Document:

EXECUTION
      COPY

    REGISTRATION
      RIGHTS AGREEMENT

     

    REGISTRATION
      RIGHTS AGREEMENT
      (this
“Agreement”),
      dated
      as of December 11, 2007, by and among China-Biotics, Inc., a Delaware
      corporation, with headquarters located at No. 999 Ningqiao Road, Jingiao Export
      Processing Zone, Pudong, Shanghai, China 201206 (the ”Company”),
      and
      Pope Investments II LLC, a Delaware limited liability company (“Buyer”)
      with
      headquarters located at 5100 Poplar Avenue, Suite 805, Memphis, Tennessee 38137.
      

    

    WHEREAS:

     

    A. In
      connection with the Investment Agreement by and between the Company and Buyer
      dated even date herewith (the “Investment
      Agreement”),
      the
      Company has agreed, upon the terms and subject to the conditions set forth
      in
      the Investment Agreement, to issue and sell to Buyer a promissory note
      convertible into shares (the “Common
      Shares”)
      of the
      Company's common stock, par value $0.001 per share (the “Common
      Stock).

     

    B. To
      induce
      the Buyer to execute and deliver the Investment Agreement, the Company has
      agreed to provide certain registration rights under the Securities Act of 1933,
      as amended, and the rules and regulations thereunder, or any similar successor
      statute (collectively, the “1933
      Act”),
      and
      applicable state securities laws.

    

    NOW,
      THEREFORE,
      in
      consideration of the premises and the mutual covenants contained herein and
      other good and valuable consideration, the receipt and sufficiency of which
      are
      hereby acknowledged, the Company and Buyer hereby agree as follows:

     

    1. Definitions.
      

     

    Capitalized
      terms used herein and not otherwise defined herein shall have the respective
      meanings set forth in the Investment Agreement. As used in this Agreement,
      the
      following terms shall have the following meanings:

     

    a. “Business
      Day”
means
      any day other than Saturday, Sunday or any other day on which commercial banks
      in the State of Delaware are authorized or required by law to remain
      closed.

     

    b. “Buyer”
means
      a
      Buyer or any transferee or assignee thereof to whom a Buyer assigns its rights
      under this Agreement and who agrees to become bound by the provisions of this
      Agreement in accordance with Section 8. 

     

    c. “Closing
      Date”
shall
      have the meaning set forth in the Investment Agreement.

     

    d. “Effective
      Date”
means
      the date the Registration Statement is declared effective by the
      SEC.

     

    e. “Effectiveness
      Deadline”
means
      December 31, 2008.

     

    f. “Person”
means
      an individual, a limited liability company, a partnership, a joint venture,
      a
      corporation, a trust, an unincorporated organization and a government or any
      department or agency thereof.

     

    g. “Previous
      Registration Rights Agreement” means
      that certain Registration Rights Agreement dated March 22, 2006, by and among
      the Company and the other parties thereto. 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    h. “register,”
      “registered,”
and
      “registration”
refer
      to a registration effected by preparing and filing one or more Registration
      Statements (as defined below) in compliance with the 1933 Act and pursuant
      to
      Rule 415 and the declaration or ordering of effectiveness of such Registration
      Statement(s) by the SEC.

     

    i. “Registrable
      Securities”
means
      (i) the Common Shares, (ii) any capital stock of the Company issued or issuable
      with respect to the Common Shares as a result of any stock split, stock
      dividend, recapitalization, exchange or similar event or otherwise, without
      regard to any limitations on conversion of the promissory notes purchased by
      the
      Buyer under the Investment Agreement, and (iii) any Guarantee Shares (as defined
      in the Investment Agreement) which the Buyer may acquire pursuant to the
      Guarantee or Pledge Agreement, as those terms are defined in the Investment
      Agreement.

     

    j. “Registration
      Statement”
means
      a
      registration statement or registration statements of the Company filed under
      the
      1933 Act covering the Registrable Securities.

     

    k. “Required
      Holders”
means
      the holders of at least a majority of the Registrable Securities.

     

    l. “Required
      Registration Amount”
means
      the sum of (i) the number of Common Shares issued, and (ii) 150% of the number
      of Note Shares issued and issuable pursuant to the Notes as of the trading
      day
      immediately preceding the applicable date of determination, all subject to
      adjustment as provided in Section 2(e).

     

    m. “Rule
      415”
means
      Rule 415 under the 1933 Act or any successor rule providing for offering
      securities on a continuous or delayed basis.

     

    n. “SEC”
means
      the United States Securities and Exchange Commission.

     

    All
      terms
      that are defined hereinabove shall refer to their respective meanings in the
      Previous Registration Rights Agreement

     

    2. Registration.

     

    a. Mandatory
      Registration; Additional Registrations.
      As soon
      as practicable after the date hereof the Company shall file with the SEC, a
      Registration Statement on Form SB-2 covering the resale of all of the
      Registrable Securities. In the event that Form SB-2 is unavailable for such
      a
      registration, the Company shall use such other form as is available for such
      a
      registration on another appropriate form reasonably acceptable to the Required
      Holders, subject to the provisions of Section 2(e). The Registration Statement
      prepared pursuant hereto shall register for resale at least the number of shares
      of Common Stock equal to the Required Registration Amount determined as of
      date
      the Registration Statement is initially filed with the SEC. The Company shall
      use commercially reasonable efforts to have the Registration Statement declared
      effective by the SEC as soon as practicable, but in no event later than the
      Effectiveness Deadline. By 9:30 am Pacific Time on the Business Day following
      the Effective Date,
      the Company shall file with the SEC in accordance with Rule 424 under the 1933
      Act, the final prospectus to be used in connection with sales pursuant to such
      Registration Statement. The
      Company and Buyer hereby acknowledge that in accordance with Rule 415 of the
      1933 Securities Act (“Rule 415”), the Company may not be allowed to register all
      of the Registrable Securities in the Registration Statement. If this occurs,
      the
      Company, upon Buyer’s request, shall be required to file additional Registration
      Statements to include any of the Registrable Securities that were not registered
      in the Registration Statement, provided that such Registrable Securities can
      be
      registered at such time to comply with Rule 415. In addition, if any of the
      Registrable Securities have not been registered in the Registration Statement
      or
      additional Registration Statements and the Company is undertaking a Registration
      Statement on Form SB-2 (or a similar form), the Buyer shall be provided with
      notice of the filing of a Registration Statement ten (10) days prior to such
      filing and given the opportunity to request the inclusion of any Registrable
      Securities that have not previously been registered in a Registration Statement,
      provided that such Registrable Securities can be registered at such time to
      comply with Rule 415. 

     

    
      
        
        

      

      
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    b. Allocation
      of Registrable Securities.
      The
      initial number of Registrable Securities included in any Registration Statement
      and any increase in the number of Registrable Securities included therein shall
      be allocated to the Buyer. In the event that the Buyer sells or otherwise
      transfers any of the Registrable Securities, each transferee shall be allocated
      a pro rata portion of the then remaining number of Registrable Securities
      included in such Registration Statement for such transferor. In no event shall
      the Company include any securities other than Registrable Securities on any
      Registration Statement without the prior written consent of the Required Holders
      on the Closing Date.

     

    c. Legal
      Counsel.
      Subject
      to Section 5 hereof, the Required Holders shall have the right to select one
      legal counsel to review any registration pursuant to this Section 2
      (“Legal
      Counsel”),
      which
      shall be Wells, Moore, Simmons & Hubbard, PLLC or such other counsel as
      thereafter designated by the Required Holders. The Company and Legal Counsel
      shall reasonably cooperate with each other in performing the Company's
      obligations under this Agreement.

     

    d. Sufficient
      Number of Shares Registered.
      In the
      event the number of shares available under a Registration Statement filed
      pursuant to Section 2(a) is insufficient to cover all of the Registrable
      Securities required to be covered by such Registration Statement or any Buyer's
      allocated portion of the Registrable Securities pursuant to Section 2(b), the
      Company shall amend the applicable Registration Statement, or file a new
      Registration Statement (on the short form available therefor, if applicable),
      or
      both, so as to cover at least the Required Registration Amount as of the trading
      day immediately preceding the date of the filing of such amendment or new
      Registration Statement, in each case, as soon as practicable, but in any event
      not later than fifteen (15) Business Days after the necessity therefor arises.
      The Company shall use commercially reasonable efforts to cause such amendment
      and/or new Registration Statement to become effective as soon as practicable
      following the filing thereof. For purposes of the foregoing provision, the
      number of shares available under a Registration Statement shall be deemed
“insufficient to cover all of the Registrable Securities” if at any time the
      number of shares of Common Stock available for resale under the Registration
      Statement is less than the product determined by multiplying (i) the Required
      Registration Amount as of such time by (ii) 0.90. The calculation set forth
      in
      the foregoing sentence shall be made without regard to any limitations on the
      conversion of the Notes, if any, and such calculation shall assume that the
      Notes are then convertible for shares of Common Stock at the then prevailing
      Conversion Price (as determined in accordance with the Notes).

     

    3. Related
      Obligations.

     

    At
      such
      time as the Company is obligated to file a Registration Statement with the
      SEC
      pursuant to Section 2 the Company will use commercially resonable efforts to
      effect the registration of the Registrable Securities in accordance with the
      intended method of disposition thereof and, pursuant thereto, the Company shall
      have the following obligations:

     

    a. The
      Company shall submit to the SEC, within five (5) Business Days after the Company
      learns that no review of a particular Registration Statement will be made by
      the
      staff of the SEC or that the staff has no further comments on a particular
      Registration Statement, as the case may be, a request for acceleration of
      effectiveness of such Registration Statement to a time and date not later than
      48 hours after the submission of such request. The Company shall keep each
      Registration Statement effective pursuant to Rule 415 at all times until the
      earlier of (i) the date as of which the Buyer may sell all of the Registrable
      Securities covered by such Registration Statement without restriction pursuant
      to Rule 144(k) (or any successor thereto) promulgated under the 1933 Act and
      is
      not otherwise prohibited by the SEC or any statute, rule, regulation or other
      applicable law from selling any such Registrable Securities pursuant to such
      Rule or (ii) the date on which the Buyer shall have sold all of the Registrable
      Securities covered by such Registration Statement (the “Registration
      Period”).
      The
      Company shall ensure that each Registration Statement (including any amendments
      or supplements thereto and prospectuses contained therein) shall not contain
      any
      untrue statement of a material fact or omit to state a material fact required
      to
      be stated therein, or necessary to make the statements therein (in the case
      of
      prospectuses, in the light of the circumstances in which they were made) not
      misleading, except for information provided by Buyer.

     

    
      
        
        

      

      
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    b. The
      Company shall prepare and file with the SEC such amendments (including
      post-effective amendments) and supplements to a Registration Statement and
      the
      prospectus used in connection with such Registration Statement, which prospectus
      is to be filed pursuant to Rule 424 promulgated under the 1933 Act, as may
      be
      necessary to keep such Registration Statement effective at all times during
      the
      Registration Period, and, during such period, comply with the provisions of
      the
      1933 Act with respect to the disposition of all Registrable Securities of the
      Company covered by such Registration Statement until such time as all of such
      Registrable Securities shall have been disposed of in accordance with the
      intended methods of disposition by the seller or sellers thereof as set forth
      in
      such Registration Statement. In the case of amendments and supplements to a
      Registration Statement which are required to be filed pursuant to this Agreement
      (including pursuant to this Section 3(b)) by reason of the Company filing a
      report on Form 10-QSB, Form 10-KSB or any analogous report under the Securities
      Exchange Act of 1934, as amended (the “1934
      Act”),
      the
      Company shall have incorporated such report by reference into such Registration
      Statement, if applicable, or shall file such amendments or supplements with
      the
      SEC on the same day on which the 1934 Act report is filed which created the
      requirement for the Company to amend or supplement such Registration
      Statement.

     

    c. The
      Company shall (A) permit Legal Counsel to review and comment upon (i) a
      Registration Statement at least five (5) Business Days prior to its filing
      with
      the SEC and (ii) all amendments and supplements to all Registration Statements
      (except for Annual Reports on Form 10-KSB, and Reports on Form 10-QSB and any
      similar or successor reports) within a reasonable number of days prior to their
      filing with the SEC, and (B) not file any Registration Statement or amendment
      or
      supplement thereto in a form to which Legal Counsel reasonably objects. The
      Company shall not submit a request for acceleration of the effectiveness of
      a
      Registration Statement or any amendment or supplement thereto without the prior
      approval of Legal Counsel, which consent shall not be unreasonably withheld.
      The
      Company shall furnish to Legal Counsel, without charge, (i) copies of any
      correspondence from the SEC or the staff of the SEC to the Company or its
      representatives relating to any Registration Statement, (ii) promptly after
      the
      same is prepared and filed with the SEC, one copy of any Registration Statement
      and any amendment(s) thereto, including financial statements and schedules,
      all
      documents incorporated therein by reference, if requested by the Buyer, and
      all
      exhibits and (iii) upon the effectiveness of any Registration Statement, one
      copy of the prospectus included in such Registration Statement and all
      amendments and supplements thereto, if requested by the Buyer. The Company
      shall
      reasonably cooperate with Legal Counsel in performing the Company's obligations
      pursuant to this Section 3.

     

    d. The
      Company shall furnish to the Buyer, without charge, (i) promptly after the
      same
      is prepared and filed with the SEC and if requested by the Buyer, at least
      one
      copy of such Registration Statement and any amendment(s) thereto, including
      financial statements and schedules, all documents incorporated therein by
      reference, if requested by the Buyer, all exhibits and each preliminary
      prospectus, (ii) upon the effectiveness of any Registration Statement, ten
      (10)
      copies of the prospectus included in such Registration Statement and all
      amendments and supplements thereto (or such other number of copies as the Buyer
      may reasonably request) and (iii) such other documents, including copies of
      any
      preliminary or final prospectus, as the Buyer may reasonably request from time
      to time in order to facilitate the disposition of the Registrable Securities
      owned by the Buyer.

     

    e. The
      Company shall use commercially reasonable efforts to (i) register and qualify,
      unless an exemption from registration and qualification applies, the resale
      by
      Buyer of the Registrable Securities covered by a Registration Statement under
      such other securities or “blue sky” laws of all applicable jurisdictions in the
      United States, (ii) prepare and file in those jurisdictions, such amendments
      (including post-effective amendments) and supplements to such registrations
      and
      qualifications as may be necessary to maintain the effectiveness thereof during
      the Registration Period, (iii) take such other actions as may be necessary
      to
      maintain such registrations and qualifications in effect at all times during
      the
      Registration Period, and (iv) take all other actions reasonably necessary or
      advisable to qualify the Registrable Securities for sale in such jurisdictions;
      provided, however, that the Company shall not be required in connection
      therewith or as a condition thereto to (x) qualify to do business in any
      jurisdiction where it would not otherwise be required to qualify but for this
      Section 3(e), (y) subject itself to general taxation in any such jurisdiction,
      or (z) file a general consent to service of process in any such jurisdiction.
      The Company shall promptly notify Legal Counsel and Buyer of the receipt by
      the
      Company of any notification with respect to the suspension of the registration
      or qualification of any of the Registrable Securities for sale under the
      securities or “blue sky” laws of any jurisdiction in the United States or its
      receipt of actual notice of the initiation or threatening of any proceeding
      for
      such purpose.

     

    
      
        
        

      

      
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    f. The
      Company shall notify Legal Counsel and Buyer in writing of the happening of
      any
      event, as promptly as practicable after becoming aware of such event, as a
      result of which the prospectus included in a Registration Statement, as then
      in
      effect, includes an untrue statement of a material fact or omission to state
      a
      material fact required to be stated therein or necessary to make the statements
      therein, in the light of the circumstances under which they were made, not
      misleading (provided that in no event shall such notice contain any material,
      nonpublic information), and, subject to Section 3(r), promptly prepare a
      supplement or amendment to such Registration Statement to correct such untrue
      statement or omission, and deliver ten (10) copies of such supplement or
      amendment to Legal Counsel and Buyer (or such other number of copies as Legal
      Counsel or Buyer may reasonably request). The Company shall also promptly notify
      Legal Counsel and Buyer in writing (i) when a prospectus or any prospectus
      supplement or post-effective amendment has been filed, and when a Registration
      Statement or any post-effective amendment has become effective (notification
      of
      such effectiveness shall be delivered to Legal Counsel and Buyer by facsimile
      on
      the same day of such effectiveness and by overnight mail), (ii) of any request
      by the SEC for amendments or supplements to a Registration Statement or related
      prospectus or related information, and (iii) of the Company's reasonable
      determination that a post-effective amendment to a Registration Statement would
      be appropriate.

     

    g. The
      Company shall use commercially reasonable efforts to prevent the issuance of
      any
      stop order or other suspension of effectiveness of a Registration Statement,
      or
      the suspension of the qualification of any of the Registrable Securities for
      sale in any jurisdiction and, if such an order or suspension is issued, to
      obtain the withdrawal of such order or suspension at the earliest possible
      moment and to notify Legal Counsel and Buyer of the issuance of such order
      and
      the resolution thereof or its receipt of actual notice of the initiation or
      threat of any proceeding for such purpose.

     

    h. The
      Company shall use its commercially reasonable efforts to (i) cause all of the
      Registrable Securities covered by a Registration Statement to be listed on
      each
      securities exchange on which securities of the same class or series issued
      by
      the Company are then listed, if any, if the listing of such Registrable
      Securities is then permitted under the rules of such exchange, or (ii) if,
      despite the Company's efforts to satisfy, the preceding clause (i), to use
      commercially reasonable efforts to arrange for at least two market makers to
      register with the National Association of Securities Dealers, Inc.
      (“NASD”)
      as
      such with respect to such Registrable Securities. The Company shall pay all
      fees
      and expenses in connection with satisfying its obligation under this Section
      3(i).

     

    i. The
      Company shall cooperate with the Buyer and, to the extent applicable, facilitate
      the timely preparation and delivery of certificates (not bearing any restrictive
      legend) representing the Registrable Securities to be offered pursuant to a
      Registration Statement and enable such certificates to be in such denominations
      or amounts, as the case may be, as the Buyers may reasonably request and
      registered in such names as the Buyers may request.

     

    j. If
      requested by the Buyer, the Company shall (i) as soon as practicable incorporate
      in a prospectus supplement or post-effective amendment such information as
      the
      Buyer reasonably requests to be included therein relating to the sale and
      distribution of Registrable Securities, including, without limitation,
      information with respect to the number of Registrable Securities being offered
      or sold, the purchase price being paid therefor and any other terms of the
      offering of the Registrable Securities to be sold in such offering; (ii) as
      soon
      as practicable make all required filings of such prospectus supplement or
      post-effective amendment after being notified of the matters to be incorporated
      in such prospectus supplement or post-effective amendment; and (iii) as soon
      as
      practicable, supplement or make amendments to any Registration Statement if
      reasonably requested by an Buyer holding any Registrable
      Securities.

     

    k. The
      Company shall otherwise use commercially reasonable efforts to comply with
      all
      applicable rules and regulations of the SEC in connection with any registration
      hereunder.

     

    
      
        
        

      

      
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    l. Within
      five (5) Business Days after a Registration Statement which covers Registrable
      Securities is ordered effective by the SEC, the Company shall deliver, and
      shall
      cause legal counsel for the Company to deliver, to the transfer agent for such
      Registrable Securities (with copies to the Buyers whose Registrable Securities
      are included in such Registration Statement) confirmation that such Registration
      Statement has been declared effective by the SEC in the form attached hereto
      as
Exhibit
      A
      or such
      other form suitable for notification

     

    m. Notwithstanding
      anything to the contrary herein, at any time after the Effective Date, the
      Company may delay the filing of or suspend the effectiveness pending such
      disclosure of material, non-public information concerning the Company the
      disclosure of which at the time is not, in the good faith opinion of the Board
      of Directors of the Company and its counsel, in the best interest of the Company
      and, in the opinion of counsel to the Company, otherwise required (a
“Grace
      Period”);
      provided, that the Company shall promptly (i) notify the Buyer in writing of
      the
      existence of material, non-public information giving rise to a Grace Period
      (provided that in each notice the Company will not disclose the content of
      such
      material, non-public information to the Buyer) and the date on which the Grace
      Period will begin, and (ii) notify the Buyer in writing of the date on which
      the
      Grace Period ends; and, provided further, that no Grace Period shall exceed
      thirty (30) consecutive days and during any three hundred sixty five (365)
      day
      period such Grace Periods shall not exceed an aggregate of ninety (90) days
      and
      the first day of any Grace Period must be at least five (5) trading days after
      the last day of any prior Grace Period (each, an “Allowable
      Grace Period”).
      For
      purposes of determining the length of a Grace Period above, the Grace Period
      shall begin on and include the date the Buyer receive the notice referred to
      in
      clause (i) and shall end on and include the later of the date the Buyer receive
      the notice referred to in clause (ii) and the date referred to in such notice.
      The provisions of Section 3(g) hereof shall not be applicable during the period
      of any Allowable Grace Period. Upon expiration of the Grace Period, the Company
      shall again be bound by the first sentence of Section 3(f) with respect to
      the
      information giving rise thereto unless such material, non-public information
      is
      no longer applicable. Notwithstanding anything to the contrary, the Company
      shall cause its transfer agent to deliver unlegended shares of Common Stock
      to a
      transferee of the Buyer in accordance with the terms of the Investment Agreement
      in connection with any sale of Registrable Securities with respect to which
      the
      Buyer has entered into a contract for sale, and delivered a copy of the
      prospectus included as part of the applicable Registration Statement (unless
      an
      exemption from such prospectus delivery requirements exists), prior to the
      Buyer's receipt of the notice of a Grace Period and for which the Buyer has
      not
      yet settled. 

     

    n. The
      Company shall, upon reasonable notice and during normal business hours, make
      available for inspection by any seller of Registrable Securities, any
      underwriter participating in any disposition pursuant to such registration
      statement and any attorney, accountant or other agent retained by any such
      seller or underwriter (but not more than one firm of counsel to each of such
      sellers and underwriters) all financial and other records, pertinent corporate
      documents and properties of the Company, in each case, reasonably required
      to
      conduct due diligence or otherwise in connection with an underwritten offering,
      and use its commercially reasonable efforts to cause the Company’s officers,
      directors, employees and independent accountants to supply all information
      reasonably requested by any such seller, underwriter, attorney, accountant
      or
      agent in connection with such registration statement; provided, however, that
      information that the Company advises any such person is confidential shall
      not
      be disclosed unless such person signs a confidentiality agreement reasonably
      satisfactory to the Company.

     

    o. From
      and
      after the date of this Agreement until the termination of this Agreement, the
      Company shall not, without the prior written consent of the Required Holders,
      enter into any agreement with any holder or prospective holder of any securities
      of the Company giving such holder or prospective holder any registration rights,
      the terms of which are more favorable than the registration rights granted
      to
      the Buyers hereunder without also giving the Buyers such greater
      rights.

     

    4. Obligations
      of the Buyer.

     

    a. At
      least
      five (5) Business Days prior to the first anticipated filing date of a
      Registration Statement, the Company shall notify the Buyer in writing of the
      information the Company requires from such Buyer if such Buyer elects to have
      any of such Buyer's Registrable Securities included in such Registration
      Statement. It shall be a condition precedent to the obligations of the Company
      to complete the registration pursuant to this Agreement with respect to the
      Registrable Securities of the Buyer that such Buyer shall furnish to the Company
      such information regarding itself, the Registrable Securities held by it and
      the
      intended method of disposition of the Registrable Securities held by it as
      shall
      be reasonably required to effect the effectiveness of the registration of such
      Registrable Securities and shall execute such documents in connection with
      such
      registration as the Company may reasonably request. 

     

    
      
        
        

      

      
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    b. The
      Buyer, by such Buyer's acceptance of the Registrable Securities, agrees to
      cooperate with the Company as reasonably requested by the Company in connection
      with the preparation and filing of any Registration Statement hereunder, unless
      such Buyer has notified the Company in writing of such Buyer's election to
      exclude all of such Buyer's Registrable Securities from such Registration
      Statement.

     

    c. In
      the
      event there is any delay the provision of information reasonably requested
      by
      the Company in connection with the preparation and filing of any Registration
      Statement hereunder, the Effectiveness Deadline shall be extended by a number
      of
      days equal to the duration of such delay.

     

    d. The
      Buyer
      agrees that, upon receipt of any notice from the Company of the happening of
      any
      event of the kind described in Section 3(g) or the first sentence of 3(f),
      such
      Buyer will immediately discontinue disposition of Registrable Securities
      pursuant to any Registration Statement(s) covering such Registrable Securities
      until such Buyer's receipt of the copies of the supplemented or amended
      prospectus contemplated by Section 3(g) or the first sentence of 3(f) or receipt
      of notice that no supplement or amendment is required. Notwithstanding anything
      to the contrary, the Company shall cause its transfer agent to deliver
      unlegended shares of Common Stock to a transferee of the Buyer in accordance
      with the terms of the Investment Agreement in connection with any sale of
      Registrable Securities with respect to which the Buyer has entered into a
      contract for sale prior to the Buyer's receipt of a notice from the Company
      of
      the happening of any event of the kind described in Section 3(g) or the first
      sentence of 3(f) and for which the Buyer has not yet settled.

     

    e. The
      Buyer covenants and agrees that it will comply with the prospectus delivery
      requirements of the 1933 Act as applicable to it or an exemption therefrom
      in
      connection with sales of Registrable
      Securities pursuant to the Registration Statement.

     

    5. Expenses
      of Registration.

     

    All
      reasonable expenses, incurred by the Company in connection with registrations,
      filings or qualifications pursuant to Sections 2 and 3, including, without
      limitation, all registration, listing and qualifications fees, printers and
      accounting fees, and fees and disbursements of counsel for the Company shall
      be
      paid by the Company. 

     

    6. Indemnification
      and Contribution.

     

    a. In
      the
      event of a registration of any Registrable Securities under the Securities
      Act
      pursuant to this Agreement, the Company will indemnify and hold harmless, to
      the
      full extent permitted by law, Buyer, the directors, officers, managers, members,
      partners, employees, agents, representatives of, and each Person, if any, who
      controls the Buyer within the meaning of the 1933 Act or the 1934 Act (each,
      a
“Buyer
      Indemnitee”),
      with
      respect to any registration, qualification, listing or compliance effected
      pursuant to this Agreement against any losses, claims, damages, liabilities
      and
      expenses, joint or several, to which Buyer may become subject under the
      Securities Act, the 1934 Act, or other federal and state laws or otherwise,
      insofar as such losses, claims, damages or liabilities (or actions in respect
      thereof) arise out of or are based upon any untrue statement or alleged untrue
      statement of any material fact contained in any registration statement under
      which such Registrable Securities were registered under the Securities Act
      pursuant to this Agreement, any preliminary prospectus or final prospectus
      contained therein, or any amendment or supplement thereof, or arise out of
      or
      are based upon the omission or alleged omission to state therein a material
      fact
      required to be stated therein or necessary to make the statements therein (in
      light of the circumstances under which they were made) not misleading, and
      will
      pay or reimburse each Buyer Indemnitee for any legal or other expenses
      reasonably incurred by them in connection with investigating or defending any
      such loss, claim, damage, liability or action; provided, however, that the
      Company (i) will not be liable in any such case if and to the extent that (A)
      any such loss, claim, damage liability or expense arises out of or is based
      upon
      an untrue statement or alleged untrue statement or omission or alleged omission
      so made in conformity with information furnished by any Buyer Indemnitee or
      any
      other shareholder holding Registrable Securities for use in such registration
      statement, prospectus, amendment or supplement, or (B) in respect to such untrue
      statement or alleged untrue statement or omission or alleged omission with
      respect to which such loss, claim, damage, liability or expense directly
      relates, the final prospectus for such registration statement corrected in
      all
      material respects such untrue statement or alleged untrue statement or omission
      or alleged omission and notice regarding the public availability of such final
      prospectus was sent or given to or on behalf of any Buyer Indemnitee (or
      otherwise delivered in accordance with applicable law or regulation) at or
      prior
      to the confirmation of the sale of Registrable Securities of such Shareholder,
      and (ii) will not be liable for amounts paid in settlement of any such loss,
      claim, damage, liability, expense or action if such settlement is effected
      without the consent of the Company, such consent not to be unreasonably withheld
      or delayed.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

       

    

    b. In
      the
      event of a registration of any Registrable Securities under the 1933 Act
      pursuant to this Agreement, each Buyer Indemnitee will indemnify and hold
      harmless the Company, each person, if any, who controls the Company, any
      underwriter retained by the Company and their respective directors, officers,
      employees, advisors, agents and affiliates against all losses, claims, damages,
      liabilities and expenses, joint or several, to which the Company or such other
      person may become subject under the 1933 Act, the 1934 Act or other federal
      or
      state laws or otherwise, but only insofar as such losses, claims, damages or
      liabilities (or actions in respect thereof), arise out of or are based upon
      an
      untrue statement or alleged untrue statement or omission or alleged omission
      to
      state therein a material fact required to be stated therein or necessary to
      make
      the statements therein not misleading, made in reliance upon and in conformity
      with information pertaining to such Buyer Indemnitee furnished to the Company
      by
      such Shareholder for use in such registration statement under which such
      Registrable Securities were registered under the 1933 Act pursuant to this
      Agreement, or in any preliminary prospectus or final prospectus contained
      therein, or any amendment or supplement thereof, and will pay or reimburse
      the
      Company and each such other person for any legal or other expenses reasonably
      incurred by them in connection with investigating or defending any such loss,
      claim, damage, liability or action; provided, however, that (i) the liability
      of
      such Buyer Indemnitee hereunder shall be limited to the greater of (a) the
      proportion of any such loss, claim, damage, liability or expense which is equal
      to the proportion that the public offering price of the shares of Registrable
      Securities sold by such Buyer Indemnitee under such registration statement
      bears
      to the total public offering price of all securities sold thereunder and (b)
      the
      amount of gross proceeds received by such Buyer Indemnitee in the offering
      giving rise to such liability, and (ii) such Buyer Indemnitee shall not be
      liable for amounts paid in settlement of any such loss, claim, damage, liability
      or action if such settlement is effected without the consent of such Buyer
      Indemnitee, such consent not to be unreasonably withheld or
      delayed.

     

    c. Promptly
      after receipt by an indemnified party hereunder of written notice of any claim
      or the commencement of any action or proceeding, such indemnified party shall,
      if a claim in respect thereof is to be made against the indemnifying party
      hereunder, notify the indemnifying party in writing thereof, but the failure
      to
      so notify the indemnifying party shall not relieve it from any liability which
      it may have to such indemnified party other than under this Section 6 and shall
      only relieve it from any liability which it may have to such indemnified party
      under this Section 6 if and to the extent the indemnifying party is materially
      prejudiced by such omission. In case any such action shall be brought against
      any indemnified party and the indemnified party shall notify the indemnifying
      party of the commencement thereof, the indemnifying party shall be entitled
      to
      participate in and, to the extent it shall wish, to assume and undertake the
      defense thereof with counsel reasonably satisfactory to such indemnified party,
      and, after notice from the indemnifying party to such indemnified party of
      its
      election so to assume and undertake the defense thereof, the indemnifying party
      shall not be liable to such indemnified party under this Section 6 for any
      legal
      or other professional expenses subsequently incurred by such indemnified party
      in connection with the defense thereof other than reasonable costs of
      investigation and of liaison with counsel so selected; provided, however, that
      if the defendants in any such action include both the indemnified party and
      the
      indemnifying party, and the indemnified party shall have been advised by counsel
      in writing that there are reasonable defenses available to it which are
      different from or additional to those available to the indemnifying party,
      the
      indemnified party shall have the right to select a separate counsel and to
      assume such legal defenses and otherwise to participate in the defense of such
      action, with the reasonable fees and expenses of such separate counsel and
      other
      expenses related to such participation to be reimbursed by the indemnifying
      party; provided, further, that in no event shall the indemnifying party be
      responsible for the fees and expenses of more than one such separate counsel.
      No
      indemnifying party, in the defense of any such claim or litigation against
      an
      indemnified party, shall consent to entry of any judgment or enter into any
      settlement which does not include as an unconditional term thereof the giving
      by
      the claimant or plaintiff to such indemnified party of a release from all
      liability in respect of such claim or litigation, unless such indemnified party
      shall otherwise consent in writing, which consent shall not be unreasonably
      withheld or delayed. An indemnifying party who is not entitled to, or elects
      not
      to, assume the defense of a claim shall not be obligated to pay the fees and
      expenses of more than one counsel for all parties indemnified by such
      indemnifying party with respect to such claim, except as expressly provided
      above.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

       

    

    d. If
      the
      indemnification provided for in this Section 6 is for any reason held by a
      court
      of competent jurisdiction to be unavailable to an indemnified party in respect
      of any claims referred to therein, then the indemnifying party, in lieu of
      indemnifying such indemnified party thereunder, shall contribute to the amount
      paid or payable by such indemnified party as a result of such claims (i) in
      such
      proportion as is appropriate to reflect the relative benefits received by the
      indemnifying party and the indemnified party, or (ii) if the allocation provided
      by clause (i) above is not permitted by applicable law, in such proportion
      as is
      appropriate to reflect not only the relative benefits referred to in clause
      (i)
      above but also the relative fault of the indemnifying party and the indemnified
      party in connection with the action or inaction which resulted in such claims,
      as well as any other relevant equitable considerations. In connection with
      any
      registration of the Company’s securities, the relative benefits received by the
      indemnifying party and the indemnified party shall be deemed to be in the same
      respective proportions that the net proceeds from the offering (before deducting
      expenses) received by the indemnifying party and the indemnified party, in
      each
      case as set forth in the table on the cover page of the applicable prospectus,
      bear to the aggregate public offering price of the securities so offered. The
      relative fault of the indemnifying party and the indemnified party shall be
      determined by reference to, among other things, whether the untrue or alleged
      untrue statement of a material fact or the omission or alleged omission to
      state
      a material fact relates to information supplied by the indemnifying party or
      the
      indemnified party and the parties' relative intent, knowledge, access to
      information and opportunity to correct or prevent such statement or
      omission.

     

    e. The
      indemnity agreements contained herein shall be in addition to (i) any cause
      of
      action or similar right of the indemnified party against the indemnifying party
      or others, and (ii) any liabilities the indemnifying party may be subject to
      pursuant to the law.

     

    7. Reports
      Under the 1934 Act.
      

     

    With
      a
      view to making available to the Buyer the benefits of Rule 144 promulgated
      under
      the 1933 Act or any other similar rule or regulation of the SEC that may at
      any
      time permit the Buyers to sell securities of the Company to the public without
      registration (“Rule
      144”),
      the
      Company agrees to:

     

    a. make
      and
      keep public information available, as those terms are understood and defined
      in
      Rule 144;

     

    b. file
      with
      the SEC in a timely manner all reports and other documents required of the
      Company under the 1933 Act and the 1934 Act so long as the Company remains
      subject to such requirements and the filing of such reports and other documents
      is required for the applicable provisions of Rule 144; and

     

    c. furnish
      to the Buyer so long as Buyer owns Registrable Securities, promptly upon
      request, (i) a written statement by the Company, if true, that it has complied
      with the reporting requirements of Rule 144, the 1933 Act and the 1934 Act,
      (ii)
      a copy of the most recent annual or quarterly report of the Company and such
      other reports and documents so filed by the Company, and (iii) such other
      information as may be reasonably requested to permit the Buyers to sell such
      securities pursuant to Rule 144 without registration.

     

    8. Assignment
      of Registration Rights.
      

     

    The
      rights under this Agreement shall be automatically assignable by the Buyer
      to
      any transferee of all or any portion of such Buyer's Registrable Securities
      if:
      (i) the Buyer agrees in writing with the transferee or assignee to assign such
      rights, and a copy of such agreement is furnished to the Company within a
      reasonable time after such assignment; (ii) the Company is, within a reasonable
      time after such transfer or assignment, furnished with written notice of (a)
      the
      name and address of such transferee or assignee, and (b) the securities with
      respect to which such registration rights are being transferred or assigned;
      (iii) immediately following such transfer or assignment the further disposition
      of such securities by the transferee or assignee is restricted under the 1933
      Act and applicable state securities laws; (iv) at or before the time the Company
      receives the written notice contemplated by clause (ii) of this sentence the
      transferee or assignee agrees in writing with the Company to be bound by all
      of
      the provisions contained herein; and (v) such transfer shall have been made
      in
      accordance with the applicable requirements of the Investment
      Agreement.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

       

    

    9. Amendment
      of Registration Rights.

     

    Provisions
      of this Agreement may be amended and the observance thereof may be waived
      (either generally or in a particular instance and either retroactively or
      prospectively), only with the written consent of the Company and the Required
      Holders. Any amendment or waiver effected in accordance with this Section 10
      shall be binding upon the Buyer and the Company. No such amendment shall be
      effective to the extent that it applies to less than all of the holders of
      the
      Registrable Securities. No consideration shall be offered or paid to any Person
      to amend or consent to a waiver or modification of any provision of any of
      this
      Agreement unless the same consideration also is offered to all of the parties
      to
      this Agreement.

     

    10. Miscellaneous.

     

    a. A
      Person
      is deemed to be a holder of Registrable Securities whenever such Person owns
      or
      is deemed to own of record such Registrable Securities. If the Company receives
      conflicting instructions, notices or elections from two or more Persons with
      respect to the same Registrable Securities, the Company shall act upon the
      basis
      of instructions, notice or election received from the such record owner of
      such
      Registrable Securities.

     

    b. Any
      notices, consents, waivers or other communications required or permitted to
      be
      given under the terms of this Agreement must be in writing and will be deemed
      to
      have been delivered: (i) upon receipt, when delivered personally; (ii) upon
      receipt, when sent by facsimile (provided confirmation of transmission is
      mechanically or electronically generated and kept on file by the sending party);
      or (iii) one Business Day after deposit with a nationally recognized overnight
      delivery service, in each case properly addressed to the party to receive the
      same. The addresses and facsimile numbers for such communications shall
      be:

     

    If
      to
      Company (prior to consummation of the transactions contemplated by the Exchange
      Agreement): 

    

    No.
      999
      Ningqiao Road

    Jinqiao
      Export Processing Zone

    Pudong,
      Shanghai 201206

    People’s
      Republic of China

    Telephone: (86
      21)
      5834 9748

    Facsimile: (86-21)
      5031 0691

    Attention:
       Song
      Jinan

     

    with
      a
      copy to:

     

    Kirkpatrick
      & Lockhart Preston Gates Ellis, LLP

    925
      Fourth Avenue, Suite 2900

    Seattle,
      Washington 98104

    Telephone: 
      (206)
      370-7679

    Facsimile: 
      (206)
      370-6240

    Attention:
       Eric
      Simonson

    

    If
      to the
      Buyer:

    

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

       

    

    Pope
      Investments LLC 

    5100
      Poplar Avenue, Suite 805

    Memphis,
      Tennessee 38137

    Telephone: (901)
      763-4001

    Facsimile: (901)
      763-4229

    Attention: William
      P. Wells, Manager

    

    with
      a
      copy to:

     

    Wells,
      Moore, Simmons & Hubbard, PLLC

    Highland
      Bluff North, Suite 200

    4450
      Old
      Canton Road

    Jackson,
      Mississippi 39211

    Telephone: 
      (601)
      354-5400 

    Facsimile: 
      (601)
      355-5850

    Attention:
       R.
      Nash
      Neyland, Esq.

     

    Written
      confirmation of receipt (A) given by the recipient of such notice, consent,
      waiver or other communication, (B) mechanically or electronically generated
      by
      the sender's facsimile machine containing the time, date, recipient facsimile
      number and an image of the first page of such transmission or (C) provided
      by a
      courier or overnight courier service shall be rebuttable evidence of personal
      service, receipt by facsimile or receipt from a nationally recognized overnight
      delivery service in accordance with clause (i), (ii) or (iii) above,
      respectively.

     

    c. Failure
      of any party to exercise any right or remedy under this Agreement or otherwise,
      or delay by a party in exercising such right or remedy, shall not operate as
      a
      waiver thereof.

     

    d. All
      questions concerning the construction, validity, enforcement and interpretation
      of this Agreement 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. Each party hereby irrevocably submits to the exclusive jurisdiction
      of
      the state and federal courts sitting in the State of Delaware for the
      adjudication of any dispute hereunder or in connection herewith or with any
      transaction contemplated hereby or discussed herein, and hereby irrevocably
      waives, and agrees not to assert in any suit, action or proceeding, any claim
      that it is not personally subject to the jurisdiction of any such court, that
      such suit, action or proceeding is brought in an inconvenient forum or that
      the
      venue of such suit, action or proceeding is improper. Each party hereby
      irrevocably waives personal service of process and consents to process being
      served in any such suit, action or proceeding by mailing a copy thereof to
      such
      party at the address for such notices to it under this Agreement and agrees
      that
      such service shall constitute good and sufficient service of process and notice
      thereof. Nothing contained herein shall be deemed to limit in any way any right
      to serve process in any manner permitted by law. If any provision of this
      Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity
      or unenforceability shall not affect the validity or enforceability of the
      remainder of this Agreement in that jurisdiction or the validity or
      enforceability of any provision of this Agreement in any other jurisdiction.
      EACH
      PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
      REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
      CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION
      CONTEMPLATED HEREBY.

     

    e. This
      Agreement, the other Transaction Documents (as defined in the Investment
      Agreement) and the instruments referenced herein and therein constitute the
      entire agreement among the parties hereto with respect to the subject matter
      hereof and thereof. There are no restrictions, promises, warranties or
      undertakings, other than those set forth or referred to herein and therein.
      This
      Agreement, the other Transaction Documents and the instruments referenced herein
      and therein supersede all prior agreements and understandings among the parties
      hereto with respect to the subject matter hereof and thereof.

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

       

    

    f. Subject
      to the requirements of Section 8, this Agreement shall inure to the benefit
      of
      and be binding upon the permitted successors and assigns of each of the parties
      hereto.

     

    g. The
      headings in this Agreement are for convenience of reference only and shall
      not
      limit or otherwise affect the meaning hereof.

     

    h. This
      Agreement may be executed in identical counterparts, each of which shall be
      deemed an original but all of which shall constitute one and the same agreement.
      This Agreement, once executed by a party, may be delivered to the other party
      hereto by facsimile transmission of a copy of this Agreement bearing the
      signature of the party so delivering this Agreement.

     

    i. Each
      party shall do and perform, or cause to be done and performed, all such further
      acts and things, and shall execute and deliver all such other agreements,
      certificates, instruments and documents, as any other party may reasonably
      request in order to carry out the intent and accomplish the purposes of this
      Agreement and the consummation of the transactions contemplated
      hereby.

     

    j. All
      consents and other determinations required to be made by the Buyer pursuant
      to
      this Agreement shall be made, unless otherwise specified in this Agreement,
      by
      the Required Holders.

     

    k. The
      language used in this Agreement will be deemed to be the language chosen by
      the
      parties to express their mutual intent and no rules of strict construction
      will
      be applied against any party. 

     

    l. This
      Agreement is intended for the benefit of the parties hereto and their respective
      permitted successors and assigns, and is not for the benefit of, nor may any
      provision hereof be enforced by, any other Person.

     

    m. (i)
      The
      Company agrees that any document may be effectively served on it in connection
      with any action, suit or proceeding in the United States by service on its
      registered agent in the State of Delaware. 

     

    (ii)
      Any
      document shall be deemed to have been duly served if marked for the attention
      of
      the agent at its address as set forth in this Section 10(m) or such other
      address in the United States as may be notified to the party wishing to serve
      the document and (a) left at the specified address if its receipt is
      acknowledged in writing; or (b) sent to the specified address by post,
      registered mail return receipt requested. In the case of (a), the document
      will
      be deemed to have been duly served when it is left and signed for. In the case
      of (b), the document shall be deemed to have been duly served when received
      and
      acknowledged.

     

    (iii)
      If
      the Company's agent at any time ceases for any reason to act as such, the
      Company shall promptly appoint a replacement agent having an address for service
      in the United States and shall promptly notify Buyer at such time of the name
      and address of the replacement agent. Failing such appointment and notification,
      the holders of a majority of the Common Shares (as defined in the Investment
      Agreement) at such time shall be entitled by notice to such the Company's to
      appoint a replacement agent to act on the Company's behalf. The provisions
      of
      this Section 10(m) applying to service on an agent apply equally to service
      on a
      replacement agent.

     

    n. Currency.
      As used
      herein, “Dollar”, “US Dollar” and “$” each mean the lawful money of the United
      States.

     

    [Signature
      Page Follows]

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF,
      the
      Buyer and the Company have caused their respective signature page to this
      Registration Rights Agreement to be duly executed as of the date first written
      above.

     

    
      	 	 	 
	 	
              COMPANY:

            
	 	 
	 	
              CHINA-BIOTICS,
                INC.

            
	 
 	 
 	 
 
	 	By:  	/s/
              Song Jinan
	 	
              
Name:  
Song
              Jinan
	 	
              Title:    Chief
                Executive Officer

            

    

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    

    IN
      WITNESS WHEREOF,
      each
      Buyer and the Company have caused their respective signature page to this
      Registration Rights Agreement to be duly executed as of the date first written
      above.

     

    
      	 	 	 
	 	
              
                BUYER:

              

            
	 	 
	 	
              
                POPE
                  INVESTMENT II, LLC

                
                  By:
                    Pope Asset Management, LLC

                  Its:
                    Manager

                

              

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

            

    

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

    

    EXHIBIT
      A

    

    FORM
      OF NOTICE OF EFFECTIVENESS

    OF
      REGISTRATION STATEMENT

     

    Computershare
      Trust Company, Inc.

    350
      Indiana Street, Suite 800

    Golden,
      Colorado 80401

     

    Attention:
      

    

    Re: China-Biotics,
      Inc.

     

    Ladies
      and Gentlemen:

     

    [We
      are][I am] counsel to China-Biotics, Inc., a Delaware corporation (the
“Company”),
      and
      have represented the Company in connection with that certain Investment
      Agreement (the “Investment
      Agreement”)
      entered into by and among the Company and the Buyer named therein (the
“Holder”)
      pursuant to which the Company issued to the Holder promissory notes of the
      Company (“Notes”) convertible into shares of the Company's common stock, par
      value $0.001 per share (the “Common
      Stock”).
      Pursuant to the Investment Agreement, the Company also has entered into a
      Registration Rights Agreement with the Holder (the “Registration
      Rights Agreement”)
      pursuant to which the Company agreed, among other things, to register the
      Registrable Securities (as defined in the Registration Rights Agreement),
      including the shares of Common Stock issuable upon any one or more conversions
      of the Notes, under the Securities Act of 1933, as amended (the “1933
      Act”).
      In
      connection with the Company's obligations under the Registration Rights
      Agreement, on ____________ ___, 200_, the Company filed a Registration Statement
      on Form SB-2 (File No. 333-_____________) (the “Registration
      Statement”)
      with
      the Securities and Exchange Commission (the “SEC”)
      relating to the Registrable Securities which names the Holder as a selling
      stockholder thereunder.

     

    In
      connection with the foregoing, [we][I] advise you that a member of the SEC's
      staff has advised [us][me] by telephone that the SEC has entered an order
      declaring the Registration Statement effective under the 1933 Act at
[ENTER
      TIME OF EFFECTIVENESS]
      on
[ENTER
      DATE OF EFFECTIVENESS]
      and
      [we][I] have no knowledge, after telephonic inquiry of a member of the SEC's
      staff, that any stop order suspending its effectiveness has been issued or
      that
      any proceedings for that purpose are pending before, or threatened by, the
      SEC
      and the Registrable Securities are available for resale under the 1933 Act
      pursuant to the Registration Statement.

     

    This
      letter shall serve as our standing instruction to you that the shares of Common
      Stock are freely transferable by the Holder pursuant to the Registration
      Statement. You need not require further letters from us to effect any future
      legend-free issuance or reissuance of shares of Common Stock to the Holders
      as
      contemplated by the Company's Irrevocable Transfer Agent Instructions dated
      ____________________________2007. 

     

    
      	 	 	 
	 	Very
              truly
              yours,
	 	 
	 	[ISSUER'S
              COUNSEL]
	 
 	 
 	 
 
	 	By:  	 
	 	 	 
	CC: [LIST
              NAMES OF HOLDERS]	 	 

    

     

    
      
        
        

      

      
        15EXECUTION
      COPY

     

    THIS
      NOTE
      HAS BEEN ACQUIRED FOR INVESTMENT PURPOSES ONLY AND MAY NOT BE TRANSFERRED UNTIL
      (i) A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
      “ACT”)
      SHALL
      HAVE BECOME EFFECTIVE WITH RESPECT THERETO OR (ii) RECEIPT BY THE COMPANY OF
      AN
      OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY TO THE EFFECT THAT
      REGISTRATION UNDER THE ACT IS NOT REQUIRED IN CONNECTION WITH SUCH PROPOSED
      TRANSFER NOR IS IN VIOLATION OF ANY APPLICABLE STATE SECURITIES LAWS. THIS
      LEGEND SHALL BE ENDORSED UPON ANY NOTE ISSUED IN EXCHANGE FOR THIS
      NOTE.

     

    CHINA-BIOTICS,
      INC.

     

    4%
      Senior Convertible Promissory Note Due 2010

     

    
      	US$25,000,000	
              December
                11, 2007

            

    

            

    FOR
      VALUE
      RECEIVED, China-Biotics, Inc., a Delaware corporation (the “Company”)
      with
      its principal executive office at No. 999 Ningqiao Road, Jingiao Export
      Processing Zone, Pudong, Shanghai, China 201206, promises to pay to the order
      of
      Pope Investments II LLC (the “Holder”)
      or its
      registered assigns, the principal amount of TWENTY FIVE MILLION U.S. DOLLARS
      (US$25,000,000.00) (the “Principal
      Amount”),
      together
      with accrued interest on the unpaid Principal Amount from time to time
      outstanding from the date hereof until the
      earlier of (i) December 11, 2010 (the “Maturity
      Date”),
      and
      (ii) the date the Holder elects to exercise its right to convert this Note,
      together with accrued and unpaid interest and other fees and obligations
      outstanding under this Note (the “Obligations”),
      in
      accordance with the provisions hereof. This Note may not be prepaid, in whole
      or
      in part, without the prior written consent of the Holder, except as provided
      in
      Section 6. This Note is payable in lawful money of the United States of America
      and in same day funds, without abatement, reduction, deduction, counterclaim,
      recoupment, defense or setoff, to Holder at such account as Holder may
      designate. Interest on the outstanding Principal Amount shall accrue at a rate
      per annum computed in accordance with Section 1 hereof and shall be payable
      to
      the Holder in accordance herewith. 

     

    Unless
      otherwise specifically defined, terms used herein shall have the meaning
      ascribed thereto in the Investment Agreement.

     

    1.    Computation
      of Interest.

     

    A.    Base
      Interest Rate.
      Subject
      to subsections 1B and IC below, until such time that the Holder elects to
      exercise its Conversion Right, the Note shall bear interest at the rate of
      four
      percent (4%) per annum calculated on the basis of the actual number of days
      elapsed and a year of 365 days. Interest shall be payable in cash, quarterly
      in
      arrears, on the last Business Day of each March, June, September and December,
      with the first interest payment date being March 31, 2008. 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    B.    Default
      Interest.
      In the
      event the Note is not repaid on the Maturity Date, or upon the occurrence of
      an
      Event of Default (after expiration of any applicable cure periods), the rate
      of
      interest applicable to the unpaid Principal Amount shall be adjusted,
      retroactively to the Closing Date, to ten percent (10%) per annum (the
“Default
      Rate”),
      whether by acceleration or otherwise.

     

    C.    Additional
      Amounts.
      In the
      event:

     

    (i)    the
      Note is
      not converted in full prior to the Maturity Date, then there shall be payable
      by
      the Company to the Holder an additional six percent (6%)
      step-up in the cash coupon rate on such unconverted principal amount of this
      Note, such interest accruing from the Closing Date until paid in full;
      or

     

    (ii)    of
      the
      automatic conversion of the Note prior to the Maturity Date pursuant to Section
      4C hereof, then the Company shall, on the effective date of such automatic
      conversion, make an additional make-whole payment to the Holder equal to the
      aggregate amount of interest that would have accrued on the Note had the Note
      remained outstanding until the Maturity Date at the rate of ten percent (10%)
      per annum.

     

    2.    Covenants
      of Company.
      The
      Company covenants and agrees that, so long as any portion of the Principal
      Amount, accrued but unpaid interest or other Obligations hereunder remain
      outstanding, it will comply with its covenants and other obligations under
      the
      Investment Agreement and the other Transaction Documents (as defined in the
      Investment Agreement). 

     

    2.    Events
      of Default.

     

    A.    Within
      five (5) business days of the occurrence of any one or more of the following
      Events of Default (after any applicable cure period), the Company shall give
      written notice to the Holder of the Event of Default (the “Default
      Notice”).
      After
      receipt of the Default Notice, if such Event of Default shall continue, the
      Holder may, by written notice (the “Acceleration
      Notice”)
      to the
      Company, declare the entire outstanding Principal Amount and accrued but unpaid
      interest and other Obligations, to be immediately due and payable within ten
      (10) Business Days (the “Default
      Notice Period”).
      If
      within the Default Notice Period the Company cures the Event of Default, the
      Acceleration Notice will be deemed rescinded and the Event of Default will
      be
      deemed to no longer exist and any rights and remedies of Holder pertaining
      to
      such Event of Default will be of no further force or effect.

     

    B.    The
      term
“Event
      of Default”
shall
      mean any of the events set forth in this Section 3B:

     

    (i)    Non-Payment
      of Obligations.
      The
      Company shall default in the payment of the outstanding Principal Amount, and
      accrued but unpaid interest under this Note as and when the same shall become
      due and payable, whether by acceleration or otherwise and such default remains
      uncured for a period of ten (10) days following receipt by the Company of
      written notice from Holder demanding payment of such amount.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

       

    

    (ii)    Non-Performance
      of Covenants.
      The
      Company shall default in the due observance or performance of any covenant
      set
      forth herein or in the Investment Agreement, which default shall continue
      uncured for a period of ten (10) days following receipt by the Company of
      written notice from the Holder of the Company’s failure to perform such
      covenant.

     

    (iii)    Bankruptcy,
      Insolvency, etc. 

     

    (a)    a
      resolution is passed or an order of a court of competent jurisdiction is made
      that the Company be wound up or dissolved otherwise than for the purposes of,
      or
      pursuant to and followed by a consolidation, amalgamation, merger or other
      corporate reorganization (a “Corporate Transaction”), the terms of which have
      previously been approved in writing by the Holder; 

     

    (b)    a
      resolution is passed or an order of a court of competent jurisdiction is made
      for the winding up or dissolution of any Subsidiary of the Company, except
      (i)
      for the purposes of or pursuant to and followed by a Corporate Transaction
      with
      or into the Company or any other Subsidiary, (ii) for the purposes of or
      pursuant to and followed by a Corporate Transaction (other than as described
      in
      (i) above) the terms of which shall have previously been approved by the Holder,
      or (iii) by way of a voluntary winding up or dissolution where there are surplus
      assets in such subsidiary and such surplus assets attributable to the Company
      and/or any other subsidiary are distributed to the Company and/or any such
      other
      subsidiary; 

     

    (c)    a
      trustee, receiver, or other custodian is appointed over the whole or a
      substantial part of the assets or undertaking of the Company or any
      Subsidiary;

     

    (d)    a
      distress, execution or seizure order before judgment is levied or enforced
      upon
      or sued out against the whole or a substantial part of the property of the
      Company or any Subsidiary (as the case may be) and is not discharged within
      sixty (60) days thereof; 

     

    (e)    the
      Company or any Subsidiary makes a public announcement that it is unable to
      pay
      its debts as and when they fall due, or the Company or any Subsidiary shall
      initiate or consent to proceedings relating to itself under any applicable
      bankruptcy, reorganization or insolvency law or make an assignment for the
      benefit of, or enter into any composition with, its creditors; 

     

    (f)    proceedings
      shall have been initiated against the Company or any Subsidiary under any
      applicable bankruptcy, reorganization or insolvency law and such proceedings
      shall not have been discharged or stayed within a period of sixty (60) days;
      or

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

       

    

    (g)    the
      Company shall take any corporate or other action authorizing, or in furtherance
      of, any of the foregoing. 

     

    (iv)    Cross
      Default.
      The
      Company or any Subsidiary shall be in default of any other Indebtedness,
      individually or in the aggregate, in excess of $2 Million
      ($2,000,000).

     

    4.    Conversion
      of Note.

     

    A.    Conversion
      Right; Conversion Price.
      Subject
      to the terms and conditions hereof, at any time prior to the Maturity Date,
      while any portion of the Principal Amount is outstanding under this Note, the
      Holder shall have the right, but not the obligation, to convert all or any
      portion of the outstanding Principal Amount (the “Conversion
      Right”),
      into
      shares of Company Common Stock. All accrued and unpaid interest outstanding
      as
      of the time of conversion shall be paid to Holder in cash. The number of shares
      of Company Common Stock the Holder shall be entitled to receive upon exercise
      of
      a Conversion Right shall be the quotient determined by dividing (i) the
      Principal Amount to be converted, as set forth in the “Conversion Notice”
(defined below) by (ii) the “Conversion
      Price”
of
      $12.00 as
      adjusted in accordance with the provisions of this Note.
      

     

    B.    Mechanics
      of Conversion.
      In
      order to exercise its Conversion Right, the Holder shall deliver written notice,
      in the form attached hereto as Exhibit
      A
      (the
“Conversion
      Notice”),
      of
      the Holder's election to convert this Note and surrender the Note to the
      Company. Holder may convert the Note in part, provided that the minimum amount
      converted must be $2.0 million. If the Note is converted in part only, the
      Company shall execute and deliver to the Holder, at the expense of the Company,
      a new Note in Principal Amount equal to the unconverted portion of the Principal
      Amount. On or before the fifth (5th) Business Day following the date on which
      the Company has received the Conversion Notice, the Company shall transmit
      by
      facsimile an acknowledgment of confirmation of receipt of the Conversion Notice
      to the Holder and the Company's transfer agent (the “Transfer
      Agent”).
      On or
      before the tenth (10th) Business Day following the date on which the Company
      has
      received the Conversion Notice (the “Share
      Delivery Date”),
      the
      Company shall issue and dispatch by international delivery service for delivery
      within 2 Business Days to the address as specified in the Conversion Notice,
      a
      certificate, registered in the Company's share register in the name of the
      Holder or its designee, for the number of shares of Common Stock to which the
      Holder is entitled pursuant to such conversion. Upon delivery of the Conversion
      Notice, the Holder shall be deemed for all corporate purposes to have become
      the
      holder of record of the Note Shares with respect to which this Note has been
      converted, irrespective of the date of delivery of the certificates evidencing
      such Note Shares. No fractional shares of Common Stock are to be issued upon
      the
      conversion of this Note, but rather the number of Note Shares to be issued
      shall
      be rounded to the nearest whole number. The Company shall pay any and all taxes
      which may be payable with respect to the issuance and delivery of Note Shares
      upon any conversion of this Note. 

     

    C.    Automatic
      Conversion.
      If, at
      the end of the Company’s fiscal year ended March 31, 2010, the Company has
      achieved $60 Million ($60,000,000) in Consolidated Net Income (as defined in
      the
      Investment Agreement) (the “Automatic
      Conversion Threshold”)
      in
      such fiscal year, the principal amount outstanding under this Note shall
      automatically convert into shares of Common Stock. The Company shall provide
      the
      Holder with ten (10) days advance notice of such automatic conversion and shall
      provide with such notice a copy of the Company’s consolidated financial
      statements prepared in accordance with U.S. generally accepted accounting
      principles (“GAAP”).
      The
      number of shares of Common Stock the Holder shall be entitled to receive upon
      automatic conversion in accordance with this Section 4(C) shall be the quotient
      determined by dividing (i) the principal amount then outstanding by (ii) the
      Conversion Price, as
      adjusted in accordance with the provisions of this Note.
      

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

       

    

    D.    Company's
      Failure to Timely Deliver Securities.
      If
      within ten (10) Trading Days after the Company's receipt of the facsimile copy
      of a Conversion Notice the Company shall fail to issue and deliver a certificate
      to the Holder and register such Note Shares on the Company's share register
      and
      if on or after such Trading Day the Holder purchases (in an open market
      transaction or otherwise) shares of Common Stock to deliver in satisfaction
      of a
      sale by the Holder of shares of Common Stock issuable upon such Conversion
      that
      the Holder anticipated receiving from the Company (a “Buy-In”),
      then
      the Company shall, within three (3) Business Days after the Holder's request
      promptly honor its obligation to deliver to the Holder a certificate or
      certificates representing such Note Shares and pay cash to the Holder in an
      amount equal to the excess (if any) of an amount equal to the Holder’s total
      purchase price (including brokerage commissions, if any) for the shares of
      Common Stock so purchased (the “Buy-In
      Price”)
      over
      the product of (A) such number of shares of Common Stock, times (B) the Closing
      Bid Price on the date of Conversion.

     

    E.    Disputes.
      In the
      case of a dispute as to the determination of the Conversion Price, the Company
      shall promptly issue to the Holder the number of Note Shares that are not
      disputed and resolve such dispute in accordance with Section 14.

     

    F.    Insufficient
      Authorized Shares.
      If at
      any time while any of the Notes remain outstanding the Company does not have
      a
      sufficient number of authorized and unreserved shares of Common Stock to satisfy
      its obligation to reserve for issuance upon conversion of the Notes at least
      a
      number of shares of Common Stock equal to 150% (the “Required
      Reserve Amount”)
      of the
      number of shares of Common Stock as shall from time to time be necessary to
      effect the conversion of all of the Notes then outstanding (an “Authorized
      Share Failure”),
      then
      the Company shall as promptly as practicable take all action necessary to
      increase the Company's authorized shares of Common Stock to an amount sufficient
      to allow the Company to reserve the Required Reserve Amount for the Notes then
      outstanding. 

     

    G.    Adjustment
      of Conversion Price.
      

     

    i.    Adjustment
      upon Subdivision or Combination of Common Stock.
      If the
      Company at any time on or after the Closing Date subdivides (by any stock split,
      stock dividend, recapitalization or otherwise) one or more classes of its
      outstanding shares of Common Stock into a greater number of shares, the
      Conversion Price in effect immediately prior to such subdivision will be
      proportionately reduced and the number of Note Shares will be proportionately
      increased. If the Company at any time on or after the Closing Date combines
      (by
      combination, reverse stock split or otherwise) one or more classes of its
      outstanding shares of Common Stock into a smaller number of shares, the
      Conversion Price in effect immediately prior to such combination will be
      proportionately increased and the number of Note Shares will be proportionately
      decreased. Any adjustment under this subsection shall become effective at the
      close of business on the date the subdivision or combination becomes
      effective.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

       

    

    ii.    Other
      Events.
      If any
      event occurs of the type contemplated by the foregoing provisions of this
      Section but not expressly provided for by such provisions (including, without
      limitation, the granting of stock appreciation rights, phantom stock rights
      or
      other rights with equity features), then the Company's Board of Directors will
      make an appropriate adjustment in the Conversion Price and the number of Note
      Shares so as to protect the rights of the Holder; provided that no such
      adjustment pursuant to this subsection (3) will increase the Conversion Price
      or
      decrease the number of Note Shares as otherwise determined.

    

     

    5.    Rights
      Upon Distribution of Assets.
      If the
      Company shall declare or make any dividend or other distribution of its assets
      (or rights to acquire its assets) to holders of shares of Common Stock (except
      for those dividends and distributions permitted pursuant to Section 4(t) of
      the
      Investment Agreement), by way of return of capital or otherwise (including,
      without limitation, any distribution of cash, stock or other securities,
      property or options by way of a dividend, spin off, reclassification, corporate
      rearrangement, scheme of arrangement or other similar transaction) (a
“Distribution”),
      at
      any time after the issuance of this Note, then, in each such case:

     

    (A)    any
      Conversion Price in effect immediately prior to the close of business on the
      record date fixed for the determination of holders of shares of Common Stock
      entitled to receive the Distribution shall be reduced, effective as of the
      close
      of business on such record date, to a price determined by multiplying such
      Conversion Price by a fraction of which (i) the numerator shall be the Closing
      Bid Price of the shares of Common Stock on the Trading Day immediately preceding
      such record date minus the value of the Distribution (as determined in good
      faith by the Company's Board of Directors) applicable to one share of shares
      of
      Common Stock, and (ii) the denominator shall be the Closing Bid Price of the
      shares of Common Stock on the Trading Day immediately preceding such record
      date; and

     

    

    (B)    the
      number of
      Note Shares shall be increased to a number of shares equal to the number of
      shares of Common Stock obtainable immediately prior to the close of business
      on
      the record date fixed for the determination of holders of shares of Common
      Stock
      entitled to receive the Distribution multiplied by the reciprocal of the
      fraction set forth in the immediately preceding paragraph (A); provided that
      in
      the event that the Distribution is of shares of Common Stock (or common stock)
      (“Other
      Shares of Common Stock”)
      of a
      company whose common shares are traded on a national securities exchange or
      a
      national automated quotation system, then the Holder may elect to receive a
      Note
      to purchase Other Shares of Common Stock in lieu of an increase in the number
      of
      Note Shares, the terms of which shall be identical to those of this Note, except
      that such Note shall be exercisable into the number of shares of Other Shares
      of
      Common Stock that would have been payable to the Holder pursuant to the
      Distribution had the Holder converted this Note immediately prior to such record
      date and with an aggregate conversion price equal to the product of the amount
      by which the Conversion Price of this Note was decreased with respect to the
      Distribution pursuant to the terms of the immediately preceding paragraph (A)
      and the number of Note Shares calculated in accordance with the immediately
      preceding paragraph (A).

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    6.    
Purchase
      Rights; Fundamental Transactions.
      

     

    (A)    Purchase
      Rights.
      In
      addition to any adjustments pursuant to the sections above, if at any time
      the
      Company grants or issues any Options, Convertible Securities or rights to
      purchase stock, warrants, securities or other property pro rata to the record
      holders of any class of shares of Common Stock other than grants or issuances
      with respect to not more than 1,700,000 shares of Common Stock pursuant to
      an
      Approved Stock Plan (as defined below) (the “Purchase
      Rights”),
      then
      the Holder will be entitled to acquire, upon the terms applicable to such
      Purchase Rights, the aggregate Purchase Rights which the Holder could have
      acquired if the Holder had held the number of shares of Common Stock acquirable
      upon complete exercise of this Note (without regard to any limitations on the
      exercise of this Note, if any) immediately before the date on which a record
      is
      taken for the grant, issuance or sale of such Purchase Rights, or, if no such
      record is taken, the date as of which the record holders of shares of Common
      Stock are to be determined for the grant, issue or sale of such Purchase Rights.
      

     

    (B)    Fundamental
      Transactions.
      The
      Company shall not enter into or be party to a Fundamental Transaction unless
      (i)
      the Successor Entity assumes in writing all of the obligations of the Company
      under this Note and the other Transaction Documents in accordance with the
      provisions of this Section (6)(B) pursuant to written agreements in form and
      substance satisfactory to the Holder and approved by the Holder prior to such
      Fundamental Transaction, including agreements to deliver to each holder of
      Notes
      in exchange for such Notes a security of the Successor Entity evidenced by
      a
      written instrument substantially similar in form and substance to this Note,
      including, without limitation, an adjusted exercise price equal to the value
      for
      the shares of Common Stock reflected by the terms of such Fundamental
      Transaction, and exercisable for a corresponding number of shares of capital
      stock equivalent to the shares of Common Stock acquirable and receivable upon
      exercise of this Note (without regard to any limitations on the exercise of
      this
      Note, if any) prior to such Fundamental Transaction, and satisfactory to the
      Holder and (ii)  the Successor Entity (including its Parent Entity) is a
      publicly traded corporation whose common stock is quoted on or listed for
      trading on an Eligible Market (a “Public
      Successor”).
      Upon
      the occurrence of any Fundamental Transaction, the Successor Entity shall
      succeed to, and be substituted for (so that from and after the date of such
      Fundamental Transaction, the provisions of this Note referring to the “Company”
shall refer instead to the Successor Entity), and may exercise every right
      and
      power of the Company and shall assume all of the obligations of the Company
      under this Note with the same effect as if such Successor Entity had been named
      as the Company herein. Upon consummation of the Fundamental Transaction, the
      Successor Entity shall deliver to the Holder confirmation that there shall
      be
      issued upon conversion of this Note at
      any
      time after the consummation of the Fundamental Transaction, in lieu of the
      shares of the Common Stock (or
      other
      securities, cash, assets or other property) issuable
      upon the conversion of the Note prior
      to
      such Fundamental Transaction,
      such
      shares of the publicly traded Common Stock (or its equivalent) of the Successor
      Entity (including its Parent Entity) which the Holder would have been entitled
      to receive upon the happening of such Fundamental Transaction had this Note
      been
      converted immediately prior to such Fundamental Transaction, as adjusted in
      accordance with the provisions of this Note. In addition to and not in
      substitution for any other rights hereunder, prior to the consummation of any
      Fundamental Transaction pursuant to which holders of shares of Common Stock
      are
      entitled to receive securities or other assets with respect to or in exchange
      for shares of Common Stock (a “Corporate
      Event”),
      the
      Company shall make appropriate provision to insure that the Holder will
      thereafter have the right to receive upon a conversion of this Note at any
      time
      after the consummation of the Fundamental Transaction but prior to the
      Expiration Date, in lieu of the shares of the Common Stock (or other securities,
      cash, assets or other property) issuable upon the conversion of the Note prior
      to such Fundamental Transaction,
      such
      shares of stock, securities, cash, assets or any other property whatsoever
      (including warrants or other purchase or subscription rights) which the Holder
      would have been entitled to receive upon the happening of such Fundamental
      Transaction had the Note been exercised immediately prior to such Fundamental
      Transaction. Provision
      made pursuant to the preceding sentence shall be in a form and substance
      reasonably satisfactory to the Holder. The provisions of this Section shall
      apply similarly and equally to successive Fundamental Transactions and Corporate
      Events and shall be applied without regard to any limitations on the conversion
      of this Note, if any. 

     

    Notwithstanding
      the foregoing and the provisions above, in the event of a Fundamental
      Transaction where the Successor Entity is not a Public Successor, if the Holder
      has not converted the Note in full prior to the consummation of the Fundamental
      Transaction, then the Company may enter into a Fundamental Transaction pursuant
      to which the Holder shall receive, simultaneously with the consummation of
      the
      Fundamental Transaction, in lieu of the note referred to above, cash in the
      amount equal to the value of the remaining unconverted principal of this Note,
      on the date of such consummation, plus a make-whole payment equal to the amount
      set forth in Section 1(C)(ii) of this Note.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

       

    

    7.    
Noncircumvention.
      The
      Company hereby covenants and agrees that the Company will not, by amendment
      of
      its Certificate of Incorporation, Bylaws or through any reorganization, transfer
      of assets, consolidation, merger, scheme of arrangement, dissolution, issue
      or
      sale of securities, or any other voluntary action, avoid or seek to avoid the
      observance or performance of any of the terms of this Note or the Transactional
      Documents, and will at all times in good faith carry out all the provisions
      of
      this Note and the Transactional Documents and take all action as may be required
      to protect the rights of the Holder. Without limiting the generality of the
      foregoing, the Company (i) shall not increase the par value of any shares
      of Common Stock receivable upon the conversion of this Note above the Conversion
      Price then in effect, (ii) shall take all such actions as may be necessary
      or appropriate in order that the Company may validly and legally issue fully
      paid and nonassessable shares of Common Stock upon the conversion of this Note,
      and (iii) shall, so long as any of the Notes are outstanding, take all action
      necessary to reserve and keep available out of its authorized and unissued
      shares of Common Stock, solely for the purpose of effecting the conversion
      of
      the Notes and for effecting the conversion, 150% of the number of shares of
      Common Stock as shall from time to time be necessary to effect the conversion
      of
      all Notes then (without regard to any limitations on exercise, if
      any).

     

    8.    
Holder
      not deemed a Stockholder.
      Except
      as otherwise specifically provided herein, the Holder, solely in such Person's
      capacity as a holder of this Note, shall not be entitled to vote or receive
      dividends or be deemed the holder of share capital of the Company for any
      purpose, nor shall anything contained in this Note be construed to confer upon
      the Holder, solely in such Person's capacity as the Holder of this Note, any
      of
      the rights of a shareholder of the Company or any right to vote, give or
      withhold consent to any corporate action (whether any reorganization, issue
      of
      stock, reclassification of stock, consolidation, merger, conveyance or
      otherwise), receive notice of meetings, receive dividends or subscription
      rights, or otherwise, prior to the issuance to the Holder of the Note Shares
      which such Person is then entitled to receive upon the due conversion of this
      Note. Notwithstanding this Section 8, the Company shall provide the Holder
      with
      copies of the same notices and other information given to the shareholders
      of
      the Company generally, contemporaneously with the giving thereof to the
      shareholders.

     

    9.    
Reissuance
      of Notes.

     

    A    Transfer
      of Note.
      If this
      Note is to be transferred, the Holder shall surrender this Note to the Company,
      whereupon the Company will forthwith issue and deliver upon the order of the
      Holder a new Note, registered as the Holder may request, representing the right
      to the Note being transferred by the Holder and, if less then the entire Note
      is
      being transferred, a new Note to the Holder representing the portion of the
      Note
      not being transferred.

     

    B    Lost,
      Stolen or Mutilated Note.
      Upon
      receipt by the Company of evidence reasonably satisfactory to the Company of
      the
      loss, theft, destruction or mutilation of this Note, and, in the case of loss,
      theft or destruction, of any indemnification undertaking by the Holder to the
      Company in customary form and, in the case of mutilation, upon surrender and
      cancellation of this Note, the Company shall execute and deliver to the Holder
      a
      new Note in substitution the Note so lost, stolen or mutilated.

     

    C    Issuance
      of New Note.
      Whenever the Company is required to issue a new Note pursuant to the terms
      of
      this Note, such new Note (i) shall be of like tenor with this Note, (ii) shall
      represent, as indicated on the face of such new Note, the Principal Amount
      of
      the old Note (or in the case of a new Note being issued pursuant to Section
      9(A), the portion of the Principal Amount designated by the Holder which, when
      added to the Principal Amount the other new Notes issued in connection with
      such
      issuance, does not exceed the aggregate Principal Amount of this Note), (iii)
      shall have an issuance date, as indicated on the face of such new Note, which
      is
      the same as the date hereof, and (iv) shall have the same rights and conditions
      as this Note.

     

    10.    Notices.
      Whenever notice is required to be given under this Note, unless otherwise
      provided herein, such notice shall be given in accordance with the Investment
      Agreement. The Company shall provide the Holder with prompt written notice
      of
      all actions taken pursuant to this Note, including in reasonable detail a
      description of such action and the reason therefore. Without limiting the
      generality of the foregoing, the Company will give written notice to the Holder
      (i) as promptly as reasonably practicable following any adjustment of the
      Conversion Price, setting forth in reasonable detail, and certifying, the
      calculation of such adjustment and (ii) at least fifteen (15) days prior to
      the
      date on which the Company closes its books or takes a record (A) with respect
      to
      any dividend or distribution upon the shares of Common Stock, (B) with respect
      to any grants, issuances or sales of any Options, Convertible Securities or
      rights to purchase stock, Notes, securities or other property to holders of
      shares of Common Stock, except for grants under an Approved Stock Plan, or
      (C)
      for determining rights to vote with respect to any Fundamental Transaction,
      dissolution or liquidation, provided in each case that such information shall
      be
      made known to the public prior to or in conjunction with such notice being
      provided to the Holder.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

       

    

    11.    Amendment
      and Waiver.
      Except
      as otherwise provided herein, the provisions of this Note may be amended and
      the
      Company may take any action herein prohibited, or omit to perform any act herein
      required to be performed by it, only if the Company has obtained the written
      consent of the Holder; provided that no such action may increase the Conversion
      Price, require a conversion, reduce the time period in which the Note may be
      converted, or grant prepayment rights to the Company, in any case without the
      written consent of the Holder. No such amendment shall be effective to the
      extent that it applies to less than all of the holders of the Notes then
      outstanding.

     

    12.    Governing
      Law.
      This
      Note 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.

     

    13.    Construction;
      Headings.
      This
      Note shall be deemed to be jointly drafted by the Company and the Holder and
      shall not be construed against any person as the drafter hereof. The headings
      of
      this Note are for convenience of reference and shall not form part of, or affect
      the interpretation of, this Note.

     

    14.    Dispute
      Resolution.
      In the
      case of a dispute as to the determination of the Conversion Price or the
      arithmetic calculation of the Note Shares, the Company shall submit the disputed
      determinations or arithmetic calculations via facsimile within two Business
      Days
      of receipt of the Conversion Notice giving rise to such dispute, as the case
      may
      be, to the Holder. If the Holder and the Company are unable to agree upon such
      determination or calculation of the Conversion Price or the Note Shares within
      three Business Days of such disputed determination or arithmetic calculation
      being submitted to the Holder, then the Company shall, within two Business
      Days
      submit via facsimile (a) the disputed determination of the Conversion Price
      to
      an independent, reputable investment bank selected by the Company and approved
      by the Required Holder Majority or (b) the disputed arithmetic calculation
      of
      the Note Shares to the Company's independent, outside accountant. The Company
      shall cause at its expense the investment bank or the accountant, as the case
      may be, to perform the determinations or calculations and notify the Company
      and
      the Holder of the results no later than ten (10) Business Days from the time
      it
      receives the disputed determinations or calculations. Such investment bank's
      or
      accountant's determination or calculation, as the case may be, shall be binding
      upon all parties absent demonstrable error.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

       

    

    15.    Remedies,
      Other Obligations, Breaches and Injunctive Relief.
      The
      remedies provided in this Note shall be cumulative and in addition to all other
      remedies available under this Note and the other Transaction Documents, at
      law
      or in equity (including a decree of specific performance and/or other injunctive
      relief), and nothing herein shall limit the right of the Holder right to pursue
      actual damages for any failure by the Company to comply with the terms of this
      Note.  

     

    16.    Transfer.
      This
      Note may be offered for sale, sold, transferred or assigned without the consent
      of the Company, subject to the limitations set forth in the Investment
      Agreement.

     

    17.    Miscellaneous.

     

    A.    Parties
      in Interest.
      All
      covenants, agreements and undertakings in this Note binding upon the Company
      or
      the Holder shall bind and inure to the benefit of the successors and permitted
      assigns of the Company and the Holder, respectively, whether so expressed or
      not.

     

    B.    Costs
      and Expenses.
      Company
      agrees to pay on demand all costs and expenses, if any, including counsel fees
      and expenses, in connection with the enforcement (whether through negotiations,
      legal proceedings or otherwise) of this Note. 

     

    C.    Waiver.
      Except
      as otherwise provided for in this Note, and to the fullest extent permitted
      by
      applicable law, Company waives: (a) presentment, notice, demand and protest,
      and
      notice of presentment, dishonor, intent to accelerate, acceleration, protest,
      default, nonpayment, maturity, release, compromise, settlement, extension or
      renewal of this Note at any time held by Holder on which Company may in any
      way
      be liable, and hereby ratifies and confirms whatever Holder may do in this
      regard; (b) all rights to notice and a hearing prior to Holder’s taking
      possession or control of, or to Holder’s replevy, attachment or levy upon, any
      property, real or personal, tangible or intangible of Company or any bond or
      security which might be required by any court prior to allowing Holder to
      Conversion any of its remedies; and (c) the benefit of all valuation, appraisal
      and exemption laws.

     

    D.    Maximum
      Payments.
      Nothing
      contained herein shall be deemed to establish or require the payment of a rate
      of interest or other charges in excess of the maximum permitted by applicable
      law. In the event that the rate of interest required to be paid or other charges
      hereunder exceed the maximum permitted by such law, any payments in excess
      of
      such maximum shall be credited against amounts owed by the Borrower to the
      Holder and the remainder, if any, refunded to the Borrower.

     

    E.    Certain
      Definitions.
      For
      purposes of this Note, the following terms shall have the following
      meanings:

    

     

    “Approved
      Stock Plan”
means
      any written employee benefit plan which has been approved by the Board of
      Directors of the Company on any such approval date, pursuant to which Options
      may be issued to any employee, officer or director of the Company or its
      Subsidiaries to purchase or otherwise acquire shares of Common Stock at a
      purchase or exercise price which the Board of Directors (or duly appointed
      committee thereof) determines that, as of the date of issuance of such Option,
      is not less than the fair market value of Common Stock of the
      Company.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

       

    

    “Bloomberg”
means
      Bloomberg Financial Markets.

     

    “Business
      Day”
means
      any day other than Saturday, Sunday or other day on which commercial banks
      in
      The City of New York are authorized or required by law to remain
      closed.

     

    “Closing
      Bid Price”
and
      “Closing
      Sale Price”
means,
      for any security as of any date, the last closing bid price and last closing
      trade price, respectively, for such security on the Principal Market, as
      reported by Bloomberg, or, if the Principal Market begins to operate on an
      extended hours basis and does not designate the closing bid price or the closing
      trade price, as the case may be, then the last bid price or last trade price,
      respectively, of such security prior to 4:00 p.m., New York time, as reported
      by
      Bloomberg, or, if the Principal Market is not the principal securities exchange
      or trading market for such security, the last closing bid price or last trade
      price, respectively, of such security on the principal securities exchange
      or
      trading market where such security is listed or traded as reported by Bloomberg,
      or if the foregoing do not apply, the last closing bid price or last trade
      price, respectively, of such security in the over-the-counter market on the
      electronic bulletin board for such security as reported by Bloomberg, or, if
      no
      closing bid price or last trade price, respectively, is reported for such
      security by Bloomberg, the average of the bid prices, or the ask prices,
      respectively, of any market makers for such security as reported in the “pink
      sheets” by Pink Sheets LLC (formerly the National Quotation Bureau, Inc.). If
      the Closing Bid Price or the Closing Sale Price cannot be calculated for a
      security on a particular date on any of the foregoing bases, the Closing Bid
      Price or the Closing Sale Price, as the case may be, of such security on such
      date shall be the fair market value as mutually determined by the Company and
      the Holder. If the Company and the Holder are unable to agree upon the fair
      market value of such security, then such dispute shall be resolved pursuant
      to
      Section 14. All such determinations to be appropriately adjusted for any stock
      dividend, stock split, stock combination or other similar transaction during
      the
      applicable calculation period.

     

    “Common
      Stock”
means
      (i) the Company's shares of Common Stock, par value $0.001 per share, and
      (ii) any share capital into which such Common Stock shall have been changed
      or any share capital resulting from a reclassification of such Common
      Stock.

     

    “Convertible
      Securities”
means
      any stock or securities (other than Options) directly or indirectly convertible
      into or exercisable or exchangeable for shares of Common Stock.

     

    “Dollar”,
      “US
      Dollar”
and
      “$”
each
      mean the lawful money of the United States.

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

       

    

    “Eligible
      Market”
means
      the Principal Market, The New York Stock Exchange, Inc., the American Stock
      Exchange, The NASDAQ Global Market, The NASDAQ Capital Market or The NASDAQ
      Global Select Market.

     

    “Fundamental
      Transaction”
means
      that the Company shall, directly or indirectly, in one or more related
      transactions, (i) consolidate or merge with or into (whether or not the Company
      is the surviving corporation) another Person, or (ii) sell, assign, transfer,
      convey or otherwise dispose of all or substantially all of the properties or
      assets of the Company to another Person, or, or (iii) consummate a stock
      purchase agreement or other business combination (including, without limitation,
      a reorganization, recapitalization, spin-off or scheme of arrangement) with
      another Person whereby such other Person acquires more than the 50% of the
      outstanding shares of Common Stock (not including any shares of Common Stock
      held by the other Person or other Persons making or party to, or associated
      or
      affiliated with the other Persons making or party to, such stock purchase
      agreement or other business combination),.

     

    “Options”
means
      any rights, warrants or options to subscribe for or purchase shares of Common
      Stock or Convertible Securities.

     

    “Parent
      Entity”
of
      a
      Person means an entity that, directly or indirectly, controls the applicable
      Person and whose common stock or equivalent equity security is quoted or listed
      on an Eligible Market, or, if there is more than one such Person or Parent
      Entity, the Person or Parent Entity with the largest public market
      capitalization as of the date of consummation of the Fundamental
      Transaction.

     

    “Person”
means
      an individual, a limited liability company, a partnership, a joint venture,
      a
      corporation, a trust, an unincorporated organization, any other entity and
      a
      government or any department or agency thereof.

     

    “Principal
      Market”
means
      the NASD OTC Bulletin Board.

     

    “Successor
      Entity”
means
      the Person (or, if so elected by the Holder, the Parent Entity) formed by,
      resulting from or surviving any Fundamental Transaction or the Person (or,
      if so
      elected by the Holder, the Parent Entity) with which such Fundamental
      Transaction shall have been entered into.

     

    “Trading
      Day”
means
      any day on which the Common Stock are traded on the Principal Market, or, if
      the
      Principal Market is not the principal trading market for the Common Stock,
      then
      on the principal securities exchange or securities market on which the Common
      Stock are then traded; provided that “Trading Day” shall not include any day on
      which the Common Stock are scheduled to trade on such exchange or market for
      less than 4.5 hours or any day that the Common Stock are suspended from trading
      during the final hour of trading on such exchange or market (or if such exchange
      or market does not designate in advance the closing time of trading on such
      exchange or market, then during the hour ending at 4:00:00 p.m., New York
      time).

     

    [Signature
      Page Follows]

    

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF,
      the
      Company has caused this Note to be duly executed as of the date set out
      above.

     

    
      
        	 	 	 
	 	CHINA-BIOTICS,
                INC.
	 
 	 
 	 
 
	 	By:  	/s/
                Song Jinan
	 	Name:	Song Jinan
	 	Title:	Chief Executive Officer
	 	
                

              
	 	Title 

      

       

    

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    EXHIBIT
      A

    

    CONVERSION
      NOTICE

     

    TO
      BE EXECUTED BY THE REGISTERED HOLDER TO CONVERT THIS

    NOTE
      INTO COMMON STOCK

     

    CHINA-BIOTICS,
      INC.

     

    The
      undersigned holder hereby exercises the right to convert _____________________of
      the Note into shares of Common Stock (“Note
      Shares”)
      of
      China-Biotics, Inc., a Delaware corporation (the “Company”),
      evidenced by the attached Note (the “Note”).
      Capitalized terms used herein and not otherwise defined shall have the
      respective meanings set forth in the Note.

    

    1.
      Delivery of Note Shares. The Company shall deliver to the holder __________
      Note
      Shares in accordance with the terms of the Note.

     

    
      	Date:	_______________
              __, ______
	 	 
	 	
            	
            
	Name
              of Holder
	 	 
	 	 	
            
	By:	 	
            
	 	Name:	
            
	 	Title:	 

    

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

    ACKNOWLEDGMENT

     

    The
      Company hereby acknowledges this Conversion Notice and hereby
      directs______________________________________ to issue the above indicated
      number of shares of Common Stock in accordance with the Transfer Agent
      Instructions dated _____________from the Company and acknowledged and agreed
      to
      by ________________________.

     

    
      
        	 	 	 
	 	CHINA-BIOTICS,
                INC.
	 
 	 
 	 
 
	 	By:  	 
	 	Name:	 
	 	Title:	 

      

       

    

    
      
        
        

      

      
        15

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