Document:

Unassociated Document

    Exhibit
      10.1

     

    SECURITIES
      EXCHANGE AGREEMENT

    

    This
      Securities Exchange Agreement (the “Agreement”)
      is
      entered into as of March 22, 2006 by and among China-Biotics, Inc., a Delaware
      corporation (“China-Biotics”),
      Sinosmart Group Inc., a British Virgin Islands corporation (the “Company”),
      and
      the persons and entities listed on Exhibit
      A
      hereto
      (“Company
      Shareholders”).

     

    RECITALS

     

    A. The
      Company has authorized share capital consisting of $50,000, divided into 50,000
      ordinary shares, $1.00 par value (the “Ordinary
      Shares”),
      of
      which 14,287 Ordinary Shares are issued and outstanding as of the date of this
      Agreement (the “Company
      Shares”).
      The
      Company Shareholders currently own all of the issued and outstanding Ordinary
      Shares.

     

    B. The
      Company Shareholders wish to sell, and China-Biotics wishes to acquire, all
      of
      the issued and outstanding Company Shares in exchange for China-Biotics’
issuance of a total of 15,980,000 shares (the “Exchange
      Shares”)
      of
      common stock of China-Biotics (“Common
      Stock”)
      to the
      Company Shareholders and their designees, subject to and upon the terms and
      conditions hereinafter set forth (the “Reorganization”).

     

    INTENDING
      TO BE LEGALLY BOUND, and in consideration of the premises and the mutual
      representations, warranties, covenants, and agreements contained herein, the
      parties hereto hereby agree as follows:

     

    ARTICLE
      1

    SHARE
      EXCHANGE 

     

    1.1 Agreement
      to Exchange Securities.
      Subject
      to the terms and upon the conditions set forth herein, each Company Shareholder
      agrees to sell, assign, transfer and deliver to China-Biotics, and China-Biotics
      agrees to purchase from each Company Shareholder, at the Closing, all of the
      Company Shares owned by such Company Shareholder, in exchange for the issuance
      by China-Biotics, at the Closing, to each such Company Shareholder the number
      of
      Exchange Shares set forth next to each Company Shareholder’s name on
Exhibit
      B
      hereto;
      provided that certain of such Company Shareholders have directed that a portion
      of the Exchange Shares to be received by such Company Shareholders at Closing
      be
      issued to their designees as set forth on Exhibit
      B,
      and
      each such Company Shareholder hereby instructs China-Biotics to issue the amount
      of Exchange Shares set forth beside each such designee’s name set forth on
Exhibit
      B
      to such
      designee.

     

    1.2 Closing.
      The
      closing of the Reorganization (the “Closing”)
      shall
      take place at the offices of Preston Gates & Ellis LLP., located at 925
      Fourth Avenue, Suite 2900, Seattle, WA 98104, at 10:00 a.m., local time, on
      March 22, 2006, or at such other time and place as may be agreed to by the
      Company and China-Biotics (“Closing
      Date”).

     

    1.3 Closing
      Deliveries.
      At the
      Closing, the following deliveries shall be made:

     

    (a) Company
      Shares.
      Each
      Company Shareholder shall deliver to China-Biotics any certificate(s) evidencing
      the Company Shares owned by such Company Shareholder (“Company
      Certificates”),
      along
      with duly executed assignments of such Company Certificates, in order to
      effectively vest in China-Biotics all right, title and interest in and to the
      Company Shares owned by such Company Shareholder. From time to time after the
      Closing Date, and without further consideration, each Company Shareholder shall
      execute and deliver such other instruments of transfer and take such other
      actions as China-Biotics may reasonably request in order to more effectively
      transfer to China-Biotics the securities intended to be transferred
      hereunder.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (b) Exchange
      Shares.
      China-Biotics shall issue to the Company Shareholders (and their designees,
      as
      contemplated by Section 1.1) the Exchange Shares and deliver original
      certificates evidencing the Exchange Shares, in form and substance satisfactory
      to the Company Shareholders, in order to effectively vest in each Company
      Shareholder and each such designee its respective right, title and interest
      in
      and to the Exchange Shares, or deliver a letter, in form and substance
      acceptable to the company, instructing China-Biotics’s transfer agent to take
      such actions.

     

    (c)
       Other
      Documents.
      Each of
      the Company, China-Biotics and each Company Shareholder shall receive, in a
      form
      and substance reasonably satisfactory to it, all certificates and other
      documents, instruments and writings to evidence the transactions contemplated
      by
      this Agreement from any other party hereto as it may reasonably
      request.

     

    ARTICLE
      2

    REPRESENTATIONS
      AND WARRANTIES OF THE COMPANY

     

    The
      Company hereby represents and warrants to China-Biotics that the following
      are
      correct and complete as of the date hereof, except insofar as the
      representations and warranties relate expressly and solely to a particular
      date
      or period, in which case the Company represents and warrants to China-Biotics
      that such representations and warranties were true, correct and complete with
      respect to such date or period:

     

    2.1 Disclosure
      Schedule.
      Attached hereto as Exhibit C is a draft of a registration statement on Form
      SB-2
      prepared by the Company dated March 22, 2006 (the “Registration
      Statement”),
      which
      is anticipated to be filed with the Securities and Exchange Commission
      (“SEC”)
      after
      the Closing. All of the representations and warranties of the Company set forth
      in this Article 2 are subject to (a) the disclosure contained in the
      Registration Statement, provided that the information set forth in the
      Registration Statement is not intended to constitute, and shall not be construed
      as constituting, any representations or warranties by the Company hereunder,
      except as and to the extent expressly provided herein, and (b) any documents
      or
      transactions entered into in connection with or contemplated by this Agreement
      or the Company’s issuance of shares in a private placement pursuant to a
      Subscription Agreement, dated as of the date hereof, which was consummated
      immediately prior to the execution and delivery of this Agreement.

     

    2.2 Corporate
      Organization, Standing, Power.
      The
      Company is a corporation duly organized, validly existing and in good standing
      under the laws of the British Virgin Islands with the requisite corporate power
      and authority to carry on its business as it is now being conducted and to
      own,
      operate and lease its properties and assets, is duly qualified or licensed
      to do
      business as a foreign corporation in good standing in every other jurisdiction
      in which the character or location of the properties and assets owned, leased
      or
      operated by it or the conduct of its business requires such qualification or
      licensing, except in such jurisdictions in which the failure to be so qualified
      or licensed and in good standing would not, individually or in the aggregate,
      have a Material Adverse Effect (as defined in Section 9.12) on the Company.
      

     

    
      
        
        

      

      
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    2.3 Capitalization;
      Subsidiaries.
      

     

    (a) The
      Company has authorized share capital consisting of $50,000, divided into 50,000
      ordinary shares, $1.00 par value, of which 14,287 Ordinary Shares are issued
      and
      outstanding as of the date of this Agreement. All Company Shares have been
      duly
      authorized and are validly issued, fully paid and nonassessable and are without
      preemptive rights. Other than as contemplated by this Agreement, there is no
      subscription, option, warrant, call, right, contract, agreement, commitment,
      understanding or arrangement to which the Company is a party, or by which it
      is
      bound, with respect to the future issuance, sale, delivery or transfer of the
      capital securities of the Company, including any right of conversion or exchange
      under any security or other instrument. 

     

    (b) The
      Company does not own, and has never owned, directly or indirectly, any equity
      interest in any person, other than (i) the Company owns 100% of the equity
      interests of Growing State Limited, a British Virgin Islands corporation and
      (ii) the Company owns 100% of the equity interests in Shanghai Shining
      Biotechnology Co., Ltd., a Chinese corporation (together, the “Subsidiaries”).
      There
      is no subscription, option, warrant, call, right, contract, agreement,
      commitment, understanding or arrangement to which either Subsidiary is a party,
      or by which it is bound, with respect to the issuance, sale, delivery or
      transfer of the capital securities of such Subsidiary, including any right
      of
      conversion or exchange under any security or other instrument. 

     

    2.4 Authorization.
      The
      Company has all requisite corporate power and authority to enter into, execute,
      deliver, and perform its obligations under this Agreement. This Agreement has
      been duly and validly executed and delivered by the Company and is the valid
      and
      binding legal obligation of the Company enforceable against the Company in
      accordance with its terms, subject to bankruptcy, moratorium, principles of
      equity and other limitations limiting the rights of creditors
      generally.

     

    2.5 Non-Contravention.
      Neither
      the execution, delivery and performance of this Agreement, nor the consummation
      of the transactions contemplated herein, in each case by the Company,
      will:

     

    (a) violate,
      contravene or be in conflict with any provision of the articles of association
      or memorandum of association of the Company or the similar governing documents
      of any Subsidiary;

     

    (b) be
      in
      conflict with, or constitute a default, however defined (or an event which,
      with
      the giving of due notice or lapse of time, or both, would constitute such a
      default), under, or cause or permit the acceleration of the maturity of, or
      give
      rise to any right of termination, cancellation, imposition of fees or penalties
      under any debt, note, bond, lease, mortgage, indenture, license, obligation,
      contract, commitment, franchise, permit, instrument or other agreement or
      obligation to which the Company or either Subsidiary is a party or by which
      the
      Company or either Subsidiary or any of the Company’s properties or assets or the
      properties or assets of either Subsidiary are or may be bound;

     

    
      
        
        

      

      
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    (c) result
      in
      the creation or imposition of any pledge, lien, security interest, restriction,
      option, claim or charge of any kind whatsoever (“Encumbrances”)
      upon
      any property or assets of the Company or either Subsidiary under any debt,
      obligation, contract, agreement or commitment to which the Company or either
      Subsidiary is a party or by which the Company or either Subsidiary or any of
      the
      Company’s or any Subsidiary’s assets or properties are bound; or

     

    (d) materially
      violate any statute, treaty, law, judgment, writ, injunction, decision, decree,
      order, regulation, ordinance or other similar authoritative matters (referred
      to
      herein individually as a “Law”
and
      collectively as “Laws”)
      of any
      foreign, federal, state or local governmental or quasi-governmental,
      administrative, regulatory or judicial court, department, commission, agency,
      board, bureau, instrumentality or other authority (referred to herein
      individually as an “Authority”
and
      collectively as “Authorities”).

     

    2.6 Consents
      and Approvals.
      No
      consent, approval, order or authorization of or from, or registration,
      notification, declaration or filing with (“Consent”)
      any
      individual or entity, including any Authority, is required in connection with
      the execution, delivery or performance of this Agreement by the Company or
      the
      consummation by the Company of the transactions contemplated herein, other
      than
      any Consent which, if not made or obtained, will not, individually or in the
      aggregate, have a Material Adverse Effect on the Company and other than any
      Consents which have been obtained.

     

    2.7 Compliance
      With Law; Permits and Other Operating Rights.
      The
      assets, properties, business and operations of the Company and each Subsidiary
      are and have been in compliance in all respects with all Laws applicable to
      their respective assets, properties, business and operations, except where
      the
      failure to comply would not have a Material Adverse Effect. The Company and
      each
      Subsidiary possesses all material permits, licenses and other authorizations
      from all Authorities necessary to permit it to operate its business in the
      manner in which it presently is conducted and the consummation of the
      transactions contemplated by this Agreement will not prevent the Company or
      any
      Subsidiary from being able to continue to use such permits and operating rights.
      Neither the Company nor any Subsidiary has received notice of any violation
      of
      any such applicable Law or is in default with respect to any order, writ,
      judgment, award, injunction or decree of any Authority.

     

    2.8 Issuance
      of Common Stock.
      To the
      Company’s knowledge, as of the date of this Agreement and as of the Closing
      Date, no facts or circumstances exist or will exist that could cause the
      issuance of Common Stock pursuant to the Reorganization to fail to meet an
      exemption from the registration requirements of Section 4(2) of the
      Securities Act and Rule 506 of Regulation D under of the Securities
      Act or Regulation S under the Securities Act. 

     

    2.9 Books
      and Records.
      The
      books of account, minute books, stock record books, and other material records
      of the Company and each Subsidiary are complete and correct in all material
      respects and have been maintained in accordance with reasonable business
      practices. The minute books of the Company and each Subsidiary contain accurate
      and complete records of all formal meetings held of, and corporate action taken
      by, the members, the managers and committees of the managers of the Company
      and
      each Subsidiary. 

     

    
      
        
        

      

      
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    2.10 Financial
      Statements.
      The
      Company has furnished or made available to China-Biotics the Company’s
      consolidated audited financial statements for the fiscal years ended March
      31,
      2005 and 2004 and unaudited financial statements at and for the nine month
      period ended December 31, 2005. Such financial statements (i) were prepared
      in
      accordance with GAAP applied on a consistent basis (except as may be indicated
      in the notes to such financial statements) and (ii) fairly present, in all
      material respects, the consolidated financial position of the Company and its
      consolidated subsidiaries as of the respective dates thereof and the results
      of
      operations of the Company and its consolidated subsidiaries for the periods
      covered thereby. All adjustments considered necessary for a fair presentation
      of
      such financial statements have been included. 

     

    2.11
       Real
      Property; Leases.
      Neither
      the Company nor any Subsidiary owns any real property or is party to any lease
      or sublease for any real property or personal property.

     

    2.12 Litigation.
      There
      is no legal, administrative, arbitration, or other proceeding, suit, claim
      or
      action of any nature or investigation, review or audit of any kind, or any
      judgment, decree, decision, injunction, writ or order pending, noticed,
      scheduled, or, to the knowledge of Company, threatened or contemplated by or
      against or involving Company, its assets, properties or business or its
      directors, officers, agents or employees (but only in their capacity as such),
      whether at law or in equity, before or by any person or entity or Authority,
      or
      which questions or challenges the validity of this Agreement or any action
      taken
      or to be taken by the parties hereto pursuant to this Agreement or in connection
      with the transactions contemplated herein.

     

    2.13 Contracts
      and Commitments; No Default.
      Neither
      the Company nor any Subsidiary is a party to, nor are any of its assets bound
      by, any material contract, oral or written (each, an “Company
      Contract”).
      None
      of the Company Contracts contains a provision requiring the consent of any
      party
      with respect to the consummation of the transactions contemplated by this
      Agreement. Neither the Company nor any Subsidiary is in breach, violation or
      default, however defined, in the performance of any of its obligations under
      any
      of the Company Contracts, and no facts and circumstances exist which, whether
      with the giving of due notice, lapse of time, or both, would constitute such
      breach, violation or default thereunder or thereof, and, to the knowledge of
      the
      Company, no other parties thereto are in a breach, violation or default, however
      defined, thereunder or thereof, and no facts or circumstances exist which,
      whether with the giving of due notice, lapse of time, or both, would constitute
      such a breach, violation or default thereunder or thereof.

     

    2.14 No
      Adverse Changes.
      There
      has been no Material Adverse Effect with respect to the Company since December
      31, 2005.

     

    2.15 Accuracy
      of Information.
      No
      representation or warranty made by the Company in this Agreement or in any
      agreement or certificate furnished or to be furnished to China-Biotics at the
      Closing by or on behalf of the Company in connection with any of the
      transactions contemplated by this Agreement contains or will contain any untrue
      statement of material fact or omit any material fact necessary in order to
      make
      the statements herein or therein not misleading in light of the circumstances
      in
      which they are made, and all of the foregoing completely and correctly present
      the information required or purported to be set forth herein or therein.

     

    
      
        
        

      

      
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    ARTICLE
      3

    REPRESENTATIONS
      AND WARRANTIES

    OF
      THE COMPANY SHAREHOLDERS

     

    Each
      Company Shareholder, severally and not jointly, represents, warrants and
      covenants to China-Biotics with respect to itself that the following are correct
      and complete as of the date hereof, except insofar as the representations and
      warranties relate expressly and solely to a particular date or period, in which
      case each Company Shareholder, severally and not jointly, represents, warrants
      and covenants to China-Biotics that such representations and warranties were
      true, correct and complete with respect to such date or period:

     

    3.1 Power
      and Authority.
      The
      Company Shareholder has all requisite power and authority, or legal capacity,
      as
      the case may be, to enter into and to carry out all of the terms of this
      Agreement and all other documents executed and delivered in connection herewith
      (collectively, the “Documents”).
      Any
      action on the part of the Company Shareholder necessary for the authorization,
      execution, delivery and performance of the Documents by the Company Shareholder
      has been taken and no further authorization on the part of the Company
      Shareholder is required to consummate the transactions provided for in the
      Documents. When executed and delivered by the Company Shareholder, the Documents
      shall constitute the valid and legally binding obligation of the Company
      Shareholder enforceable in accordance with their respective terms, subject
      to
      bankruptcy, moratorium, principles of equity and other limitations limiting
      the
      rights of creditors generally. Each Company Shareholder who is a natural person
      is over the age of 21, has not been declared incompetent, and has the right
      to
      execute, deliver and perform this Agreement without the consent or joinder
      of
      any other person or entity.

     

    3.2 Ownership
      of and Title To Securities.
      Exhibit A
      to this
      Agreement accurately and completely sets forth all of the Company Shares owned
      of record by the Company Shareholder as of the date hereof. The Company
      Shareholder will transfer to China-Biotics good and marketable title to the
      Company Shares which it owns or will own, free and clear of all pledges,
      security interests, mortgages, liens, claims, charges, restrictions or
      encumbrances, except for any restrictions imposed by United States federal
      or
      state securities Laws.

     

    3.3 Investment
      and Related Representations.

     

    (a) Securities
      Laws Compliance.
      The
      Company Shareholder is aware that neither the Exchange Shares nor the offer
      or
      sale thereof to the Company Shareholder has been registered under the U.S.
      Securities Act of 1933 (the “Securities
      Act”),
      or
      under any state securities Laws. The Company Shareholder understands that the
      Exchange Shares will be characterized as “restricted” securities under federal
      securities Laws inasmuch as they are being acquired in a transaction not
      involving a public offering and that under such Laws and applicable regulations
      such securities may be resold without registration under the Securities Act
      only
      in certain limited circumstances. The Company Shareholder agrees that the
      Company Shareholder will not sell all or any portion of Exchange Shares except
      pursuant to Regulation S under the Securities Act, pursuant to registration
      under the Securities Act or pursuant to an available exemption from registration
      under the Securities Act, and will not engage in hedging transactions with
      regard to the Exchange Shares unless in compliance with the Securities Act.
      The
      Company Shareholder understands that each certificate for Exchange Shares issued
      to the Company Shareholder or to any subsequent transferee shall bear a legend
      substantially as set forth below, and that China-Biotics shall refuse to
      transfer the Exchange Shares except in accordance with such
      restrictions:

     

    
      
        
        

      

      
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    THE
      SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
      SECURITIES ACT OF 1933 (THE “1933 ACT”) OR ANY STATE SECURITIES LAWS. THE
      SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED,
      HYPOTHECATED, ASSIGNED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE
      REGISTRATION STATEMENT UNDER THE 1933 ACT WITH RESPECT TO SUCH SHARES, OR WITH
      AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER STATING THAT SUCH
      SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS BEING MADE IN ACCORDANCE WITH
      REGULATION S UNDER THE SECURITIES ACT OR IS EXEMPT FROM THE REGISTRATION
      REQUIREMENTS OF THE 1933 ACT AND ANY APPLICABLE STATE SECURITIES LAWS; AND
      HEDGING TRANSACTIONS INVOLVING THESE SECURITIES MAY NOT BE CONDUCTED UNLESS
      IN
      COMPLIANCE WITH THE 1933 ACT.

     

    (b) Investment
      Representation.
      This
      Agreement is made with the Company Shareholder in reliance upon the Company
      Shareholder’s representation, which by the Company Shareholder’s execution of
      this Agreement the Company Shareholder hereby confirms, that the Exchange Shares
      to be received by the Company Shareholder are being acquired pursuant to this
      Agreement for its own account, for investment, and not with a view to the resale
      or distribution thereof (i) such that the Company Shareholder would be
      considered an “underwriter” as such term is defined in the Securities Act, and
      (ii) unless pursuant to an effective registration statement or exemption under
      the Securities Act.

     

    (c) No
      Public Solicitation.
      The
      Company Shareholder is acquiring the Exchange Shares after private negotiation
      and has not been attracted to the acquisition of the Exchange Shares by any
      press release, advertising, publication, or other general solicitation or
      through any directed selling efforts (as such term is defined in Regulation
      S
      promulgated under the Securities Act) made in the United States.

     

    (d) Access
      to Information.
      The
      Company Shareholder acknowledges that the reports (collectively the
“SEC
      Reports”)
      filed
      by China-Biotics with the SEC are publicly available, and that the Company
      Shareholder has reviewed the SEC Reports to the extent that the Company
      Shareholder deemed necessary and appropriate in making an investment decision
      hereunder.

     

    (e) Investor
      Solicitation and Ability to Bear Risk to Loss.
      The
      Company Shareholder, if a corporation or a partnership, has not been organized
      for the purpose of acquiring the Exchange Shares or, if so organized, all of
      its
      equity owners are accredited investors as defined in Regulation D
      promulgated under the Securities Act. The Company Shareholder acknowledges
      that
      it is able to protect its interests in connection with the acquisition of the
      Exchange Shares and can bear the economic risk of investment in such securities
      without producing a material adverse change in the Company Shareholder’s
      financial condition. The Company Shareholder otherwise has such knowledge and
      experience in financial or business matters that the Company Shareholder is
      capable of evaluating the merits and risks of the investment in the Exchange
      Shares.

     

    
      
        
        

      

      
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    (f) Accredited
      Investor/Non-U.S. Person Status.
      The
      Company Shareholder is at least one of the following: (i) an “accredited
      investor” as that term is defined in Regulation D promulgated under the
      Securities Act or (ii) not a U.S. Person, and is not acquiring the Exchange
      Shares for the account or benefit of any U.S. Person, and is acquiring the
      Exchange Shares in an offshore transaction (as “U.S. Person” and “offshore
      transaction” are defined in Regulation S promulgated under the Securities
      Act).

     

    ARTICLE
      4

    REPRESENTATIONS
      AND WARRANTIES OF CHINA-BIOTICS 

     

    China-Biotics
      hereby represents and warrants to the Company and the Company Shareholders
      that
      the following are correct and complete as of the date hereof, except insofar
      as
      the representations and warranties relate expressly and solely to a particular
      date or period, in which case China-Biotics represents and warrants to the
      Company and the Company Shareholders that such representations and warranties
      were true, correct and complete with respect to such date or
      period:

     

    4.1 [Intentionally
      omitted]

     

    4.2 Corporate
      Organization, Standing and Power.
      China-Biotics is a corporation duly organized, validly existing and in good
      standing under the Laws of the State of Delaware with the requisite corporate
      power and authority to carry on its business as it is now being conducted and
      to
      own, operate and lease its properties and assets, is duly qualified or licensed
      to do business as a foreign corporation in good standing in every other
      jurisdiction in which the character or location of the properties and assets
      owned, leased or operated by it or the conduct of its business requires such
      qualification or licensing, except in such jurisdictions in which the failure
      to
      be so qualified or licensed and in good standing would not, individually or
      in
      the aggregate, have a Material Adverse Effect on China-Biotics. Complete and
      correct copies of China-Biotics’ certificate of incorporation and bylaws have
      previously been made available to the Company. 

     

    4.3 Capitalization;
      Subsidiaries.
      

     

    (a) China-Biotics
      has 110,000,000 shares of capital stock authorized, of which 100,000,000 shares
      are designated common stock and 10,000,000 shares are designated preferred
      stock. China-Biotics has 21,100,000 shares of common stock issued and
      outstanding (the “China-Biotics
      Shares”)
      and no
      other shares of any class or series of capital stock issued and outstanding.
      All
      of the China-Biotics Shares have been duly authorized and are validly issued,
      fully paid and nonassessable and are without, and were not issued in violation
      of, preemptive rights. Other than as contemplated by this Agreement, there
      is no
      subscription, option, warrant, call, right, contract, agreement, commitment,
      understanding or arrangement to which China-Biotics is a party, or by which
      it
      is bound, with respect to the issuance, sale, delivery or transfer of the
      capital securities of China-Biotics, including any right of conversion or
      exchange under any security or other instrument, other than pursuant to the
      Stan
      Ford Agreement. 

     

    
      
        
        

      

      
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    (b) China-Biotics
      does not own, and has never owned, directly or indirectly, any equity interest
      in any person other than the 726 shares of stock of Diadem Resources Ltd. to
      be
      transferred pursuant to the Stan Ford Agreement.

     

    4.4 Authorization.
      China-Biotics has all requisite corporate power and authority to enter into,
      execute, deliver, and perform its obligations under this Agreement. The Board
      of
      Directors of China-Biotics has taken all action required by Law, China-Biotics’
certificate of incorporation and bylaws or otherwise to authorize the execution,
      delivery and performance of this Agreement and the consummation of the
      transactions contemplated herein. This Agreement has been duly and validly
      executed and delivered by China-Biotics and is the valid and binding legal
      obligation of China-Biotics enforceable against China-Biotics in accordance
      with
      its terms, subject to bankruptcy, moratorium, principles of equity and other
      limitations limiting the rights of creditors generally.

     

    4.5 Non-Contravention.
      Neither
      the execution, delivery and performance of this Agreement, nor the consummation
      of the transactions contemplated herein will:

     

    (a) violate
      any provision of the certificate of incorporation or bylaws of China-Biotics;
      or

     

    (b) be
      in
      conflict with, or constitute a default, however defined (or an event which,
      with
      the giving of due notice or lapse of time, or both, would constitute such a
      default), under, or cause or permit the acceleration of the maturity of, or
      give
      rise to, any right of termination, cancellation, imposition of fees or penalties
      under, any debt, note, bond, lease, mortgage, indenture, license, obligation,
      contract, commitment, franchise, permit, instrument or other agreement or
      obligation to which China-Biotics is a party or by which China-Biotics or any
      of
      its properties or assets is or may be bound;

     

    (c) result
      in
      the creation or imposition of any Encumbrance upon any property or assets of
      China-Biotics under any debt, obligation, contract, agreement or commitment
      to
      which China-Biotics is a party or by which China-Biotics or any of their
      respective assets or properties is or may be bound; or

     

    (d) materially
      violate any Law of any Authority.

     

    4.6 Consents
      and Approvals.
      No
      Consent is required by any person or entity, including any Authority, in
      connection with the execution, delivery and performance of this Agreement by
      China-Biotics or the consummation of the transactions contemplated herein,
      other
      than any Consent which, if not made or obtained, will not, individually or
      in
      the aggregate, have a Material Adverse Effect on the business of China-Biotics,
      and other than any Consents which have been obtained or are required pursuant
      to
      applicable securities Laws.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    4.7 Valid
      Issuance.
      The
      Exchange Shares to be issued in connection with this Agreement have been duly
      authorized and, when issued and delivered and upon the delivery of the
      consideration therefor as provided in this Agreement, will be validly issued,
      fully paid and non-assessable.

     

    4.8 SEC
      Filings; Financial Statements.

     

    (a) All
      statements, reports, schedules, forms and other documents required to have
      been
      filed by China-Biotics with the SEC have been so filed on a timely basis. As
      of
      the time it was filed with the SEC (or, if amended or superseded by a filing
      prior to the date of this Agreement, then on the date of such filing):
      (i) each of the SEC Reports complied in all material respects with the
      applicable requirements of the Securities Act or the Securities Exchange Act
      of
      1934 (the “Exchange
      Act”);
      and
      (ii) none of the SEC Reports contained any untrue statement of a material
      fact or omitted to state a material fact required to be stated therein or
      necessary in order to make the statements therein, in the light of the
      circumstances under which they were made, not misleading.

     

    (b) The
      financial statements contained in the SEC Reports: (i) complied as to form
      in all material respects with the published rules and regulations of the SEC
      applicable thereto; (ii) were prepared in accordance with GAAP applied on a
      consistent basis throughout the periods covered (except as may be indicated
      in
      the notes to such financial statements and, in the case of unaudited statements,
      as permitted by Form 10-QSB of the SEC); and (iii) fairly present, in all
      material respects, the financial position of China-Biotics as of the respective
      dates thereof and the results of operations of China-Biotics for the periods
      covered thereby. All adjustments considered necessary for a fair presentation
      of
      such financial statements have been included.

     

    4.9 No
      Liabilities.
      China-Biotics has no liabilities, obligations, or contingencies (whether
      absolute, accrued, or contingent) (each a “Liability”
and
      collectively, “Liabilities”)
      except
      for (i) Liabilities expressly stated in the most recent balance sheet included
      in the SEC Reports or the notes thereto and (ii) Liabilities which do not exceed
      US$1,000 in the aggregate.

     

    4.10 Assets.
      The
      sole assets of China-Biotics are (a) 726 shares of Diadem Resources Ltd which
      will be transferred to Stan Ford under the Stan Ford Agreement and (b) any
      cash
      in any bank account of China-Biotics. All mining claims previously owned by
      China-Biotics related to the Lac Laparre property have been relinquished prior
      to the date of this Agreement, and China-Biotics has no further Liabilities
      with
      respect to such mining claims.

     

    4.11 Real
      Property; Leases.
      China-Biotics owns no real property and is not party to any lease or sublease
      for any real property or personal property. China-Biotics has terminated all
      agreements, arrangements and understandings with respect to its previous lease
      of office space from Stan Ford and has no further Liabilities with respect
      thereto. 

     

    4.12 Litigation.
      There
      is no legal, administrative, arbitration, or other proceeding, suit, claim
      or
      action of any nature or investigation, review or audit of any kind, or any
      judgment, decree, decision, injunction, writ or order pending, noticed,
      scheduled, or, to the knowledge of China-Biotics, threatened or contemplated
      by
      or against or involving China-Biotics, its assets, properties or business or
      its
      directors, officers, agents or employees (but only in their capacity as such),
      whether at law or in equity, before or by any person or entity or Authority,
      or
      which questions or challenges the validity of this Agreement or any action
      taken
      or to be taken by the parties hereto pursuant to this Agreement or in connection
      with the transactions contemplated herein.

     

    
      
        
        

      

      
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    4.13 Contracts
      and Commitments; No Default.
      China-Biotics is not a party to, nor are any of its assets bound by, any
      contract, oral or written (each, an “China-Biotics
      Contract”),
      that
      is not disclosed in the SEC Reports, except for (a) the Stan Ford Agreement
      and
      (b) that certain agreement between China-Biotics and Fred Cooper dated as of
      February 6, 2006 related to the redemption of 1,000,000 shares of Common Stock
      owned by Mr. Cooper (the “Fred
      Cooper Agreement”).
      None
      of the China-Biotics Contracts contains a provision requiring the consent of
      any
      party with respect to the consummation of the transactions contemplated by
      this
      Agreement. China-Biotics is not in breach, violation or default, however
      defined, in the performance of any of its obligations under any of the
      China-Biotics Contracts, and no facts and circumstances exist which, whether
      with the giving of due notice, lapse of time, or both, would constitute such
      breach, violation or default thereunder or thereof, and, to the knowledge of
      China-Biotics, no other parties thereto are in a breach, violation or default,
      however defined, thereunder or thereof, and no facts or circumstances exist
      which, whether with the giving of due notice, lapse of time, or both, would
      constitute such a breach, violation or default thereunder or
      thereof.

     

    4.14 No
      Broker or Finder.
      No
      broker, finder or investment banker is entitled to any brokerage, finders or
      other fee or commission in connection with any of the transactions contemplated
      by this Agreement based upon arrangements made by or on behalf of China-Biotics.
      

     

    4.15 Intercompany
      and Affiliate Transactions; Insider Interests.
      There
      are, and during the last three years there have been, no transactions,
      agreements or arrangements of any kind, direct or indirect, between
      China-Biotics, on the one hand, and any director, officer, employee,
      stockholder, or affiliate of China-Biotics, on the other hand, including loans,
      guarantees or pledges to, by or for China-Biotics or from, to, by or for any
      of
      such persons, that are currently in effect, other than the Fred Cooper Agreement
      and the Stan Ford Agreement. 

     

    4.16 No
      Adverse Changes.
      There
      has been no material adverse change in the business, financial condition,
      prospects, assets or operations of China-Biotics since November 30,
      2005.

     

    4.17 Compliance
      With Law; Permits and Other Operating Rights.
      The
      assets, properties, business and operations of China-Biotics are and have been
      in compliance in all respects with all Laws applicable to China-Biotics’ assets,
      properties, business and operations, except where the failure to comply would
      not have a Material Adverse Effect. China-Biotics possesses all material
      permits, licenses and other authorizations from all Authorities necessary to
      permit it to operate its business in the manner in which it presently is
      conducted and the consummation of the transactions contemplated by this
      Agreement will not prevent China-Biotics from being able to continue to use
      such
      permits and operating rights. China-Biotics has not received notice of any
      violation of any such applicable Law, and is not in default with respect to
      any
      order, writ, judgment, award, injunction or decree of any
      Authority.

     

    4.18 Taxes.
      China-Biotics has duly filed when due all tax reports and returns in connection
      with and in respect of its business, assets and employees, and has timely paid
      and discharged all amounts shown as due thereon. China-Biotics has not received
      any notice of any tax deficiency outstanding, proposed or assessed against
      or
      allocable to it, and has not executed any waiver of any statute of limitations
      on the assessment or collection of any tax or executed or filed with any
      Authority any agreement now in effect extending the period for assessment or
      collection of any taxes against it. 

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    4.19 Accuracy
      of Information.
      No
      representation or warranty made by China-Biotics in this Agreement or in any
      agreement or certificate furnished or to be furnished to the Company at the
      Closing by or on behalf of China-Biotics in connection with any of the
      transactions contemplated by this Agreement contains or will contain any untrue
      statement of material fact or omits or will omit to state any material fact
      necessary in order to make the statements herein or therein not misleading
      in
      light of the circumstances in which they are made, and all of the foregoing
      completely and correctly present the information required or purported to be
      set
      forth herein or therein.

     

    ARTICLE
      5

    COVENANTS
      OF THE PARTIES

     

    5.1 Conduct
      of Business.
      Except
      as contemplated by this Agreement, during the period from the date of this
      Agreement to the Closing Date, the Company and China-Biotics shall each conduct
      their respective businesses and operations according to their ordinary and
      usual
      course of business consistent with past practices. Without limiting the
      generality of the foregoing, and, except as otherwise expressly provided in
      this
      Agreement, prior to the Closing Date, without the prior written consent of
      the
      other party, neither China-Biotics nor the Company shall:

     

    (a) amend
      its
      certificate of incorporation, articles of association, bylaws or memorandum
      of
      association, as the case may be, except that China-Biotics may amend and restate
      its Certificate of Incorporation in the form previously provided to the
      Company;

     

    (b) issue,
      reissue, sell, deliver, or pledge, or authorize or propose the issuance,
      reissuance, sale, delivery or pledge of shares of capital stock of any class,
      or
      securities convertible into capital stock of any class, or any rights, warrants
      or options to acquire any convertible securities, or capital stock;

     

    (c) adjust,
      split, combine, subdivide, reclassify or redeem, purchase or otherwise acquire,
      or propose to redeem or purchase or otherwise acquire, any shares of its capital
      stock, or any of its other securities, other than, with respect to
      China-Biotics, entry into the Stan Ford Agreement;

     

    (d) declare,
      set aside or pay any dividend or distribution (whether in cash, stock or
      property or any combination thereof) in respect of its capital stock, redeem
      or
      otherwise acquire any shares of its capital stock or other securities, or alter
      any term of any of its outstanding securities;

     

    (e) (i) except
      as required under any employment agreement existing on the date hereof, increase
      in any manner the compensation of any of its directors, officers or other
      employees; (ii) pay or agree to pay any pension, retirement allowance or
      other employee benefit not required or permitted by any existing plan, agreement
      or arrangement to any such director, officer or employee, whether past or
      present; or (iii) commit itself to any additional pension, profit-sharing,
      bonus, incentive, deferred compensation, stock purchase, stock option, stock
      appreciation right, group insurance, severance pay, retirement or other employee
      benefit plan, agreement or arrangement, or to any employment agreement or
      consulting agreement (arising out of prior employment ) with or for the benefit
      of any person, or, except to the extent required to comply with applicable
      law,
      amend any of such plans or any of such agreements in existence on the date
      of
      this Agreement;

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    (f) incur,
      assume, suffer or become subject to, whether directly or by way of guarantee
      or
      otherwise, any Liabilities which, individually or in the aggregate, exceed
      US$1,000 in the case of China-Biotics or US$300,000 in the case of the
      Company;

     

    (g) make
      or
      enter into any commitment for capital expenditures which, individually or in
      the
      aggregate, exceed US$1,000 in the case of China-Biotics or US$300,000 in the
      case of the Company;

     

    (h) pay,
      lend
      or advance any amount to, or sell, transfer or lease any properties or assets
      (real, personal or mixed, tangible or intangible) to, or enter into any
      agreement or arrangement with, any of its officers or directors or any affiliate
      or associate of any of its officers or directors; provided that the Company
      may
      enter into the Stan Ford Agreement;

     

    (i) terminate,
      enter into or amend in any material respect any contract, agreement, lease,
      license or commitment, or take any action or omit to take any action which
      will
      cause a breach, violation or default (however defined) under any contract,
      except in the ordinary course of business and consistent with past
      practice;

     

    (j) acquire
      any of the business or assets of any other person or entity;

     

    (k) permit
      any of its current insurance (or reinsurance) policies to be cancelled or
      terminated or any of the coverage thereunder to lapse, unless simultaneously
      with such termination, cancellation or lapse, replacement policies providing
      coverage equal to or greater than coverage remaining under those cancelled,
      terminated or lapsed are in full force and effect;

     

    (l) enter
      into other material agreements, commitments or contracts not in the ordinary
      course of business or in excess of current requirements;

     

    (m) settle
      or
      compromise any suit, claim or dispute or threatened suit, claim or dispute;
      or

     

    (n) agree
      in
      writing or otherwise to take any of the foregoing actions or any action which
      would make any representation or warranty in this Agreement untrue or incorrect
      in any material respect.

     

    5.2 Full
      Access.
      Throughout the period prior to the Closing, each party shall afford to the
      other
      and its directors, officers, employees, counsel, accountants, investment
      advisors and other authorized representatives and agents, reasonable access
      to
      the facilities, properties, books and records of the party in order that the
      other may have full opportunity to make such investigations as it shall desire
      to make of the affairs of the disclosing party. Each party shall furnish such
      additional financial and operating data and other information as the other
      shall, from time to time, reasonably request, including access to the working
      papers of its independent certified public accountants; provided,
      however,
      that
      any such investigation shall not affect or otherwise diminish or obviate in
      any
      respect any of the representations and warranties of the disclosing
      party.

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    5.3 Confidentiality.
      Each of
      the parties hereto agrees that it shall not use, or permit the use of, any
      of
      the information relating to any other party hereto furnished to it in connection
      with the transactions contemplated herein (“Information”)
      in a
      manner or for a purpose detrimental to such other party or otherwise than in
      connection with the transaction, and that they shall not disclose, divulge,
      provide or make accessible (collectively, “Disclose”),
      or
      permit the Disclosure of, any of the Information to any person or entity, other
      than their respective directors, officers, employees, investment advisors,
      accountants, sources of financing, counsel and other authorized representatives
      and agents, except as may be required by judicial or administrative process
      or,
      in the opinion of such party’s counsel, by other requirements of Law;
provided,
      however,
      that
      prior to any Disclosure of any Information permitted hereunder, the disclosing
      party will first obtain the recipients’ agreement to comply with the provisions
      of this Section 5.3 with respect to such information. Notwithstanding the
      foregoing, the confidentiality obligations of this Section 5.3 will not apply
      after the Closing to any Information furnished to the Company or the Company
      Shareholders regarding China-Biotics or its business. The term “Information”
does
      not include any information relating to a party that the party disclosing such
      information can show: (i) to have been in its possession prior to its
      receipt from another party hereto; (ii) to be now or to later become
      generally available to the public through no fault of the disclosing party;
      (iii) to have been available to the public at the time of its receipt by
      the disclosing party; (iv) to have been received separately by the
      disclosing party in an unrestricted manner from a person entitled to disclose
      such information; or (v) to have been developed independently by the
      disclosing party without regard to any information received in connection with
      this transaction. Each party hereto agrees to promptly return to the party
      from
      whom it originally received such information all original and duplicate copies
      of written materials containing Information if the Reorganization does not
      occur. A party hereto shall be deemed to have satisfied its obligations to
      hold
      the Information confidential if it exercises the same care as it takes with
      respect to its own similar information.

     

    5.4 Filings;
      Consents; Removal of Objections.
      Subject
      to the terms and conditions herein provided, the parties hereto shall use their
      best efforts to take or cause to be taken all actions and do or cause to be
      done
      all things necessary, proper or advisable under applicable Laws to consummate
      and make effective, as soon as reasonably practicable, the transactions
      contemplated hereby, including without limitation obtaining all Consents of
      any
      person or entity, whether private or governmental, required in connection with
      the consummation of the transactions contemplated herein. In furtherance, and
      not in limitation of the foregoing, it is the intent of the parties to
      consummate the transactions contemplated herein at the earliest practicable
      time, and they respectively agree to exert commercially reasonable efforts
      to
      that end, including without limitation: (i) the removal or satisfaction, if
      possible, of any objections to the validity or legality of the transactions
      contemplated herein; and (ii) the satisfaction of the conditions to
      consummation of the transactions contemplated hereby.

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

    5.5 Further
      Assurances; Cooperation; Notification.

     

    (a) Each
      party hereto shall, before, at and after Closing, execute and deliver such
      instruments and take such other actions as the other party or parties, as the
      case may be, may reasonably require in order to carry out the intent of this
      Agreement. Without limiting the generality of the foregoing, at any time after
      the Closing, at the reasonable request of China-Biotics and without further
      consideration, the Company shall execute and deliver such instruments of sale,
      transfer, conveyance, assignment and confirmation and take such action as
      China-Biotics may reasonably deem necessary or desirable in order to more
      effectively consummate the transactions contemplated hereby.

     

    (b) At
      all
      times from the date hereof until the Closing, each party shall promptly notify
      the other in writing of the occurrence of any event which it reasonably believes
      will or may result in a failure by such party to satisfy the conditions
      specified in this Article 5.

     

    5.6 Public
      Announcements.
      None of
      the parties hereto shall make any public announcement with respect to the
      transactions contemplated herein without the prior written consent of
      China-Biotics and the Company, which consent shall not be unreasonably withheld
      or delayed; provided,
      however,
      that
      any of the parties hereto may at any time make any announcements that are
      required by applicable Law so long as the party so required to make an
      announcement promptly upon learning of such requirement notifies the other
      parties of such requirement and discusses with the other parties in good faith
      the exact proposed wording of any such announcement.

     

    5.7 Satisfaction
      of Conditions Precedent.
      Each
      party shall use commercially reasonable efforts to satisfy or cause to be
      satisfied all the conditions precedent that are applicable to them, and to
      cause
      the transactions contemplated by this Agreement to be consummated, and, without
      limiting the generality of the foregoing, to obtain all material consents and
      authorizations of third parties and to make filings with, and give all notices
      to, third parties that may be necessary or reasonably required on its part
      in
      order to effect the transactions contemplated hereby.

     

    ARTICLE
      6

    CONDITIONS
      TO THE OBLIGATIONS OF CHINA-BIOTICS

     

    Notwithstanding
      any other provision of this Agreement to the contrary, the obligation of
      China-Biotics to effect the transactions contemplated herein will be subject
      to
      the satisfaction at or prior to the Closing, or waiver by China-Biotics, of
      each
      of the following conditions:

     

    6.1 Representations
      and Warranties True.
      The
      representations and warranties of the Company and the Company Shareholders
      contained in this Agreement shall be true, complete and accurate in all material
      respects as of the date when made and at and as of the Closing Date as though
      such representations and warranties were made at and as of such time, except
      for
      changes specifically permitted or contemplated by this Agreement, and except
      insofar as the representations and warranties relate expressly and solely to
      a
      particular date or period, in which case they shall be true and correct at
      the
      Closing with respect to such date or period.

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

    6.2 Performance.
      The
      Company shall have performed and complied in all material respects with all
      agreements, covenants, obligations and conditions required by this Agreement
      to
      be performed or complied with by the Company on or prior to the
      Closing.

     

    6.3 Required
      Approvals and Consents.

     

    (a) All
      action required by Law and otherwise to be taken by the directors and
      shareholders of the Company to authorize the execution, delivery and performance
      of this Agreement and the consummation of the transactions contemplated hereby
      shall have been duly and validly taken.

     

    (b) All
      Consents of or from all Authorities required hereunder to consummate the
      transactions contemplated herein shall have been delivered, made or obtained,
      and China-Biotics shall have received copies thereof.

     

    6.4 Agreements
      and Documents.
      China-Biotics shall have received a certificate of good standing of the Company
      from the British Virgin Islands and any other states where the Company is
      qualified to do business, as of the most recent practicable date.

     

    6.5 Adverse
      Changes.
      No
      Material Adverse Effect shall have occurred with respect to the Company since
      December 31, 2005, except as expressly permitted or contemplated by this
      Agreement.

     

    6.6 No
      Proceeding or Litigation.
      No
      suit, action, investigation, inquiry or other proceeding by any Authority or
      other person or entity shall have been instituted or threatened which delays
      or
      questions the validity or legality of the transactions contemplated hereby
      or
      which, if successfully asserted, would, in the reasonable judgment of
      China-Biotics, individually or in the aggregate, otherwise have a Material
      Adverse Effect on the Company’s business, financial condition, prospects, assets
      or operations or prevent or delay the consummation of the transactions
      contemplated by this Agreement.

     

    6.7 Legislation.
      No Law
      shall have been enacted which prohibits, restricts or delays the consummation
      of
      the transactions contemplated hereby or any of the conditions to the
      consummation of such transaction.

     

    ARTICLE
      7

    CONDITIONS
      TO OBLIGATIONS OF THE COMPANY AND COMPANY SHAREHOLDERS

     

    Notwithstanding
      anything in this Agreement to the contrary, the obligations of the Company
      and
      Company Shareholders to effect the transactions contemplated herein will be
      subject to the satisfaction at or prior to the Closing, or waiver by the
      Company, of each of the following conditions:

     

    7.1 Representations
      and Warranties True.
      The
      representations and warranties of China-Biotics contained in this Agreement
      shall be true, complete and accurate in all material respects as of the date
      when made and at and as of the Closing, as though such representations and
      warranties were made at and as of such time, except for changes permitted or
      contemplated in this Agreement, and except insofar as the representations and
      warranties relate expressly and solely to a particular date or period, in which
      case they shall be true and correct at the Closing with respect to such date
      or
      period.

     

    7.2 Performance.
      China-Biotics shall have performed and complied in all material respects with
      all agreements, covenants, obligations and conditions required by this Agreement
      to be performed or complied with by China-Biotics at or prior to the
      Closing.

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

    7.3 Required
      Approvals and Consents.

     

    (a) All
      action required by law and otherwise to be taken by the directors and
      stockholders of China-Biotics to authorize the execution, delivery and
      performance of this Agreement and the consummation of the transactions
      contemplated hereby shall have been duly and validly taken.

     

    (b) All
      Consents of or from all Authorities required hereunder to consummate the
      transactions contemplated herein, shall have been delivered, made or obtained,
      and the Company shall have received copies thereof.

     

    7.4 Agreements
      and Documents.
      The
      Company shall have received the following agreements and documents, each of
      which shall be in full force and effect:

     

    (a) a
      copy of
      the written consent of the board of directors of China-Biotics, executed by
      all
      such directors, approving the transactions contemplated by this Agreement,
      including the issuance of the Exchange Shares and the matters referred to in
      Section 7.4(f) of this Agreement;

     

    (c) a
      certified list of the record holders of capital stock of China-Biotics as of
      the
      most recent practicable date evidencing all of the shares of China-Biotics
      capital stock issued and outstanding; 

     

    (d) a
      certificate of good standing of China-Biotics from the State of Delaware and
      any
      other states where China-Biotics is qualified to do business, as of the most
      recent practicable date; 

     

    (e) written
      resignations of the officers and directors of China-Biotics, effective as of
      the
      Closing, and evidence that prior to their resignations, the pre-Closing
      directors of China-Biotics appointed to the board of directors of China-Biotics
      the persons designated by the Company Shareholders, to be effective as of the
      Closing; 

     

    (f) a
      written
      agreement between Stan Ford and China-Biotics (the “Stan
      Ford Agreement”),
      in
      form and substance satisfactory to the Company, whereby China-Biotics agrees
      to
      transfer to Mr. Ford (i) all of its right, title and interest in and to the
      726
      shares of stock of Diadem Resources Ltd. that it holds, and (ii) US$5,000,
      in
      exchange for the assumption by Mr. Ford of any and all liabilities associated
      therewith and the delivery by Mr. Ford to China-Biotics for cancellation of
      the
      20,000,000 shares of common stock of China-Biotics owned by Mr. Ford, the
      consummation of which shall be conditioned solely upon, and occur immediately
      after, the Closing;

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

    (g) a
      copy of
      a written consent of the board of directors of China-Biotics regarding the
      change of the list of authorized banking signatories for all bank accounts
      of
      China-Biotics to persons nominated by the Company, or evidence reasonably
      satisfactory to the Company that all bank accounts of China-Biotics have been
      closed with no further Liability thereunder; and

     

    (h) all
      books
      and records of China-Biotics.

     

    7.5 Adverse
      Changes.
      No
      Material Adverse Effect shall have occurred with respect to China-Biotics since
      November 30, 2005, except as expressly permitted or contemplated by this
      Agreement.

     

    7.7 No
      Proceeding or Litigation.
      No
      suit, action, investigation, inquiry or other proceeding by any Authority or
      other person or entity shall have been instituted or threatened which delays
      or
      questions the validity or legality of the transactions contemplated hereby
      or
      which, if successfully asserted, would, in the reasonable judgment of the
      Company, individually or in the aggregate, otherwise have a Material Adverse
      Effect on China-Biotics’ business, financial condition, prospects, assets or
      operations or prevent or delay the consummation of the transactions contemplated
      by this Agreement.

     

    7.8 Legislation.
      No Law
      shall have been enacted which prohibits, restricts or delays the consummation
      of
      the transactions contemplated hereby or any of the conditions to the
      consummation of such transaction.

     

    7.9 No
      Assets and Liabilities.
      China-Biotics shall have no material Liabilities, assets or operations, other
      than any Liabilities or assets, other than those that will be transferred to
      Stan Ford immediately after the Closing as set forth in Section
      7.4(f).

     

    7.10 Filings;
      Press Releases.
      China-Biotics shall have made such filings and press releases, in form and
      substance satisfactory to the Company, as may be requested by the Company to
      comply with any disclosure requirements under the U.S. securities
      regulations.

     

    7.11 Appropriate
      Documentation.
      The
      Company shall have received, in a form and substance reasonably satisfactory
      to
      Company, dated the Closing Date, copies of all documents, instruments and
      writings to evidence the fulfillment of the conditions set forth in this
      Article 7 as the Company may reasonably request.

     

    ARTICLE
      8

    TERMINATION
      AND ABANDONMENT

     

    8.1 Termination
      by Mutual Consent.
      This
      Agreement may be terminated at any time prior to the Closing by the written
      consent of the Company and China-Biotics.

     

    8.2 Termination
      by Either the Company or China-Biotics.
      This
      Agreement may be terminated by either the Company or China-Biotics if the
      Closing is not consummated by March 31, 2006 (provided that the right to
      terminate this Agreement under this Section 8.2 shall not be available to
      any party whose failure to fulfill any obligation under this Agreement has
      been
      the cause of or resulted in the failure of the Closing to occur on or before
      such date).

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

    8.3 Procedure
      and Effect of Termination.
      In the
      event of termination of this Agreement and abandonment of the transactions
      contemplated hereby by the Company or China-Biotics pursuant to this
      Article 8, written notice thereof shall be given to all other parties and
      this Agreement shall terminate and the transactions contemplated hereby shall
      be
      abandoned, without further action by any of the parties hereto. If this
      Agreement is terminated as provided herein:

     

    (a) Each
      of
      the parties shall, upon request, redeliver all documents, work papers and other
      material of the other parties relating to the transactions contemplated hereby,
      whether obtained before or after the execution hereof, to the party furnishing
      the same;

     

    (b) No
      party
      shall have any liability for a breach of any representation, warranty,
      agreement, covenant or the provision of this Agreement, unless such breach
      was
      due to a willful or bad faith action or omission of such party or any
      representative, agent, employee or independent contractor thereof;
      and

     

    (c) All
      filings, applications and other submissions made pursuant to the terms of this
      Agreement shall, to the extent practicable, be withdrawn from the agency or
      other person to which made.

     

    ARTICLE
      9

    MISCELLANEOUS
      PROVISIONS

     

    9.1 Expenses.
      China-Biotics and the Company shall each bear their own costs and expenses
      relating to the transactions contemplated hereby, including fees and expenses
      of
      legal counsel, accountants, investment bankers, brokers or finders, printers,
      copiers, consultants or other representatives for the services used, hired
      or
      connected with the transactions contemplated hereby.

     

    9.2 Amendment
      and Modification.
      Subject
      to applicable Law, this Agreement may be amended, supplemented or modified
      only
      in a writing duly executed by all of the parties hereto.

     

    9.3 Waiver
      of Compliance; Consents.
      Any
      failure of a party to comply with any obligation, covenant, agreement or
      condition herein may be expressly waived in writing by China-Biotics, on the
      one
      hand, and the Company and the Company Shareholders, on the other, but such
      waiver or failure to insist upon strict compliance with such obligation,
      covenant, agreement or condition shall not operate as a waiver of, or estoppel
      with respect to, any subsequent or other failure. No single or partial exercise
      of a right or remedy shall preclude any other or further exercise thereof or
      of
      any other right or remedy hereunder. Whenever this Agreement requires or permits
      the consent by or on behalf of a party, such consent shall be given in writing
      in the same manner as for waivers of compliance.

     

    9.4 No
      Third Party Beneficiaries.
      Nothing
      in this Agreement shall entitle any person or entity (other than a party hereto
      and his, her or its respective successors and assigns permitted hereby) to
      any
      claim, cause of action, remedy or right of any kind.

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

    9.5 Notices.
      All
      notices, requests, demands and other communications required or permitted
      hereunder shall be made in writing and shall be deemed to have been duly given
      and effective: (i) on the date of delivery, if delivered personally;
      (ii) on the date of transmission, if sent by facsimile, telecopy, telex or
      other similar telegraphic communications equipment; (iii) one business day
      after
      delivery to an overnight delivery courier service for next-business day
      delivery; or (iv) on the fifth business day following the date of mailing,
      if
      sent by registered mail, return receipt requested, postage prepaid, and in
      each
      case addressed to such party at the following address:

     

    
      	
              If
                to the Company or, following the Closing, to
                China-Biotics:

               

              Sinosmart
                Group Inc.

              No.
                999 Ningqiao Road

              Jinqiao
                Export Processing Zone

              Pudong,
                Shanghai 201206

              People’s
                Republic of China

              Attn:
                President

              Fax:
                86-21-5834-7713

            	
              With
                a copy (which shall not constitute notice) to:

               

              Preston
                Gates & Ellis LLP

              925
                Fourth Avenue, Suite 2900

              Seattle,
                WA 98104

              Attn:
                Eric Simonson

              Fax:
                (206) 623-7022

               

              And
                to:

              Preston
                Gates & Ellis LLP

              35/F,
                Two International Finance Centre

              8
                Finance Street, Central

              Hong
                Kong

              Attn:
                Mr. Clifford Ng/ Ms. Felicia Law

              Fax:
                (852) 2511-9515

               

            
	
              If
                to China-Biotics prior to the Closing:

               

              China-Biotics,
                Inc.

              c/o
                Chinamerica Fund, LP

              2909
                St. Andrews Drive

              Richardson,
                TX 75082

              Attn:
                Mr. Beau Johnson

              Telephone
                No.: 972-690-1177

              Facsimile:
                972-690-1306 

              
                 

                And
                  to:

                Stan
                  Ford

                1000
                  355 Burrand Street

                Vancouver,
                  BC V6C 2G8

                Telephone
                  No.: 604-687-5257

                Facsimile:
                  604-608-6163

              

            	
              With
                a copy (which shall not constitute notice) to:

               

              Secore
                & Waller, LLP

              12221
                Merit Drive, Suite 1100

              Dallas,
                TX 75251

              Attn:
                Ms. Joan Conway Waller

              Telephone
                No.: 972-776-0200

              Facsimile:
                972-776-0240

               

              And
                to:

              Heskett
                & Heskett

              501
                South Johnston, Suite 501

              Bartlesville,
                OK 74003

              Attn:
                Mr. John Heskett

              Telephone
                No.: 918-336-1773

              Facsimile:
                918-336-3152

            

    

    

    or
      to
      such other person or address as such party shall furnish to the other parties
      hereto in writing in accordance with this Section 9.5.

     

    If
      to a
      Company Shareholder, to the appropriate address set forth on the signature
      page
      hereto or at such other address as such Company Shareholder shall furnish to
      the
      other parties hereto in writing in accordance with this Section
      9.5.

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

    9.6 Assignment.
      This
      Agreement and all of the provisions hereof shall be binding upon and inure
      to
      the benefit of the parties hereto and their respective successors and permitted
      assigns, but neither this Agreement nor any of the rights, interests or
      obligations hereunder shall be assigned (whether voluntarily, involuntarily,
      by
      operation of law or otherwise) by any of the parties hereto without the prior
      written consent of the other parties.

     

    9.7 Governing
      Law.
      This
      Agreement and the legal relations among the parties hereto shall be governed
      by
      and construed in accordance with the internal substantive laws of Delaware
      (without regard to the laws of conflict that might otherwise apply) as to all
      matters, including matters of validity, construction, effect, performance and
      remedies.

     

    9.8 Counterparts.
      This
      Agreement may be executed in one or more counterparts, each of which shall
      be
      deemed an original, but all of which together shall constitute one and the
      same
      instrument.

     

    9.9 Headings.
      The
      table of contents and the headings of the sections and subsections of this
      Agreement are inserted for convenience only and shall not constitute a part
      hereof.

     

    9.10 Entire
      Agreement.
      This
      Agreement, and any schedules and exhibits hereto and other writings referred
      to
      in this Agreement or any such exhibit or other writing are part of this
      Agreement, together they embody the entire agreement and understanding of the
      parties hereto in respect of the transactions contemplated by this Agreement
      and
      together they are referred to as this “Agreement” or the “Agreement.” There are
      no restrictions, promises, warranties, agreements, covenants or undertakings,
      other than those expressly set forth or referred to in this Agreement. This
      Agreement supersedes all prior agreements and understandings between the parties
      with respect to the transaction or transactions contemplated by this Agreement.
      

     

    9.11 Remedies
      and Injunctive Relief.
      It is
      expressly agreed among the parties hereto that monetary damages would be
      inadequate to compensate a party hereto for any breach by any other party of
      its
      covenants in Article 5 hereof. Accordingly, the parties agree and
      acknowledge that any such violation or threatened violation shall cause
      irreparable injury to the other and that, in addition to any other remedies
      which may be available, such party shall be entitled to injunctive relief
      against the threatened breach of Article 5 hereof or the continuation of
      any such breach without the necessity of proving actual damages and may seek
      to
      specifically enforce the terms thereof.

     

    9.12 Definition
      of Material Adverse Effect.
      “Material
      Adverse Effect”
with
      respect to a party means a material adverse change in or effect on the business,
      operations, financial condition, properties or liabilities of the party taken
      as
      a whole; provided, however, that a Material Adverse Effect shall not be deemed
      to include (i) changes as a result of the announcement of this transaction,
      (ii) events or conditions arising from changes in general business or
      economic conditions or (iii) changes in generally accepted accounting
      principles.

     

    9.13 Severability.
      The
      provisions of this Agreement will be deemed severable and the invalidity or
      unenforceability of any provision will not affect the validity or enforceability
      of the other provisions hereof; provided that if any provision of this
      Agreement, as applied to any party hereto or to any circumstance, is adjudged
      by
      an Authority, arbitrator, or mediator not to be enforceable in accordance with
      its terms, the parties hereto agree that the Authority, arbitrator, or mediator
      making such determination will have the power to modify the provision in a
      manner consistent with its objectives such that it is enforceable, and/or to
      delete specific words or phrases, and in its reduced form, such provision will
      then be enforceable and will be enforced.

     

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

    9.14 Construction.
      The
      parties hereto have participated jointly in the negotiation and drafting of
      this
      Agreement. If an ambiguity or question of intent or interpretation arises,
      this
      Agreement will be construed as if drafted jointly by the parties hereto and
      no
      presumption or burden of proof will arise favoring or disfavoring any party
      hereto because of the authorship of any provision of this Agreement. The words
      “include,” “includes,” and “including” will be deemed to be followed by “without
      limitation.” Pronouns in masculine, feminine, and neuter genders will be
      construed to include any other gender, and words in the singular form will
      be
      construed to include the plural and vice versa, unless the context otherwise
      requires. 

     

    (remainder
      of page left intentionally blank)

     

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
      executed as of the day and year first above written.

     

    
      	 SINOSMART
              GROUP INC.	 	 	 CHINA-BIOTICS,
              INC.
	 	 	 	 
	/s/ Song
              Jinan	 	 	/s/ Stan
              Ford
	
              
                

              

              Name:
                SONG JINAN 

              Title:
                Director

            	 	 	
              
Name:
              STAN FORD 
              Title:
                President

            

    

     

    
      	 COMPANY
              SHAREHOLDERS:	 	 	 
	 	 	 	 
	 Song
              Jinan 	 	 	 Yan
              Yihong
	 	 	 	 
	/s/ Song
              Jinan	 	 	/s/ Yan
              Yihong
	
              

              Address:
                Ningqiao Road, Jingqiao Export Processing Zone, 
Pudong, Shanghai
                201206, People’s Republic of China   

              Facsimile
                No: 86-21-5834-7713

            	 	 	
              

              Address:
                Ningqiao Road, Jingqiao Export Processing Zone, 
Pudong, Shanghai
                201206, People’s Republic of China   

              Facsimile
                No: 86-21-5834-7713

            

    

     

    
      	 Yan
              Li 	 	 	 Kwok
              Kin Kwok
	 	 	 	 
	/s/ Yan
              Li	 	 	/s/ Kwok
              Kin Kwok
	
              

              Address:
                Ningqiao Road, Jingqiao Export Processing Zone, 
Pudong, Shanghai
                201206, People’s Republic of China   

              Facsimile
                No: 86-21-5834-7713  

            	 	 	
              

              Address:
                Flat B, 7/F., Block 8, Caribbean Coast, Tung Chung, 
New Territories,
                Hong Kong    

              Facsimile
                No: 852-2802-3223 

            

    

     

    
      	 Huang
              Weida	 	 	 Charming
              Leader Group Limited
	 	 	 	 
	/s/ Huang
              Weida	 	 	/s/ TAI
              Kwok Leung, Alexander
	
              

              Address:
                Ningqiao Road, Jingqiao Export Processing Zone, 
Pudong, Shanghai
                201206, People’s Republic of China   

              Facsimile
                No: 86-21-5834-7713  

            	 	 	
              

              Name: 
                TAI Kwok Leung, Alexander

              Title: 
                Director   

              Address:
                20F., Diamond Exchange Building, 8-10 Duddell Street, Hong
                Kong 

              Facsimile
                No: 853-2230-0733 

            

    

     

    
      
        [Signature
          Page to Securities Exchange Agreement]

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	 Chinamerica
              Fund, L.P.	 	 	 Chinamerica
              Sino-biotics Acquisition, LLC
	 
              
              By:
                Chinamerica Partners, LP

              Its
                General
                Partner

              By:
                Chinamerica Holdings, LLC

              Its
                General
                Partner

            	 	 	 

              By:
                Chinamerica Holdings, LLC

              Its
                Manager

            
	 	 	 	 
	/s/ Beau
              Johnson	 	 	/s/
              Beau Johnson 
	
              

              Name: 
                Beau Johnson  

              Title: 
                Manager   

              Address:
                2909 St. Andrews Drive

              Richardson,
                Texas 75082 

              Facsimile
                No: (972)
                690-1306 

            	 	 	
              

              Name: 
                Beau Johnson  

              Title: 
                Manager   

              Address:
                2909 St. Andrews Drive 

              Richardson,
                Texas 75082 

              Facsimile
                No: (972)
                690-1306

            

    

     

    
      	 Pope
              Investments LLC	 	 	 Halter/Pope
              USX China Fund
	 Pope
              Asset Managment, LLC, Manager	 	 	 
	 	 	 	 
	/s/ William
              P. Wells	 	 	/s/ Stephen
              Parr
	
              

              Name: 
                William P. Wells 

              Title:  
                Member 

              Address:5100
                Poplar Avenue, Suite 512

              Memphis,
                TN 38137

              Facsimile
                No: 901-763-4229

            	 	 	
              

              Name: 
                Stephen Parr 

              Title:  President 

              Address:
                5100 Poplar Avenue, Suite 512

              Memphis,
                TN 38137

              Facsimile
                No: 
                901-763-4229

            

    

     

    
      	 BFS
              US Special Opportunities Trust PLC	 	 	 Renaissance
              US Growth Investment Trust PLC
	 
              
              By: 
                RENN Capital Group, Inc.

              Its
                Investment Adviser

            	 	 	 

              By: RENN
                Capital Group, Inc.

                
                Its Investment Manager

            
	 	 	 	 
	 	 	 	 
	/s/ Russell
              Cleveland	 	 	/s/ Russell
              Cleveland
	
              

              Name:
                Russell Cleveland

              Title:
                President

              Address:
                8080 N. Central Expressway, Suite 210, Dallas, Texas 75206

              Facsimile
                No: 214-891-8291

            	 	 	
              

              Name:
                Russell Cleveland

              Title:
                President

              Address:
                8080 N. Central Expressway, Suite 210, Dallas, Texas 75206

              Facsimile
                No: 214-891-8291

            

    

     

    
      	 Matt
              Hayden	 	 	 
	 	 	 	 
	/s/ Matt
              Hayden	 	 	 
	
              

              Address:1298
                Prospect Street, Suite D

              LaJolla,
                CA 92037

              Phone/Facsimile
                No: 843-361-0758

            	 	 	
            

    

     

    
      
        [Signature
          Page to Securities Exchange Agreement]

      

      
        
        

        
          

        

      

      
        
        

      

    

    EXHIBIT
      A

    COMPANY
      SHAREHOLDERS

     

    
      	
              Company
                Shareholder

            	 	 	
              Shares

            	 
	
              Song
                Jinan

            	 	 	
              4,545
                

            	 
	
              Yan
                Li

            	 	 	
              2,655
                

            	 
	
              Huang
                Weida

            	 	 	
              1,350
                

            	 
	
              Yan
                Yihong

            	 	 	
              450
                

            	 
	
              Kwok
                Kin Kwok

            	 	 	
              1,000
                

            	 
	
              Charming
                Leader Group Limited

            	 	 	
              1,429
                

            	 
	
              Chinamerica
                Fund, LP

            	 	 	
              423

            	 
	
              Chinamerica
                Sino-biotics Acquisition LLC

            	 	 	
              705
                

            	 
	
              Pope
                Investments LLC

            	 	 	
              1,307

            	 
	
              Halter/Pope
                USX China Fund

            	 	 	
              56

            	 
	
              Matt
                Hayden

            	 	 	
              85
                

            	 
	
              BFS
                US Special Opportunities Trust PLC

            	 	 	
              
              

              141

            	 
	
              Renaissance
                US Growth Investment Trust PLC

            	 	 	
              141
                

            	 
	
              Total

            	 	 	
              14,287
                

            	 

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    EXHIBIT
      B

    EXCHANGE
      SHARES

     

    
      	
              Company
                Shareholder / Designee

            	 	
              Shares

            	 
	
              Song
                Jinan

            	 	 	
              5,084,037
                

            	 
	
              Yan
                Li

            	 	 	
              2,969,883
                

            	 
	
              Huang
                Weida

            	 	 	
              1,510,110

            	 
	
              Yan
                Yihong

            	 	 	
              503,370

            	 
	
              Kwok
                Kin Kwok 

              To
                be issued to Bright Treasure Group Ltd.

            	 	 	
              1,118,600

            	 
	
              Charming
                Leader Group Limited

              To
                be issued as follows:

              Charming
                Leader Group Limited

              Fascinating
                Gain Investments Limited

              Sharpsville
                Investments Limited

              Yiu
                Ying Fai

              Po
                Ka Tsun Karlson

              Master
                Talent Group Ltd.

              Bright
                Boom Group Ltd. 

            	 	 	
              734,850

              734,850

              500,650

              290,650

              221,000

              221,000

              221,000

            	 
	
              Total

            	 	 	
              2,924,000

            	 
	
              Chinamerica
                Fund, LP

            	 	 	
              276,752

            	 
	
              Chinamerica
                Sino-biotics Acquisition LLC

            	 	 	
              461,255

            	 
	
              Pope
                Investments LLC

            	 	 	
              855,240

            	 
	
              Halter/Pope
                USX China Fund

            	 	 	
              36,900

            	 
	
              Matt
                Hayden

            	 	 	
              55,351

            	 
	
              BFS
                US Special Opportunities Trust PLC

            	 	 	
              92,251

            	 
	
              Renaissance
                US Growth Investment Trust PLC

            	 	 	
              92,251

            	 
	
              Total

            	 	 	
              15,980,000Unassociated Document

    Exhibit
      10.2

    FORM
      OF LOCKUP AGREEMENT

    

    THIS
      LOCKUP AGREEMENT (this “Agreement”)
      is
      entered into as of March 22, 2006 among the stockholder listed on the signature
      page hereto (“Stockholder”),
      China-Biotics, Inc., a Delaware corporation (the “Company”),
      and
      Chinamerica Fund, LP (“Chinamerica”).
      In
      consideration of and subject to the mutual agreements, terms and conditions
      herein contained and other good and valuable consideration, the receipt and
      sufficiency of which are hereby acknowledged, the parties hereto agree as
      follows:

    

    1. Lockup.
      Without
      the prior written consent of the Company and Chinamerica, Stockholder
      will
      not,
      from the date of this Agreement until the one year anniversary of this
      Agreement, directly or indirectly, (a) offer, pledge, announce the intention
      to
      sell, sell, assign, transfer, encumber, contract to sell, sell any option or
      contract to purchase, purchase any option or contract to sell, grant any option,
      right or warrant to purchase, or otherwise transfer or dispose of, directly
      or
      indirectly, any Lockup Shares (defined below), or (b) enter into any swap or
      other agreement that transfers, in whole or in part, any of the economic
      consequences of ownership of any Lockup Shares, whether any such transaction
      described is to be settled by delivery of Lockup Shares, other securities,
      cash
      or otherwise; provided
      that
      this Agreement will not prevent the transfer of Lockup Shares by Stockholder
      (i) as
      a gift
      or gifts to family members or charitable organizations to the extent that any
      donee thereof agrees in writing (in form and substance acceptable to the
      Company) to be bound by the terms of this Agreement or (ii) to any equity
      owner(s) of Stockholder provided that such transfer is made pursuant to an
      effective registration statement or exemption under the U.S. Securities Act
      of
      1933, as amended, and in compliance with any other applicable laws and to the
      extent that any such transferee thereof executes and delivers to the Company
      the
      agreement to be bound by the terms of this Agreement attached hereto as
Annex
      A.
      “Lockup
      Shares”
means
      ________ shares of the Company’s common stock (the “Common
      Stock”)
      currently held by Stockholder. For clarification, any additional shares of
      Common Stock, or any or any securities convertible into or exercisable or
      exchangeable for Common Stock (including without limitation Common Stock or
      any
      securities convertible into or exercisable or exchangeable for Common Stock
      that
      may be deemed to be beneficially owned by the undersigned in accordance with
      the
      rules and regulations of the U.S. Securities and Exchange Commission), currently
      held or acquired by Stockholder after the date of this Agreement are not and
      will not be subject to the restrictions set forth in this
      Agreement.

    

    2. Consent
      to Decline Transfers.
      Stockholder
      agrees
      and consents that the Company and its transfer agent and registrar are hereby
      authorized to decline to make any transfer of Lockup Shares if such transfer
      would constitute a violation or breach of this Agreement.

    

    3. Amendment.
      This
      Agreement may only be amended, supplemented or modified by a writing executed
      by
      all of the parties hereto.

    

    4. Assignability.
      This
      Agreement shall be binding upon and inure to the benefit of the respective
      parties hereto, their successors and permitted assigns, heirs and personal
      representatives. Neither this Agreement nor any right, remedy, obligation or
      liability hereunder shall be assignable by any party hereto without the prior
      written consent of each other party, except as otherwise provided in
Section
      1.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    5. Headings.
      The
      section headings in this Agreement are for reference purposes only and shall
      not
      affect in any way the interpretation of this Agreement.

    

    6. Governing
      Law.
      This
      Agreement shall be governed by and construed and enforced in accordance with
      the
      laws of the State of Delaware, without giving effect to principles of conflicts
      of laws thereof that would require the application of the law of another
      jurisdiction.

    

    7. Counterparts.
      This
      Agreement may be executed in any number of counterparts, each of which when
      so
      executed and delivered shall be deemed to be an original and all of which
      together shall be deemed to be one and the same agreement.

    

    [Remainder
      of page intentionally left blank]

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF, the Company, Chinamerica and Stockholder have executed this
      Agreement as of the date first written above.

     

    
      
        	 	 	 
	 	CHINA-BIOTICS,
                INC.
	 
 	 
 	 
 
	 	By:  	 
	 	
                
                  

                

                Name:____________________________________________

                Title:_____________________________________________

              

      

      
        	 	 	 
	 	CHINAMERICA
                FUND, LP
	 	 	 
	 	 By:
                	 Chinamerica
                Partners, LP
	 	 	 Its
                General Partner
	 	 	 
	 	 By:
                	 Chinamerica
                Holdings, LLC
	 	 	 Its
                General Partner
	 
 	 
 	 
 
	 	By:  	 
	 	
                

                Name:
                  Beau Johnson

                Title:
                  Its Manager

              

      

    

     

    
      	 	 	 
	 	 STOCKHOLDER
	 	 
	 	
              
                

              

            
	Date: 	By:  	 
	 	
              
                

              

              Name:____________________________________________

              Title:_____________________________________________

            

 

    
      
        [Signature
          Page to Lockup Agreement]

      

      
        
        

        
          

        

      

      
        
        

      

    

    ANNEX
      A

    

    ASSIGNMENT
      AND ASSUMPTION AGREEMENT

    

    This
      ASSIGNMENT AND ASSUMPTION AGREEMENT (“Assignment”)
      is
      made as of ______________________, 200_, by and between __________
      (“Assignor”)
      and
      ___________ (“Assignee”).

    

    RECITALS

    

    A. Assignor
      entered into a Lockup Agreement, dated _______, 2006, by and among Chinamerica
      Fund, LP (“Chinamerica”),
      China-Biotics, Inc., a Delaware corporation (the “Company”),
      and
      the stockholders listed on the signature page thereto (the “Lockup
      Agreement”).

    

    B. Assignor
      entered into a Registration Rights Agreement, dated _______, 2006, by and among
      the Company and the stockholders listed on the signature page thereto (the
      “Registration
      Rights Agreement”).

    

    C. In
      connection with this Assignment, Assignor is transferring shares of the
      Company’s common stock to Assignee (the “Transfer
      Shares”),
      some
      or all of which are Lockup Shares (as defined in the Lockup Agreement) and/or
      Registrable Securities (as defined in the Registration Rights
      Agreement).

    

    D. Assignor
      desires to assign all of its rights, title, and interests in, and all of its
      duties, obligations and responsibilities under, the Lockup Agreement and
      Registration Rights Agreement to Assignee, and Assignee desires to assume all
      of
      such rights, title, and interests in, and all such duties, obligations and
      responsibilities under, the Lockup Agreement and Registration Rights Agreement,
      in each instance to the extent that such rights, title, and interests, and
      such
      duties, obligations and responsibilities, relate to the Transfer
      Shares.

    

    NOW
      THEREFORE, in consideration of the mutual promises made in this Assignment
      and
      other good and valuable consideration, receipt of which is hereby acknowledged,
      the parties agree as follows:

    

    AGREEMENT

    

    1. Assignment.
      Assignor hereby assigns, transfers, and conveys to Assignee all of Assignor’s
      rights, title, and interests in, and all of Assignor’s duties, obligations and
      responsibilities under, the Lockup Agreement and Registration Rights Agreement,
      in each instance to the extent that such rights, title, and interests, and
      such
      duties, obligations and responsibilities, relate to the Transfer
      Shares.

    

    2. Assumption.
      Assignee hereby accepts and assumes all of Assignor’s rights, title, and
      interests in, and all of Assignor’s duties, obligations and responsibilities
      under, the Lockup Agreement and Registration Right Agreement, in each instance
      to the extent that such rights, title, and interests, and such duties,
      obligations and responsibilities, relate to the Transfer Shares. Assignee hereby
      agrees to be bound by the terms and conditions of each of the Lockup Agreement
      and Registration Rights Agreement with respect to the Transfer Shares.

    

    3. Assignee
      Representations.
      Assignee represents to Assignor that it has reviewed the Lockup Agreement and
      Registration Rights Agreement, and has obtained, to the extent Assignor deems
      necessary, legal advice with respect to the transactions contemplated hereunder,
      the effects of entering into this Assignment, and the consequences of being
      bound by the terms and conditions of the Lockup Agreement and Registration
      Rights Agreement. 

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    4. Binding
      Effect.
      The
      provisions of this Assignment shall be binding upon and inure to the benefit
      of
      Assignor and Assignee and their respective successors and permitted
      assigns.

    

    5. Counterparts.
      This
      Assignment may be executed in counterparts, each of which when so executed
      and
      delivered shall be deemed to be an original and all of which together shall
      be
      deemed to be one and the same agreement.

    

    6. Applicable
      Law.
      This
      Assignment shall be governed by and construed and enforced in accordance with
      the laws of the State of Delaware, without giving effect to principles of
      conflicts of laws thereof that would require the application of the law of
      another jurisdiction.

     

    SIGNATURE
      PAGE - ASSIGNMENT AND ASSUMPTION AGREEMENT

    

    Dated
      as
      of the date and year first above written.

    

      
        	 	 	 
	 	ASSIGNOR:
	 
 	 
 	 
 
	 	By:  	 
	 	
                

                Name: ________________________________________________

                Title: _________________________________________________

              

      

    

     

    
      	 	 	 
	 	ASSIGNEE:
	 
 	 
 	 
 
	 	By:  	 
	 	
              

              Name: ________________________________________________

              Title: _________________________________________________

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