
      	
              6.1.

            	
              It
      is hereby agreed and declared that:

            


    

    


    
      	
                             6.1.1.

            	
              the
      security created by this Charge shall be held by the Chargee as a
      continuing security for the payment and discharge of the Secured
      Obligations and the security so created shall not be satisfied by any
      intermediate payment or satisfaction of any part of the Secured
      Obligations;

            


    

    


    
      	
                      
      6.1.2.

            	
              the
      security so created shall be in addition to and shall not in any way be
      prejudiced or affected by any of the other Security
    Documents;

            


    

    


    
      	
                      
      6.1.3.

            	
              the
      Chargee shall not be bound to enforce any other security before enforcing
      the security created by this
Charge;

            


    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
                 
           6.1.4.

            	
              no
      delay or omission on the part of the Chargee in exercising any right,
      power or remedy under this Charge shall impair such right, power or remedy
      or be construed as a waiver thereof nor shall any single or partial
      exercise of any such right, power or remedy preclude any further exercise
      thereof or the exercise of any other right, power or
      remedy.  The rights, powers and remedies herein provided are
      cumulative and not exclusive of any rights, powers and remedies provided
      by law and may be exercised from time to time and as often as the Chargee
      may deem expedient; and

            


    

    


    
      	
                    
        6.1.5.

            	
              any
      waiver by the Chargee of any terms of this Charge shall only be effective
      if given in writing and then only for the purpose and upon the terms for
      which it is given.

            


    

    


    
      	
              6.2.

            	
              Any
      settlement or discharge under this Charge between the Chargee and the
      Chargor shall be conditional upon no security or payment to the Chargee by
      the Company or the Chargor or any other person being avoided or set-aside
      or ordered to be refunded or reduced by virtue of any provision or
      enactment relating to bankruptcy, insolvency, administration or
      liquidation for the time being in force and, if such condition is not
      satisfied, the Chargee shall be entitled to recover from the Chargor on
      demand the value of such security or the amount of any such payment as if
      such settlement or discharge had not
occurred.

            


    

    


    
      	
              6.3.

            	
              The
      rights of the Chargee under this Charge and the Security Interest hereby
      constituted shall not be affected by any act, omission, matter or thing
      which, but for this provision, might operate to impair, affect or
      discharge such rights and security, in whole or in part, including without
      limitation, and whether or not known to or discoverable by the Company,
      the Chargor, the Chargee or any other
person:

            


    

     

    
      	
                       
      6.3.1.

            	
              any
      time or waiver granted to or composition with the Company or any other
      person;

            


    

     

    
      	
                        6.3.2.

            	
              the
      taking, variation, compromise, renewal or release of or refusal or neglect
      to perfect or enforce any rights, remedies or securities against the
      Company or any other person;

            


    

     

    
      	
                       
      6.3.3.

            	
              any
      legal limitation, disability, incapacity or other circumstances relating
      to the Company or any other person;

            


    

     

    
      	
                        6.3.4.

            	
              any
      amendment or supplement to the Note, the other Security Documents or any
      other document or security;

            


    

     

    
      	
                       
      6.3.5.

            	
              the
      dissolution, liquidation, merger, consolidation, reconstruction or
      reorganisation of the Company or any other person;
  or

            


    

     

    
      	
                       
      6.3.6.

            	
              the
      unenforceability, invalidity or frustration of any obligations of the
      Company or any other person under the Note, the other Security Documents
      or any other document or security.

            


    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
              6.4.

            	
              Until
      the Secured Obligations have been unconditionally and irrevocably
      satisfied and discharged in full to the satisfaction of the Chargee, the
      Chargor shall not by virtue of any payment made hereunder on account of
      the Secured Obligations or by virtue of any enforcement by the Chargee of
      its rights under, or the Security Interest constituted by, this Charge or
      by virtue of any relationship between or transaction involving, the
      Chargor and the Company (whether such relationship or transaction shall
      constitute the Chargor a creditor of the Company, a guarantor of the
      obligations of the Company or a party subrogated to the rights of others
      against the Company or otherwise howsoever and whether or not such
      relationship or transaction shall be related to, or in connection with,
      the subject matter of this Charge):

            


    

    


    
      	
                      
       6.4.1.

            	
              exercise
      any rights of subrogation in relation to any rights, security or moneys
      held or received or receivable by the Chargee or any
    person;

            


    

    


    
      	
                       
      6.4.2.

            	
              exercise
      any right of contribution from any co-surety liable in respect of such
      moneys and liabilities under any other guarantee, security or
      agreement;

            


    

    


    
      	
                       
      6.4.3.

            	
              exercise
      any right of set-off or counterclaim against the Company or any such
      co-surety;

            


    

    


    
      	
                       
      6.4.4.

            	
              receive,
      claim or have the benefit of any payment, distribution, security or
      indemnity from the Company or any such co-surety;
  or

            


    

    


    
      	
                       
      6.4.5.

            	
              unless
      so directed by the Chargee (when the Chargor will prove in accordance with
      such directions), claim as a creditor of the Company or any such co-surety
      in competition with the Chargee.

            


    

    


    The
Chargor shall hold in trust for the Chargee and forthwith pay or transfer (as
appropriate) to the Chargee any such payment (including an amount equal to any
such set-off), distribution other than such dividend or distribution payments
described in Clause
5.1.2 or benefit of such security, indemnity or claim in fact received by
it.

    


    
      	
              6.5.

            	
              Until
      the Secured Obligations have been unconditionally and irrevocably
      satisfied and discharged in full to the satisfaction of the Chargee, the
      Chargee may at any time keep in a separate account or accounts (without
      liability to pay interest thereon) in the name of the Chargee for as long
      as it may think fit, any moneys received, recovered or realised under this
      Charge or under any other guarantee, security or agreement relating in
      whole or in part to the Secured Obligations without being under any
      intermediate obligation to apply the same or any part thereof in or
      towards the discharge of such
amount.

            


    

    


    
      	
              7.

            	
              ENFORCEMENT
      OF SECURITY

            


    

    


    
      	
              7.1.

            	
              Upon
      the occurrence of an Event of Default the Security Interest hereby
      constituted shall become immediately enforceable and the Chargee may, at
      any time, without further notice to or consultation with, or consent
      of  the Chargor:

            


    

    


    
      	
                       
      7.1.1.

            	
              solely
      and exclusively exercise all voting and/or consensual powers pertaining to
      the Charged Property or any part thereof and may exercise such powers in
      such manner as the Chargee may think fit;
and/or

            


    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
                    
      7.1.2.

            	
              receive
      and retain all dividends, interest, distributions or other moneys or
      assets accruing on or in respect of the Charged Property or any part
      thereof, such dividends, interest, distributions or other moneys or assets
      to be held by the Chargee, until applied in the manner described in Clause 6.4, as
      additional security charged under and subject to the terms of this Charge
      and any such dividends, interest, distributions or other moneys or assets
      received by the Chargor after such time shall be held in trust by the
      Chargor for the Chargee and paid or transferred to the Chargee on demand;
      and/or

            


    

     

      	
                    
      7.1.3.

            	
              appoint
      by instrument any person to be a receiver of the Charged Property (the
      “Receiver”) and remove any Receiver so appointed and appoint another or
      others in his stead;

            


    

     

      	
                     
      7.1.4.

            	
              sell,
      transfer, grant options over or otherwise dispose of the Charged Property
      or any part thereof at such place and in such manner and at such price or
      prices as the Chargee may deem fit, and thereupon the Chargee shall have
      the right to deliver, assign and transfer in accordance therewith the
      Charged Property so sold, transferred, granted options over or otherwise
      disposed of; and/or

            


    

     

      	
                     
      7.1.5.

            	
              complete
      any undated blank share transfer forms of all or any part of the Charged
      Property by dating the same and/or inserting its name or the name of its
      nominee as transferee.

            


    

     

      	
              7.2.

            	
              The
      Chargee shall not be obliged to make any enquiry as to the nature or
      sufficiency of any payment received by it under this Charge or to make any
      claim or to take any action to collect any moneys assigned by this Charge
      or to enforce any rights or benefits assigned to the Chargee by this
      Charge or to which the Chargee may at any time be entitled
      hereunder.

            


    

    


    
      	
              7.3.

            	
              Upon
      any sale of the Charged Property or any part thereof by the Chargee the
      purchaser shall not be bound to see or enquire whether the Chargee's power
      of sale has become exercisable in the manner provided in this Charge and
      the sale shall be deemed to be within the power of the Chargee, and the
      receipt of the Chargee for the purchase money shall effectively discharge
      the purchaser who shall not be concerned with the manner of application of
      the proceeds of sale or be in any way answerable
  therefor.

            


    

    


    
      	
              7.4.

            	
              All
      moneys received by the Chargee pursuant to this Charge shall be held by it
      upon trust in the first place to pay or make good all such expenses,
      liabilities, losses, costs, duties, fees, charges or other moneys
      whatsoever as may have been paid or incurred by the Chargee in exercising
      any of the powers specified or otherwise referred to in this Charge and
      the balance shall be applied in the following
  manner:

            


    

    


    
      	
                      
      7.4.1.

            	
              FIRSTLY:  in
      or towards satisfaction of any amounts in respect of the balance of the
      Secured Obligations as are then accrued due and payable or are then due
      and payable by virtue of payment demanded, in such order or application as
      the Chargee shall think fit;

            


    

    


    
      	
                      
      7.4.2.

            	
              SECONDLY:  in
      retention of an amount equal to any part or parts of the Secured
      Obligations as are or are not then due and payable but which (in the sole
      and absolute opinion of the Chargee) will or may become due and payable in
      the future and, upon the same becoming due and payable, in or towards
      satisfaction thereof in accordance with the foregoing provisions of this
      clause; and

            


    

    


    
      	
                      
      7.4.3.

            	
              THIRDLY:  the
      surplus (if any) shall be repaid promptly to the Chargor or whosoever else
      may be entitled thereto.

            


    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
              7.5.

            	
              Neither
      the Chargee nor its agents, managers, officers, employees, delegates or
      advisers shall be liable for any claim, demand, liability, loss, damage,
      cost or expense incurred or arising in connection with the exercise or
      purported exercise of any rights, powers and discretions hereunder in the
      absence of negligence; however, in no event shall the Chargee be liable
      for consequential damages.

            


    

    


    
      	
              7.6.

            	
              The
      Chargee shall not by reason of the taking of possession of the whole or
      any part of the Charged Property or any part thereof be liable to account
      as mortgagee-in-possession or for anything except actual receipts or be
      liable for any loss upon realisation or for any default or omission for
      which a mortgagee-in-possession might be
liable.

            


    

    


    
      	
              7.7.

            	
              In
      addition to all other rights or powers vested in the Chargee hereunder or
      by statute or otherwise, the Receiver may take such action in relation to
      the enforcement of this Charge to:

            


    

    


    
      	
                      
      7.7.1.

            	
              take
      possession of, redeem, collect and get in all or any part of the Charged
      Property;

            


    

    


    
      	
                      
      7.7.2.

            	
              raise
      or borrow money and grant security therefor over all or any part of the
      Charged Property;

            


    

    


    
      	
                      
      7.7.3.

            	
              appoint
      an attorney or accountant or other professional qualified person to assist
      him in the performance of his
functions;

            


    

    


    
      	
                      
      7.7.4.

            	
              do
      all acts and to execute in the name and on behalf of the Chargor any
      document or deed in respect of all or any part of the Charged
      Property;

            


    

    


    
      	
                      
      7.7.5.

            	
              in
      the name of the Chargor or in his own name, bring, prosecute, enforce,
      defend and abandon applications, claims, disputes, actions, suits and
      proceedings in connection with all or any part of the Charged Property and
      to submit to arbitration, negotiate, compromise and settle any such
      applications, claims, disputes, actions, suits or
    proceedings;

            


    

    


    
      	
                      
      7.7.6.

            	
              sell,
      call in, collect and convert to money the Charged Property or any of it at
      such place and in such manner and at such price or prices as he shall
      think fit;

            


    

    


    
      	
                      
      7.7.7.

            	
              exercise
      any powers, discretion, voting or other rights or entitlements in relation
      to the Charged Property and generally to carry out any other action which
      he may in his sole discretion deem appropriate in relation to the
      enforcement of this Charge;

            


    

    


    
      	
                      
      7.7.8.

            	
              make
      any arrangement or compromise which he shall think expedient;
      and

            


    

    


    
      	
                      
      7.7.9.

            	
              do
      all such other acts and things as may be considered to be incidental or
      conducive to any of the matters or powers aforesaid and which the Receiver
      lawfully may or can do as agent for the
Chargor.

            


    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
              7.8.

            	
              Every
      Receiver shall so far as it concerns responsibility for his acts be deemed
      to be an agent of the Chargor, which shall be solely responsible for his
      acts and defaults and for the payment of his remuneration and no Receiver
      shall at any time act as agent for the
Chargee.

            


    

    


    
      	
              7.9.

            	
              Every
      Receiver shall be entitled to remuneration for his services at a rate to
      be fixed by agreement between him and the Chargee (or, failing such
      agreement, to be fixed by the Chargee) appropriate to the work and
      responsibilities involved, upon the basis of current  industry
      practice.

            


    

    


    
      	
              7.10.

            	
              Any
      remedies referred to in Section 66 of the BVI Business Companies Act
      (British Virgin Islands), including the right to sell the shares and the
      right to appoint a receiver to vote the shares, receive distributions, and
      exercise any other rights in respect of the shares, shall not be
      exercisable upon the occurrence of an Event of Default
    until:

            


    

    


    
      	
                    
         7.10.1.

            	
              a
      default has occurred and has continued for a period of not less than five
      Business Days; and

            


    

    


    
      	
                    
         7.10.2.

            	
              the
      default has not been rectified within five Business Days from service of a
      notice specifying the default and requiring rectification
      thereof.

            


    

    


    
      	
              7.11.

            	
              The
      Conveyancing and Law of Property Act shall not apply to this
      Charge.

            


    

    


    
      	
              8.

            	
              FURTHER
      ASSURANCES

            


    

    


    
      	
              8.1.

            	
              The
      Chargor shall execute and do all such assurances, acts and things as the
      Chargee in its absolute discretion may require
  for:

            


    

    


    
      	
                      
      8.1.1.

            	
              perfecting,
      protecting or ensuring the priority of the Security Interest hereby
      created (or intended to be
created);

            


    

    


    
      	
                      
      8.1.2.

            	
              preserving
      or protecting any of the rights of the Chargee under this
      Charge;

            


    

    


    
      	
                      
      8.1.3.

            	
              ensuring
      that the security constituted by this Charge and the covenants and
      obligations of the Chargor under this Charge shall inure to the benefit of
      any assignee of the Chargee;

            


    

    


    
      	
                      
      8.1.4.

            	
              facilitating
      the appropriation or realisation of the Charged Property or any part
      thereof; or

            


    

    


    
      	
                      
      8.1.5.

            	
              exercising
      any power, authority or discretion vested in the Chargee under this
      Charge,

            


    

    


    in any
such case, forthwith upon demand by the Chargee and at the expense of the
Chargor.

    


    
      	
              8.2.

            	
              Without
      limitation to the generality of Clause 8.1, the Chargor
      covenants with the Chargee that it will on demand of the Chargee procure
      any amendment to the memorandum of association or articles of association
      of the Company necessary or, in the opinion  of the Chargee
      desirable, in order to give effect to the terms of the Charge or any
      documents or transactions provided for
herein.

            


    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
              8.3.

            	
              The
      Chargor shall provide such assurances and do all acts and things the
      Receiver may in his absolute discretion require for the purpose of
      exercising the powers (or giving effect to the exercise of the powers)
      conferred on the Receiver hereunder and the Chargor hereby irrevocably
      appoints the Receiver to be the lawful attorney in fact of the Chargor to
      do any act or thing and to exercise all the powers of the Chargor for the
      purpose of exercising the powers (or giving effect to the exercise of the
      powers) conferred on the Receiver
hereunder.

            


    

    


    
      	
              8.4.

            	
              The
      Chargor shall use its best efforts to procure the entry in the share
      register of the Company pursuant to section 66(8) of the BVI Business
      Companies Act, 2004 (British Virgin Islands) of the details of this
      Charge, to have the Company submit its share register for registration by
      the Registrar of Corporate Affairs pursuant to section 231 of the BVI
      Business Companies Act, 2004 (British Virgin Islands) and to have the
      Company not amend the same or inform the Registrar of Corporate Affairs
      that it ceases to register any changes in the register, without the
      consent of the Chargee.

            


    

    


    
      	
              9.

            	
              INDEMNITIES

            


    

    


    
      	
              9.1.

            	
              The
      Chargor will indemnify and save harmless the Chargee, the Receiver and
      each agent or attorney appointed under or pursuant to this Charge from and
      against any and all expenses, claims, liabilities, losses, taxes, costs,
      duties, fees and charges properly and reasonably suffered, incurred or
      made by the Chargee, the Receiver or such agent or
    attorney:

            


    

    


    
      	
                      
      9.1.1.

            	
              in
      the exercise or purported exercise of any rights, powers or discretions
      vested in them pursuant to this
Charge;

            


    

    


    
      	
                      
      9.1.2.

            	
              in
      the preservation or enforcement of the Chargee's rights under this Charge
      or the priority thereof; or

            


    

    


    
      	
                      
      9.1.3.

            	
              on
      the release of any part of the Charged Property from the Security Interest
      created by this Charge,

            


    

    


    and the
Chargee, Receiver or such agent or attorney may retain and pay all sums in
respect of the same out of money received under the powers conferred by this
Charge.  All amounts recoverable by the Chargee, Receiver or such
agent or attorney or any of them shall be recoverable on a full indemnity
basis.

    


    
      	
              9.2.

            	
              If,
      under any applicable law or regulation, and whether pursuant to a judgment
      being made or registered against the Chargor or the bankruptcy or
      liquidation of the Chargor or for any other reason any payment under or in
      connection with this Charge is made or falls to be satisfied in a currency
      (the “Payment Currency”) other than the currency in which such payment is
      due under or in connection with this Charge (the “Contractual Currency”),
      then to the extent that the amount of such payment actually received by
      the Chargee when converted into the Contractual Currency at the rate of
      exchange, falls short of the amount due under or in connection with this
      Charge, the Chargor, as a separate and independent obligation, shall
      indemnify and hold harmless the Chargee against the amount of such
      shortfall.  For the purposes of this clause, “rate of exchange”
      means the rate at which the Chargee is able on or about the date of such
      payment to purchase the Contractual Currency with the Payment Currency and
      shall take into account any premium and other costs of exchange with
      respect thereto.

            


    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
              10.

            	
              POWER
      OF ATTORNEY

            


    

    


    
      	
              10.1.

            	
              The
      Chargor, by way of security and in order more fully to secure the
      performance of its obligations hereunder hereby irrevocably appoints the
      Chargee and the persons deriving title under it jointly and also severally
      to be its attorney:

            


    

    


    
      	
                   
          10.1.1.

            	
              to
      execute and complete in favour of the Chargee or its nominees or of any
      purchaser any documents which the Chargee may from time to time require
      for perfecting its title to or for vesting any of the assets and property
      hereby charged or assigned in the Chargee or its nominees or in any
      purchaser and to give effectual discharges for
  payments;

            


    

    


    
      	
                     
        10.1.2.

            	
              to
      take and institute on non-payment (if the Chargee in its sole discretion
      so decides) all steps and proceedings in the name of the Chargor or of the
      Chargee for the recovery of such moneys, property and assets hereby
      charged and to agree accounts;

            


    

    


    
      	
                    
         10.1.3.

            	
              to
      make allowances and give time or other indulgence to any surety or other
      person liable;

            


    

    


    
      	
                    
         10.1.4.

            	
              otherwise
      generally to act for it and in its name and on its behalf;
    and

            


    

    


    
      	
                     
        10.1.5.

            	
              to
      sign, execute, seal and deliver and otherwise perfect and do any such
      legal assignments and other assurances, charges, authorities and documents
      over the moneys, property and assets hereby charged, and all such deeds,
      instruments, acts and things (including, without limitation, those
      referred to in Clause
      8) that may be required for the full exercise of all or any of the
      powers conferred or which may be deemed proper on or in connection with
      any of the purposes aforesaid.

            


    

    


    
      	
              10.2.

            	
              The
      power hereby conferred shall be a general power of attorney and the
      Chargor hereby ratifies and confirms and agrees to ratify and confirm any
      instrument, act or thing which any such attorney may execute or
      do.  In relation to the power referred to herein, the exercise
      by the Chargee of such power shall be conclusive evidence of its right to
      exercise the same.

            


    

    


    
      	
              11.

            	
              EXPENSES

            


    

    


    
      	
              11.1.

            	
              The
      Chargor shall pay to the Chargee on demand all costs, fees and expenses
      (including, but not limited to, legal fees and expenses) and taxes thereon
      incurred by the Chargee or for which the Chargee may become liable in
      connection with the preserving or enforcing of, or attempting to preserve
      or enforce, any of its rights under this Charge or the priority
      hereof.

            


    

    


    
      	
              11.2.

            	
              The
      Chargor shall pay promptly all stamp, documentary and other like duties
      and taxes to which this Charge may be subject or give rise and shall
      indemnify the Chargee on demand against any and all liabilities with
      respect to or resulting from any delay or omission on the part of the
      Chargor to pay any such duties or
taxes.

            


    

    


    
      	
              12.

            	
              NOTICES

            


    

    


    Any
notice required to be given hereunder shall be in writing in the English
language and shall be served pursuant to the provisions of Section 9(f) of the
Agreement.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
              13.

            	
              ASSIGNMENTS

            


    

    


    
      	
              13.1.

            	
              This
      Charge shall be binding upon and shall inure to the benefit of the Chargor
      and the Chargee and each of their respective successors and (subject as
      hereinafter provided) assigns and references in this Charge to any of them
      shall be construed accordingly.

            


    

    


    
      	
              13.2.

            	
              The
      Chargor may not assign or transfer all or any part of its rights and/or
      obligations under this Charge.

            


    

    


    
      	
              13.3.

            	
              The
      Chargee may not assign or transfer all or any part of its rights or
      obligations under this Charge to any assignee or transferee without the
      consent of the Chargor, such consent not to be unreasonably withheld,
      provided that no such consent shall be required if an Event of Default
      affecting the Chargor has occurred and is continuing.  The
      Chargee shall notify the Chargor promptly following any such assignment or
      transfer.

            


    

    


    
      	
              14.

            	
              MISCELLANEOUS

            


    

    


    
      	
              14.1.

            	
              The
      Chargee, at any time and from time to time, may delegate by power of
      attorney or in any other manner to any person or persons all or any of the
      powers, authorities and discretions which are for the time being
      exercisable by the Chargee under this Charge in relation to the Charged
      Property or any part thereof.  Any such delegation may be made
      upon such terms and be subject to such regulations as the Chargee may
      think fit.  The Chargee shall not be in any way liable or
      responsible to the Chargor for any loss or damage arising from any act,
      default, omission or misconduct on the part of any such delegate provided
      the Chargee has acted reasonably in selecting such
    delegate.

            


    

    


    
      	
              14.2.

            	
              If
      any of the clauses, conditions, covenants or restrictions of this Charge
      or any deed or document emanating from it shall be found to be void but
      would be valid if some part thereof were deleted or modified, then such
      clause, condition, covenant or restriction shall apply with such deletion
      or modification as may be necessary to make it valid and
      effective.

            


    

    


    
      	
              14.3.

            	
              This
      Charge (together with any documents referred to herein) constitutes the
      whole agreement between the Parties relating to its subject matter and no
      variations hereof shall be effective unless made in writing and signed by
      each of the Parties.

            


    

    


    
      	
              14.4.

            	
              The
      headings in this Charge are inserted for convenience only and shall not
      affect the construction of this
Charge.

            


    

    


    
      	
              14.5.

            	
              This
      Charge may be executed in counterparts each of which when executed and
      delivered shall constitute an original but all such counterparts together
      shall constitute one and the same
instrument.

            


    

    


    
      	
              15.

            	
              LAW
      AND JURISDICTION

            


    

    


    This
Charge shall be governed by and construed in accordance with the laws of the
British Virgin Islands and the Parties hereby irrevocably submit to the
non-exclusive jurisdiction of the courts of the British Virgin Islands, provided
that nothing in this clause shall affect the right of the Chargee to serve
process in any manner permitted by law or limit the right of the Chargee to take
proceedings with respect to this Charge against the Chargor in any jurisdiction
nor shall the taking of proceedings with respect to this Charge in any
jurisdiction preclude the Chargee from taking proceedings with respect to this
Charge in any other jurisdiction, whether concurrently or not.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    IN
WITNESS whereof the Parties hereto have caused this Charge to be duly executed
as a Deed the day and year first before written.

    


    


    
      
        	
                The
      Common Seal of

              	
                )

              
	
                the
      Chargor

              	
                )

              
	
                was
      hereunto affixed in the

              	
                )

              
	
                presence
      of:

              	
                )

              
	 
      	 
      
	 
      	 
      
	
                The
      Common Seal of

              	
                )

              
	
                the
      Chargee

              	
                )

              
	
                was
      hereunto affixed

              	
                )

              
	
                in
      the presence of:

              	
                )

              


      

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    SCHEDULE
A

    


    SHARE
TRANSFER FORM

    


    


    Sinomart
Group, Inc.

    (the
“Company”)

    


    FOR
VALUE                                                                

    RECEIVED

    


    
      
        	
                China-Biotics, Inc.

              
	 
      


      

    

     

     

    hereby
sells, assigns and transfers to

     

     

    
      	
              Pope Investments II LLC, a Delaware limited
      liability company

            
	
              (Name
      in full and nationality of
Transferee)

            


    

     

     

    
      	
              5100 Poplar Avenue, Suite 805, Memphis, Tennessee
      38137

            
	
              (address)

            


    

    


            14,287
ordinary shares of US$1.00 each of the Company.

    


    


    Dated
this                          day
of

    


    


    In the
presence of:

     

     

    
      
        	 	 	 	 	 
	 	 	 	 	 
	For and on behalf
      of      	 	 	(Witness)	 
	China-Biotics,
      Inc.   	 	 	Notary
    Public	 
	Transferor	 	 	 	 


      

    

     

    In the
presence of:

     

    
       

      
        
          	 	 	 	 	 
	 	 	 	 	 
	For and on behalf
      of      	 	 	(Witness)	 
	Pope Investments II
      LLC  	 	 	Notary
    Public	 
	
                  Transferee

                	 	 	 	 


        

      

    

    Transferee

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    SCHEDULE
B

    


    IRREVOCABLE
PROXY FORM

    


    


     

    We,
China-Biotics, Inc. of No. 999 Ningqiao Road, Jinqiao Export Processing Zone,
Pudong, Shanghai 201206, People’s Republic of China (the “Shareholder”) being
the holder of shares of Sinomart Group, Inc., a British Virgin Islands business
company (the “Company”), hereby appoint each and every officer of the Chargee
(as defined in the Share Charge dated September 21, 2009 made between the
Shareholder and the Chargee (the “Share Charge”)) from time to time (the “Proxy
Holders”) the true and lawful attorney and proxy of the Shareholder for and in
the Shareholder's name, place and stead to attend all meetings of the
shareholders of the Company and to vote in respect of 14,287 shares in the
Company at the time standing in the Shareholder’s name and to exercise all
consensual rights in respect of such shares (including without limitation giving
or withholding written consents of shareholders and calling special general
meetings of shareholders) solely upon and during the continuance of an Event of
Default (as defined in the Share Charge).

     

    The
Shareholder hereby affirms that this proxy is given pursuant to Clause 4.2.3 of the
Share Charge.  THIS
PROXY IS COUPLED WITH AN INTEREST AND IS IRREVOCABLE.

    


    The
Shareholder hereby ratifies and confirms and undertakes to ratify and confirm
all that the Chargee may lawfully do or cause to be done by virtue
hereof.

    


    If at any
time this proxy shall or for any reason be ineffective or unenforceable or fail
to provide the Chargee with the rights or the control over the Shareholder’s
shares of the Company purported to be provided herein, the Shareholder shall
execute a replacement instrument which provides the Chargee with substantially
the same control over the Company as contemplated herein.  This
irrevocable proxy shall be governed by the laws of the British Virgin Islands
and the Shareholder irrevocably submits to the jurisdiction of the courts of the
British Virgin Islands in relation to the matters contained herein.

    


    Executed
and Delivered as a Deed

    


    This
_____day of    September, 2009

    


    


    The
common seal of

    China-Biotics,
Inc.

    was
hereunto affixed

    in the
presence of:

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    SCHEDULE
C

    


    


    UNDERTAKING

    


    


    We,
Sinosmart Group Inc. (the “Company”) hereby irrevocably UNDERTAKE and COVENANT
with Pope Investments II LLC (the “Transferee”) to register all transfers of
Charged Shares submitted to the Company for registration by the Transferee
pursuant to the due exercise of rights under the Share Charge (as defined below)
as soon as practical following the submission of such transfers.

    


    This
Undertaking is given pursuant to Clause 4.2.4 of the Share
Charge (the “Share Charge”) dated September 21, 2009 between China-Biotics, Inc.
and the Transferee, and any capitalised terms used herein and not otherwise
defined herein shall have the meanings given such terms in the Share
Charge.

    


    


    EXECUTED
AS A DEED on behalf of the Company on September ____ 2009.

    


    


    
      
        	 	 	 	 	 
	 	 	 	
              	 
	
                 

              	 	 	
              	 
	
                
                  Director