Document:

EXECUTION
      COPY

    GUARANTY

     

    THIS
      GUARANTY
      (this
“Guaranty”) is made effective as of December 11, 2007 by SONG
      JINAN, an
      individual, with his principal business address located at No.
      999
      Ningqiao Road, Jinqiao Export Processing Zone, Pudong, Shanghai 201206, People’s
      Republic of China (the “Guarantor”), to and for the benefit of POPE
      INVESTMENTS II LLC,
      a
      Delaware limited liability company, with its principal executive offices located
      at 5100 Poplar Avenue, Suite 805, Memphis, Tennessee 38137
      (“Purchaser”).

     

    WHEREAS,
      China-Biotics, Inc, a
      Delaware company (“Issuer”), and Purchaser have entered into that certain
      Investment Agreement dated as of even date herewith (as amended, supplemented
      or
      modified from time to time, the “Agreement”), and Issuer has issued to Purchaser
      its 4% Senior Convertible Notes Due 2010 in the aggregate principal amount
      of
      TWENTY FIVE MILLION DOLLARS ($25,000,000) (the “Notes);

     

    WHEREAS,
      Guarantor, as an inducement for Purchaser’s entering into the Agreement and
      purchasing the Notes, offered and agreed to personally guarantee the performance
      of and full and prompt payment of the Notes in full, with all accrued but unpaid
      interest and any other payments which may be due thereunder, and to secure
      his
      guaranty with a pledge or deposit of Four Million shares of Common Stock of
      the
      Issuer; 

     

    WHEREAS,
      it is a
      condition precedent to Purchaser’s obligation to consummate the transactions
      contemplated by the Agreement, including the purchase of the Notes that
      Guarantor execute and deliver this Guaranty; and

     

    WHEREAS,
      Guarantor acknowledges and confirms that, (a) he will benefit from the
      Purchaser’s consummation of the transactions contemplated by the Agreement, (b)
      the Notes constitute valuable consideration to Guarantor, (d) this Guaranty
      is
      intended to be an inducement to Purchaser to execute, deliver and perform under
      the Agreement and to purchase the Notes, and (e) Purchaser is relying upon
      this
      Guaranty in consummating the transactions contemplated by the Agreement,
      including the purchase of the Notes.

     

    NOW, THEREFORE,
      in
      consideration of the foregoing and of the covenants and agreements hereinafter
      set forth, the receipt and sufficiency of which are hereby acknowledged, and
      as
      an inducement for Purchaser to enter into the Notes, Guarantor, intending to
      be
      legally bound hereby, agrees as follows:

     

    1. All
      capitalized terms used in this Guaranty and not defined herein shall have the
      defined meanings provided in the Agreement. Whenever the context so requires,
      each reference to gender includes the masculine and feminine, the singular
      number includes the plural and vice versa. The words “hereof” “herein” and
“hereunder” and words of similar import when used in this Guaranty shall refer
      to this Guaranty as a whole and not to any particular provision of this
      Guaranty, and references to section, article, annex, schedule, exhibit and
      like
      references are references to this Guaranty unless otherwise specified. An Event
      of Default shall “continue” or be “continuing” until such Event of Default has
      been cured or waived by Purchaser. References in this Guaranty to any person
      shall include such person and its successors and permitted assigns.

     

    2. Guarantor
      hereby irrevocably, unconditionally and absolutely guarantees the prompt,
      complete and full payment and performance when due, no matter how the same
      shall
      become due, but subject to any applicable grace periods, of all Notes
      outstanding from time to time under the Notes, together with all interest
      thereon and all other sums payable under the Notes, whether in respect of
      interest, Default Interest, additional fees, expense reimbursement or otherwise,
      (the “Guaranteed Obligations”). 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    3. As
      collateral security for his obligations under this Guaranty, the Guarantor
      shall
      pledge Four Million (4,000,000) shares of the Issuer’s Common Stock and shall
      have executed and delivered to Purchaser a pledge, assignment or similar
      agreement in form and substance satisfactory to the Purchaser with respect
      thereto (the “Pledge Agreement”), and shall have taken such other steps or
      actions as Purchaser may reasonably require to perfect its interest in such
      collateral.

     

    4. The
      Guarantor shall also be responsible for and pay, or promptly reimburse the
      Purchaser all out-of-pocket expenses (including reasonable fees and expenses
      of
      counsel) incurred in the enforcement or protection of rights hereunder, after
      proper demand under this Guaranty has been made and not timely honored by
      Guarantor.

     

    5. This
      Guaranty is a guaranty of payment and not a guaranty of collection. If any
      Guaranteed Obligation is not satisfied when due, whether by acceleration or
      otherwise, the Guarantor shall forthwith satisfy such Guaranteed Obligation,
      upon demand, and no such satisfaction shall discharge the obligations of the
      Guarantor hereunder until all Guaranteed Obligations have been indefeasibly
      paid
      in cash, or shares and performed and satisfied in full and the Notes irrevocably
      terminated or converted into equity of the Issuer. The Guarantor reserves the
      right to (a) set-off against any payment owing hereunder any amounts owing
      by
      the Purchaser to the Issuer, and (b) assert defenses which the Issuer may have
      to payment of any Guaranteed Obligations other than defenses arising from the
      bankruptcy or insolvency of the Issuer. 

     

    6. It
      is the
      intention hereof that Guarantor shall remain liable as a principal until the
      full amount of all Guaranteed Obligations shall have been performed and fully
      satisfied through payment in cash or conversion into Conversion Shares, or
      some
      combination thereof, subject to the provisions of the Notes, , notwithstanding
      any act, omission or anything else which might otherwise operate as a legal
      or
      equitable discharge of Issuer or Guarantor. 

     

    7. Guarantor
      acknowledges and agrees that his obligation hereunder as Guarantor shall not
      be
      impaired, modified, changed, released or limited in any manner whatsoever by
      any
      impairment, modification, change, release or limitation of the liability of
      the
      Issuer or any other guarantor of the Guaranteed Obligations or any other person
      or his or their respective estates in bankruptcy resulting from the operation
      of
      any present or future provision of the bankruptcy laws or other similar statute,
      or from the decision of any court.

     

    8. Guarantor
      agrees that his obligation hereunder is irrevocable, unconditional, and
      independent of the obligations of Issuer or any other guarantor of the
      Guaranteed Obligations. Guarantor shall take all reasonable actions to (i)
      ensure that this Guaranty is and remains enforceable against Guarantor in
      accordance with its terms and in order to (ii) fully effectuate the purposes,
      terms and conditions of this Guaranty and the consummation of the transactions
      contemplated hereby and performance and payment of the Guaranteed Obligations
      hereunder. 

     

    9. Upon
      payment of any of the Guaranteed Obligations by Guarantor, Guarantor shall
      be
      subrogated to the rights of the Purchaser against the Issuer with respect to
      such Guaranteed Obligations so paid, and the Purchaser agrees to take, at such
      Guarantor’s expense, such steps as the Guarantor may reasonably request to
      implement such subrogation.

     

    10. Any
      notice or request hereunder shall be given to Guarantor or to Purchaser at
      their
      respective addresses and in the manner set forth in the Investment
      Agreement.

     

    
      
        
        

      

      
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    11. Guarantor
      hereby agrees and acknowledges that no course of action or delay, renewal or
      extension of this Guaranty or any rights or obligations hereunder, release
      of
      any other guarantor, release of any collateral, or any of the foregoing, or
      delay, failure or omission on Purchaser’s part in enforcing this Guaranty or in
      exercising any right, remedy, option or power hereunder shall affect the
      liability of Guarantor or operate as a waiver of such or of any other right,
      remedy, power or option or of any default, nor shall any single or partial
      exercise of any right, remedy, option or power hereunder affect the liability
      of
      Guarantor or preclude any other or further exercise of such or any other right,
      remedy, power or option. No waiver by Purchaser of any one or more defaults
      by
      Guarantor in the performance of any of the provisions of this Guaranty shall
      operate or be construed as a waiver of any future default or defaults, whether
      of a like or different nature. 

     

    12. If
      any
      term or provision of this Guaranty is adjudicated to be invalid under applicable
      laws or regulations, such provision shall be inapplicable to the extent of
      such
      invalidity or unenforceability without affecting the validity or enforceability
      of the remainder of this Guaranty, which shall be given effect so far as
      possible.

     

    13. This
      Guaranty shall be governed by and construed in accordance with the internal
      laws
      of the State of New York. Any judicial proceeding brought by or against
      Guarantor with respect to any of the Guaranteed Obligations or any of the rights
      or obligations hereunder, this Guaranty or any related agreement may be brought
      in any court of competent jurisdiction located the State of Delaware, and,
      by
      execution and delivery of this Guaranty, Guarantor accepts for himself and
      in
      connection with his properties generally and unconditionally the non-exclusive
      jurisdiction of the aforesaid courts and irrevocably agree to be bound by any
      judgment rendered thereby in connection with this Guaranty. Guarantor hereby
      waives personal service of process and agree that service of process upon
      Guarantor may be made by certified or registered mail, return receipt requested,
      at Guarantor’ addresses specified or determined in accordance with Section 10,
      and
      service so made shall be deemed completed on the tenth (10th) Business Day
      after
      mailing. Any judicial proceeding by Guarantor against Purchaser involving,
      directly or indirectly, any matter or claim in any way arising out of, related
      to or connected with the Guaranteed Obligations, this Guaranty, shall be brought
      only in a court located in the State of Delaware. Guarantor acknowledge that
      Guarantor participated in the negotiation and drafting of this Guaranty, the
      Agreement, the Notes and the other Transaction Documents (as defined in the
      Agreement) and that, accordingly, Guarantor shall not move or petition a court
      construing this Guaranty to construe it more stringently against Purchaser
      than
      against Guarantor.

     

    14. This
      Guaranty may be executed in one or more counterparts, all of which taken
      together shall constitute one and the same instrument. This
      Guaranty may be executed by facsimile transmission, which facsimile signatures
      shall be considered original executed
      counterparts for purposes of this Section 14,
      and Guarantor agrees that he will be bound by his own facsimile signature and
      that he accepts the facsimile signature of each other party to this
      Guaranty.

     

    15. This
      Guaranty constitutes the entire agreement between Guarantor and Purchaser with
      respect to the subject matter hereof and thereof, and supersedes all prior
      agreements and understandings, if any, relating to the subject matter hereof
      or
      thereof. Neither this Guaranty nor any provision hereof may be changed,
      modified, amended, restated, waived, supplemented, canceled or terminated other
      than by an agreement in writing signed by Purchaser and Guarantor. The Purchaser
      may, without any notice to or consent from Guarantor, assign rights under this
      Guaranty in connection with the transfer, sale, assignment, pledge or other
      alienation of any of the Notes. Guarantor may not assign its right, interests
      or
      obligations hereunder to any other person (except by operation of law) without
      the prior written consent of the Purchaser.

     

    [SIGNATURES
      APPEAR ON THE FOLLOWING PAGE]

     

    
      
        
        

      

      
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    IN
      WITNESS WHEREOF, the parties have executed this Guaranty as of the day and
      year
      first above written.

     

    
      	 	 	 
	 	GUARANTOR:
	 	 
	 	SONG
              JINAN
	 	 
	 	/s/
              Song Jinan

    

     

    
      	 	 	 
	 	PURCHASER:
	 	 
	 	
              POPE INVESTMENTS II LLC

              
                By:
                  Pope Asset Management, LLC

                Its:
                  Manager

              

            
	 
 	 
 	 
 
	 	By:  	/s/
              William P. Wells
	 	Name:
              	William P. Wells
	 	Title:
              	Manager

    

     

    
      
        
        

      

      
        4EXECUTION
      COPY

     

    STOCK
      PLEDGE AGREEMENT

     

    THIS
      STOCK PLEDGE AGREEMENT
      (this
“Agreement”),
      dated
      as of December 11, 2007 is made between Song Jinan, an individual, with his
      principal business address located at No.
      999
      Ningqiao Road, Jinqiao Export Processing Zone, Pudong, Shanghai 201206, People’s
      Republic of China (the “Pledgor”)
      and
      Pope Investments II LLC, a Delaware limited liability company, with its
      principal executive offices located at 5100 Poplar Avenue, Suite 805, Memphis,
      Tennessee 38137 (“Pledgee”).

     

    WHEREAS,
      China-Biotics, Inc, a
      Delaware company (“Issuer”),
      and
      Pledgee have entered into that certain Investment Agreement dated as of even
      date herewith (as amended, supplemented or modified from time to time, the
      “Investment
      Agreement”),
      and
      Issuer has issued to Pledgee its 4% Senior Convertible Notes Due 2010 in the
      aggregate principal amount of Twenty Five Million U.S. Dollars (US$25,000,000)
      (the “Notes”);

     

    WHEREAS,
      Pledgor, as an inducement for Pledgee’s entering into the Agreement and
      purchasing the Notes, offered and agreed to personally guaranty, pursuant to
      a
      guaranty dated as of even date herewith (the “Guaranty”),
      the
      performance of and full and prompt payment of the Notes in full, with all
      accrued but unpaid interest and any other payments which may be due thereunder,
      and to secure his guaranty with a pledge or deposit of Four Million (4,000,000)
      shares of Common Stock of the Issuer; 

     

    WHEREAS,
      it is a
      condition precedent to Pledgee’s obligation to consummate the transactions
      contemplated by the Agreement, including the purchase of the Notes that Pledgor
      execute and deliver this Agreement.

     

    NOW, THEREFORE,
      in
      consideration of the foregoing and of the covenants and agreements hereinafter
      set forth, the receipt and sufficiency of which are hereby acknowledged, and
      as
      an inducement for Pledgee to enter into the Notes, Pledgor, intending to be
      legally bound hereby, agrees as follows:

     

    AGREEMENT

    

    1.    Defined
      Terms.
      As
      used in this Agreement, the following terms have the following
      meanings:

     

    “Event
      of Default”
      has the meaning given in Section 8 hereof.

    

    “Lien”
      means, for any person, any security interest, pledge, mortgage, charge,
      assignment, hypothecation, encumbrance, attachment, garnishment, execution
      or
      other voluntary or involuntary lien upon or affecting the revenues of such
      person or any real or personal property in which such person has or hereafter
      acquires any interest.

    

    “Pledged
      Stock”
      means 4 Million (4,000,000) shares of the Common Stock of the
      Issuer.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    2.    Grant
      of Security Interest.
      Pledgor hereby pledges, assigns and grants to Pledgee a security interest in
      all
      of his right, title and interest in and to the following personal property,
      whether now owned or hereafter acquired (collectively, the “Collateral”):

     

    a.    Shares
      of Stock.
      The Pledged Stock;

     

    b.    Additional
      Shares of Stock.
      Such additional shares of common stock of the Issuer as may be issued from
      time
      to time hereafter to Pledgor with respect to such pledged shares, whether by
      stock split, stock dividend, or otherwise;
      and

     

    c.    Proceeds
      and Products.
      All cash and non-cash proceeds and products of all of the foregoing
      Collateral.

     

    3.    Transfer
      of Instruments, Etc.
      Pledgor agrees to deliver to Pledgee all instruments and stock certificates
      pertaining to the Collateral now
      owned
      upon execution of this Agreement and to deliver to Pledgee promptly upon receipt
      thereof all instruments and stock certificates pertaining to the Collateral
      hereafter acquired. Without limiting the foregoing, if Pledgor shall become
      entitled to receive or shall receive, in connection with any of the Collateral,
      any: (i) stock certificate, including without limitation any certificate
      representing a stock dividend or in connection with any increase or reduction
      of
      capital, reclassification, merger, consolidation, sale of assets, combination
      of
      shares, stock split, spin-off, split-off, split-up or liquidation; (ii) option,
      warrant, or right, whether as an addition to or in substitution or in exchange
      for any of its securities, or otherwise; or (iii) dividend (provided that
      Pledgor shall be entitled to retain any cash dividend declared and paid) or
      distribution payable in properties; then Pledgor shall accept the same as
      Pledgee’s agent, in trust for Pledgee, and shall deliver them forthwith to
      Pledgee in the exact form received, with, as applicable, such Pledgor’s
      endorsement when necessary, or appropriate stock powers duly executed in blank,
      to be held by Pledgee, subject to the terms hereof, as part of the Collateral.
      This Agreement does not grant Pledgee power to control the voting or disposition
      of the securities prior to the occurrence of an Event of Default.

     

    4.    Obligations
      Secured.
      The pledge, assignment and grant of security interest made pursuant to this
      Agreement secures the full and timely payment and performance of the following
      indebtedness, liabilities and obligations (collectively, the “Obligations”):

     

    a.    The
      indebtedness and obligations of the Issuer to Pledgee pursuant to the
      Notes;

     

    b.    All
      indebtedness, liabilities and obligations of Pledgor now or hereafter existing
      under this Agreement and those under the Guaranty; and

     

    c.    All
      accrued interest on any of the foregoing indebtedness, liabilities and
      obligations, whether accruing prior to or subsequent to the commencement of
      a
      bankruptcy or similar proceeding.

     

    5.    Representations
      and Warranties Regarding Collateral.
      Pledgor represents and warrants that:

     

    a.    Pledgor
      is the legal and beneficial owner of the Pledged Stock;

     

    b.    The
      Pledged Stock is free and clear of all Liens other than Liens created hereunder
      in favor of Pledgee;
      and

     

    
      
        
        

      

      
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    c.    No
      governmental approval or filing or registration is required for the making
      and
      performance by Pledgor of this Agreement.

     

    6.    Pledgor’s
      Voting Rights.
      So long as no Event of Default has occurred and is continuing, Pledgor shall
      be
      entitled to exercise, or permit others to exercise, any voting rights incident
      to the Collateral. Upon the occurrence and continuation of an Event of Default,
      at the option of Pledgee and upon notice to Pledgors, Pledgors’ right to
      exercise, or permit others to exercise, such voting rights shall immediately
      cease and terminate and all voting rights with respect to the Collateral shall
      thereupon rest solely and exclusively in Pledgee. The foregoing sentence shall
      constitute and grant to Pledgee an irrevocable proxy coupled with an interest
      to
      vote the Collateral upon the occurrence and continuation of such an Event of
      Default, and any officer of any corporation whose voting stock constitutes
      Collateral, including without limitation any inspectors of elections or tellers,
      may rely hereon and on any written notice from Pledgee as to the existence
      of an
      Event of Default and Pledgee’s right to vote such Collateral.

     

    7.    Receipt
      of Cash Dividends.
      So long as no Event of Default has occurred and is continuing, each Pledgor
      shall be entitled to receive and retain for its own account all cash dividends
      paid by any Company in respect of the Collateral.

     

    8.    Events
      of Default.
      The occurrence of any of the following events shall constitute an “Event
      of Default”:

     

    a.    An
      Event of Default as defined in the Notes;
      or

     

    b.    Pledgor
      shall have failed to comply with this Agreement
      or the Guaranty.

     

    9.    Remedies
      Upon Default.
      If an Event of Default shall occur and remain uncured, Pledgee shall have all
      remedies provided by law and, without limiting the generality of the foregoing
      or the remedies provided in any other section hereof, shall have the following
      remedies:

     

    a.    The
      remedies of a secured party under applicable law; 

     

    b.    The
      right to exercise all voting rights incident to the Collateral as provided
      in
      Section 6 above;

     

    c.    The
      right to receive all dividends and all other distributions of any kind on all
      or
      any of the Collateral; and

     

    d.    The
      right to exercise any and all rights of collection, conversion or exchange,
      and
      any and all other rights, privileges, options or powers of Pledgor pertaining
      or
      relating to the Collateral (the Pledgor hereby irrevocably constituting and
      appointing Pledgee its proxy and attorney-in-fact with full power of
      substitution so to do), although Pledgee shall not have any duty to exercise
      any
      such rights, privileges, options or powers or to sell or to otherwise realize
      upon any of the Collateral, as hereinafter authorized, or to preserve the same,
      and Pledgee shall not be responsible for any failure to do so or delay in so
      doing.

     

    10.    Release.
      Upon satisfaction of the full amount of all indebtedness and obligations under
      the Notes through payment in cash or conversion into shares of the Issuer’s
      Common Stock or some combination thereof, subject to the provisions of the
      Notes, Pledgee shall immediately return to Pledgor the Collateral. 

     

    
      
        
        

      

      
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    11.    No
      Waiver.
      No
      waiver
      by the Pledgee of any default shall operate as a waiver of any other default
      or
      of the same default on a future occasion. No delay or omission on the part
      of
      the Pledgee in exercising any right or remedy shall operate as a waiver thereof,
      and no single or partial exercise by the Pledgee of any right or remedy shall
      preclude any other or further exercise thereof or the exercise of any other
      right or remedy. Time is of the essence of this Agreement.

     

    12.    Successors
      and Assigns.
      All rights of the Pledgee hereunder shall inure to the benefit of its successors
      and assigns, and all Obligations of the Pledgor shall bind the permitted
      successors and assigns of the Pledgor.

     

    13.    Governing
      Law.
      This
      Agreement shall be governed by and construed and enforced in accor-dance with,
      and all questions concerning the construction, validity, interpretation and
      performance of this Note shall be governed by, the internal laws of the State
      of
      New York, without giving effect to any choice of law or conflict of law
      provision or rule (whether of the State of New York or any other jurisdictions)
      that would cause the application of the laws of any jurisdictions other than
      the
      State of New York.

     

    14.    Severability.
      If any
      of the provisions of this Agreement shall contravene or be held invalid under
      the laws of any jurisdiction, the Agreement shall be construed as if not
      containing such provision and the remainder of this Agreement shall be construed
      and enforced accordingly. 

     

    [Signature
      Page Follows]

     

    
      
        
        

      

      
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    IN
      WITNESS WHEREOF, this Agreement has been executed as of the date first written
      above. 

     

    
      
        	 	 	 
	 	PLEDGOR:
	 	 
	 	SONG
                JINAN
	 	 
	 	/s/
                Song Jinan

      

       

      
        	 	 	 
	 	PLEDGEE:
	 	 
	 	POPE INVESTMENTS
                II LLC

                By:
                  Pope Asset Management, LLC

                Its:
                  Manager

              
	 
 	 
 	 
 
	 	By:  	/s/
                William P. Wells
	 	Name:
                	William
                P. Wells
	 	Title:
                	Manager

      

       

      
        
          
          

        

        
          5

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