GUARANTY
EXECUTION
COPY
THIS
GUARANTY
(this
“Guaranty”) is made effective as of December 11, 2007 by SONG
JINAN, an
individual, with his principal business address located at No.
999
Ningqiao Road, Jinqiao Export Processing Zone, Pudong, Shanghai 201206, People’s
Republic of China (the “Guarantor”), to and for the benefit of XXXX
INVESTMENTS II LLC,
a
Delaware limited liability company, with its principal executive offices located
at 0000 Xxxxxx Xxxxxx, Xxxxx 000, Xxxxxxx, Xxxxxxxxx 00000
(“Purchaser”).
WHEREAS,
China-Biotics, Inc, a
Delaware company (“Issuer”), and Purchaser have entered into that certain
Investment Agreement dated as of even date herewith (as amended, supplemented
or
modified from time to time, the “Agreement”), and Issuer has issued to Purchaser
its 4% Senior Convertible Notes Due 2010 in the aggregate principal amount
of
TWENTY FIVE MILLION DOLLARS ($25,000,000) (the “Notes);
WHEREAS,
Guarantor, as an inducement for Purchaser’s entering into the Agreement and
purchasing the Notes, offered and agreed to personally guarantee the performance
of and full and prompt payment of the Notes in full, with all accrued but unpaid
interest and any other payments which may be due thereunder, and to secure
his
guaranty with a pledge or deposit of Four Million shares of Common Stock of
the
Issuer;
WHEREAS,
it is a
condition precedent to Purchaser’s obligation to consummate the transactions
contemplated by the Agreement, including the purchase of the Notes that
Guarantor execute and deliver this Guaranty; and
WHEREAS,
Guarantor acknowledges and confirms that, (a) he will benefit from the
Purchaser’s consummation of the transactions contemplated by the Agreement, (b)
the Notes constitute valuable consideration to Guarantor, (d) this Guaranty
is
intended to be an inducement to Purchaser to execute, deliver and perform under
the Agreement and to purchase the Notes, and (e) Purchaser is relying upon
this
Guaranty in consummating the transactions contemplated by the Agreement,
including the purchase of the Notes.
NOW, THEREFORE,
in
consideration of the foregoing and of the covenants and agreements hereinafter
set forth, the receipt and sufficiency of which are hereby acknowledged, and
as
an inducement for Purchaser to enter into the Notes, Guarantor, intending to
be
legally bound hereby, agrees as follows:
1. All
capitalized terms used in this Guaranty and not defined herein shall have the
defined meanings provided in the Agreement. Whenever the context so requires,
each reference to gender includes the masculine and feminine, the singular
number includes the plural and vice versa. The words “hereof” “herein” and
“hereunder” and words of similar import when used in this Guaranty shall refer
to this Guaranty as a whole and not to any particular provision of this
Guaranty, and references to section, article, annex, schedule, exhibit and
like
references are references to this Guaranty unless otherwise specified. An Event
of Default shall “continue” or be “continuing” until such Event of Default has
been cured or waived by Purchaser. References in this Guaranty to any person
shall include such person and its successors and permitted assigns.
2. Guarantor
hereby irrevocably, unconditionally and absolutely guarantees the prompt,
complete and full payment and performance when due, no matter how the same
shall
become due, but subject to any applicable grace periods, of all Notes
outstanding from time to time under the Notes, together with all interest
thereon and all other sums payable under the Notes, whether in respect of
interest, Default Interest, additional fees, expense reimbursement or otherwise,
(the “Guaranteed Obligations”).
3. As
collateral security for his obligations under this Guaranty, the Guarantor
shall
pledge Four Million (4,000,000) shares of the Issuer’s Common Stock and shall
have executed and delivered to Purchaser a pledge, assignment or similar
agreement in form and substance satisfactory to the Purchaser with respect
thereto (the “Pledge Agreement”), and shall have taken such other steps or
actions as Purchaser may reasonably require to perfect its interest in such
collateral.
4. The
Guarantor shall also be responsible for and pay, or promptly reimburse the
Purchaser all out-of-pocket expenses (including reasonable fees and expenses
of
counsel) incurred in the enforcement or protection of rights hereunder, after
proper demand under this Guaranty has been made and not timely honored by
Guarantor.
5. This
Guaranty is a guaranty of payment and not a guaranty of collection. If any
Guaranteed Obligation is not satisfied when due, whether by acceleration or
otherwise, the Guarantor shall forthwith satisfy such Guaranteed Obligation,
upon demand, and no such satisfaction shall discharge the obligations of the
Guarantor hereunder until all Guaranteed Obligations have been indefeasibly
paid
in cash, or shares and performed and satisfied in full and the Notes irrevocably
terminated or converted into equity of the Issuer. The Guarantor reserves the
right to (a) set-off against any payment owing hereunder any amounts owing
by
the Purchaser to the Issuer, and (b) assert defenses which the Issuer may have
to payment of any Guaranteed Obligations other than defenses arising from the
bankruptcy or insolvency of the Issuer.
6. It
is the
intention hereof that Guarantor shall remain liable as a principal until the
full amount of all Guaranteed Obligations shall have been performed and fully
satisfied through payment in cash or conversion into Conversion Shares, or
some
combination thereof, subject to the provisions of the Notes, , notwithstanding
any act, omission or anything else which might otherwise operate as a legal
or
equitable discharge of Issuer or Guarantor.
7. Guarantor
acknowledges and agrees that his obligation hereunder as Guarantor shall not
be
impaired, modified, changed, released or limited in any manner whatsoever by
any
impairment, modification, change, release or limitation of the liability of
the
Issuer or any other guarantor of the Guaranteed Obligations or any other person
or his or their respective estates in bankruptcy resulting from the operation
of
any present or future provision of the bankruptcy laws or other similar statute,
or from the decision of any court.
8. Guarantor
agrees that his obligation hereunder is irrevocable, unconditional, and
independent of the obligations of Issuer or any other guarantor of the
Guaranteed Obligations. Guarantor shall take all reasonable actions to (i)
ensure that this Guaranty is and remains enforceable against Guarantor in
accordance with its terms and in order to (ii) fully effectuate the purposes,
terms and conditions of this Guaranty and the consummation of the transactions
contemplated hereby and performance and payment of the Guaranteed Obligations
hereunder.
9. Upon
payment of any of the Guaranteed Obligations by Guarantor, Guarantor shall
be
subrogated to the rights of the Purchaser against the Issuer with respect to
such Guaranteed Obligations so paid, and the Purchaser agrees to take, at such
Guarantor’s expense, such steps as the Guarantor may reasonably request to
implement such subrogation.
10. Any
notice or request hereunder shall be given to Guarantor or to Purchaser at
their
respective addresses and in the manner set forth in the Investment
Agreement.
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11. Guarantor
hereby agrees and acknowledges that no course of action or delay, renewal or
extension of this Guaranty or any rights or obligations hereunder, release
of
any other guarantor, release of any collateral, or any of the foregoing, or
delay, failure or omission on Purchaser’s part in enforcing this Guaranty or in
exercising any right, remedy, option or power hereunder shall affect the
liability of Guarantor or operate as a waiver of such or of any other right,
remedy, power or option or of any default, nor shall any single or partial
exercise of any right, remedy, option or power hereunder affect the liability
of
Guarantor or preclude any other or further exercise of such or any other right,
remedy, power or option. No waiver by Purchaser of any one or more defaults
by
Guarantor in the performance of any of the provisions of this Guaranty shall
operate or be construed as a waiver of any future default or defaults, whether
of a like or different nature.
12. If
any
term or provision of this Guaranty is adjudicated to be invalid under applicable
laws or regulations, such provision shall be inapplicable to the extent of
such
invalidity or unenforceability without affecting the validity or enforceability
of the remainder of this Guaranty, which shall be given effect so far as
possible.
13. This
Guaranty shall be governed by and construed in accordance with the internal
laws
of the State of New York. Any judicial proceeding brought by or against
Guarantor with respect to any of the Guaranteed Obligations or any of the rights
or obligations hereunder, this Guaranty or any related agreement may be brought
in any court of competent jurisdiction located the State of Delaware, and,
by
execution and delivery of this Guaranty, Guarantor accepts for himself and
in
connection with his properties generally and unconditionally the non-exclusive
jurisdiction of the aforesaid courts and irrevocably agree to be bound by any
judgment rendered thereby in connection with this Guaranty. Guarantor hereby
waives personal service of process and agree that service of process upon
Guarantor may be made by certified or registered mail, return receipt requested,
at Guarantor’ addresses specified or determined in accordance with Section 10,
and
service so made shall be deemed completed on the tenth (10th) Business Day
after
mailing. Any judicial proceeding by Guarantor against Purchaser involving,
directly or indirectly, any matter or claim in any way arising out of, related
to or connected with the Guaranteed Obligations, this Guaranty, shall be brought
only in a court located in the State of Delaware. Guarantor acknowledge that
Guarantor participated in the negotiation and drafting of this Guaranty, the
Agreement, the Notes and the other Transaction Documents (as defined in the
Agreement) and that, accordingly, Guarantor shall not move or petition a court
construing this Guaranty to construe it more stringently against Purchaser
than
against Guarantor.
14. This
Guaranty may be executed in one or more counterparts, all of which taken
together shall constitute one and the same instrument. This
Guaranty may be executed by facsimile transmission, which facsimile signatures
shall be considered original executed
counterparts for purposes of this Section 14,
and Guarantor agrees that he will be bound by his own facsimile signature and
that he accepts the facsimile signature of each other party to this
Guaranty.
15. This
Guaranty constitutes the entire agreement between Guarantor and Purchaser with
respect to the subject matter hereof and thereof, and supersedes all prior
agreements and understandings, if any, relating to the subject matter hereof
or
thereof. Neither this Guaranty nor any provision hereof may be changed,
modified, amended, restated, waived, supplemented, canceled or terminated other
than by an agreement in writing signed by Purchaser and Guarantor. The Purchaser
may, without any notice to or consent from Guarantor, assign rights under this
Guaranty in connection with the transfer, sale, assignment, pledge or other
alienation of any of the Notes. Guarantor may not assign its right, interests
or
obligations hereunder to any other person (except by operation of law) without
the prior written consent of the Purchaser.
[SIGNATURES
APPEAR ON THE FOLLOWING PAGE]
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IN
WITNESS WHEREOF, the parties have executed this Guaranty as of the day and
year
first above written.
| GUARANTOR: | ||
| SONG JINAN | ||
| /s/ Song Jinan | ||
| PURCHASER: | ||
|
XXXX INVESTMENTS II LLC
By:
Xxxx Asset Management, LLC
Its:
Manager
|
||
| |
|
|
| By: | /s/ Xxxxxxx X. Xxxxx | |
| Name: | Xxxxxxx X. Xxxxx | |
| Title: | Manager | |
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