Document:

Unassociated Document

    
      EXECUTION
        VERSION

    

     

    TENTH
      AMENDMENT TO CREDIT AGREEMENT

    

    This
      TENTH AMENDMENT TO CREDIT AGREEMENT (this “Amendment”),
      dated
      as of August 8, 2008, is entered into by and among THE GYMBOREE CORPORATION,
      a
      Delaware corporation (the “Company”),
      each
      other Borrower named in the signature pages hereof (together with the Company,
      each a “Borrower”
and,
      collectively, the “Borrowers”),
      and
      BANK OF AMERICA, N.A. (the “Lender”).

     

    RECITALS

    

    A. The
      Borrowers and the Lender are parties to a Credit Agreement, dated as of August
      11, 2003 as amended by (i) that certain Waiver and First Amendment to Credit
      Agreement dated as of December 6, 2004, (ii) that certain Second Amendment
      to
      Credit Agreement dated as of July 25, 2005, (iii) that certain Third Amendment
      to Credit Agreement dated as of March 30, 2006, (iv) that certain Fourth
      Amendment to Credit Agreement dated as of July 5, 2006, (v) that certain Fifth
      Amendment to Credit Agreement dated as of February 7, 2007, (vi) that
      certain Sixth Amendment to Credit Agreement dated as of April 24, 2007,
      (vii) that certain Seventh Amendment to Credit Agreement dated as of June
      12, 2007, (viii) that certain Eighth Amendment to Credit Agreement dated as
      of July 31, 2007, and (ix) that certain Ninth Amendment to Credit Agreement
      dated as of November 21, 2007 (collectively, and as the same may be further
      amended, restated, extended, supplemented or otherwise modified from time to
      time, the “Credit
      Agreement”),
      pursuant to which the Lender has extended certain credit facilities to the
      Borrowers.

     

    B. The
      Borrowers have requested that the Lender agree to certain amendments to the
      Credit Agreement, and the Lender has agreed to such request, subject to the
      terms and conditions of this Amendment.

     

    NOW,
      THEREFORE, for valuable consideration, the receipt and adequacy of which are
      hereby acknowledged, the parties hereto hereby agree as follows:

     

    1. Defined
      Terms.
      Unless
      otherwise defined herein, capitalized terms used herein shall have the meanings,
      if any, assigned to such terms in the Credit Agreement (as amended hereby).
      As
      used herein, “Amendment
      Documents”
means
      this Amendment, the Restated Note, the Credit Agreement (as amended by this
      Amendment), and each certificate and other document executed and delivered
      by
      the Borrowers pursuant to Section
      5
      hereof.

     

    2. Interpretation.
      The
      rules of interpretation set forth in Sections
      1.02,
      1.03,
      1.04,
      1.05,
      and
1.06
      of the
      Credit Agreement shall be applicable to this Amendment and are incorporated
      herein by this reference.

     

    3. Amendments
      to Credit Agreement.
      Subject
      to the terms and conditions hereof, and with effect from and after the Effective
      Date, the Credit Agreement shall be amended as follows:

     

    (a) Section
      1.01
      of the
      Credit Agreement shall be amended by amending and restating the definition
      “Applicable Rate” to read as follows:

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    “Applicable
      Rate”
means
      (a) prior to the Tenth Amendment Date, the following percentages per annum,
      based upon the Consolidated Adjusted Leverage Ratio as set forth in the most
      recent Compliance Certificate received by the Lender pursuant to Section
      6.02(a):

     

    
      	
              Pricing
                Level

            	
              Consolidated
                Adjusted Leverage Ratio

            	
              Unused
                Line Fee (%)

            	
              Eurodollar
                Rate Loans/ Letters of Credit (%)

            	
              Base
                Rate Loans (%)

            
	
              1

            	
              >
                3.00:1.00

            	
              0.500

            	
              1.500

            	
              0.250

            
	
              2

            	
              >
                2.50:1.00 but <
                3.00:1.00

            	
              0.400

            	
              1.250

            	
              0.000

            
	
              3

            	
              >
                2.00:1.00 but <
                2.50:1.00

            	
              0.300

            	
              1.000

            	
              0.000

            
	
              4

            	
              <
                2.00:1.00

            	
              0.200

            	
              0.750

            	
              0.000

            

    

    

     

    and
      (b)
      at all times from and after the Tenth Amendment Date, the following percentages
      per annum, based upon the Consolidated Adjusted Leverage Ratio as set forth
      in
      the most recent Compliance Certificate received by the Lender pursuant to
Section 6.02(a):

     

    
      	
              Pricing
                Level

            	
              Consolidated
                Adjusted Leverage Ratio

            	
              Unused
                Line Fee (%)

            	
              Eurodollar
                Rate Loans/ Letters of Credit (%)

            	
              Base
                Rate Loans (%)

            
	
              1

            	
              >
                3.00:1.00

            	
              0.600

            	
              1.750

            	
              0.250

            
	
              2

            	
              >
                2.50:1.00 but <
                3.00:1.00

            	
              0.500

            	
              1.500

            	
              0.000

            
	
              3

            	
              >
                2.00:1.00 but <
                2.50:1.00

            	
              0.400

            	
              1.250

            	
              0.000

            
	
              4

            	
              <
                2.00:1.00

            	
              0.300

            	
              1.000

            	
              0.000

            

    

    

     

    Any
      increase or decrease in the Applicable Rate resulting from a change in the
      Consolidated Adjusted Leverage Ratio shall become effective as of the first
      Business Day immediately following the date a Compliance Certificate is
      delivered pursuant to Section
      6.02(a);
      provided,
      however,
      that if
      a Compliance Certificate is not delivered when due in accordance with such
      Section, then Pricing Level 1 shall apply as of the first Business Day after
      the
      date on which such Compliance Certificate was required to have been
      delivered.

     

    (b) Section
      1.01
      of the
      Credit Agreement shall be amended by amending and restating the definition
      “Commitment” to read as follows:

     

    “Commitment”
means
      the obligation of the Lender to make Loans and other Credit Extensions hereunder
      in an aggregate principal amount at any time not to exceed $80,000,000; as
      such
      amount may be adjusted from time to time in accordance with Section
      2.05
      of this
      Agreement.

     

    (c) Section
      1.01
      of the
      Credit Agreement shall be further amended by adding the definition “Increase
      Effective Date”,
      in
      appropriate alphabetical order, to read as follows:

     

    “Increase
      Effective Date”
has
      the
      meaning specified in Section
      2.12.

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    (d) Section
      1.01
      of the
      Credit Agreement shall be further amended by amending and restating “Scheduled
      Maturity Date” to read in full as follows:

     

    “Scheduled
      Maturity Date”
means
      August 11, 2009.

     

    (e) Section
      1.01
      of the
      Credit Agreement shall be further amended by adding the definition “Tenth
      Amendment Date”,
      in
      appropriate alphabetical order, to read as follows:

     

    “Tenth
      Amendment Date”
means
      the “Effective Date” as defined in that Tenth Amendment to Credit Agreement
      dated as of August 8, 2008 among the Borrowers and the Lender.

     

    (f) The
      Credit Agreement shall be further amended by adding Section
      2.12
      thereto,
      to read as follows:

     

    2.12 Option
      to Increase Commitment.
      From and
      after the Tenth Amendment Date, the Company may, upon written notice to the
      Lender, on not more than two occasions, request an increase in the Commitment
      by
      up to $20,000,000 in the aggregate. Upon such request, the Commitment shall
      be
      increased by the amount specified in such notice, not to exceed $20,000,000
      in
      the aggregate for all such requests together, effective as of the date specified
      in such request (not to be earlier than three Business Days after the date
      such
      request is received by Lender) (the “Increase
      Effective Date”).
      As a
      condition precedent to any such increase, the Company shall deliver to the
      Lender (a) a certificate of the Company signed by a Responsible Officer of
      the
      Company in the form of Exhibit F
      hereto
      and attaching the resolutions adopted by each Loan Party approving or consenting
      to such increase or authorizing a Responsible Officer of the Company to approve
      such increase, and (b) an upfront expansion fee equal to 0.035% times the amount
      of the requested increase in Commitment.

     

    (g) The
      Credit Agreement shall be further amended at Section
      7.12,
      by
      amending and restating the table contained therein to read as follows:

     

    
      	
              Fiscal
                Year Ending Nearest

            	
              Amount
                ($)

            
	
              January
                31, 2004

            	
              $40,000,000

            
	
              January
                31, 2005

            	
              $75,000,000

            
	
              January
                31, 2006

            	
              $50,000,000

            
	
              January
                31, 2007

            	
              $50,000,000

            
	
              January
                31, 2008

            	
              $70,000,000

            
	
              January
                31, 2009 and thereafter

            	
              $65,000,000

            

    

    

     

    (h) The
      Credit Agreement shall be further amended by adding Exhibit
      F
      thereto,
      in the form attached hereto as Annex
      I.

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    4. Representations
      and Warranties.
      Each
      Borrower hereby represents and warrants to the Lender as follows:

     

    (a) No
      Default has occurred and is continuing (or would result from the amendment
      to
      the Credit Agreement contemplated hereby).

     

    (b) The
      execution, delivery and performance by the Borrowers of this Amendment and
      the
      Restated Note have been duly authorized by all necessary corporate and other
      action and do not and will not require any registration with, consent or
      approval of, or notice to or action by, any Person (including any Governmental
      Authority) in order to be effective and enforceable.

     

    (c) The
      Amendment Documents constitute the legal, valid and binding obligations of
      the
      Borrowers party thereto, enforceable against each such Borrower in accordance
      with their respective terms, without defense, counterclaim or
      offset.

     

    (d) All
      representations and warranties of the Borrowers contained in Article
      V
      of the
      Credit Agreement are true and correct on and as of the Effective Date, except
      to
      the extent that any such representation and warranty specifically relates to
      an
      earlier date, in which case they are true and correct as of such earlier
      date.

     

    (e) Each
      Borrower is entering into this Amendment on the basis of its own investigation
      and for its own reasons, without reliance upon the Lender or any other
      Person.

     

    (f) There
      has
      occurred since February 2, 2008 no event or circumstance that has resulted
      or
      could reasonably be expected to result in a Material Adverse
      Effect.

     

    (g) The
      Obligations of each Borrower under the Credit Agreement and each other Loan
      Document are not subject to any defense, counterclaim, set-off, right of
      recoupment, abatement or other claim.

     

    (h) As
      of
      January 2008, the Borrower Gymboree Stores, Inc. was merged with and into
      Gymboree Retail Stores, Inc., and the Borrower Gymboree Logistics Partnership
      was dissolved, in each case in accordance with applicable law.

     

    5. Effective
      Date.

     

    (a) This
      Amendment will become effective when each of the conditions precedent set forth
      in this Section
      5
      has been
      satisfied (the “Effective
      Date”):

     

    (i) The
      Lender shall have received from each Borrower a duly executed original (or,
      if
      elected by the Lender, an executed facsimile copy) counterpart to this
      Amendment.

     

    (ii) The
      Lender shall have received from the Company a certificate signed by the
      assistant secretary of each Borrower, dated the Effective Date, in form and
      substance satisfactory to the Lender, and certifying evidence of the
      authorization of the execution, delivery and performance by each Borrower of
      the
      Amendment Documents to which it is party.

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

    (iii) The
      Company shall have paid to the Lender a supplemental upfront fee of
      $28,000.

     

    (iv) The
      Company shall have paid to the Lender all amounts owing as of the Effective
      Date
      under Section
      2.04(b)
      and
Section
      3.05,
      if
      any.

     

    (v) The
      Lender shall have received, in form and substance satisfactory to it, such
      additional approvals, consents, opinions, documents and other information as
      the
      Lender shall request.

     

    (b) From
      and
      after the Effective Date, the Credit Agreement is amended as set forth, herein.
      Except as expressly amended pursuant hereto, the Credit Agreement shall remain
      unchanged and in full force and effect and is hereby ratified and confirmed
      in
      all respects.

     

    6. Reservation
      of Rights.
      Each
      Borrower acknowledges and agrees that neither the execution nor the delivery
      by
      the Lender of this Amendment shall (a) be deemed to create a course of dealing
      or otherwise obligate the Lender to execute similar amendments under the same
      or
      similar circumstances in the future or (b) be deemed to create any implied
      waiver of any right or remedy of the Lender with respect to any term or
      provision of any Loan Document (including any term or provision relating to
      the
      occurrence of a Material Adverse Effect).

     

    7. Miscellaneous.

     

    (a) Except
      as
      herein expressly amended, all terms, covenants and provisions of the Credit
      Agreement are and shall remain in full force and effect and all references
      therein to such Credit Agreement shall henceforth refer to the Credit Agreement
      as amended by this Amendment. This Amendment shall be deemed incorporated into,
      and a part of, the Credit Agreement.

     

    (b) This
      Amendment shall be binding upon and inure to the benefit of the parties hereto
      and thereto and their respective successors and assigns. No third party
      beneficiaries are intended in connection with this Amendment.

     

    (c) THIS
      AMENDMENT IS SUBJECT TO THE PROVISIONS OF SECTIONS
      9.19,
      9.20
      and
9.23
      OF THE
      CREDIT AGREEMENT RELATING TO GOVERNING LAW, VENUE, WAIVER OF RIGHT TO TRIAL
      BY
      JURY AND JUDICIAL REFERENCE, THE PROVISIONS OF WHICH ARE BY THIS REFERENCE
      INCORPORATED HEREIN IN FULL.

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

    (d) This
      Amendment may be executed in any number of counterparts, each of which shall
      be
      deemed an original, but all such counterparts together shall constitute but
      one
      and the same instrument. Each of the parties hereto understands and agrees
      that
      this document (and any other document required herein) may be delivered by
      any
      party hereto or thereto either in the form of an executed original or an
      executed original sent by facsimile transmission to be followed promptly by
      mailing of a hard copy original, and the receipt by the Lender of a facsimile
      transmitted document purportedly bearing the signature of a Borrower shall
      bind
      such Borrower with the same force and effect as the delivery of a hard copy
      original. Any failure by the Lender to receive the hard copy executed original
      of such document shall not diminish the binding effect of receipt of the
      facsimile transmitted executed original of such document of the party whose
      hard
      copy page was not received by the Lender.

     

    (e) This
      Amendment, together with the Credit Agreement, contains the entire and exclusive
      agreement of the parties hereto with reference to the matters discussed herein
      and therein. This Amendment supersedes all prior drafts and communications
      with
      respect thereto. This Amendment may not be amended except in accordance with
      the
      provisions of Section
      9.01
      of the
      Credit Agreement.

     

    (f) If
      any
      term or provision of this Amendment shall be deemed prohibited by or invalid
      under any applicable law, such provision shall be invalidated without affecting
      the remaining provisions of this Amendment or the Credit Agreement,
      respectively.

     

    (g) Each
      Borrower covenants to pay to or reimburse the Lender, upon demand, for all
      costs
      and expenses (including Attorney Costs and the non-duplicative allocated costs
      of in-house counsel) incurred in connection with the development, preparation,
      negotiation, execution and delivery of this Amendment.

     

    (h) This
      Amendment shall constitute a “Loan
      Document”
under
      and as defined in the Credit Agreement.

     

    [Remainder
      of page intentionally left blank]

     

     

     

     

     

     

     

     

     

     

     

     

     

    
 

     

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

     

    IN
      WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly
      executed as of the date first above written.

     

    
      	 	
              THE
                GYMBOREE CORPORATION,

              as
                a Borrower

            
	 	 	 
	 	 	 
	 	By: 	/s/ Lynda
              Gustafson
	 	 	
              
                
                  

                

                Name:
                  Lynda Gustafson 

              

              Title:
                Vice President, Corporate Controller

               

            
	 	 	 
	 	
              GYMBOREE
                MANUFACTURING, INC.,
                

              as
                a Borrower

            
	 	 	 
	 	 	 
	 	By: 	/s/ Lynda
              Gustafson
	 	 	
              
                
                  
Name:
                  Lynda Gustafson 

              

              Title:
                Vice President, Corporate Controller

               

            
	 	 	 
	 	
              GYM-MARK,
                INC.,

              as
                a Borrower

            
	 	 	 
	 	 	 
	 	By:	/s/ Lynda
              Gustafson 
	 	 	
              
                
                  
Name:
                  Lynda Gustafson 

              

              Title:
                Vice President, Corporate Controller

               

            
	 	 	 
	 	
              GYMBOREE
                RETAIL STORES, INC.,

              as
                a Borrower

            
	 	 	 
	 	 	 
	 	By:	/s/ Lynda
              Gustafson 
	 	 	
              
                
                  

                

              

              Name:
                Lynda Gustafson 

              Title:
                Vice President, Corporate Controller

               

            
	 	 	 
	 	
              GYMBOREE
                PLAY PROGRAMS, INC.,

              as
                a Borrower

            
	 	 	 
	 	 	 
	 	By:	/s/ Lynda
              Gustafson
	 	 	
              
                
                  
Name:
                  Lynda Gustafson 

              

              Title:
                Vice President, Corporate
                Controller

            

    

    

    
      
        
          Signature
            Page One to Tenth Amendment to Credit Agreement

           

        

         

      

      
         

        
          

        

      

      
         

        
        

      

    

    
      	 	
              GYMBOREE
                OPERATIONS, INC.,

              as
                a Borrower

            
	 	 	 
	 	 	 
	 	By:	/s/ Lynda
              Gustafson
	 	 	
              
                
Name:
                Lynda Gustafson 

              Title:
                Vice President, Corporate Controller

               

            
	 	 	 
	 	
              GYMBOREE,
                INC. (CANADA),

              as
                a Borrower

            
	 	 	 
	 	 	 
	 	By: 	/s/ Lynda
              Gustafson
	 	 	
              
                
                  
Name:
                  Lynda Gustafson 

              

              Title:
                Vice President, Corporate
                Controller

            

    

     

    
 

    
      
        
          Signature
            Page Two to Tenth Amendment to Credit Agreement

           

        

         

      

      
         

        
          

        

      

      
         

        
        

      

    

    
      	 	
              LENDER

               

              BANK
                OF AMERICA, N.A.,
                as the Lender

            
	 	 	 
	 	 	 
	 	By:	/s/ Alex J.
              McCombs
	 	 	
              
                
                  
Name:
                  Alex J. McCombs

              

              Title:
                Senior Vice President

            

    

    

    

    

     

    
      
        
          Signature
            Page Three to Tenth Amendment to Credit Agreement

           

        

         

      

      
         

        
          

        

      

      
         

        
        

      

    

    ANNEX
      I

     

    EXHIBIT
      F

     

    

     

    FORM
      OF REQUEST TO INCREASE COMMITMENT

     

    Date:_________

     

    
      	
              To:

            	
              Bank
                of America, N.A. 

            

      	 	
              315
                Montgomery Street

              13th
                Floor

              San
                Francisco CA 94104

            

    

    
      	
            	
              Attn:

            	
              Mr.
                Alex McCombs

            

    

    

     

    Ladies
      and Gentlemen:

     

    Reference
      is made to that certain Credit Agreement, dated as of August 11, 2003 (as
      amended, restated, extended, supplemented or otherwise modified in writing
      from
      time to time, the “Agreement;”
the
      terms defined therein being used herein as therein defined), among The Gymboree
      Corporation, a Delaware corporation (the “Company”),
      the
      additional co-borrowers named therein and Bank of America, N.A. (the
“Lender”).

     

    Pursuant
      to Section
      2.12
      of the
      Agreement, on behalf of the Company, the undersigned Responsible Officer hereby
      requests that the Lender increase the Commitment on a one-time basis by
      [$________], with effect from [_________].

     

    The
      undersigned Responsible Officer hereby certifies as of the date hereof that
      he/she is the [_______________] of the Company, and that, as such, he/she is
      authorized to execute and deliver this Certificate to the Lender on the behalf
      of the Company, and that:

     

    1. Attached
      hereto is a true, correct and complete copy of the resolutions authorizing
      the
      Company to increase the Commitment, which resolutions were adopted by the Board
      of Directors of the Company at a meeting duly called, convened and held on
      [___________] at which a quorum was present and acting throughout. Such
      resolutions have not been amended, rescinded or modified since their adoption
      and are in full force and effect as of this date.

     

    2. Each
      of
      the Loan Parties has, by all necessary corporate or other organizational action,
      approved or consented to the increase of the Commitment by the amount stated
      herein, and such approvals or consents are in full force and effect as of this
      date.

     

    3. Attached
      hereto as Schedule
      1
      is the
      duly executed Consent and Agreement of the Borrowers to the delivery of this
      request and to the increase in the Commitment.

     

    4. Before
      and after giving effect to the increase of the Commitment:

     

    
      
         

      

      
        F-1

        
          

        

      

      
         

      

    

    (a) the
      representations and warranties of the Company and each Borrower contained in
      Article V
      of the
      Agreement, or which are contained in any document furnished at any time under
      or
      in connection with the Loan Documents, are and shall be true and correct on
      and
      as of the date hereof, except to the extent that such representations and
      warranties specifically refer to an earlier date, in which case they are and
      shall be true and correct as of such earlier date, and except that for purposes
      of this Certificate, the representations and warranties contained in subsections
      (a) and (b) of Section
      5.05
      of the
      Agreement shall be deemed to refer to the most recent statements furnished
      pursuant to clauses (a) and (b), respectively, of Section
      6.01
      of the
      Agreement; and

     

    (b) as
      of the
      date hereof, no Default or Event of Default exists.

     

    IN
      WITNESS WHEREOF,
      the
      undersigned has executed this Certificate as of __________, ____.

     

    
      	 	THE
              GYMBOREE CORPORATION
	 	 	 
	 	
              By:
                 

            	
               

            
	 	
              Name: 

            	
               

            
	 	
              Title:

            	
               
                

            

    

    

     

    
      
         

      

      
        F-2Exhibit
      10.1

     

    YUHE
      INTERNATIONAL, INC. 

     

    FORM
      OF STOCK OPTION AGREEMENT 

     

    
      
        
          	I.	
                  NOTICE
                    OF STOCK OPTION GRANT 

                

        

      

    

     

    
      	
            	Name:	
              [to
                be inserted] (the “Optionee”)

            

    

     

    
      	
            	Address:	
              301
                Hailong Street, Hanting District, Weifang, Shandong Province, the
                People’s
                Republic of China

            

    

     

    You
      have
      been granted a nonstatutory stock option (the “Option”) to purchase common stock
      of Yuhe International, Inc. (the “Company”) (the “Common Stock”), subject to the
      terms and conditions of this Stock Option Agreement (the “Agreement”), as
      described below:- 

     

    
      	
              Grant
                Number

            	 	 	
               
                

            	 
	
               

            	 	 	

            	 
	
               

            	 	 	

            	 
	
              Date
                of Grant

            	 	 	
               
                

            	 
	
               

            	 	 	

            	 
	
               

            	 	 	

            	 
	
              Vesting
                Commencement Date

            	 	 	
               
                

            	 
	
               

            	 	 	

            	 
	
               

            	 	 	

            	 
	
              Exercise
                Price per Share 

            	 	
              $

            	
               
                

            	 
	
               

            	 	 	

            	 
	
               

            	 	 	

            	 
	
              Total
                Number of Shares Granted

            	 	 	
               
                

            	 
	
               

            	 	 	

            	 
	
               

            	 	 	

            	 
	
              Total
                Exercise Price 

            	 	
              $

            	
               
                

            	 
	
               

            	 	 	

            	 
	 	 	 	

            	 
	
               Term/Expiration
                Date:

            	 	 	
               
                

            	 

    

     

    Vesting
      Schedule:
      Subject
      to Optionee’s continued service with the Company through the vesting period, the
      Option will vest and become exercisable in equal installments on each of the
      first three anniversaries of the grant date, so that if the Optionee is still
      serving as the [to be inserted] of the Company on the third anniversary of
      the
      grant date, the Optionee will be fully vested in the Option by that
      date.

     

    
      
         

      

      
        1

        
          

        

      

      
         

      

    

     

    Termination
      Period:
      The
      Option will expire, and this Option may not be exercise (even as to vested
      shares) on the fifth anniversary of the grant date (or earlier if Optionee’s
      service with the Company terminates prior to that date) or after the date on
      which the Option terminates by virtue of Change of Control (as defined in the
      Agreement attached hereto).

     

    By
      your
      signature and the signature of the Company’s representative below, you and the
      Company agree that this Option is granted under and governed by the terms and
      conditions of the Agreement, including this Notice of Grant, all as set forth
      herein. 

     

    
      	
              OPTIONEE:

            	 	
              YUHE
                INTERNATIONAL, INC.

            
	 	 	 
	 	 	 
	
              Signature

            	 	
              By

            
	 	 	 
	 	 	 
	
              Print
                Name:

            	 	
              Title

            

    

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

     

    
      	II.	
              AGREEMENT 

            

    

     

    
      	
            	A.	
              Definitions

            

    

     

    (a) “Applicable
      Laws” means any national, federal, state or local law, statute, rule,
      regulation, ordinance, order, decree, directive, requirement, code, notice
      or
      rule of common law, now or in the future in effect, and in each case as amended
      or re-enacted from time to time, and legislation supplemental to it, and any
      judicial or administrative interpretation of it by a governmental authority
      or
      otherwise, including any judicial or administrative order, determination,
      consent, decree or judgment applicable to or having jurisdiction over, as the
      context requires, the Option and any other matters that are subject to this
      Agreement and “Applicable Laws” shall be construed accordingly.

     

    (b) “Cause”
      for termination of Optionee’s employment will exist if Optionee is terminated by
      the Company for any of the following reasons: (i) Optionee’s willful failure
      substantially to perform his duties and responsibilities to the Company or
      deliberate violation of a Company policy; (ii) Optionee’s commission of any act
      of fraud, embezzlement, dishonesty or any other willful misconduct that has
      caused or is reasonably expected to result in material injury to the Company;
      (iii) unauthorized use or disclosure by Optionee of any proprietary information
      or trade secrets of the Company or any other party to whom Optionee owes an
      obligation of nondisclosure as a result of his relationship with the Company;
      or
      (iv) Optionee’s willful breach of any of his obligations under any written
      agreement or covenant with the Company. The determination as to whether Optionee
      is being terminated for Cause shall be made in good faith by the Company and
      shall be final and binding on Optionee. 

     

    (c) “Change
      of Control” means, unless such term or an equivalent term is otherwise defined
      with respect to an Option by the Company’s written contract of employment or
      service, the occurrence of any of the following:

     

    (i)
      any
      merger or consolidation in which the Company shall not be the surviving entity
      (or survives only as a subsidiary of another entity whose shareholders did
      not
      own all or substantially all of the Common Stock in substantially the same
      proportions as immediately prior to such transaction), 

     

    (ii)
      the
      sale of all or substantially all of the Company's assets to any other person
      or
      entity (other than a wholly-owned subsidiary), 

     

    (iii)
      the
      acquisition of beneficial ownership of a controlling interest (including,
      without limitation, power to vote) the outstanding shares of Common Stock by
      any
      person or entity (including a “group” as defined by or under Section 13(d)(3) of
      the Securities Exchange Act of 1934, as amended), 

     

    (iv)
      the
      dissolution or liquidation of the Company, 

     

    (v)
      a
      contested election of the Company’s Directors, as a result of which or in
      connection with which the persons who were Directors before such election or
      their nominees (the “Incumbent Directors”) cease to constitute a majority of the
      Company’s Board of Directors; provided however that if the election, or
      nomination for election by the Company’s shareholders, of any new director was
      approved by a vote of at least fifty percent (50%) of the Incumbent Directors,
      such new Director shall be considered as an Incumbent Director, or 

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

     

    (vi)
      any
      other event specified by the Company’s Board or Compensation Committee,
      regardless of whether at the time the Option is granted or
      thereafter.

     

    (d) “Fair
      Market Value” means, as of any date, the value of a share of Common Stock
      determined by the Administrator in good faith using a reasonable application
      of
      a reasonable valuation method without regard to any restriction other than
      a
      restriction which, by its terms, will never lapse. Whenever
      possible and if relevant, the determination of Fair Market Value shall be based
      upon the closing price for the Shares as reported in the Wall Street Journal
      for
      the applicable date. 

     

    
      	
            	B.	
              Grant
                of Option.

            

    

     

    The
      administrator hereby grants to Optionee named in the Notice of Stock Option
      Grant (the “Notice”) attached as Part I of this Agreement the Option to
      purchase the number of shares of Common Stock (the “Shares”), as set forth in
      the Notice, at the exercise price per Share set forth in the Notice (the
“Exercise Price”). The Company’s Compensation Committee shall be the
      administrator (the “Administrator”) of this Option and its good faith
      determinations with regard to this Option, the Notice, and this Agreement shall
      be final and binding on all parties.

     

    
      	
            	C.	
              Exercise
                of Option.
                

            

    

     

    (a)  Right
      to Exercise.
      This
      Option is exercisable during its term with respect to vested Shares in
      accordance with the Vesting Schedule set out in the Notice and the applicable
      provisions of this Agreement. No Shares will be issued, and the Company will
      have no liability for the failure to issue Shares, pursuant to the exercise
      of
      this Option unless such issuance and exercise comply with all Applicable Laws.
      Assuming such compliance, for income tax purposes the exercised Shares will
      be
      considered transferred to Optionee on the date the Option is exercised with
      respect to such exercised Shares. 

     

    (b) Method
      of Exercise.
      This
      Option is exercisable through E*Trade Financial by contacting E*Trade Financial
      online at www.etrade.com or by phone at 1-800-838-0908, and following E*Trade
      Financial’s procedures as well as through any other means that may be designated
      by the Company from time to time (such applicable notice procedure is referred
      to as the “Exercise Notice”). The Exercise Notice will be delivered as so
      specified and accompanied by payment of the aggregate Exercise Price in a manner
      consistent with Section II.D. below, as to all vested Shares in respect of
      which
      the Option is being exercised (the “Exercised Shares”) together with any
      applicable withholding taxes. This Option will be deemed to be exercised upon
      receipt by the Company of such fully executed Exercise Notice accompanied by
      such aggregate Exercise Price and applicable withholding taxes. 

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

     

    
      	
            	D.	
              Method
                of Payment.
                

            

    

     

    Payment
      of the aggregate Exercise Price will be by any of the following, or a
      combination thereof, at the election of Optionee: 

     

    1. cash,
      check or wire transfer;

     

    2. consideration
      received by the Company under a cashless, brokered exercise program permitted
      by
      the Company in connection with its stock option programs; or

     

    3. surrender
      of vested shares of Common Stock (or by attestation) which have been owned
      by
      you and have not been subject to substantial risk of forfeiture
      for a reasonable period of time as may be necessary to avoid liability
      accounting treatment and
      having
      an aggregate Fair Market Value on the date of surrender equal to the aggregate
      Exercise Price of the Exercised Shares. 

     

    
      	
            	E.	
              Change
                of Control.
                

            

    

     

     In
      the event there is a Change of Control, as determined by the Board or the
      Compensation Committee, the Administrator may, in its discretion,
      (i) provide for the assumption or substitution of, or adjustment to, the
      Option; (ii) accelerate the vesting of the Option; and/or
      (iii) provide for termination of the Option as a result of the Change of
      Control on such terms and conditions as it deems appropriate, including
      providing for the cancellation of the Option for a cash payment to Optionee.
      

     

    
      	
            	F.	
              Termination
                of Employment.
                

            

    

     

    Following
      the date of termination of Optionee’s employment with the Company for any reason
      (the “Termination Date”), Optionee may exercise the Option only as set forth in
      the Notice and this Section F. In the event of termination of Optionee’s
      employment other than as a result of Optionee’s disability or death or for
      Cause, Optionee may, to the extent Optionee is vested in the Exercised Shares
      at
      the Termination Date, exercise the Option for 90 days after termination (but
      in
      no event later than the Expiration Date set forth in the Notice). In the event
      of termination of Optionee’s employment with the Company as a result of
      Optionee’s disability, Optionee may, but only within twelve months
      from the Termination Date, exercise the Option to the extent Optionee was vested
      in the Exercised Shares as of the Termination Date. In the
      event
      of the death of Optionee during the term of the Option and while an employee
      of
      the Company, the Option may be exercised at any time within twelve months
      following the date of death by Optionee’s estate or by a person who acquired the
      right to exercise the Option by bequest or inheritance, but only to the extent
      Optionee was vested in the Option as of the Termination Date. In the event
      Optionee’s employment with the Company is terminated for Cause, the Option shall
      terminate immediately upon such termination for Cause. In the event Optionee’s
      employment with the Company is suspended pending investigation of whether such
      relationship shall be terminated for Cause, all Optionee’s rights under the
      Option, including the right to exercise the Option, shall be suspended during
      the investigation period. To the extent that Optionee is not entitled to
      exercise the Option as of the Termination Date, or if Optionee does not exercise
      the Option within the periods set forth above, the Option shall terminate in
      its
      entirety. In no event, may any Option be exercised after the Expiration Date
      of
      the Option as set forth in the
      Notice.

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

     

    
      	
            	G.	
              Non-Transferability
                of Option.
                

            

    

     

    This
      Option may not be transferred in any manner otherwise than by will or by the
      laws of descent or distribution and may be exercised during the lifetime of
      Optionee only by Optionee. The terms of this Agreement will be binding upon
      the
      executors, administrators, heirs, successors and assigns of Optionee.

     

    
      
        
          	
                	H.	
                  Term
                    of Option.
                    

                

        

      

    

     

              This
      Option may be exercised only within the term set out in the Notice, and may
      be
      exercised during such term only in accordance with the terms of this Agreement.
      

     

    
      
        
          	
                	I.	
                  Adjustments.
                    

                

        

      

    

     

    In
      the
      event that any dividend or other distribution (whether in the form of cash,
      Shares, other securities, or other property), recapitalization, stock split,
      reverse stock split, reorganization, merger, consolidation, split-up, spin-off,
      combination, repurchase, or exchange of Shares or other securities of the
      Company, or other change in the corporate structure of the Company affecting
      the
      Shares occurs, the Administrator, in order to prevent diminution or enlargement
      of the benefits or potential benefits intended to be made available under this
      Agreement, shall proportionately adjust the number and class of Shares that
      may
      be delivered under this Agreement and the per Share Exercise Price applicable
      hereto. The Administrator’s determinations with regard to any such adjustment
      shall be final and binding on all parties.

     

    
      	
            	J.	
              Tax
                Obligations. 

            

    

     

    By
      Optionee’s acceptance: Optionee agrees to make appropriate arrangements with the
      Company for the satisfaction of all applicable federal, state, and local income
      and employment tax withholding requirements applicable to the Option, including
      upon exercise thereof. Optionee acknowledges and agrees that the Company may
      refuse to honor the exercise and refuse to deliver Shares if such withholding
      amounts are not satisfied in a manner permitted hereunder at the time of
      exercise. 

     

    Optionee
      may satisfy such tax withholding obligation, in whole or in part by any one
      or
      more of the following or any combination of the following: (a) paying cash
      to the Company (including through the Company’s withholding on or in advance of
      the exercise date from cash compensation amounts otherwise owed to Optionee),
      (b) electing to have the Company withhold Shares otherwise deliverable upon
      exercise of the Option which Shares have an aggregate Fair Market Value that
      does not exceed the minimum required statutory withholding amount,
      (c) delivering (or attesting) to the Company other Shares which
      have been owned by Optionee and have not been subject to substantial risk of
      forfeiture
      for a reasonable period of time as may be necessary to avoid liability
      accounting treatment and that have an aggregate Fair Market Value that does
      not
      exceed the minimum required statutory withholding amount or (d) pursuant to
      a
      cashless exercise program. The Fair Market Value of the Shares to be withheld
      or
      delivered will be determined as of the date that the taxes are required to
      be
      withheld in a manner consistent with the Administrator’s determination of Fair
      Market Value with respect to options granted under the Agreement. 

     

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

     

    In
      addition, Optionee agrees that he is responsible for any applicable taxes of
      any
      nature (including any penalties or interest that may apply to such taxes) that
      the Company reasonably determines apply with respect to the Option.

     

    Optionee
      understands that the per share “Exercise Price” for the Shares is intended to be
      at least equal to the fair market value of the Company’s Common Stock at the
      date of grant and that the Company has attempted in good faith to make the
      fair
      market value determination in compliance with applicable tax law although there
      can be no certainty that the IRS will agree. Optionee understands that if the
      IRS does not agree and asserts that the fair market value at the time of grant
      is higher than the Exercise Price, the IRS could seek to impose greater taxes
      on
      Optionee, including interest and penalties under Internal Revenue Code Section
      409A.

     

    
      
        
          	
                	K.	
                  Entire
                    Agreement; Governing Law. 

                

        

      

    

     

              The
      Option is governed under the rules and in the manner specified in the Notice
      and
      in this Agreement, which constitute the entire agreement between the parties
      with respect hereto and, except as specifically set forth herein, supersede
      in
      their entirety all prior undertakings and agreements of the Company and Optionee
      with respect to the subject matter hereof. The Notice and this Agreement are
      governed by the internal substantive laws, but not the choice of law rules,
      of
      Nevada. 

     

    
      
         

      

      
        7

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