Exhibit 10.23

SHAREHOLDERS AGREEMENT
 
of
 
HYPOR AGFEED BREEDING COMPANY INC.

DATED AS OF DECEMBER 11, 2009
 
 
 

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TABLE OF CONTENTS

       
Page
         
ARTICLE 1
 
DEFINITIONS AND INTERPRETATION
1
 
1.1
 
Defined Terms
1
 
1.2
 
Company Documentation
7
 
1.3
 
Interpretation and Rules of Construction
8
ARTICLE 2
 
CAPITAL /PERCENTAGE INTERESTS/FUTURE FINANCING
9
 
2.1
 
Initial Capital Contributions
9
 
2.2
 
Equity Interest/Cash Investment
9
 
2.3
 
Additional Capital Commitments
9
ARTICLE 3
 
DISTRIBUTIONS TO SHAREHOLDERS
10
 
3.1
 
Distributions
10
 
3.2
 
Distribution of Assets in Kind
10
ARTICLE 4
 
REPRESENTATIONS AND WARRANTIES
11
 
4.1
 
Representations and Warranties of the Shareholders
11
ARTICLE 5
 
MANAGEMENT AND CONTROL
12
 
5.1
 
Board Composition
12
 
5.2
 
Matters Requiring Consent of the Shareholders
13
 
5.3
 
Matters Requiring Consent of AGFEED
14
 
5.4
 
Matters Requiring Consent of HYPOR
14
 
5.5
 
Rights of Shareholders
15
ARTICLE 6
 
REPORTS AND TAX RETURNS
15
 
6.1
 
Annual Budget and Business Plan
15
 
6.2
 
Tax Returns, Books and Records
15
ARTICLE 7
 
TRANSFERS OF SHARES
16
 
7.1
 
Restrictions on Transferability
16
 
7.2
 
Attempted Transfers in Contravention
16
 
7.3
 
Transfers to Affiliates
16
 
7.4
 
Permitted Disposition of an Interest
16
 
7.5
 
Grant of Option
17
 
7.6
 
Exercise of Option
17
 
7.7
 
Bona Fide Offer
17

 
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TABLE OF CONTENTS
(continued)
 

       
Page
         
ARTICLE 8
 
PURCHASE PRICE
18
 
8.1
 
Purchase Price
18
 
8.2
 
Bona Fide Offer
18
ARTICLE 9
 
SUBSTITUTED SHAREHOLDERS/ADDITIONAL SHAREHOLDERS
18
 
9.1
 
Substituted Shareholders
18
 
9.2
 
Additional Shareholders
18
ARTICLE 10
 
CONFIDENTIALITY
19
 
10.1
 
Confidentiality and Non-Disclosure
19
ARTICLE 11
 
DISSOLUTION OF THE COMPANY
20
 
11.1
 
Dissolution Events
20
 
11.2
 
Winding-Up
20
 
11.3
 
Rights of Shareholders
20
ARTICLE 12
 
EVENT OF DEFAULT/TERMINATION
21
 
12.1
 
Event of Default
21
 
12.2
 
Effect of Event of Default
22
 
12.3
 
Liquidation and Dissolution
22
 
12.4
 
Power of Attorney in Event of Default
22
 
12.5
 
Termination
23
ARTICLE 13
 
ACKNOWLEDGMENT/FEES
23
 
13.1
 
Production and Distribution Agreement
23
 
13.2
 
AgFeed Lease Agreement
23
 
13.3
 
AGFEED Authorized Signatory
23
ARTICLE 14
 
MISCELLANEOUS
23
 
14.1
 
Authority to Amend
23
 
14.2
 
Notices
23
 
14.3
 
Name Change
24
 
14.4
 
Binding Effect
24
 
14.5
 
Construction
24
 
14.6
 
Entire Agreement
24

 
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TABLE OF CONTENTS
(continued)
 

       
Page
           
14.7
 
Headings
24
 
14.8
 
Severability
24
 
14.9
 
Incorporation by Reference
24
 
14.10
 
Further Action
24
 
14.11
 
Variation of Pronouns
24
 
14.12
 
Governing Law; Consent to Jurisdiction
25
 
14.13
 
Specific Performance
25
 
14.14
 
Counterpart Execution; Facsimile
25

 
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EXHIBITS

Exhibit A – Shareholders' Names, Addresses, Capital Contributions, Equity
Interest and Number of Shares
Exhibit B – AgFeed Lease Agreement
Exhibit C – Hypor Production and Distribution Agreement
Exhibit D – 2009 Approved Annual Budget and Business Plan
Exhibit E – Form of Share Transfer Form

SCHEDULES

Schedule 1 – Exception to Business Activities of the Company

 
 

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SHAREHOLDERS AGREEMENT

THIS SHAREHOLDERS AGREEMENT (this "Agreement") is made and entered into as of
December 11, 2009 (the "Effective Date"), by and between AgFeed Industries,
Inc., a company formed under the laws of The British Virgin Islands ("AGFEED"),
and Hypor B.V., a company incorporated under the laws of The Netherlands
("HYPOR").  AGFEED, HYPOR and any other parties that become a party hereto after
the Effective Date are hereinafter sometimes referred to collectively as the
"Shareholders," and individually as a "Shareholder" of Hypor Agfeed Breeding
Company Inc. (the "Company").
 
WHEREAS, AGFEED is one of the largest commercial hog producers and one of the
largest premix feed companies in the Peoples Republic of China ("PRC");
 
WHEREAS, HYPOR is active in the field of breeding pigs and produces (great)
grand parent stock and semen of same stock levels for production of great grand
parent, grand parent and parent stock pigs and, in relation thereto, avails its
expertise, know-how and other information in relation to the selection and the
production of pigs (gilts and boars);
 
WHEREAS, in order to co-develop, co-operate and co-market a new genetic nucleus
farm in Wuning, China to produce great grand parent, grand parent and parent
stock pigs to supply farms owned by AGFEED and sell grand parent pigs and parent
stock pigs to customers of AGFEED and third parties within the Territory (as
defined in ARTICLE 1), AGFEED and HYPOR shall incorporate the Company as a
Chinese Wholly Owned Foreign Entity (“WOFE”)  with registered capital of
Eighteen Million Five Hundred Thousand China Yuan Renminbi (18,500,000 RMB) and
enter into this Agreement on the Effective Date under the laws of the State of
Nevada, United States;
 
WHEREAS, AGFEED shall own 85% of the Shares (as defined in ARTICLE 1) and HYPOR
own 15% of the Shares; and
 
WHEREAS, the Shareholders wish to enter into this Agreement to provide for,
among other things, the respective rights and obligations of the Shareholders to
each other and to the Company, and certain other matters.
 
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
agreements, promises and undertakings hereinafter set forth, the receipt and
sufficiency of which are hereby acknowledged, the Shareholders, intending to be
legally bound, hereby agree as follows:
 
ARTICLE 1

 
DEFINITIONS AND INTERPRETATION
 
1.1           Defined Terms.  Unless the context otherwise requires or unless
otherwise provided in this Agreement, capitalized terms used in this Agreement
shall have the meanings ascribed to them in this Section 1.1.

 
 

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1.1.1         "Additional Capital Contribution" refers to the working capital
needs of the Company that may arise from time-to-time and which a Shareholder is
actually obligated to contribute or alternatively satisfy pursuant to Section
2.3.1.
 
1.1.2         "Additional Shareholder" means any Person admitted as a
Shareholder pursuant to Section 9.2 hereof.
 
1.1.3         "Affected Shareholder" has the meaning set forth in Section 7.5.
 
1.1.4         "Affiliate" means, with respect to any Person, (a) any other
Person that, directly or indirectly, through one or more intermediaries,
controls, or is controlled by, or is under common control with, such Person; (b)
any Person owning or controlling 10% or more of the outstanding voting
securities of such Person; (c) any officer, director, manager, trustee or
general partner of such Person; (d) any other Person that is owned by at least
80% of the same equity owners as such Person; and (e) any Person who is an
officer, director, manager, trustee or general partner or holder of 10% or more
of the voting securities of any Person described in clauses (a) through (c);
provided that the Company shall not be deemed an Affiliate of any Shareholder or
any Affiliate of any Shareholder.  For purposes of this definition, "control,"
when used with respect to any specified Person, means the power to direct or
cause the direction of the management and policies of such Person, directly or
indirectly, by contract or otherwise, the term "controlled" has the meaning
correlative to the foregoing.
 
1.1.5         "AGFEED" has the meaning set forth in the preamble to this
Agreement.
 
1.1.6         "AgFeed Lease Agreement" means that Facilities Lease Agreement
between the Company and AGFEED dated as of the Effective Date attached hereto as
Exhibit B.
 
1.1.7         "Agreement" has the meaning set forth in the preamble to this
Agreement.  Terms such as "hereof," "hereto," "hereby," "hereunder" and "herein"
refer to this Agreement as a whole, unless the context otherwise requires.
 
1.1.8         "Annual Budget and Business Plan" has the meaning set forth in
Section 6.1.
 
1.1.9         "Approved Annual Budget and Business Plan" has the meaning set
forth in Section 6.1.  The 2009 Approved Annual Budget and Business Plan is
attached hereto as Exhibit C.
 
1.1.10       "Approved Sale" means the sale of all or substantially all of the
Company's Property or any sale of the Company in a single transaction or a
series of related transactions to a third party or a group of third parties,
other than to an Affiliate of a Shareholder, acting in concert (a) pursuant to
which such third party or group desires to acquire all of the Shares (whether by
merger, consolidation, recapitalization, reorganization or otherwise), in each
case for cash or Marketable Securities (b) which has been approved by the Board
pursuant to Section 5.2 and (c) pursuant to which all holders of Shares in the
Company receive (whether in such transaction or, with respect to an asset sale,
upon a subsequent liquidation) the same form and amount of consideration pro
rata for its Shares or, if any Shareholders are given an option as to the form
and amount of consideration to be received, all Shareholders are given the same
option, in each as if the proceeds of such transaction were distributed pursuant
to Section 3.1.

 
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1.1.11       "Assignee" means a Person who has acquired Shares as are assigned
to such Person, but who has not been admitted as a substitute Shareholder.
 
1.1.12       "Basis" means, with respect to any Company's Property, the adjusted
basis of such asset for U.S. federal income tax purposes.
 
1.1.13       "Board" means the Directors, or such of those Directors present at
a duly convened meeting of the Directors at which a quorum is present, such
quorum being a majority of the Directors.
 
1.1.14       "Bona Fide Offer" has the meaning set forth in Section 7.5.5.
 
1.1.15       "Business Day" means any day other than a Saturday, a Sunday or a
day on which commercial banks in New York, New York are required or authorized
to be closed.
 
1.1.16       "Capital Contributions" means, with respect to any Shareholder the
aggregate amount of money, services and the Fair Market Value of any Contributed
Property contributed to the Company as consideration for the subscription for
such Shareholder's Shares, or the value attributed to such money, services and
the Fair Market Value of any Contributed Property being its reasonable present
cash value, such cash value being not less than the amount to be credited for
the issue of the Shareholder's Shares.
 
1.1.17       "CEO" has the meaning set forth in Section 5.2.1.
 
1.1.18       "Code" means the United States Internal Revenue Code of 1986, as
amended from time to time (or any corresponding provisions of succeeding law).
 
1.1.19       "Company" has the meaning set forth in the third WHEREAS to this
Agreement.
 
1.1.20       "Contributed Property" shall mean property or other consideration
contributed to the capital of the Company by a Shareholder in consideration for
the issue of Shares.
 
1.1.21       "Contribution Date" has the meaning set forth in Section 2.3.1.
 
1.1.22       "Contributing Shareholder" has the meaning set forth in Section 2.
 
1.1.23       "Debtor Relief Laws" has the meaning set forth in Section 12.1.4.

 
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1.1.24       "Defaulting Shareholder" has the meaning set forth in Section
12.2.3.
 
1.1.25       "Designated Person" has the meaning set forth in Section 7.5.
 
1.1.26       "Director" means a duly appointed director of the Company for the
time being or a duly appointed alternate of any Director.
 
1.1.27       "Dissolution Event" has the meaning set forth in Section 11.1
 
1.1.28       "Distributable Cash" means, with respect to any Fiscal Year or
other applicable period, the Company’s cash position, if it is determined that
(a) the Company has no current outstanding loans; (b) its retained earnings show
a positive value under US GAAP accounting treatment for the most recent audited
period; and (c) the Company’s cash position at the date of review exceeds the
projected needs (or those mandated by law, contract or the Company's
Indebtedness), including, without limitation, any amounts owed to HYPOR by the
Company under the Production and Distribution Agreement or AGFEED under the
Facilities Lease Agreement for the ensuing 6-month period or an amount which
exceeds the cash reserves deemed reasonable by the Board.
 
1.1.29       "Effective Date" has the meaning set forth in the preamble to this
Agreement.
 
1.1.30       "Encumbrances" means all claims, liens, charges, security
interests, encumbrances, royalties, debentures, pledges, options, equitable
rights and interests, net profit interests, rights of pre-emption, rights of
first refusal, mortgages or any other third party rights and any agreement or
arrangement to create any of the foregoing;
 
1.1.31       "Equity Interest" shall mean, as to any Shareholder, a percentage
as determined by dividing the number of Shares issued to and owned by such
Shareholder by the total number of Shares then issued and outstanding.  The
Equity Interest of each Shareholder initially shall be set forth opposite such
Shareholder's name on Exhibit A.  The combined Equity Interest of all
Shareholders shall at all times equal 100%.

1.1.32       "Fair Market Value" means the fair market value of Shares that are
subject to purchase under this Agreement which shall be determined, as of the
date of the event giving rise to such determination, by mutual agreement between
AGFEED and HYPOR.  The Fair Market Value shall be computed as the amount which
could reasonably be expected to be realized, based upon the Equity Interest,
upon a sale of the Company at the time of the determination of Fair Market Value
and shall exclude any and all expenses, costs and damages incurred by the
Company as a result of the event giving rise to such determination.  If AGFEED
and HYPOR cannot agree upon the Fair Market Value within 30 days of the date of
notice from (a) an Affected Shareholder (hereinafter defined) pursuant to
Section 7.5 or (b) a non-breaching Shareholder of its election to exercise its
purchase rights under Section 12.1.6.3, the Fair Market Value shall be
determined by independent appraisal by a mutually selected appraiser.  If AGFEED
and HYPOR are unable to agree on the independent appraiser, upon 5 days after
the expiration of the 30-day period referenced above, either HYPOR or AGFEED may
request that the American Arbitration Association appoint an arbitrator
according to its rules who shall then select an appraiser.  AGFEED and HYPOR
shall each, within 10 days of the selection of the appraiser, submit written
information to the appraiser and a proposed valuation of the Fair Market
Value.  The appraiser shall, within 30 days of his or her selection, determine
which of the proposed valuations is closest to the appraiser's estimate of the
Fair Market Value and such proposed valuation shall be used as the Fair Market
Value for purposes of this Agreement.  The appraiser's determination shall be
final and binding and may be enforced by legal proceedings pursuant to this
Agreement.  The costs, including the compensation to the arbitrator and the
appraiser, shall be borne equally by AGFEED and HYPOR.
 
 
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1.1.33       "Fiscal Year" means the 12-month period ending on December 31 of
each year or such other fiscal year as the Board may select in its reasonable
discretion from time to time in accordance with the Code and the Treasury
Regulations.
 
1.1.34       "Formation Documentation" has the meaning set forth in Section 1.2.
 
1.1.35       “Formation Correction Resolution” has the meaning set forth in
Section 1.2.
 
1.1.36       "Formation Defect" has the meaning set forth in Section 1.2.
 
1.1.37       "Governmental Entity" means any U.S. federal, state or local, or
any foreign government, governmental authority, regulatory or administrative
agency, governmental commission, court, tribunal or arbitrator (or any
department, bureau or division thereof).
 
1.1.38       "HYPOR" has the meaning set forth in the preamble to this
Agreement.
 
1.1.39       "Indebtedness" means, with respect to any Person, any and all
obligations of such Person (a) for borrowed money, (b) evidenced by notes,
bonds, debentures or similar instruments, (c) under or relating to letters of
credit (including any obligation to reimburse the letter of credit issuer with
respect to amounts drawn on such instruments), (d) for the deferred purchase
price of goods or services (other than trade payables or accruals incurred and
paid in the ordinary course of the business), (e) under capital leases, (f) with
respect to bank overdrafts or otherwise reflected as negative cash in financial
statements of such Person, (g) for deferred compensation, (h) to pay any accrued
dividends or dividends that have otherwise been declared and not yet paid, and
(i) in the nature of guarantees of the obligations described in clauses (a)
through (h) above of any other Person.
 
1.1.40       "Initial Capital Contribution" has the meaning set forth in
Section 2.1.
 
1.1.41       "Interim Budget" has the meaning set forth in Section 6.1.
 
1.1.42       "IRS" means the Internal Revenue Service.
 
 
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1.1.43       "Laws" means all laws, statutes, rules, regulations, codes,
injunctions, judgments, orders, decrees, rulings, constitutions, ordinances, or
common law of any federal, state, local or municipal Governmental Entity.
 
1.1.44       "Major Actions" has the meaning set forth in Section 5.2.
 
1.1.45       "Non-Breaching Shareholder" has the meaning set forth in Section
12.1.6.3.
 
1.1.46       "Offer Notice" has the meaning set forth in Section 7.6.
 
1.1.47       "Persons" means any individual, partnership, corporation, trust,
limited liability company or other entity.
 
1.1.48       "PRC" has the meaning set forth in the first WHEREAS to this
Agreement.
 
1.1.49       "Production and Distribution Agreement" means that Production and
Distribution Agreement between the Company, HYPOR and AGFEED dated as of the
Effective Date attached hereto as Exhibit C.
 
1.1.50       "Property" means all real and personal property owned by a Person
from time to time during the term of its existence and any improvements thereto,
and shall include both tangible and intangible property.
 
1.1.51       "Pro Rata Share" means the ratio of the number of Shares held by
such Shareholder compared to the total number of Shares held by all the
Shareholders or, where the context so requires, by a particular set of
Shareholders.
 
1.1.52       "Remaining Shareholder" has the meaning set forth in Section 7.5.
 
1.1.53       "Salaries" has the meaning set forth in Section 7.7.
 
1.1.54       "Shareholders" has the meaning set forth in the preamble to this
Agreement.  Solely for purposes of the allocation and distribution provisions of
Section 3.1 of this Agreement (and any definitions relating thereto), a
Shareholder shall also include an Assignee who has not been admitted to the
Company as a substitute Shareholder.
 
1.1.55       "Shares" means all of ordinary shares of a par value of US$0.0001
each of the Company.
 
1.1.56       "Subsidiary" means any Person that more than 50% of the voting
rights or beneficial ownership of such Person is owned, either directly or
indirectly, by the Company (or other specified Person).
 
 
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1.1.57       "Tax(es)" means any U.S. federal, state, local or foreign income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under
Section 59A of the Code), customs duties, capital stock, franchise, profits,
withholding, social security (or similar, including FICA), unemployment,
disability, real property, personal property, sales, use, transfer,
registration, value added, alternative or add-on minimum, estimated or other tax
of any kind whatsoever, including any Shares, penalty or addition thereto.
 
1.1.58       "Territory" means the Provinces or Municipalities within the
Peoples Republic of China commonly known as Anhui, Hubei, Zhejiang, Jiangsu,
Jiangxi, Hunan, Guangxi, Fujian, Guangdong, Hainan Provinces and Shanghai.
 
1.1.59       "Transfer" (whether or not such term is capitalized) means, as a
noun, any voluntary or involuntary transfer, sale, pledge, hypothecation,
assignment or other disposition by a Shareholder of a Shareholder's Shares and,
as a verb, voluntarily or involuntarily to transfer, sell, pledge, hypothecate,
assign or otherwise dispose of a Shareholder's Shares.
 
1.1.60       "Trigger Event" has the meaning set forth in Section 7.5.
 
1.1.61       "WOFE" has the meaning set forth in the third WHEREAS to this
Agreement.
 
1.1.62       “WOFE Act” means The China Foreign Invested Enterprise Law of 2000
and accompanying Detailed Rules of 2001 for Implementation of China’s Foreign
Invested Enterprise Law.
 
1.2           Company Documentation.  The parties hereto acknowledge that the
Company is to be incorporated under the laws of the PRC as a WOFE with
registered capital of Eighteen Million Five Hundred Thousand China Yuan Renminbi
(18,500,000 RMB).  Appropriate formation documentation will be filed with the
appropriate governmental authority in the PRC (the “Formation
Documentation”).  From a business perspective, the Company shall be a joint
venture between AGFEED and HYPOR, two entities formed under Laws of The British
Virgin Islands and The Netherlands, respectively.  In order to reflect the
business agreement of the parties hereto, the parties hereto desire to reflect
their business agreement in the form of a joint venture agreement as evidenced
by entering into this Agreement.  Therefore, the parties hereto intend, to the
fullest extent permitted by Law, that their business agreement and the business
activities and operations of the Company (including any matters addressed in or
regulated by the Formation Documentation, including without limitation, (a)
rights, privileges, restrictions or conditions therein attaching to any Share or
accruing in favor of or against any holder of the Shares and (b) any provisions
therein relating to the management of the Company) be governed by and construed
in accordance with the terms of this Agreement and not the Formation
Documentation.  If any conflict or inconsistency exists or arises between the
terms of this Agreement and the Formation Documentation, to the fullest extent
permitted by Law, this Agreement shall govern and prevail. To the extent that
any matter addressed in the Formation Documentation conflicts with or is
inconsistent with the provisions of this Agreement (a "Formation Defect"), the
Shareholders agree (forthwith upon becoming aware of the same) to take all
actions necessary, including the exercise of all voting rights in respect of the
Shares and the passing of all necessary resolutions of the Shareholders, to
effect such amendments to the Formation Documentation as may be necessary and
appropriate to give full effect to the provisions of this Agreement and to
correct the Formation Defect so that the Formation Documentation is in all
relevant respects consistent with (and does not conflict with) this Agreement,
and, without prejudice to the generality of the foregoing, each Shareholder
shall take all actions necessary to promptly cause a meeting of all the holders
of the Shares of the Company to be held for a Formation Correction Resolution to
be passed by the holders of the Shares in the Company. For the purposes of this
Agreement, "Formation Correction Resolution" means a resolution which amends and
restates any of the Formation Documentation in order to correct a Formation
Defect so that the Formation Documentation is in all relevant respects
consistent with (and does not conflict with) this Agreement.

 
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1.3           Interpretation and Rules of Construction.  In this Agreement,
except to the extent otherwise provided or that the context otherwise requires:
 
1.3.1         when a reference is made in this Agreement to an Article, Section,
Exhibit or Schedule, such reference is to an Article or Section of, or an
Exhibit or Schedule to, this Agreement unless otherwise indicated;
 
1.3.2         the table of contents and headings for this Agreement are for
reference purposes only and do not affect in any way the meaning or
interpretation of this Agreement;
 
1.3.3         references to "dollars" or "$" are to United States dollars.
 
1.3.4         whenever the words "include," "includes" or "including" are used
in this Agreement, they are deemed to be followed by the words "without being
limited to";
 
1.3.5         the words "hereof," "herein" and "hereunder" and words of similar
import, when used in this Agreement, refer to this Agreement as a whole and not
to any particular provision of this Agreement;
 
1.3.6         all terms defined in this Agreement have the defined meanings when
used in any certificate or other document made or delivered pursuant hereto,
unless otherwise defined therein;
 
1.3.7         the definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms;
 
1.3.8         references to a Person are also to its successors and permitted
assigns; and

 
1.3.9         the use of "or" is not intended to be exclusive unless expressly
indicated otherwise.
 
 
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ARTICLE 2

 
CAPITAL /PERCENTAGE INTERESTS/FUTURE FINANCING
 
2.1           Initial Capital Contributions.  As specified in Exhibit A, the
Shareholders shall contribute to the Company the relevant amounts or assets as
set forth next to their name on Exhibit A under the column entitled "Initial
Capital Contributions" (such Shareholder's "Initial Capital Contribution") as
consideration for the Company's allotment of the Shares set out against such
Shareholder's Name set forth on Exhibit A.
 
2.2           Equity Interest/Cash Investment.  Each Shareholder's (a) Capital
Contributions, (b) Equity Interest in the Company and (c) Shares in the Company
are set forth on Exhibit A.  The Board shall amend Exhibit A from time to time
to maintain the accuracy thereof, which shall be conclusive absent manifest
error.
 
2.3           Additional Capital Commitments.  Except as expressly set forth
herein, no Shareholder shall be requested to make (a) a loan to the Company or
(b) any additional contribution to the capital of the Company in consideration
for an issue of further Shares.
 
2.3.1         AGFEED and HYPOR recognize that the Company may require additional
capital from time to time, in addition to the Initial Capital Contribution, in
order to accomplish the purpose and business for which it is formed.  In the
event that the Company shall require funds in excess of those available, the
Company, through a Director or executive officer, shall request such Additional
Capital Contributions be made to the Company first in the form of a
market-interest bearing loan provided by a Shareholder or third party and
thereafter convertible into an alternative other than a loan or Shareholder
contribution not altering the original ownership Shares or Shares pursuant to
the terms of this ARTICLE 2 (each, an "Additional Capital Contribution"), but
only if such Additional Capital Contribution (a) has been authorized or directed
by the Board in accordance with Section 5.2, (b) has been provided for and
agreed to in the Approved Annual Budget and Business Plan and then only in
accordance with the timing and conditions of such Additional Capital
Contribution set forth in the Approved Annual Budget and Business Plan, or (c)
if the Company does not have enough money (from operating revenue, customer
reimbursements or otherwise) to pay any amounts due to HYPOR under the
Production and Distribution Agreement or AGFEED under the Facilities Lease
Agreement.  The Company, through a Director or executive officer, shall give
written notice to AGFEED and HYPOR of (i) the date on which the Additional
Capital Contribution is requested, which date (the "Contribution Date") shall
not be less than 15 days following the date of such notice, and (ii) the amount
of Additional Capital Contribution recommended from each of them.
 
2.3.2         In the event a Shareholder agrees to pay the Additional Capital
Contribution to the Company on the Contribution Date (a “Contributing
Shareholder”),  the Contributing Shareholder will be deemed to advance to the
Company a loan equal to the Additional Capital Contribution furnished by the
Contributing Shareholder, with the following results:

 
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(a)     the sum thus advanced shall constitute a loan to the Company;
 
(b)     such loan and all accrued unpaid interest thereon shall be due not later
than six (6) months after such advance is made; and
 
(c)     the loan shall bear interest at LIBOR plus 3%, as determined at the time
such advance is made.
 
2.3.3         AGFEED and HYPOR agree that the Board shall determine, pursuant to
Section 5.2, whether any loans made by a Contributing Shareholder under Section
2.3.2 and then outstanding at October 15 of each year or more than six (6)
months after such advance is made (such determination not occur later than
fifteen (15) days after such date or as the Board shall duly determine), as
applicable, shall remain a loan or be converted to:
 
(a)     an alternative other than a loan or Shareholder contribution not
altering the original ownership Shares; or
 
(b)     one-tenth (1/10) additional Shares in consideration for each $1 of
Additional Capital Contribution made by the Contributing Shareholder then
outstanding (excluding accrued interest) or such other amount of additional
Shares as the Board may determine in accordance with Section 5.2.
 
2.3.4         The Company shall amend Exhibit A to reflect the receipt by the
Company of the Additional Capital Contributions and any other amounts received
pursuant to Section 2.3.2, and reflect the adjusted Equity Interests and Shares
of the Shareholders.
 
ARTICLE 3
 
DISTRIBUTIONS TO SHAREHOLDERS
 
3.1           Distributions.  Except as provided upon the occurrence of a
Dissolution Event in Section 11.2, and subject to Section 3.2 and applicable
Law, and if, upon conclusion of the annual financial statement audit of the
Company, it is determined that the Company has no current outstanding loan, its
retained earnings show a positive value based on US GAAP accounting treatment
for the most recent audited period, and the Company’s cash position exceeds the
reasonable cash reserves deemed necessary by the Board, then the Company shall
make distributions by way of dividends from Distributable Cash to the
Shareholders, pari passu, in accordance with their respective Equity Interest on
an annual basis, unless otherwise approved under Section 5.2.
 
3.2           Distribution of Assets in Kind.  Except as otherwise provided
herein, no Shareholder shall have the right to require any distribution of any
Company's Property in kind.  The Company's Property may be distributed in kind,
at the election of the Board.  If any of the Company's Property is distributed
in kind, such Property shall be distributed pursuant to Section 3.1 on the basis
of its fair market value as reasonably determined by the Board as of the date of
such distribution, treating such distribution as a distribution of Distributable
Cash in an amount equal to such fair market value.
 
 
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ARTICLE 4

 
REPRESENTATIONS AND WARRANTIES
 
4.1           Representations and Warranties of the Shareholders.  As of the
Effective Date or the date on which such Person becomes an Additional
Shareholder or substitute Shareholder, each of the Shareholders hereby makes
each of the representations and warranties applicable to such Shareholder as set
forth below (and such representations and warranties shall survive the execution
of this Agreement):
 
4.1.1         Due Incorporation or Formation; Authorization of Agreement.  If
such Shareholder is a corporation or other entity, it is duly organized, duly
incorporated or duly formed (as the case may be), validly existing, and in good
standing under the laws of the jurisdiction of its organization or incorporation
or formation (as the case may be) and has the corporate or entity power and
authority to own its property and carry on its business as owned and carried on
at the Effective Date.  Such Shareholder is duly licensed or qualified to do
business and in good standing in each of the jurisdictions in which the failure
to be so licensed or qualified would have a material adverse effect on its
financial condition or its ability to perform its obligations hereunder.  Such
Shareholder has the individual, corporate, or entity power and authority to
execute and deliver this Agreement and to perform its obligations hereunder and,
if such Shareholder is a corporation, limited liability company or partnership,
the execution, delivery, and performance of this Agreement has been duly
authorized by all necessary corporate, company or partnership action.  This
Agreement constitutes the legal, valid, and binding obligation of such
Shareholder.
 
4.1.2         No Conflict With Restrictions; No Default.  Neither the execution,
delivery, and performance of this Agreement nor the consummation by such
Shareholder of the transactions contemplated hereby (a)  will conflict with,
violate, or result in a breach of any of the terms, conditions, or provisions of
any law, regulation, order, writ, injunction, decree, determination, or award of
any court, any governmental department, board, agency, or instrumentality,
domestic or foreign, or any arbitrator, applicable to such Shareholder, (b) will
conflict with, violate, result in a breach of, or constitute a default under any
of the terms, conditions, or provisions of its charter or articles of
incorporation, memorandum or articles of association, bylaws, or operating
agreement of such Shareholder, if such Shareholder is a corporation or limited
liability company, or of any material agreement or instrument to which such
Shareholder is a party or by which such Shareholder is or may be bound or to
which any of its material properties or assets is subject, (c) will conflict
with, violate, result in a breach of, constitute a default under (whether with
notice or lapse of time or both), accelerate or permit the acceleration of the
performance required by, give to others any material interest or rights, or
require any consent, authorization, or approval under any indenture,
Encumbrance, mortgage, lease agreement, or instrument to which such Shareholder
is a party or by which such Shareholder is or may be bound, or (d) will result
in the creation or imposition of any lien upon any of the material properties or
assets of such Shareholder.

 
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4.1.3         Governmental Authorizations.  Any registration, declaration or
filing with or consent, approval, license, permit or other authorization or
order by, any governmental or regulatory authority, domestic or foreign, that is
required in connection with the valid execution, delivery, acceptance, and
performance by such Shareholder under this Agreement or the consummation by such
Shareholder of any transaction contemplated hereby has been completed, made, or
obtained on or before the Effective Date.
 
4.1.4         Litigation.  There are no actions, suits, proceedings, or
investigations pending or, to the knowledge of such Shareholder, threatened
against such Shareholder or any of their properties, assets, or businesses in
any court or before or by any Governmental Entity which could, if adversely
determined (or, in the case of an investigation could lead to any action, suit,
or proceeding, which if adversely determined could) reasonably be expected to
materially impair such Shareholder's ability to perform its obligations under
this Agreement or to have a material adverse effect on the consolidated
financial condition of such Shareholder; and such Shareholder has not received
any currently effective notice of any default, and such Shareholder is not in
default, under any applicable order, writ, injunction, decree, permit,
determination, or award of any court, any Governmental Entity which could
reasonably be expected to materially impair such Shareholder's ability to
perform its obligations under this Agreement or to have a material adverse
effect on the consolidated financial condition of such Shareholder.
 
ARTICLE 5

 
MANAGEMENT AND CONTROL
 
5.1           Board Composition.
 
5.1.1         The Shareholders agree that the provisions of this Section 5.1
apply in respect of the appointment and removal of Directors and that they shall
take all actions as may be required under the Formation Documents, including the
passing of any resolutions of Shareholders, to give effect to the provisions of
this Section 5.1.
 
5.1.2         AGFEED may from time to time, for so long as it holds an Equity
Interest greater than 50%, appoint two (2) persons to be Directors, and, for so
long as it holds an Equity Interest equal to or less than 50%, appoint one (1)
person to be a Director, and at any time remove any such Directors from office
and appoint another person in his place.
 
5.1.3         HYPOR may from time to time, for so long as it holds an Equity
Interest greater than 50%, appoint two (2) persons to be Directors, and, for so
long as it holds an Equity Interest equal to or less than 50%, appoint one (1)
person to be a Director, and at any time remove any such Directors from office
and appoint another person in his place.
 
5.1.4         The Chairman of the Board of Directors shall be elected by a
majority vote of the Board of Directors.
 
5.1.5         Any such appointments or removals shall be effected by an
instrument in writing signed by or on behalf of the relevant Shareholder and
will take effect upon lodgement at the registered office at the Company or on
delivery to a meeting of the Directors.

 
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5.1.6         The Shareholders agree that at all times the number of Directors
shall be set at three (3). Any vacancy in the directors not filled pursuant to
the provisions of Sections 5.1.1 to 5.1.3 above shall be filled by a resolution
of the Shareholders in accordance with the Formation Documents.
 
5.2           Matters Requiring Consent of the Shareholders. The Shareholders
acknowledge and agree that the business and affairs of the Company shall be
managed by the Board.  All directors shall be entitled to one vote on all
matters submitted to the Board and the affirmative vote of the majority of the
directors then in office shall be the act of the Board.  Notwithstanding the
foregoing, the Shareholders acknowledge and agree that the Board shall not have
the authority to take the following actions (collectively, the "Major Actions")
without the prior written consent of at least one director appointed by AGFEED
to the Board and at least one director appointed by HYPOR to the Board, it being
agreed that the casting of a vote in favor of any Major Action recorded in the
minutes of a duly constituted and convened Board meeting or by execution of a
written resolution shall also constitute such written consent:
 
5.2.1         appointment of the Chief Executive Officer of the Company (the
"CEO") and establishment of the CEO's duties;
 
5.2.2         requesting Additional Capital Contributions pursuant to Section
2.3.1(a);
 
5.2.3         exercise of the option to convert a loan by a Contributing
Shareholder or third party pursuant to Section 2.3.2;
 
5.2.4         admission of any Additional Shareholder by the allotment or
transfer of Shares, or issuance of options, warrants or other securities, of the
Company, including, without limitation, any issuance of Shares to any employees
of the Company or its Subsidiaries;
 
5.2.5         approval of any employee benefit plans, including, without
limitation, any stock option plans or other employee incentive plans;
 
5.2.6         approval of the Annual Budget and Business Plan and any amendments
thereto;
 
5.2.7         approval of expenditures not included in the Approved Annual
Budget and Business Plan or in excess of 105% of any line item in the Approved
Annual Budget and Business Plan;
 
5.2.8         entering into, amending or enforcing any contracts (i) in excess
of $100,000, (ii) not in the Approved Annual Budget and Business Plan, (iii)
that are not cancellable with 30 days prior notice, or (iv) that are otherwise
material to the business of the Company;
 
5.2.9         engaging in or settling any litigation in which the Company is a
party;
 
 
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5.2.10       approval of the compensation on an annual basis for any employee or
consultant receiving compensation on an annual basis in excess of $150,000,
which compensation shall be included in the Approved Annual Budget and Business
Plan;
 
5.2.11       changing the tax status or accounting methods of the Company;
 
5.2.12       extending the statute of limitations for assessing or computing any
tax liability against the Company or the amount of any Company tax item;
 
5.2.13       commencing the dissolution, winding-up or liquidation of the
Company except pursuant to Section 12.2.2;
 
5.2.14       an Approved Sale;
 
5.2.15       a merger, consolidation or other acquisition of the Company with or
into any other Person or any Public Offering of the Public Entity;
 
5.2.16       any amendment to the Formation Documents, provided that the
Formation Documents may be amended by a resolution of Shareholders in respect of
which both AGFEED and HYPOR vote in favor without the approval of any of the
Directors;
 
5.2.17       any material Property sale, exchange, or other disposition of the
Company not in the ordinary course of business and not in the Approved Annual
Budget and Business Plan;
 
5.2.18       the borrowing of money, incurring Indebtedness or otherwise
committing the credit of the Company, the granting of any collateral or security
interest in any Company's Property, or the granting of any guaranty; and
 
5.2.19       the approval of any distributions of Distributable Cash to the
Shareholders not in accordance with Section 3.1.
 
5.3           Matters Requiring Consent of AGFEED. Notwithstanding anything set
forth in this ARTICLE 5, the Shareholders acknowledge and agree that the Board
shall not have the authority to (a) enter into, amend, terminate, rescind,
enforce or waive any rights under the Production and Distribution Agreement or
any other agreements between the Company and HYPOR or one of its Affiliates or
(b) determine whether a default has occurred thereunder, without the prior
written consent of AGFEED.
 
5.4           Matters Requiring Consent of HYPOR. Notwithstanding anything set
forth in this ARTICLE 5, the Shareholders acknowledge and agree that the Board
shall not have the authority to (a) enter into, amend, terminate, rescind,
enforce or waive any rights under the AgFeed Lease Agreement or any other
agreements between the Company and AGFEED or one of its Affiliates or (b)
determine whether a default has occurred thereunder, without the prior written
consent of HYPOR.

 
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5.5           Rights of Shareholders.  Except as otherwise expressly provided in
this Agreement, and subject to, and without prejudice to any rights and other
powers reserved to the Shareholders under the WOFE Act, no Shareholder shall be
entitled to participate in the control and management of the Company, nor shall
any Shareholder have the right to sign for or bind the Company except when
acting as a duly designated Director, officer, employee or agent of the Company
and provided such person acts or when acting within the scope of powers properly
delegated by the Board to such Director, Shareholder, officer, employee or agent
of the Company.
 
ARTICLE 6

 
REPORTS & TAX RETURNS
 
6.1           Annual Budget and Business Plan.   The CEO shall submit an annual
budget (including, without limitation, capital expenditures, general and
administrative expenses and operating costs for assets owned by the Company) and
business plan (each, an "Annual Budget and Business Plan") to AGFEED and HYPOR
by October 15 of each calendar year.  Not later than 15 days after the Annual
Budget and Business Plan is submitted for approval to AGFEED and HYPOR, AGFEED
and HYPOR shall either approve or disapprove the proposed Annual Budget and
Business Plan.  If AGFEED and HYPOR fails to approve a proposed Annual Budget
and Business Plan within the 15-day period (as the same may be extended by
agreement of the parties), the proposed Annual Budget and Business Plan shall be
deemed disapproved.  Upon the approval of an Annual Budget and Business pursuant
to this Section 6.1, such shall be deemed an "Approved Annual Budget and
Business Plan" for the purposes hereof.  Until such approval, the Company shall
operate under the most current Approved Annual Budget and Business Plan and the
Board shall manage the Company in a manner consistent with the Approved Annual
Budget and Business Plan.  The Board shall prepare and deliver to AGFEED and
HYPOR a revised budget (each, an "Interim Budget") within 15 days of the
preparation of an Interim Budget, to the extent the Approved Annual Budget and
Business Plan has been modified by any business activity of the Company.  Any
such Interim Budget shall be for informational purposes only and shall be deemed
approved until the approval of the following Approved Annual Budget and Business
Plan.
 
6.2           Tax Returns, Books and Records.  Unless the Board approves the
hiring of the Company’s own financial staff, HYPOR, or its affiliate, as
approved by AGFEED, will maintain the books and records of the Company, as well
as prepare and submit any tax returns or other filings of the Company with the
relevant Chinese authorities or the IRS, as applicable, at a fixed annual fee to
the Company of €70,000 (€40,000 of which shall be allocated to the hiring of a
General Manager and €30,000 of which shall be allocated to the hiring of a
Controller) (the “Salaries”), commencing on the Effective Date and payable in
twelve equal monthly installments.  Board approval shall be required for such
annual percentage increases to the Salaries due to merit or increases in the
rate of inflation in China.  The Shareholders shall have the right to access and
inspect the books and records of the Company, and the Company shall, upon
advanced written notice to such effect, use reasonable efforts to promptly make
available to any Shareholder such books and records.

 
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ARTICLE 7

 
TRANSFERS OF SHARES
 
7.1           Restrictions on Transferability.  Shareholders may not Transfer
all or any part of their Shares, whether voluntarily or by foreclosure,
assignment in lieu thereof or other enforcement of a pledge, hypothecation or
collateral assignment, without complying with the provisions of this ARTICLE
7.  If a Shareholder Transfers any of his, her or its Shares to any Person
pursuant to this ARTICLE 7, in addition to any other requirements under this
Agreement, no such Transfer shall be effective and no such Transfer shall be
registered in the register of members of the Company unless and until (a) a duly
executed share transfer form being substantially in the form set out in Exhibit
E is delivered to the Company, and (b) the proposed transferee agrees in writing
to be bound by the terms and provisions and to assume all obligations of the
transferor and to be subject to all restrictions to which the transferor was and
is subject under both this Agreement and the Formation Documents; provided,
however, the admission of the transferee as a Shareholder shall not release the
transferor from liability to the Company under this Section 7.1 and Section
7.2.  Any Additional Shareholder shall pay any reasonable expenses in connection
with admission as such.
 
7.2           Attempted Transfers in Contravention.  Any attempted Transfer in
contravention of Section 7.1 shall be void and of no effect and shall not bind
or be recognized by the Company and shall not be registered in the register of
members of the Company.  In the case of an attempted Transfer not permitted
hereby, the transferring Shareholder shall indemnify and hold harmless (and
hereby agrees to indemnify and hold harmless), the Company and the other
Shareholders from all costs, liabilities and damages that any of such
indemnified Persons may incur (including, without limitation, incremental tax
liability and attorneys' fees and expenses) as a result of such attempted
Transfer and efforts to enforce the indemnity granted hereby.
 
7.3           Transfers to Affiliates.  Notwithstanding the terms of Section
7.1, AGFEED and HYPOR may Transfer all or any portion of its Shares to any
Affiliate of such Shareholder, provided that, (a) such Affiliate agrees in
writing to be bound by the terms of this Agreement and (b) the transferring
Shareholder shall remain jointly and severally liable to the Company for all
obligations of such Affiliates hereunder.
 
7.4           Permitted Disposition of an Interest.  Dispositions of a
Shareholder’s Shares shall be subject to and made only in accordance with this
ARTICLE 7 and any purported disposition to the contrary shall be null and void
ab initio and shall not be recognized by or binding upon the Company.  A
Shareholder may dispose of all or any part of its Shares at any time after the
fifth (5th) anniversary of the Effective Date of this Agreement to any
transferee upon the occurrence of the following:  (i) such Shareholder having
first obtained the written consent to such disposition from the Remaining
Shareholder (hereinafter defined), not to be unreasonably withheld; and (ii)
approval of at least one director appointed by AGFEED to the Board and at least
one director appointed by HYPOR to the Board.

 
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7.5           Grant of Option.  Except as hereinafter provided, any Shareholder
for whom any of the events set forth in this Section 7.5 occurs (the “Affected
Shareholder”) hereby grants to the non-Affected Shareholder (the “Remaining
Shareholder”), or any Persons so designated by the Company (such designation to
be made on behalf of the Company by the Remaining Shareholder) to purchase such
Shares (a “Designated Person”), in consideration of the mutual covenants herein
contained, an option to purchase any and all of the Shares now owned or held, or
hereafter acquired, by such Affected Shareholder, such option to be exercisable
upon the occurrence of any of the following events (a “Trigger Event”):
 
7.5.1         Any attempt by such Shareholder to sell, assign, transfer or in
any way dispose of any or all of such Shareholder’s Shares, or the beneficial
interests therein; or
 
7.5.2         Any pledge or the creation of any encumbrance on any or all of the
Shares held by such Shareholder, except to secure an obligation owed to another
Shareholder; or
 
7.5.3         Any other transfer of any or all of the Shares held by such
Shareholder, or the beneficial interests therein, whether voluntary or
involuntary, by operation of law or otherwise, including all executions or legal
processes attaching such Shares and all processes affecting the interest of any
Shareholder with respect to such Shares; or
 
7.5.4         Such Shareholder becoming Bankrupt; or
 
7.5.5         The receipt by such Shareholder of a bona fide offer from a third
party to purchase all, but not less than all, of such Shareholder’s Shares (a
"Bona Fide Offer"), which offer such Shareholder desires to accept; or
 
7.5.6         A material breach by a Shareholder of any of the terms or
covenants contained herein or of the confidentiality or intellectual property
provisions of any agreement between the Company and such Shareholder; or any
wrongful and intentional act or omission by such Shareholder which has had or
would reasonably be expected to have a material adverse impact on the business,
properties, results of operations, condition (financial or otherwise) or
prospects of the Company.
 
7.6           Exercise of Option.   Except as hereinafter provided, immediately
upon the occurrence of a Trigger Event, the Affected Shareholder shall send
notice in writing to the Company of such fact ("Offer Notice").  Except as
hereinafter provided, during the period which shall begin with the occurrence of
such Trigger Event, and (a) if the notice is given, ending forty-five (45) days
after such notice is given, or (b) if no notice is given, continuing without
end, the Remaining Shareholder or a Designated Person shall have the right to
exercise its option to purchase the Affected Shareholder’s Shares on the terms
and conditions set forth herein.  Notwithstanding anything herein contained to
the contrary, all determinations by the Company under ARTICLES 7 and 8 shall be
made by the Remaining Shareholder.
 
7.7           Bona Fide Offer.  In the event a Bona Fide Offer occurs pursuant
to which the Remaining Shareholder or a Designated Person, as applicable, may
exercise its option to purchase and the Remaining Shareholder or a Designated
Person fails to so exercise its option to purchase all of the Shares offered for
sale within the allotted time, said option to purchase with respect to such Bona
Fide Offer shall terminate; provided, however, in the event a proposed transfer
or sale as a result of a Bona Fide Offer is not consummated either (i)
substantially in accordance with the price and on the terms set forth in the
notice sent to the Company pursuant to Section 7.6 hereof or otherwise contained
in a Bona Fide Offer or (ii) within sixty (60) days of the date of said notice,
such Affected Shareholder shall not be entitled to sell such Shares unless
reoffered to the Remaining Shareholder or a Designated Person, as applicable,
under the terms of this Agreement and at any lower price and on any different
terms.
 
 
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ARTICLE 8
 
PURCHASE PRICE
 
8.1           Purchase Price.  Except as otherwise provided in this ARTICLE 8,
the purchase price to be paid for Shares purchased pursuant to this Agreement
(the “Purchase Price”) shall equal the Fair Market Value of such Shares.
 
8.2           Bona Fide Offer.  Notwithstanding the foregoing provisions of this
ARTICLE 8, in the event an option granted hereunder becomes exercisable pursuant
to the provisions of Section 7.5.5 herein because of a Bona Fide Offer for
Shares, the Purchase Price with respect to such Shares shall be the price set
forth in the Bona Fide Offer.
 
ARTICLE 9

 
SUBSTITUTED SHAREHOLDERS/ADDITIONAL SHAREHOLDERS
 
9.1           Substituted Shareholders. Any transferee acquiring the Shares of a
Shareholder as permitted under ARTICLE 7 shall be deemed admitted as a
Shareholder with respect to the Shares transferred concurrently with the
registration of the Transfer in the Company's register of members (provided that
such transferee, unless already a Shareholder, shall, as a condition to such
admission, execute a counterpart of this Agreement, agreeing thereby to be bound
by all of the terms and conditions hereof), and such Shareholder shall be
entitled to all of the rights and benefits under this Agreement of the
transferor of such Shares.  No purported Transfer of any Shares, or any portion
thereof or Shares therein, in violation of the terms of this Agreement
(including any Transfer occurring by operation of law) shall vest the purported
transferee with any rights, powers, or privileges hereunder, and no such
purported transferee shall be deemed for any purposes as a Shareholder hereunder
or under the Formation Documents or have any right to vote or consent with
respect to Company matters, to inspect Company records to maintain derivative
proceedings, to maintain any action for an accounting or to exercise any other
rights of a Shareholder hereunder or under the Formation Documents or the WOFE
Act.

9.2           Additional Shareholders.  Additional Shareholders may be admitted
to the Company in accordance with Section 5.2.  The Capital Contributions by any
Additional Shareholder shall be as determined in accordance with Section 5.2
(and the Equity Interest of other Shareholders shall be adjusted to reflect the
Equity Interest granted to the Additional Shareholder.  Any Additional
Shareholder shall execute a counterpart of this Agreement, agreeing thereby to
be bound by all of the terms and provisions hereof.
 
 
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ARTICLE 10

 
CONFIDENTIALITY
 
10.1         Confidentiality and Non-Disclosure.  Except as otherwise consented
to by the Company (acting on the direction of the Board), all information which
has been furnished to a Shareholder in its capacity as a Shareholder or will be
furnished to a Shareholder in its capacity as a Shareholder, pursuant to this
Agreement or otherwise, relating to the Company or any of its Affiliates or the
business of any of them will be kept confidential, will not be used by such
Shareholder, or by any of its agents, representatives, or employees, for any
purpose other than evaluating and monitoring the investment in the Company and
enforcing rights hereunder, and except as permitted in this Section 10.1 will
not be disclosed by such Shareholder, or by any of its agents, representatives,
or employees, in any manner whatsoever, in whole or in part; provided, however,
that the foregoing shall not apply to any information that (a) was in such
Shareholder's possession prior to disclosure by the Company or any of its
Affiliates as evidenced by the written records of such Shareholders, (b) was
generally known, in the trade or business in which it is practiced by the
Company or its Affiliates, at the time of disclosure to such Shareholder, or
becomes generally known, through no act of such Shareholder or its employees or
agents or in violation of a confidentiality provision, or (c) has come into the
possession of such Shareholder from a third party who, to such Shareholder's
knowledge, after reasonable inquiry, is under no obligation to the Company or
any of its Affiliates to maintain the confidentiality of such information.  Each
Shareholder shall be permitted to disclose such information: (a) to those of its
agents, partners, Shareholders, representatives, and employees who need to be
familiar with such information in connection with such Shareholder's investment
in the Company for use solely for such purpose; provided, however, that each
such Person shall have been informed of the covenants set forth in this Section
10.1 and such Shareholder shall be liable for any breach by any such Person of
such covenants; (b) to the extent required by law, so long as such Shareholder
shall have, to the extent reasonably practicable, first afforded the Company
with a reasonable opportunity to contest the necessity of disclosing such
information; and (c) with the prior consent of the Company, which consent shall
not be unreasonably withheld, to any prospective transferee of such Shareholder;
provided, however, that such prospective transferee agrees to be bound by the
provisions of this Section 10.1.  Without intending to limit the remedies
available to the Company, each Shareholder acknowledges that a breach of this
Section 10.1 may result in material irreparable injury to the Company or its
Affiliates for which there is no adequate remedy at law, that it will not be
possible to measure damages for such injuries precisely and that, in the event
of such a breach or threat thereof, the Company shall be entitled to
specifically enforce the covenants contained herein without the posting of a
bond and such Shareholder agrees not to oppose the granting of such injunctive
relief on the basis that monetary damages are an adequate remedy.  The
provisions of this Section 10.1 shall survive any termination of this Agreement
and shall continue to bind each Person who was ever subject to this provision
even if such Person would otherwise cease to be subject to this provision.

 
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ARTICLE 11

 
DISSOLUTION OF THE COMPANY
 
11.1         Dissolution Events.  The Company will appoint a liquidator and
commence liquidation and dissolution upon the first to occur of any of the
following (each, a "Dissolution Event"):
 
11.1.1       The sale or other transfer of all or substantially all of the
Company's Property or assets; or
 
11.1.2       A vote in accordance with Section 5.2.13; or
 
11.1.3       A Shareholder, as the non-breaching party, exercises its rights
under Section 12.2.2 of this Agreement in respect of an Event of Default to
require that the Company be liquidated and dissolved.
 
The Shareholders hereby agree that the Company will not dissolve prior to the
occurrence of a Dissolution Event.
 
11.2         Winding-Up.  Upon the occurrence of a Dissolution Event, the
Company will continue solely for the purposes of winding up its affairs in an
orderly manner, liquidating its assets, and satisfying the claims of its
creditors and Shareholders, provided always that the same is carried out in
accordance with the applicable provisions of the Nevada Private Corporation
Act.  No Shareholder will take any action that is inconsistent with, or not
necessary to or appropriate for, the winding-up of the Company's business and
affairs.  The Company's assets will be liquidated as promptly as is consistent
with obtaining the fair value thereof, and the proceeds therefrom, to the extent
sufficient therefore, and will be applied and distributed in the following
order:
 
11.2.1       First, to provide for the payment of, or to discharge, all claims,
debts, liabilities and obligations of the Company;
 
11.2.2       Second, distribute the surplus assets of the Company to
Shareholders in accordance with their pro-rata share.
 
No Shareholder will receive any additional compensation for any services
performed pursuant to this ARTICLE 11.
 
11.3         Rights of Shareholders.  Except as otherwise provided in this
Agreement, (a) each Shareholder will upon liquidation and/or dissolution of the
Company look solely to the surplus assets of the Company for the return of such
Shareholder's Capital Contribution and will have no right or power to demand or
receive property other than cash from the Company, and (b) no Shareholder will
have priority over any other Shareholder as to the return of such Shareholder's
Capital Contribution, distributions or allocations whether on a liquidation,
dissolution or otherwise, including prior to a liquidation and/or dissolution.

 
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ARTICLE 12
 
EVENT OF DEFAULT/TERMINATION
 
12.1         Event of Default.  The occurrence of any one or more of the
following events shall constitute an event of default (each, an "Event of
Default") under this Agreement:
 
12.1.1       AGFEED or HYPOR fails to make any Initial Capital Contribution;
 
12.1.2       AGFEED or HYPOR breaches any covenants set forth in ARTICLE 7 and
ARTICLE 10 and such breach is not cured by such party within 30 days after
written notice is given to such party by the Company or the other party;
 
12.1.3       the approval procedures set forth in Sections 5.2, 5.3 and 5.4 are
violated by AGFEED or HYPOR;
 
12.1.4       AGFEED or HYPOR shall (i) apply for or consent to the appointment
of, or the taking of possession by, a trustee, receiver, custodian, liquidator
or the like of itself or all or a substantial part of its property, (ii) admit
in writing its inability or be generally unable to pay its debts as such debts
become due, (iii) make a general assignment for the benefit of its creditors,
(iv) commence a voluntary case under Title 11, Section 101 et seq. of the United
States Code titled "Bankruptcy," as amended from time to time, and any successor
statute thereto or any applicable liquidation, dissolution, conservatorship,
bankruptcy, moratorium, rearrangement, insolvency, reorganization, readjustment
of debt or similar law affecting the rights or remedies of creditors generally,
as in effect from time to time, including Title 11, Section 101 et seq. of the
United States Code titled "Bankruptcy," (collectively, the "Debtor Relief
Laws"), (v) file a petition seeking to take advantage of any other Debtor Relief
Laws, (vi) fail to controvert in a timely and appropriate manner, acquiesce in
writing to, or file an answer admitting the material allegations of any petition
filed against it in an involuntary case under the any Debtor Relief Laws or
(vii) take any action for the purpose of effecting any of the foregoing;
 
12.1.5       a proceeding or case shall be commenced without the application or
consent of AGFEED or HYPOR in any court of competent jurisdiction, seeking with
respect to such Person (i) its liquidation, reorganization, dissolution or
winding up or the composition or readjustment of its debts or similar action or
(ii) the appointment of a trustee, receiver, custodian, liquidator or the like
of such Person or all or a substantial part of its property under any Debtor
Relief Laws and such proceeding or case shall continue undismissed, or any
order, judgment or decree approving any of the foregoing shall be entered and
continue unstayed and in effect for a period of 60 or more consecutive days from
and including the date of commencement of such proceeding or case, or any order
for relief against such Person shall be entered in any involuntary case under
any Debtor Relief Laws;
 
12.1.6       the Company is not formed within three (3) months after this
Agreement has been signed by the duly authorized officers of AGFEED and HYPOR,
or such reasonable time greater than such three (3) months as the Parties may
deem appropriate.
  
 
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12.2         Effect of Event of Default.  Upon an Event of Default, the
non-breaching party (the "Non-Breaching Shareholder") shall have the right to:
 
12.2.1       terminate this Agreement effective immediately but without
prejudice to the rights and obligations of the parties under this Agreement
which have accrued as a the date of such termination; and/or
 
12.2.2       cause the Company to be liquidated and dissolved in accordance with
the Formation Documents; and/or
 
12.2.3       purchase free from Encumbrances all of the Shares of the
Shareholder being the defaulting party (the "Defaulting Shareholder") for a
purchase price equal to 80% of the Fair Market Value of such Shares.  In order
to exercise such right, the Non-Breaching Shareholder must provide written
notice to the Defaulting Shareholder within 15 days after the event giving rise
to such termination (or, if later, within 15 days of becoming aware of such
event).  Within 30 days after the determination of the Fair Market Value
pursuant to this Section 12.1.6.3, the Defaulting Shareholder shall deliver to
the Non-Breaching Shareholder the Share certificates evidencing the relevant
Shares and a duly executed share transfer form (substantially in the form set
out in Exhibit E) in relation thereto and the Non-Breaching Shareholder shall
pay the Defaulting Shareholder the purchase price for the Defaulting
Shareholder's Shares determined in accordance with this Section 12.2.3 in cash.
 
12.3         Liquidation and Dissolution.  In the event that the Non-Breaching
Shareholder elects to exercise its rights under Section 12.2.2 to cause the
Company to be liquidated and dissolved in accordance with the Formation
Documents, the Shares held by the Defaulting Shareholder shall not carry the
right to vote on any resolution of Shareholders to liquidate and dissolve the
Company in accordance with Section 12.2.2 or any other resolution of
shareholders in connection with such liquidation and dissolution.
 
12.4         Power of Attorney in Event of Default.  The Defaulting Shareholder,
for value received, by way of security and in order more fully to secure the
performance of its obligations under Section 12.2.3, hereby irrevocably appoints
the Non-Breaching Shareholder and the persons deriving title under it
(including, but without any limitation, any receiver) jointly and also severally
(with full power of substitution and delegation) to be its attorney-in-fact:
 
12.4.1       to execute and complete on behalf of the Defaulting Shareholder or
its nominees any deeds, transfers or other documents which the Non-Breaching
Shareholder may from time to time require for perfecting the Non-Breaching
Shareholder's title to the Shares purchased by the non-breaching party pursuant
to Section 12.2.3; and

12.4.2       generally for the Defaulting Shareholder and in its name and on its
behalf and as its act and deed or otherwise to execute, seal and deliver and
otherwise perfect and do any such legal assignments and other assurances,
charges, authorities and documents and all such deeds, instruments, acts and
things which may be required for the full exercise of all or any of the powers
conferred or which may be deemed proper on or in connection with any of the
purposes aforesaid including directing that the directors of the Company
register the transfer of Shares pursuant to Section 12.2.3.
 
 
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12.4.3       The power conferred by Section 12.4 shall be a general power of
attorney and the Defaulting Shareholder hereby ratifies and confirms and agrees
to ratify and confirm any instrument, act or thing which any attorney appointed
pursuant hereto may execute or do. In relation to the power referred to herein,
the exercise by the Non-Breaching Shareholder of such power shall be conclusive
evidence of its right to exercise the same.
 
12.5         Termination.  This Agreement may be terminated by mutual written
consent of AGFEED and HYPOR.
 
ARTICLE 13

 
ACKNOWLEDGMENT/FEES
 
13.1     Production and Distribution Agreement.  Each party hereto acknowledges
that HYPOR and AGFEED will be entering into a Production and Distribution
Agreement with the Company as of the Effective Date.
 
13.2     AgFeed Lease Agreement.  Each party hereto acknowledges that the AGFEED
will be entering into the AgFeed Lease Agreement with the Company as of the
Effective Date.
 
13.3     AGFEED Authorized Signatory.  Each party hereto acknowledges that [Dr.
Songyan Li] has been designated as the Person authorized to execute any
agreement on behalf of the Company, including, without limitation, this
Agreement, the Production and Distribution Agreement and the AgFeed Lease
Agreement.
 
ARTICLE 14

 
MISCELLANEOUS
 
14.1         Authority to Amend.  Amendments to this Agreement shall require the
approval of AGFEED and HYPOR.  Notwithstanding the foregoing, the parties hereto
agree that, in the event AGFEED, HYPOR or the Company exercises any of its
repurchase rights set forth in ARTICLE 7 or Section 12.2.3 and this Agreement is
not terminated, any reference in this Agreement to the selling party (i.e.,
HYPOR or AGFEED, as applicable) shall mean to refer to the repurchasing party
(i.e., AGFEED or HYPOR, as applicable).
 
14.2         Notices.  All notices, requests, demands and other communications
under this Agreement must be in writing and will be deemed duly given, unless
otherwise expressly indicated to the contrary in this Agreement, (a) when
personally delivered, (b) 2 days after having been deposited in the United
States mail, postage prepaid, (c) 1 Business Day after having been dispatched by
a nationally recognized overnight courier service, addressed to the parties or
their permitted assigns with an acknowledgment of receipt requested at the
following addresses, or (d) upon receipt of confirmation of a facsimile or other
electronic transmission:

 
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14.2.1       If to the Company, to the Company at AgFeed Industries, Inc., Rm.
A1001-1002, Tower 16, Hengmao Int’l Center, 333 S. Guangchang Rd., Nanchang,
Jiangxi, China 330003; and
 
14.2.2       If to a Shareholder, to the addresses set forth on Exhibit A to
this Agreement.  Any Person may from time to time specify a different address by
written notice to the Company in accordance with this Section 14.2.
 
14.3         Name Change.  In the event this Agreement is terminated or HYPOR or
AGFEED cease being Shareholders of the Company, then, at such time, the Company
shall (i) no longer be entitled to use the name “Hypor” or “AgFeed,” as
applicable; and (ii) the Company shall further refrain from the use of a name
similar to “Hypor” or “AgFeed,” as applicable, as (or as part of) its company
name so as not to cause confusion to a third party in relation to the products
the Company markets or the ownership of the Company.
 
14.4         Binding Effect.  Except as otherwise provided in this Agreement,
every covenant, term, and provision of this Agreement will be binding upon and
inure to the benefit of the Shareholders and their respective heirs, legatees,
legal representatives, successors, transferees and permitted assigns.
 
14.5         Construction.  Every covenant, term and provision of this Agreement
will be construed simply according to its fair meaning and not strictly for or
against any Shareholder.
 
14.6         Entire Agreement.  This Agreement, as it may be amended in writing
from time to time, contains the entire understanding among the parties hereto
and supersedes any prior understandings and agreements among them respecting the
subject matter of this Agreement.
 
14.7         Headings.  The table of contents, section and other headings
contained in this Agreement are for reference purposes only and are not intended
to describe, interpret, define or limit the scope or extent of this Agreement or
any provision hereof.
 
14.8         Severability.  Every provision of this Agreement is intended to be
severable.  If any term or provision hereof is invalid for any reason
whatsoever, such illegality or invalidity will not affect the validity or
legality of the remainder of this Agreement.
 
14.9         Incorporation by Reference.  Every appendix, exhibit, schedule, and
other document attached to this Agreement and referred to herein is hereby
incorporated into this Agreement by reference.
 
14.10       Further Action.  Each Shareholder agrees to perform all further acts
and execute, acknowledge, and deliver any documents that maybe reasonably
necessary, appropriate, or desirable to carry out the provisions of this
Agreement.
 
14.11       Variation of Pronouns.  All pronouns and any variations will be
deemed to refer to masculine, feminine, or neuter, singular or plural, as the
identity of the Person or Persons may require.
 
 
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14.12       Governing Law; Consent to Jurisdiction.  This Agreement shall be
governed by, and construed in accordance with, the laws of the State of Nevada,
United States, save as regards to the application of any non-Nevada law
statutes, laws or regulations referred to herein.  To the fullest extent
applicable Law permits, each Shareholder hereby consents to the jurisdiction of
any court located in Philadelphia County, Pennsylvania, United States for the
purposes of enforcement of this Agreement and waives personal service of any and
all process.  To the fullest extent applicable Law permits, each Shareholder
waives any objection to venue of any action instituted under this Agreement.
 
14.13       Specific Performance.  The parties hereto acknowledge that it is
impossible to measure, in money, the damages that shall accrue to a party from a
failure of a party to perform any of the obligations under this
Agreement.  Therefore, if any party enters into any action or proceeding to
enforce the provisions of this Agreement, any Person (including the Company)
against whom the action or proceeding is brought waives the claim or defense
that the moving party has or shall have an adequate remedy at law, and the
Person shall not urge in the action or proceeding the claim or defense that an
adequate remedy at law exists.
 
14.14       Counterpart Execution; Facsimile.  This Agreement may be executed in
any number of counterparts with the same effect as if all of the Shareholders
had signed the same document.  All counterparts will be construed together and
will constitute one agreement.  This Agreement may be executed via facsimile or
other electronic transmission.
 
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as a Deed as
of the Effective Date.

SHAREHOLDERS:
       
AGFEED INDUSTRIES, INC.
       
By:
/s/ Li Songyan
 
Name:
Li Songyan
 
Title:
Chairman
       
EXECUTED IN CHINA
       
HYPOR B.V.
       
By:
/s/ M. H. M. Hendrix
 
Name:
M. H. M. Hendrix
 
Title:
President
     
THE COMPANY:
     
Executed as a Deed for and on behalf of
       
HYPOR AGFEED BREEDING COMPANY
INC.
       
By:
/s/ Li Songyan
 
Name:
Li Songyan
 
Title:
Authorized Signatory

 
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SCHEDULE 1

EXCEPTION TO BUSINESS ACTIVITIES OF THE COMPANY

None.

 
2

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EXHIBIT A
SHAREHOLDERS' NAMES, ADDRESSES, EQUITY INTEREST AND SHARES
AS OF DECEMBER 11, 2009
(Capitalized terms used herein shall have the meaning given to them in the
Shareholders
Agreement, dated December 11, 2009, as amended from time to time)

Parties have agreed to an Initial Capital Contribution of Thirty Seven Million
China Yuan Renminbi (37,000,000 RMB). This Initial Capital Contribution will be
made available to the Company in accordance with the schedule stated hereunder.

TOTAL INVESTMENT
    37,000,000          
Capital
    50 %        
Loan
    50 %        

     
Capital
Contribution
   
Loan
   
Total
 
AgFeed
    85 %     15,725,000       15,725,000       31,450,000  
Hypor
    15 %     2,775,000       2,775,000       5,550,000  

(Note 1, this assumes an exchange rate to the Euro of 10,1, this is the rate to
transfer the euro amount of the animal purchased to RMB)
(Note 2, Hypor to contribute capital and loan as part of the value of the
animals supplied under the Production and Distribution Agreement.)

A.           As to the Eighteen Million Five Hundred Thousand China Yuan
Renminbi (18,500,000RMB) to be paid as registered capital of the Company, the
Parties have agreed as follows:

Names and Addresses
of Shareholders
 
Number of Shares
   
Amount Paid for Share
(RMB 1,000 per Share)
   
Equity
Interest of the
Company
 
AgFeed Industries, Inc.
Akara Bldg., 24 De Castro Street,
Wickhams Cay 1, Road Town,
Tortola, British Virgin Islands
    15,725       15,725,000       85 %                          
HYPOR B.V.
Spoorstraat 69,
5831 CK Boxmeer
The Netherlands
Attn:  Managing Director
    2,775       2,775,000       15 %                          
TOTAL ISSUED
    18,500       18,500,000       100 %

B.           As to the Eighteen Million Five Hundred Thousand China Yuan
Renminbi (18,500,000RMB) to be paid under a shareholders loan agreement, the
Parties have agreed to the shareholders loan agreement between the Company and
AGFEED and HYPOR respectively, a format of such shareholders loan agreement has
been attached hereto as Exhibit AA.

 

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