Document:

2010 Equity Incentive Plan

 Exhibit 10.1 

HATTERAS FINANCIAL CORP. 

2010 EQUITY INCENTIVE PLAN 
  

	1.	Establishment, Purpose and Types of Awards 

Hatteras Financial Corp. (the “Company”), hereby establishes the Hatteras Financial Corp. 2010 Equity Incentive Plan (the
“Plan”). The purpose of the Plan is to promote the long-term growth and profitability of the Company by (i) providing key people with incentives to improve shareholder value and to contribute to the growth and financial success
of the Company through their future services, and (ii) enabling the Company to attract, retain and reward the best-available persons. 

The Plan permits the granting of stock options (including incentive stock options qualifying under Code section 422 and nonstatutory
stock options), stock appreciation rights, restricted or unrestricted stock awards, phantom stock, performance awards, other stock-based awards, or any combination of the foregoing. 

 

	2.	Definitions 

 Under this
Plan, except where the context otherwise indicates, the following definitions apply: 
 (a)
“Administrator” means the Board or the committee(s) or officer(s) appointed by the Board that have authority to administer the Plan as provided in Section 3 hereof. 

(b) “Affiliate” means any entity, whether now or hereafter existing, which controls, is controlled by, or
is under common control with, the Company (including, but not limited to, joint ventures, limited liability companies, and partnerships). For this purpose, “control” shall mean ownership of 50% or more of the total combined voting
power or value of all classes of stock or interests of the entity, or the power to direct the management and policies of the entity, by contract or otherwise. 

(c) “Award” means any stock option, stock appreciation right, stock award, phantom stock award,
performance award, or other stock-based award. 
 (d) “Board” means the Board of Directors of
the Company. 
 (e) “Change in Control” means: (i) the acquisition (other than from the
Company) in one or more transactions by any Person, as defined in this Section 2(e), of the beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended) of 50% or more of (A) the
then outstanding shares of the securities of the Company, or (B) the combined voting power of the then outstanding securities of the Company entitled to vote generally in the election of directors (the “Company Voting Stock”);
(ii) the closing of a sale or other conveyance 
  

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of all or substantially all of the assets of the Company; or (iii) the effective time of any merger, share exchange, consolidation, or other business combination involving the Company if
immediately after such transaction persons who hold a majority of the outstanding voting securities entitled to vote generally in the election of directors of the surviving entity (or the entity owning 100% of such surviving entity) are not persons
who, immediately prior to such transaction, held the Company Voting Stock; provided, however, that for purposes of any Award or subplan that constitutes a “nonqualified deferred compensation plan,” within the meaning of Code
section 409A, the Administrator, in its discretion, may specify a different definition of Change in Control in order to comply with the provisions of Code section 409A. For purposes of this Section 2(e), a “Person” means any
individual, entity or group within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended, other than: employee benefit plans sponsored or maintained by the Company and by entities controlled by the
Company or an underwriter of the Common Stock in a registered public offering. 
 (f) “Code”
means the Internal Revenue Code of 1986, as amended, and any regulations promulgated thereunder. 
 (g)
“Common Stock” means shares of common stock of the Company, par value of $.001 per share. 
 (h)
“Fair Market Value” means, with respect to a share of the Company’s Common Stock for any purpose on a particular date, the value determined by the Administrator in good faith. However, if the Common Stock is registered under
Section 12(b) or 12(g) of the Securities Exchange Act of 1934, as amended, and listed for trading on a national exchange or market, “Fair Market Value” means, as applicable, (i) either the closing price or the average of
the high and low sale price on the relevant date, as determined in the Administrator’s discretion, quoted on the New York Stock Exchange, the American Stock Exchange, the Nasdaq Global Select Market, or the Nasdaq Global Market; (ii) the
last sale price on the relevant date quoted on the Nasdaq Capital Market; (iii) the average of the high bid and low asked prices on the relevant date quoted on the Nasdaq OTC Bulletin Board Service or by the National Quotation Bureau, Inc. or a
comparable service as determined in the Administrator’s discretion; or (iv) if the Common Stock is not quoted by any of the above, the average of the closing bid and asked prices on the relevant date furnished by a professional market
maker for the Common Stock, or by such other source, selected by the Administrator. If no public trading of the Common Stock occurs on the relevant date but the shares are so listed, then Fair Market Value shall be determined as of the last date
before the relevant date on which trading of the Common Stock did occur. For all purposes under this Plan, the term “relevant date” as used in this Section 2(h) means either the date as of which Fair Market Value is to be
determined or the next preceding date on which public trading of the Common Stock occurs, as determined in the Administrator’s discretion. 
  

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 (i) “Grant Agreement” means a written document, including
an electronic writing acceptable to the Administrator, memorializing the terms and conditions of an Award granted pursuant to the Plan and which shall incorporate the terms of the Plan. 

(i) “Manager” means the person or persons, if any, appointed or employed by or contracted with the
Company from time to time and responsible for directing or performing day-to-day business affairs or operations of the Company, including any person or persons to whom the Manager subcontracts any of such functions. The initial Manager is Atlantic
Capital Advisors LLC. 
  

	3.	Administration 

(a) Administration of the Plan. The Plan shall be administered by the Board or by such committee or committees as
may be appointed by the Board from time to time. To the extent allowed by applicable state law, the Board by resolution may authorize an officer or officers to grant Awards (other than stock Awards) to other officers and employees of the Company and
its Affiliates, and, to the extent of such authorization, such officer or officers shall be the Administrator. 

(b) Powers of the Administrator. The Administrator shall have all the powers vested in it by the terms of the Plan,
such powers to include authority, in its sole and absolute discretion, to grant Awards under the Plan, prescribe Grant Agreements evidencing such Awards and establish programs for granting Awards. 

The Administrator shall have full power and authority to take all other actions necessary to carry out the purpose and
intent of the Plan, including, but not limited to, the authority to: (i) determine the eligible persons to whom, and the time or times at which Awards shall be granted; (ii) determine the types of Awards to be granted; (iii) determine
the number of shares to be covered by or used for reference purposes for each Award; (iv) impose such terms, limitations, restrictions and conditions upon any such Award as the Administrator shall deem appropriate; (v) modify, amend,
extend or renew outstanding Awards, or accept the surrender of outstanding Awards and substitute new Awards (provided however, that, except as provided in Section 6 or 7(d) of the Plan, any modification that would materially adversely affect
any outstanding Award shall not be made without the consent of the holder); (vi) accelerate or otherwise change the time in which an Award may be exercised or becomes payable and to waive or accelerate the lapse, in whole or in part, of any
restriction or condition with respect to such Award following the death, disability or retirement of the participant or a Change in Control of the Company or a termination of the Company’s management agreement; (vii) establish objectives
and conditions, if any, for earning Awards and determining whether Awards will be paid with respect to a performance period; and (viii) for any purpose, including but not limited to, qualifying for preferred tax treatment under foreign tax laws
or otherwise complying with the regulatory requirements of local or foreign jurisdictions, to establish, amend, modify, administer or terminate sub-plans, and prescribe, amend and rescind rules and regulations relating to such sub-plans. 

 

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 The Administrator shall have full power and authority, in its sole and
absolute discretion, to administer, construe and interpret the Plan, Grant Agreements and all other documents relevant to the Plan and Awards issued thereunder, to establish, amend, rescind and interpret such rules, regulations, agreements,
guidelines and instruments for the administration of the Plan and for the conduct of its business as the Administrator deems necessary or advisable, and to correct any defect, supply any omission or reconcile any inconsistency in the Plan or in any
Award in the manner and to the extent the Administrator shall deem it desirable to carry it into effect. 

Notwithstanding any provision of the Plan to the contrary, neither the Board nor the Administrator shall have the
authority to take any of the following actions, unless the shareholders of the Company have approved such an action within twelve (12) months prior to such an event: (i) the reduction of the exercise price of any outstanding stock option
or Stock Appreciation Right under the Plan; (ii) the cancellation of any outstanding stock option or Stock Appreciation Right under the Plan and the grant in substitution therefor of (1) a new stock option or Stock Appreciation Right under
the Plan or another equity plan of the Company covering the same or a different number of shares of Common Stock, (2) a restricted stock Award (including a share bonus), (3) an other stock-based Award, (4) a phantom stock Award,
(5) a performance award, (6) cash and/or (7) other valuable consideration (as determined by the Board, in its sole discretion); or (iii) any other action that is treated as a repricing under generally accepted accounting
principles. 
 (c) Non-Uniform Determinations. The Administrator’s determinations under the Plan
(including without limitation, determinations of the persons to receive Awards, the form, amount and timing of such Awards, the terms and provisions of such Awards and the Grant Agreements evidencing such Awards) need not be uniform and may be made
by the Administrator selectively among persons who receive, or are eligible to receive, Awards under the Plan, whether or not such persons are similarly situated. 

(d) Limited Liability. To the maximum extent permitted by law, no member of the Administrator shall be liable for
any action taken or decision made in good faith relating to the Plan or any Award thereunder. 
 (e)
Indemnification. To the maximum extent permitted by law and by the Company’s charter and by-laws, the members of the Administrator shall be indemnified by the Company in respect of all their activities under the Plan. 

(f) Effect of Administrator’s Decision. All actions taken and decisions and determinations made by the
Administrator on all matters relating to the Plan pursuant to the powers vested in it hereunder shall be in the Administrator’s sole and absolute discretion and shall be conclusive and binding on all parties concerned, including the Company,
its shareholders, any participants in the Plan and any other employee, consultant, or director of the Company, and their respective successors in interest. 
  

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	4.	Shares Available for the Plan; Maximum Awards 

Subject to adjustments as provided in Section 7(d) of the Plan, the shares of Common Stock that may be issued with respect to Awards
granted under the Plan shall not exceed an aggregate of 1,000,000 shares of Common Stock. All of such shares of Common Stock shall be awardable for issuance as incentive stock options to qualify under Code section 422. The Company shall reserve
such number of shares for Awards under the Plan, subject to adjustments as provided in Section 7(d) of the Plan. If any Award, or portion of an Award, under the Plan expires or terminates unexercised, becomes unexercisable, is settled in cash
without delivery of shares of Common Stock, or is forfeited or otherwise terminated, surrendered or canceled as to any shares, or if any shares of Common Stock are repurchased by or surrendered to the Company in connection with any Award (whether or
not such surrendered shares were acquired pursuant to any Award), or if any shares are withheld by the Company, the shares subject to such Award and the repurchased, surrendered and withheld shares shall thereafter be available for further Awards
under the Plan; provided, however, that any such shares that are surrendered to or repurchased or withheld by the Company in connection with any Award or that are otherwise forfeited after issuance shall not be available for purchase pursuant to
incentive stock options intended to qualify under Code section 422. 
 Subject to adjustments as provided in Section 7(d)
of the Plan, the maximum number of shares of Common Stock subject to Awards of any combination that may be granted during any one fiscal year of the Company to any one individual under this Plan shall be limited to 100,000 shares. Such
per-individual limit shall not be adjusted to effect a restoration of shares of Common Stock with respect to which the related Award is terminated, surrendered or canceled. 

 

	5.	Participation 

Participation in the Plan shall be open to all employees, officers, and directors of, and other individuals providing bona fide
services to or for, the Company, the Manager or of any Affiliate of the Company or the Manager, as may be selected by the Administrator from time to time. The Administrator may also grant Awards to individuals in connection with hiring, retention or
otherwise, prior to the date the individual first performs services for the Company or an Affiliate, provided that such Awards shall not become vested or exercisable, and no shares shall be issued to such individual, prior to the date the individual
first commences performance of such services. 
  

	6.	Awards 

 The
Administrator, in its sole discretion, establishes the terms of all Awards granted under the Plan. Awards may be granted individually or in tandem with other types of Awards, concurrently with or with respect to outstanding Awards. All Awards are
subject to the terms and conditions provided in the Grant Agreement. 
  

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 (a) Stock Options. The Administrator may from time to time grant to
eligible participants Awards of incentive stock options as that term is defined in Code section 422 or nonstatutory stock options; provided, however, that Awards of incentive stock options shall be limited to employees of the
Company or of any current or hereafter existing “parent corporation” or “subsidiary corporation,” as defined in Code sections 424(e) and (f), respectively, of the Company and any other individuals who are eligible
to receive incentive stock options under the provisions of Code section 422. Options intended to qualify as incentive stock options under Code section 422 must have an exercise price at least equal to Fair Market Value as of the date of
grant, but nonstatutory stock options may be granted with an exercise price less than Fair Market Value. No stock option shall be an incentive stock option unless so designated by the Administrator at the time of grant or in the Grant Agreement
evidencing such stock option. 
 (b) Stock Appreciation Rights. The Administrator may from time to time
grant to eligible participants Awards of Stock Appreciation Rights (“SAR”). A SAR entitles the grantee to receive, subject to the provisions of the Plan and the Grant Agreement, a payment having an aggregate value equal to the
product of (i) the excess of (A) the Fair Market Value on the exercise date of one share of Common Stock over (B) the base price per share specified in the Grant Agreement, times (ii) the number of shares specified by the SAR, or
portion thereof, which is exercised. The base price per share specified in the Grant Agreement shall not be less than the lower of the Fair Market Value on the grant date or the exercise price of any tandem stock option Award to which the SAR is
related. No SAR shall have a term longer than ten years’ duration. Payment by the Company of the amount receivable upon any exercise of a SAR may be made by the delivery of Common Stock or cash, or any combination of Common Stock and cash, as
determined in the sole discretion of the Administrator. If upon settlement of the exercise of a SAR a grantee is to receive a portion of such payment in shares of Common Stock, the number of shares shall be determined by dividing such portion by the
Fair Market Value of a share of Common Stock on the exercise date. No fractional shares shall be used for such payment and the Administrator shall determine whether cash shall be given in lieu of such fractional shares or whether such fractional
shares shall be eliminated. 
 (c) Stock Awards. The Administrator may from time to time grant restricted
or unrestricted stock Awards to eligible participants in such amounts, on such terms and conditions, and for such consideration, including no consideration or such minimum consideration as may be required by law, as it shall determine. A stock Award
may be paid in Common Stock, in cash, or in a combination of Common Stock and cash, as determined in the sole discretion of the Administrator. 

(d) Phantom Stock. The Administrator may from time to time grant Awards to eligible participants denominated in
stock-equivalent units (“phantom stock”) in such amounts and on such terms and conditions as it shall determine. Phantom stock units granted to a participant shall be credited to a bookkeeping reserve account solely for accounting
purposes and shall not require a segregation of any of the Company’s assets. 
  

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An Award of phantom stock may be settled in Common Stock, in cash, or in a combination of Common Stock and cash, as determined in the sole discretion of the Administrator. Except as otherwise
provided in the applicable Grant Agreement, the grantee shall not have the rights of a shareholder with respect to any shares of Common Stock represented by a phantom stock unit solely as a result of the grant of a phantom stock unit to the grantee.

 (e) Performance Awards. The Administrator may, in its discretion, grant performance awards which become
payable on account of attainment of one or more performance goals established by the Administrator. Performance awards may be paid by the delivery of Common Stock or cash, or any combination of Common Stock and cash, as determined in the sole
discretion of the Administrator. Notwithstanding anything to the contrary herein, certain awards granted under this Section 6(e) may be granted in a manner which is intended to be deductible by the Company under Section 162(m) of the Code
(or any successor section thereto) (“Performance-Based Awards”). A participant’s Performance-Based Award shall be determined based on the attainment of written performance goals approved by the Administrator for a performance
period established by the Administrator (i) while the outcome for that performance period is substantially uncertain and (ii) no more than 90 days after the commencement of the performance period to which the performance goal relates
or, if less, the number of days which is equal to 25 percent of the relevant performance period. The performance goals, which must be objective, shall be based upon one or more of the following criteria: (i) consolidated earnings before or
after taxes (including earnings before interest, taxes, depreciation and amortization); (ii) net income; (iii) operating income; (iv) earnings per share; (v) book value per share; (vi) return on shareholders’ equity;
(vii) expense management; (viii) return on investment; (ix) improvements in capital structure; (x) profitability of an identifiable business unit or product; (xi) maintenance or improvement of profit margins;
(xii) stock price; (xiii) revenues or sales; (xiv) costs; (xv) cash flow, funds from operations or similar measure; and (xvi) return on assets. The foregoing criteria may relate to the Company, one or more of its Affiliates
or one or more of its or their divisions or units, or any combination of the foregoing, and may be applied on an absolute basis and/or be relative to prior years for the Company, one or more peer group companies or indices, or any combination
thereof, all as the Administrator shall determine. In addition, to the degree consistent with Section 162(m) of the Code (or any successor section thereto), the performance goals may be calculated without regard to extraordinary items. The
Administrator shall determine whether, with respect to a performance period, the applicable performance goals have been met with respect to a given participant and, if they have, shall so certify and ascertain the amount of the applicable
Performance-Based Award. No Performance-Based Awards will be paid for such performance period until such certification is made by the Administrator. The amount of the Performance-Based Award actually paid to a given Participant may be less than the
amount determined by the applicable performance goal formula, at the discretion of the Administrator. The amount of the Performance-Based Award determined by the Administrator for a performance period shall be paid to the participant at such time as
determined by the Administrator in its sole discretion after the end of such performance period; provided, however, that a participant may, if and to the extent permitted by the Board and consistent with the

  

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provisions of Sections 162(m) and 409A of the Code, elect to defer payment of a Performance-Based Award. 

(f) Other Stock-Based Awards. The Administrator may from time to time grant other stock-based awards to eligible
participants in such amounts, on such terms and conditions, and for such consideration, including no consideration or such minimum consideration as may be required by law, as it shall determine. Other stock-based awards may be denominated in cash,
in Common Stock or other securities, in stock-equivalent units, in stock appreciation units, in securities or debentures convertible into Common Stock, or in any combination of the foregoing and may be paid in Common Stock or other securities, in
cash, or in a combination of Common Stock or other securities and cash, all as determined in the sole discretion of the Administrator. 
  

	7.	Miscellaneous 

(a) Withholding of Taxes. Grantees and holders of Awards shall pay to the Company or its Affiliate, or make
provision satisfactory to the Administrator for payment of, any taxes required to be withheld in respect of Awards under the Plan no later than the date of the event creating the tax liability. The Company or its Affiliate may, to the extent
permitted by law, deduct any such tax obligations from any payment of any kind otherwise due to the grantee or holder of an Award. In the event that payment to the Company or its Affiliate of such tax obligations is made in shares of Common Stock,
such shares shall be valued at Fair Market Value on the applicable date for such purposes and shall not exceed in amount the minimum statutory tax withholding obligation. 

(b) Loans. To the extent otherwise permitted by law, the Company or its Affiliate may make or guarantee loans to
grantees to assist grantees in exercising Awards and satisfying any withholding tax obligations. 
 (c)
Transferability. Except as otherwise determined by the Administrator, and in any event in the case of an incentive stock option or a stock appreciation right granted with respect to an incentive stock option, no Award granted under the Plan
shall be transferable by a grantee otherwise than by will or the laws of descent and distribution. Unless otherwise determined by the Administrator in accord with the provisions of the immediately preceding sentence, an Award may be exercised during
the lifetime of the grantee, only by the grantee or, during the period the grantee is under a legal disability, by the grantee’s guardian or legal representative. 

(d) Adjustments for Corporate Transactions and Other Events. 

 

	 	(i)	 Stock Dividend, Stock Split and Reverse Stock Split. In the event of a stock dividend of, or stock split or reverse stock split affecting, the
Common Stock, (A) the maximum number of shares of such Common Stock as to which Awards may be granted under this Plan and the maximum number of shares with respect to which

  

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Awards may be granted during any one fiscal year of the Company to any individual, as provided in Section 4 of the Plan, and (B) the number of shares covered by and the exercise price
and other terms of outstanding Awards, shall, without further action of the Board, be adjusted to reflect such event. The Administrator may make adjustments, in its discretion, to address the treatment of fractional shares and fractional cents that
arise with respect to outstanding Awards as a result of the stock dividend, stock split or reverse stock split. 

  

	 	(ii)	Non-Change in Control Transactions. Except with respect to the transactions set forth in Section 7(d)(i), in the event of any change affecting the Common
Stock, the Company or its capitalization, by reason of a spin-off, split-up, dividend, recapitalization, merger, consolidation or share exchange, other than any such change that is part of a transaction resulting in a Change in Control of the
Company, the Administrator, in its discretion and without the consent of the holders of the Awards, may make (A) appropriate adjustments to the maximum number and kind of shares reserved for issuance or with respect to which Awards may be
granted under the Plan, in the aggregate and with respect to any individual during any one fiscal year of the Company, as provided in Section 4 of the Plan; and (B) any adjustments in outstanding Awards, including but not limited to
modifying the number, kind and price of securities subject to Awards. 

  

	 	(iii)	Change in Control Transactions. In the event of any transaction resulting in a Change in Control of the Company, outstanding stock options and other Awards that
are payable in or convertible into Common Stock under this Plan will terminate upon the effective time of such Change in Control unless provision is made in connection with the transaction for the continuation or assumption of such Awards by, or for
the substitution of the equivalent awards, as determined in the sole discretion of the Administrator, of, the surviving or successor entity or a parent thereof. In the event of such termination, (A) the outstanding stock options and other
Awards that will terminate upon the effective time of the Change in Control shall become fully vested immediately before the effective time of the Change in Control, and (B) the holders of stock options and other Awards under the Plan will be
permitted, immediately before the Change in Control, to exercise or convert all portions of such stock options or other Awards under the Plan that are then exercisable or convertible or which become exercisable or convertible upon or prior to the
effective time of the Change in Control. 

  

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	 	(iv)	Unusual or Nonrecurring Events. The Administrator is authorized to make, in its discretion and without the consent of holders of Awards, adjustments in the terms
and conditions of, and the criteria included in, Awards in recognition of unusual or nonrecurring events affecting the Company, or the financial statements of the Company or any Affiliate, or of changes in applicable laws, regulations, or accounting
principles, whenever the Administrator determines that such adjustments are appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan. 

(e) Substitution of Awards in Mergers and Acquisitions. Awards may be granted under the Plan from time to time in
substitution for awards held by employees, officers, consultants or directors of entities who become or are about to become employees, officers, consultants or directors of the Company or an Affiliate as the result of a merger or consolidation of
the employing entity with the Company or an Affiliate, or the acquisition by the Company or an Affiliate of the assets or stock of the employing entity. The terms and conditions of any substitute Awards so granted may vary from the terms and
conditions set forth herein to the extent that the Administrator deems appropriate at the time of grant to conform the substitute Awards to the provisions of the awards for which they are substituted. 

(f) Termination, Amendment and Modification of the Plan. The Board may terminate, amend or modify the Plan or any
portion thereof at any time. Except as otherwise determined by the Board, termination of the Plan shall not affect the Administrator’s ability to exercise the powers granted to it hereunder with respect to Awards granted under the Plan prior to
the date of such termination. 
 (g) Non-Guarantee of Employment or Service. Nothing in the Plan or in any
Grant Agreement thereunder shall confer any right on an individual to continue in the service of the Company or shall interfere in any way with the right of the Company to terminate such service at any time with or without cause or notice and
whether or not such termination results in (i) the failure of any Award to vest; (ii) the forfeiture of any unvested or vested portion of any Award; and/or (iii) any other adverse effect on the individual’s interests under the
Plan. 
 (h) No Trust or Fund Created. Neither the Plan nor any Award shall create or be construed to
create a trust or separate fund of any kind or a fiduciary relationship between the Company and a grantee or any other person. To the extent that any grantee or other person acquires a right to receive payments from the Company pursuant to an Award,
such right shall be no greater than the right of any unsecured general creditor of the Company. 
 (i)
Governing Law. The validity, construction and effect of the Plan, of Grant Agreements entered into pursuant to the Plan, and of any rules, regulations, 

 

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determinations or decisions made by the Administrator relating to the Plan or such Grant Agreements, and the rights of any and all persons having or claiming to have any interest therein or
thereunder, shall be determined exclusively in accordance with applicable federal laws and the laws of the State of North Carolina, without regard to its conflict of laws principles. 

(j) 409A Savings Clause. The Plan and all Awards granted hereunder are intended to comply with, or otherwise be
exempt from, Code section 409A. The Plan and all Awards granted under the Plan shall be administered, interpreted, and construed in a manner consistent with Code section 409A to the extent necessary to avoid the imposition of additional taxes under
Code section 409A(a)(1)(B). Should any provision of the Plan, any Award Agreement, or any other agreement or arrangement contemplated by the Plan be found not to comply with, or otherwise be exempt from, the provisions of Code section 409A, such
provision shall be modified and given effect (retroactively if necessary), in the sole discretion of the Administrator, and without the consent of the holder of the Award, in such manner as the Administrator determines to be necessary or appropriate
to comply with, or to effectuate an exemption from, Code section 409A. Notwithstanding anything in the Plan to the contrary, in no event shall the Administrator exercise its discretion to accelerate the payment or settlement of an Award where such
payment or settlement constitutes deferred compensation within the meaning of Code section 409A unless, and solely to the extent, that such accelerated payment or settlement is permissible under Treasury Regulation section 1.409A-3(j)(4) or any
successor provision. 
 (k) Effective Date; Termination Date. The Plan is effective as of the date on
which the Plan is adopted by the Board, subject to approval of the shareholders within twelve months before or after such date. No Award shall be granted under the Plan after the close of business on the day immediately preceding the tenth
anniversary of the effective date of the Plan, or if earlier, the tenth anniversary of the date this Plan is approved by the shareholders. Subject to other applicable provisions of the Plan, all Awards made under the Plan prior to such termination
of the Plan shall remain in effect until such Awards have been satisfied or terminated in accordance with the Plan and the terms of such Awards. 

PLAN APPROVAL 
 Date
Approved by the Board: March 23, 2010 
 Date Approved by the Shareholders: May 5, 2010 

 

 -11-Yayi International Inc.: Exhibit 10.1 - Prepared by newsfilecorp.com

Exhibit 10.1

LOAN AGREEMENT  

by and between

YAYI INTERNATIONAL
INC. 

as Borrower 

and

SAIF PARTNERS III
L.P. 

as Lender 

Dated: April 30, 2010

CONTENTS 

	Section 	Page 
	 	 
	1. 	Definitions 	1 
	2. 	LOAN 	4 
	3. 	Conditions to Closing 	5 
	4. 	Use of Proceeds 	6 
	5. 	Principal Repayment 	6 
	6. 	Representations and Warranties of the Borrower
    	6 
	7. 	Affirmative Covenants 	7 
	8. 	Negative Covenants 	8 
	9. 	Events of Default 	8 
	10. 	Notices 	10 
	11. 	Waivers; Amendments 	11 
	12. 	Expenses 	11 
	13. 	Successors and Assigns 	11 
	14. 	Counterparts; Integration; Effectiveness 	11 
	15. 	Severability 	12 
	16. 	Governing Law 	12 
	17. 	Jurisdiction 	12 
	18. 	Headings 	12 

	Exhibit A 	Form of
      Promissory Note 
	Appendix 1 	Form of First Amendment to the
      Pledge Agreement 

LOAN AGREEMENT 

THIS LOAN AGREEMENT (this “Agreement”) is dated
April 30, 2010 and made by and among: 

	(1) 	
      Yayi International Inc., a Delaware company with its
      address at No. 9 Xingguang Road, Northern Industrial Park of Zhongbei
      Town, Xiqing District, Tianjin 300384, China, as borrower (the
      “Borrower”); and

	 	 
	(2) 	
      SAIF Partners III L.P, an exempted limited partnership
      duly established and validly existing under the laws of the Cayman
      Islands, with its registered address at PO Box 309, Ugland House, Grand
      Cayman, KY1-1104, Cayman Islands, as lender (the
  “Lender”).

R E C I T A L S 

	A. 	
      The Borrower has requested that the Lender loan
      US$3,000,000 to the Borrower, and the Lender has agreed to make such a
      loan, upon the terms and subject to the conditions set forth in the
      Agreement.

NOW, THEREFORE, in consideration of the foregoing premises, the
respective representations and warranties, covenants and agreements contained
herein, the parties hereto agree as follows: 

	1. 	
      DEFINITIONS

	 	 
		
      As used in this Agreement, the following capitalized
      terms shall have the meanings set forth below:

	 	 
		
      “Affiliate” means, with respect to any Person, any
      other Person (i) which directly or indirectly through one or more
      intermediaries Controls, or is Controlled by, or is under common Control
      with, such first Person, (ii) which beneficially owns or holds 50% or more
      of any class of the voting stock of such first Person, or (iii) whereby
      50% or more of the voting stock (or in the case of a Person which is not a
      corporation, 50% or more of the equity interest) of such other Person is
      beneficially owned or held by such first Person or by a Subsidiary of such
      first Person.

	 	 
		
      “Business Day” means, with respect to any location
      (i.e., Hong Kong and/or the PRC), any day other than a Saturday,
      Sunday or other day with respect to which banks in such location are
      authorized or required to be closed; however, provided, that
      if such day relates to the making of the Loan or the repayment or
      prepayment of the Loan, then “Business Day” shall be further limited to
      refer to a Business Day in New York City.

	 	 
		
      “Control” means, when used with respect to any
      Person, the power to direct the management and policies of such Person,
      directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise, and the terms “Controlling” and “Controlled” have
meanings correlative to the foregoing. 

1 

“Debt” means: (i) indebtedness
or liability for borrowed money, or for the deferred purchase price of property
or services (including trade obligations); (ii) obligations as lessee under
capital leases; (iii) obligations under letters of credit issued for the account
of any Person; (iv) all obligations arising under bankers’ acceptance
facilities; (v) all guaranties, endorsements (other than for collection or
deposit in the ordinary course of business), and other contingent obligations to
purchase, to provide funds for payment, to supply funds to invest in any Person,
or otherwise to assure a creditor against loss; and (vi) obligations secured by
any Lien on property owned, whether or not the obligations have been assumed.

“Default Rate” has the meaning
set forth in Section 9.2 hereof. 

“Dollars” and the symbol “$”mean
such coin or currency of the United States of America as is, at the relevant
time, legal tender for the payment of public and private debts. 

“Event of Default” has the
meaning set forth in Section 9.1 hereof. 

“GAAP” means generally accepted
accounting principles as in effect in an applicable jurisdiction from time to
time. 

“Governmental Approval” means
any authorization, consent, approval, license, franchise, concession, lease,
ruling, permit, certification, exemption, filing or registration by or with any
Governmental Authority or legal or administrative body material and necessary
for the authority of the Borrower or each of the Group Companies to conduct
their respective businesses or for the execution and delivery of this Agreement
or the Note. 

“Governmental Authority” means
any nation or government, any state or other political subdivision thereof, and
any entity exercising executive, legislative, judicial, regulatory or
administrative authority or functions of or pertaining to government. 

“Group Company” means any
Subsidiary of the Borrower and any Person (other than a natural person) that is
controlled by the Borrower. 

“Lien” means, with respect to
any property, any security interest, mortgage, pledge, lien, claim, charge or
other encumbrance in, of, or on such property or the income therefrom,
including, without limitation, the interest of a vendor or lessor under a
conditional sale agreement, capital lease or other title retention agreement, or
any other agreement or arrangement providing any of the foregoing or having a
similar effect. 

“Loan Amount” has the meaning
set forth in Section 2.1. 

2 

“Loan Closing Date” has the
meaning set forth in Section 2.4.

“Loan Documents” has the meaning set
forth in Section 6.2.

“Loan” has the meaning set forth in Section 2.1.

“Material Adverse Effect” means
a material adverse effect on (i) the business, assets, operations, prospects or
financial or other condition of the Borrower or any Group Company; (ii) the
ability of the Borrower or any Group Company to pay or perform the Obligations
in accordance with the terms hereof and to avoid an Event of Default, or an
event which, with the giving of notice or the passage of time or both, would
constitute an Event of Default, under any Loan Document; or (iii) the rights and
remedies of the Lender under any Loan Document or any related document,
instrument or agreement. 

“Maturity Date” has the meaning
set forth in Section 2.3. 

“Note” has the meaning set forth
in Section 2.4. 

“Obligations” means and includes
all loans, advances, debts, liabilities and obligations, howsoever arising, owed
by the Borrower or any Group Company to the Lender of every kind and description
(whether or not evidenced by any note or instrument and whether or not for the
payment of money), now existing or hereafter arising under or pursuant to the
terms of this Agreement and the Note, including, all interest, fees, charges,
expenses, attorneys’ fees and costs and accountants’ fees and costs chargeable
to and payable by the Borrower hereunder and thereunder, in each case, whether
direct or indirect, absolute or contingent, due or to become due. 

“Ordinary Course of Business”,
with respect to the Borrower or any Group Company, means the ordinary course of
the research, development, planting, processing, and sale of organic cereals,
fishing services, storage of cereals, development of agricultural products and
other related businesses, consistent with past practice or as otherwise
contemplated by the business plan of the Borrower or any Group Company.

“Permitted Indebtedness”, with
respect to the Borrower or any Group Company, means (i) the Obligations; (ii)
indebtedness incurred in the Ordinary Course of Business; (iii) indebtedness of
a company that becomes a Subsidiary after the date hereof; provided,
however, that (A) the Lender has approved the acquisition or
establishment of such Subsidiary and (B) the indebtedness existed at the time
such company became a Subsidiary; (iv) indebtedness existing on the date hereof
and has been disclosed to the Lender; (v) any refinancing, extension or renewal
of any existing Permitted Indebtedness hereunder not involving an increase in
the principal amount thereof; and “(vi) any other indebtedness incurred with the
prior written consent of the Lender.

3 

“Permitted Liens” means, as of
any particular time, (i) Liens of taxes, assessments or governmental charges not
then delinquent or being contested as provided below, (ii) any mechanic’s, worker’s, repairer’s,
supplier’s, vendor’s or like Liens securing obligations arising in the ordinary
course of business that (A) are not mature or not overdue for more than fifteen
(15) days, or (B) both (x) are being contested in good faith and (y) as to which
adequate reserves have been established on the books of the Borrower in
accordance with GAAP, (iii) Liens upon tangible personal property acquired after
the date hereof (provided that the aggregate cost of all such tangible personal
property acquired by the Borrower after the date hereof shall not exceed
$10,000) granted by the Borrower, each of which Liens was created solely to
secure Debt incurred to finance the cost of such property (provided that no such
Lien shall extend to cover any property other than the property so acquired),
and (iv) Liens not otherwise permitted hereunder that secure Permitted
Indebtedness not exceeding $20,000 in aggregate amount outstanding at any time.
A contest referred to in this definition shall be permitted only if the
execution or enforcement of the Lien being contested shall have been stayed or
is taxed as a result thereof and such contest could not be reasonably expected
to have a Material Adverse Effect. 

“Person” means an individual, a
partnership, a corporation, a limited liability company, an association, a joint
stock company, a trust, a joint venture, an unincorporated organization and a
governmental entity or any department, agency or political subdivision thereof.

“PRC” means the People’s
Republic of China, excluding Hong Kong, Macau and Taiwan. 

“Preferred Shares” means the
shares of Series A Preferred Stock of the Borrower that the Lender holds. 

“Security Documents” means First
Amendment to the Pledge Agreement and any other document executed from time to
time by any person as a further guarantee of or security for the Borrower’s
obligations hereunder or under any other Loan Document. 

“Share Pledge Agreement” means
First Amendment to the Pledge Agreement by and between Global Rock Stone
Industrial Ltd, a British Virgin Island company (the “Pledgor”) and the
Lender, in form and substance as set forth in Appendix 1 attached hereto,
as the same may be supplemented, amended or otherwise in effect from time to
time. 

“Subsidiary” means any
“significant subsidiary” as defined in Rule 1-02(w) of the Regulation S-X
promulgated by the U.S. Securities and Exchange Commission under the Exchange
Act of 1934, as amended.

4 

	2. 	
      LOAN

	 	
       

	2.1 	
      Loan Amount. Subject to the terms and conditions
      set forth herein, the Lender agrees to make a term loan (the
      “Loan”) to the Borrower on or before May 7, 2010, which Loan shall
      be in the amount three million U.S. Dollars (US$3,000,000) (the “Loan
      Amount”).

	 	 
	2.2 	
      Interest Rate. The Loan shall bear interest at a
      rate of twelve percent (12%) per annum, calculated on the basis of the
      actual number of days elapsed during the relevant period and a 360-day
      year.

	 	 
	2.3 	
      Term. The entire principal amount of the Loan and
      any accrued interest on the Loan shall become fully due and payable on the
      date (the “Maturity Date”) that is the earlier to occur of (i) the
      date that is six (6) months after the Loan Closing Date (as defined
      below), unless extended in the sole discretion of the Lender;
      provided, however, that such date may be extended with the
      written consent of the Lender, and (ii) the acceleration of the maturity
      of the Loan upon the occurrence of an Event of Default (as defined in
      Section 9.1 below), without further action on the part of the Lender. The
      Borrower can repay the entire principal and the accrued interest before
      Maturity Date without any prepayment penalty.

	 	 
	2.4 	
      Closing. Subject to the conditions to Closing in
      Section 3 hereof, on or before May 7, 2010 (the “Loan Closing
      Date”), the Lender shall wire funds equal to the Loan Amount to a bank
      account designated by the Borrower which is under co-signature management
      of the Borrower and the Lender. The Borrower shall issue an executed
      promissory note (the “Note”) in favor of the Lender in form and
      substance as set forth in Exhibit A attached hereto. The Note shall
      be dated the Loan Closing Date and shall mature on the Maturity
    Date.

	 	 
	3. 	
      CONDITIONS TO CLOSING

	 	 
		
      The Lender’s obligations at the Closing are subject to
      the satisfaction, on or prior to the Loan Closing Date, of each of the
      following conditions, any of which may be waived in whole or in part by
      the Lender:

	 	 
	3.1 	
      Representations and Warranties. The
      representations and warranties made by the Borrower in Section 6 hereof
      shall have been true, correct and complete when made, and shall be true
      and correct on the Loan Closing Date.

	 	 
	3.2 	
      Legal Requirements. The sale and issuance by the
      Borrower, and the purchase by the Lender, of the Note shall be legally
      permitted by all laws and regulations to which the Lender or the Borrower
      is subject.

	 	 
	3.3 	
      Proceedings and Documents. All corporate
      proceedings, including board resolutions, in connection with the
      transactions contemplated hereby and all documents incident to such
      transactions shall be reasonably satisfactory in form and substance to the
      Lender, and the Lender shall have received such counterpart original or
      other copies of such documents as it may reasonably
  request.

5 

	3.4 	
      Loan Agreements and Security Documents. (i) The
      Borrower shall have duly executed and delivered to the Lender this
      Agreement; (ii) the Borrower shall have duly executed and delivered to the
      Lender the Note issued hereunder; and (iii) the Pledgor shall have duly
      executed and delivered to the Lender the Share Pledge Agreement.

	 	 
	4. 	
      USE OF PROCEEDS

	 	 
		
      The Borrower shall use the proceeds of the Loan for the
      benefit of the Borrower and the Group Company and shall obtain the
      Lender’s written permit before each tranche of the use of the proceeds,
      which written permit shall not be unreasonably withheld, conditioned or
      delayed.

	 	 
	5. 	
      PRINCIPAL REPAYMENT

	 	 
		
      The Borrower hereby unconditionally promises to pay to
      the Lender the entire outstanding principal amount of the Loan and any
      accrued interest thereon in immediately available funds on the Maturity
      Date.

	 	 
	6. 	
      REPRESENTATIONS AND WARRANTIES OF THE
    BORROWER

	 	 
		
      The Borrower hereby represents and warrants to the Lender
      as follows:

	 	 
	6.1 	
      Organization; Good Standing. The Borrower is duly
      organized, validly existing and in good standing under the laws of the
      State of Delaware. The Borrower has all requisite corporate power and
      authority to carry on its business as now conducted and as proposed to be
      conducted and is duly qualified and licensed to do business in each
      jurisdiction in which the failure to be so qualified or licensed could
      reasonably be expected to have a Material Adverse Effect.

	 	 
	6.2 	
      Due Authorization. All corporate actions on the
      part of the Borrower, its directors and its shareholders necessary for the
      authorization, execution and delivery of this Agreement and the Note
      (together with this Agreement, the “Loan Documents”) by the
      Borrower, and the performance of the obligations of the Borrower under the
      Loan Documents, as applicable, have been taken or will be taken prior to
      the Loan Closing Date. The Loan Documents constitute the valid and legally
      binding obligations of the Borrower, enforceable against the Borrower in
      accordance with their terms, except as limited by (i) applicable
      bankruptcy, insolvency or other laws of general application affecting
      enforcement of creditors’ rights generally and (ii) laws relating to the
      availability of specific performance, injunctive relief or other equitable
      remedies (whether enforcement is sought by proceedings in equity or at
      law).

	 	 
	6.3 	
      Governmental Consents. All consents, approvals,
      orders and authorizations of, and all registrations, qualifications,
      designations, declarations and filings with, any governmental authority or
      other third party required on the part of the Borrower in connection with
      the valid execution and delivery of the Loan Documents, the
      offer, sale or issuance of the Note, or the consummation of any other
      transaction contemplated hereby shall have been obtained and will be
      effective at the Loan Closing Date.

6 

	6.4 	
      No Judgments or Litigation. There is no action,
      suit, proceeding or investigation pending or, to the knowledge of the
      Borrower, threatened against the Borrower, that questions the validity of
      this Agreement or the right of the Borrower to consummate the transactions
      contemplated hereby or that might result, either individually or in the
      aggregate, in any material adverse change in the assets, condition,
      affairs or prospects of the Borrower, nor is the Borrower aware that there
      is any basis for the foregoing. The Borrower is not a party or subject to
      the provisions of any order, writ, injunction, judgment or decree of any
      court or government agency or instrumentality.

	 	 
	6.5 	
      Compliance with Other Instruments;
      Non-Contravention. The authorization, execution and delivery of the
      Loan Documents, and the consummation of the transactions contemplated
      under the Loan Documents, do not and will not (i) constitute or result in
      a default or violation of any law or regulation applicable to the Borrower
      or any term or provision of the Borrower’s current Certificate of
      Incorporation , or any material judgment, order, writ, decree, statute,
      rule or regulation applicable to the Borrower; (ii) violate any provision
      of, or result in the breach or the acceleration of, or entitle any other
      Person to accelerate (whether after the giving of notice or lapse of time
      or both), any material mortgage, indenture, agreement, instrument or
      contract to which the Borrower is a party or by which any of them is
      bound; or (iii) result in the creation or imposition of any material Lien
      upon any property, asset or revenue of the Borrower, or the suspension,
      revocation, impairment, forfeiture, or nonrenewal of any material permit,
      license, authorization or approval applicable to the Borrower, its
      business or operations, or any of its assets or properties.

	 	 
	7. 	
      AFFIRMATIVE COVENANTS

	 	 
		
      So long as any portion of the Loan remains outstanding,
      the Borrower shall:

	 	 
	7.1 	
      Inspection Rights. Permit the Lender to visit and
      inspect its facilities and properties, to examine its books of account and
      records and to discuss its affairs, business, finances, accounts and
      operations with its directors, officers, employees, accountants, legal
      counsel and investment bankers, all at such reasonable times as may be
      requested by the Lender.

	 	 
	7.2 	
      Compliance with Laws. Comply in all material
      respects with applicable laws, rules, regulations and orders, such
      compliance to include, without limitation, paying before the same become
      delinquent all taxes, assessments, and governmental charges imposed upon
      it or upon its property except for good faith contests for which adequate
      reserves are being maintained.

	 	 
	7.3 	
      Notice of Litigation. Provide to Lender promptly
      after the commencement thereof, notice of all actions, suits, and
      proceedings before any court or governmental entity in which
  the Borrower is named as a party.

7 

	7.4 	
      Notice of Defaults and Events of Defaults. Provide
      to Lender, as soon as possible and in any event within five (5) days after
      the occurrence thereof, with written notice of each event which either (i)
      is an Event of Default, or (ii) with the giving of notice or lapse of time
      or both would constitute an Event of Default, in each case setting forth
      the details of such event and the action which is proposed to be taken by
      the Borrower with respect thereto.

	 	 
	7.5 	
      Governmental Approvals. Promptly obtain and
      maintain all Governmental Approvals as are necessary for the operation of
      its business.

	 	 
	7.6 	
      Continuance of Business. Maintain its corporate
      existence, licenses and privileges in good standing under and in
      compliance with all applicable laws and continue to operate the business
      it currently conducts.

	 	 
	7.7 	
      Maintenance. Conduct its business in a manner
      consistent with relevant industry standards, keep its material assets and
      properties in good working order and condition and make all necessary and
      proper repairs, replacements and improvements thereof so that such
      business may be properly and prudently conducted at all times.

	 	 
	8. 	
      NEGATIVE COVENANTS

	 	 
	8.1 	
      Protective Provisions. So long as any portion of
      the Loan remains outstanding, the Borrower shall not permit any Group
      Company to, take any of the actions as listed in section 8 (Protective
      Provisions) of the valid CERTIFICATE OF DESIGNATION OF SERIES A PREFERRED
      STOCK of the Borrower dated June 16, 2009 without the prior written
      consent of the Lender or the director appointed by the Lender in the
      Borrower.

	 	 
	8.2 	
      Liens. The Borrower shall not create or suffer to
      exist any Lien on any of its assets except Permitted Liens and Liens in
      existence on the date hereof of which it has provided the Lender written
      notice or documents evidencing such Liens. For the avoidance of doubt, the
      Borrower may make (i) pledges or deposits in connection with workers’
      compensation, employee welfare and other social security legislation and
      (ii) deposits to secure the performance of bids, trade contracts, leases,
      statutory obligations, performance bonds and other obligations of a like
      nature incurred in the Ordinary Course of Business of the Borrower without
      the Lender’s prior consent.

	 	 
	9. 	
      EVENTS OF DEFAULT

	 	 
	9.1 	
      Each of the following shall constitute an event of
      default (each, an “Event of Default”) under this Agreement and the
      Note:

8 

	 	(a) 	
      The Borrower fails to pay on the Maturity Date any unpaid
      principal, accrued interest or other amounts owing under any Loan
      Document;

	 	 	 
	 	(b) 	
      Any representation or warranty made by the Borrower in
      the Loan Documents, or any representation or warranty made by the Pledgor
      in the Security Documents shall prove, when given, to have been false or
      misleading in any material respect;

	 	 	 
	 	(c) 	
      The Borrower or the Pledgor, as applicable, breaches any
      covenant set forth in any of the Loan Documents and the Security
      Documents;

	 	 	 
	 	(d) 	
      The Borrower defaults in the observance or performance of
      any other agreement contained in the Loan Documents (other than as
      provided in paragraphs (a) through (c) above in this Section 9.1), and
      such default shall continue unremedied for a period of thirty (30) days;
      provided, however, that the Borrower shall have notified the
      Lender within five (5) days of the occurrence of such default;

	 	 	 
	 	(e) 	
      The Borrower or any Group Company shall fail to make any
      payment in respect of any Debt in principal amount of $200,000 or more
      when due or within any applicable grace period;

	 	 	 
	 	(f) 	
      Any event or condition shall occur which results in the
      acceleration of the maturity of any Debt in principal amount of $200,000
      or more of the Borrower or any Group Company or enables the holder of such
      Debt to accelerate the maturity thereof;

	 	 	 
	 	(g) 	
      The Borrower or any Group Company files any petition or
      action for relief under any bankruptcy, reorganization, insolvency or
      moratorium law or any other law for the relief of, or relating to,
      debtors, now or hereafter in effect, makes any general assignment for the
      benefit of creditors or takes any corporate action in furtherance of any
      of the foregoing or fails to pay its debts as they become due;
or

	 	 	 
	 	(h) 	
      An involuntary petition is filed against the Borrower or
      any Group Company (unless such petition is dismissed or discharged within
      forty-five (45) days) under any bankruptcy statute now or hereafter in
      effect, or a custodian, receiver, trustee, assignee for the benefit of
      creditors (or other similar official) is appointed to take possession,
      custody or control of any property of the Borrower or any Group
      Company.

	9.2 	
      Upon the occurrence of any Event of Default specified in
      paragraphs 9.1(c), 9.1(g) and 9.1(h) above in Section 9.1, all unpaid
      principal on the Note, accrued and unpaid interest thereon and all other
      amounts owing under this Agreement and the Note shall become immediately
      due and payable without any action on the part of the Lender, and the
      Borrower shall immediately pay to the Lender all such amounts. Upon the
      occurrence of any other Event of Default, the Borrower shall notify the
      Lender in writing within five (5) days of the occurrence of such Event of
      Default. Upon receipt of the notice, the Lender may by notice to the Borrower declare the Loan to be due and
payable forthwith, whereupon the Loan shall become immediately due and payable.
From and after an Event of Default, all Indebtedness hereunder shall accrue
interest at a rate of seventeen percent (17%) per annum (the “Default
Rate”). In the event of any Event of Default, the Borrower shall pay all
reasonable attorneys’ fees and any other reasonable costs incurred by the Lender
in enforcing the Note and the other Loan Documents and in any effort to collect
Indebtedness hereunder. No right or remedy conferred upon or reserved to the
Lender under this Agreement is intended to be exclusive of any other right or
remedy, and every right and remedy shall be cumulative and in addition to every
other right and remedy given hereunder or now and hereafter existing under
applicable law. 

9 

	 	
       
	10. 	
      NOTICES

	 	 
		
      All notices, request, demands, claims, and other
      communications hereunder shall be in writing. Any notice, request, demand,
      claim, or other communication hereunder shall be deemed duly given (i)
      when delivered personally to the recipient, (ii) one (1) Business Day
      after being sent to the recipient by reputable courier service (charges
      prepaid), (iii) one (1) Business Day after being sent to the recipient by
      facsimile transmission or electronic mail, or (iv) four (4) Business Days
      after being mailed to the recipient by certified or registered mail,
      return receipt requested and postage prepaid, and addressed to the
      intended recipient as set forth below:

	 	If to the Lender, to: 	SAIF Partners III L.P. 
	 	  	c/o Maples Corporate Services Limited 
	 	  	PO Box 309, Ugland House 
	 	  	Grand Cayman, KY1-1104 
	 	  	Cayman Islands 
	 	  	Fax: +852 2234-9116 
	 	 	 
	 	With a copy to: 	SAIF Advisors Ltd. 
	 	  	Suites 2115-2118, Two Pacific Place 
	 	  	88 Queensway, Hong Kong 
	 	  	Attention: Andrew. Y. Yan/Jason So 
	 	  	Fax: +852 2234-9116 
	 	 	 
	 	If to the Borrower, to: 	c/o Tianjin Yayi Industrial Co., Ltd., 
	 	  	No. 9 Xingguang Road, 
	 	  	Northern Industrial Park of 
	 	  	Zhongbei Town, Xiqing District, 
	 	  	Tianjin 300384, China 
	 	  	Attention: Li Liu 
	 	  	Fax: 86 (22) 2798-4358

10 

		
      Any Party may change the address to which notices,
      requests, demands, claims, and other communications hereunder are to be
      delivered by giving the other Parties notice in the manner herein set
      forth.

	 	 
	11. 	
      WAIVERS; AMENDMENTS

	 	 
		
      Neither this Agreement or the Note nor any terms hereof
      or thereof may be changed, waived, discharged, or terminated unless such
      change, waiver, discharge, termination or release is in writing signed by
      the parties. Neither failure or delay by the parties hereto in exercising
      any right or power hereunder shall operate as a waiver thereof, nor shall
      any single or partial exercise of any such right or power, or any
      abandonment or discontinuance of steps to enforce such a right or power,
      preclude any other or further exercise thereof or the exercise of any
      other right or power. The rights and remedies of the parties hereunder are
      cumulative and are not exclusive of any rights or remedies that the
      parties would otherwise have.

	 	 
	12. 	
      EXPENSES

	 	 
		
      The Borrower shall bear any expenses (including, without
      limitation, legal fees) incurred by the Borrower or the Lender with
      respect to this Agreement and the transactions contemplated hereby in
      connection with the Loan made hereunder, including all such out- of-pocket
      expenses reasonably incurred during any negotiations.

	 	 
	13. 	
      SUCCESSORS AND ASSIGNS

	 	 
		
      The provisions of this Agreement shall be binding upon
      and inure to the benefit of the parties hereto and their respective
      successors and assigns permitted hereby. The Borrower may not assign,
      encumber or otherwise transfer any of its rights or obligations hereunder
      without the prior written consent of the Lenders, and any attempted
      assignment or transfer by the Borrower without such consent shall be null
      and void. The Lender may assign, encumber or otherwise transfer any or all
      of its rights or obligations hereunder without the prior written consent
      of the Borrower. Nothing in this Agreement, expressed or implied, shall be
      construed to confer upon any person (other than the parties hereto, their
      respective successors and assigns permitted hereby) any legal or equitable
      right, remedy or claim under or by reason of this Agreement.

	 	 
	14. 	
      COUNTERPARTS; INTEGRATION; EFFECTIVENESS

	 	 
		
      This Agreement may be executed in counterparts (and by
      different parties hereto on different counterparts), each of which shall
      constitute an original, but all of which when taken together shall
      constitute a single contract. This Agreement, including all exhibits and
      schedules hereto, which are expressly incorporated herein by reference,
      and any amendments hereto shall constitute the entire contract among the
      parties relating to the subject matter hereof and supersede any and all
      previous agreements and understandings, oral or written, relating to the
      subject matter hereof. Delivery of an executed
  counterpart of a signature page of this Agreement by facsimile shall
      be as effective as delivery of a manually executed counterpart of this
      Agreement.

11 

	15. 	
      SEVERABILITY

	 	 
		
      Any provision of this Agreement held to be invalid,
      illegal or unenforceable in any jurisdiction shall, as to such
      jurisdiction, be ineffective to the extent of such invalidity, illegality
      or unenforceability without affecting the validity, legality and
      enforceability of the remaining provisions hereof; and the invalidity of a
      particular provision in a particular jurisdiction shall not invalidate
      such provision in any other jurisdiction.

	 	 
	16. 	
      GOVERNING LAW

	 	 
		
      This Agreement and the rights and obligations of the
      parties hereunder shall be construed in accordance with and governed by
      the laws of the State of New York without giving effect to choice of law
      provisions.

	 	 
	17. 	
      JURISDICTION

	 	 
	17.1 	
      Arbitration. In the event the Parties are unable
      to settle any dispute between them regarding this Agreement within thirty
      (30) days after the occurrence of the dispute, such dispute may he
      referred to and finally settled by arbitration at the Hong Kong
      International Arbitration Centre in accordance with the UNCITRAL
      Arbitration Rules (the “UNCITRAL Rules”) in effect, which
      rules are deemed to be incorporated by reference into this Section 18.1.
      The arbitration tribunal shall consist of three (3) arbitrators; one (1)
      of whom shall be appointed by the claimant, one (1) of whom shall be
      appointed by the respondent, and the third arbitrator, who shall be the
      presiding arbitrator, shall be appointed by the Hong Kong International
      Arbitration Centre. The language of the arbitration shall be English. By
      agreeing to arbitration, the Parties do not intend to deprive any court of
      its jurisdiction to issue a pre-arbitral injunction, pre-arbitral
      attachment or other order in aid of arbitration proceedings and
      enforcement of any award.

	 	 
	18. 	
      HEADINGS

	 	 
		
      Article and Section headings used herein are for
      convenience of reference only, are not part of this Agreement and shall
      not affect the construction of, or be taken into consideration in
      interpreting, this Agreement.

[NO FURTHER TEXT ON THIS PAGE] 

12 

[SIGNATURE PAGE 1 – LOAN AGREEMENT] 

IN WITNESS WHEREOF, the Parties hereto have caused this
Agreement to be duly executed by their respective authorized officers as of the
day and year first above written. 

THE BORROWER: 

Yayi International Inc. 

By: /s/ Li
Liu                                                    

       Name: Li Liu 
       Title: Chief Executive Officer

[Signatures Continued on the Following Page] 

13 

[SIGNATURE PAGE 2 – LOAN AGREEMENT] 

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

THE LENDER: 

SAIF Partners III L.P, 

By:/s/ Andrew
Yan                                  

      Name: Andrew Yan 
      Title: Authorized Signatory 

1 

Exhibit A 

Promissory Note 

PROMISSORY NOTE 

Yayi International Inc. 

US$3,000,000 

FOR VALUE RECEIVED, Yayi International Inc., a company duly
incorporated and validly existing under the laws of Delaware (the
“Payor”) promises to pay to the order of SAIF Partners III L.P, an
exempted limited partnership duly established and validly existing under the
laws of the Cayman Islands (together with its successors and assigns, the
“Payee”), the principal sum of three million U.S. Dollars (US$3,000,000),
together with all accrued and unpaid interest thereon as set forth below. 

Terms defined in the Loan Agreement dated as of April 30, 2010
by and between the Payor and the Payee (the “Loan Agreement”) are used
herein with the same meanings. This Promissory Note (this “Note”) is the
promissory note referred to in Section 2.4 of the Loan Agreement and is issued
pursuant to and entitled to the benefits of the Loan Agreement, to which
reference is hereby made for a more complete statement of the terms and
conditions under which the Loan evidenced hereby was made and is to be repaid.

The entire principal amount of the Loan and all unpaid accrued
interest thereon shall become fully due and payable on the date (the
“Maturity Date”) that is the earlier to occur of (i) the date that is six
(6) months after the Loan Closing Date (unless extended at the discretion of the
Payee), or (ii) the acceleration of the maturity of the Loan upon the occurrence
of an Event of Default, without further action on the part of the Payee. Payment
of principal and interest hereunder shall be made by wire transfer of
immediately available funds to a bank account furnished by the Payee to the
Payor for that purpose. 

Reference is made to the Loan Agreement and the Security
Documents for (i) provisions for the prepayment hereof and the acceleration of
the maturity hereof and (ii) a description of the property mortgaged, charged,
pledged, assigned and transferred pursuant to the Security Documents and the
nature and extent of the security and rights of the Payor and the Payee in
respect of such security. 

Payment of the principal and interest payable thereon in
respect of this Note shall be made in lawful money of the United States of
America in same day funds at such place as shall be designated in writing for
such purpose in accordance with the terms of the Loan Agreement. Unless and
until this Note has been assigned pursuant to Section 13 of the Loan Agreement,
the Payor shall be entitled to deem and treat the Payee as the owner and holder
of this Note and the Loan evidenced hereby. The Payee hereby agrees, by its
acceptance hereof, that before disposing of this Note or any part hereof it will make a
notation hereon of all principal and interest payments previously made
hereunder; provided, however, that the failure to make a notation of any payment
made on this Note shall not limit or otherwise affect the obligations of the
Payor hereunder with respect to payments of principal and interest of this Note. 

Exhibit A

Whenever any payment on this Note shall be stated to be due on
a day which is not a business day, such payment shall be made on the next
succeeding Business Day. 

The LOAN Agreement and this Note shall be governed by, and
shall be construed and enforced in accordance with, the laws of the State of New
York without giving effect to choice of law provisions. 

The terms of this Note are subject to amendment only in the
manner provided in the Loan Agreement. 

No reference herein to the Loan Agreement and no provision of
this Note or the Loan Agreement shall alter or impair the obligations of the
Payor, which are absolute and unconditional, to pay the principal and interest
of this Note at the place, at the respective times, and in the currency herein
prescribed. 

The Payor hereby waives diligence, presentment, protest, demand
and notice of every kind and, to the full extent permitted by law, the right to
plead any statute of limitations as a defense to any demand hereunder. Upon the
occurrence and during the continuance of any Event of Default, the entire
principal balance and any accrued and unpaid interest on this Note shall become
immediately due and payable in full in accordance with Section 9.2 of the Loan
Agreement. In the event of any Event of Default, the Payor shall pay all
reasonable attorneys’ fees and any other costs incurred by the Payee in
collecting any Indebtedness and enforcing its rights under this Note. Payor may
not prepay this Note prior to the Maturity Date without the express written
consent of the Payee. 

This Note and the Payee’s rights hereunder may not be assigned
or otherwise transferred by the Payee, or any interest of any sort whatsoever
transferred, directly or indirectly, to any person or entity other than the
Payee, in whole or in part, except in compliance with Section 13 of the Loan
Agreement. 

Exhibit A

IN WITNESS WHEREOF, the Payor has caused this Note to be duly
executed and delivered by its officer thereunto duly authorized as of the date
and at the place first written above. 

Yayi International Inc. 

By:                                                                    

Name: 
Title: 

Exhibit A

Appendix 1 

Form of First Amendment to the Pledge Agreement

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