Document:

Yayi International Inc.: Exhibit 4.1 - Prepared by TNT Filings Inc.

  

Exhibit 4.1

EXECUTION VERSION

YAYI INTERNATIONAL INC.  

INVESTOR AND REGISTRATION RIGHTS AGREEMENT

Dated as of June 18, 2009

 

TABLE OF CONTENTS 

	 	 	 	Page
	1	INTERPRETATION	1
	 	1.1	Definitions	1
	 	1.2	Other Defined Terms	6
	 	1.3	Interpretation	7
	2	INFORMATION RIGHTS	7
	 	2.1	Information Rights	7
	 	2.2	Inspection Rights	8
	3	RESTRICTIONS ON TRANSFER,
    RIGHT OF FIRST REFUSAL AND	 
	 	RIGHT OF CO-SALE	9
	 	3.1	Restrictions on Transfer of Founder Shares	9
	 	3.2	Right of First Refusal	9
	 	3.3	Co-Sale Rights of Holders	10
	 	3.4	Restrictions on Transfer of Series A
    Preferred Stock	11
	4	PRE-EMPTIVE RIGHTS	11
	 	4.1	General	11
	 	4.2	Exercise of Right	11
	 	4.3	Sales by the Company	12
	5	DRAG ALONG RIGHTS	12
	 	5.1	Rights to Require Compulsory Trade Sale	12
	 	5.2	Rights in Tender Offers	13
	 	5.3	Delivery of Power of Attorney; Instrument of
    Transfers and Director	 
	 	 	Resignation Letters	13
	6	REGISTRATION RIGHTS	13
	 	6.1	Demand Registration	13
	 	6.2	Piggyback Registrations	15
	 	6.3	Procedures	16
	 	6.4	Expenses of Registration	17
	 	6.5	Indemnification	18
	 	6.6	Additional Undertakings	20
	 	6.7	Damages	21
	7	ADDITIONAL UNDERTAKINGS	21
	 	7.1	Qualified Listing	21
	 	7.2	Series A Preferred Stock Lock-up Period	22
	 	7.3	Investor Favorable Terms	22
	 	7.4	ESOP	22
	 	7.5	Insurance	22
	 	7.6	Internal Control System	22
	 	7.7	Board Activities	23
	 	7.8	Director Indemnification	23

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TABLE OF CONTENTS 

(continued) 

	 	 	 	Page
	 	7.9	U.S. Tax Matters	23
	8	MISCELLANEOUS	24
	 	8.1	No Third Party Beneficiaries	24
	 	8.2	Governing Law	24
	 	8.3	Dispute Resolution	24
	 	8.4	Amendments	26
	 	8.5	Notices	26
	 	8.6	Further Assurances	26
	 	8.7	Charter Documents	26
	 	8.8	Entire Agreement	27
	 	8.9	Severability	27
	 	8.10	Remedies Cumulative	27
	 	8.11	No Presumption	27
	 	8.12	Aggregation of Shares	27
	 	8.13	No Waiver	27
	 	8.14	Counterparts	28
	 	 	 	 

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YAYI INTERNATIONAL INC.  

INVESTOR AND REGISTRATION RIGHTS AGREEMENT

THIS INVESTOR AND REGISTRATION RIGHTS AGREEMENT (this “Agreement”) is entered into as of June 18, 2009, by and among:

(i)

Yayi International Inc., a Delaware company (the “Company”);

(ii)

Global Rock Stone Industrial Ltd, a British Virgin Islands company (“Global Rock”);
 

(iii)

the individuals as set forth in Schedule I attached hereto (collectively, the “Founders”); and

(iv)

SAIF Partners III L.P., a Cayman Islands exempted limited partnership (the “Investor”).

RECITALS

WHEREAS, the Series A Preferred Stock Purchase Agreement dated as of the date hereof (the “Purchase Agreement”) by and among the Company, the Investor, and certain other parties thereto provides that the execution and delivery of this Agreement by the Parties hereto is a condition precedent to the consummation of the closing (the “Closing”) contemplated thereunder;
 

WHEREAS, the Parties seek to enter into this Agreement to set out the terms governing the rights and obligations of the Parties subsequent to the Closing; and

NOW, THEREFORE, in consideration of the foregoing recitals, the mutual promises hereinafter set forth, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:
 

AGREEMENT

1

INTERPRETATION

1.1

Definitions.  The following terms shall have the meanings ascribed to them below:
 

“Affiliate” means, with respect to a Person, any other Person that, directly or indirectly, Controls, is Controlled by, or is under common Control with such Person.  

“Applicable Securities Law” means (a) with respect to any offering of securities in the United States of America, or any other act or omission within that jurisdiction, the securities laws of the United States, including the Exchange Act and the Securities Act, and any applicable law of any state of the United States of America, and (b) with respect to any offering of securities in any jurisdiction other than the United States of America, or any related act or omission in that jurisdiction, the applicable laws of that jurisdiction.

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“Auditors” means one of the Big Four Accounting Firms or other accounting firms with internationally recognized standing that is duly appointed by the Board to audit the Company’s financial statements.
 

“Benefits Plan” means any employment contract, deferred compensation agreement, bonus plan, incentive plan, profit sharing plan, retirement agreement or other employment compensation agreement or any other plan which provides or provided benefits for any employee, officer, consultant, and/or director or with respect to which contributions are or have been made on account of an employee, officer, consultant, and/or a director.
 

“Big Four Accounting Firms” means the four largest international accountancy firms in the world.

“Board” means the board of directors of the Company.

“Business Day” means any day that is not a Saturday, Sunday, legal holiday or other day on which commercial banks are required or authorized by law to be closed in the PRC.

“Certificate of Designation” means the certificate of designation the Company filed with the Secretary of State of the State of Delaware in connection with the authorization and issuance of the Series A Preferred Stock.

“Charter Documents” means, with respect to a particular legal entity, the articles of incorporation, certificate of incorporation, memorandum of association, articles of association, certificate of designation, Bylaws, articles of organization, certificate of formation, limited liability company agreement, operating agreement, or similar or other constitutive, governing, or charter documents, or equivalent documents, of such entity.
 

“Closing” has the meaning ascribed thereto in the Purchase Agreement.

“Commission” means (a) with respect to any offering of securities in the United States of America, the Securities and Exchange Commission of the United States of American or any other federal agency at the time administering the Securities Act, and (b) with respect to any offering of securities in a jurisdiction other than the United States of America, the regulatory body of the jurisdiction with authority to supervise and regulate the sale of securities in that jurisdiction.

“Common Stock” means the Company’s common stock, par value US$0.001.

“Company Parties” means the Company, Global Rock and the Founders.

“Control” of a given Person means the power or authority, whether exercised or not, to direct the business, management and policies of such Person, directly or indirectly, whether through the ownership of voting Securities, by Contract or otherwise; provided, that such power or authority shall conclusively be presumed to exist upon possession of beneficial ownership or power to direct the vote of more than fifty percent (50%) of the votes entitled to be cast at a meeting of the members, shareholders or stockholders of such Person or power to control the composition of a majority of the board of directors of such Person.  The terms “Controlled” and “Controlling” have meanings correlative to the foregoing.
 

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“Co-Sale Pro Rata Share” of a Holder shall mean the ratio that (a) the sum of the number of shares of Common Stock then held by such Holder which were issued upon conversion of Series A Preferred Stock plus the number of shares of Common Stock issuable upon conversion of Series A Preferred Stock then held by such Holder bears to (b) the sum of the total number of shares of Common Stock then held by all Holders which were issued upon conversion of Series A Preferred Stock plus the number of shares of Common Stock issuable upon conversion of all outstanding Series A Preferred Stock then held by all Holders plus the number of shares of Common Stock then held by the Founder Parties proposing to sell any of the Founder Shares.

“Exchange Act” means the United States Securities Exchange Act of 1934, as amended.

“First Refusal Pro Rata Share” of a Holder shall mean the ratio that (a) the sum of the number of shares of Common Stock then held by such Holder which were issued upon conversion of Series A Preferred Stock plus the number of shares of Common Stock issuable upon conversion of Series A Preferred Stock then held by such Holder bears to (b) the sum of the total number of shares of Common Stock then held by all Holders which were issued upon conversion of Series A Preferred Stock plus the number of shares of Common Stock issuable upon conversion of all outstanding Series A Preferred Stock then held by all Holders.
 

“Form F-3” means Form F-3 promulgated by the Commission under the Securities Act or any substantially similar form then in effect.

“Form S-3”  means Form S-3 promulgated by the Commission under the Securities Act or any substantially similar form then in effect.

“Founder Parties” means, collectively, the Founders, Global Rock and their Permitted Transferees.
 

“Founder Shares” shall mean (a) the shares of Common Stock of the Company and (b) any securities convertible into, or exchangeable for, or representing the economic interests in or the rights to receive the shares of Common Stock of the Company, including without limitation, the equity interests in Global Rock, and in each case, now beneficially own or hereafter acquired, whether directly or through their nominees (as determined in accordance with Section 13(d) of the Exchange Act, and the rules and regulations promulgated thereunder) by any of the Founder Parties.

“Governmental Authority” means any nation or government or any federation, province or state or any other political subdivision thereof; any entity, authority or body exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, including any government authority, agency, department, board, commission or instrumentality of the PRC or any other country, or any political subdivision thereof, any court, tribunal or arbitrator, and any self-regulatory organization.
 

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“Governmental Order” means any applicable order, ruling, decision, verdict, decree, writ, subpoena, mandate, precept, command, directive, consent, approval, award, judgment, injunction or other similar determination or finding by, before or under the supervision of any Governmental Authority.

“Group” means, collectively, the Company and its Subsidiaries.
 

“Group Company” means a member of the Group.

“Holder” shall mean a holder of Series A Preferred Stock; provided, however, for Section
6, Holders shall means a holder of the Registrable Securities.
 

“Investor Directors” means the directors of the Company that are nominated by the holders of shares of Series A Preferred Stock and elected to the Board pursuant to the Certificate of Designation and other Charter Documents of the Company.

“Laws” means any and all provisions of any constitution, treaty, statute, law, regulation, ordinance, code, rule, rule of common law, governmental approval, concession, grant, franchise, license, agreement, directive, requirement, or other governmental restriction or any similar form of decision of, or determination by, or any interpretation or administration of any of the foregoing by, any Governmental Authority, in each case as amended, and any and all Governmental Order.

“Liabilities” means, with respect to any Person, all liabilities, obligations and commitments of such Person of any nature, whether accrued, absolute, contingent or otherwise, and whether due or to become due.

“Majority Holders” means Holders holding a majority of the voting power of the Registrable Securities held by all Holders.
 

“Majority Initiating Holders” means Initiating Holders holding a majority of the voting power of the Registrable Securities held by all Initiating Holders.
 

“Management Rights Agreement” means a certain management rights agreement delivered by the Company to the Investor at the Closing.
 

“New Securities” means any Securities of the Company issued after the date hereof, excluding (i) Common Stocks issued upon conversion of the Series A Preferred Shares (ii) shares of Common Stock and options issued pursuant to the ESOP, and (iii) any Securities issued as a result of any stock split, stock dividend, reclassification, reorganization or similar event with respect to shares of Common Stock as duly approved by the Board.

“Person” means any natural person, corporation, limited liability company, joint stock company, joint venture, partnership, enterprise, trust, unincorporated organization or any other entity or organization.

“Pledge Agreement” means a certain pledge agreement entered into between Global Rock and the Investor as of the date hereof.

“PRC” means the People’s Republic of China, solely for purposes of this Agreement, excluding Hong Kong, Macau and Taiwan.

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“Pre-emptive Pro Rata Share” of a Holder shall mean the ratio that (i) the sum of the number of shares of Common Stock then held by such Holder which were issued upon conversion of Series A Preferred Stock plus the number of shares of Common Stock issuable upon conversion of Series A Preferred Stock then held by such Holder bears to (ii) the total number of shares of Common Stock outstanding immediately prior to the issuance of the New Securities (assuming full conversion and exercise of all outstanding convertible and exercisable securities of the Company).
 

“Qualified Listing” means the approval for the listing the Company’s shares of Common Stock or American Depositary Shares representing shares of the Common Stock on the New York Stock Exchange or the NASDAQ Global Market.

“Registrable Securities” means the Common Stock issued or issuable upon conversion of the Series A Preferred Stock.
 

“Registration” means a registration effected by preparing and filing a Registration Statement and the declaration or ordering of the effectiveness of that Registration Statement, and the terms “Register” and “Registered” have meanings correlative with the foregoing.

“Registration Statement” means a registration statement prepared on Forms S-1, S-3, F-1, or F-3 under the Securities Act, or on any comparable form in connection with registration in a jurisdiction other than the United States.

“Representatives” means, with respect to a Person, such Person’s Affiliates, and its and their respective counsels, financial advisors, auditors and other authorized representatives, including, without limitation, their agents, employees, officers, and directors.
 

“Securities” means, with respect to any Person that is a legal entity, any and all shares of capital stock, membership interests, units, profits interests, ownership interests, equity interests, registered capital, and other securities of such Person, and any right, warrant, option, call, commitment, conversion privilege, preemptive right or other right to acquire any of the foregoing, or security convertible into, exchangeable or exercisable for any of the foregoing, or any Contract providing for the acquisition of any of the foregoing.

“Securities Act” means the United States Securities Act of 1933, as amended.

“Selling Expenses” means any broker’s commission, underwriter’s discount, concession or commission in connection with the sale of the Registrable Securities.
 

“Series A Majority Holders” means, as of any given time, holders holding no less than a majority in voting power of the shares of Common Stock issued or issuable upon the conversion of all Series A Preferred Stock.

“Series A Preferred Stock” means Series A Preferred Stock of the Company, par value US$0.001.

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“Subsidiary” means, with respect to any given Person, any other Person that is not a natural person and that is Controlled directly or indirectly by such given Person.
 

“Trade Sale” means any of the following events:
 

(a)

any consolidation, amalgamation, scheme of arrangement or merger of any Group Company with or into any other Person or other corporate reorganization, in which the stockholders of such Group Company immediately prior to such consolidation, amalgamation, merger, scheme of arrangement or reorganization, do not own more than fifty percent (50%) of such Group Company’s voting power in the aggregate immediately after such consolidation, merger, amalgamation, scheme of arrangement or reorganization, or any transaction or series of related transactions to which any Group Company is a party in which in excess of fifty percent (50%) of such Group Company’s voting power is transferred;

(b)

a sale, transfer, lease or other disposition of all or substantially all of the assets of any Group Company (with respect to the Company, including without limitation its equity interest in its Subsidiaries) (or any series of related transactions resulting in such sale, transfer, lease or other disposition of all or substantially all of the assets of any Group Company); or

(c)

the sale, transfer or other disposition of all or substantially all of any Group Company’s outstanding capital stock (or any series of related transactions resulting in such sale, pledge, transfer or other disposition of all or substantially all of any Group Company’s outstanding capital stock).

“Transaction Documents” means this Agreement, the Purchase Agreement, the Voting Agreement, the Pledge Agreement, the Management Rights Agreement and each of the agreements and other documents otherwise required in connection with implementing the transactions contemplated by any of the foregoing.

“US GAAP” means generally accepted accounting principles in the United States, consistently applied.

“Voting Agreement” means a certain Voting Agreement entered into by Global Rock, the Company, the Investor and certain other parties thereto, at the Closing.

1.2

Other Defined Terms.

  The following terms shall have the meanings defined for such terms in the Sections set forth below:  

	
    Agreement
	
    Preamble

	
    Annual Budget and Business Plan
	
    Section 2.1(f)

	
    Arbitration Notice
	
    Section 8.3(a)

	
    Board Secretary
	
    Section 7.7

	
    Closing
	
    Recitals

	
    Company
	
    Preamble

	
    Company’s Competitor
	
    Section 3.4(b)

	
    Dispute
	
    Section 8.3(a)

	
    Electing Holders
	
    Section 3.2(a)

	
    ESOP
	
    Section 7.4(a)

 

6

 

	
     
	
     

	
    Event
	
    Section 6.7(a)

	
    Event of Default
	
    Section 5.1(b)

	
    Exempt Registrations
	
    Section 6.2(d)

	
    Founders
	
    Preamble

	
    Fully-Exercising Holder
	
    Section 4.2

	
    Global Rock
	
    Preamble

	
    HKIAC
	
    Section 8.3(b)

	
    HKIAC Rules
	
    Section 8.3(b)

	
    Holders Notice
	
    Section 3.2(a)

	
    Initiating Holders
	
    Section 6.1(a)

	
    Investor
	
    Preamble

	
    Investor Favorable Terms
	
    Section 7.3

	
    Investor U.S. Equity Holders
	
    Section 7.9(a)

	
    Issuance Notice
	
    Section 4.2

	
    Notice Period
	
    Section 3.2(b)

	
    Permitted Transfer
	
    Section 3.1(b)

	
    Permitted Transferee
	
    Section 3.1(b)

	
    PFIC
	
    Section 7.9(b)

	
    Principal Tribunal
	
    Section 8.3(i)(i)

	
    Purchase Agreement
	
    Recitals

	
    Second Holders Notice
	
    Section 3.2(a)

	
    Transfer
	
    Section 3.1(a)

	
    Violation
	
    Section 6.5(a)(i)

 

1.3

Interpretation.  For all purposes of this Agreement, except as otherwise expressly herein provided, (a) the terms defined in this Section 1.3 shall have the meanings assigned to them in this Section 1.3 and include the plural as well as the singular, (b) all accounting terms not otherwise defined herein have the meanings assigned under US GAAP, (c) all references in this Agreement to designated “Sections” and other subdivisions are to the designated Sections and other subdivisions of the body of this Agreement, (d) pronouns of either gender or neuter shall include, as appropriate, the other pronoun forms, (e) the words “herein,” “hereof” and “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular Section or other subdivision, (f) all references in this Agreement to designated Schedules and Appendices are to the Schedules and Appendices attached to this Agreement, (g) references to this Agreement, any other Transaction Documents and any other document shall be construed as references to such document as the same may be amended, supplemented or novated from time to time, (h) the term “or” is not exclusive, (i) the term “including” will be deemed to be followed by “, but not limited to,” (j) the terms “shall,” “will,” and “agrees” are mandatory, and the term “may” is permissive, (k) the phrase “directly or indirectly” means directly, or indirectly through one or more intermediate Persons or through contractual or other arrangements, and “direct or indirect” has the correlative meaning, and (l) the headings used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.

2

INFORMATION RIGHTS

2.1

Information Rights.  

Subject to compliance with applicable Laws, the Company shall deliver or cause to be delivered to each Holder:
 

7

 

(a)

as soon as practicable, but in any event within ninety-five (95) days after the end of each fiscal year of the Company, consolidated income statements and statements of cash flows for the Group for such fiscal year and consolidated balance sheets for the Group as of the end of such fiscal year, including footnotes thereto, all prepared in accordance with US GAAP and audited and certified by the Auditors of the Company, together with a management discussion and analysis report including a comparison of financial results with the applicable period;

(b)

as soon as practicable, but in any event within forty-five (45) days after the end of each of the first three (3) quarters of each fiscal year of the Company, an unaudited income statement, statement of cash flows for such fiscal quarter and an unaudited balance sheet as of the end of such fiscal quarter, including footnotes thereto, all prepared in accordance with US GAAP;

(c)

within thirty (30) days of the end of each month, an unaudited income statement and statement of cash flows and balance sheet for and as of the end of such month, in reasonable detail;

(d)

 with respect to the financial statements called for in Sections
2.1 (a)  to (c) above, an instrument executed by the Chief Executive Officer and Chief Financial Officer  of the Company certifying that such financials were prepared in accordance with US GAAP consistently and fairly present the financial condition of the Company and its results of operation for the period specified, subject to year-end audit adjustment, if applicable;
 

(e)

as soon as practicable, but in any event within ten  (10) days after the end of each month of the Company all bank statements for each of the major bank accounts held by each of the Group Companies;

(f)

as soon as practicable, but in any event at least thirty (30) days prior to the end of each fiscal year, an annual budget and business plan for the succeeding fiscal year for the Group (the “Annual Budget and Business Plan”), setting forth: the projected balance sheets of each Group Company, income statements and statements of cash flows for each month during such period of each Group Company; the projected budget for operation of business; any dividend or distribution to be declared or paid; the projected incurrence, assumption or refinancing of indebtedness; projected revenue and profit for each month during such period; all payments projected to be made not in the ordinary course of business consistent with past practice by any of the Group Companies; and all other material matters relating to the operation, development and  business of the Group Companies;
 

(g)

as soon as practicable, but in any event within five (5) Business Days after providing such information to any Person in its or his capacity as a stockholder of any Group Company, copies of all documents or information (including, without limitation, proposals and/or reports with respect to the establishment, or negotiations in respect of the establishment, of any joint venture by any Group Company) sent to such Person; and

(h)

as soon as practicable, such other information as any of the Holders shall reasonably request from time to time.

2.2

Inspection Rights.  Subject to compliance with applicable Laws, the Company shall permit each of the Holders, and/or their authorized representatives or advisors, to visit and inspect all of the properties and examine all books of account and records of each Group Company (including any technology reports and contracts) and discuss the affairs, finances and accounts of any Group Company with the directors, officers, employees, accountants, legal counsel and investment bankers thereof, all at such reasonable times with reasonable advance notification by such Holder and at such Holder’s expense.  The Company shall provide all reasonable assistance to the Holders in connection therewith.
 

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3

RESTRICTIONS ON TRANSFER, RIGHT OF FIRST REFUSAL AND RIGHT OF CO-SALE  

3.1

Restrictions on Transfer of Founder Shares.  

(a)

During the period commencing on the Closing and ending on the earlier of (x) the first anniversary of the Qualified Listing and (y) the third anniversary of the Closing, Founder Parties may not sell, assign, lend, contract to sell, pledge or otherwise dispose of, directly or indirectly, any of the Founder Shares, whether with or without consideration and whether voluntarily or involuntarily or by operation of law (“Transfer,” and such correlative transaction, a “Transfer”) except as provided in Sections
3.2  to 3.4  below and except the 2,000,000 shares of Common Stock pledged to Allied Merit International Investment, Inc. pursuant to certain stock pledge agreement dated as of July 15, 2008. For the avoidance of doubt, this Section
3 applies to the equity interests in Global Rock held by the Founders.
 

(b)

The restrictions on Transfer provided in this Section 3 shall not be applicable to any Transfer by a Founder Party to a Founder’s spouse, the siblings, ancestors and descendants (whether natural or adopted) of such Founder, and any trust for the benefit of the Founder or any of the foregoing, provided that such transferee agrees in writing to be bound by the terms of this Agreement.  Any such transferee shall be referred to herein as a “Permitted Transferee” and any such transfer be referred to as a “Permitted Transfer.”

(c)

In the case of any such Permitted Transfer, the transferring Founder Party shall have provided the Holders with written notice of such proposed Transfer at least 30 days prior to consummating such Transfer stating the name and address of the Permitted Transferee, the relationship between the transferring Founder Party and the Permitted Transferee, and the Permitted Transferee shall have executed a copy of this Agreement as a Founder Party of the Company.  

(d)

If any such Permitted Transferee to whom Founder Shares have been transferred by a Founder Party ceases to be a Permitted Transferee, such shares of Common Stock shall be transferred back to the transferring stockholder immediately prior to the time such Person ceases to be a Permitted Transferee of such stockholder.

(e)

In the case of any transfer to a Permitted Transferee, the transferring Founder Party and such Permitted Transferee shall be jointly and severally liable for any breach of this Agreement by such Permitted Transferee.
 

3.2

Right of First Refusal.  

(a)

In the event that any Founder Party proposes to Transfer any Founder Shares, such Founder Party shall give each Holder a written notice (the “Holders Notice”) of the price, terms and conditions of the proposed Transfer, including the identity of the proposed transferee of such Founder Shares and a copy of any written proposal, term sheet, letter of intent or other agreement relating to the proposed Transfer.  Each Holder shall have twenty (20) days from the date of the Holders Notice to agree to acquire all or any portion of such Holder’s First Refusal Pro Rata Share of such Founder Shares, for the price and upon the terms and conditions specified in the Holders Notice, by giving written notice to such Founder Party stating therein the quantity of such Founder Shares to be acquired.  If any Holder fails to agree to acquire its full First Refusal Pro Rata Share within such twenty (20) day period, such Founder Party transferring such Founder Shares will give the Holders who did so agree (the “Electing Holders”) notice (the “Second Holders Notice”) of the number of Founder Shares which were not subscribed for.  The Electing Holders shall have ten (10) days from the date of the Second Holders Notice to agree to acquire their respective First Refusal Pro Rata Share of all or any part of the Founder Shares not subscribed for by such other Holders.  For purposes of the second election under this Section 3.2
(a), securities held by Holders other than Electing Holders shall be excluded for the purpose of calculating an Electing Holder’s “First Refusal Pro Rata Share.”  

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(b)

Subject to the provisions of Section 3.3, in the event a Holder fails to exercise the right of first refusal within said twenty (20) day period plus the ten (10) day period specified above (collectively, the “Notice Period”), such Founder Party shall have sixty (60) days thereafter to Transfer the Founder Shares not elected to be subscribed upon the terms and conditions no more favorable to the transferee of such Founder Shares than specified in the Holder Notice.  In the event such Founder Party has not transferred the Shares within said sixty (60) day period, such Founder Party shall not thereafter Transfer any Founder Shares without first offering such Shares to the Holders in the manner provided in Section 3.2
(a).

3.3

Co-Sale Rights of Holders.

(a)

Notwithstanding anything to the contrary set forth in Section
3.2, neither the Founder Party nor Permitted Transferee may Transfer any of the Founder Shares which have not been elected to be subscribed by the Holders pursuant to Section
3.2 until each of the Holders shall have been given the opportunity, exercisable within twenty (20) days from the date of the Holders Notice, to sell to the proposed purchaser or purchasers, upon the same terms and conditions offered to the Founder Parties or Permitted Transferee, up to such Holder’s Co-Sale Pro Rata Share of the Founder Shares proposed to be sold.
 

(b)

Holders who fail to notify the Founder Party or such Permitted Transferee within twenty (20) days after the Holders Notice shall be deemed to have waived their rights under this Section 3.3.  Any Transfer made pursuant to this Section 3.3
(b) shall be consummated within sixty (60) days of the end of the Notice Period and shall be conditioned upon the agreement of the proposed transferee that such proposed transferee will acquire from each Holder timely electing to participate in such Transfer pursuant to this Section 3.3, such Holder’s Co-Sale Pro Rata Share of the Founder Shares proposed to be sold.  

(c)

Each Holder shall effect its participation in the Transfer by promptly delivering to the Founder Party for Transfer to the prospective transferee one or more certificates, properly endorsed for transfer, which represent:

(i)

the number of shares of Common Stock which such Holder elects to sell; or
 

10

 

(ii)

that number of shares of Series A Preferred Stock that is at such time convertible into the number of shares of Common Stock that such Holder elects to sell; provided, however, that if the prospective transferee objects to the delivery of Series A Preferred Stock in lieu of Common Stock, such Holder shall convert such Series A Preferred Stock into Common Stock and deliver Common Stock as provided above.  The Company agrees to make any such conversion concurrent with the actual sale of such shares to the proposed purchaser.

(d)

The stock certificate or certificates that the Holder delivers to the Founder or such Permitted Transferee pursuant to Section 3.3
(c) shall be transferred to the prospective purchaser in consummation of the Transfer of the Founder Shares pursuant to the terms and conditions specified in the Holders Notice, and the Founder Party shall concurrently therewith remit to such Holder that portion of the sale proceeds to which such Holder is entitled by reason of its participation in such sale.  To the extent that any prospective transferee prohibits such assignment or otherwise refuses to acquire shares or other securities from a Holder exercising its rights of co-sale hereunder, the Founder Party shall not Transfer to such prospective transferees any Founder Shares unless and until, simultaneously with such Transfer, the Founder Party shall purchase such shares or other securities from such Holder.

3.4

Restrictions on Transfer of Series A Preferred Stock.  

(a)

Except the restrictions set forth in Section 3.4 (b) below or as required by law, the Series A Preferred Shares shall not subject to any transfer restriction or limitations.

(b)

If a Holder proposes to sell any Series A Preferred Shares in a private negotiated transaction to a third party whose main operation business, to the knowledge of such selling Holder, is the processing or sale of goat milk (such third party, a “Company’s Competitor”), such Holder shall first notify the Founders and give the Founders the right of first refusal to purchase all of Series A Preferred Shares offered to sale on the same terms as the Company’s Competitor.  The Holder shall have rights to proceed the proposed transfer if the Founders waive such right of first refusal, fail to accept the offer within twenty (20) days after such notice is given, or do not pay the purchase price in full within sixty (60) days after the Founder exercising the right of first refusal.
 

4

PRE-EMPTIVE RIGHTS

4.1

General.  Each Holder shall have a pre-emptive right to purchase up to such Holder’s Pre-emptive Pro Rata Share of any New Securities which the Company may, from time to time, propose to issue.  For purposes of this Section 4, Holder includes any Affiliates of a Holder.  A Holder shall be entitled to apportion the pre-emptive right hereby granted it among itself and its Affiliates in such proportions as it deems appropriate.

4.2

Exercise of Right.  By written notification received by the Company, within twenty (20) calendar days after receipt of the notice (the “Issuance Notice”), the Holder may elect to purchase or obtain, at the price and on the terms specified in the Issuance Notice, up to its Pre-emptive Pro Rata Shares of such New Securities.  The Company shall promptly, in writing, inform each Holder which purchases all the shares available to it (“Fully-Exercising Holder”) of any other Holder’s failure to do likewise.  During the ten (10) day period commencing after receipt of such information, each Fully-Exercising Holder shall be entitled to obtain that portion of the New Securities for which other Holders were entitled to subscribe but which were not subscribed for by such other Holders which is equal to the proportion that the number of shares of Common Stock issued and held, or issuable upon conversion of Series A Preferred Stock then held, by such Fully-Exercising Holder bears to the total number of shares of Common Stock issued and held, or issuable upon conversion of Series Preferred Stock then held, by all Fully-Exercising Holder who wish to purchase some of the unsubscribed New Securities.
 

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4.3

Sales by the Company.  In connection with any proposed issuance of New Securities, for sixty (60) days after the expiration of any period for exercise by the Holders hereto of their pre-emptive right and any right of over-allotment under this Section 4 in respect of such proposed issuance, the Company may sell any New Securities with respect to which the Holders have not exercised such rights, at a price and upon terms no more favorable than specified in the Issuance Notice so long as each purchaser of such New Securities who is not already a party to this Agreement shall have executed and delivered to each of the other parties hereto an instrument of accession joining this Agreement as a party in form and substance reasonably satisfactory to the Holders.  In the event the Company has not sold such New Securities within such 60-day period, the Company shall not thereafter issue or sell any New Securities, without first again offering such securities to the Holders in the manner provided in Section 4.2 above.
 

5

DRAG ALONG RIGHTS  

5.1

Rights to Require Compulsory Trade Sale.

(a)

Upon any Event of Default (as defined below), the Series A Majority Holders shall have the right to cause the Founder Parties to enter into a Trade Sale of any Group Company with a third party.  In furtherance of any forgoing compulsory Trade Sale, each of the Founder Parties shall (i) be present, in person or by proxy, as a holder of shares of voting Securities, at all meetings for the vote upon any such proposed Trade Sale (so as to be counted for the purposes of determining the presence of a quorum at such meetings); (ii) vote, or give his, her or its written consent with respect to, all Securities held by him, her or it in favor of such proposed Trade Sale and in opposition of any proposal that could reasonably be expected to delay or impair the consummation of any such proposed Trade Sale; (iii) refrain from exercising any dissenters’ rights or rights of appraisal under applicable law at any time with respect to or in connection with such proposed Trade Sale; and (iv) take all actions reasonably necessary to consummate the proposed Trade Sale, including without limitation amending the then existing Certificate of Incorporation of the Company.

(b)

For the purpose of Section 5.1 (a), any one of more of the following events shall occur or be continuing shall constitute an “Event of Default”:

(i)

any representation, warranty, certification or other statement made or deemed made by any of the Company Parties in any Transaction Document or in any statement or certificate at any time given by any of the Company Parties or their Representatives in writing, pursuant hereto or thereto or in connection herewith or therewith shall be false in any material respect as of the date made or deemed made;

(ii)

any Company Party shall default in the performance of or compliance with any material term contained herein or any of the other Transaction Document, and such default shall not have been remedied or waived within fourteen (14) days after the earlier of (i) the date upon which the Company Party had knowledge of such default and (ii) the date upon which written notice thereof is given to any of the Company Parties by a Holder;
 

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(iii)

the net loss of the Company on a consolidated basis in the 12-month period ended June 30, 2010 or any accumulated loss in any subsequent year exceeds US$9 million and the Company fails to deliver a business plan acceptable to the holders of a majority of the voting power of all then outstanding shares of Series A Preferred Stock;
 

(iv)

the Company is unable to, or fails to, convene a board meeting during any 6-month period or a stockholders’ meeting during any 18-month period; or
 

(v)

the Company fails to pay the Redemption Amount (as defined in the Certificate of Designation) within 12 months after the Redemption Date (as defined in the Certificate of Designation).

5.2

Rights in Tender Offers.  Subject to the terms of this Agreement, if stockholders of the Company shall receive an offer from a third party to purchase 50% or more of the issued and outstanding shares of capital stock of the Company, either for cash or for securities, and if such purchase and sale would not otherwise trigger a vote of the stockholders, then, if the Series A Majority Holders agree to participate in such purchase and sale, each of the Founder Parties shall agree to participate fully in such purchase and sale.

5.3

Delivery of Power of Attorney; Instrument of Transfers and Director Resignation Letters.  Each Party who holds Securities of the Company, upon joining this Agreement as a party, shall deliver to the Series A Majority Holders upon request (i) an instrument of transfer, duly executed in blank and in proper form to permit the disposition of all of the Securities of the Company it currently holds to a prospective purchaser, (ii) a limited power-in-attorney, in form and substance reasonably satisfactory to the Series A Majority Holders, authorizing the Representative of the Series A Majority Holders to effect the disposition of its equity interest in the Company to the prospective purchaser at the Trade Sale, and (iii) an executed and undated resignation letter from each director of any Group Companies nominated by such Party which resignation shall take effect immediately upon the consummation of the Trade Sale, in form and substance reasonably satisfactory to the Series A Majority Holders.
 

6

REGISTRATION RIGHTS

6.1

Demand Registration.

(a)

Registration.  Subject to the terms of this Section 6, at any time after the date of this Agreement, any Holders holding at least 20% or more in voting power of the then outstanding Registrable Securities (the “Initiating Holders”) may request the Company in writing to file a Registration Statement providing for the resale of the Registrable Securities that they hold for which the reasonably anticipated aggregate price to the public, net of Selling Expenses, would exceed US$500,000.  Such Registration Statement shall be on Form S-3 or Form F-3 (except if the Company is not then eligible to register the Registrable Securities on Form S-3 or Form F-3, such registration shall be on Form S-1 or Form F-1 or such other appropriate form in accordance herewith and the Securities Act and the rules promulgated thereunder).  Upon receipt of such a request, the Company shall (i) promptly (and in any event within 10 days) give written notice of the proposed Registration to all other Holders and (ii) uses its best efforts to file such Registration Statement within forty-five (45) days of the receipt of such request covering all Registrable Securities specified in the request, together with any Registrable Securities of any Holder who requests in writing to join such Registration within ten (10) days after the Company’s delivery of written notice.  The Company shall use its best efforts to cause such Registration Statement to be declared effective under the Securities Act as promptly as practicable after the filing thereof.  The Company shall be obligated to effect no more than two Registrations within any twelve-month period; provided if the sale of all of the Registrable Securities requested to be included pursuant to this Section 6.1
(a) is not consummated for any reason other than due to the action or inaction of the Holders including Registrable Securities in such Registration, such Registration shall not be deemed to constitute one Registration effected by the Company pursuant to this Section 6.1
(a).

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(b)

Limitations.  

(i)

The Company shall not be obligated to Register or qualify Registrable Securities pursuant to Section6.1
(a)  if, within ten (10) days of the receipt of any request of Initiating Holders to Register any Registrable Securities under Section 6.1
(a), The Company gives notice to such Initiating Holders of its bona fide intention to effect the filing for its own account of a Registration Statement with the Commission within sixty (60) days of receipt of that request (other than an Exempt Registration as defined below), provided that the Company is actively employing in good faith all reasonable efforts to cause that Registration Statement to become effective.

(ii)

The Company shall not be obligated to Register or qualify Registrable Securities pursuant to Section 6.1(a) if, after receiving a request from Initiating Holders pursuant to Section 6.1(a) hereof, the Board of the Company concludes in good faith, and upon the advice of legal counsel, that the filing of a Registration Statement under Section 6.1(a) would be materially detrimental to the Company and its stockholders in the near future because such action would (i) materially interfere with a significant acquisition, corporate reorganization, or other similar transaction involving the Company; (ii) require premature disclosure of material information that the Company has a bona fide business purpose for preserving as confidential; or (iii) render the Company unable to comply with requirements under the Securities Act or Exchange Act, and that, as a result, it is in the best interests of the Company and its stockholders to defer the filing of such registration statement at such time. If the Company furnishes to the Initiating Holders a certificate signed by the Chief Executive Officer of the Company to the foregoing effect, then the Company shall have the right to defer such filing for a period of not to exceed ninety (90) days from the receipt of any request duly submitted by Initiating Holders under Section 6.1
(a) to Register Registrable Securities; provided, however, that the Company shall not utilize this right more than once in any one-year period; and provided further that the Company shall not register any Securities for the account of itself or any other stockholder during such period (other than an Exempt Registration).
 

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(c)

Underwritten Offerings.  If, in connection with a request to Register Registrable Securities under Section 6.1
(a), the Initiating Holders seek to distribute such Registrable Securities in an underwriting, they shall so advise the Company as a part of the request, and the Company shall include such information in the written notice to the other Holders described in Section .  In such event, the right of any Holder to include its Registrable Securities in such Registration shall be conditioned upon such Holder’s participation in such underwriting and the inclusion of such Holder’s Registrable Securities in the underwriting (unless otherwise mutually agreed by the Majority Initiating Holders) to the extent provided herein.  All Holders proposing to distribute their Securities through such underwriting shall enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting by the Company (which underwriter or underwriters shall be reasonably acceptable to the Majority Initiating Holders).  Notwithstanding any other provision of this Agreement, if the managing underwriter advises the Company that market factors (including the aggregate number of securities requested to be Registered, the general condition of the market, and the status of the Persons proposing to sell Securities pursuant to the Registration) require a limitation of the number of Registrable Securities to be underwritten, the underwriters may exclude such number of Registrable Securities from the underwriting as required, but only after excluding all other Securities from the underwriting (including, without limitation, any Securities which the Company may seek to include in the underwriting for its own account).  If a limitation of the number of Registrable Securities is required pursuant to this Section 6.1
(c), the number of Registrable Securities that may be included in the underwriting by selling Holders shall be allocated among such Holders, in proportion, as nearly as practicable, to the respective amounts of Registrable Securities which the Holders request to include in the Registration.  Any Registrable Securities excluded or withdrawn from such underwriting shall be withdrawn from the Registration.
 

6.2

Piggyback Registrations.

(a)

Registration of Company’s Securities.  Subject to Section 6.2
(c), if the Company proposes to Register for its own account or the account of any other stockholders any of its Securities in connection with the public offering of such Securities, the Company shall promptly give each Holder written notice of such Registration and, upon the written request of any Holder given within twenty (20) days after delivery of such notice, the Company shall include in such Registration any Registrable Securities thereby requested by such Holder.  If a Holder decides not to include all or any of its Registrable Securities in such Registration by the Company, such Holder shall nevertheless continue to have the right to include any Registrable Securities in any subsequent Registration Statement or Registration Statements as may be filed by the Company with respect to offerings of its Securities, all upon the terms and conditions set forth herein.

(b)

Right to Terminate Registration.  The Company shall have the right to terminate or withdraw any Registration initiated by it under Section 6.2
(a) prior to the effectiveness of such Registration, whether or not any Holder has elected to participate therein.  The expenses of such withdrawn Registration shall be borne by the Company in accordance with Section 6.4.

(c)

Underwriting Requirements.  In connection with any offering involving an underwriting of the Company’s Securities, the Company shall not be required to Register the Registrable Securities of a Holder under this Section 6.2 unless such Holder shall include such Registrable Securities in the underwriting and such Holder enters into an underwriting agreement in customary form with the underwriters selected by the Company (which underwriter or underwriters shall be reasonably acceptable to the Holders) and setting forth such terms for the underwriting as have been agreed upon between the Company and the underwriters.  In the event the underwriters advise Holders seeking Registration of Registrable Securities in writing that market factors (including the aggregate number of Registrable Securities requested to be Registered, the general condition of the market, and the status of the Persons proposing to sell Securities pursuant to the Registration) require a limitation of the number of Registrable Securities to be underwritten, the underwriters may exclude some or all Registrable Securities from the Registration and underwriting, but only after excluding all other Securities from the underwriting (other than any Securities which the Company may seek to include in the underwriting for its own account) (provided that, notwithstanding anything to the contrary in this section, in no event shall, after such exclusion, the Registrable Securities included in the underwriting would constitute less than 25% of the total Securities proposed to be sold in the offering), and the number of Securities and Registrable Securities that may be included in the Registration and the underwriting shall be allocated (i) first, to the Company, (ii) thereafter, among the Holders requesting inclusion of their Registrable Securities in such Registration Statement in proportion, as nearly as practicable, to the respective amounts of Registrable Securities which the Holders would otherwise be entitled to include in the Registration, and (iii) finally to any other stockholders entitled to include Securities in such Registration Statement.

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(d)

Exempt Transactions.  The Company shall have no obligation to Register any Registrable Securities under this Section 6.2 in connection with a Registration by the Company (i) relating solely to the sale of securities to participants in accordance with a Benefits Plan, or (ii) relating to a corporate reorganization or other transaction under Rule 145 of the Securities Act (collectively, “Exempt Registrations”).

6.3

Procedures.

(a)

Registration Procedures and Obligations.  Whenever required under this Section 6 to effect the Registration of any Registrable Securities held by the Holders, the Company shall, as expeditiously as reasonably possible:

(i)

Prepare and file with the Commission a Registration Statement with respect to those Registrable Securities and if applicable, cause that Registration Statement to become effective and remain continuously effective until the date on which all such Registrable Securities have been sold pursuant to the Registration Statement;

(ii)

Prepare and file with the Commission amendments and supplements to that Registration Statement and the prospectus used in connection with the Registration Statement as may be necessary to comply with the provisions of Applicable Securities Law with respect to the disposition of all Registrable Securities covered by the Registration Statement;

(iii)

Furnish to the Holders the number of copies of a prospectus, including a preliminary prospectus, required by Applicable Securities Law, and any other documents as they may reasonably request in order to facilitate the disposition of Registrable Securities owned by them;

(iv)

Use its reasonable best efforts to Register and qualify the Registrable Securities covered by the Registration Statement under the securities laws of any jurisdiction, as reasonably requested by the Holders, provided that the Company shall not be required to qualify to do business or file a general consent to service of process in any such jurisdiction;

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(v)

In the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter of the offering;

(vi)

Notify each Holder of Registrable Securities covered by the Registration Statement at any time when a prospectus relating thereto is required to be delivered under Applicable Securities Law or of the happening of any event as a result of which any prospectus included in the Registration Statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing;

(vii)

Provide a transfer agent and registrar for all Registrable Securities Registered pursuant to the Registration Statement and, where applicable, a CUSIP number for all those Registrable Securities, in each case not later than the effective date of the Registration;
 

(viii)

Use its commercially best efforts to furnish, at the request of any Holder requesting Registration of Registrable Securities, on the date that such Registrable Securities are delivered for sale in connection with a Registration, (i) an opinion, dated the date of the sale, of the counsel representing the Company for the purposes of the Registration, in form and substance as is customarily given to underwriters in an underwritten public offering; and (ii) a comfort letter dated the date of the sale, from the independent certified public accountants of the Company, in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering, addressed to the underwriters; and

(ix)

Take all reasonable action necessary to list the Registrable Securities on the stock exchange upon which the shares of Company’s Common Stock are traded.

(b)

Information From Holder.  It shall be a condition precedent to the obligations of the Company to take any action pursuant to Section 6.1 or Section 6.2 with respect to the Registrable Securities of any selling Holder that such Holder shall furnish to the Company such information regarding itself, the Registrable Securities held by it, and the intended method of disposition of such Registrable Securities as shall be required to effect the Registration of such Holder’s Registrable Securities.

6.4

Expenses of Registration.  All expenses, other than Selling Expenses, incurred in connection with Registrations, filings or qualifications pursuant to this Section 6, including (without limitation) all registration, filing and qualification fees, printers’ and accounting fees, fees and disbursements of counsel for the Company, any selling Holders and underwriters, shall be borne by the Company.  The Company shall not, however, be required to pay for any expenses of any Registration proceeding begun pursuant to Section 6.1
(a) if the Registration request is subsequently withdrawn at the request of the Majority Initiating Holders (in which case all participating Holders shall bear such expenses pro rata based upon the number of Registrable Securities that were to be thereby Registered in the withdrawn Registration); provided, however, that if at the time of such withdrawal, the Holders have learned of a material adverse change in the condition, business or prospects of the Company from that known to the Holders at the time of their request and have withdrawn the request with reasonable promptness following disclosure by the Company of such material adverse change, then the Holders shall not be required to pay any of such expenses.  All Selling Expenses shall be borne by the holders of the Securities Registered pro rata on the basis of the number of shares Registered.
 

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6.5

Indemnification.

(a)

Company Indemnity.  

(i)

To the extent permitted by applicable law, the Company will indemnify and hold harmless each Holder, such Holder’s officers, directors, shareholders, stockholders, limited partner, general partner, legal counsel, and any underwriter (as defined in the Securities Act) for such Holder and each Person, if any, who controls (as defined in the Securities Act) such Holder or underwriter against any losses, claims, damages or liabilities (joint or several) to which they may become subject under Applicable Securities Laws, or any rule or regulation promulgated under Applicable Securities Laws, insofar as such losses, claims, damages, or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (each a “Violation”):  (i) any untrue statement or alleged untrue statement of a material fact contained in the applicable Registration Statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, (ii) the omission or alleged omission to state in the Registration Statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, a material fact required to be stated therein or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by the Company of Applicable Securities Laws, or any rule or regulation promulgated under Applicable Securities Laws.  The Company will reimburse each such Holder, underwriter or controlling Person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action.

(ii)

The indemnity agreement contained in Section 6.5 (a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld or delayed), nor shall the Company be liable in any such case for any such loss, claim, damage, liability or action to the extent that it arises out of or is based upon a Violation that occurs in sole reliance upon and in full conformity with written information furnished expressly for use in the Registration Statement by any such Holder, underwriter or controlling Person.

(iii)

With respect to any preliminary prospectus, the foregoing indemnity shall not inure to the benefit of any Holder or underwriter, or any Person controlling (within the meaning of the Securities Act) such Holder or underwriter, from whom a Person asserting any losses, claims, damages or liabilities purchased shares in the offering, if a copy of the prospectus (as then amended or supplemented if the Company shall have furnished any amendments or supplements thereto) was not sent or given by or on behalf of such Holder or underwriter to such Person, if required by applicable law so to have been delivered, at or prior to the written confirmation of the sale of the shares to such Person, and if the prospectus (as so amended or supplemented) would have cured the defect giving rise to such loss, claim, damage or liability.

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(b)

Holder Indemnity.  

(i)

To the extent permitted by applicable law, each selling Holder that has included Registrable Securities in a Registration will, severally and not jointly, indemnify and hold harmless the Company, its directors, officers, legal counsel, any underwriter, any other Holder selling Registrable Securities in connection with such Registration and each Person, if any, who controls (within the meaning of the Securities Act) the Company, such underwriter or other Holder, against any losses, claims, damages or liabilities (joint or several) to which any of the foregoing Persons may become subject, under Applicable Securities Laws, or any rule or regulation promulgated under Applicable Securities Laws, insofar as such losses, claims, damages or liabilities (or actions in respect thereto) solely arise out of or are solely based upon any Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in full conformity with written information furnished by such Holder expressly for use in connection with such Registration.  

(ii)

The indemnity contained in this Section 6.5 (b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Holder (which consent shall not be unreasonably withheld).

(iii)

In no event shall any indemnity under this Section 6.5
(b) exceed the net proceeds from the offering received by such Holder.

(c)

Notice of Indemnification Claim.  Promptly after receipt by an indemnified party under Section 6.5
(a) or Section 6.5 (b) of notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under Section 6.5
(a) or Section 6.5 (b), deliver to the indemnifying party a written notice of the commencement thereof, and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the parties.  

(d)

Contribution.  If any indemnification provided for in Section 6.5
(a) or Section 6.5 (b) is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, liability, claim, damage or expense referred to herein, the indemnifying party, in lieu of indemnifying such indemnified party hereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such loss, liability, claim, damage or expense in such proportion as is appropriate to reflect the relative fault of the indemnifying party, on the one hand, and of the indemnified party, on the other, in connection with the statements or omissions that resulted in such loss, liability, claim, damage or expense, as well as any other relevant equitable considerations.
 

(e)

Underwriting Agreement.  To the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into in connection with the underwritten public offering are in conflict with the foregoing provisions, the provisions in the underwriting agreement shall control.

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(f)

Survival.  The obligations of the Company and Holders under this Section 6.5 shall survive the completion of any offering of Registrable Securities in a Registration Statement under this section.

6.6

Additional Undertakings.

(a)

Reports Under the Exchange Act.  With a view to making available to the Holders the benefits of Rule 144 promulgated under the Securities Act and any comparable provision of any Applicable Securities Law that may at any time permit a Holder to sell Securities of the Company to the public without Registration or pursuant to a Registration on Form S-3 or Form F-3 as the case may be, the Company agrees to:

(i)

make and keep public information available, as those terms are understood and defined in Commission Rule 144, at all times;

(ii)

file with the Commission in a timely manner all reports and other documents required of the Company under all Applicable Securities Laws; and

(iii)

promptly furnish to any Holder holding Registrable Securities, upon request (i) a written statement by the Company that it has complied with the reporting requirements of all Applicable Securities Laws at any time after it has become subject to such reporting requirements or, at any time after so qualified, that it qualifies as a registrant whose Securities may be resold pursuant to Form S-3 or F-3 (or any successor form thereto), (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents as may be filed by the Company with the Commission, and (iii) such other information as may be reasonably requested in availing any Holder of any rule or regulation of the Commission, that permits the selling of any such Securities without Registration or pursuant to Form F-3 (or any successor form thereto).
 

(b)

Limitations on Subsequent Registration Rights.  From and after the date of this Agreement, the Company shall not, without the prior written consent of the Majority Holders, enter into any agreement with any holder or prospective holder of any Securities of the Company that would allow such holder or prospective holder (i) to include such Securities in any Registration filed under Section 6.1 or Section 6.2, unless under the terms of such agreement such holder or prospective holder may include such Securities in any such Registration only to the extent that the inclusion of such Securities will not reduce the amount of the Registrable Securities of the Holders that are included, (ii) to demand Registration of their Securities, or (iii) cause the Company to include such Securities in any Registration filed pursuant to the terms hereof on a basis pari passu with or more favorable to such holder or prospective holder than is provided to the Holders.

(c)

Termination of Registration Rights.  No Holder shall be entitled to exercise any right provided for in this Section 6 at such time in which all Registrable Securities held by such Holder (together with any Affiliate of the Holder with whom such Holder must aggregate its sales under Rule 144) can be sold in a single transaction without restriction in compliance with Rule 144.
 

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(d)

Assignment of Registration Rights.  The right to cause the Company to Register Registrable Securities pursuant to this Agreement may be assigned by any Holder to a transferee or assignee of such Registrable Securities, provided that: (a) the Company is, within a reasonable time after such transfer, furnished with written notice of the name and address of such transferee or assignee and the Registrable Securities with respect to which such registration rights are being assigned; (b) such transferee or assignee agrees in writing to be bound by and subject to the terms and conditions of this Section 6; and (c) such transfer or assignment shall be effective only if immediately following such transfer or assignment the further disposition of such Registrable Securities by the transferee or assignee is restricted under Applicable Securities Law.  In the event of a transfer or assignment of Registrable Securities which does not satisfy the conditions set forth above, such Registrable Securities shall no longer be deemed to constitute “Registrable Securities” for purposes of this Agreement.

6.7

Damages.

(a)

Damages.  If any of the following events (each, an “Event”) shall occur and be continuing, then for each thirty (30) calendar day period commencing on the date of the Event until the applicable Event is cured, the Company shall pay to each Holder who properly requested registration of its Registrable Securities under this Agreement, in addition to any other rights or remedies that the Holder may have hereunder or under applicable law, as partial damages and not as a penalty, cash in an amount equal to 1.0% of the aggregate purchase price paid by such Holder for the subject Registrable Securities (it being understood that damages pursuant to the terms hereof shall apply on a daily pro rata basis for any portion of any thirty (30) calendar day period prior to the cure of an Event):
 

(i)

a Registration Statement covering the resale of Registrable Securities is not filed with the Commission within the time specified therefor in Section 6.1 hereof;

(ii)

after a Registration Statement has initially been declared effective, such Registration Statement is not continuously effective; or

(iii)

the Registrable Shares may not be sold pursuant to Rule 144 because the Company does not meet the current public information condition of Rule 144.

(b)

Reasonable Estimate.  The parties to this Agreement agree that the Holders may suffer damages in the event that an Event has occurred and is continuing, and that it would not be possible to ascertain the amount of such damages.  The parties to this Agreement further agree that the damages provided for in this Section 6.7 constitute a reasonable estimate of the damages that may be incurred by the Holders by reason of an Event.

7

ADDITIONAL UNDERTAKINGS  

7.1

Qualified Listing.  The Founders and the Company shall use their best efforts to accomplish a Qualified Listing within three (3) years following the date of this Agreement.
 

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7.2

Series A Preferred Stock Lock-up Period.  The Company and the Founders shall use their best efforts to shorten the lock-up period that apply to shares of the Series A Preferred Stock in connection with any public offering of the Company’s securities.

7.3

Investor Favorable Terms.  Should the Company complete a future financing with terms more favorable (“Investor Favorable Terms”) to any investors than the terms provided to the Investors in connection with the issuance of the Series A Preferred Stock, the Investor shall have the right to receive such Investor Favorable Terms and have them apply to the Series A Preferred Stock and the purchase thereof.  

7.4

ESOP.  

(a)

As soon as practicable following the Closing, the Company shall duly establish an equity incentive plan (the “ESOP”) in the form and substance reasonably satisfactory to the Series A Majority Holders providing for the issuance of such number of shares of Common Stock representing no more than 5% of the then total outstanding share capital of the Company on a fully diluted basis to employees, officers, consultants or directors of the Group Companies from time to time.  In addition, such ESOP should provide that (i) with respect to a particular award under the ESOP, no more than 25% shall vest upon the first anniversary of the grant of such award and thereafter shall not vest any faster than monthly over the next three (3) years following the first anniversary of such grant; (ii) unvested options will terminate, and unvested shares will be subject to a repurchase right at cost, in any case on termination of the employment or other service, with or without cause; and (iii) any individual who owns more than 5% of the shares of Common Stock prior to the Closing shall not be entitled to any grants under the ESOP; in each case, except otherwise approved or waived by the Board (which approval or waiver must include the affirmative vote of at least one (1) Investor Director).

(b)

Among the shares of Common Shares reserved for ESOP, the Company shall allocate a number of shares of Common Stock equal to 1.5% of post-Closing total number of fully-diluted shares as options to the Investor Directors, which option shall be vested immediately upon issuance and at an exercise price equal to the then effective Conversion Price (as defined in the Certificate of Designation), as adjusted pursuant to any anti-dilution protection that shares of Series A Preferred Stock may be entitled to.

7.5

Insurance.  If requested by the Series A Majority Holders, the Group Company shall promptly purchase and maintain in effect, worker’s injury compensation insurance, key man insurance (such key-man insurance should cover the Chairman and the Chief Executive Officer of the Company in an amount not less than US$1 million, naming the Company as beneficiary), and other insurance with respect to the Group’s properties, employees, products, operations, and/or business, each in the amounts not less than that are customarily obtained by companies of similar size, in a similar line of business, and with operations in the PRC.
 

7.6

Internal Control System.  Each Group Company shall maintain the books and records in accordance with sound business practices and implement and maintain an adequate system of procedures and controls with respect to finance, management, and accounting that meets international standard of good practice and is reasonably satisfactory to Series A Majority Holders.

22

 

7.7

Board Activities.  As soon as practicable, the Company shall designate a secretary of the board of director (the “Board Secretary”) to administer all stockholders and Board meetings.  The Board Secretary shall ensure (i) proper notification and adequate meeting materials are provided for directors and stockholders’ meetings and (ii) accurate minutes of meetings are taken and available for directors comments and approval within five(5) business days after the meeting.  Furthermore, the Company shall reimburse the Investor all expenses relating to any Board activities, including but not limited to, attending the Board meetings by the Investor Director and/or its representatives.

7.8

Director Indemnification.  To the maximum extent permitted by the law of the jurisdiction in which the Company is organized, the Company shall indemnify and hold harmless the Investor Directors and shall enter into the indemnification agreement with any Investor Director and comply with the terms of such director indemnification agreements.  At the request of any Investor, the Company shall obtain and maintain customary directors and officers insurance coverage for the Investor Directors.

7.9

U.S. Tax Matters.  

(a)

The Company will comply and will cause its Subsidiaries to comply with all record-keeping, reporting, and other requests necessary for the Company and its Subsidiaries to comply with any applicable U.S. tax law or to allow the Investor and any direct or indirect equity holders of the Investor that are United States persons for United States federal income tax purposes (the “Investor U.S. Equity Holders”) to comply with all applicable provisions of U.S. tax law.  The Company will, upon request, also provide the Investor and the Investor U.S. Equity Holders with any information to allow such Investor or Investor Equity Holders to comply with U.S. tax law or to avail itself of any provision of U.S. tax law.

(b)

The Company acknowledges that the U.S. income tax consequences to the Investor and the Investor U.S. Equity Holders of the investment in the Company will be significantly affected by whether the Company and/or any of the entities in which it owns an equity interest at any time is (i) a “passive foreign investment company” (within the meaning of Section 1297 of the U.S. Internal Revenue Code of 1986, as amended) (a “PFIC”) or (ii) classified as a partnership or a branch for U.S. federal income tax purposes.

(c)

The Company shall determine annually, with respect to its taxable year (i) whether the Company is or may become a PFIC (including whether any exception to PFIC status may apply) or whether the Company or any of its Subsidiaries is  or may be classified as a partnership or branch for U.S. federal income tax purposes and notify the Investor of its finding.  If the Company is or may become a PFIC, it will (i) determine with respect to each taxable year whether each of the entities in which the Company owns or proposes to acquire an equity interest (directly or indirectly) is or may become a PFIC and, (ii) upon request from the Investor or any of the Investor U.S. Equity Holders, provide such information as the Investor and any of the Investor U.S. Equity Holders may request to permit them to elect to treat the Company and/or any such entity as a “qualified electing fund” (within the meaning of Section 1295 of the U.S. Internal Revenue Code of 1986, as amended) for U.S. federal income tax purposes. The Company shall also obtain and provide reasonably promptly upon request any and all other information deemed necessary by the Investor and the Investor U.S. Equity Holders to comply with the provisions of this agreement, including English translations of any information requested.

23

 

(d)

The Company shall, if requested by the Investor or any the Investor U.S. Equity Holders, cooperate in determining whether it would be desirable, reasonable and appropriate for the Company and/or any of its Subsidiaries to elect to be classified as a partnership or branch for U.S. federal income tax purposes and, if so, to take all reasonable steps to cause any such elections to be made.

(e)

The Company shall provide to the Investor within 45 days following the end of the Company’s taxable year for which the Company was (or may have been) a PFIC, a complete and accurate “PFIC Annual Information Statement,” in the form of Appendix A attached hereto, as applicable, for the Company and for each Subsidiary that was a PFIC for such taxable year and in which the Company owns an equity interest at any time during such year.

8

MISCELLANEOUS

8.1

No Third Party Beneficiaries.  This Agreement and the rights and obligations of the Parties hereunder shall inure to the benefit of, and be binding upon, their respective successors, assigns and legal representatives.  Except as otherwise provided herein, nothing in this Agreement is intended to confer upon any Person other than the Parties hereto and their respective successors and permitted assigns any rights, benefits, or obligations hereunder.
 

8.2

Governing Law.  This Agreement shall be governed by, and construed in accordance with, the Laws of the State of New York, the United States of America.

8.3

Dispute Resolution.  

(a)

Any dispute, controversy or claim (each, a “Dispute”) arising out of or relating to this Agreement, or the interpretation, breach, termination, validity or invalidity thereof, shall be referred to arbitration upon the demand of either party to the Dispute with notice (the “Arbitration Notice”) to the other.

(b)

The Dispute shall be settled by arbitration in Hong Kong by the Hong Kong International Arbitration Centre (the “HKIAC”) in accordance with the Hong Kong International Arbitration Centre Administered Arbitration Rules (the “HKIAC Rules”) in force when the Arbitration Notice is submitted in accordance with the HKIAC Rules.  There shall be three (3) arbitrators.  The HKIAC Council shall select the presiding arbitrator, who shall be qualified to practice law in the State of New York, the United States of America.  

(c)

The arbitral proceedings shall be conducted in English.  To the extent that the HKIAC Rules are in conflict with the provisions of this Section 8.3, including the provisions concerning the appointment of the arbitrators, the provisions of this Section 8.3 shall prevail.

(d)

Each party to the arbitration shall cooperate with each other party to the arbitration in making full disclosure of and providing complete access to all information and documents requested by such other party in connection with such arbitral proceedings, subject only to any confidentiality obligations binding on such party.

24

 

(e)

The award of the arbitral tribunal shall be final and binding upon the parties thereto, and the prevailing party may apply to a court of competent jurisdiction for enforcement of such award.

(f)

The arbitral tribunal shall decide any Dispute submitted by the parties to the arbitration strictly in accordance with the substantive Law of the State of New York, the United States of America and shall not apply any other substantive Law.

(g)

Any party to the Dispute shall be entitled to seek preliminary injunctive relief, if possible, from any court of competent jurisdiction pending the constitution of the arbitral tribunal.

(h)

During the course of the arbitral tribunal’s adjudication of the Dispute, this Agreement shall continue to be performed except with respect to the part in dispute and under adjudication.

(i)

The Parties to this Agreement agree to the consolidation of arbitrations under the Transaction Documents in accordance with the following:
 

(i)

In the event of two or more arbitrations having been commenced under any of the Transaction Documents, the tribunal in the arbitration first filed (the “Principal Tribunal”) may in its sole discretion, upon the application of any party to the arbitrations, order that the proceedings be consolidated before the Principal Tribunal if (A) there are issues of fact and/or law common to the arbitrations, (B) the interests of justice and efficiency would be served by such a consolidation, and (C) no prejudice would be caused to any party in any material respect as a result of such consolidation, whether through undue delay or otherwise.  Such application shall be made as soon as practicable and the party making such application shall give notice to the other parties to the arbitrations.  

(ii)

The Principal Tribunal shall be empowered to (but shall not be obliged to) order at its discretion, after inviting written (and where desired oral) representations from the parties that all or any of such arbitrations shall be consolidated or heard together and/or that the arbitrations be heard immediately after another and shall establish a procedure accordingly.  All Parties shall take such steps as are necessary to give effect and force to any orders of the Principal Tribunal.

(iii)

If the Principal Tribunal makes an order for consolidation, it: (A) shall thereafter, to the exclusion of other arbitral tribunals, have jurisdiction to resolve all disputes forming part of the consolidation order; (B) shall order that notice of the consolidation order and its effect be given immediately to any arbitrators already appointed in relation to the disputes that were consolidated under the consolidation order; and (C) may also give such directions as it considers appropriate (a) to give effect to the consolidation and make provision for any costs which may result from it (including costs in any arbitration rendered functus officio under this Section 8.3); and (b) to ensure the proper organization of the arbitration proceedings and that all the issues between the parties are properly formulated and resolved.

(iv)

Upon the making of the consolidation order, any appointment of arbitrators relating to arbitrations that have been consolidated by the Principal Tribunal (except for the appointment of the arbitrators of the Principal Tribunal itself) shall for all purposes cease to have effect and such arbitrators are deemed to be functus officio, on and from the date of the consolidation order.  Such cessation is without prejudice to (A) the validity of any acts done or orders made by such arbitrators before termination, (B) such arbitrators’ entitlement to be paid their proper fees and disbursements and (C) the date when any claim or defence was raised for the purpose of applying any limitation period or any like rule or provision.  

25

 

(v)

The Parties hereby waive any objections they may have as to the validity and/or enforcement of any arbitral awards made by the Principal Tribunal following the consolidation of disputes or arbitral proceedings in accordance with this Section 8.3 where such objections are based solely on the fact that consolidation of the same has occurred.
 

8.4

Amendments.  Except as otherwise permitted herein, this Agreement and its provisions may be amended, changed, waived, discharged or terminated only by a writing signed by each of (i) the Company, (ii) the Series A Majority Holders, and (iii) stockholders representing more than 75% in voting power of the Company’s issued and outstanding shares of Common Stock held by Parties hereto on a fully diluted and as converted basis.
 

8.5

Notices.  Any notice required or permitted pursuant to this Agreement shall be given in writing and shall be given either personally or by sending it by next-day or second-day courier service of international standing, fax, electronic mail or similar means to the address as shown below the signature of such Party on the signature page of this Agreement (or at such other address as such Party may designate by fifteen (15) days’ advance written notice to the other Parties to this Agreement given in accordance with this Section 8.5).  Where a notice is sent by next-day or second-day courier service, service of the notice shall be deemed to be effected by properly addressing, pre-paying and sending by next-day or second-day service through an internationally-recognized courier a letter containing the notice, with a confirmation of delivery, and to have been effected at the earlier of (i) receipt (or when delivery is refused) and (ii) expiration of two (2) Business Days after the letter containing the same is sent as aforesaid.  Where a notice is sent by fax or electronic mail, service of the notice shall be deemed to be effected by properly addressing, and sending such notice through a transmitting organization, with a written confirmation of delivery, and to have been effected on the day the same is sent as aforesaid.
 

8.6

Further Assurances.  Each Party hereto shall do and perform, or cause to be done and performed, all such further acts and things and shall execute and deliver all such other agreements, certificates, written assurances, instruments and documents as any other Party may reasonably request to give effect to the terms and intent of this Agreement.  No Party will, by any voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be performed hereunder by it, and each Party will at all times in good faith assist and take action as appropriate in the carrying out of all of the provisions of this Agreement.

8.7

Charter Documents.  In the event of any conflict or inconsistency between any of the terms of this Agreement and any of the terms of the Charter Documents for any of the Group Companies, the terms of this Agreement shall prevail, and accordingly, the Parties hereto shall exercise all voting and other rights and powers to procure any required alteration to such Charter Documents to resolve such conflict or inconsistency.  Each Party hereto agrees that it shall not enter into any other agreements or arrangements of any kind with respect to the voting of any Securities of the Company or deposit any Securities in other voting trust or similar arrangement.
 

26

 

8.8

Entire Agreement.  This Agreement constitutes the entire agreement between the Parties with respect to the subject matter hereof and supersedes all prior written or oral understandings or agreements with respect to the subject matter hereof.

8.9

Severability.  If any provision of this Agreement is prohibited by applicable Law or otherwise determined to be invalid or unenforceable by a court of competent jurisdiction, the provision that would otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the broadest extent that it would be valid and enforceable, and the invalidity or unenforceability of such provision shall not affect the validity of the remaining provisions of this Agreement so long as this Agreement as so modified continues to express, without material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity or unenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations of the parties or the practical realization of the benefits that would otherwise be conferred upon the parties.  The Parties will endeavor in good faith negotiations to replace the prohibited, invalid or unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceable provision(s).
 

8.10

Remedies Cumulative.  Each and all of the various rights, powers and remedies of a Party hereto will be considered to be cumulative with and in addition to any other rights, powers and remedies which such Party may have at law or in equity in the event of the breach of any of the terms of this Agreement.  The exercise or partial exercise of any right, power or remedy will neither constitute the exclusive election thereof nor the waiver of any other right, power or remedy available to such Party.

8.11

No Presumption.  The Parties agree that this Agreement was jointly drafted by them, that each has been represented by counsel in connection with this Agreement, and that any applicable Law that would require interpretation of any claimed ambiguities in this Agreement against the Party that drafted it has no application and is expressly waived.  If any claim is made by a Party relating to any conflict, omission or ambiguity in the provisions of this Agreement, no presumption or burden of proof or persuasion will be implied because this Agreement was prepared by or at the request of any Party or its counsel, and no Party will claim or assert otherwise.

8.12

Aggregation of Shares.  All Securities of the Company held or acquired by Affiliates of an Investor shall be aggregated for purposed of determining the availability of any rights under this Agreement.

8.13

No Waiver.  Failure to insist upon strict compliance with any of the terms, covenants, or conditions hereof will not be deemed a waiver of such term, covenant, or condition, nor will any waiver or relinquishment of, or failure to insist upon strict compliance with, any right, power or remedy power hereunder at any one or more times be deemed a waiver or relinquishment of such right, power or remedy at any other time or times.

27

 

8.14

Counterparts.  This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

 [The remainder of this page has been left intentionally blank.]

 28

 

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

	 	
  
  COMPANY:

Yayi International Inc.,

a Delaware company

By:

/s/ Li LIU

Name:

Li LIU

Title:

Chief Executive Officer and President

Address:

c/o Tianjin Yayi Industrial Co., Ltd., No. 9 Xingguang Road, 

Northern Industrial Park of Zhongbei Town, Xiqing District, Tianjin 300384, China
 

Fax:

+86 (22) 2798-4358

Tel:

+86 (22) 2798-4033

Attention:

Ms. Li LIU, Chief Executive Officer and President

SIGNATURE PAGE TO INVESTOR RIGHTS AGREEMENT

 

 

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

	 	
  
  GLOBAL ROCK:

Global Rock Stone Industrial Ltd,  

a British Virgin Islands company

By:  

/s/ Fung SHEK

Name:

Fung SHEK

Title:

Director

Address:

c/o Tianjin Yayi Industrial Co., Ltd., No. 9 Xingguang Road, 

Northern Industrial Park of Zhongbei Town, Xiqing District, Tianjin 300384, China

Fax:

+86 (22) 2798-4358

Tel:

+86 (22) 2798-4033

Attention:

Mr. Fung SHEK

SIGNATURE PAGE TO INVESTOR RIGHTS AGREEMENT

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

	 	
  
  FOUNDERS:

By:  

/s/ Li LIU

Name:

Li LIU (刘丽)

Address:

c/o Tianjin Yayi Industrial Co., Ltd., No. 9 Xingguang Road, 

Northern Industrial Park of Zhongbei Town, Xiqing District, Tianjin 300384, China

Fax:

+86 (22) 2798-4358

Tel:

+86 (22) 2798-4033

	 	
  
  

By:  

/s/ Fung SHEK

Name:

Fung SHEK (石峰)

Address:

c/o Tianjin Yayi Industrial Co., Ltd., No. 9 Xingguang Road, 

Northern Industrial Park of Zhongbei Town, Xiqing District, Tianjin 300384, China

Fax:

+86 (22) 2798-4358

Tel:

+86 (22) 2798-4033

SIGNATURE PAGE TO INVESTOR RIGHTS AGREEMENT

 

 

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

	 	
  
  INVESTOR:

SAIF Partners III L.P.,  

a Cayman Islands exempted limited partnership

By:

/s/ Andrew Y. Yan

Name:

Andrew. Y. Yan

Title:

Authorized Signatory

For and on behalf of

SAIF Partners III L.P.

Acting by its general partner

SAIF III GP L.P.

In turn acting by its general partner

SAIF III GP Capital Ltd

Address:

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

Tel:

+86 (10) 6563-0357

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

Tel:

+852 2918-2214

SIGNATURE PAGE TO INVESTOR RIGHTS AGREEMENT

 

SCHEDULE I

SCHEDULE OF FOUNDERS

	
  
  Founder Name

	
  
  I.D./Passport Numbers

	
  
  Li LIU (刘丽)

	
  
  120104195905017327 (PRC ID Card Number)

	
  
  Fung SHEK (石峰)

	
  
  E750805(4) (Hong Kong ID Card Number)

 

APPENDIX A

PFIC ANNUAL INFORMATION STATEMENT

PFIC Annual Information Statement pursuant to U.S. Treasury Regulation § 1.1295-1(g).

____________________________________ (the “Company”) hereby represents that:

1.

This PFIC Annual Information Statement applies to the Company’s taxable year beginning on ____________ and ending on _____________.

2.

The pro rata shares of the Company’s ordinary earnings and net capital gain attributable to the U.S. Shareholder (directly or indirectly through any other entity that holds the investment in the Company) for the taxable year specified in paragraph (1) are:

Ordinary Earnings:  

U.S.$ ____________________  

Net Capital Gains:

U.S.$ ____________________  

3.

The amount of cash and the fair market value of other property distributed or deemed distributed by the Company to the U.S. Shareholder during the taxable year specified in paragraph (1) are as follows:

Cash: U.S.$____________________________________  

Fair Market Value of Property: U.S.$________________  

4.

The Company will permit the U.S. Shareholder to inspect and copy the Company’s permanent books of account, records, and such other documents as may be maintained by the Company that are necessary to establish that the Company’s ordinary earnings and net capital gain are computed in accordance with US Federal income tax principles, and to verify these amounts and the U.S. Shareholders direct or indirect pro rata shares thereof.

By:

___________________________  

Title:

Date:

[Must be signed by an authorized representative of the Company]Yayi International Inc.: Exhibit 10.1 - Prepared by TNT Filings Inc.

Exhibit 10.1

EXECUTION VERSION

YAYI INTERNATIONAL INC. 

SERIES A PREFERRED
STOCK

PURCHASE AGREEMENT 

Dated as of June 18, 2009

 

	  TABLE OF CONTENTS 
  
	  	  	  	  
	  	  	  	  
	  	  	  	Page 
	  	  	  	  
	1. 	DEFINITIONS.
    	1 
	  	  	  	  
	2. 	PURCHASE AND SALE
      OF THE SHARES. 	9 
	  	2.1 	Sale and Issuance of the Shares. 	9 
	  	2.2 	Closing. 	9 
	  	2.3 	Company Deliveries at Closing. 	9 
	  	2.4 	Deliveries by Global Rock,
      Charleston and Founders at Closing. 	10 
	  	2.5 	Investor Deliveries at Closing 	10 
	  	  	  	  
	3. 	REPRESENTATIONS AND WARRANTIES OF
      THE WARRANTORS 	10 
	  	3.1 	Organization, Good Standing,
      Qualification and Business Scope 	10 
	  	3.2 	Capitalization. 	11 
	  	3.3 	Subsidiaries 	12 
	  	3.4 	Authorization. 	12 
	  	3.5 	Valid Issuance of the Shares
	13 
	  	3.6 	Consents; No Conflicts. 	13 
	  	3.7 	SEC Reports; Financial
      Statements. 	13 
	  	3.8 	Changes 	14 
	  	3.9 	Internal Controls and
      Securities Law Compliance. 	16 
	  	3.10 	Actions. 	16 
	  	3.11 	Liabilities. 	16 
	  	3.12 	Commitments 	17 
	  	3.13 	Compliance with Laws; Consents
    	18 
	  	3.14 	Anti-Bribery, Anti-Corruption, Anti-Money
      Laundering and Sanctions. 	19 
	  	3.15 	Related Party Transactions. 	20 
	  	3.16 	Tax Matters. 	20 
	  	3.17 	Environmental and Safety Laws.
    	21 
	  	3.18 	Title; Liens 	22 
	  	3.19 	Intellectual Property Rights.
    	22 
	  	3.20 	Real Property. 	23 
	  	3.21 	Labor and Employment Matters.
    	23 
	  	3.22 	Offering 	23 
	  	3.23 	Over-the-Counter Bulletin Board
      Quotation. 	24 
	  	3.24 	Investment Company. 	24 
	  	3.25 	Selling Restrictions Compliance
    	24 
	  	3.26 	Full Disclosure 	24 
	  	  	  	  
	4. 	REPRESENTATIONS AND WARRANTIES OF
      THE INVESTOR. 	25 
	  	4.1 	Organization and Good Standing
    	25 
	  	4.2 	Authorization. 	25 
	  	4.3 	Investment Experience 	25 
	  	4.4 	Purchase for Own Account. 	25 
	  	4.5 	Independent Investment Decision
    	25 
	  	4.6 	General Solicitation. 	25 
	  	4.7 	Access to Information 	25

i 

	  TABLE OF CONTENTS 
  
	  (continued)  
	  	  	  	  
	  	  	  	Page 
	  	  	  	  
	5. 	CONDITIONS OF THE
      INVESTOR’S OBLIGATIONS AT THE CLOSING. 	26 
	  	5.1 	Representations and Warranties 	26 
	  	5.2 	Consents 	26 
	  	5.3 	Proceedings and Documents 	26 
	  	5.4 	Opinions of Counsel. 	26 
	  	5.5 	Adoption and Filing of Certificate of
      Designation. 	26 
	  	5.6 	Transaction Documents. 	26 
	  	5.7 	Board of Directors 	26 
	  	5.8 	Bank Account 	27 
	  	5.9 	Financial Information 	27 
	  	5.10 	Budget and Business Plan 	27 
	  	5.11 	PRC Companies Restructuring. 	27 
	  	5.12 	Jinghai Plant Transfer
      Supplemental Agreement. 	27 
	  	5.13 	Share Pledge 	27 
	  	5.14 	Employee Proprietary
      Information, Inventions Assignment and Non- 	  
	  	  	Competition Agreement 	27 
	  	5.15 	Trade Secret Escrow. 	27 
	  	5.16 	Lock-up Agreements 	27 
	  	5.17 	Agreement with Richlink 	27 
	  	5.18 	Absence of Material Litigation. 	28 
	  	5.19 	Absence of Material Adverse
      Effect 	28 
	  	5.20 	Completion of Diligence 	28 
	  	5.21 	Legal Matters. 	28 
	  	5.22 	Closing Certificate. 	28 
	  	  	  	  
	6. 	CONDITIONS OF THE COMPANY’S
      OBLIGATIONS AT CLOSING 	28 
	  	  	  	  
	7. 	COVENANTS. 	28 
	  	7.1 	Use of Proceeds 	28 
	  	7.2 	Subsidiary Boards. 	29 
	  	7.3 	Supervisors Committee 	29 
	  	7.4 	Board Activities. 	29 
	  	7.5 	ESOP 	29 
	  	7.6 	Completion of PRC Companies Restructuring 	30 
	  	7.7 	Jinghai Real Property 	30 
	  	7.8 	Due to Related Parties 	30 
	  	7.9 	Executive Search 	30 
	  	7.10 	Warrantors’ Additional Covenants. 	30 
	  	  	  	  
	8. 	INDEMNITY 	31 
	  	8.1 	Indemnification by the
      Warrantors. 	31 
	  	8.2 	Defense of Third Party Claims. 	31 
	  	  	  	  
	9. 	MISCELLANEOUS. 	32 
	  	9.1 	Survival of Representations,
      Warranties and Covenants 	32 
	  	9.2 	Governing Law. 	32 

ii

	 TABLE OF CONTENTS  
	 (continued)  
	  	  	  
	  	  	Page 
	  	  	  
	       
                 9.3 	Successors and Assigns 	32 
	           
             9.4 	Confidentiality. 	32 
	       
                 9.5 	Public Announcements. 	32 
	           
             9.6 	Amendments and Waivers. 	32 
	       
                 9.7 	Dispute Resolution 	33 
	           
             9.8 	Enforcement 	35 
	       
                 9.9 	Notices. 	35 
	           
             9.10 	Fees and Expenses. 	35 
	       
                 9.11 	Severability. 	35 
	           
             9.12 	No Waiver 	36 
	       
                 9.13 	Rights Cumulative. 	36 
	           
             9.14 	Delays or Omissions. 	36 
	       
                 9.15 	No Presumption. 	36 
	           
             9.16 	Headings and Subtitles; Interpretation 	36 
	       
                 9.17 	Counterparts 	37 
	           
             9.18 	No Commitment for Additional Financing 	37 
	       
                 9.19 	Entire Agreement 	37 
	  	  	  
	  	  	  
	Schedule I 	       
         Schedule of Founders 	  
	Schedule II 	       
         Group Companies 	  
	Schedule III 	       
         PRC Companies Restructuring 	  
	  	  	  
	Exhibit A 	       
         Certificate of Designation 	  
	Exhibit B 	       
         Investor Rights Agreement 	  
	Exhibit C 	       
         Voting Agreement 	 
  

iii

SERIES A PREFERRED STOCK PURCHASE AGREEMENT 

THIS SERIES A PREFERRED STOCK PURCHASE AGREEMENT
(this "Agreement") is entered into as of June 18, 2009, by and among: 

(i) 

Yayi International Inc., a Delaware company (the "Company"); 

(ii) 

Global Rock Stone Industrial Ltd, a British Virgin Islands company ("Global
Rock"); 

(iii) 

Charleston Industrial Ltd, a British Virgin Islands company ("Charleston");

(iv) 

Tianjin Yayi Industrial Co., Ltd. 
(天津市亚亿实业有限公司),
a company organized under the laws of the People’s Republic of China (the "Tianjin
Yayi"); 

(v) 

the individuals as set forth in Schedule I attached hereto (collectively, the "Founders");
and 

(vi) 

SAIF Partners III L.P., a Cayman Islands exempted limited partnership (the "Investor").

Each of the parties listed above referred to herein
individually as a "Party" and collectively as the "Parties." 

RECITALS 

WHEREAS, the Company has created a
new class of convertible preferred shares designated as Series A Preferred Stock
(the "Series A Preferred Stock") through the adoption by the Board of
Directors of the Company of a certificate of designation in the form attached as
Exhibit A hereto (the "Certificate of Designation"); 

WHEREAS, the Company wishes to
issue and sell to the Investor, and the Investor wishes to purchase from the
Company, 1,530,612 shares of Series A Preferred Stock (the "Shares") upon
the terms and subject to the conditions set forth herein; 

WHEREAS, Global Rock is a principal stockholder of
the Company, Charleston is a whole-owned subsidiary of the Company and Tianjin
Yayi is a subsidiary of Charleston; and 

NOW, THEREFORE, in consideration of
the foregoing recitals, the mutual promises hereinafter set forth, and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties hereby agree as follows: 

AGREEMENT 

1. 

Definitions. The following terms shall have the meanings ascribed to them
below: 

"1933 Act" means the U.S. Securities Act of
1933, as amended and interpreted from time to time. 

"Action" means any notice, charge, claim,
action, complaint, petition, investigation, suit or other proceeding, whether
administrative, civil or criminal,
whether at Law or in equity, and whether or not before any mediator, arbitrator or Governmental Authority.

1 

“Affiliate” means, with respect to a Person, any other Person that, directly or indirectly, Controls, is Controlled by or is under common Control with such Person. In the case of an Investor, the term
“Affiliate” also includes (v) any shareholder of the Investor, (w) any of such shareholder’s general partners or limited partners, (x) the fund manager managing such shareholder (and general partners, limited partners and officers
thereof) and (y) trusts controlled by or for the benefit of any such Person referred to in (v), (w) or (x). In the case of a natural person, the term “Affiliate” also includes his or her Relatives, and any Affiliates of his or her
Relatives. For purposes of this Agreement, each Group Company shall be deemed an Affiliate of each other. 

“Benefits Plan” means any employment contract, deferred compensation agreement, bonus plan, incentive plan, profit sharing plan, retirement agreement or other employment compensation agreement or any
other plan which provides or provided benefits for any employee, officer, consultant, and/or director or with respect to which contributions are or have been made on account of an employee, officer, consultant, and/or a director. 

“Board” or “Board of Directors” means the board of directors of the Company. 

“Business Day” means any day that is not a Saturday, Sunday, legal holiday or other day on which commercial banks are required or authorized by law to be closed in the PRC.

“Charter Documents” means, with respect to a particular legal entity, the articles of incorporation, certificate of incorporation, memorandum of association, articles of association, Bylaws, articles of
organization, certificate of formation, limited liability company agreement, operating agreement, certificate of designation, or similar or other constitutive, governing, or charter documents, or equivalent documents, of such entity. 

 “Circular 75” means the Notice on Relevant Issues Concerning Foreign Exchange Administration for Domestic Residents to Engage in Overseas Financing and Round Trip Investment via Overseas Special Purpose
Companies issued by SAFE on October 21, 2005. 

“Code” means the U.S. Internal Revenue Code of 1986, as amended. 

“Common Stock” means the Company’s common stock, par value US$0.001.

“Company Registered IP” means all Intellectual Property for which registrations have been obtained throughout the world (and all applications for, or extensions or reissues of, any of the foregoing
throughout the world) that are owned by, or registered or applied for in the name of, any Group Company. 

“Consent” means any consent, approval, authorization, waiver, permit, grant, franchise, concession, agreement, license, exemption or order of, registration,
certificate, declaration or filing with, or report or notice to, any Person, including any Governmental Authority.

2

“Contract” means, a contract, agreement, understanding, indenture, note, bond, loan, instrument, lease, mortgage, franchise, license, commitment, purchase order, purchasing arrangement and other legally
binding arrangement, whether written, oral, express or implied. 

“Control” of a given Person means the power or authority, whether exercised or not, to direct the business, management and policies of such Person, directly or indirectly, whether through the ownership
of voting securities, by Contract or otherwise; provided, that such power or authority shall conclusively be presumed to exist upon possession of beneficial ownership or power to direct the vote of more than fifty percent (50%) of the votes entitled
to be cast at a meeting of the members or shareholders of such Person or power to control the composition of a majority of the board of directors of such Person.  The terms “Controlled” and “Controlling” have meanings correlative
to the foregoing.

“Conversion Shares” means collectively, the Common Stock issuable upon conversion of the Shares in accordance with the terms under Certificate of Designation. 

“Disclosure Schedule” means the Disclosure Schedule, dated of even date herewith, delivered by the Warrantors to the Investor in connection with Section 3 of this Agreement. 

“Environmental Law” means any and all applicable Laws of or by any Governmental Authority relating to (i) environmental matters, (ii) the generation, use, storage, transportation or disposal of
hazardous substances, or (iii) occupational safety and health, industrial hygiene, land use or the protection of human, plant or animal health or welfare. 

“Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended and interpreted from time to time. 

“FCPA” means the U.S. Foreign Corrupt Practices Act of 1977, as amended, and interpreted from time to time. 

“Governmental Authority” means any nation or government or any federation, province or state or any other political subdivision thereof; any entity, authority or body exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government, including any government authority, agency, department, board, commission or instrumentality of the PRC or any other country, or any political subdivision thereof, any
court, tribunal or arbitrator, and any self-regulatory organization. 

“Governmental Order” means any applicable order, ruling, decision, verdict, decree, writ, subpoena, mandate, precept, command, directive, consent, approval, award, judgment, injunction or other similar
determination or finding by, before or under the supervision of any Governmental Authority. 

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“Group” means, collectively, the Company and its Subsidiaries, including without limitation, the entities set forth on Schedule II attached hereto. 

“Group Company” means any member of the Group.

“Indebtedness” of any Person means, without duplication, each of the following of such Person: (i) all indebtedness for borrowed money, (ii) all obligations issued, undertaken or assumed as the deferred
purchase price of property or services (other than trade payables entered into in the ordinary course of business consistent with past practice), (iii) all reimbursement or payment obligations with respect to letters of credit, surety bonds and
other similar instruments, (iv) all obligations evidenced by notes, bonds, debentures or similar instruments, including obligations so evidenced that are incurred in connection with the acquisition of properties, assets or businesses, (v) all
indebtedness created or arising under any conditional sale or other title retention agreement, or incurred as financing, in either case with respect to any property or assets acquired with the proceeds of such indebtedness (even though the rights
and remedies of the seller or bank under such agreement in the event of default are limited to repossession or sale of such property), (vi) all obligations that are capitalized in accordance with US GAAP, (vii) all obligations under banker’s
acceptance, letter of credit or similar facilities, (viii) all obligations to purchase, redeem, retire, defease or otherwise acquire for value any Securities of such Person, (ix) all obligations in respect of any interest rate swap, hedge or cap
agreement, (x) all indebtedness referred to in clauses (i) through (ix) above secured by (or for which the holder of such indebtedness has an existing right, contingent or otherwise, to be secured by) any mortgage, lien, pledge, charge, security
interest or other encumbrance upon or in any property or assets (including accounts and contract rights) owned by any other Person, even though such other Person which owns such assets or property has not assumed or become liable for the payment of
such indebtedness, and (xi) all contingent obligations in respect of indebtedness or obligations of other Persons of the kinds referred to in clauses (i) through (x) above. 

“Indemnifiable Loss” means, with respect to any Person, any action, cost, damage, disbursement, expense, liability, loss, deficiency, diminution in value, obligation, penalty or settlement of any kind
or nature, including without limitation, (i) interest or other carrying costs, penalties, legal, accounting and other professional fees and expenses incurred in the investigation, collection, prosecution and defense of claims and amounts paid in
settlement, that may be imposed on or otherwise incurred or suffered by such Person, and (ii) any Taxes that may be payable by such Person by reason of the indemnification of any Indemnifiable Loss hereunder, other than Taxes that would have been
payable notwithstanding the event giving rise to indemnification.

“Intellectual Property” means any and all (i) patents, all patent rights and all
patent rights and all applications therefor and all reissues, reexaminations,
continuations, continuations-in-part, divisions, and patent term extensions
thereof, (ii) inventions (whether patentable or not), discoveries, improvements,
concepts, innovations and industrial models, (iii) registered and unregistered
copyrights, copyright registrations and applications, mask works and mask work
registrations and applications therefor, author’s rights and works of authorship
(including artwork of any kind and software of all types in whatever medium,
inclusive of computer programs, source code, object code and executable code,
firmware, development tools, files, records and data, and 
related documentation), (iv) URLs, web sites, web pages and any part thereof, (v) technical information, know-how, trade secrets, drawings, designs, design protocols, specifications, proprietary data, customer lists, databases, proprietary
processes, technology, formulae, and algorithms, (vi) trade names, trade dress, trademarks, domain names, service marks, logos, business names, and registrations and applications therefor, and (vii) the goodwill symbolized or represented by the
foregoing. 

4 

“Investor Directors” means the directors of the Company that are nominated by the holders of shares of Series A Preferred Stock and elected to the Board pursuant to the Certificate of Designation and
other Charter Documents of the Company. 

“Investor Rights Agreement” means a certain Investor and Registration Rights Agreement in the form attached as Exhibit B hereto entered into by Global Rock, the Company, the Investor and certain
other parties thereto, at the Closing. 

“Jinghai Plant Transfer Supplemental Agreement” means that certain Plant Transfer Supplemental Agreement dated as of June 12, 2009 by and between Tianjin Yayi and Tianjin Mengyang Biotechnology Co.,
Ltd. 

“Jinghai Real Property” means the real property located in Jinghai, Tianjin and set forth in the Jinghai Plant Transfer Supplemental Agreement, which shall consist of (i) approximately 7,800 square
meters of office building, (ii) approximately 30,165 square meters of plants and warehouses, and (iii) the land use rights relating to (i) and (ii) above. 

“Key Employees” means with respect to an entity, the president, chief executive officer, the chief financial officer, the chief operating officer, the general manager, any other senior manager or any
other employee with responsibilities similar to any of the foregoing, of such entity.

“Laws” means any and all provisions of any constitution, treaty, statute, law, regulation, ordinance, code, rule, rule of common law, governmental approval, concession, grant, franchise, license,
agreement, directive, requirement, or other governmental restriction or any similar form of decision of, or determination by, or any interpretation or administration of any of the foregoing by, any Governmental Authority, in each case as amended,
and any and all Governmental Order. 

“Liabilities” means, with respect to any Person, all liabilities, obligations and commitments of such Person of any nature, whether accrued, absolute, contingent or otherwise, and whether due or to
become due. 

“Lien” means any claim, charge, easement, encumbrance, lease, covenant, security interest, lien, option, pledge, rights of others, or restriction (whether on voting, sale, transfer, disposition or
otherwise), whether imposed by Contract, understanding, law, equity or otherwise. 

“Management Rights Agreement” means a certain management rights agreement delivered by the Company to the Investor at the Closing.

5

“Material Adverse Effect” means any event, occurrence, fact, condition, change or development, either individually or with other events, occurrences, facts, conditions, changes or developments, that (i)
has or is reasonably likely to have a material adverse effect on the operations, results of operations, condition (financial or otherwise), prospects, assets or liabilities of any Group Company, (ii) materially impairs or is reasonably likely to
materially impair the ability of any party (other than the Investor) to perform its/his/her material obligations under any Transaction Document, or (iii) materially impairs or is reasonably likely to materially impair the validity or enforceability
of any Transaction Document against any party thereto (other than the Investor).

“MOFCOM” means the Ministry of Commerce or, with respect to any matter to be submitted for examination and approval by the Ministry of Commerce, any Governmental Authority which is similarly competent
to examine and approve such matter under the laws of the PRC.

“Notice 106” means the Implementing Rules for Circular 75 issued by SAFE on May 31, 2007.

“Order No. 10” means the Rules for Mergers with and Acquisitions of
Domestic Enterprises by Foreign Investors
(《关于外国投资者并购境内企业的规定》)
jointly issued by the MOFCOM, the
State-owned Assets Supervision and Administration Commission, the State
Administration of Taxation, the SAIC, the China Securities Regulatory Commission
and the SAFE on August 8, 2006. 

"Permitted Liens" means (i)
Liens for Taxes not yet due and payable or the validity of which are being
contested, and (ii) Liens incurred in the ordinary course of business consistent
with past practice, which (x) do not in the aggregate materially detract from
the value or use of the assets that are subject to such Liens and (y) were not
incurred in connection with the borrowing of money. 

"Person" means any
individual, corporation, partnership, limited partnership, proprietorship,
association, limited liability company, firm, trust, estate or other enterprise
or entity. 

"PRC" means the People’s
Republic of China, but solely for the purposes of this Agreement and the other
Transaction Documents, excluding Hong Kong, Macau and Taiwan. 

"PRC Companies Restructuring"
means all the actions need to taken and all such agreements, documents and
instruments need to executed, as set forth in Schedule III hereto in connection
with the restructuring of Tianjin Yayi and its Subsidiaries. 

"PRC Entities" means any Group Company that
is organized under the laws of the PRC. 

"Public Official" means any
executive, official, or employee of a Governmental Authority, political party or
member of a political party, political candidate; executive, employee or officer
of a public international organization; or 
director, officer or employee or agent of a wholly owned or partially state-owned or controlled enterprise, including a PRC state-owned or controlled enterprise.

6

“Related Party” means (i) any officer, director, supervisory board member, or holder of a Security of any Group Company, (ii) any Affiliate of any such officer, director, supervisory board member, or
holder, (iii) any Group Company or any Affiliates of any Group Company, and (iv) each member of the immediate family of each of the foregoing that is an individual, and any Affiliates of such member.

“Relatives” of a natural person means the spouse of such person, and any parent, grandparent, child, grandchild, sibling, uncle, aunt, nephew, or niece of such person, and the spouse of the foregoing
persons. 

“Reserve” or “reservation” means, with respect to a specified number of shares of Common Stock of the Company, the Company shall refrain from issuing such number of shares so that such
number of shares shall remain in the authorized but unissued share capital of the Company and available for issuance upon exercise of the conversion rights attached to the Series A Preferred Stock. 

“SAFE” means the State Administration of Foreign Exchange of the PRC.

“SAFE Rules and Regulations” means collectively, the Circular 75, Notice 106, and any other applicable SAFE rules and regulations. 

“SAIC” means the State Administration of Industry and Commerce or, with respect to the issuance of any business license or filing or registration to be effected by or with the State Administration of
Industry and Commerce, any Governmental Authority which is similarly competent to issue such business license or accept such filing or registration under the laws of the PRC.

“SEC” means the United States Securities and Exchange Commission.

“Securities” means, with respect to any Person that is a legal entity, any and all shares of capital stock, membership interests, units, profits interests, ownership interests, equity interests,
registered capital, and other securities of such Person, and any right, warrant, option, call, commitment, conversion privilege, preemptive right or other right to acquire any of the foregoing, or security convertible into, exchangeable or
exercisable for any of the foregoing, or any Contract providing for the acquisition of any of the foregoing.

“Social Insurance” means any form of social insurance required under applicable Laws, including without limitation, national and local contributions for pensions, medical insurance, unemployment
insurance, work-related injury insurance, pregnancy benefits, and housing accumulation funds. 

“Statement Date” means April 30, 2009.

“Subsidiary” means, with respect to any given Person, any other Person that is not a natural person and that is Controlled directly or indirectly by such given Person. 

7

“Tax” means (i) in the
PRC: (a) any national, provincial, municipal, or local taxes, charges, fees,
levies, or other assessments, including, without limitation, all net income
(including enterprise income tax and individual income withholding tax),
turnover (including value-added tax, business tax, and consumption tax),
resource (including urban and township land use tax), special purpose (including
land value-added tax, urban maintenance and construction tax, and additional
education fees), property (including urban real estate tax and land use fees),
documentation (including stamp duty and deed tax), filing, recording, social
insurance (including pension, medical, unemployment, housing, and other social
insurance withholding), tariffs (including import duty and import value-added
tax), and estimated and provisional taxes, charges, fees, levies, or other
assessments of any kind whatsoever, (b) all interest, penalties (administrative,
civil or criminal), or additional amounts imposed by any Governmental Authority
in connection with any item described in clause (a) above, and (c) any form of
transferee liability imposed by any Governmental Authority in connection with
any item described in clauses (a) and (b) above, and (ii) in any jurisdiction
other than the PRC: all similar liabilities as described in clause (i)
above.

“Tax Return” means any
return, report or statement showing Taxes, used to pay Taxes, or required to be
filed with respect to any Tax (including any elections, declarations, schedules
or attachments thereto, and any amendment thereof), including any information
return, claim for refund, amended return or declaration of estimated or
provisional Tax.

“Transaction Documents”
means this Agreement, the Investor Rights Agreement, the Voting Agreement, the
Pledge Agreement, the Management Rights Agreement and each of the agreements and
other documents otherwise required in connection with implementing the
transactions contemplated by any of the foregoing. 

“US GAAP” means generally
accepted accounting principles in the United States, consistently applied. 

“Voting Agreement” means a
certain Voting Agreement in the form attached as Exhibit C hereto entered
into by Global Rock, the Company, the Investor and certain other parties
thereto, at the Closing. 

“Warrantors” means
collectively, the Company, Global Rock, Charleston, Tianjin Yayi and the
Founders. 

In addition, the following
capitalized terms have the meanings given thereto in the referenced section
below:

  
  	
      Agreement	
      Preamble
	Arbitration Notice	Section 9.7(i)
	
      Board Secretary	
      Section 7.4
	Certificate of
      Designation	Recitals
	
      Charleston	
      Preamble
	Closing	Section 2.2
	
      Company	
      Preamble
	Company IP	Section 3.19(i)
	
      Compliance Laws	
      Section 3.14(i)

  

 

8

  
  	
      Disclosure Materials	
      Section 4.7
	Dispute	Section 9.7(i)
	
      Environmental Consents	
      Section 3.17(ii)
	ESOP	Section 7.5(i)
	
      Financial Statements	
      Section 3.7(ii)
	Founders	Preamble
	
      Global Rock	
      Preamble
	HKIAC	Section 9.7(ii)
	
      HKIAC Rules	
      Section 9.7(ii)
	Indemnified Party	Section 8.1(iii)
	
      Indemnifying Party	
      Section 8.1(iii)
	Indemnitee	Section 8.1(i)
	
      Investor	
      Preamble
	Investor Expenses	Section 9.10
	
      Leases	
      Section 3.20
	Material Contracts	Section 3.12(i)
	
      New York	
      Section 9.2
	Party	Preamble
	
      Pledge Agreement	
      Section 5.13
	Principal Tribunal	Section 9.7(ix)(a)
	
      Purchase Price	
      Section 2.1
	Real Property	Section 3.20
	
      Representatives	
      Section 3.14(i)
	Repurchase Amount	Section 7.7(ii)
	
      Repurchase Date	
      Section 7.7(ii)
	Required Consents	Section 3.13(iii)
	
      SEC Reports	
      Section 3.7(i)
	Security Holder	Section 3.13(v)
	
      Series A Preferred Stock	
      Recitals
	Shares	Recitals
	
      Tianjin Yayi	
      Preamble
	Total Purchase Price	Section 2.1

  

2. 

Purchase and Sale of the Shares.

2.1 

Sale and Issuance of the Shares. Subject to the terms and conditions of this
Agreement, at the Closing (as defined below), the Company shall sell and issue to the Investor, and the Investor shall purchase from the Company, 1,530,612 shares of Series A Preferred Stock for an aggregate consideration of US$15,000,000
(Fifteen Million US Dollars) (the “Total Purchase Price”) at an issuance price of US$9.80 per Share (the “Purchase Price”).

2.2  

Closing.  The consummation of the sale and issuance of the Shares pursuant to Section 2.1 above (the “Closing”) shall take place at the offices of Latham & Watkins,
41st Floor, One Exchange Square, 8 Connaught Place, Central, Hong Kong, at 10:00 a.m. Hong Kong time on the date hereof (or at such later time and place as the Parties may agree) after notification of satisfaction (or waiver) of the conditions
specified in Sections 5 and 6. 

2.3  

Company Deliveries at Closing.  At the Closing, the Company shall cause to be delivered to the Investor: 

 9 

(i) 

a certificate or certificates representing the Shares, in form reasonably satisfactory to the Investor;

	(ii) 

to each Investor, a copy of the Company’s updated share ledger, evidence of the appointment of the directors as contemplated by Section 5.7 hereof, and an application form to be filed with the relevant Administration
of Industry and Commerce of the appointment of the directors to the board of directors of each of the PRC Entities as contemplated by Section 5.7 hereof, each certified as true and accurate by the Company’s Chief Executive Officer and
Chief Financial Officer; and

	(iii) 

such other documents, agreements and instruments required to be delivered by the Company to the Investor under Section 5 hereof.

 

2.4 

Deliveries by Global Rock, Charleston and Founders at Closing.  At the Closing, each of Global Rock, Charleston and Founders shall deliver to each Investor the agreements, documents, and
instruments required to be delivered by them under Section 5 hereof.

2.5  

Investor Deliveries at Closing.  At the Closing, the Investor shall cause to be delivered to the Company the Total Purchase Price by wire transfer of immediately available United States Dollar
funds to a bank account designated by the Company. 

3.  

Representations and Warranties of the Warrantors.  The Warrantors jointly and severally represent and warrant to the Investor that: 

3.1 

Organization, Good Standing, Qualification and Business Scope.

(i) 

Each Group Company is duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation. Each Group Company has all requisite legal and corporate power and authority to own and operate
its properties and to carry on its business as now conducted and as proposed to be conducted. Each Group Company is duly qualified to transact business and is in good standing in each other jurisdiction in which such qualification is required,
except where the failure to so qualify would not cause a Material Adverse Effect.

	(ii) 

Each PRC Entity has a valid business license issued by the SAIC or its local branch or other relevant Government Authorities, and has, since its establishment, carried on its business materially in compliance with the business
scope set forth in its business license.

	(iii) 

The minute books for each Group Company contain, in all material respects, complete and accurate records of all meetings conducted, resolutions adopted, and written consents entered into by such company’s shareholders and
board of directors (or committees thereof) since the date of its incorporation. A true and complete copy of the minute books for each Group Company has been made available to the Investor or its advisors.

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iv) 

The true and complete copies of the Charter Documents of each Group Company in effect have been provided to the Investor. No Group Company is in violation, breach or default of any of its Charter Documents.

	
3.2 

Capitalization.

	(i) 

Section 3.2(i) of the Disclosure Schedule sets forth, as of the date hereof and immediately following the Closing, the authorized, issued, outstanding and reserved Securities of the Company. Other than those set forth in Section
3.2(i) of the Disclosure Schedule: (i) there are no options, warrants or other rights outstanding which give any Person the right to acquire any share capital of the Company or to subscribe to any increase of any share capital of the Company; and
(ii) there are no disputes, arbitrations or litigation proceedings involving the Company with respect to the share capital of the Company.

	(ii) 

Section 3.2(ii) of the Disclosure Schedule sets forth the following information for Global Rock and each Group Company as of and immediately following the Closing: (a) the authorized, issued and outstanding Securities of Global
Rock and each Group Company (other than the Company), the record and beneficial owners of such Securities, the nature and amount of their shareholding, and any nominee shareholder arrangement with respect to such Securities,(b) the legal entity nature of Global Rock and each Group Company,
(c) the jurisdiction in which Global Rock and each Group Company was organized and exists, and (d) each jurisdiction in which Global Rock and each Group Company is required to be qualified or licensed to do business as a foreign Person.

	(iii) 

All share capital of each Group Company (other than PRC Entities)
(a) has been duly and validly issued (or subscribed for), is fully paid and is non-assessable, (b) is free of limitation in voting rights, preemptive rights, any other restrictions on transfer (except for any restrictions on transfer under applicable securities laws or as expressly contemplated under
the Transaction Documents), and other Liens,
(c) has been issued in compliance with the requirements of all applicable securities Laws, including, to the extent applicable, the 1933 Act, and (d) was not issued or subscribed to in violation of the preemptive rights of any Person, any Contract, or any applicable Laws.

	(iv) 

All outstanding registered capital of each PRC Entity has been fully contributed (and such contribution has been duly verified by a certified accountant registered in the PRC and the accounting firm employing such accountant, and
the report of the certified accountant evidencing such verification has been registered with the relevant Government Authorities) with no personal liability attaching to ownership thereof, and free of all limitations in voting rights, preemptive
rights and any other restrictions on transfer (except for any preemptive rights or restrictions required under applicable Laws or as expressly contemplated under the Transaction Documents), and other Liens. No registered capital of any PRC Entity was obtained by the current holder thereof in violation of the preemptive rights of any Person, the terms of any Contract or any applicable Laws.

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(v) 

Except as set forth in Section 3.2(v) of the Disclosure Schedule, there are no (a) resolutions pending to increase the authorized share capital or registered capital of any Group Company; (b) authorized or outstanding Securities
of any Group Company other than as set forth in Section 3.2(i) and Section 3.2(ii) hereof; (c) dividends which have accrued or been declared but are unpaid by any Group Company;
(d) equity incentive plans with respect to any Group Company;
(e) obligations, contingent or otherwise, of any Group Company to repurchase, redeem, or otherwise acquire any Securities; or (f) voting trusts, shareholder agreements, proxies or other agreements or understandings in effect with respect to the voting or transfer of any Securities of any Group
Company. Other than pursuant to the Transaction Documents, no Group Company has granted or agreed to grant any Person any registration rights (including piggyback registration rights) with respect to any of its Securities.

3.3  

Subsidiaries.  Except as set forth in Section 3.3 of the Disclosure Schedule, none of the Group Companies has any Subsidiaries or owns or Controls, directly or indirectly, any interest in any
other Person, or is a participant in any joint venture, partnership or similar arrangement, or maintains any representative offices or any branches. None of the Group Companies has any obligations to provide working capital to, or make any
investment (in the form of a loan, capital contribution or otherwise) in any Person. 

3.4 

Authorization.

(i) 

Each Group Company has all requisite power and authority to execute and deliver the Transaction Documents to which it is a party and to carry out and perform its obligations thereunder. All corporate action necessary on the part
of each Group Company and their respective officers, directors and shareholders has been taken for the authorization, execution, and delivery by such Group Company of each Transaction Document to which it is a party, and the performance by such
Group Company of its obligations thereunder. Each Transaction Document has been duly and validly executed and delivered by each of the parties thereto other than the Investor, and constitutes a legal, valid, and binding obligation of each of the
parties thereto (other than the Investor), enforceable against such parties in accordance with its terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium, and other applicable Laws of general application
affecting enforcement of creditors’ rights generally, and (ii) as limited by applicable Laws relating to the availability of specific performance, injunctive relief, or other equitable remedies.

	(ii) 

Each Founder is of sound mind, has the necessary legal capacity to perform such Founder’s obligations under any Transaction Documents to which such Founder is a party, has entered into or will enter into the Transaction
Documents on such Founder’s own will after obtaining
full independent professional advice (including legal advice) in respect thereof and understands the nature of the obligations to be assumed by him/her under the Transaction Documents to which such Founder is a party.

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3.5 

Valid Issuance of the Shares.  The Shares, when issued, sold and delivered in accordance with the terms and for the consideration set forth herein, will be duly and validly issued in compliance
with all applicable Laws, including those regulating the offer, sale or issuance of securities, will be fully-paid and non-assessable, and will be free of restrictions on transfer (other than restrictions on transfer under applicable securities
laws) and other Liens. Immediately following the Closing, the Investor will be the sole legal and beneficial owner of, and will have good and marketable title to the Shares. As of the Closing, the Conversion Shares will have been duly and validly
reserved for issuance and, upon issuance in accordance with the terms of the Certificate of Designation, will be duly and validly issued, fully-paid, and non-assessable and will be free restrictions on transfer (other than restrictions on transfer
under applicable securities laws) and other Liens.

3.6  

Consents; No Conflicts.  No Consent from any Governmental Authority or any other Person is required in connection with the valid execution, delivery and performance of the Transaction Documents,
and the consummation of the transactions contemplated by the Transaction Documents on the part of any party thereto (other than the Investor) or any Group Company. The execution, delivery and performance of each Transaction Document by each party
thereto (other than the Investor) and the consummation by such party of the transactions contemplated thereby will not (i) result in any violation of, be in conflict with, or constitute a default under, with or without the passage of time or the
giving of notice, or give any Person rights of termination, amendment, acceleration or cancellation under, (w) any Governmental Order, (x) any provision of the Charter Documents of any Group Company, (y) any applicable Laws (including without
limitation, Order No. 10 and the SAFE Rules and Regulations), or (z) any Material Contract, (ii) result in any termination, modification, cancellation, or suspension of any material right of, or any augmentation or acceleration of any material
obligation of, any Group Company (including without limitation, any Indebtedness of such Group Company), or trigger any preemptive right or transfer restriction, or (iii) except pursuant to the Pledge Agreement, result in the creation of any Lien
upon any of the properties or assets of any Group Company. 

3.7 

SEC Reports; Financial Statements.

 

(i) 

The Company has filed all reports, schedules, forms, statements and other documents required to be filed by it under the 1933 Act and the Exchange Act (the foregoing materials, including the exhibits thereto and documents
incorporated by reference therein, being collectively referred to herein as the “SEC Reports”) on a timely basis or has received a valid extension of such time of filing and has filed any such SEC Reports prior to the expiration of
any such extension. As of the date of filing, in the case of SEC Reports filed pursuant to the Exchange Act (and to the extent such SEC Report was amended, then as of the date of filing of such amendment), and as of the date of effectiveness in the
case of SEC Reports filed pursuant to the 1933 Act (and to the extent such SEC Report was amended, then as of the date of effectiveness of such amendment), the SEC Reports complied in all material respects with the requirements of the 1933 Act and
the Exchange Act and the rules and regulations of the SEC promulgated thereunder, as applicable, and none of the SEC Reports, as of the date of filing, in the case of SEC Reports filed pursuant to the Exchange Act (and to the extent
such SEC Report was amended, then as to the date of filing of such amendment), and as of the date of effectiveness in the case of SEC Reports filed pursuant to the 1933 Act (and to the extent such SEC Report was amended, then as of the date of
effectiveness of such amendment), contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which
they were made, not misleading. All other financial, statistical, and market and industry-related data included in the SEC Reports are based on or derived from sources that the Company reasonably believes to be reliable and accurate.

13

(ii) 

As of their respective dates, the financial statements contained in the SEC Reports and the related notes (the “Financial Statements”) complied as to form in all material respects with all applicable accounting
requirements and the published rules and regulations of the SEC with respect thereto. The Financial Statements: (i) were prepared in accordance with US GAAP during the periods involved (ii) fairly present in all material respects the consolidated
financial position of the Company and its consolidated subsidiaries as of the dates thereof and the consolidated results of their operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end
audit adjustments) and (iii) are in all material respects in accordance with the books of account and records of the Company and its consolidated subsidiaries.

	(iii) 

Each Group Company maintains its books of accounts and records relating to its business, operations, conditions (financial or other), and assets and properties in the usual, regular and ordinary manner, on a basis consistent with
prior practice, and which permits its Financial Statements to be prepared in accordance with US GAAP.

3.8  

Changes.  Since the Statement Date, the Group has operated its business in the ordinary course consistent with its past practice.  Except as expressly set forth on Section 3.8 of the
Disclosure Schedule, since the Statement Date, there has not been: 

(i) 

any Material Adverse Effect;

	(ii) 

any waiver of a material right or of a material debt owed to any Group Company;

	(iii) 

any receipt of notice that there has been a loss of, or material order cancellation by, any major customer or supplier of, or major licensor;

	(iv) 

any incurrence, creation, assumption, repayment, satisfaction or discharge of any Indebtedness or any material Lien (except Permitted Liens), or any loan or advance to, guarantee for the benefit of, or investment in, any Person (other than advances to employees in the ordinary course of business consistent with past practice that are immaterial in the aggregate), in any case with respect to a Group Company;

14

(v) 

any resignation or termination of any Key Employee of any Group Company or any material group of employees of any Group Company;

	(vi) 

any waiver, change, amendment to or termination of a Material Contract; any entering of any new Material Contract or any termination of any Contract that would have been a Material Contract if in effect on the date hereof; or any
amendment to, or waiver under any Charter Documents of any Group Company;

	(vii) 

any change in any compensation arrangement or agreement with any Key Employee, or adoption of any Benefits Plan, in any case of any Group Company;

	(viii) 

any sale, assignment, exclusive license, or transfer of any Intellectual Property of any Group Company, other than non-exclusive licenses to customers in the ordinary course of business consistent with past practice;

	(ix) 

any declaration, setting aside or payment of any dividend or other distribution in respect of any Securities of any Group Company, or any direct or indirect redemption, purchase or other acquisition of any Securities of any Group
Company;

	(x) 

any capital expenditures or commitments therefor by any Group Company that aggregate in excess of US$100,000;

	(xi) 

except in the ordinary course of business consistent with past practice, entry by any Group Company into any closing agreement in respect of material Taxes, settlement of any claim or assessment in respect of any material Taxes,
or consent by any Group Company to any extension or waiver of the limitation period applicable to any claim or assessment in respect of any material Taxes, or entry or change by any Group Company of any material Tax election, change of any method of
accounting resulting in a material amount of additional Tax or filing of any material amended Tax Return;

	(xii) 

entry into any transaction or series of related transactions by any Group Company in an aggregate amount in excess of US$50,000, other than in the ordinary course of business consistent with past practice; or entry into any
transaction by any Group Company with any Related Party;

	(xiii) 

any material change in the nature, scope or organization of the Group’s business; or disposal of the whole or substantial part of the business or material assets; or any purchase, acquisition, sale, lease, disposal of or
transfer of any assets that are individually or in the aggregate material to the Group’s business, other than the purchase or sale of inventory in the ordinary course of business consistent with past practice;

15

(xiv) 

any acquisition or formation of any Subsidiary, any branch companies, any Security in any Person or the whole or any substantial part of the undertaking, assets or business of any Person or entering into any joint venture or
partnership with any Person, in any case with respect to a Group Company;

	(xv) 

entry into any consolidation, amalgamation, scheme of arrangement or merger with or into any Person or other similar corporate reorganization, in any case with respect to a Group Company;

	(xvi) 

any sale, issuance, transfer, pledge or other disposition of any Securities of any Group Company (except for the Company);

	(xvii) 

any settlement or commencement of any material Action by any Group Company; or

	(xviii) 

any agreement or commitment to do any of the things described in this Section 3.8.

 3.9 

Internal Controls and Securities Law Compliance. The Company is in compliance with any and all applicable securities laws and excepted as disclosed in the SEC Reports, each Group Company
maintains a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions by it and its Subsidiaries are executed in accordance with management’s general or specific authorization, (ii) transactions by
it are recorded as necessary to permit preparation of financial statements in conformity with US GAAP and to maintain asset accountability, (iii) access to assets of it is permitted only in accordance with management’s general or specific
authorization and (iv) the recorded accountability for assets of it and its Subsidiaries is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any material differences.

3.10  

Actions.  There is no material Action pending or threatened against or affecting any Group Company or any of its officers, directors or employees with respect to its businesses or proposed
business activities, or any Key Employee or director of any Group Company in connection with such Person’s respective relationship with such Group Company, nor is there any basis for any of the foregoing. There is no Governmental Order in
effect and binding on any Group Company or their respective assets or properties. There is no material Action pending by any Group Company against any third party nor does any Group Company intend to commence any such material Action. No
Governmental Authority has at any time materially challenged or questioned in writing the legal right of any Group Company to conduct its business as presently being conducted or proposed to be conducted. No Group Company has received any written
opinion or memorandum or written advice from legal counsel to the effect that it is exposed, from a legal standpoint, to any liability or disadvantage which may be material to the business of any Group Company. 

3.11 

Liabilities.  The Group has no material liability (whether absolute or contingent, whether liquidated or unliquidated, whether due or to become due), except for the following: (i) liabilities
reflected in or reserved for in the consolidated balance sheet of the Group as of April 30, 2009, (ii) liabilities that have arisen since the date of the consolidated
balance sheet of the Group as of April 30, 2009 in the ordinary course of the businesses of the Group consistent with past practice that would have been required under GAAP to be reflected in the consolidated balance sheet of the as of April 30,
2009 had such liabilities existed as of the date of the consolidated balance sheet of the Company and its Subsidiaries as of April 30, 2009, (iii) liabilities that would not be required under GAAP to be reflected in an audited consolidated balance
sheet of the Group and that are not in the aggregate material and (iv) liabilities incurred in connection with this Agreement.  The Group has not, since April 30, 2009, incurred any short-term or long-term debt, issued any equity or equity-linked
securities or made any dividends or distributions other than in the ordinary course, except as disclosed in Section 3.11 of the Disclosure Schedule. 

 16 

3.12 

Commitments.

(i) 

Section 3.12 of the Disclosure Schedule contains a complete and accurate list of the following Contracts to which any Group Company is a party or to which any Group Company or any of their respective properties is subject or by
which any such company or property is bound: (a) any Contract entered into in connection with any issuance of Securities, (b) any Contract or series of related Contracts that obligates Group Companies to pay or receive an amount in excess of
US$200,000, (c) any Contract relating to Indebtedness or a surety or guarantee of performance of any Person, (d) any Contract relating to the mortgaging, pledging, transferring of a security interest, or otherwise placing a Lien (other than a
Permitted Lien) on any material asset or material part of the assets of any Group Company, (e) any Contract that limits or restricts the ability of any Group Company to compete or otherwise to conduct its business in any manner or place, or that
includes a right of first refusal, “most favored nations,” “change in control,” or exclusivity provision, (f) any Contract that involves the establishment, contribution to, or operation of a partnership, joint venture, or
involves a sharing of or distribution based on profits or losses, or involves any investment in, loan to or acquisition or sale of the Securities of any Person, (g) any asset purchase agreement, share purchase agreement or other Contract for
license, lease, sale, acquisition or divestiture of any material assets or of any business, division or line of business, (h) any Contract requiring material performance by a Group Company in any country other than the PRC, (i) any licenses and any
other Contract involving the transfer of material Intellectual Property to or from any Group Company, except for (1) agreements between any Group Company and employees thereof which contain standard Intellectual Property assignment provisions, the
form of which has been provided to the Investor or their advisors, and (2) agreements involving “off-the-shelf” commercially available software, (j) any Contract that involves the waiver, compromise, or settlement or any material dispute
or Action, (k) any Contract that involves the ownership or lease of, title to, use of, or any leasehold or other interest in, any real or personal property (except for personal property leases involving payments of less than US$15,000 per annum)
(l) any Contract that is with any Key Employees of any Group Company, any Governmental Authority, or any Related Party or that is between any Group Companies, and (m) any other Contract that is material to the Group or on which its business is substantially dependent. Collectively, all of the Contracts referenced in this Section 3.12(i) are
referred to as “Material Contracts.”

17

(ii) 

Each of the Material Contracts is valid, in full force and effect and enforceable by each party thereto and complies with applicable Laws. True and complete copies of the Material Contracts, including any amendments and
supplements to such Contracts, have been delivered to the Investor.

	(iii) 

Each Group Company has in all material respects satisfied or provided for all of its liabilities and obligations under the Material Contracts requiring performance prior to the date hereof, is not in default in any material
respect under any Material Contract, nor does any condition exist that with notice or lapse of time or both would constitute such a default. There are no material default thereunder by any other party to any Material Contract or any condition
existing that with notice or lapse of time or both would constitute such a material default, or give any Person the right to declare a material default or exercise any remedy under, or to accelerate the maturity or performance of, or to cancel,
terminate or modify, a Material Contract. No Group Company has given to or received from any Person any notice or other communication (whether oral or written) regarding any actual, alleged, possible, or potential material violation or material
breach of, or material default under, any Material Contract.

	
3.13 

Compliance with Laws; Consents.

	(i) 

Each Group Company is and has been in compliance with all applicable Laws, except where the failure to be so in compliance would not cause a Material Adverse Effect. No event has occurred and no circumstance exists that (with or
without notice or lapse of time)
(a) may constitute or result in a violation by any Group Company of, or a failure on the part of any Group Company to comply with, any applicable Laws that would cause a Material Adverse Effect, or
(b) may give rise to any obligation on the part of any Group Company to undertake, or to bear all or any portion of the cost of, any remedial action of any nature constituting a Material Adverse Effect. None of the Group Companies has received any notice from any Governmental Authority regarding
any of the foregoing. No Group Company is under investigation with respect to the foregoing.

	(ii) 

The consummation of the PRC Companies Restructuring will not violate any applicable Laws (including without limitation, SAFE Rules and Regulations, Order No. 10 and any other applicable PRC rules and regulations).

	(iii) 

All Consents from the relevant Governmental Authority or other Person required in respect of the due and proper establishment and operations of each Group Company as now conducted or proposed to be conducted, including but not limited to the Consents from MOFCOM (or any predecessors thereof), SAIC, SAFE, any Tax bureau, customs authorities, and product registration authorities, the Ministry of Agriculture, and the local
counterpart thereof, as applicable (collectively, the “Required Consents”),
have been duly obtained or completed in accordance with all applicable Laws.
Section 3.13(iii) of the Disclosure Schedule is a complete list of such Required
Consents, together with the name of the entity issuing each such Required
Consent.

	

18

 

(iv) 

No Required Consent contains any materially burdensome restrictions or conditions, and each Required Consent is in full force and effect and will remain in full force and effect upon the consummation of the transactions
contemplated hereby. None of the Group Companies is in default in any material respect under any Required Consent. There is no reason to believe that any Required Consent which is subject to periodic renewal will not be granted or renewed. No Group
Company has received any letter or other communication from any Governmental Authority threatening or providing notice of revocation of any Required Consent issued to any Group Company or the need for compliance or remedial actions in respect of the
activities carried out directly or indirectly by any Group Company.

	(v) 

Each holder or beneficial owner of the Securities of each Group Company (each, a “Security Holder”), who is a “Domestic Resident” as defined in Circular 75 and Notice 106 and is subject to any of the
registration or reporting requirements of Circular 75, has complied with all reporting and/or registration requirements (including filings of amendments to existing registrations) under the SAFE Rules and Regulations, and has made all oral or
written filings, registrations, reporting or any other communications required by SAFE or any of its local branches. No Group Company has, nor any Security Holder has, received any oral or written inquiries, notifications, orders or any other form
of official correspondence from SAFE or any of its local branches with respect to any actual or alleged non-compliance with SAFE Rules and Regulations.

	
3.14 

Anti-Bribery, Anti-Corruption, Anti-Money Laundering and Sanctions.

	(i) 

Each Group Company, and its directors, officers, employees, agents and other persons acting on behalf of such company and each Founder (collectively, “Representatives”) are familiar with and are and have been in
compliance with all applicable Laws relating to anti-bribery, anti-corruption, anti-money laundering, record keeping and internal control laws (collectively, the “Compliance Laws”). Without limiting the foregoing, neither any Group
Company nor any Representative has, directly or indirectly, offered, authorized, promised, condoned, participated in, or received notice of any allegation of:

	(a) 

the making of any gift or payment of anything of value to any Public Official by any Person to obtain any improper advantage, affect or influence any act or decision of any such Public Official, or assist any Group Company in obtaining or retaining business for, or with, or directing business to, any Person;

19

(b) 

the taking of any action by any Person which (i) would violate the FCPA, if taken by an entity subject to the FCPA or (ii) could reasonably be expected to constitute a violation of any applicable Compliance Law;

	(c) 

the making of any false or fictitious entries in the books or records of any Group Company by any Person; or

	(d) 

the using of any assets of any Group Company for the establishment of any unlawful or unrecorded fund of monies or other assets, or the making of any unlawful or undisclosed payment.

	(ii) 

No Group Company or its Representatives has ever been found by a Governmental Authority to have violated any criminal or securities Law or is subject to any indictment or any government investigation for bribery.

3.15  

Related Party Transactions.  Except as set forth on Section 3.15 of the Disclosure Schedule, no Related Party has any Contract, understanding, or proposed transaction with, or is indebted to,
any Group Company or has any direct or indirect ownership interest in any Group Company, nor is any Group Company indebted (or committed to make loans or extend or guarantee credit) to any Related Party (other than for accrued salaries, reimbursable
expenses or other standard employee benefits). 

3.16 

Tax Matters.

	(i) 

Each of the Group Companies (a) has timely filed all Tax Returns that are required to have been filed by it with any Governmental Authority, (b) has timely paid all Taxes owed by it which are due and payable (whether or not shown
on any Tax Return) and withheld and remitted to the appropriate Governmental Authority all Taxes which it is obligated to withhold and remit from amounts owing to any employee, creditor, customer or third party, and has not waived any statute of
limitations with respect to Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency, other than, in the case of clauses (a) and (b), unpaid Taxes that are in contest with Tax authorities by such entity in good faith
or nonmaterial in amount.

	(ii) 

Each Tax Return referred to in paragraph (i) above was properly prepared in compliance with applicable Laws and was (and will be) true, correct and complete in all material respects. None of such Tax Returns contains a statement
that is false or misleading or omits any matter that is required to be included or without which the statement would be false or misleading. No reporting position was taken on any such Tax Return which has not been disclosed to the appropriate
Tax authority or in such Tax Return, as may be required by Law. All records relating to such Tax Returns or to the preparation thereof required by applicable Laws to be maintained by the Company or the applicable Group Company have
been duly maintained. No written claim has been made by a Governmental Authority in a jurisdiction where any Group Company is or may be subject to taxation. No Tax lien is currently in effect against any of the assets of any Group Company.

20

(iii) 

All Tax credits and Tax holidays enjoyed by the Group Company established under the Laws of the PRC under applicable Laws since its establishment have been in compliance with all applicable Laws and is not subject to reduction,
revocation, cancellation or any other changes (including retroactive changes) in the future, except through change in applicable Laws published by relevant Governmental Authority.

	(iv) 

None of the Group Companies is resident for Tax purposes of, or is otherwise subject to income Tax, in any jurisdiction other than the jurisdiction in which it has been organized.

	(v) 

None of the Company or any of its Subsidiaries is or has been for the past two years a (i) passive foreign investment company as described in Code Section 1297; (ii) controlled foreign corporation described in Code Section 957;
(iii) a qualified intermediary described in Treasury Regulations section 1.1441-1.

	(vi) 

Neither the Company, nor any of its Subsidiaries, nor any of the Founders has personal liability under local law for the debts and claims of the relevant entity. There has been no communication from any Governmental Authority
relating to or affecting the tax classification of the Company or any of its Subsidiaries.

	(vii) 

Each Group Company has conducted all transactions with Related Parties at arm’s length.

	
3.17 

Environmental and Safety Laws.

	(i) 

No Group Company (a) owns or operates any real property contaminated with any substance that is subject to any Environmental Laws, (b) is liable for any off-site disposal or contamination pursuant to any Environmental Laws, or (c)
is subject to any Action relating to any Environmental Laws, and there is no pending or threatened Action against any of them which could reasonably be expected to lead to any Liability under or as a result of any Environmental Law. No material
expenditures are or will be required on the part of any Group Company in order to comply with any Environmental Law.

	(ii) 

Each Group Company is in compliance with all Environmental Laws, has obtained and holds all Consents required under Environmental Law (the “Environmental Consents”), and is in compliance with all terms and
conditions of such Environmental Consents. No notice, order, judgment, demand or letter requiring the taking of remedial or other action under or pursuant to the Environmental Law or the Environmental Consents has been received by any of Group Companies. No Group Company has been
notified of, nor does any of the Group Companies have, any Liabilities in respect of any Environmental Law or Environmental Consents with respect to the storage, treatment, clean-up or disposal of any pollutant, contaminant, substance, material or
waste (whether solid, liquid or gaseous).

21

 (iii) 

There have been no environmental investigations, studies, tests, reviews or other analyses conducted by, on behalf of, or which are in the possession or control of the Group with respect to any Real Property that have not been
delivered or made available to the Investor prior to execution of this Agreement.

3.18 

Title; Liens. Each Group Company has good and valid title to, or a valid leasehold interest in, all of its material assets, whether real, personal or mixed, purported to be owned or that are
used by such Group Company, free and clear of any Liens, other than Permitted Liens. The foregoing assets collectively represent in all material respects all assets, rights and properties necessary for the conduct of the business of such Group
Company as presently conducted. Except for leased items, no Person other than a Group Company owns any interest in any such assets. All leases of personal property to which a Group Company is a party are fully effective and afford the Group Company
valid leasehold possession of the personal property that is the subject of the lease. All machinery, vehicles, equipment and other tangible personal property owned or leased by a Group Company is (a) in good condition and repair in all material
respects (reasonable wear and tear excepted) and (b) not obsolete or in need in any material respect of renewal or replacement, except for renewal or replacement in the ordinary course of business consistent with past practice. 

3.19 

Intellectual Property Rights.

	(i) 

Company IP. Each Group Company owns or otherwise has the sufficient rights (including but not limited to the rights of development, maintenance, licensing and sale) to, all Intellectual Property (“Company
IP”) necessary and sufficient to conduct its business as currently conducted and as proposed to be conducted by such Group Company without any conflict with or infringement of the rights of any other Person.

	(ii) 

Infringement, Misappropriation and Claims. No Group Company has violated, infringed or misappropriated any Intellectual Property of any other Person, nor has any Group Company received any written notice alleging any of the
foregoing.

	(iii) 

Protection of IP. Each Group Company has taken reasonable and appropriate steps to register, protect, maintain and safeguard material Company IP and made all appropriate filings, registrations and payments of fees in
connection with the foregoing. Without limiting the foregoing, all current officers, employees, consultants and independent contractors of any Group Company having access to any material Company IP have executed and delivered to such Group
Company an agreement requiring the protection of such trade secret or proprietary information.

22

3.20 

Real Property.  Section 3.20 of the Disclosure Schedule contains an accurate and complete list and description of (i) all real properties owned or leased by any Group Company (collectively, the
“Real Property”), and (ii) any lease under which any such Real Property is possessed (the “Leases”). None of the Group Company is in default under any of the Leases, and there is no default by any of the lessors
thereunder.

3.21 

Labor and Employment Matters. Except as disclosed in Section 3.21 of the Disclosure Schedule, each Group Company has complied in all material respects with all applicable Laws related to labor
or employment, including provisions thereof relating to wages, hours, working conditions, benefits, retirement, social welfare, equal opportunity and collective bargaining. Except as disclosed in Section 3.21 of the Disclosure Schedule, each Group
Company is in compliance in all material respects with all Laws and Contracts relating to its provision of any form of Social Insurance, and has paid, or made provision for the payment of, all Social Insurance contributions required under applicable
Laws and Contracts. Except as disclosed in Section 3.21 of the Disclosure Schedule, there is no, and there has not been in the last three (3) years, any Action relating to the violation or alleged violation of any applicable Laws by any Group
Company related to labor or employment, including any charge or complaint filed by an employee with any Governmental Authority or any Group Company.

3.22 

Offering.

	(i) 

Subject in part to the truth and accuracy of each Investor’s representations set forth in Section 4 hereof, the offer, sale and issuance of the Shares pursuant to the terms hereof, and the issuance of applicable
Conversion Shares upon conversion of the Shares are exempt from the registration requirements of all applicable securities Laws, and neither the Company nor any authorized agent acting on their behalf will take any action that would cause the loss
of such exemption.

	(ii) 

Neither the Company nor any of their respective Affiliates, nor any Person acting on its behalf or their behalf, directly or indirectly has
(i) sold, offered for sale, solicited offers to buy or otherwise negotiated in respect of, any security (as defined in the 1933 Act) which is or will be integrated with the sale of the Shares by the Company in a manner that would require the registration under the 1933 Act of the offer or sale of the
Shares or the Conversion Shares; or (ii) offered or solicited offers to buy or sell the Shares or the Conversion Shares by any form of general solicitation or general advertising (as those terms are used in Rule 506 of Regulation D as promulgated by
the SEC) or in any manner involving a public offering within the meaning of Section 4(2) of the 1933 Act.

	(iii) 

None of the Warrantors has, and no one acting on its behalf has,
(a) taken, directly or indirectly, any action designed to cause or to result in, or that has constituted or which might reasonably be expected to constitute, the stabilization or manipulation of the price of any
Security of the Company to facilitate the sale or resale of the Shares, (b) sold, bid for, purchased, or paid any compensation for soliciting purchases of the Shares, or (c) paid or agreed to pay to any person any compensation for soliciting another
to purchase any other Securities of the Company. 

23

3.23  

Over-the-Counter Bulletin Board Quotation.  The Company’s Common Stock is quoted on the OTCBB. There is no Action pending or threatened against the Company by the Financial Industry
Regulatory Authority or the SEC with respect to any intention by such entities to prohibit or terminate the quotation of such securities on the OTCBB. The Common Stock has been registered pursuant to Section 12(g) of the Exchange Act and the Company
has taken no action designed to, or which is likely to have the effect of, terminating the registration of such securities under the Exchange Act nor has the Company received any notification that the SEC is contemplating terminating such
registration. 

3.24  

Investment Company.  The Company is not, and as a result of the offer and sale of the Shares as contemplated herein will not be, required to register as an “investment company” under,
and as such term is defined in, the U.S. Investment Company Act of 1940, as amended. 

3.25  

Selling Restrictions Compliance.  Neither the Company nor any of its or their Affiliates nor any person acting on its or their behalf has offered or sold, or will offer or sell, any Securities
under circumstances that would require the registration of any of the Shares under the 1933 Act; neither the Company nor any of its or their Affiliates nor any person acting on its or their behalf has engaged or will engage in any form of general
solicitation or general advertising within the meaning of Regulation D under the 1933 Act in connection with the offer or sale of the Shares in the United States. 

3.26 

Full Disclosure.

	(i) 

The Warrantors have provided the Investor with all the information regarding the Group requested by the Investor for deciding whether to purchase the Shares. No representation or warranty of the Warrantors contained in this
Agreement or any certificate furnished to the Investor at Closing contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained herein or therein not misleading in light of the
circumstances under which they were made. There is no fact that the Warrantors have not disclosed to the Investor in writing and of which any of its officers, directors or executive employees has knowledge and that has had or would reasonably be
expected to have a Material Adverse Effect.

	(ii) 

Each of the Warrantors confirms that neither it, nor any other Person acting on its behalf, has provided the Investor or its agents or counsel with any information that constitutes or could reasonably be expected to constitute
material, nonpublic information.

24

4. 

Representations and Warranties of the Investor.  The Investor hereby represents and warrants to the Company that:

4.1  

Organization and Good Standing.  Such Investor is an entity duly organized, validly existing and in good standing under the laws of Cayman Islands. 

4.2  

Authorization.  Such Investor has full power and authority to enter into this Agreement and each of the other Transaction Documents to which it is a party, and this Agreement and each of the
other Transaction Documents to which it is a party, when executed and delivered by such Investor, will constitute valid and legally binding obligations of the Investor, enforceable against it in accordance with their respective terms except (i) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium and other Laws of general application affecting enforcement of creditors’ rights generally, and (ii) as limited by Laws relating to the availability of specific
performance, injunctive relief or other equitable remedies. 

4.3  

Investment Experience.  At the time such Investor was offered the Shares, it was, and at the date hereof it is, an “accredited investor” as defined in Rule 501(a) under the 1933 Act.
Such Investor is not a registered broker-dealer under Section 15 of the Exchange Act. Such Investor has the knowledge, sophistication and experience necessary to make, and is qualified to make decisions with respect to, an investment decision like
that involved in the purchase of the Shares and can bear the economic risk of a total loss of its investment in the Shares. 

4.4  

Purchase for Own Account.  The Shares to be received by the Investor will be acquired for investment purposes for such Investor’s own account or the account of one or more of the
Investor’s Affiliates, not as a nominee or agent, and not with a view to the immediate resale or distribution of any part thereof, and such Investor has no present intention of selling, granting any participation in, or otherwise distributing
the same. 

4.5 

Independent Investment Decision. Such Investor has independently evaluated the merits of its decision to purchase Shares pursuant to the Transaction Documents, and such Investor confirms that it
has not relied on the advice of any other Investor’s business and/or legal counsel in making such decision. 

4.6 

General Solicitation. Such Investor is not purchasing the Shares as a result of any advertisement, article, notice or other communication regarding the Shares published in any newspaper,
magazine or similar media or broadcast over television or radio or presented at any seminar or any other general solicitation or general advertisement. 

4.7 

Access to Information. Such Investor acknowledges that it has reviewed the SEC Reports and the Disclosure Schedule (collectively, the “Disclosure Materials”) and has been
afforded (i) the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Company concerning the terms and conditions of the offering of the Shares and the merits and risks of investing in
the Shares; (ii) access to information about the Company and the Subsidiaries and their respective financial condition, results of operations, business, properties, management and prospects sufficient to enable it to evaluate its investment; and
(iii) the opportunity to obtain such additional information that the Company possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment. Neither such
inquiries nor any other investigation conducted by or on behalf of such Investor or its representatives
or counsel shall modify, amend or affect such Investor’s right to rely on the truth, accuracy and completeness of the Disclosure Materials and the Company’s representations and warranties contained in the Transaction Documents. 

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5. 

Conditions of the Investor’s Obligations at the Closing.  The obligations of the Investor to consummate the Closing under Section 2 of this Agreement, unless otherwise waived in writing by the Investor, are
subject to the fulfillment of each of the following conditions:

5.1 

Representations and Warranties.  Each of the representations and warranties of the Warrantors contained in Section 3 shall be true, complete and not misleading when made, and shall be
true, complete and not misleading on and as of the Closing with the same effect as though such representations and warranties had been made on and as of the date of such Closing (except for those representations and warranties that speak as of a
specific date, which shall be true, complete and not misleading as of such specified date).

5.2  

Consents.  All Consents of any Governmental Authority or any other Person required in connection with all of the transactions contemplated under the Transaction Documents and for the conduct and
operation of the business by each Group Company shall have been duly obtained and shall continue to be in effect. 

5.3  

Proceedings and Documents.  All corporate and other proceedings taken by Group Companies in connection with the transactions contemplated by the Transaction Documents and all documents incident
thereto, shall have been completed in form and substance satisfactory to the Investor, and the Investor shall have received all such counterpart original or other copies of such documents as it may reasonably request. 

5.4 

Opinions of Counsel. The Investor shall have received:

	(i) 

from Jincheng Tongda & Neal, special People’s Republic of China counsel for the Warrantors, an opinion addressed to the Investor in form and substance satisfactory to the Investor, dated as of the Closing; and

	(ii) 

from Pillsbury Winthrop Shaw Pittman LLP, special United States counsel for the Warrantors, an opinion addressed to the Investor in form and substance satisfactory to the Investor, dated as of the Closing.

	
5.5 

Adoption and Filing of Certificate of Designation. The Certificate of
Designation shall have been duly adopted by the Board, be in full force and effect and shall have been filed with the Secretary of State of the State of Delaware. 

5.6

Transaction Documents.  Each Transaction Document shall have been duly executed and delivered by all the parties thereto (other than the Investor) to the Investor. 

5.7  

Board of Directors.  The Board of Directors of the Company shall be set to consist of five (5) directors.  Two (2) persons nominated by the Investor shall have been appointed to the Board of
Directors, and evidence thereof shall have been delivered to the Investor. The Company shall have accepted one (1) person designated by the Investor as board observer, who shall have rights to attend all meetings of the Board or of any committee of
the Board in a non-voting observer capacity. 

26

5.8  

Bank Account.  The Company shall have set up bank accounts co-signed by a
representative of the Investor and a representative of the Company and bank
accounts for capital expenditure for the Group. 

5.9  

Financial Information. The Company shall have provided the consolidated financial statements for the fiscal quarter ended April 30, 2009, including footnotes thereto, such financial statements:
(i) must be acceptable to the Investor, (ii) were prepared in accordance with US GAAP during the periods involved, (iii) fairly present in all material respects the consolidated financial position of the Company and its consolidated subsidiaries as
of the dates thereof and the consolidated results of their operations and cash flows for the periods then ended and (iv) are in all material respects in accordance with the books of account and records of the Company and its consolidated
subsidiaries. 

5.10  

Budget and Business Plan. The Company shall have provided an annual budget and business plan for the fiscal year ending October 31, 2011 for the Group, including the projected balance sheets,
income statements and statements of cash flows, the projected budget for operation of business and all other material matters relating to the operation, development and business of the Group. 

5.11  

PRC Companies Restructuring. All of the actions required to be taken and all of the documents required to be executed prior to the Closing relating to PRC Companies Restructuring should have
been taken or executed to the satisfaction of the Investor. 

5.12

Jinghai Plant Transfer Supplemental Agreement. The Company shall have entered into the Jinghai Plant Transfer Supplemental Agreement with the parties thereof and such agreement is in full force
and effect and enforceable by each party thereto. 

5.13 

Share Pledge. Global Rock shall have pledged to the Investor, and granted to the Investor a security interest in certain numbers of shares of Common Stock held by Global Rock pursuant to a
pledge agreement (the “Pledge Agreement”) in form and substance satisfactory to the Investor.

5.14  

Employee Proprietary Information, Inventions Assignment and Non-Competition Agreement.  The Company shall have obtained, and shall have caused its Subsidiaries to obtain, an employee
proprietary information, inventions assignment and non-competition agreement in form and substance reasonably satisfactory to the Investor from all current Key Employees and other employees identified by the Investor. 

5.15  

Trade Secret Escrow. All trade secrets relating to the goat milk odor elimination technologies being used by the Company shall have been escrowed with a reputable entity to the satisfaction of
the Investor. 

5.16  

Lock-up Agreements.  The Company shall have entered into share lock-up agreements with certain shareholders as identified by the Investors in form and substance reasonably satisfactory to the
Investor. 

5.17 

Agreement with Richlink. Tianjin Yayi shall have entered into an agreement in form and substance reasonably satisfactory to the Investor with Taiwan Richlink Enterprises Co., Ltd. concerning
the license and/or the transfer of goat milk odor elimination technologies, which agreement shall confirm that Tianjin Yayi and its Affiliates are not
obligated to make any payments regarding such technologies license or transfer and they are entitled to continue to use the above technologies without time limit. 

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5.18  

Absence of Material Litigation.  There shall not be pending any material litigation against any Group Company. 

5.19  

Absence of Material Adverse Effect.  Since the Statement Date, there shall not have occurred a Material Adverse Effect. 

5.20  

Completion of Diligence. Each Investor shall have completed the business, accounting and legal due diligence review on the Group, and the results of which shall have been to its reasonable
satisfaction. 

5.21  

Legal Matters.  There shall not be issued, enacted, or adopted any applicable Law that prohibits, restrains or renders illegal the transactions contemplated by this Agreement or any other
Transaction Document. No Action shall be pending for the purpose or with the probable effect of enjoining or preventing the consummation of the transactions contemplated by this Agreement or any other Transaction Document. 

5.22  

Closing Certificate. Each of the Warrantors shall have executed and delivered to the Investor a certificate dated as of the Closing certifying (i) that the conditions specified in this
Section 5 have been fulfilled, (ii) as to the signatures and authority of the Persons signing the Transaction Documents on their behalf, and (iii) that attached thereto are the certified true and complete copies of (a) the Charter Documents
of each Warrantor, (b) all resolutions approved by the shareholders and/or boards of directors related to the transactions contemplated by the Transaction Documents, if applicable, and (c) as applicable, good standing certificates with respect to
the Company, Charleston and Global Rock from the applicable authority(ies) in the jurisdiction of its incorporation, or with respect to the PRC Entities, the business licenses of such entities with current annual inspection stamps of branches of
SAIC. 

6.  

Conditions of the Company’s Obligations at Closing. The obligations of the Company to consummate the Closing under Section 2 of this Agreement, unless otherwise waived in writing by the Company, are subject to the
fulfillment of each of the following conditions: (i) the representations and warranties of the Investor contained in Section 4 shall be true, complete and not misleading when made, and shall be true, complete and not misleading on and as of
the Closing with the same effect as though such representations and warranties had been made on and as of the date of the Closing (except for those representations and warranties that speak as of a specific date, which shall be true, complete and
not misleading as of such specified date), (ii) there shall not be issued, enacted, or adopted any applicable Law that prohibits, restrains or renders illegal the transactions contemplated by this Agreement or any other Transaction Document, and no
Action shall be pending for the purpose or with the probable effect of enjoining or preventing the consummation of the transactions contemplated by this Agreement or any other Transaction Document, and (iii) the Investor shall have delivered to the
Company duly executed counterparts to the Transaction Documents to which it is a party. 

7. 

Covenants.

7.1 

Use of Proceeds. The Company shall use the entire proceeds from the
issuance of the Shares pursuant to this Agreement for business expansion, working capital
and capital expenditure in accordance with the Company’s budget and business plan, as approved by the Board. 

 28 

7.2  

Subsidiary Boards. As soon as practicable, the Company shall cause the composition of each of the Company’s Subsidiaries to consist of the same persons as directors as those then on the
Company’s Board. 

7.3 

Supervisors Committee.  As soon as practicable, but in any event within
twenty (20) business days after the Closing, the Company should cause each PRC Entity to appoint the sole supervisor with a candidate nominated by the Investor. 

7.4 

Board Activities.  As soon as practicable, the Company shall designate a secretary of the board of director (the “Board Secretary”) to administer all stockholders and Board
meetings.  The Board Secretary shall ensure (i) proper notification and adequate meeting materials are provided for directors and stockholders’ meetings and (ii) accurate minutes of meetings are taken and available for directors’ comments
and approval within five (5) business days after the meeting. Furthermore, the Company shall reimburse all expenses to the Investor relating to all Board activities, including but not limited to, attending the Board meetings by the Investor Director
and/or its representatives.

7.5 

ESOP.

	(i) 

As soon as practicable following the Closing, the Company shall duly establish an equity incentive plan in the form and substance reasonably satisfactory to the Series A Majority Holders (the “ESOP”),
providing for the issuance of such number of shares of Common Stock representing no more than 5% of the then total outstanding share capital of the Company on a fully diluted basis, to employees, officers, consultants or directors of the Group
Companies from time to time. Such ESOP should provide that (x) with respect to a particular award under the ESOP, no more than 25% shall vest upon the first anniversary of the grant of such award and thereafter shall not vest any faster than monthly
over the next three (3) years following the first anniversary of such grant; (y) unvested options will terminate, and unvested shares will be subject to a repurchase right at cost, in any case on termination of the employment or other service, with
or without cause; and (z) any individual who owns more than 5% of the shares of Common Stock prior to the Closing shall not be entitled to any grants under the ESOP; in each case, except otherwise approved or waived by the Board (including the
affirmative vote of at least one (1) Investor Director).

	(ii) 

Among the shares of Common Stock reserved for ESOP, the Company shall allocate options equal to 1.5% of post-Closing total number of fully-diluted shares to the Investor Directors, which option shall be vested immediately upon
issuance and at an exercise price equal to the then effective Conversion Price (as defined in the Certificate of Designation), as adjusted pursuant to any anti-dilution protection that shares of Series A Preferred Stock may be entitled to.

29

7.6  

Completion of PRC Companies Restructuring. As soon as practicable, but in any event before December 31, 2010, Warrantors shall cause the fully completion of the PRC Companies Restructuring to
the Investor’s satisfactory. 

7.7 

Jinghai Real Property.

	(i) 

As soon as practicable, but in any event before December 31, 2010, Tianjin Yayi shall have obtained, and the other Warrantors shall procure Tianjin Yayi to obtain, good and marketable title to all the Jinghai Real Property, free
and clear of all liens and such property shall be in good order and condition.

	(ii) 

In the event that Tianjin Yayi has not obtain such title as required under Section 7.7(i) above for any reasons whatsoever, then the Investor shall have the rights, at its sole discretion, to request any of the Warrantors
to repurchase any or all shares of Series A Preferred Stock then held by the Investor. Within ten (10) days (the “Repurchase Date”) after the receipt by such Warrantors of a written request from the Investor, such Warrantors shall
purchase or redeem any or all of the shares of Series A Preferred Stock so requested by the Investor by paying in cash in exchange for the shares of Series A Preferred Stock to be purchased or redeemed an amount per share equal to the Purchase Price
plus an IRR of 25% for the period from the issuance date of the Series A Preferred Stock to the Repurchase Date (such amount, the “Repurchase Amount”).

	(iii) 

The obligations of Global Rock under this Section 7.7 shall be secured a security interest in all shares of Common Stock in the Company held by Global Rock pursuant to the Pledge Agreement.

	
7.8 

Due to Related Parties. Prior to December 31, 2010, Li LIU shall not
demand, withdraw or accept any of the Company borrowings due to her or take any actions that may result in the forgoing effects, without the Investor’s prior consent.

7.9

Executive Search. The Company shall use its best efforts to establish a capable senior management team, including the Chief Executive Officer, the President, the Chief Operating Officer and
the Chief Financial Officer, that is acceptable to the Investor as soon as practicable following the Closing. The Investor shall have the right to recommend candidates for the positions of the Chief Financial Officer and financial controller and the
Company shall appoint the Chief Financial Officer and financial controller only from those candidates recommended by the Investor. 

7.10 

Warrantors’ Additional Covenants.  Warrantors jointly and severally undertake to do and perform, or cause to be done and performed, all such acts and things as set forth in Section 7.10 of
the Disclosure Schedule.

30

8. 

Indemnity.

	
8.1 

Indemnification by the Warrantors.

	(i) 

Each Warrantor hereby agrees to jointly and severally indemnify, defend and hold harmless the Investor, and such Investor’s directors, employees, Affiliates, agents, advisors, auditors, assigns and transferees (each an
“Indemnitee”), from and against any and all Indemnifiable Losses suffered by such Indemnitee, directly or indirectly, as a result of, or based upon or arising from (a) any inaccuracy in or breach or nonperformance of any of the
representations, warranties, covenants or agreements in or pursuant to any of the Transaction Documents by the parties thereto (other than the Investor) and (b) any violation of Order No. 10, SAFE Rules and Regulations by any Warrantor or a Security
Holder thereof or any non- compliance with all Laws and Contracts relating to the provision of any form of Social Insurance by any of the Group Company, regardless whether such violation or noncompliance has been disclosed in the Disclosure
Schedule.

	(ii) 

Each Warrantor hereby agrees to jointly and severally indemnify and hold harmless Investor from and against (a) any Taxes imposed on such Investor by any PRC Governmental Authority in connection with its investment in the Company,
and (b) any Indemnifiable Loss attributable to (x) any Taxes (or the non-payment thereof) of any Group Company for all taxable periods ending on or before the Closing and the portion through the end of the Closing for any taxable period that
includes (but does not end on) the Closing and (y) any liability for any Taxes of any other Person imposed by any Governmental Authority on any Group Company as a transferee, successor, withholding agent, accomplice, or party providing conveniences
in connection with an event or transaction occurring before the Closing.

	(iii) 

Any Party seeking indemnification with respect to any Indemnifiable Loss (an “Indemnified Party”) shall give written notice to the party required to provide indemnity hereunder (the “Indemnifying
Party”).

	
8.2 

Defense of Third Party Claims. If any claim, demand or Liability is asserted
by any third party against any Indemnified Party, the Indemnifying Party shall at its own expense, upon the written request of the Indemnified Party, defend any actions or proceedings brought against the Indemnified Party in respect of matters
embraced by the indemnity under this Section 8.2.  If the Indemnifying Party assumes the defense, the Indemnifying Party may not agree to any compromise or settlement to which the Indemnified Party has not consented in writing. If, after a
request to defend any action or proceeding, the Indemnifying Party neglects to promptly defend or continue the defense of the Indemnified Party reasonably and in good faith, the Indemnified Party may assume the defense thereof at the expense of the
Indemnifying Party, and a recovery against the Indemnified Party suffered by it in good faith shall be conclusive in its favor against the Indemnifying Party. 

31

9. 

Miscellaneous.

9.1 

Survival of Representations, Warranties and Covenants. The warranties,representations and covenants of the Warrantors and Investor contained in or made pursuant to this Agreement shall survive the execution and delivery of this Agreement and the Closing and shall in no way be affected by any investigation of the
subject matter thereof made by or on behalf of the Investor or the Warrantors. All statements as to factual matters contained in any certificate or other instrument delivered by or on behalf of the Warrantors pursuant hereto in connection with the
transactions contemplated hereby shall be deemed to be representations and warranties by the Warrantors hereunder. 

9.2 

Governing Law.  This Agreement shall be governed by and construed under the Laws of the State of New York, the United States of America (“New York”).

9.3  

Successors and Assigns.  Except as otherwise provided herein, the terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors, assigns and
transferees of the Parties hereto whose rights or obligations hereunder are affected by such terms and conditions. This Agreement, and the rights and obligations hereunder, shall not be assigned by any Warrantor without the prior written consent of
the Investor.  Nothing in this Agreement, express or implied, is intended to confer upon any Person other than the Parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this
Agreement, except as expressly provided in this Agreement. 

9.4 

Confidentiality.  Each of the Parties agree to keep confidential all material non-public information provided to it by the other Party that is designated by the provider thereof as confidential,
unless compelled to disclose by judicial or administrative process or by other requirements of law or by the rules and regulations of, or pursuant to any agreement of a stock exchange or trading system, except to the extent that such information can
be shown to have been (a) previously known by the Party to which it was furnished, (b) in the public domain through no fault of such Party, or (c) later lawfully acquired by the Party to which it was furnished from other sources, which source is not
a representative of the other Party. Each Party shall be deemed to have satisfied its obligations to hold confidential information concerning or supplied by the other Party, if it exercises the same care as it takes to preserve confidentiality for
its own similar information. For the avoidance of doubt, any disclosure of information required to be included by each Party in its respective filings with the SEC as required by the applicable laws will not be violation of this Section 9.4.

9.5  

Public Announcements.  Parties shall cooperate in good faith to jointly prepare all press releases and public announcements pertaining to this Agreement and the transactions governed by it, and
none of the foregoing shall issue or otherwise make any public announcement or communication pertaining to this Agreement or the transaction without the prior consent from the other Party, except as required by Law or by the rules and regulations
of, or pursuant to any agreement of, a stock exchange or trading system. Each Party will not unreasonably withhold approval from the others with respect to any press release or public announcement. This provision will not apply to communications by
any Party to its counsel, accountants and other professional advisors. 

9.6 

Amendments and Waivers.  Any term of this Agreement may be amended only with the written consent of the Parties, and the observance of any term of this Agreement may be waived (either generally
or in a particular instance and either retroactively
or prospectively) only with the written consent of the Party against whom such waiver is sought. Any amendment effected in accordance with this paragraph shall be binding upon each of the Parties hereto.

32

9.7 

Dispute Resolution.

	(i) 

Any dispute, controversy or claim (each, a “Dispute”) arising out of or relating to this Agreement, or the interpretation, breach, termination, validity or invalidity thereof, shall be referred to arbitration upon
the demand of either party to the Dispute with notice (the “Arbitration Notice”) to the other.

	(ii) 

The Dispute shall be settled by arbitration in Hong Kong by the Hong Kong International Arbitration Centre (the “HKIAC”) in accordance with the Hong Kong International Arbitration Centre Administered Arbitration
Rules (the “HKIAC Rules”) in force when the Arbitration Notice is submitted in accordance with the HKIAC Rules. There shall be three (3) arbitrators. The HKIAC Council shall select the presiding arbitrator, who shall be qualified to
practice law in New York.

	(iii) 

The arbitral proceedings shall be conducted in English. To the extent that the HKIAC Rules are in conflict with the provisions of this Section 9.7, including the provisions concerning the appointment of the arbitrators, the
provisions of this Section 9.7 shall prevail.

	(iv) 

Each party to the arbitration shall cooperate with each other party to the arbitration in making full disclosure of and providing complete access to all information and documents requested by such other party in connection with
such arbitral proceedings, subject only to any confidentiality obligations binding on such party.

	(v) 

The award of the arbitral tribunal shall be final and binding upon the parties thereto, and the prevailing party may apply to a court of competent jurisdiction for enforcement of such award.

	(vi) 

The arbitral tribunal shall decide any Dispute submitted by the parties to the arbitration strictly in accordance with the substantive Law of New York and shall not apply any other substantive Law.

	(vii) 

Any party to the Dispute shall be entitled to seek preliminary injunctive relief and/or any other applicable relief, if possible, from any court of competent jurisdiction in aid of, pending or independently of the resolution of
any dispute pursuant to the provisions of this Section 9.7 and/or pending the constitution of the arbitral tribunal.

	(viii) 

During the course of the arbitral tribunal’s adjudication of the Dispute, this Agreement shall continue to be performed except with respect to the part in dispute and under adjudication.

 

(ix)

The Parties to this Agreement agree to the consolidation of arbitrations under the Transaction Documents in accordance with the following:

33

(a) 

In the event of two or more arbitrations having been commenced under any of the Transaction Documents, the tribunal in the arbitration first filed (the “Principal Tribunal”) may in its sole discretion, upon the
application of any party to the arbitrations, order that the proceedings be consolidated before the Principal Tribunal if (A) there are issues of fact and/or law common to the arbitrations, (B) the interests of justice and efficiency would be served
by such a consolidation, and (C) no prejudice would be caused to any party in any material respect as a result of such consolidation, whether through undue delay or otherwise. Such application shall be made as soon as practicable and the party
making such application shall give notice to the other parties to the arbitrations.

	(b) 

The Principal Tribunal shall be empowered to (but shall not be obliged to) order at its discretion, after inviting written (and where desired oral) representations from the parties that all or any of such arbitrations shall be
consolidated or heard together and/or that the arbitrations be heard immediately after another and shall establish a procedure accordingly. All Parties shall take such steps as are necessary to give effect and force to any orders of the Principal
Tribunal.

	(c) 

If the Principal Tribunal makes an order for consolidation, it:
(A) shall thereafter, to the exclusion of other arbitral tribunals, have jurisdiction to resolve all disputes forming part of the consolidation order; (B) shall order that notice of the consolidation order and its effect be given immediately to any arbitrators already appointed in relation to the
disputes that were consolidated under the consolidation order; and (C) may also give such directions as it considers appropriate (a) to give effect to the consolidation and make provision for any costs which may result from it (including costs in
any arbitration rendered functus officio under this Section 9.7); and (b) to ensure the proper organization of the arbitration proceedings and that all the issues between the parties are properly formulated and resolved.

	(d) 

Upon the making of the consolidation order, any appointment of arbitrators relating to arbitrations that have been consolidated by the Principal Tribunal (except for the appointment of the arbitrators of the Principal Tribunal
itself) shall for all purposes cease to have effect and such arbitrators are deemed to be functus officio, on and from the date of the consolidation order. Such cessation is without prejudice to
(A) the validity of any acts done or orders made by such arbitrators before termination, (B) such arbitrators’ entitlement
to be paid their proper fees and disbursements and (C) the date when any claim or defense was raised for the purpose of applying any limitation period or any like rule or provision.

34

(e)  

The Parties hereby waive any objections they may have as to the validity and/or enforcement of any arbitral awards made by the Principal Tribunal following the consolidation of disputes or arbitral proceedings in accordance with this Section
9.7 where such objections are based solely on the fact that consolidation of the same has occurred.

9.8 

Enforcement.  The Parties hereto acknowledge and agree irreparable harm would occur for which money damages would not be an adequate remedy in the event that any of the provisions of any
Transaction Document were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the Parties shall be entitled to injunction to prevent breaches of any Transaction Document and to enforce
specifically the terms and provisions of each Transaction Document, this being in addition to any other remedy to which they are entitled at law or in equity.

9.9 

Notices.  Any notice required or permitted pursuant to this Agreement shall be given in writing and shall be given either personally or by sending it by next-day or second-day courier service,
fax, electronic mail or similar means to the address as shown below the signature of such Party on the signature page of this Agreement (or at such other address as such Party may designate by fifteen (15) days’ advance written notice to the
other Parties to this Agreement given in accordance with this Section 9.9). Where a notice is sent by next-day or second-day courier service, service of the notice shall be deemed to be effected by properly addressing, pre-paying and sending
by next-day or second-day service through an internationally-recognized courier a letter containing the notice, with a written confirmation of delivery, and to have been effected at the earlier of (i) delivery (or when delivery is refused) and (ii)
expiration of two (2) Business Days after the letter containing the same is sent as aforesaid. Where a notice is sent by fax or electronic mail, service of the notice shall be deemed to be effected by properly addressing, and sending such notice
through a transmitting organization, with a written confirmation of delivery, and to have been effected on the day the same is sent as aforesaid, if such day is a Business Day and if sent during normal business hours of the recipient, otherwise the
next Business Day.

9.10 

Fees and Expenses.  Each Warrantor shall pay all of its own costs and expenses incurred in connection with the negotiation, execution, delivery and performance of this Agreement and other
Transaction Documents and the transactions contemplated hereby and thereby. The Company shall pay or reimburse all reasonable costs and expenses incurred by the Investor in connection with the negotiation, execution, delivery and performance of this
Agreement and other Transaction Documents and the transactions contemplated hereby and thereby, including all fees and expenses of counsel, accountants, consultants, and other advisors to the Investor (collectively “Investor
Expenses”) up to RMB1,500,000, if the Closing occurs or if the Closing does not occur for any reasons not attributable to the Investor. In addition, if any action at law or in equity is necessary to enforce or interpret the terms of this
Agreement, the prevailing party shall be entitled to reasonable attorney’s fees and expenses in addition to any other relief to which such party may be entitled.

9.11 

Severability.  If any provision of this Agreement is prohibited by applicable Law or otherwise determined to be invalid or unenforceable by a court of competent
jurisdiction, the provision that would otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the broadest extent that it would be valid and enforceable, and the invalidity or unenforceability of such provision shall
not affect the validity of the remaining provisions of this Agreement so long as this Agreement as so modified continues to express, without material change, the original intentions of the parties as to the subject matter hereof and the prohibited
nature, invalidity or unenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations of the parties or the practical realization of the benefits that would otherwise be conferred
upon the parties. The Parties will endeavor in good faith negotiations to replace the prohibited, invalid or unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or
unenforceable provision(s). 

 35 

9.12  

No Waiver.  Failure to insist upon strict compliance with any of the terms, covenants, or conditions hereof will not be deemed a waiver of such term, covenant, or condition, nor will any waiver
or relinquishment of, or failure to insist upon strict compliance with, any right, power or remedy power hereunder at any one or more times be deemed a waiver or relinquishment of such right, power or remedy at any other time or times. 

9.13  

Rights Cumulative.  Each and all of the various rights, powers and remedies of a Party hereto will be considered to be cumulative with and in addition to any other rights, powers and remedies
which such Party may have at law or in equity in the event of the breach of any of the terms of this Agreement. The exercise or partial exercise of any right, power or remedy will neither constitute the exclusive election thereof nor the waiver of
any other right, power or remedy available to such Party. 

9.14  

Delays or Omissions.  No delay or omission to exercise any right, power or remedy accruing to any Party under this Agreement, upon any breach or default of any other Party under this Agreement,
shall impair any such right, power or remedy of such non-breaching or non-defaulting Party nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in any similar breach or default thereafter
occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring.  Any waiver, permit, consent or approval of any kind or character on the part of any Party of any
breach or default under this Agreement, or any waiver on the part of any Party of any provisions or conditions of this Agreement, must be in writing and shall be effective only to the extent specifically set forth in such writing.  All remedies,
either under this Agreement or by law or otherwise afforded to any Party, shall be cumulative and not alternative. 

9.15  

No Presumption.  The Parties agree that this Agreement was jointly drafted by them, that each has been represented by counsel in connection with this Agreement, and that any applicable Law that
would require interpretation of any claimed ambiguities in this Agreement against the Party that drafted it has no application and is expressly waived. If any claim is made by a Party relating to any conflict, omission or ambiguity in the provisions
of this Agreement, no presumption or burden of proof or persuasion will be implied because this Agreement was prepared by or at the request of any Party or its counsel, and no Party will claim or assert otherwise. 

9.16 

Headings and Subtitles; Interpretation.  The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.
Unless a provision hereof expressly provides otherwise:

36

(i) 

the term “or” is not exclusive;

	(ii) 

words in the singular include the plural, and words in the plural include the singular;

	(iii) 

the terms “herein”, “hereof”, and other similar words refer to this Agreement as a whole and not to any particular section, subsection, paragraph, clause, or other subdivision;

	(iv) 

the term “including” will be deemed to be followed by, “but not limited to”,

	(v) 

the masculine, feminine, and neuter genders will each be deemed to include the others;

	(vi) 

the terms “shall”, “will”, and “agrees” are mandatory, and the term “may” is permissive;

	(vii) 

the term “day” means “calendar day”, and “month” means calendar month,

	(viii) 

all references to dollars or to “US$” are to currency of the United States of America (and shall be deemed to include reference to the equivalent amount in other currencies),

	(ix) 

references to laws include any such law modifying, re-enacting, extending or made pursuant to the same or which is modified, re-enacted, or extended by the same or pursuant to which the same is made,

	(x) 

each representation, warranty, agreement, and covenant contained herein will have independent significance, regardless of whether also addressed by a different or more specific representation, warranty, agreement, or covenant,
and

	(xi) 

reference to an agreement means such agreement as amended from time to time.

9.17  

Counterparts.  This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
Facsimile and e-mailed copies of signatures shall be deemed to be originals for purposes of the effectiveness of this Agreement. 

9.18 

No Commitment for Additional Financing.  Each of the Warrantors acknowledges and agrees that the Investor have made no representation, undertaking, commitment or agreement to provide or assist
such Warrantor in obtaining any financing, investment or other assistance, other than the purchase of the Shares as set forth herein and subject to the conditions set forth herein.

9.19 

Entire Agreement.  This Agreement and the other Transaction Documents, together with all schedules and exhibits hereto and thereto, constitute the entire agreement among the Parties and
supersedes all prior agreements and understandings (oral or written)

37

with respect to the subject matter hereof and thereof, and no Party shall be liable or bound to any other Party in any manner by any warranties, representations, or covenants except as specifically set forth herein or therein.

[The remainder of this page has been left intentionally blank]

38

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. 

 

  	

COMPANY:  

Yayi International Inc.,

a Delaware company 

By: /s/ Li LIU                   

       Name: Li LIU

     Title: Chief Executive Officer
and President  

Address:   

c/o Tianjin Yayi Industrial Co., Ltd., 

No. 9 Xingguang Road, 

Northern Industrial Park of 

Zhongbei Town, Xiqing District, 

Tianjin 300384, China  

 

 

Fax:                  
+86 (22) 2798-4358 

Tel:                  
+86 (22) 2798-4033 

Attention:       
Ms. Li LIU, Chief Executive Officer
and President  

      

 

 

SIGNATURE PAGE TO SERIES A PREFERRED 

STOCK PURCHASE AGREEMENT 

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. 

  	
      
GLOBAL ROCK: 

       

Global Rock Stone Industrial Ltd,

a British Virgin Islands company 

 

By: /s/ Fung SHEK             

       Name: Fung SHEK

     Title: Director

Address:   

c/o Tianjin Yayi Industrial Co., Ltd., 

No. 9 Xingguang Road, 

Northern Industrial Park of 

Zhongbei Town, Xiqing District, 

Tianjin 300384, China  

 

 

Fax:                  
+86 (22) 2798-4358 

Tel:                  
+86 (22) 2798-4033 

Attention:        Mr. Fung SHEK

       

 

 

SIGNATURE PAGE TO SERIES A PREFERRED 

STOCK PURCHASE AGREEMENT 

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. 

  	

CHARLESTON: 

 

Charleston Industrial Ltd, 

a British Virgin Islands company

 

By: /s/ Li LIU             

       Name: Li LIU

     Title: Director

Address:   

c/o Tianjin Yayi Industrial Co., Ltd., 

No. 9 Xingguang Road, 

Northern Industrial Park of 

Zhongbei Town, Xiqing District, 

Tianjin 300384, China  

 

 

Fax:                  
+86 (22) 2798-4358 

Tel:                  
+86 (22) 2798-4033 

Attention:        Ms. Li LIU

      

 

 

 

SIGNATURE PAGE TO SERIES A PREFERRED 

STOCK PURCHASE AGREEMENT 

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. 

  	TIANJIN
      YAYI: 
      Tianjin Yayi Industrial Co., Ltd. 

      (天津市亚亿实业有限公司),
      

      

      a company organized under the laws of the
      People’s Republic of China 

      

 

By: /s/ Li LIU            

       Name: Li LIU

     Title: Chairman and General
Manager

Address:   

c/o Tianjin Yayi Industrial Co., Ltd., 

No. 9 Xingguang Road, 

Northern Industrial Park of 

Zhongbei Town, Xiqing District, 

Tianjin 300384, China  

 

 

Fax:                  
+86 (22) 2798-4358 

Tel:                  
+86 (22) 2798-4033 

Attention:        Ms. Li LIU, Chairman and
General Manager

      

 

 

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. 

 

  	
      FOUNDERS:

 

By: /s/ Li LIU             

       Name: Li LIU 
(刘丽)

Address:   

c/o Tianjin Yayi Industrial Co., Ltd., 

No. 9 Xingguang Road, 

Northern Industrial Park of 

Zhongbei Town, Xiqing District, 

Tianjin 300384, China  

 

 

Fax:                  
+86 (22) 2798-4358 

Tel:                  
+86 (22) 2798-4033 

 

By: /s/ Fung SHEK          

       Name: Fung SHEK 
(石峰)

Address:   

c/o Tianjin Yayi Industrial Co., Ltd., 

No. 9 Xingguang Road, 

Northern Industrial Park of 

Zhongbei Town, Xiqing District, 

Tianjin 300384, China  

 

 

Fax:                  
+86 (22) 2798-4358 

Tel:                  
+86 (22) 2798-4033  

      

 

 

SIGNATURE PAGE TO SERIES A PREFERRED 

STOCK PURCHASE AGREEMENT 

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. 

 

  	

INVESTOR:

SAIF Partners III L.P.,

a Cayman Islands exempted limited partnership

By: /s/ Andrew Y. Yan                     

      
Name: Andrew. Y. Yan 

       Title: Authorized Signatory  For and on behalf of SAIF Partners III L.P.

                
 Acting by its general partner  SAIF III GP L.P. 

                
 In turn acting by its general partner  SAIF III GP Capital Ltd 

Address:  

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 

Tel: +86 (10) 6563-0357 

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 

Tel: +852 2918-2214  

       

 

 

 

SIGNATURE PAGE TO SERIES A PREFERRED 

STOCK PURCHASE AGREEMENT 

SCHEDULE I 

Schedule of Founders 

	
Founder Name
		
 
 I.D./Passport Numbers
	

	
Li LIU (刘丽)	
 120104195905017327 (PRC ID Card Number)
	

	
Fung SHEK (石峰)	
 E750805(4) (Hong Kong ID Card Number)
	

 

SCHEDULE II 

Group Companies 

(Information immediately prior to the Closing) 

1.
 Yayi International Inc. 

	
  Place of Incorporation
	
	
 State of Delaware
	

	
  Registered Address
	
	
 1209 Orange Street, Wilmington,
	

	
 
	
	
 New Castle, Delaware, U.S.A.
	

	
  Establishment Date
	
	
 February 12, 1986
	

	
  Directors
	
	
 Li LIU, Cili YAN, Fung SHEK
	

2.
 Charleston Industrial Ltd 

	
  Place of Incorporation
		
 British Virgin Islands
	

	
  Registered Address
		
 Quastisky Building, P.O. Box 4389,
	

	
 
		
 Road Town, Tortola, British Virgin Islands
	

	
  Establishment Date
		
 October 31, 2007
	

	
  Authorized Share Capital
		
 50,000 shares, par value of US$1.00 each
	

	
  Issued Share Capital
		
 50,000 shares, par value of US$1.00 each
	

	
  Shareholder
		
 Yayi International Inc.
	

	
  Director
		
 Li LIU
	

3.
Tianjin Yayi Industrial Co., Ltd.
(天津市亚亿实业有限公司)

	
    
    Place of Incorporation
	
    
    People’s Republic of China

	
    
    Registered Address
	
    
    Unit 4, 4/F, Build D1, Xinmao Tech-park,

	
     
	
    
    Huamao Industry Zone,

	
     
	
    
    People’s Republic of China

	
    
    Establishment Date
	
    
    May 19, 1994

	
    
    Investment Amount
	
    
    RMB 30,000,000

	
    
    Registered Capital
	
    
    RMB 30,000,000

	
    
    Shareholder
	
    
    Charleston Industrial Ltd

	
    
    Directors
	
    
    Li LIU, Cili YAN, Fung SHEK

4. Weinan Hi-Tech Milkgoat Co.,
Ltd. 
(渭南市高新区美可高特羊乳制品有限公司)

	
    
    Place of Incorporation
	
    
    People’s Republic of China

	
    
    Registered Address
	
    
    No.6, Juyi Street, Wanguo Mall,

	
     
	
    
    Weinan High-Tech Zone,

	
     
	
    
    People’s Republic of China

	
    
    Establishment Date
	
    
    December 11, 2006

	
    
    Investment Amount
	
    
    RMB 5,000,000

	
    
    Registered Capital
	
    
    RMB 5,000,000

	
    
    Shareholder
	
    
    Tianjin Yayi Industrial Co., Ltd.

	
    
    Director
	
    
    Li LIU

	

5. Fuping Milkgoat Co., Ltd. 
(富平县美可高特羊乳有限公司)

	
 

	
    
    Place of Incorporation
	
    
    People’s Republic of China

	
    
    Registered Address
	
    
    Yongan Hamlet, Zhuangli Village,

	
     
	
    
    Fuping County, People’s Republic of China

	
    
    Establishment Date
	
    
    September 6, 2005

	
    
    Investment Amount
	
    
    RMB 5,000,000

	
    
    Registered Capital
	
    
    RMB 5,000,000

	
    
    Shareholder
	
    
    Tianjin Yayi Industrial Co., Ltd.

	
    
    Director
	
    
    Li LIU

 

SCHEDULE III 

PRC Companies Restructuring

 

 

 

EXHIBIT A 

CERTIFICATE OF DESIGNATION

 

 

 

EXHIBIT B 

INVESTOR RIGHTS AGREEMENT

 

 

 

 

EXHIBIT C 

VOTING AGREEMENT

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