Yayi International Inc.  - Exhibit 10.2 - Filed by newsfilecorp.com






Exhibit 10.2

MAKE GOOD ESCROW AGREEMENT 

          This
MAKE GOOD ESCROW AGREEMENT (the “Make Good Agreement”), effective
as of September 27, 2010, is entered into by and among Yayi International Inc.,
a Delaware corporation (the “Company”), Global Rock Stone Industrial Ltd,
a British Virgin Islands company (the “Make Good Pledgor”), Euro Pacific
Capital, Inc., as Investor agent (“Investor Agent”) and Escrow, LLC, as
escrow agent (“Escrow Agent”).

          WHEREAS,
each of the investors (the “Investors”) in the Company’s private offering
of securities (the “Offering”) has entered into a Securities Purchase
Agreement, dated as of the date of this Agreement (the “Securities
Purchase Agreement”), evidencing their participation in the Company’s
Offering; 

          WHEREAS,
pursuant to the terms of the Securities Purchase Agreement, the Investor Agent
has been duly appointed and has the power to act by and on behalf of the
Investors hereunder; 

          WHEREAS,
as an inducement to the Investors to participate in the Offering and as set
forth in the Securities Purchase Agreement, the Make Good Pledgor has agreed to
place certain shares of the Company’s common stock, par value $0.001 per share
(the “Common Stock”) held by the Make Good Pledgor into escrow for the
benefit of the Investors in the event the Company fails to satisfy certain
financial thresholds as set forth in this Make Good Agreement; 

          WHEREAS,
pursuant to the requirements of the Securities Purchase Agreement, the Company
and the Make Good Pledgor have agreed to establish an escrow on the terms and
conditions set forth in this Make Good Agreement;

          WHEREAS,
the Company, the Make Good Pledgor and the Investor Agent have requested that
the Escrow Agent hold the Escrow Shares (as defined below) and the Escrow Agent
has agreed to act as escrow agent pursuant to the terms and conditions of this
Make Good Agreement; and

          WHEREAS,
all capitalized terms used but not defined herein which are defined in the
Securities Purchase Agreement shall have the respective meanings given to such
terms in the Securities Purchase Agreement;

          NOW,
THEREFORE, in consideration of the mutual promises of the parties and the terms
and conditions hereof, the parties hereby agree as follows:

1.      
 Appointment of Escrow Agent. The Company, the Make
Good Pledgor and the Investor Agent hereby appoint Escrow Agent to act as Escrow
Agent in accordance with the terms and conditions set forth in this Make Good
Agreement, and Escrow Agent hereby accepts such appointment and agrees to act as
Escrow Agent in accordance with such terms and conditions.




2.       
Establishment of Escrow. Within five (5) Trading Days following
each Closing, the Make Good Pledgor shall deliver, or cause to be delivered, to
the Escrow Agent certificates evidencing an aggregate of 15% of the maximum
number of shares of Common Stock issuable upon conversion of the Notes sold at
such Closing (the “Escrow Shares”) pursuant to the Securities Purchase
Agreement, along with bank signature stamped stock powers executed in blank (or
such other signed instrument of transfer acceptable to the Company’s Transfer
Agent). As used in this Make Good Agreement, “Transfer Agent” means
American Registrar & Transfer Co., or such other entity hereafter retained
by the Company as its stock transfer agent as specified in a writing from the
Company to the Escrow Agent. The Make Good Pledgor understands and agrees that
the Investors’ rights to receive the Make Good Shares (as defined below)
pursuant to Section 4.11 of the Securities Purchase Agreement and this Make Good
Agreement shall not continue to run to the benefit of an Investor to the extent
such Investor shall have transferred or sold all or any portion of its Notes,
and that after any such transfer or sale such rights shall run to the Persons
receiving such Units. The Make Good Pledgor hereby irrevocably agrees that other
than in accordance with Section 4.11 of the Securities Purchase Agreement and
this Make Good Agreement, the Make Good Pledgor will not offer, pledge, sell,
contract to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant to purchase or otherwise
transfer or dispose of, directly or indirectly, or announce the offering of any
of the Escrow Shares (including any securities convertible into, or exchangeable
for, or representing the rights to receive Escrow Shares). In furtherance
thereof, the Company and the Make Good Pledgor will (x) place a stop order on
all Escrow Shares which shall expire on the date the Escrow Shares are delivered
to the Investors or returned to the Make Good Pledgor, (y) notify the Transfer
Agent in writing of the stop order and the restrictions on such Escrow Shares
under this Make Good Agreement and direct the Transfer Agent not to process any
attempts to resell or transfer by the Make Good Pledgor or anyone else any
Escrow Shares before the date when such Escrow Shares are delivered to the
Investor Agent and Investors or returned to the Make Good Pledgor, or otherwise
in violation of Section 4.11 of the Securities Purchase Agreement and this Make
Good Agreement. The Company and the Make Good Pledgor shall notify the Investors
as soon as the Escrow Shares have been deposited with the Escrow Agent. 

3.      
Representations of the Make Good Pledgor. The Make Good Pledgor
hereby represents and warrants to the Investors as follows:

          (i) The
Make Good Pledgor is the record and beneficial owner of the Escrow Shares and
all of the Escrow Shares are validly issued, fully paid and nonassessable shares
of the Company, and free and clear of all Liens. There are no restrictions on
the ability of the Make Good Pledgor to transfer the Escrow Shares to the
Investors, except as stated herein. There are no restrictions on the ability of
the Make Good Pledgor to enter into this Make Good Agreement other than transfer
restrictions under applicable federal and state securities laws. Upon any
transfer of Escrow Shares to Investors hereunder, Investors will receive full
right, title and authority to such shares as holders of Common Stock of the
Company free and clear of all liens other than those imposed by US Federal
Securities laws.

2 




          (ii)
Performance of this Make Good Agreement and compliance with the provisions
hereof will not violate any provision of any applicable law and will not
conflict with or result in any breach of any of the terms, conditions or provisions of, or
constitute a default under, or result in the creation or imposition of any Lien
upon any of the properties or assets of the Company or the Make Good Pledgor
pursuant to the terms of any indenture, mortgage, deed of trust or other
agreement or instrument binding upon the Company or the Make Good Pledgor or
such properties or assets, other than such breaches, defaults or Liens which
would not have a material adverse effect taken as a whole. No notice to, filing
with, or authorization, registration, consent or approval of any governmental
authority or other person is necessary for the execution, delivery or
performance of this Make Good Agreement or the consummation of the transactions
contemplated hereby by the Make Good Pledgor. 

          (iii)
The Make Good Pledgor has carefully considered and understands its obligations
and rights under Section 4.11 of the Securities Purchase Agreement and this Make
Good Agreement, and in furtherance thereof (x) has consulted with its legal and
other advisors with respect thereto and (y) hereby forever waives and agrees
that it may not assert any equitable defenses in any Proceeding involving the
Escrow Shares. 

4. Disbursement of Escrow Shares.

         
a.           In the event that
the Combined Net Sales (as defined below) reported in the Annual Report of the
Company on Form 10-K (or such other form appropriate for such purpose as
promulgated by the Commission) for both of the fiscal years ending March 31,
2011 and 2012, as filed with the Commission (the “2011 Annual Report” and
“2012 Annual Report”), is less than $125,000,000 (the “Guaranteed
Amount”), the Escrow Agent (on behalf of the Make Good Pledgor) will,
without any further action on the part of the Investors or the Investor Agent,
transfer a number of Make Good Shares (as calculated below) to the Investor
Agent, as agent for the Investors, on a pro-rata basis (determined by dividing
each Investor’s Investment Amount by the aggregate of all Investment Amounts
delivered to the Company by the Investors under the Securities Purchase
Agreement) as specified in Exhibit A to this Agreement for no
consideration other than payment of their respective Investment Amount paid to
the Company at Closing. The “Make Good Shares” means a number of shares
of Common Stock equal to 15% of the maximum number of shares of Common Stock
issuable upon conversion of the Notes (measured as of the Final Closing Date).
The number of Make Good Shares transferable to Investors shall be equal to: 

[(the Guaranteed Amount – actual Combined Net Sales of the
Company for the fiscal years ending March 31, 2011 and 2012)/the Guaranteed
Amount]*aggregate number of Make Good Shares 

          b.          
For purposes hereof, “Combined Net Sales” shall mean the aggregate amount
of the Company’s net sales as for both of the fiscal years ending March 31, 2011
and 2012 in each case determined in accordance with GAAP as reported in each of
the 2011 Annual Report and 2012 Annual Report. Notwithstanding the foregoing or
anything else to the contrary herein, for purposes of determining whether or not
the Guaranteed Amount has been met, the Company may disregard any compensation
charge or expense required to be recognized by the Company under GAAP resulting
from the release of the Make Good Shares to the Make Good Pledgor if and to the
extent such charge or expense is specified in the Company’s independent
auditor’s report for the relevant year, as filed with the Commission. In determining
whether the Company has achieved the Guaranteed Amount, any liquidated damages
payable pursuant to the Transaction Documents shall not be included as expenses
of the Company.

3 




          c.          
In the event that the Combined Net Sales reported in both of the 2011 Annual
Report and 2012 Annual Report is equal to or greater than the Guaranteed Amount,
no transfer of the Make Good Shares shall be required by the Make Good Pledgor
to the Investors under this Section and such Make Good Shares shall be returned
to the Make Good Pledgor in accordance with this Make Good Agreement.

          d.          
Any required transfer of the Make Good Shares under this Section shall be made
to the Investors or the Make Good Pledgor, as applicable, within 20 calendar
days after the date which the 2012 Annual Report is filed with the Commission
and otherwise in accordance with this Make Good Agreement subject to return as
provided in the immediately preceding paragraph and, in the event that any of
the Make Good Shares are required to be distributed to the Investors in
accordance with the terms of this Make Good Agreement, the Escrow Agent will
deliver such shares to the Investors in accordance with Exhibit A. The
Investor Agent will deliver to the Escrow Agent (with a copy to the Company and
the Make Good Pledgor) a copy of the 2011 Annual Report and 2012 Annual Report,
together with the calculation of whether the Guaranteed Amount has been
achieved. Escrow Agent need only rely on such letters from the Investor Agent
and will disregard any contrary or further calculations or instructions in such
regard delivered by or on behalf of the Company or the Make Good Pledgor.

         
e.           Pursuant to
Section 4(a), if the Investor Agent delivers a notice to the Escrow Agent that
the Escrow Shares are to be transferred to the Investors, then the Escrow Agent
shall immediately forward the Make Good Shares to the Company’s Transfer Agent
for reissuance to the Investors in an amount to each Investor as set forth on
Exhibit A attached hereto and otherwise in accordance with this Make Good
Agreement. Each of the Company and the Make Good Pledgor covenants and agrees
that upon the transfer of Make Good Shares to the Investors in accordance with
this Make Good Agreement, the Company and the Make Good Pledgor shall promptly
instruct its Transfer Agent to reissue such Make Good Shares in the applicable
Investor’s name and deliver the same, or cause the same to be delivered as
directed by such Investor in an amount to each Investor as set forth on
Exhibit A attached hereto. If the Company and the Make Good Pledgor do
not promptly provide such instructions to the Transfer Agent of the Company,
then the Investor Agent is hereby irrevocably authorized and directed by the
Company and the Make Good Pledgor to give such re-issuance instruction to the
Transfer Agent of the Company. If a notice from the Investor Agent pursuant to
Section 4(a) indicates that the Escrow Shares are to be returned to the Make
Good Pledgor, then the Escrow Agent will promptly deliver the Make Good Shares
to the Make Good Pledgor in accordance with instructions provided by the Company
and the Make Good Pledgor at such time. 

         
f.           The Company and
the Make Good Pledgor covenant and agree to provide the Escrow Agent with
certified tax identification numbers by furnishing appropriate forms W-9 or W-8
and such other forms and documents that the Escrow Agent may request, including
appropriate W-9 or W-8 forms for each Investor. The Company and the Make Good
Pledgor understand that if such tax reporting documentation is not provided and
certified to the Escrow Agent, the Escrow Agent may be required by the Internal Revenue
Code of 1986, as amended, and the Regulations promulgated thereunder, to
withhold a portion of any interest or other income earned on the investment of
the Escrow Shares. 

4 




         
g.           Notwithstanding
the foregoing or anything else to the contrary herein, any Investor that
exercises the right to convert such Investor’s Notes into shares of Common Stock
prior to the date on which the 2012 Annual Report is filed with the Commission
shall not receive the Make Good Shares to which such Investor would otherwise be
entitled pursuant to this Section 4 and the Securities Purchase Agreement, and
such Make Good Shares shall be returned to the Make Good Pledgor within 20
calendar days after the date on which the 2012 Annual Report is filed with the
Commission and otherwise handled in accordance with this Make Good Agreement.


         
h.           Notwithstanding
the foregoing or anything else to the contrary herein, at such time as the
aggregate principal amount (including accrued but unpaid interest) of
outstanding Notes is less than 15% of the Gross Proceeds, all Make Good Shares
shall be returned to the Make Good Pledgor within 20 calendar days after the
date on which the Investor Agent delivers a notice to the Escrow Agent to that
effect, and all obligations of the Make Good Pledgor hereunder to maintain funds
in escrow shall cease. 

5.       
Notice of Filings. The Company agrees to promptly provide the
Investor Agent written notice of the filing with the Commission of any financial
statements or reports referenced herein. 

6.       
Escrow Shares.

         
a.           If any Escrow
Shares are deliverable to the Investors in accordance with this Make Good
Agreement, (i) the Make Good Pledgor covenants and agrees to execute all such
instruments of transfer (including stock powers and assignment documents) as are
customarily executed to evidence and consummate the transfer of the Escrow
Shares from the Make Good Pledgor to the Investors, to the extent not done so in
accordance with Section 2, and (ii) following its receipt of the documents
referenced in Section 6(i), the Company and Escrow Agent covenant and agree to
cooperate with the Transfer Agent so that the Transfer Agent may promptly
reissue such Escrow Shares in the applicable Investor’s name and delivers the
same as provided herein or otherwise directed in writing by the applicable
Investors. Until such time as (if at all) the Escrow Shares are required to be
delivered pursuant to the Securities Purchase Agreement and in accordance with
this Make Good Agreement, (i) any dividends payable in respect of the Escrow
Shares and all voting rights applicable to the Escrow Shares shall be retained
by the Make Good Pledgor and (ii) should the Escrow Agent receive dividends or
voting materials, such items shall not be held by the Escrow Agent, but shall be
passed immediately on to the Make Good Pledgor and shall not be invested or held
for any time longer than is needed to effectively re-route such items to the
Make Good Pledgor. In the event that the Escrow Agent receives a communication
requiring the conversion of the Escrow Shares to cash or the exchange of the
Escrow Shares for that of an acquiring company, the Escrow Agent shall solicit
and follow the written instructions of the Make Good Pledgor; provided,
that the cash or exchanged shares are instructed to be redeposited into the
Escrow Account. If the Company shall at any time after the date hereof (A)
declare and pay a dividend or make a distribution on Common Stock, or (B) subdivide or split the outstanding shares of Common Stock into
a greater number of shares, or (C) combine or reclassify the outstanding shares
of Common Stock into a smaller number of shares, or (D) make any other similar
changes to its share capital, the Investors shall be entitled to receive the
proportionately adjusted number of Make Good Shares and all dividends and other
distributions made on the Make Good Shares that the Investors would have
received had the Investors received such Make Good Shares at their applicable
Closing. The Make Good Pledgor shall be responsible for all taxes of the
Company, the Make Good Pledgor, or any Investor resulting from any such
conversion, exchange or adjustment. 

5 




          b.          
Assuming the Make Good Pledgor provides good and valid title to the Escrow
Shares to be transferred and delivered on behalf of the Make Good Pledgor to the
Investors hereunder, free and clear of all liens, encumbrances, equities or
claims, the Escrow Agent will ensure that upon delivery of the Escrow Shares,
good and valid title to the Escrow Shares, free and clear of all liens,
encumbrances, equities or claims will pass to the Investors. The Escrow Agent
shall not take any action which could impair Investors’ rights in the Escrow
Shares. The Escrow Agent shall not sell, transfer, assign or otherwise dispose
of (by operation of law or otherwise) or grant any option with respect to any
Escrow Shares prior to the termination of this Agreement. 

7.       
Interpleader. Should any controversy arise among the parties
hereto with respect to this Make Good Agreement or with respect to the right to
receive the Escrow Shares, Escrow Agent and/or the Investor Agent shall have the
right to consult and hire counsel and/or to institute an appropriate
interpleader action to determine the rights of the parties. Escrow Agent and/or
the Investor Agent are also each hereby authorized to institute an appropriate
interpleader action upon receipt of a written letter of direction executed by
the parties so directing either Escrow Agent or the Investor Agent. If Escrow
Agent or the Investor Agent is directed to institute an appropriate interpleader
action, it shall institute such action not prior to thirty (30) days after
receipt of such letter of direction and not later than sixty (60) days after
such date. Any interpleader action instituted in accordance with this Section 7
shall be filed in the New York Courts (as defined below), and the Escrow Shares
in dispute shall be deposited with the court and in such event Escrow Agent and
the Investor Agent shall be relieved of and discharged from any and all
obligations and liabilities under and pursuant to this Make Good Agreement with
respect to the Escrow Shares and any other obligations hereunder.

8.       
Exculpation and Indemnification of Escrow Agent and the Investor
Agent.

         
a.          
Escrow Agent is not a party to, and is not bound by or charged with notice of
any agreement out of which this escrow may arise. Escrow Agent acts under this
Make Good Agreement as a depositary only and is not responsible or liable in any
manner whatsoever for the sufficiency, correctness, genuineness or validity of
the subject matter of the escrow, or any part thereof, or for the form or
execution of any notice given by any other party hereunder, or for the identity
or authority of any person executing any such notice. Escrow Agent will have no
duties or responsibilities other than those expressly set forth herein. Escrow
Agent will be under no liability to anyone by reason of any failure on the part
of any party hereto (other than Escrow Agent) or any maker, endorser or other
signatory of any document to perform such person’s or entity’s obligations
hereunder or under any such document. Except for this Make Good Agreement and instructions to Escrow Agent pursuant to the
terms of this Make Good Agreement, Escrow Agent will not be obligated to
recognize any agreement between or among any or all of the persons or entities
referred to herein, notwithstanding its knowledge thereof. The Investor Agent’s
sole obligation under this Make Good Agreement is to provide written instruction
to Escrow Agent (following such time as the Company files certain periodic
financial reports as specified in Section 4 hereof) directing the distribution
of the Escrow Shares. The Investor Agent will provide such written instructions
upon review of the relevant Combined Net Sales amount reported in such periodic
financial reports as specified in Section 4 hereof. The Investor Agent is not
charged with any obligation to conduct any investigation into the financial
reports or make any other investigation related thereto. In the event of any
actual or alleged mistake or fraud of the Company, its auditors or any other
person (other than the Investor Agent) in connection with such financial reports
of the Company, the Investor Agent shall have no obligation or liability to any
party hereunder. 

6 




          b.          
  Neither the Escrow Agent nor Investor Agent will be liable for any action taken
  or omitted by it, or any action suffered by it to be taken or omitted, absent
  gross negligence or willful misconduct. The Escrow Agent and Investor Agent
  may each rely conclusively on, and will be protected in acting upon, any order,
  notice, demand, certificate, or opinion or advice of counsel (including counsel
  chosen by Escrow Agent or Investor Agent, as applicable), statement, instrument,
  report or other paper or document (not only as to its due execution and the
  validity and effectiveness of its provisions, but also as to the truth and acceptability
  of any information therein contained) which is reasonably believed by Escrow
  Agent or Investor Agent, as applicable, to be genuine and to be signed or presented
  by the proper person or persons. The duties and responsibilities of the Escrow
  Agent and Investor Agent, as the case may be, hereunder shall be determined
  solely by the express provisions of this Make Good Agreement and no other or
  further duties or responsibilities shall be implied, including, but not limited
  to, any obligation under or imposed by any laws of the State of New York upon
  fiduciaries. NEITHER THE ESCROW AGENT NOR INVESTOR AGENT SHALL BE LIABLE, DIRECTLY
  OR INDIRECTLY, FOR ANY (I) DAMAGES, LOSSES OR EXPENSES ARISING OUT OF THE SERVICES
  PROVIDED HEREUNDER, OTHER THAN DAMAGES, LOSSES OR EXPENSES WHICH HAVE BEEN FINALLY
  ADJUDICATED TO HAVE DIRECTLY RESULTED FROM THE ESCROW AGENT’S OR INVESTOR
  AGENT'S, AS THE CASE MAY BE, GROSS NEGLIGENCE OR WILLFUL MISCONDUCT, OR (II)
  SPECIAL, INDIRECT OR CONSEQUENTIAL DAMAGES OR LOSSES OF ANY KIND WHATSOEVER
  (INCLUDING, WITHOUT LIMITATION, LOST PROFITS), EVEN IF THE ESCROW AGENT OR INVESTOR
  AGENT, AS APPLICABLE, HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH LOSSES OR
  DAMAGES AND REGARDLESS OF THE FORM OF ACTION. 

         
c.           The Company and
the Make Good Pledgor hereby indemnify and hold harmless each of Escrow Agent,
the Investor Agent and any of their principals, partners, agents, employees and
affiliates from and against any expenses, including reasonable attorneys’ fees
and disbursements, damages or losses suffered by Escrow Agent or the Investor
Agent in connection with any claim or demand, which, in any way, directly or
indirectly, arises out of or relates to this Make Good Agreement or the services
of Escrow Agent or the Investor Agent hereunder; except, that if Escrow Agent or
the Investor Agent is guilty of willful misconduct or gross negligence under this Make Good Agreement, then Escrow Agent or
the Investor Agent, as the case may be, will bear all losses, damages and
expenses arising as a result of its own willful misconduct or gross negligence.
Promptly after the receipt by Escrow Agent or the Investor Agent of notice of
any such demand or claim or the commencement of any action, suit or proceeding
relating to such demand or claim, Escrow Agent or the Investor Agent, as the
case may be, will notify the other parties hereto in writing. For the purposes
hereof, the terms “expense” and “loss” will include all amounts paid or payable
to satisfy any such claim or demand, or in settlement of any such claim, demand,
action, suit or proceeding settled with the express written consent of the
parties hereto, and all costs and expenses, including, but not limited to,
reasonable attorneys’ fees and disbursements, paid or incurred in investigating
or defending against any such claim, demand, action, suit or proceeding. The
provisions of this Section 8 shall survive the termination of this Make Good
Agreement, and the resignation or removal of the Escrow Agent. 

7 




9.         
Compensation of Escrow Agent. Escrow Agent shall be entitled to a fee of
$1,500.00 as compensation for its services, which compensation shall be paid by
the Company. The fee agreed upon for the services rendered hereunder is intended
as full compensation for Escrow Agent’s services as contemplated by this Make
Good Agreement; provided, however, that in the event that Escrow
Agent renders any material service not contemplated in this Make Good Agreement,
or there is any assignment of interest in the subject matter of this Make Good
Agreement, or any material modification hereof, or if any material controversy
arises hereunder, or Escrow Agent is made a party to any litigation pertaining
to this Make Good Agreement, or the subject matter hereof, then Escrow Agent
shall be reasonably compensated by the Company for such extraordinary services
and reimbursed for all costs and expenses, including reasonable attorney’s fees,
occasioned by any delay, controversy, litigation or event, and the same shall be
recoverable from the Company. Prior to incurring any costs and/or expenses in
connection with the foregoing sentence, Escrow Agent shall be required to
provide written notice to the Company of such costs and/or expenses and the
relevancy thereof and Escrow Agent shall not be permitted to incur any such
costs and/or expenses which are not related to litigation prior to receiving
written approval from the Company, which approval shall not be unreasonably
withheld. 

10.        Resignation of
Escrow Agent. At any time, upon ten (10) Business Days’ written notice to
the Company and the Investors, Escrow Agent may resign and be discharged from
its duties as Escrow Agent hereunder. As soon as practicable after its
resignation, Escrow Agent will promptly turn over to a successor escrow agent
appointed by the Company and the Investor Agent the Escrow Shares held hereunder
upon presentation of a document appointing the new escrow agent and evidencing
its acceptance thereof. If, by the end of the ten (10) Business Day period
following the giving of notice of resignation by Escrow Agent, the Company and
the Investor Agent shall have failed to appoint a successor escrow agent, Escrow
Agent shall deposit the Escrow Shares as directed by the Investor Agent with the
understanding that such Escrow Shares will continue to be subject to the
provisions of this Make Good Agreement. 

11.        Records.
Escrow Agent shall maintain accurate records of all transactions hereunder.
Promptly after the termination of this Make Good Agreement or as may reasonably
be requested by the parties hereto from time to time before such termination,
Escrow Agent shall provide the parties hereto, as the case may be, with a
complete copy of such records, certified by Escrow Agent to be a complete and accurate account of all such
transactions. The authorized representatives of each of the parties hereto shall
have access to such books and records at all reasonable times during normal
business hours upon reasonable notice to Escrow Agent and at the requesting
party’s expense.

8 




12.        Notices.
Any and all notices or other communications or deliveries required or permitted
to be provided hereunder shall be in writing and shall be deemed given and
effective on the earliest of (a) the date of transmission, if such notice or
communication is delivered via (i) facsimile (provided the sender receives a
machine-generated confirmation of successful transmission) at the facsimile
number specified in this Section or (ii) electronic mail (i.e., Email) prior to
6:30 p.m. (New York City time) on a Trading Day, (b) the next Trading Day after
the date of transmission, if such notice or communication is delivered via (i)
facsimile at the facsimile number specified in this Section or (ii) electronic
mail (i.e., Email) on a day that is not a Trading Day or later than 6:30 p.m.
(New York City time) on any Trading Day, or (c) the Trading Day following the
date of mailing, if sent by U.S. nationally recognized overnight courier
service, or (d) upon actual receipt by the party to whom such notice is required
to be given, if sent by any means other than facsimile or Email transmission.
The address for such notices and communications shall be as follows: 

	 	 If to the Company: 	Yayi International Inc. 
	 	  	No. 9 Xingguang Road 
	 	  	Northern Industrial Park of
      Zhongbei Town, 
	 	  	Xiqing District, Tianjin 300384,
      China 
	 	  	Attention: President 
	 	  	Facsimile: 86-22-2798-4358 
	 	  	  
	 	With a copy to: 	Pillsbury Winthrop Shaw Pittman
      LLP 
	 	  	2300 N Street NW 
	 	  	Washington, D.C. 20037 
	 	  	Attention: Louis A. Bevilacqua,
      Esq. 
	 	  	Facsimile: 202-663-8007 
	 	  	  
	 	 If to the Make 	  
	 	 Good Pledgor: 	c/o Tianjin Yayi Industrial Co.,
      Ltd. 
	 	  	No. 9 Xingguang Road 
	 	  	Northern Industrial Park of
      Zhongbei Town, 
	 	  	Xiqing District, Tianjin 300384,
      China 
	 	  	Attention: Mr. Fung Shek 
	 	  	Facsimile: 86-22-2798-4358 
	 	  	  
	 	If to the Investor 	  
	 	Agent: 	Euro Pacific Capital, Inc. 
	 	  	88 Post Road West, 3rd Floor
  
	 	  	Westport, CT 06880 
	 	  	Attention: Mr. Thomas Tan 
	 	  	Facsimile: (203) 662-9771
  


9 





	 	With a copy to: 	Ellenoff Grossman & Schole
      LLP 
	 	  	150 East 42nd Street,
      11th Floor 
	 	  	New York, NY 10017 
	 	  	Attention: Barry I. Grossman,
      Esq. 
	 	  	Facsimile: (212) 370-7889 
	 	  	  
	 	If to the Escrow 	  
	 	Agent: 	Escrow, LLC 
	 	  	215 Mockingbird Lane 
	 	  	Warrenton, VA 20186 
	 	  	Attention: Johnnie L. Zarecor
  
	 	  	Facsimile: (212) 370-7889
  


13.        Execution in
Counterparts. This Make Good Agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument. Facsimile or e-mail execution and delivery of this
Agreement is legal, valid and binding for all purposes. 

14.        Assignment and
Modification. This Make Good Agreement and the rights and obligations
hereunder of the Make Good Pledgor may not be assigned. This Make Good Agreement
and the rights and obligations hereunder of the Escrow Agent may be assigned by
the Escrow Agent only with the prior consent of the Company and the Investor
Agent. Subject to the requirements under federal and state securities laws, an
Investor may assign its rights under this Make Good Agreement without any
consent from any other party. This Make Good Agreement may not be changed orally
or modified, amended or supplemented without an express written agreement
executed by the Escrow Agent, the Company, the Make Good Pledgor and the
Investor Agent. This Make Good Agreement is binding upon and intended to be for
the sole benefit of the parties hereto and their respective successors, heirs
and permitted assigns, and none of the provisions of this Make Good Agreement
are intended to be, nor shall they be construed to be, for the benefit of any
third person, except for the Investors under the Securities Purchase Agreement.
No portion of the Escrow Shares shall be subject to interference or control by
any creditor of any party hereto, or be subject to being taken or reached by any
legal or equitable process in satisfaction of any debt or other liability of any
such party hereto prior to the disbursement thereof to such party hereto in
accordance with the provisions of this Make Good Agreement. 

15.        Applicable
Law. This Make Good Agreement shall be governed by, and construed in
accordance with, the internal laws of the State of New York, without regard to
the conflicts of laws principles thereof. The representations and warranties
contained in this Make Good Agreement shall survive the execution and delivery
hereof and any investigations made by any party. Each party agrees that all
legal proceedings concerning the interpretations, enforcement and defense of the
transactions contemplated by this Make Good Agreement shall be commenced
exclusively in the state and federal courts sitting in the City of New York,
Borough of Manhattan (the “New York Courts”). Each party hereto hereby
irrevocably submits to the exclusive jurisdiction of the New York Courts for the
adjudication of any dispute hereunder or in connection herewith, and hereby irrevocably waives, and agrees
not to assert in any such proceeding, any claim that it is not personally
subject to the jurisdiction of any such New York Court, or that such proceeding
has been commenced in an improper or inconvenient forum. Each party hereto
hereby irrevocably waives personal service of process and consents to process
being served in any such proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to such party
at the address in effect for notices to it under this Make Good Agreement and
agrees that such service shall constitute good and sufficient service of process
and notice thereof. Nothing contained herein shall be deemed to limit in any way
any right to serve process in any manner permitted by law. 

10 




16.        Headings.
The headings contained in this Make Good Agreement are for convenience of
reference only and shall not affect the construction of this Make Good
Agreement.

17.        Attorneys’
Fees. If any action at law or in equity, including an action for declaratory
relief, is brought to enforce or interpret the provisions of this Make Good
Agreement, the prevailing party shall be entitled to recover reasonable
attorneys' fees from the other party (unless such other party is the Escrow
Agent), which fees may be set by the court in the trial of such action or may be
enforced in a separate action brought for that purpose, and which fees shall be
in addition to any other relief that may be awarded. 

18.        Merger or
Consolidation. Any entity into which the Escrow Agent may be converted or
merged, or with which it may be consolidated, or to which it may sell or
transfer all or substantially all of its corporate trust business and assets as
a whole or substantially as a whole, or any corporation or association resulting
from any such conversion, sale, merger, consolidation or transfer to which the
Escrow Agent is a party, shall be and become the successor escrow agent under
this Make Good Agreement and shall have and succeed to the rights, powers,
duties, immunities and privileges as its predecessor, without the execution or
filing of any instrument or paper or the performance of any further act.

19.        Waiver. No
waiver of, or any breach of any covenant or provision herein contained shall be
deemed a waiver of any preceding or succeeding breach thereof, or of any other
covenant or provision herein contained. No extension of time for performance of
any obligation or act shall be deemed an extension of the time for performance
of any other obligation or act. 

20.        Entire
Agreement. This Make Good Agreement is the final expression of, and contains
the entire agreement between, the parties with respect to the subject matter
hereof and supersedes all prior understandings with respect thereto. This Make
Good Agreement may not be modified, changed, supplemented or terminated, nor may
any obligations hereunder be waived, except by written instrument signed by the
parties to be charged or by its agent duly authorized in writing or as otherwise
expressly permitted herein. 

21.       
Construction. Whenever required by the context of this Make Good Agreement,
the singular shall include the plural and masculine shall include the feminine.
This Make Good Agreement shall not be construed as if it had been prepared by
one of the parties, but rather as if all parties had prepared the same.

11 




22.        Further
Instruments. If this Make Good Agreement reasonably requires other or
further instruments in connection with this Make Good Agreement or obligations
in respect hereto, the necessary parties hereto shall use its best efforts to
join in furnishing such instruments. 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 

12 




          IN
WITNESS WHEREOF, the parties have duly executed this Make Good Agreement as of
the date set forth opposite their respective names. 

	 	COMPANY: 
	 	 
	 	YAYI INTERNATIONAL INC. 
	 	 
	 	 
	 	By: /s/ Li
      Liu                                                                      
       
	 	Name: Li Liu 
	 	Title: Chief Executive Officer and President
  
	 	 
	 	 
	 	MAKE GOOD PLEDGOR: 
	 	 
	 	GLOBAL ROCK STONE INDUSTRIAL LTD 
	 	 
	 	 
	 	By: /s/ Fung
      Shek                                                              
       
	 	Name: Fung Shek 
	 	Title: Director 
	 	 
	 	 
	 	ESCROW AGENT: 
	 	 
	 	ESCROW, LLC 
	 	 
	 	 
	 	By: /s/ Johnnie L.
      Zarecor                                               
       
	 	Name: Johnnie L. Zarecor 
	 	Title: Vice President 
	 	 
	 	 
	 	INVESTOR AGENT: 
	 	 
	 	EURO PACIFIC CAPITAL, INC. 
	 	 
	 	 
	 	By: /s/ Gordon
      McBean                                                 
       
	 	Name: Gordon McBean 
	 	Title: Head of Capital Markets



Yayi Make Good Escrow Agreement 




Exhibit A 

INVESTORS 


	
Investor’s Legal Name 	Investment 
Amount 
	AMY J STEFANIK TTEE AMY J STEFANIK REVOCABLE TRUST U/A
      2/6/01 	$100,000 
	ANDREW P COOK SUSAN R COOK 	$50,000 
	ARNOLD WILLIAM GOLDSCHLAGER NORA GOLDSCHLAGER TTEE THE
      GOLDSCHLAGER FAMILY TRUST U/A 6/24/04 	$50,000 
	ART KLEPPEN KIMBERLY KLEPPEN 	$100,000 
	BARBARA HEARST 	$100,000 
	BARBARA J PETERSON TTEE REV TR OF BARBARA J PETERSON U/A
      2/4/00 	$70,000 
	BARBARA S MEISTER TTEE THE MEISTER NON-EXEMPT MARITAL TR
      U/A 11/17/83 	$100,000 
	BARBARA SEIDEL TTEE BARBARA GALLUN SEIDEL RESIDUAL TRUST
      U/A 2/9/60 	$50,000 
	BARBARA SUE WILSON DAVID D WILSON TTEE THE BARBARA SUE
      WILSON U/A 8/23/94 	$50,000 
	BERT HUNTSINGER 	$50,000 
	BRENT PAULGER SHARISSA PAULGER 	$50,000 
	BRIAN S BEHAN 	$50,000 
	BRUCE WALKER RAVENEL III 	$300,000 
	BUCKTHORN LLC 	$50,000 
	CARLOS A MERINO TTEE CARLOS ALFONSO MERINO REV LIVING
      TRUST, U/A 12/04/96 	$50,000 
	CAROLYN R LONG 	$60,000 
	CHARLOTTE J BELASCO 	$50,000 
	CHRISTIANNA SEIDEL TTEE PROPERTY TRUST U/A 11/5/99 FBO
      CHRISTIANNA SEIDEL 	$50,000 
	CINDY J LEWIS TTEE CINDY J LEWIS DECL OF TRUST U/A 3/11/93
    	$50,000 
	COREY SHANNON MCNAMEE 	$50,000 
	CYNTHIA KESSLER & JAMES KESSLER 	$50,000 
	DAVID ALAN SCULLY 	$100,000 
	DAVID ARITA TOD 	$50,000 
	DAVID BRISBIN TTEE INNES/BRISBIN LIVING TRUST DATED 6/8/04
    	$100,000 
	DAVID W LARSON JENNIFER L LARSON 	$100,000 
	DEBORAH FOREMAN TTEE DEBORAH D FOREMAN TRUST U/A 9/29/94
	$50,000 
	DOUGLAS W JOHNSON TTEE DOUGLAS WILLIAM JOHNSON REV TRST U/A
      6/25/10 	$50,000 
	DR UZZI REISS MRS YAEL REISS TTEE THE REISS FAMILY TRUST
      U/A 12/29/88 	$50,000 
	EVA MARIE SALAS TTEE EVA M SALAS TRUST 	$50,000 
	GAYLE M & DEBORAH SANDERS TTEE THE GAYLE M SANDERS FAM
      TR REV TR, U/A 8/15/02 	$100,000 
	GEORGE FELDMAN 	$250,000 
	GILBERT DOMINGUEZ TTEE DOMINGUEZ TRUST U/A 3/3/05 	$350,000 
	HCR INVESTMENTS INC. 	$100,000 
	HEIDI W KIENE KEVIN KIENE 	$100,000 
	HEMANT KATHURIA P/ADM H KATHURIA INVESTMENTS II P PLAN 	$50,000 
	JACK ABRAMS MARGO ABRAMS TTEE JACK ABRAMS PENSION PLAN 1
	$50,000 
	JANET D RUSSELL TTEE JANET DICKINSON RUSSELL LIVING TR U/A
      1/20/10 	$50,000 
	JEAN A DAVIDS-OSTERHAUS TTEE JEAN A DAVIDS-OSTERHAUS REV
      U/A 10/03/07 	$50,000 
	JEFF ARCHIBALD 	$100,000 
	JERRY F MCWILLIAMS 	$50,000 
	JIM GRIFFIN CUST DANIEL J GRIFFIN UTMA OH 	$60,000 









	
Investor’s Legal Name 	Investment 
Amount 
	JIM GRIFFIN CUST MICHELLE E GRIFFIN UTMA OH 	$60,000 
	JIM ROBERT PUGH 	$50,000 
	JIMMIE C WEST CAROLYN E WEST 	$50,000 
	JOHN A RUPP TTEE JOHN A RUPP TRUST U/A 3/9/07 	$50,000 
	JOHN D SMEAD 	$50,000 
	JOSEPH MCCARTHY MIKI MCCARTHY TOD 	$50,000 
	JULIA L GRIFFIN 	$60,000 
	KENNETH H NASS & MAUREEN K NASS TTEE KENNETH H NASS
      & MAUREEN K NASS CHARITRUST U/A 6/7/05 	$100,000 
	KEVIN MOORE 	$50,000 
	KK SWOGGER ASSET MANAGEMENT, LP 	$80,000 
	LARRY GUAGLIARDO TOD 	$70,000 
	LAURA SMITH FORREST SMITH TTEE CONNELLY JOHNSON SMITH FAM
      TR U/A 4/2/09 	$50,000 
	MARC A PIERRE, P BARRAGAN P/ADM CENTER FOR PHYS HLTH 401K
      PSP MARC PIERRE 	$50,000 
	MARC BIENSTOCK JENNY I BIENSTOCK 	$50,000 
	MARC W LEVIN SUSAN G LEVIN 	$50,000 
	MARK A OSTERHAUS TTEE THE MARK A OSTERHAUS REV TR U/A
      10/31/07 	$50,000 
	MARK DUGGER P/ADM THE ALLSTATES DRYWALL INC EE ST 	$50,000 
	MARK EDWARD SMEAD TTEE MARK E SMEAD REVOC LIVING TRUST U/A
      11/17/95 	$100,000 
	MARK STERIN 	$70,000 
	MAUREEN K NASS KENNETH H NASS TTEE MAUREEN K NASS LIVING
      TRUST U/A 5/16/05 	$50,000 
	MICHAEL J HANRATTY LYNSAY F HANRATTY 	$100,000 
	MICHAEL SCULLY 	$100,000 
	MITCHELL MARTIN DEBORAH MARTIN 	$50,000 
	NANCY L BENSON TTEE THE NANCY L BENSON LIVING TRUST U/A
      11/11/02 	$50,000 
	N E APPERSON, P MCEACHERN TTEE NORMAN E APPERSON AND PAMELA
      MCEACHERN TR, U/A 7/22/96 	$100,000 
	NFS/FMTC IRA FBO DIANE D SPOLUM 	$200,000 
	NFS/FMTC IRA FBO HOWARD W WAHL 	$100,000 
	NFS/FMTC IRA FBO LEONARD SIEGEL 	$50,000 
	NFS/FMTC IRA FBO LYNN HAVLIK 	$50,000 
	NFS/FMTC IRA FBO ROYCE V JACKSON 	$100,000 
	NFS/FMTC IRA FBO ROBERT STEPHEN ADAMS 	$100,000 
	NFS/FMTC ROLLOVER IRA FBO ANDRES KEICHIAN 	$50,000 
	NFS/FMTC ROLLOVER IRA FBO BERTRAND BROOKS CARDER 	$50,000 
	NFS/FMTC ROLLOVER IRA FBO DONALD T GLASER JR 	$50,000 
	NFS/FMTC ROLLOVER IRA FBO EDWIN BRUNO KAEHLER 	$50,000 
	NFS/FMTC ROLLOVER IRA FBO JAMES A TAMBORELLO 	$100,000 
	NFS/FMTC ROLLOVER IRA FBO JERRY R SPEAKS 	$50,000 
	NFS/FMTC ROLLOVER IRA FBO LYNN ROLLINS STULL 	$50,000 
	NFS/FMTC ROLLOVER IRA FBO RALPH DALE EDSON 	$100,000 
	NFS/FMTC ROLLOVER IRA FBO RICHARD DAVIS MOORE 	$40,000 
	NFS/FMTC ROLLOVER IRA FBO ROBERT M WEISSBERG 	$50,000 
	NFS/FMTC ROLLOVER IRA FBO RONALD ALLEN MCCANN 	$50,000 
	NFS/FMTC ROLLOVER IRA FBO TODD HOWARD OVERGARD 	$50,000 
	NFS/FMTC ROTH IRA FBO HELEN ERSKINE 	$50,000 









	
Investor’s Legal Name 	Investment 
Amount 
	NFS/FMTC ROTH IRA FBO VIRGINIA C ADAMS 	$50,000 
	NFS/FMTC SEP IRA FBO CARTER LAREN 	$100,000 
	NFS/FMTC SEP IRA FBO GERALD E MANWILL 	$50,000 
	NFS/FMTC SEP IRA FBO GERALD MONA 	$50,000 
	NORMAN S KRAMER & LINDA L KRAMER 	$50,000 
	OLEKSANDR TUMKO OKSANA TUMKO 	$50,000 
	PETER D SCHIFF 	$200,000 
	POINT AUX CHENES, LLC 	$50,000 
	POM INVESTMENTS LLC 	$100,000 
	PRASAD REALTY CORP 	$50,000 
	QUINCY MURPHY INC 	$50,000 
	R STEVEN SMITH 	$100,000 
	RICHARD GRIFF JACKIE GRIFF 	$150,000 
	RICHARD P ANTHONY III & KIMBERLY J ANTHONY 	$50,000 
	RICHARD POTAPCHUK 	$300,000 
	ROBERT L BISHOP TOD FRANCINE BISHOP 	$50,000 
	ROBERT T FOSS MARGARET FOSS TTEE ROBERT T & MARGARET
      FOSS REV TR U/A 3/31/04 	$60,000 
	SCOTT & MISTY DAVIES TTEE THE SCOTT & MISTY DAVIES
      LIVING TR, U/A 6/28/07 	$80,000 
	SCOTT R GRIFFIN 	$60,000 
	SHELBY JORDAN, BECKY JORDAN 	$50,000 
	SKEE GOEDHART TTEE THE PARACELSUS REVOCABLE TRUST U/A
      7/25/97 	$50,000 
	STEPHEN RASKIN P/ADM DREW & RASKIN P/S PLAN FBO STEPHEN
      RASKIN 	$100,000 
	STEVE & COLLEEN HOKE TTEE HOKE LIVING TRUST U/A 4/19/02
    	$50,000 
	STEVEN JAY EPSTEIN 	$50,000 
	SUSAN C CULLEN 	$50,000 
	THOMAS L INGRAM CARISSA INGRAM TTEE INGRAM LIVING TRUST U/A
      11/2/05 	$50,000 
	TIMOTHY CRANE TTEE TIMOTHY R CRANE TRUST U/A 12/6/04 	$100,000 
	TRISHA L FRERES THEODORE KYLE FRERES TTEE TRISHA L FRERES
      LIVING TRUST U/A 12/20/04 	$50,000 
	WALTER FRIESEN 	$80,000 
	WILLIAM A KARGES JR TTEE KARGES REVOC INTERVIVOS TRUST U/A
      4/29/85 	$50,000 
	WILLIAM BRADLEY P/ADM BRADLEY ANESTHESIOLOGY PSP 	$50,000 
	WILLIAM J CYR 	$70,000 
	WILLIAM TEN BRINK TTEE TEN BRINK TRUST U/A 10/2/86 	$90,000 
	WILLIAM WILEY MARIANNE WILEY TTEE WILEY FAMILY LIVING TRUST
      U/A 7/19/95 	$60,000 
	TOTAL 	$8,920,000