Document:

EXH.
        10.5

       

      PLEDGE
        AGREEMENT

       

      PLEDGE
        AGREEMENT (this
        "Agreement"),
        dated
        as of February 12, 2007, made by Lotus Pharmaceutical International, Inc.,
        a
        Nevada corporation (the "Pledgor"),
        in
        favor of S. Michael Rudolph, in his capacity as collateral agent (in such
        capacity, the "Collateral
        Agent")
        for
        the "Buyers" (as defined below) party to the Subscription Agreement, dated
        as of
        February 12, 2007 (as amended, restated or otherwise modified from time to
        time,
        the "Subscription
        Agreement").

       

      WITNESSETH:

       

       

      WHEREAS,
        the Pledgor is the wholly subsidiary of Lotus Pharmaceuticals, Inc., a Nevada
        corporation, (the “Parent”)
        and
        the
        Parent and each party listed as a "Buyer" on the Schedule of Buyers attached
        thereto (collectively, the "Buyers")
        are
        parties to a Subscription Agreement pursuant to which the Parent shall be
        required to sell, and the Buyers shall purchase or have the right to purchase
        the “Notes” (as defined therein);

       

      WHEREAS,
        it is a condition precedent to the Buyers entering into the Subscription
        Agreement that the Pledgor shall have executed and delivered to the Collateral
        Agent for the benefit of itself and the Buyers this Agreement to secure all
        of
        the Parent’s obligations under the Subscription Agreement, the “Notes” (as
        defined therein) issued pursuant thereto (as such Notes may be amended,
        restated, replaced or otherwise modified from time to time in accordance
        ith the
        terms thereof, collectively, the "Notes"),
        and
        the other “Transaction Documents” (as defined in the Subscription Agreement, the
        "Transaction
        Documents");

       

       

      WHEREAS,
        the Pledgor has executed a Security Agreement granting the Collateral Agent
        a
        first priority perfected lien in all its personal property (the "Security
        Agreement");
        

       

       

      WHEREAS,
        the Pledgor is a party to certain agreements consisting of a Consulting Services
        Agreement, an Operating Agreement, an Equity Pledge Agreement, an Option
        Agreement and a Proxy Agreement (collectively, the “Management
        Agreements”)
        by and
        among the Pledgor and Beijing Liang Fang Pharmaceutical Co., Ltd. (“Liang Fang”)
        and the shareholders of Liang Fang, and Beijing En Ze Jia Shi Pharmaceutical
        Co., Ltd. (“En Ze Jia Shi”) and the shareholders of En Ze Jia Shi (collectively,
        the “Beijing Companies”), whereby Pledgor exerts primary control over the
        operations of and is the primary beneficiary of all of the assets of the
        Beijing
        Companies; 

       

      WHEREAS,
        the Pledgor has determined that the execution, delivery and performance of
        this
        Agreement directly benefits, and is in its best interest.

       

      NOW,
        THEREFORE, in consideration of the premises and the agreements herein and
        in
        order to induce the Collateral Agent to perform under the Subscription
        Agreement, the Pledgor agrees with the Collateral Agent as follows:

       

      SECTION
        1. Definitions
        and Rules of Interpretation.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      (a) Definitions.
        Reference is made to the Subscription Agreement, and for a statement of terms
        thereof. All terms used in this Agreement which are defined in the Subscription
        Agreement or in Article 8 or Article 9 of the Uniform Commercial Code (the
        "Code")
        as in
        effect from time to time in the State of New York and which are not otherwise
        defined herein shall have the same meanings herein as set forth therein;
        provided,
        that
        terms used herein which are defined in the Code as in effect in the State
        of New
        York on the date hereof shall continue to have the same meaning notwithstanding
        any replacement or amendment of such statute except as the Collateral Agent
        may
        otherwise determine. In the event that any such term is defined in both the
        Subscription Agreement and the Code, the definition of such term in the
        Subscription Agreement shall control.

       

      (b) Rules
        of Interpretation .
        Except
        as otherwise expressly provided in this Agreement, the following rules of
        interpretation apply to this Agreement: (i) the singular includes the plural
        and
        the plural includes the singular; (ii) “or” and “any” are not exclusive and
“include” and “including” are not limiting; (iii) a reference to any agreement
        or other contract includes permitted supplements and amendments; (iv) a
        reference to a law includes any amendment or modification to such law and
        any
        rules or regulations issued thereunder; (v) a reference to a person includes
        its
        permitted successors and assigns; and (vi) a reference in this Agreement
        to an
        Article, Section, Annex, Exhibit or Schedule is to the Article, Section,
        Annex,
        Exhibit or Schedule of this Agreement.

       

      SECTION
        2. Pledge
        and Grant of Security Interest.
        As
        collateral security for all of the Obligations (as defined in Section
        3
        hereof),
        the Pledgor hereby pledges and assigns and grants to the Collateral Agent
        a
        continuing security interest in, and Lien on, all of the Pledgor’s right, title
        and interest in and to the following (collectively, the "Pledged
        Collateral"):

       

      (a) the
        assets and equity interests contemplated by the Management Agreements with
        the
        Beijing Companies; 

       

      (b) all
        present, and all future, issued and outstanding shares of capital stock,
        or
        other equity or investment securities of, or partnership, membership, or
        joint
        venture interests in, the Beijing Companies, whether now owned or hereafter
        acquired by the Pledgor and whether or not evidenced or represented by any
        stock
        certificate, certificated security or other instrument, together with the
        certificates representing such equity interests, all options and other rights,
        contractual or otherwise, in respect thereof and all dividends, distributions,
        cash, instruments, investment property and any other property (including,
        but
        not limited to, any stock dividend and any distribution in connection with
        a
        stock split) from time to time received, receivable or otherwise distributed
        in
        respect of or in exchange for any or all of the foregoing and all cash and
        noncash proceeds thereof (collectively, the "Pledged
        Shares");

       

      (c) all
        present and future increases, profits, combinations, reclassifications, and
        substitutes and replacements for all or part of the foregoing Collateral
        heretofore described;

       

      (d) all
        investment property, financial assets, securities, capital stock, other equity
        interests, stock options and commodity contracts of the Pledgor, all notes,
        debentures, bonds, promissory notes or other evidences of indebtedness payable
        or owing to the Pledgor, and all other assets now or hereafter received or
        receivable with respect to the foregoing;

       

      
        
          
          

        

        
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      (e) all
        securities entitlements of the Pledgor in any and all of the foregoing;
        and

       

      (f) all
        proceeds (including proceeds of proceeds) of any and all of the
        foregoing;

       

      in
        each
        case, whether now owned or hereafter acquired by the Pledgor and howsoever
        its
        interest therein may arise or appear (whether by ownership, security interest,
        Lien, claim or otherwise).

       

      SECTION
        3. Security
        for Obligations.
        The
        security interest created hereby in the Pledged Collateral constitutes
        continuing collateral security for all of the following obligations, whether
        now
        existing or hereafter incurred (the "Obligations"):

       

      (a) the
        payment by the Pledgor, as and when due and payable (by scheduled maturity,
        required prepayment, acceleration, demand or otherwise), of all amounts from
        time to time owing by it in respect of the Subscription Agreement, the Notes
        and
        the other Transaction Documents, including, without limitation, (A) all
        principal of and interest on the Notes (including, without limitation, all
        interest that accrues after the commencement of any bankruptcy proceeding
        of the
        Pledgor, whether or not the payment of such interest is unenforceable or
        is not
        allowable due to the existence of such bankruptcy proceeding), and (B) all
        fees,
        commissions, expense reimbursements, indemnifications and all other amounts
        due
        or to become due under any of the Transaction Documents; and

       

      (b) the
        due
        performance and observance by the Pledgor of all of its other obligations
        from
        time to time existing in respect of any of the Transaction Documents for
        so long
        as the Notes are outstanding.

       

      SECTION
        4. Delivery
        of the Pledged Collateral.

       

      (a) All
        certificates currently representing the Pledged Shares shall be delivered
        to the
        Collateral Agent on or prior to the execution and delivery of this Agreement.
        All other promissory notes, certificates and instruments constituting Pledged
        Collateral from time to time or required to be pledged to the Collateral
        Agent
        pursuant to the terms of this Agreement or the Subscription Agreement (the
        "Additional
        Collateral")
        shall
        be delivered to the Collateral Agent promptly upon receipt thereof by or
        on
        behalf of the Pledgor. All such promissory notes, certificates and instruments
        shall be held by the Collateral Agent pursuant hereto and shall be delivered
        in
        suitable form for transfer by delivery or shall be accompanied by duly executed
        instruments of transfer or assignment or undated stock powers executed in
        blank,
        all in form and substance reasonably satisfactory to the Collateral Agent.
        If
        any Pledged Collateral consists of uncertificated securities, unless the
        immediately following sentence is applicable thereto, the Pledgor shall cause
        the Collateral Agent (or its designated custodian, nominee or other designee) to
        become the registered holder thereof, or cause each issuer of such securities
        to
        agree that it will comply with instructions originated by the Collateral
        Agent
        (or its designated custodian, nominee or other designee) with respect to
        such
        securities without further consent by the Pledgor. If any Pledged Collateral
        consists of securities entitlements, the Pledgor shall transfer such securities
        entitlements to the Collateral Agent (or its designated custodian, nominee
        or
        other designee) or cause the applicable securities intermediary to agree
        that it
        will comply with entitlement orders by the Collateral Agent (or its designated
        custodian, nominee or other designee) without further consent by the
        Pledgor.

       

      
        
          
          

        

        
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      (b) Promptly
        upon the receipt by the Pledgor of any Additional Collateral, a Pledge
        Amendment, duly executed by the Pledgor, in substantially the form of
Annex
        I
        hereto
        (a "Pledge
        Amendment"),
        shall
        be delivered to the Collateral Agent, in respect of the Additional Collateral
        which is or are to be pledged pursuant to this Agreement and the Subscription
        Agreement, which Pledge Amendment shall from and after delivery thereof
        constitute part of Schedules
        I
        and
II
        hereto.
        The Pledgor hereby authorizes the Collateral Agent to attach each Pledge
        Amendment to this Agreement and agrees that all promissory notes, certificates
        or instruments listed on any Pledge Amendment shall for all purposes hereunder
        constitute Pledged Collateral and the Pledgor shall be deemed upon delivery
        thereof to have made the representations and warranties set forth in
Section
        5
        with
        respect to such Additional Collateral.

       

      (c) If
        the
        Pledgor shall receive, by virtue of the Pledgor’s being or having been an owner
        of any Pledged Collateral, any (i) stock certificate (including, without
        limitation, any certificate representing a stock dividend or distribution
        in
        connection with any increase or reduction of capital, reclassification, merger,
        consolidation, sale of assets, combination of shares, stock split, spin-off
        or
        split-off), promissory note or other instrument, (ii) option or right, whether
        as an addition to, substitution for, or in exchange for, any Pledged Collateral,
        or otherwise, (iii) dividends payable in cash (except such dividends
        permitted to be retained by the Pledgor pursuant to Section
        7
        hereof)
        or in securities or other property or (iv) dividends, distributions, cash,
        instruments, investment property and other property in connection with a
        partial
        or total liquidation or dissolution or in connection with a reduction of
        capital, capital surplus or paid-in surplus, the Pledgor shall receive such
        stock certificate, promissory note, instrument, option, right, payment or
        distribution in trust for the benefit of the Collateral Agent, shall segregate
        it from the Pledgor’s other property and shall deliver it forthwith to the
        Collateral Agent in the exact form received, with any necessary endorsement
        and/or appropriate stock powers duly executed in blank, to be held by the
        Collateral Agent as Pledged Collateral and as further collateral security
        for
        the Obligations.

       

      SECTION
        5. Representations
        and Warranties.
        The
        Pledgor represents and warrants as follows:

       

      (a) The
        Pledgor (i) is a corporation duly organized, validly existing and in good
        standing under the laws of the state or jurisdiction of its organization,
        and
        (ii) has all requisite power and authority to execute, deliver and perform
        this
        Agreement.

       

      (b) The
        execution, delivery and performance by the Pledgor of this Agreement (i)
        have
        been duly authorized by all necessary action, (ii) do not and will not
        contravene its charter or bylaws, its limited liability company or operating
        agreement or its certificate of partnership or partnership agreement, as
        applicable, or any applicable law or any contractual restriction binding
        on or
        affecting it or any of its properties, and (iii) do not and will not result
        in
        or require the creation of any Lien upon or with respect to any of its
        properties other than pursuant to this Agreement.

       

      
        
          
          

        

        
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      (c) The
        issuer of the Pledged Shares set forth in Schedule
        I
        hereto
        are the Pledgor’s only Subsidiary existing on the date hereof. The Pledged
        Shares have been duly authorized and validly issued, are fully paid and
        nonassessable and the holder thereof is not entitled to any preemptive first
        refusal or other similar rights. Except as noted in Schedule
        I
        hereto,
        the Pledged Shares constitute 100% of the issued shares of capital stock,
        partnership interests or membership or other equity interests, as applicable,
        of
        the Subsidiary. All other shares of stock constituting Pledged Collateral
        will
        be, when issued, duly authorized and validly issued, fully paid and
        nonassessable.

       

      (d) The
        Pledgor is and will be at all times the legal and beneficial owner of the
        Pledged Collateral free and clear of any Lien, security interest, option
        or
        other charge or encumbrance except for the security interest and Lien created
        by
        this Agreement or any Permitted Liens.

       

      (e) The
        exercise by the Collateral Agent of any of its rights and remedies hereunder
        will not contravene any law or any contractual restriction binding on or
        affecting the Pledgor or any of the properties of the Pledgor and will not
        result in or require the creation of any Lien, security interest or other
        charge
        or encumbrance upon or with respect to any of the properties of the Pledgor
        other than pursuant to this Agreement and the other Transaction
        Documents.

       

      (f) No
        authorization or approval or other action by, and no notice to or filing
        with,
        any governmental authority is required to be obtained or made by the Pledgor
        for
        (i) the due execution, delivery and performance by the Pledgor of this
        Agreement, (ii) the grant by the Pledgor, or the perfection, of the security
        interest and Lien purported to be created hereby in the Pledged Collateral
        or
        (iii) the exercise by the Collateral Agent of any of its rights and remedies
        hereunder, except as may be required in connection with any sale of any Pledged
        Collateral by laws affecting the offering and sale of securities
        generally.

       

      (g) This
        Agreement creates a valid security interest and Lien in favor of the Collateral
        Agent in the Pledged Collateral, as security for the Obligations. The Collateral
        Agent’s having possession of the promissory notes evidencing the Pledged Debt,
        the certificates representing the Pledged Shares and all other certificates,
        instruments and cash constituting Pledged Collateral from time to time results
        in the perfection of such security interest and Lien. Such security interest
        and
        Lien is, or in the case of Pledged Collateral in which the Pledgor obtains
        rights after the date hereof, will be, a perfected Lien, subject only to
        the
        Permitted Liens. All action necessary or desirable to perfect and protect
        such
        security interest and Lien has been duly taken, except for the Collateral
        Agent’s having possession of certificates, instruments and cash constituting
        Pledged Collateral after the date hereof.

       

      SECTION
        6. Covenants
        as to the Pledged Collateral.
        So long
        as any Obligations shall remain outstanding and the Subscription Agreement
        and
        the other Transaction Documents shall not have been terminated, the Pledgor
        will, unless the Collateral Agent shall otherwise consent in
        writing:

       

      
        
          
          

        

        
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      (a) keep
        adequate records concerning the Pledged Collateral and permit the Collateral
        Agent, or any designees or representatives thereof at any time or from time
        to
        time to examine and make copies of and abstracts from such records;

       

      (b) at
        the
        Pledgor’s expense, promptly deliver to the Collateral Agent a copy of each
        material notice or other material communication received by the Pledgor in
        respect of the Pledged Collateral;

       

      (c) at
        the
        Pledgor’s expense, defend the Collateral Agent’s right, title and security
        interest in and to the Pledged Collateral against the claims of any
        Person;

       

      (d) at
        the
        Pledgor’s expense, at any time and from time to time, promptly execute and
        deliver all further instruments and documents and take all further action
        that
        may be necessary or desirable or that the Collateral Agent may reasonably
        request in order to (i) perfect and protect, or maintain the perfection of,
        the security interest and Lien purported to be created hereby, (ii) enable
        the
        Collateral Agent to exercise and enforce its rights and remedies hereunder
        in
        respect of the Pledged Collateral or (iii) otherwise effect the purposes
        of this
        Agreement, including, without limitation, delivering to the Collateral Agent
        irrevocable proxies in respect of the Pledged Collateral;

       

      (e) not
        sell,
        assign (by operation of law or otherwise), exchange or otherwise dispose
        of any
        Pledged Collateral or any interest therein except as expressly permitted
        by the
        Subscription Agreement;

       

      (f) not
        create or suffer to exist any Lien, upon or with respect to any Pledged
        Collateral except for the Lien created hereby or for any Permitted
        Lien;

       

      (g) not
        make
        or consent to any amendment or other modification or waiver with respect
        to any
        Pledged Collateral or enter into any agreement or permit to exist any
        restriction with respect to any Pledged Collateral other than pursuant to
        the
        Transaction Documents;

       

      (h) not
        issue
        any additional stock certificate, certificated security or other instrument
        to
        evidence or represent any shares of capital stock, any partnership interest
        or
        membership interest described in Schedule
        I
        hereto;
        and

       

      (i) not
        take
        or fail to take any action which would in any manner impair the validity
        or
        enforceability of the Collateral Agent’s security interest in and Lien on any
        Pledged Collateral. 

       

      SECTION
        7. Voting
        Rights, Dividends, Etc. in Respect of the Pledged Collateral.

       

      (a) So
        long
        as no Event of Default (as defined in the Notes) (an "Event
        of Default") shall
        have occurred and be continuing:

       

      (i) the
        Pledgor may exercise any and all voting and other consensual rights pertaining
        to any Pledged Collateral for any purpose not inconsistent with the terms
        of
        this Agreement, the Subscription Agreement or the other Transaction Documents;
        provided,
        however,
        that
        (A) Pledgor will not exercise nor refrain from exercising any such right,
        as the case may be, if the Collateral Agent gives it notice that, in the
        Collateral Agent’s judgment, such action (or inaction) is reasonably likely to
        have a Material Adverse Effect and (B) the Pledgor will give the Collateral
        Agent at least five (5) Business Days’ notice of the manner in which it intends
        to exercise, or the reasons for refraining from exercising, any such right
        which
        is reasonably likely to have a Material Adverse Effect;

       

      
        
          
          

        

        
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      (ii) the
        Pledgor may receive and retain any and all dividends, interest or other
        distributions paid in respect of the Pledged Collateral to the extent permitted
        by the Subscription Agreement; provided,
        however,
        that
        any and all (A) dividends and interest paid or payable other than in cash
        in
        respect of, and instruments and other property received, receivable or otherwise
        distributed in respect of or in exchange for, any Pledged Collateral, (B)
        dividends and other distributions paid or payable in cash in respect of any
        Pledged Collateral in connection with a partial or total liquidation or
        dissolution or in connection with a reduction of capital, capital surplus or
        paid-in surplus, and (C) cash paid, payable or otherwise distributed in
        redemption of, or in exchange for, any Pledged Collateral, together with
        any
        dividend, distribution, interest or other payment which at the time of such
        dividend, distribution, interest or other payment was not permitted by the
        Subscription Agreement, shall be, and shall forthwith be delivered to the
        Collateral Agent to hold as, Pledged Collateral and shall, if received by
        the
        Pledgor, be received in trust for the benefit of the Collateral Agent, shall
        be
        segregated from the other property or funds of the Pledgor, and shall be
        forthwith delivered to the Collateral Agent in the exact form received with
        any
        necessary indorsement and/or appropriate stock powers duly executed in blank,
        to
        be held by the Collateral Agent as Pledged Collateral and as further collateral
        security for the Obligations; and

       

      (iii) the
        Collateral Agent will execute and deliver (or cause to be executed and
        delivered) to the Pledgor all such proxies and other instruments as the Pledgor
        may reasonably request for the purpose of enabling the Pledgor to exercise
        the
        voting and other rights which it is entitled to exercise pursuant to paragraph
        (i) of this Section
        7(a)
        and to
        receive the dividends, distributions, interest and other payments which it
        is
        authorized to receive and retain pursuant to paragraph (ii) of this Section
        7(a),
        in each
        case, to the extent that the Collateral Agent has possession of such Pledged
        Collateral.

       

      (b) Upon
        the
        occurrence and during the continuance of an Event of Default:

       

      (i) all
        rights of the Pledgor to exercise the voting and other consensual rights
        which
        it would otherwise be entitled to exercise pursuant to paragraph (i) of
        subsection (a) of this Section
        7,
        and to
        receive the dividends, distributions, interest and other payments which it
        would
        otherwise be authorized to receive and retain pursuant to paragraph (ii) of
        subsection (a) of this Section 7,
        shall
        cease, and all such rights shall thereupon become vested in the Collateral
        Agent
        which shall thereupon have the sole right to exercise such voting and other
        consensual rights and to receive and hold as Pledged Collateral such dividends,
        distributions, interest and other payments;

       

      
        
          
          

        

        
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      (ii) without
        limiting the generality of the foregoing, the Collateral Agent may at its
        option
        exercise any and all rights of conversion, exchange, subscription or any
        other
        rights, privileges or options pertaining to any of the Pledged Collateral
        as if
        it were the absolute owner thereof, including, without limitation, the right
        to
        exchange, in its discretion, any and all of the Pledged Collateral upon the
        merger, consolidation, reorganization, recapitalization or other adjustment
        of
        any issuer of the Pledged Collateral or upon the exercise by any issuer of
        the
        Pledged Collateral of any right, privilege or option pertaining to any Pledged
        Collateral, and, in connection therewith, to deposit and deliver any and
        all of
        the Pledged Collateral with any committee, depository, transfer Collateral
        Agent, registrar or other designated Collateral Agent upon such terms and
        conditions as it may determine; and 

       

      (iii) all
        dividends, distributions, interest and other payments which are received
        by the
        Pledgor contrary to the provisions of paragraph (i) of this Section
        7(b)
        shall be
        received in trust for the benefit of the Collateral Agent, shall be segregated
        from other funds of the Pledgor, and shall be forthwith paid over to the
        Collateral Agent as Pledged Collateral in the exact form received with any
        necessary indorsement and/or appropriate stock powers duly executed in blank,
        to
        be held by the Collateral Agent as Pledged Collateral and as further collateral
        security for the Obligations.

       

      SECTION
        8. Additional
        Provisions Concerning the Pledged Collateral.

       

      (a) The
        Pledgor hereby (i) authorizes the Collateral Agent to file one or more financing
        or continuation statements, and amendments thereto, relating to the Pledged
        Collateral, without the signature of the Pledgor where permitted by law,
        (ii)
        ratifies such authorization to the extent that the Collateral Agent has filed
        any such financing or continuation statements, or amendments thereto, without
        the signature of the Pledgor prior to the date hereof and (iii) authorizes
        the
        Collateral Agent to execute any agreements, instruments or other documents
        in
        the Pledgor’s name and to file such agreements, instruments or other documents
        that are related to the security interest and Lien of the Collageral Agent
        in
        the Pledged Collateral or as provided under Article 8 or Article 9 of the
        UCC in
        any appropriate filing office. 

       

      (b) The
        Pledgor hereby irrevocably appoints the Collateral Agent as its attorney-in-fact
        and proxy, with full authority in the place and stead and in its name or
        otherwise, from time to time in the Collateral Agent’s discretion to take any
        action and to execute any instrument which the Collateral Agent may deem
        necessary or advisable to accomplish the purposes of this Agreement (subject
        to
        the rights of the Pledgor under Section
        7(a)
        hereof),
        including, without limitation, to receive, indorse and collect all instruments
        made payable to the Pledgor representing any dividend, interest payment or
        other
        distribution in respect of any Pledged Collateral and to give full discharge
        for
        the same. This power is coupled with an interest and is irrevocable until
        the
        termination of this Agreement in accordance with Section 13(e)
        hereof.

       

      (c) If
        the
        Pledgor fails to perform any agreement or obligation contained herein, the
        Collateral Agent itself may perform, or cause performance of, such agreement
        or
        obligation, and the expenses of the Collateral Agent incurred in connection
        therewith shall be payable by the Pledgor pursuant to Section
        10
        hereof
        and shall be secured by the Pledged Collateral.

       

      
        
          
          

        

        
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      (d) Other
        than the exercise of reasonable care to assure the safe custody of the Pledged
        Collateral while held hereunder, the Collateral Agent shall have no duty
        or
        liability to preserve rights pertaining thereto and shall be relieved of
        all
        responsibility for the Pledged Collateral upon surrendering it or tendering
        surrender of it to the Pledgor. The Collateral Agent shall be deemed to have
        exercised reasonable care in the custody and preservation of the Pledged
        Collateral in its possession if the Pledged Collateral is accorded treatment
        substantially equal to that which the Collateral Agent accords its own property,
        it being understood that the Collateral Agent shall not have responsibility
        for
        (i) ascertaining or taking action with respect to calls, conversions, exchanges,
        maturities, tenders or other matters relating to any Pledged Collateral,
        whether
        or not the Collateral Agent has or is deemed to have knowledge of such matters,
        or (ii) taking any necessary steps to preserve rights against any parties
        with
        respect to any Pledged Collateral.

       

      (e) The
        powers conferred on the Collateral Agent hereunder are solely to protect
        its
        interest in the Pledged Collateral and shall not impose any duty upon it
        to
        exercise any such powers. Except for the safe custody of any Pledged Collateral
        in its possession and the accounting for monies actually received by it
        hereunder, the Collateral Agent shall have no duty as to any Pledged Collateral
        or as to the taking of any necessary steps to preserve rights against prior
        parties or any other rights pertaining to any Pledged Collateral.

       

      (f) Upon
        the
        occurrence and during the continuation of any Default or Event of Default,
        the
        Collateral Agent may at any time in its discretion (i) without notice to
        the
        Pledgor, transfer or register in the name of the Collateral Agent or any
        of its
        nominees any or all of the Pledged Collateral, subject only to the revocable
        rights of the Pledgor under Section
        7(a)
        hereof,
        and (ii) exchange certificates or instruments constituting Pledged Collateral
        for certificates or instruments of smaller or larger denominations.

       

      SECTION
        9. Remedies
        Upon Default.
        If any
        Event of Default shall have occurred and be continuing:

       

      (a) The
        Collateral Agent may exercise in respect of the Pledged Collateral, in addition
        to other rights and remedies provided for herein or otherwise available to
        it,
        all of the rights and remedies of a secured party on default under the Code
        then
        in effect in the State of New York; and without limiting the generality of
        the
        foregoing and without notice except as specified below, sell the Pledged
        Collateral or any part thereof in one or more parcels at public or private
        sale,
        at any exchange or broker’s board or elsewhere, at such price or prices and on
        such other terms as the Collateral Agent may deem commercially reasonable.
        The
        Pledgor agrees that, to the extent notice of sale shall be required by law,
        at
        least ten (10) days’ notice to the Pledgor of the time and place of any public
        sale or the time after which any private sale is to be made shall constitute
        reasonable notification. The Collateral Agent shall not be obligated to make
        any
        sale of Pledged Collateral regardless of notice of sale having been given.
        The
        Collateral Agent may adjourn any public or private sale from time to time
        by
        announcement at the time and place fixed therefor, and such sale may, without
        further notice, be made at the time and place to which it was so
        adjourned.

       

      
        
          
          

        

        
          -9-

          
            

          

        

        
          
          

        

      

      (b) The
        Pledgor recognizes that it may be impracticable to effect a public sale of
        all
        or any part of the Pledged Shares or any other securities constituting Pledged
        Collateral and that the Collateral Agent may, therefore, determine to make
        one
        or more private sales of any such securities to a restricted group of purchasers
        who will be obligated to agree, among other things, to acquire such securities
        for its own account, for investment and not with a view to the distribution
        or
        resale thereof. The Pledgor acknowledges that any such private sale may be
        at
        prices and on terms less favorable to the seller than the prices and other
        terms
        which might have been obtained at a public sale and, notwithstanding the
        foregoing, agrees that such private sales shall be deemed to have been made
        in a
        commercially reasonable manner and that the Collateral Agent shall have no
        obligation to delay sale of any such securities for the period of time necessary
        to permit the issuer of such securities to register such securities for public
        sale under the Securities Act of 1933, as amended (the "Securities
        Act").
        The
        Pledgor further acknowledges and agrees that any offer to sell such securities
        which has been (i) publicly advertised on a bona fide basis in a newspaper
        or
        other publication of general circulation in the financial community of New
        York,
        New York (to the extent that such an offer may be so advertised without prior
        registration under the Securities Act) or (ii) made privately in the manner
        described above to not less than fifteen (15) bona fide
        offerees
        shall be deemed to involve a “public disposition” for the purposes of Section
        9-610 of the Code (or any successor or similar, applicable statutory provision)
        as then in effect in the State of New York, notwithstanding that such sale
        may
        not constitute a “public offering” under the Securities Act, and that the
        Collateral Agent may, in such event, bid for the purchase of such
        securities.

       

      (c) Any
        cash
        held by the Collateral Agent as Pledged Collateral and all cash proceeds
        received by the Collateral Agent in respect of any sale of, collection from,
        or
        other realization upon, all or any part of the Pledged Collateral may, in
        the
        discretion of the Collateral Agent, be held by the Collateral Agent as
        collateral for, and/or then or at any time thereafter applied (after payment
        of
        any amounts payable to the Collateral Agent pursuant to Section
        10
        hereof)
        in whole or in part by the Collateral Agent against, all or any part of the
        Obligations in such order as the Collateral Agent shall elect consistent
        with
        the provisions of the Subscription Agreement. 

       

      (d) In
        the
        event that the proceeds of any such sale, collection or realization are
        insufficient to pay all amounts to which the Collateral Agent is legally
        entitled, the Pledgor shall be liable for the deficiency, together with interest
        thereon at the highest rate specified in the Subscription Agreement for interest
        on overdue principal thereof or such other rate as shall be fixed by applicable
        law, together with the costs of collection and the reasonable fees, costs
        and
        expenses of any attorneys employed by the Collateral Agent to collect such
        deficiency.

       

      
        
          
          

        

        
          -10-

          
            

          

        

        
          
          

        

      

      SECTION
        10. Indemnity
        and Expenses.

       

      (a) The
        Pledgor hereby agrees to indemnify and hold the Collateral Agent (and all
        of its
        officers, directors, employees, attorneys, consultants) harmless from and
        against any and all claims, damages, losses, liabilities, obligations,
        penalties, fees, costs and expenses (including, without limitation, reasonable
        legal fees and disbursements of counsel) to the extent that they arise out
        of or
        otherwise result from this Agreement (including, without limitation, enforcement
        of this Agreement), except claims, losses or liabilities arising or resulting
        directly from such Person’s gross negligence or willful misconduct as determined
        by a court of competent jurisdiction.

       

      (b) The
        Pledgor shall be obligated for, and will upon demand pay to the Collateral
        Agent
        the reasonable amount of any and all out-of-pocket costs and expenses, including
        the reasonable fees and disbursements of the Collateral Agent’s counsel and of
        any experts which the Collateral Agent may incur in connection with (i) the
        preparation, negotiation, execution, delivery, recordation, administration,
        amendment, waiver or other modification or termination of this Agreement,
        (ii)
        the custody, preservation, use or operation of, or the sale of, collection
        from,
        or other realization upon, any Pledged Collateral, (iii) the exercise or
        enforcement of any of the rights of the Collateral Agent hereunder, or (iv)
        the
        failure by the Pledgor to perform or observe any of the provisions
        hereof.

       

      SECTION
        11. Notices,
        Etc.
        All
        notices and other communications provided for hereunder shall be in writing
        and
        shall be mailed (by certified mail, postage prepaid and return receipt
        requested), sent by Federal Express or other recognized courier service (return
        receipt requested), telecopied or delivered, if to the Pledgor, to it at
        the
        address specified the Subscription Agreement or if to the Collateral Agent,
        to
        it at the address specified in the Subscription Agreement; or as to either
        such
        Person at such other address as shall be designated by such Person in a written
        notice to such other Person complying as to delivery with the terms of this
        Section
        11.
        All
        such notices and other communications shall be effective (i) if sent by
        certified mail, postage prepaid, return receipt requested, when received
        or
        three (3) Business Days after mailing, whichever first occurs, (ii) if
        telecopied, when transmitted and confirmation is received, provided
        same is
        on a Business Day and, if not, on the next Business Day or (iii) if delivered
        or
        sent by Federal Express or other recognized courier service (return receipt
        requested), upon delivery, provided
        same is
        on a Business Day and, if not, on the next Business Day. 

       

      SECTION
        12. Security
        Interest Absolute.
        All
        rights of the Collateral Agent, all Liens and all obligations of the Pledgor
        hereunder shall be absolute and unconditional irrespective of: (i) any lack
        of
        validity or enforceability of the Subscription Agreement or any other agreement
        or instrument relating thereto, (ii) any change in the time, manner or place
        of
        payment of, or in any other term in respect of, all or any of the Obligations,
        or any other amendment or waiver of or consent to any departure from the
        Subscription Agreement or any other Transaction Document, (iii) any exchange
        or
        release of, or non-perfection of any Lien on any Collateral, or any release
        or
        amendment or waiver of or consent to departure from any guaranty, for all
        or any
        of the Obligations, or (iv) any other circumstance which might otherwise
        constitute a defense available to, or a discharge of, the Pledgor in respect
        of
        the Obligations (other than the payment in full of the Obligations). All
        authorizations and agencies contained herein with respect to any of the Pledged
        Collateral are irrevocable and powers coupled with an interest.

       

      
        
          
          

        

        
          -11-

          
            

          

        

        
          
          

        

      

      SECTION
        13. Miscellaneous.

       

      (a) No
        amendment of any provision of this Agreement shall be effective unless it
        is in
        writing and signed by the Pledgor and the Collateral Agent, and no waiver
        of any
        provision of this Agreement, and no consent to any departure by the Pledgor
        therefrom, shall be effective unless it is in writing and signed by the
        Collateral Agent, and then such waiver or consent shall be effective only
        in the
        specific instance and for the specific purpose for which given.

       

      (b) No
        failure on the part of the Collateral Agent to exercise, and no delay in
        exercising, any right hereunder or under any other Transaction Document shall
        operate as a waiver thereof; nor shall any single or partial exercise of
        any
        such right preclude any other or further exercise thereof or the exercise
        of any
        other right. The rights and remedies of the Collateral Agent provided herein
        and
        in the other Transaction Documents are cumulative and are in addition to,
        and
        not exclusive of, any rights or remedies provided by law. The rights of the
        Collateral Agent under any Transaction Document against any party thereto
        are
        not conditional or contingent on any attempt by the Collateral Agent to exercise
        any of its rights under any other Transaction Document against such party
        or
        against any other Person.

       

      (c) Any
        provision of this Agreement which is prohibited or unenforceable in any
        jurisdiction shall, as to such jurisdiction, be ineffective to the extent
        of
        such prohibition or unenforceability without invalidating the remaining portions
        hereof or affecting the validity or enforceability of such provision in any
        other jurisdiction. 

       

      (d) This
        Agreement shall create a continuing security interest in and Lien on the
        Pledged
        Collateral and shall (i) remain in full force and effect until the termination
        of this Agreement in accordance with Section 13 (e) hereof and (ii) be
        binding on the Pledgor and their its successors and assigns and shall inure,
        together with all rights and remedies of the Collateral Agent, to the benefit
        of
        the Collateral Agent and its successors, transferees and assigns. Without
        limiting the generality of clause (ii) of the immediately preceding sentence,
        the Collateral Agent may assign or otherwise transfer its rights and obligations
        under this Agreement and any other Transaction Document to any other Person
        pursuant to the terms of the Subscription Agreement, and such other Person
        shall
        thereupon become vested with all of the benefits in respect thereof granted
        to
        the Collateral Agent herein or otherwise. Upon any such assignment or transfer,
        all references in this Agreement to the Collateral Agent shall mean the assignee
        of the Collateral Agent. None of the rights or obligations of the Pledgor
        hereunder may be assigned or otherwise transferred without the prior written
        consent of the Collateral Agent, and any such assignment or transfer shall
        be
        null and void.

       

      (e) Notwithstanding
        anything to the contrary in this Agreement, (i) this Agreement (along with
        all
        powers of attorney granted hereunder) and the security interests and Lien
        created hereby shall terminate and all rights to the Pledged Collateral shall
        revert to the Pledgor upon the repayment in full and/or complete conversion
        to
        equity securities of the Pledgor of all indebtedness obligations owed by
        the
        Pledgor to the Collateral Agent under the Notes (including, without limitation,
        all principal, interest and fees related to the Notes), and (ii) the Collateral
        Agent will, upon the Pledgor’s request and at the Pledgor’s expense, (A) return
        to the Pledgor such of the Pledged Collateral (to the extent delivered to
        the
        Collateral Agent) as shall not have been sold or otherwise disposed of or
        applied pursuant to the terms hereof, and (B) execute and deliver to the
        Pledgor, without recourse, representation or warranty, such documents as
        the
        Pledgor shall reasonably request to evidence such termination.

       

      
        
          
          

        

        
          -12-

          
            

          

        

        
          
          

        

      

      (f) The
        internal laws, and not the laws of conflicts, of New York shall govern the
        enforceability and validity of this agreement, the construction of its terms
        and
        the interpretation of the rights and duties of the parties, except as required
        by mandatory provisions of law and except to the extent that the validity
        and
        perfection or the perfection and the effect of perfection or non-perfection
        of
        the security interest and Lien created hereby, or remedies hereunder, in
        respect
        of any particular Pledged Collateral are governed by the law of a jurisdiction
        other than the State of New York.

       

      (g) Each
        party to this Agreement hereby irrevocably and unconditionally submits, for
        itself and its property, to the exclusive jurisdiction of the United States
        District Court for the Central District of New York sitting in Manhattan
        or the
        commercial division, civil branch of the supreme court of the State of New
        York
        sitting in New York county in connection with any suit, action or proceeding
        directly or indirectly arising out of, under or in connection with the
        transaction documents, the conversion shares, or the transactions contemplated
        thereby. No party to this Agreement may move to (i) transfer any such suit,
        action or proceeding brought in such New York court or federal court to another
        jurisdiction, (ii) consolidate any such suit, action or proceeding brought
        in
        such New York court or federal court with a suit, action or proceeding in
        another jurisdiction or (iii) dismiss any such suit, action or proceeding
        brought in such New York court or federal court for the purpose of bringing
        the
        same in another jurisdiction. Each party to this Agreement agrees that a
        final
        judgment in any such suit, action or proceeding shall be conclusive and may
        be
        enforced in any other jurisdiction by suit on the judgment or in any other
        manner provided by law. Each party to this Agreement hereby irrevocably and
        unconditionally waives, to the fullest extent it may legally and effectively
        do
        so, any objection which it may now or hereafter have to the laying of venue
        of
        any suit, action or proceeding arising out of or relating to the transaction
        documents, the shares or the conversion shares in any New York court sitting
        in
        the county of New York or any federal court sitting in the southern district
        of
        New York. Each party to this agreement hereby consents to the service of
        process
        in any such suit, action or proceeding by notice in the manner specified
        in
Section
        11.

       

      (h) The
        Pledgor irrevocably consents to the service of process of any of the aforesaid
        courts in any such action, suit or proceeding by the mailing of copies thereof
        by registered or certified mail (or any substantially similar form of mail),
        postage prepaid, to the Pledgor at its address provided herein, such service
        to
        become effective when received or 10 days after such mailing, whichever first
        occurs.

       

      (i) Nothing
        contained herein shall affect the right of the Collateral Agent to serve
        process
        in any other manner permitted by law or commence legal proceedings or otherwise
        proceed against the Pledgor or
        any
        property of the Pledgor in
        any
        other jurisdiction.

       

      
        
          
          

        

        
          -13-

          
            

          

        

        
          
          

        

      

      (j) The
        Pledgor irrevocably and unconditionally waives any right it may have to claim
        or
        recover in any legal action, suit or proceeding referred to in this Section
        any
        special, exemplary, punitive or consequential damages.

       

      (k) EACH
        PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
        LAW,
        ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY SUIT, ACTION OR
        PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION
        WITH
        THIS AGREEMENT OR OTHER TRANSACTION DOCUMENTS.

       

      (l) The
        headings herein are for convenience only, do not constitute a part of this
        Agreement and shall not be deemed to limit or affect any of the provisions
        hereof. 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.

       

      (m) This
        Agreement may be executed in any number of counterparts and by different
        parties
        hereto in separate counterparts, each of which shall be deemed to be an
        original, but all of which taken together shall constitute one and the same
        agreement.

       

      

      [Signature
        Page Follows]

       

      
        
          
          

        

        
          -14-

          
            

          

        

        
          
          

        

         

      

      In
        Witness Whereof,
        the
        Pledgor has caused this Agreement to be executed and delivered by its officer
        thereunto duly authorized, as of the date first above written.

       

      

      
        	 	
                LOTUS
                  PHARMACEUTICAL INTERNATIONAL, INC.

                

                

                By: /s/
                  Liu Zhong
                  Yi                                
                  

                Name:
                  Liu Zhong Yi

                Title: Chief
                  Executive Officer

              
	 	 
	
                ACCEPTED
                  BY:

                

                S.
                  MICHAEL RUDOLPH,

                as
                  Collateral Agent

                 

                

                /s/
                  S. Michael
                  Rudolph                         
                  

                Address:
                  

              	 
	 	 
	
                APPROVED
                  BY:

                 

                BEIJING
                  LIANG FANG 

                PHARMACEUTICAL
                  CO., LTD.

                 

                By:  /s/
                  Liu Zhong
                  Yi                          
                  

                Name:
                  Liu Zhong Yi

                Title: Chief
                  Executive Officer

              	
                 

                 

                BEIJING
                  EN ZE JIA SHI 

                PHARMACEUTICAL
                  CO., LTD.

                 

                 

                By:  /s/
                  Liu Zhong
                  Yi                          
                    

                Name:
                  Liu Zhong Yi

                Title: Chief
                  Executive Officer

              
	 	 
	
                SHAREHOLDERS
                  OF BEIJING LIANG FANG PHARMACEUTICAL CO., LTD.

                 

                 

                /s/
                  Liu Zhong
                  Yi                                     
                  

                Liu
                  Zhong Yi

                 

                 

                /s/
                  Song
                  Zhenghong                              
                  

                Song
                  Zhenghong

                 

                 

                /s/
                  Xian Wen
                  Li                                    
                  

                Xian
                  Wen Li

              	
                SHAREHOLDERS
                  OF BEIJING EN ZE JIA SHI PHARMACEUTICAL CO., LTD.

                 

                 

                /s/
                  Liu Zhong
                  Y                                     
                  

                Liu
                  Zhong Yi

                 

                 

                /s/
                  Song
                  Zhenghong                           
                  

                Song
                  Zhenghong 

              

      

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

       

      SCHEDULE
        I TO PLEDGE AGREEMENT

       

      Pledged
        Shares

       

      
        	
                Pledgor

              	
                 

                Name
                  of Issuer

              	
                Number
                  of 

                Shares

              	
                 

                %
                  of Shares

              	
                Certificate

                No.(s)

              
	
                Lotus
                  Pharmaceutical 

                International,
                  Inc.

              	
                 

                Beijing
                  Liang Fang

                 Pharmaceutical
                  Co., Ltd.

              	 	 	 
	 	 	 	 	 
	
                Lotus
                  Pharmaceutical 

                International,
                  Inc.

              	
                Beijing
                  En Ze Jia Shi

                 Pharmaceutical
                  Co., Ltd.

              	 	 	 

      

       

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      ANNEX
        I

       

      TO

       

      PLEDGE
        AGREEMENT

       

      

       

      PLEDGE
        AMENDMENT

       

      This
        Pledge Amendment, dated ●, 20●, is delivered pursuant to Section
        4
        of the
        Pledge Agreement referred to below. The undersigned hereby agrees that this
        Pledge Amendment may be attached to the Pledge Agreement, dated as of January
        12, 2007, made by Lotus Pharmaceutical International, Inc. in favor of S.
        Michael Rudolph, as Collateral Agent for the Buyers, (the "Collateral
        Agent")
        as it
        may heretofore have been or hereafter may be amended or otherwise modified
        or
        supplemented from time to time and that the promissory notes [and/or] shares
        or
        other equity interests listed on this Pledge Amendment shall be hereby pledged
        and assigned to the Collateral Agent and become part of the Pledged Collateral
        referred to in such Pledge Agreement and shall secure all of the obligations
        referred to in such Pledge Agreement.

       

      Pledged
        Shares

       

      
        	
                Pledgor

              	
                Name
                  of Issuer

              	
                Number
                  of Shares or 

                Other
                  Equity Interests

              	
                Class

              	
                Certificate
                  No(s)

              
	 	 	 	 	 

      

       

       

      
 

      
        	 	
                LOTUS
                  PHARMACEUTICAL INTERNATIONAL, INC.

                

                By:       
                    

                  Name:

                  Title:EXH.
      10.6

     

    GUARANTY
      

     

    
      	1.	
              Identification.

            

    

    

    This
      Guaranty (the "Guaranty"), dated as of February 12, 2007, is entered into by
      Lotus Pharmaceutical International, Inc., a Nevada corporation (and wholly
      owned
      subsidiary of Lotus Pharmaceuticals, Inc., a Nevada corporation), En
      Ze Jia
      Shi Pharmaceutical CO., Ltd., a People’s Republic of China corporation, Liang
      Fang Pharmaceutical CO., Ltd., a People’s Republic of China
      corporation
      (each a
“Guarantor” or “Guarantors”), for the benefit of the parties identified on
      Schedule A hereto (each a “Lender” and collectively, the
      "Lenders").

    

    
      	2.	
              Recitals.

            

    

    

    2.1 Guarantor
      Lotus Pharmaceutical International, Inc. is a wholly owned subsidiary of Lotus
      Pharmaceuticals, Inc., a Nevada corporation (“Parent”). En
      Ze Jia
      Shi Pharmaceutical CO., Ltd., and Liang Fang Pharmaceutical CO., Ltd., are
      both
      entities formed in the People’s Republic of China as corporations and are not
      direct subsidiaries of Parent but have entered contracts assigning all or
      substantially all of their respective revenue to Lotus
      Pharmaceutical International, Inc. The Lenders have made, are making and will
      be
      making loans to Parent (the "Loans"). Guarantors, and each of them, will obtain
      substantial benefit from the proceeds of the Loans.

    

    2.2 The
      Loans
      are and will be evidenced by certain promissory Notes (collectively, “Note” or
“Notes") issued by Parent on, about or after the date of this Guaranty pursuant
      to subscription agreements dated at or about the date hereof (“Subscription
      Agreements”). The Notes are further identified on Schedule A hereto and were and
      will be executed by Parent as “Borrower” or “Debtor” for the benefit of each
      Lender as the “Holder” or “Lender” thereof.

    

    2.3 In
      consideration of the Loans made and to be made by Lenders to Parent and for
      other good and valuable consideration, and as security for the performance
      by
      Parent of its obligations under the Notes and as security for the repayment
      of
      the Loans and all other sums due from Debtor to Lenders arising under the Notes,
      Subscription Agreements and any other agreement between or among them relating
      to the foregoing (collectively, the "Obligations"), Guarantors, for good and
      valuable consideration, receipt of which is acknowledged, each has agreed to
      enter into this Guaranty. Obligations include all future advances by Lenders
      to
      Parent made by Lenders pursuant to the Subscription Agreement. 

    

    2.4 The
      Lenders have appointed S. Michael Rudolph as Collateral Agent pursuant to that
      certain Collateral Agent Agreement dated at or about the date of this Agreement
      (“Collateral Agent Agreement”), among the Lenders and Collateral
      Agent.

    

    
      	3.	
              Guaranty.

            

    

    

    3.1 Guaranty.
      Guarantors, and each of them, hereby unconditionally and irrevocably guarantees,
      jointly and severally with any other Guarantor, the punctual payment,
      performance and observance when due, whether at stated maturity, by acceleration
      or otherwise, of all of the Obligations now or hereafter existing, whether
      for
      principal, interest (including, without limitation, all interest that accrues
      after the commencement of any insolvency, bankruptcy or reorganization of
      Parent, whether or not constituting an allowed claim in such proceeding), fees,
      commissions, expense reimbursements, liquidated damages, indemnifications or
      otherwise (such obligations, to the extent not paid by Parent being the
“Guaranteed Obligations”), and agrees to pay any and all reasonable costs, fees
      and expenses (including reasonable counsel fees and expenses) incurred by
      Collateral Agent and the Lenders in enforcing any rights under the guaranty
      set
      forth herein. Without limiting the generality of the foregoing, each Guarantor’s
      liability shall extend to all amounts that constitute part of the Guaranteed
      Obligations and would be owed by Parent to Collateral Agent and the Lenders,
      but
      for the fact that they are unenforceable or not allowable due to the existence
      of an insolvency, bankruptcy or reorganization involving Parent.

     

    
      
         

      

      
        1

        
          

        

      

      
         

      

    

    3.2 Guaranty
      Absolute.
      Guarantor and each of them undersigned hereby guarantees that the Guaranteed
      Obligations will be paid strictly in accordance with the terms of the Notes,
      regardless of any law, regulation or order now or hereafter in effect in any
      jurisdiction affecting any of such terms or the rights of Collateral Agent
      or
      the Lenders with respect thereto. The obligations of each Guarantor under this
      Guaranty are independent of the Guaranteed Obligations, and a separate action
      or
      actions may be brought and prosecuted against Guarantor to enforce such
      obligations, irrespective of whether any action is brought against Parent or
      any
      other Guarantor or whether Parent or any other Guarantor is joined in any such
      action or actions. The liability of each Guarantor under this Guaranty
      constitutes a primary obligation, and not a contract of surety, and to the
      extent permitted by law, shall be irrevocable, absolute and unconditional
      irrespective of, and Guarantors hereby irrevocably waive any defenses they
      may
      now or hereafter have in any way relating to, any or all of the
      following:

     

    (a)
      any
      lack of validity or enforceability of the Notes or any agreement or instrument
      relating thereto;

     

    (b)
      any
      change in the time, manner or place of payment of, or in any other term of,
      all
      or any of the Guaranteed Obligations, or any other amendment or waiver of or
      any
      consent to departure from the Notes, including, without limitation, any increase
      in the Guaranteed Obligations resulting from the extension of additional credit
      to Parent or otherwise;

     

    (c)
      any
      taking, exchange, release, subordination or non-perfection of any Collateral,
      or
      any taking, release or amendment or waiver of or consent to departure from
      any
      other guaranty, for all or any of the Guaranteed Obligations;

     

    (d)
      any
      change, restructuring or termination of the corporate, limited liability company
      or partnership structure or existence of Parent; or

     

    (e)
      any
      other circumstance (including, without limitation, any statute of limitations)
      or any existence of or reliance on any representation by Collateral Agent or
      the
      Lenders that might otherwise constitute a defense available to, or a discharge
      of, Parent or any other guarantor or surety.

     

    This
      Guaranty shall continue to be effective or be reinstated, as the case may be,
      if
      at any time any payment of any of the Guaranteed Obligations is rescinded or
      must otherwise be returned by Collateral Agent, the Lenders or any other entity
      upon the insolvency, bankruptcy or reorganization of the Parent or otherwise
      (and whether as a result of any demand, settlement, litigation or otherwise),
      all as though such payment had not been made.

     

    3.3 Waiver.
      Guarantors hereby waive promptness, diligence, notice of acceptance and any
      other notice with respect to any of the Guaranteed Obligations and this Guaranty
      and any requirement that Collateral Agent or the Lenders or exhaust any right
      or
      take any action against any Borrower or any other person or entity or any
      Collateral. Guarantor acknowledges that it will receive direct and indirect
      benefits from the financing arrangements contemplated herein and that the waiver
      set forth in this Section 3.3
      is
      knowingly made in contemplation of such benefits. Guarantor hereby waives any
      right to revoke this Guaranty, and acknowledges that this Guaranty is continuing
      in nature and applies to all Guaranteed Obligations, whether existing now or
      in
      the future.

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    3.4
      Continuing
      Guaranty; Assignments.
      This
      Guaranty is a continuing guaranty and shall (a) remain in full force and effect
      until the later of the indefeasible cash payment in full of the Guaranteed
      Obligations and all other amounts payable under this Guaranty, the Subscription
      Agreements and Notes, (b) be binding upon Guarantor, its successors and assigns
      and (c) inure to the benefit of and be enforceable by the Lenders and their
      successors, pledgees, transferees and assigns. Without limiting the generality
      of the foregoing clause (c), any Lender may pledge, assign or otherwise
      transfer all or any portion of its rights and obligations under this Guaranty
      (including, without limitation, all or any portion of its Notes owing to it)
      to
      any other Person, and such other Person shall thereupon become vested with
      all
      the benefits in respect thereof granted such Collateral Agent or Lender herein
      or otherwise.

     

    3.5
      Subrogation.
      No
      Guarantor will exercise any rights that it may now or hereafter acquire against
      the Collateral Agent or any Lender or other Guarantor (if any) that arise from
      the existence, payment, performance or enforcement of such Guarantor’s
      obligations under this Guaranty, including, without limitation, any right of
      subrogation, reimbursement, exoneration, contribution or indemnification,
      whether or not such claim, remedy or right arises in equity or under contract,
      statute or common law, including, without limitation, the right to take or
      receive from the Collateral Agent or any Lender or other Guarantor (if any),
      directly or indirectly, in cash or other property or by set-off or in any other
      manner, payment or security solely on account of such claim, remedy or right,
      unless and until all of the Guaranteed Obligations and all other amounts payable
      under this Guaranty shall have been indefeasibly paid in full in cash.

     

    3.6
      Maximum
      Obligations.
      Notwithstanding any provision herein contained to the contrary, Guarantors’
liability with respect to the Obligations shall be limited to an amount not
      to
      exceed, as of any date of determination, the amount that could be claimed by
      Lenders from any Guarantor without rendering such claim voidable or avoidable
      under Section 548 of the Bankruptcy Code or under any applicable state Uniform
      Fraudulent Transfer Act, Uniform Fraudulent Conveyance Act or similar statute
      or
      common law.

     

    
      	4.	
              Miscellaneous.
                

            

    

     

    4.1 Expenses.
      Guarantors and each of them jointly and severally shall pay to the Lenders,
      on
      demand, the amount of any and all reasonable expenses, including, without
      limitation, attorneys' fees, legal expenses and brokers' fees, which the Lenders
      may incur in connection with exercise or enforcement of any the rights, remedies
      or powers of the Lenders hereunder or with respect to any or all of the
      Obligations.

    

    4.2 Waivers,
      Amendment and Remedies.
      No
      course of dealing by the Lenders and no failure by the Lenders to exercise,
      or
      delay by the Lender in exercising, any right, remedy or power hereunder shall
      operate as a waiver thereof, and no single or partial exercise thereof shall
      preclude any other or further exercise thereof or the exercise of any other
      right, remedy or power of the Lenders. No amendment, modification or waiver
      of
      any provision of this Guaranty and no consent to any departure by Guarantor
      therefrom, shall, in any event, be effective unless contained in a writing
      signed by the Majority in Interest (as such term is defined in the Collateral
      Agent Agreement) or the Lender or Lenders against whom such amendment,
      modification or waiver is sought, and then such waiver or consent shall be
      effective only in the specific instance and for the specific purpose for which
      given. The rights, remedies and powers of the Lenders, not only hereunder,
      but
      also under any instruments and agreements evidencing or securing the Obligations
      and under applicable law are cumulative, and may be exercised by the Lenders
      from time to time in such order as the Lenders may elect.

    

    4.3 Notices.
      All
      notices or other communications given or made hereunder shall be in writing
      and
      shall be personally delivered or deemed delivered the first business day after
      being faxed (provided that a copy is delivered by first class mail) to the
      party
      to receive the same at its address set forth below or to such other address
      as
      either party shall hereafter give to the other by notice duly made under this
      Section:

    

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    To
      Parent
      and

    
      	
            	Guarantors,
              to:	
              Lotus
                Pharmaceuticals, Inc.

            

    

    Boca
      Corporate Plaza

    7900
      Glades Road, Suite 420

    Boca
      Raton, FL 33434

    Attn:
      Mr.
      Zhongyi Liu,
      CEO

    Fax:
      (561) 988-9890

    

    With
      a
      copy by telecopier only to:

    

    Casale
      Alliance, LLP

    1158
      26th
      Street,
      Suite 325

    Santa
      Monica, CA 90403

    Fax:
      (310) 919-2810

    

     

    
      	
            	To
              Lenders:	
              To
                the addresses and telecopier numbers set

            

    

    forth
      on
      Schedule A 

    

    

    
      	
            	TotheCollateralAgent:	
              S.
                Michael Rudolph

            

    

    600
      Montgomery Street, 44th Floor

    San
      Francisco, CA 94111

    Fax:
      (415) 981-5301

    

    

    If
      to
      Parent, Guarantor, Lender or

    Collateral
      Agent, with a copy by telecopier only to:

    

    Grushko
      & Mittman, P.C.

    551
      Fifth
      Avenue, Suite 1601

    New
      York,
      New York 10176

    Fax:
      (212) 697-3575

    

    Any
      party
      may change its address by written notice in accordance with this
      paragraph.

    

    4.4 Term;
      Binding Effect.
      This
      Guaranty shall (a) remain in full force and effect until payment and
      satisfaction in full of all of the Obligations; (b) be binding upon Guarantor
      and its successors and permitted assigns; and (c) inure to the benefit of the
      Lenders and their respective successors and assigns. All the rights and benefits
      granted by Guarantors to the Collateral Agent and Lenders hereunder and other
      agreements and documents delivered in connection therewith are deemed granted
      to
      both the Collateral Agent and Lenders. Upon the payment in full of the
      Obligations, (i) this Guaranty shall terminate and (ii) the Lenders will, upon
      Guarantor's request and at Guarantor's expense, execute and deliver to Guarantor
      such documents as Guarantor shall reasonably request to evidence such
      termination, all without any representation, warranty or recourse
      whatsoever.

    

    4.5 Captions.
      The
      captions of Paragraphs, Articles and Sections in this Guaranty have been
      included for convenience of reference only, and shall not define or limit the
      provisions hereof and have no legal or other significance
      whatsoever.

    

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

    4.6 Governing
      Law; Venue; Severability.
      This
      Guaranty shall be governed by and construed in accordance with the laws of
      the
      State of New York without regard to principles of conflicts or choice of law.
      Any legal action or proceeding against Guarantors with respect to this Guaranty
      may be brought in the courts of the State of New York or of the United States
      for the Southern District of New York, and, by execution and delivery of this
      Guaranty, Guarantor hereby irrevocably accepts for itself and in respect of
      its
      property, generally and unconditionally, the jurisdiction of the aforesaid
      courts. Guarantors hereby irrevocably waive any objection which they may now
      or
      hereafter have to the laying of venue of any of the aforesaid actions or
      proceedings arising out of or in connection with this Guaranty brought in the
      aforesaid courts and hereby further irrevocably waives and agrees not to plead
      or claim in any such court that any such action or proceeding brought in any
      such court has been brought in an inconvenient forum. If any provision of this
      Guaranty, or the application thereof to any person or circumstance, is held
      invalid, such invalidity shall not affect any other provisions which can be
      given effect without the invalid provision or application, and to this end
      the
      provisions hereof shall be severable and the remaining, valid provisions shall
      remain of full force and effect.

    

    4.7 Satisfaction
      of Obligations.
      For all
      purposes of this Guaranty, the payment in full of the Obligations shall be
      conclusively deemed to have occurred when either the Obligations have been
      indefeasibly paid in cash or all outstanding Notes have been converted to common
      stock pursuant to the terms of the Notes and the Subscription
      Agreements.

    

    4.8 Counterparts/Execution.
      This
      Agreement may be executed in any number of counterparts and by the different
      signatories hereto on separate counterparts, each of which, when so executed,
      shall be deemed an original, but all such counterparts shall constitute but
      one
      and the same instrument. This Agreement may be executed by facsimile signature
      and delivered by facsimile transmission.

    

    

    

    [THE
      BALANCE OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]

     

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

       

    

    IN
      WITNESS WHEREOF, the
      undersigned have executed and delivered this Guaranty, as of the date first
      written above.

    

    “GUARANTOR”      

    LOTUS
      PHARMACEUTICAL INTERNATIONAL, INC.    

     

    a
      Nevada
      corporation   

    

    /s/
      Zhongyi Liu   

    By:
      Zhongyi Liu  

    

    Its:
      CEO  

    

    
      	“GUARANTOR”	“GUARANTOR”
	EN ZE JIA SHI PHARMACEUTICAL CO.,
              LTD.	LIANG FAN PHARMACEUTICAL CO.,
              LTD.
	a People’s Republic of China
              corporation	a People’s Republic of China corporation
              
	 	 
	 	 
	/s/ Zhongyi
              Liu                
              	/s/ Zhongyi
              Liu                      
              
	By: Zhongyi Liu	By: Zhongyi Liu
	Its: CEO	Its: CEO
	 	 
	 	 
	
               APPROVED
                BY
                “LENDERS”:

            
	 	 
	 	 
	LONGVIEW FUND, L.P.	ALPHA CAPITAL ANSTALT
	 	 
	 	 
	By:_/s/
              S. Michael
              Rudolph                      
              	By:_/s/
              Kondrad
              Ackerman                            
              
	 	 
	Print Name of Signator: S.
              Michael Rudolph	Print Name of Signator: Konrad
              Ackerman            
              

    

    

     

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

    

    

    

    This
      Guaranty Agreement may be signed by facsimile signature
      and

    delivered
      by confirmed facsimile transmission.

     

     

     

     

    
 

    
      
         

      

      
        7

        
          

        

      

      
         

      

       

    

    SCHEDULE
      A TO GUARANTY

    

    

    
      	
              LENDER

            	
              PRINCIPAL
                AMOUNT OF NOTE TO BE ISSUED ON CLOSING DATE

            
	
              LONGVIEW
                FUND, L.P.

              600
                Montgomery Street, 44th Floor

              San
                Francisco, CA 94111

              Fax:
                (415) 981-5301

            	
              $2,750,000.00

            
	
              ALPHA
                CAPITAL ANSTALT

              Pradafant
                7

              9490
                Furstentums

              Vaduz,
                Lichtenstein

              Fax:
                011-42-32323196

            	
              $250,000.00

            
	
              TOTAL

            	
              $3,000,000.00

            

    

    

     

    
      
         

      

      
        8

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