Unassociated Document


    


    AMERICAN
DAIRY, INC.

    2009
STOCK INCENTIVE PLAN

     

    
      	
            	
              1.

            	
              Purpose. 

            


    

     

    The
purpose of the American Dairy, Inc. 2008 Stock Incentive Plan (the “Plan”) is
to enhance the long-term stockholder value of American Dairy, Inc., a Utah
corporation (the “Company”),
by offering opportunities to employees, directors, officers, consultants,
agents, advisors and independent contractors of the Company and its Subsidiaries
(as defined in Section  2) to participate in the Company’s growth and
success, and to encourage them to remain in the service of the Company and its
Subsidiaries and to acquire and maintain stock ownership in the
Company.

     

    
      	
            	
              2.

            	
              Definitions. 

            


    

     

    For
purposes of the Plan, the following terms shall be defined as set forth
below:

     

    2.1           “Award”
means an award or grant made pursuant to the Plan, including, without
limitation, awards or grants of Options, Performance Options, Performance Stock
Awards,  and Restricted Stock Awards or any combination of the
foregoing.

     

    2.2           “Board”
means the Board of Directors of the Company.

     

    2.3           “Cause”
means dishonesty, fraud, misconduct, unauthorized use or disclosure of
confidential information or trade secrets, or conviction or confession of a
crime punishable by law (except minor violations), as provided under applicable
law, in each case as determined by the Plan Administrator, and its determination
shall be conclusive and binding.

     

    2.4           “Code”
means the United States Internal Revenue Code of 1986, as amended from time to
time.

     

    2.5           “Common
Stock” means the common stock, par value $.01 per share, of the
Company.

     

    2.6           “Corporate
Transaction” means any of the following events:

     

    (a)           Consummation
of any merger or consolidation of the Company in which the Company is not the
continuing or surviving corporation, or pursuant to which shares of the Common
Stock are converted into cash, securities or other property (other than a merger
of the Company in which the holders of Common Stock immediately prior to the
merger have the same proportionate ownership of capital stock of the surviving
corporation immediately after the merger);

     

    (b)           Consummation
of any sale, lease, exchange or other transfer in one transaction or a series of
related transactions of all or substantially all of the Company’s assets other
than a transfer of the Company’s assets to a majority-owned subsidiary
corporation (as the term “subsidiary corporation” is defined in Section 8.3) of
the Company; or


    
      
         


      

      
        1

        
          

        

      

      
         


      

    

     

    (c)           Approval
by the holders of the Common Stock of any plan or proposal for the liquidation
or dissolution of the Company.

     

    2.7           “Disability”
means “permanent and total disability” as that term is defined for purposes of
Section 22(e)(3) of the Code.

     

    2.8           “Early
Retirement” means early retirement as that term is defined by the Plan
Administrator from time to time for purposes of the Plan.

     

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

     

    2.10          “Fair Market
Value” shall be established in good faith by the Plan Administrator or
(a) if the Common Stock is listed on the Nasdaq Global Market or the Nasdaq
Capital Market, the average of the high and low per share sales prices for the
Common Stock as reported by the Nasdaq Global Market or the Nasdaq Capital
Market (as the case may be) for a single trading day or (b) if the Common Stock
is listed on the New York Stock Exchange, the NYSE Arca Exchange, or the
American Stock Exchange, the average of the high and low per share sales prices
for the Common Stock as such price is officially quoted in the composite tape of
transactions on such exchange for a single trading day. If there is no such
reported price for the Common Stock for the date in question, then such price on
the last preceding date for which such price exists shall be determinative of
the Fair Market Value.  Notwithstanding anything in this Plan to the
contrary, to the extent applicable, the determination of the Fair Market Value
of a share of Common Stock shall be determined in a manner which complies with
Section 409A of the Code and the applicable Treasury Regulations promulgated
thereunder.

     

    2.11           “Grant
Date” means the date the Plan Administrator adopted the granting
resolution and all conditions precedent to the grant have been satisfied;
provided that conditions to the exercisability or vesting of Awards shall not
defer the Grant Date. If, however, the Plan Administrator designates in a
resolution a later date as the date an Award is to be granted, then such later
date shall be the “Grant
Date.”

     

    2.12           “Incentive Stock
Option” means an Option to purchase Common Stock granted under Section 7
with the intention that it qualify as an “incentive stock option” as that term
is defined in Section 422 of the Code.

     

    2.13           “Nonqualified
Stock Option” means an Option to purchase Common Stock granted under
Section 7 other than an Incentive Stock Option.

     

    2.14           “Option”
means the right to purchase Common Stock granted under Section 7.

     

    2.15           “Participant”
means (a) the person to whom an Award is granted; (b) for a Participant who has
died, the personal representative of the Participant’s estate, the person(s) to
whom the Participant’s rights under the Award have passed by will or by the
applicable laws of descent and distribution, or the beneficiary designated in
accordance with Section 10; or (c) person(s) to whom an Award has been
transferred in accordance with Section 10.


    
      
         


      

      
        2

        
          

        

      

      
         


      

    

     

    2.16           “Performance
Option” means an Option subject to performance requirements granted under
Section 7.

     

    2.17           “Performance Stock
Award” means shares of Common Stock or units denominated in Common Stock
granted under Section 9, the rights of ownership of which may be subject to
restrictions and/or performance requirements prescribed by the Plan
Administrator.

     

    2.18           “Plan
Administrator” means the Compensation Committee of the Board or any
successor committee of the Board designated to administer the Plan under Section
3.1.

     

    2.19           “PRC” means
the People’s Republic of China.

     

    2.20           “Restricted Stock
Award” means shares of Common Stock or units denominated in Common Stock
granted under Section 9, the rights of ownership of which may be subject to
restrictions prescribed by the Plan Administrator.

     

    2.21           “Retirement”
means retirement on or after the individual’s normal retirement date under PRC
law or the law of such individual’s other jurisdiction of employment unless
otherwise defined by the Plan Administrator from time to time for purposes of
the Plan.

     

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

     

    2.23           “Subsidiary”,
except as provided in Section 8.3 in connection with Incentive Stock Options,
means any entity that is directly or indirectly controlled by the Company or in
which the Company has a significant ownership interest, as determined by the
Plan Administrator, and any entity that may become a direct or indirect
subsidiary of the Company.

     

    
      	
            	
              3.

            	
              Administration. 

            


    

     

    3.1           Plan
Administrator.  The Plan shall be administered by the
Compensation Committee of the Board or a successor committee or committees
(which term includes subcommittees) appointed by, and consisting of two or more
members of, the Board. If and so long as the Common Stock is registered under
Section 12(b) or 12(g) of the Exchange Act, the Board shall consider in
selecting the Plan Administrator and the membership of any committee acting as
Plan Administrator, with respect to any persons subject or likely to become
subject to Section 16 of the Exchange Act, the provisions regarding (a) “outside
directors” as contemplated by Section 162(m) of the Code and (b) “non employee
directors” as contemplated by Rule 16b-3 under the Exchange Act. The Plan
Administrator may delegate the responsibility for administering the Plan with
respect to designated classes of eligible persons to different committees
consisting of one or more members of the Board, subject to such limitations as
the Board deems appropriate. Committee members shall serve for such term as the
Board may determine, subject to removal by the Board at any time. To the extent
consistent with applicable law, the Plan Administrator may authorize one or more
officers of the Company to grant Awards to designated classes of eligible
persons, within the limits specifically prescribed by the Plan
Administrator.


    
      
         


      

      
        3

        
          

        

      

      
         


      

    

     

    3.2           Administration and Interpretation by
the Plan Administrator.  Except for the terms and conditions
explicitly set forth in the Plan, the Plan Administrator shall have exclusive
authority, in its discretion, to determine all matters relating to Awards under
the Plan, including the selection of individuals to be granted Awards, the type
of Awards, the number of shares of Common Stock subject to an Award, all terms,
conditions, restrictions and limitations, if any, of an Award and the terms of
any instrument that evidences the Award. The Plan Administrator shall also have
exclusive authority to interpret the Plan and may from time to time adopt, and
change, rules and regulations of general application for the Plan’s
administration. The Plan Administrator’s interpretation of the Plan and its
rules and regulations, and all actions taken and determinations made by the Plan
Administrator pursuant to the Plan, shall be conclusive and binding on all
parties involved or affected. The Plan Administrator may delegate administrative
duties to such of the Company’s officers as it so determines.

     

    
      	
            	
              4.

            	
              Stock Subject to the
      Plan. 

            


    

     

    4.1           Authorized Number of
Shares.  Subject to adjustment from time to time as provided in
Section 11.1, the number of shares of Common Stock that shall be available for
issuance under the Plan shall be: (a) 2,000,000 shares plus (b) any authorized
shares of Common Stock that, as of May 7, 2009, were available for issuance
under the American Dairy, Inc. 2003 Incentive Stock Plan (the “Prior Plan”)  (or
that thereafter become available for issuance under the Prior Plan in accordance
with its terms).  The maximum aggregate number of shares
of  Common Stock that may be issued under the Plan pursuant to the
exercise or vesting of Awards shall be the number determined pursuant to the
preceding sentence, as adjusted from time to time pursuant to Section
11.1.  Shares issued under the Plan shall be drawn from authorized and
unissued shares or shares now held or subsequently acquired by the Company as
treasury shares.

     

    4.2           Limitations.  Subject
to adjustment from time to time as provided in Section 11.1, the number of
shares of Common Stock that may be made subject to Awards under the Plan to any
individual shall be limited in accordance with the requirements under Section
162(m) of the Code.

     

    4.3           Reuse of
Shares.  Any shares of Common Stock that have been made subject
to an Award that cease to be subject to the Award (other than by reason of
exercise or payment of the Award to the extent it is exercised for or settled in
shares), and/or shares of Common Stock subject to repurchase or forfeiture which
are subsequently reacquired by the Company, shall again be available for
issuance in connection with future grants of Awards under the Plan; provided, however, that for
purposes of Section 4.2, any such shares shall be counted in accordance with the
requirements of Section 162(m) of the Code.

     

    
      	
            	
              5.

            	
              Eligibility. 

            


    

     

    Awards
may be granted under the Plan to those officers, directors and employees of the
Company and its Subsidiaries as the Plan Administrator from time to time
selects. Awards may also be granted to consultants, agents, advisors and
independent contractors who provide services to the Company and its
Subsidiaries.


    
      
         


      

      
        4

        
          

        

      

      
         


      

    

     

    
      	
            	
              6.

            	
              Awards.

            


    

     

    6.1           Form and Grant of
Awards.  The Plan Administrator shall have the authority, in
its sole discretion, to determine the type or types of Awards to be made under
the Plan. Such Awards may include, but are not limited to, Incentive Stock
Options, Nonqualified Stock Options, Performance Options, Performance Stock
Awards and Restricted Stock Awards. Awards may be granted singly or in
combination.

     

    6.2           Settlement of
Awards.  The Company may settle Awards through the delivery of
shares of Common Stock, cash payments, the granting of replacement Awards or any
combination thereof as the Plan Administrator shall determine. Any Award
settlement, including payment deferrals, may be subject to such conditions,
restrictions and contingencies as the Plan Administrator shall determine. The
Plan Administrator may permit or require the deferral of any Award payment,
subject to such rules and procedures as it may establish, which may include
provisions for the payment or crediting of interest, or dividend equivalents,
including converting such credits into deferred stock equivalents.

     

    6.3           Acquired Company Option
Awards.  Notwithstanding anything in the Plan to the contrary,
the Plan Administrator may grant Awards under the Plan in substitution for
awards issued under other plans, or assume under the Plan awards issued under
other plans, if the other plans are or were plans of other acquired entities
(“Acquired
Entities”) (or the parent of an Acquired Entity) and the new Award is
substituted, or the old award is assumed, by reason of a merger, consolidation,
acquisition of property or of stock, reorganization or liquidation (the “Acquisition
Transaction”). In the event that a written agreement pursuant to which
the Acquisition Transaction is completed is approved by the Board and said
agreement sets forth the terms and conditions of the substitution for or
assumption of outstanding awards of the Acquired Entity, said terms and
conditions shall be deemed to be the action of the Plan Administrator without
any further action by the Plan Administrator, except as may be required for
compliance with Rule 16b-3 under the Exchange Act, and the persons holding such
awards shall be deemed to be Participants.

     

    
      	
            	
              7.

            	
              Terms and
      Conditions of
Options.

            


    

     

    7.1           Grant of
Options.  The Plan Administrator is authorized under the Plan,
in its sole discretion, to issue Options or Performance Options as Incentive
Stock Options or as Nonqualified Stock Options, which shall be appropriately
designated.

     

    7.2           Option Exercise
Price.  The exercise price for shares purchased under an Option
shall be as determined by the Plan Administrator, but shall not be less than
100% of the Fair Market Value of the Common Stock on the Grant Date with respect
to Incentive Stock Options.

     

    7.3           Term of
Options.  The term of each Option shall be as established by
the Plan Administrator or, if not so established, shall be 10 years from the
Grant Date.


    
      
         


      

      
        5

        
          

        

      

      
         


      

    


    7.4           Exercise and Vesting of
Options.  The Plan Administrator shall establish and set forth
in each instrument that evidences an Option the time at which, or the
installments in which, the Option shall vest and become exercisable, which
provisions may be waived or modified by the Plan Administrator at any time. To
the extent that an Option has become exercisable, the Option may be exercised
from time to time by written notice to the Company, in accordance with
procedures established by the Plan Administrator, setting forth the number of
shares with respect to which the Option is being exercised and accompanied by
payment in full as described in Section 7.6. The Plan Administrator may
determine at any time that an Option may not be exercised as to less than any
number of shares at any one time for vested shares and any number in its
discretion for unvested shares (or the lesser number of remaining shares covered
by the Option).

     

    7.5           Performance
Options.  The Plan Administrator is authorized to subject an
Option to performance requirements (which may be based on continuous service
with the Company or the achievement of performance goals related to profits or
loss, revenue or profit growth or loss reduction, profit or loss related return
ratios, other balance sheet or income statement targets or ratios, market share,
project completion, operational or productivity efficiency gains, cash flow,
share price appreciation or total stockholder return, where such goals may be
stated in absolute terms or relative to comparison companies), as the Plan
Administrator shall determine, in its sole discretion, must be satisfied as a
condition of the Option becoming vested and exercisable.  Such
performance requirements shall be set forth in the instrument evidencing the
Award.

     

    7.6           Payment of Exercise
Price.  Except in the case that a cashless exercise or
same-day-sale is approved and implemented by the Plan Administrator, the
exercise price for shares purchased under an Option shall be paid in full to the
Company by delivery of consideration equal to the product of the Option exercise
price and the number of shares purchased. Such consideration must be paid in
cash or by check or, unless the Plan Administrator in its sole discretion
determines otherwise, either at the time the Option is granted or at any time
before it is exercised, a combination of cash and/or check (if any) and one or
both of the following alternative forms: (a) tendering (either actually or, if
and so long as the Common Stock is registered under Section 12(b) or 12(g) of
the Exchange Act, by attestation) Common Stock already owned by the Participant
for at least six months (or any shorter period necessary to avoid a charge to
the Company’s earnings for financial reporting purposes) having a Fair Market
Value on the day prior to the exercise date equal to the aggregate Option
exercise price or (b) if and so long as the Common Stock is registered under
Section 12(b) or 12(g) of the Exchange Act, delivery of a properly executed
exercise notice, together with irrevocable instructions, to (i) a brokerage firm
designated by the Company to deliver promptly to the Company the aggregate
amount of sale or loan proceeds to pay the Option exercise price and any
withholding tax obligations that may arise in connection with the exercise and
(ii) the Company to deliver the certificates for such purchased shares directly
to such brokerage firm, all in accordance with the regulations of the United
States Federal Reserve Board. In addition, the exercise price for shares
purchased under an Option may be paid, either singly or in combination with one
or more of the alternative forms of payment authorized by this Section 7.6, or
by such other consideration as the Plan Administrator may permit.

     

    7.7           Post-Termination
Exercises.  The Plan Administrator shall establish and set
forth in each instrument that evidences an Option whether the Option will
continue to be exercisable, and the terms and conditions of such exercise, if a
Participant ceases to be employed by, or to provide services to, the Company or
its Subsidiaries, which provisions may be waived or modified by the Plan
Administrator at any time. If not so established in the instrument evidencing
the Option, the Option will be exercisable according to the following terms and
conditions, which may be waived or modified by the Plan Administrator at any
time.


    
      
         


      

      
        6

        
          

        

      

      
         


      

    

     

    In case
of termination of the Participant’s employment or services other than by reason
of death or Cause, the Option shall be exercisable, to the extent of the number
of shares vested at the date of such termination, only (a) within one year if
the termination of the Participant’s employment or services is coincident with
Retirement, Early Retirement at the Company’s request or Disability or (b)
within three months after the date the Participant ceases to be an employee,
director, officer, consultant, agent, advisor or independent contractor of the
Company or a Subsidiary if termination of the Participant’s employment or
services is for any reason other than Retirement, Early Retirement at the
Company’s request or Disability, but in no event later than the remaining term
of the Option. Any Option exercisable at the time of the Participant’s death may
be exercised, to the extent of the number of shares vested at the date of the
Participant’s death, by the personal representative of the Participant’s estate,
the person(s) to whom the Participant’s rights under the Option have passed by
will or the applicable laws of descent and distribution or the beneficiary
designated pursuant to Section 10 at any time or from time to time within one
year after the date of death, but in no event later than the remaining term of
the Option. Any portion of an Option that is not vested on the date of
termination of the Participant’s employment or services shall terminate on such
date, unless the Plan Administrator determines otherwise. In case of termination
of the Participant’s employment or services for Cause, the Option shall
automatically terminate upon first notification to the Participant of such
termination, unless the Plan Administrator determines otherwise. If a
Participant’s employment or services with the Company are suspended pending an
investigation of whether the Participant shall be terminated for Cause, all the
Participant’s rights under any Option likewise shall be suspended during the
period of investigation.

     

    With
respect to employees, unless the Plan Administrator at any time determines
otherwise, “termination of the Participant’s employment or services” for
purposes of the Plan (including without limitation this Section 7) shall mean
any reduction in the Participant’s regular hours of employment to less than
thirty (30) hours per week. A transfer of employment or services between or
among the Company and its Subsidiaries shall not be considered a termination of
employment or services. The effect of a Company approved leave of absence on the
terms and conditions of an Option shall be determined by the Plan Administrator,
in its sole discretion.

     

    7.8           Prohibition on Option
Repricing.  An option issued under the Plan may not, without
prior approval of the Company’s stockholders at a duly-constituted meeting, be
repriced by lowering the option exercise price or by cancellation of an
outstanding option with a subsequent replacement or re-grant of an option with a
lower exercise price.

     

    
      	
            	
              8.

            	
              Incentive
      Stock Option
Limitations.

            


    

     

    To the
extent required by Section 422 of the Code, Incentive Stock Options shall be
subject to the following additional terms and conditions:


    
      
         


      

      
        7

        
          

        

      

      
         


      

    

     

    8.1           Dollar
Limitation.  To the extent the aggregate Fair Market Value
(determined as of the Grant Date) of Common Stock with respect to which
Incentive Stock Options are exercisable for the first time during any calendar
year (under the Plan and all other stock option plans of the Company) exceeds
$100,000, such portion in excess of $100,000 shall be subject to delayed
exercisability or treated as a Nonqualified Stock Option as set forth by the
Plan Administrator in the agreement(s) evidencing the Option. In the event the
Participant holds two or more such Options that become exercisable for the first
time in the same calendar year, such limitation shall be applied on the basis of
the order in which such Options are granted.

     

    8.2           10%
Stockholders.  If an individual owns more than 10% of the total
voting power of all classes of the Company’s stock, then the exercise price per
share of an Incentive Stock Option shall not be less than 110% of the Fair
Market Value of the Common Stock on the Grant Date and the Option term shall not
exceed five years. The determination of 10% ownership shall be made in
accordance with Section 422 of the Code.

     

    8.3           Eligible
Employees.  Individuals who are not employees of the Company or
one of its parent corporations or subsidiary corporations may not be granted
Incentive Stock Options. For purposes of this Section 8.3, “parent corporation”
and “subsidiary corporation” shall have the meanings attributed to those terms
for purposes of Section 422 of the Code.

     

    8.4           Term.  The term of
an Incentive Stock Option shall not exceed 10 years.

     

    8.5           Exercisability.  To
qualify for Incentive Stock Option tax treatment, an Option designated as an
Incentive Stock Option must be exercised within three months after termination
of employment for reasons other than death, except that, in the case of
termination of employment due to Disability, such Option must be exercised
within one year after such termination. Disability shall be deemed to have
occurred on the first day after the Company has furnished its opinion of
Disability to the Plan Administrator. Employment shall not be deemed to continue
beyond the first 90 days of a leave of absence unless the Participant’s
reemployment rights are guaranteed by statute or contract.

     

    8.6           Taxation of Incentive Stock
Options.  In order to obtain certain tax benefits afforded to
Incentive Stock Options under Section 422 of the Code, the Participant must hold
the shares issued upon the exercise of an Incentive Stock Option for two years
after the Grant Date of the Incentive Stock Option and one year from the date of
exercise. A Participant may be subject to the alternative minimum tax at the
time of exercise of an Incentive Stock Option. The Plan Administrator may
require a Participant to give the Company prompt notice of any disposition of
shares acquired by the exercise of an Incentive Stock Option prior to the
expiration of such holding periods.

     

    
      	
            	
              9.

            	
              Restricted Stock
      Awards and Performance Stock Awards. 

            


    

     

    9.1           Grant of Restricted Stock
Awards.  The Plan Administrator is authorized to make Awards of
Common Stock or Awards denominated in units of Common Stock on such terms and
conditions and subject to such restrictions and/or requirements, as the Plan
Administrator shall determine, in its sole discretion, which terms, conditions
and restrictions shall be set forth in the instrument evidencing the Award. The
terms, conditions and restrictions that the Plan Administrator shall have the
power to determine shall include, without limitation, the manner in which shares
subject to Restricted Stock Awards are held during the periods they are subject
to restrictions and the circumstances under which forfeiture of the Restricted
Stock Award shall occur by reason of termination of the Participant’s employment
or service relationship.


    
      
         


      

      
        8

        
          

        

      

      
         


      

    

     

    9.2           Performance Stock
Awards.  The Plan Administrator in its sole discretion is
authorized to subject Restricted Stock Awards to performance restrictions and/or
requirements which may be based on continuous service with the Company or the
achievement of performance goals related to profits or loss, revenue or profit
growth or loss reduction, profit or loss related return ratios, other balance
sheet or income statement targets or ratios, market share, project completion,
operational or productivity efficiency gains, cash flow, share price
appreciation or total stockholder return, where such goals may be stated in
absolute terms or relative to comparison companies. To the extent an Award
subject to performance goals is intended to be exempt under  Section
162(m) of the Code, unless otherwise permitted in compliance with Section 162(m)
of the Code, the Plan Administrator shall establish the performance goals (and
any applicable performance award formula) applicable to the Award no later than
the earlier of (a) the date ninety (90) days after the commencement of the
applicable performance period or (b) the date on which twenty five percent (25%)
of the performance period has elapsed, and, in any event, at a time when the
outcome of the performance goals remains substantially uncertain.

     

    9.3           Issuance of
Shares.  Upon the satisfaction of any terms, conditions and
restrictions prescribed in respect to a Restricted Stock Award, or upon the
Participant’s release from any terms, conditions and restrictions of a
Restricted Stock Award, as determined by the Plan Administrator, the Company
shall release, as soon as practicable, to the Participant or, in the case of the
Participant’s death, to the personal representative of the Participant’s estate
or as the appropriate court directs, the appropriate number of shares of Common
Stock.

     

    9.4           Waiver of
Restrictions.  Notwithstanding any other provisions of the
Plan, the Plan Administrator may, in its sole discretion, waive the forfeiture
period and any other terms, conditions or restrictions on any Restricted Stock
Award under such circumstances and subject to such terms and conditions as the
Plan Administrator shall deem appropriate; provided, however, that the
Plan Administrator may not adjust performance goals for any Restricted Stock
Award intended to be exempt under Section 162(m) of the Code for the year in
which the Restricted Stock Award is settled in such a manner as would increase
the amount otherwise payable to a Participant.

     

    
      	
            	
              10.

            	
              Assignability.

            


    

     

    No Awards
granted under the Plan or any interest therein may be assigned, pledged or
transferred by the Participant other than by will or by the applicable laws of
descent and distribution, and, during the Participant’s lifetime, such Award may
be exercised only by the Participant or a permitted assignee or transferee of
the Participant (as provided below). Notwithstanding the foregoing, and to the
extent permitted by Section 422 of the Code, the Plan Administrator, in its sole
discretion, may permit such assignment, transfer and exercisability and may
permit a Participant to designate a beneficiary who may exercise the Award or
receive payment under the Award after the Participant’s death; provided, however, that any
Award so assigned or transferred shall be subject to all the same terms and
conditions contained in the instrument evidencing the Award.


    
      
         


      

      
        9

        
          

        

      

      
         


      

    

     

    
      	
            	
              11.

            	
              Adjustments. 

            


    

     

    11.1           Adjustment of
Shares.  In the event that, at any time or from time to time, a
stock dividend, stock split, spin-off, combination or exchange of shares,
recapitalization, merger, consolidation, distribution to stockholders other than
a normal cash dividend, or other change in the Company’s corporate or capital
structure results in (a) the outstanding shares, or any securities exchanged
therefor or received in their place, being exchanged for a different number or
class of securities of the Company or of any other corporation or (b) new,
different or additional securities of the Company or of any other corporation
being received by the holders of shares of Common Stock of the Company, then the
Plan Administrator shall make proportional adjustments in (i) the maximum number
and kind of securities subject to the Plan as set forth in Sections
4.1;  (ii) the maximum number and kind of securities that may be made
subject to Awards to any individual as set forth in Section 4.2; and (iii) the
number and kind of securities that are subject to any outstanding Award and the
per share price of such securities, without any change in the aggregate price to
be paid therefor. The determination by the Plan Administrator as to the terms of
any of the foregoing adjustments shall be conclusive and binding.

     

    11.2           Corporate
Transaction.

     

    (a)           Options.  Except
as otherwise provided in the instrument that evidences the Option, in the event
of a Corporate Transaction, the Plan Administrator shall determine whether
provision will be made in connection with the Corporate Transaction for an
appropriate assumption of the Options theretofore granted under the Plan (which
assumption may be effected by means of a payment to each Participant (by the
Company or any other person or entity involved in the Corporate Transaction), in
exchange for the cancellation of the Options held by such Participant, of the
difference between the then Fair Market Value of the aggregate number of shares
of Common Stock then subject to such Options and the aggregate exercise price
that would have to be paid to acquire such shares) or for substitution of
appropriate new options covering stock of a successor corporation to the Company
or stock of an affiliate of such successor corporation. If the Plan
Administrator determines that such an assumption or substitution will be made,
the Plan Administrator shall give notice of such determination to the
Participants, and the provisions of such assumption or substitution, and any
adjustments made (i) to the number and kind of shares subject to the outstanding
Options (or to the options in substitution therefor), (ii) to the exercise
prices, and/or (iii) to the terms and conditions of the stock options, shall be
binding on the Participants. Any such determination shall be made in the sole
discretion of the Plan Administrator and shall be final, conclusive and binding
on all Participants. If the Plan Administrator, in its sole discretion,
determines that no such assumption or substitution will be made, the Plan
Administrator shall give notice of such determination to the Participants, and
each Option that is at the time outstanding shall automatically accelerate so
that each such Option shall, immediately prior to the specified effective date
for the Corporate Transaction, become 100% vested and exercisable. All such
Options shall terminate and cease to remain outstanding immediately following
the consummation of the Corporate Transaction, except to the extent assumed by
the successor corporation or an affiliate thereof.


    
      
         


      

      
        10

        
          

        

      

      
         


      

    

     

    (b)           Performance Stock
Awards or Restricted Stock Awards.  Except as otherwise
provided in the instrument that evidences the Award, in the event of a Corporate
Transaction, the vesting of shares subject to Performance Stock Awards or
Restricted Stock Awards shall accelerate, and the forfeiture provisions to which
such shares are subject shall lapse, if and to the same extent that the vesting
of outstanding Options accelerates in connection with the Corporate Transaction.
If unvested Options are to be assumed, continued or substituted by a successor
corporation without acceleration upon the occurrence of a Corporate Transaction,
the forfeiture provisions to which such Performance Stock Awards or Restricted
Stock Awards are subject will continue with respect to shares of the successor
corporation that may be issued in exchange for such shares subject to
Performance Stock Awards or Restricted Stock Awards.

     

    11.3           Further Adjustment of
Awards.  Subject to Section 11.2, the Plan Administrator shall
have the discretion, exercisable at any time before a sale, merger,
consolidation, reorganization, liquidation or change in control of the Company,
as defined by the Plan Administrator, to take such further action as it
determines to be necessary or advisable, and fair and equitable to Participants,
with respect to Awards. Such authorized action may include (but shall not be
limited to) establishing, amending or waiving the type, terms, conditions or
duration of, or restrictions on, Awards so as to provide for earlier, later,
extended or additional time for exercise and other modifications, and the Plan
Administrator may take such actions with respect to all Participants, to certain
categories of Participants or only to individual Participants. The Plan
Administrator may take such action before or after granting Awards to which the
action relates and before or after any public announcement with respect to such
sale, merger, consolidation, reorganization, liquidation or change in control
that is the reason for such action.

     

    11.4           Limitations.  The
grant of Awards will in no way affect the Company’s right to adjust, reclassify,
reorganize or otherwise change its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its
business or assets.

     

    11.5           Fractional
Shares.  In the event of any adjustment in the number of shares
covered by any Award, each such Award shall cover only the number of full shares
resulting from such adjustment.

     

    
      	
            	
              12.

            	
              Withholding. 

            


    

     

    The
Company may require the Participant to pay to the Company the amount of any
taxes or social insurance contributions that the Company is required to withhold
with respect to the grant, vesting or exercise of any Award. Subject to the Plan
and applicable law, the Plan Administrator may, in its sole discretion, permit
the Participant to satisfy withholding obligations, in whole or in part, (a) by
paying cash, (b) by electing to have the Company withhold shares of Common Stock
(up to the minimum required federal withholding rate), or (c) by transferring
shares of Common Stock to the Company (already owned by the Participant for the
period necessary to avoid a charge to the Company’s earnings for financial
reporting purposes), in such amounts as are equivalent to the Fair Market Value
of the withholding obligation. The Company shall have the right to withhold from
any shares of Common Stock issuable pursuant to an Award or from any cash
amounts otherwise due or to become due from the Company to the Participant an
amount equal to such taxes or social insurance contributions. The Company may
also deduct from any Award any other amounts due from the Participant to the
Company or a Subsidiary.


    
      
         


      

      
        11

        
          

        

      

      
         


      

    

     

    
      	
            	
              13.

            	
              Amendment and
      Termination of Plan. 

            


    

     

    13.1           Amendment of
Plan.  The Plan may be amended only by the Board in such
respects as it shall deem advisable; however, to the extent required for
compliance with Section 422 of the Code or any applicable law or regulation,
stockholder approval will be required for any amendment that will (a) increase
the total number of shares available for issuance under the Plan, (b) modify the
class of persons eligible to receive Options, or (c) otherwise require
stockholder approval under any applicable law or regulation.

     

    13.2           Termination of
Plan.  The Board may suspend or terminate the Plan at any time.
The Plan will have no fixed expiration date; provided, however, that no
Incentive Stock Options may be granted more than 10 years after the later of (a)
the Plan’s adoption by the Board and (b) the adoption by the Board of any
amendment to the Plan that constitutes the adoption of a new plan for purposes
of Section 422 of the Code.

     

    13.3           Consent of
Participant.  The amendment or termination of the Plan shall
not, without the consent of the Participant, impair or diminish any rights or
obligations under any Award theretofore granted under the Plan. Any change or
adjustment to an outstanding Incentive Stock Option shall not, without the
consent of the Participant, be made in a manner so as to constitute a
“modification” that would cause such Incentive Stock Option to fail to continue
to qualify as an Incentive Stock Option.

     

    
      	
            	
              14.

            	
              General. 

            


    

     

    14.1           Evidence of
Awards.  Awards granted under the Plan shall be evidenced by a
written agreement that shall contain such terms, conditions, limitations and
restrictions as the Plan Administrator shall deem advisable and that are not
inconsistent with the Plan.

     

    14.2           Continued Employment or Services;
Rights in Awards.  None of the Plan, participation in the Plan
or any action of the Plan Administrator taken under the Plan shall be construed
as giving any person any right to be retained in the employ of the Company or
limit the Company’s right to terminate the employment or services of any
person.

     

    14.3           Registration.  The
Company shall be under no obligation to any Participant to register for offering
or resale or to qualify for exemption under the Securities Act, or to register
or qualify under state securities laws, any shares of Common Stock, security or
interest in a security paid or issued under, or created by, the Plan, or to
continue in effect any such registrations or qualifications if
made.

     

    The
Company may issue certificates for shares with such legends and subject to such
restrictions on transfer and stop-transfer instructions as counsel for the
Company deems necessary or desirable for compliance by the Company with U.S.
federal and state securities laws.


    
      
         


      

      
        12

        
          

        

      

      
         


      

    

     

    Inability
of the Company to obtain, from any regulatory body having jurisdiction, the
authority deemed by the Company’s counsel to be necessary for the lawful
issuance and sale of any shares hereunder or the unavailability of an exemption
from registration for the issuance and sale of any shares hereunder shall
relieve the Company of any liability in respect of the nonissuance or sale of
such shares as to which such requisite authority shall not have been
obtained.

     

    As a
condition to the exercise of an Award, the Company may require the Participant
to represent and warrant at the time of any such exercise or receipt that such
shares are being purchased or received only for the Participant’s own account
and without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required by any
relevant provision of the aforementioned laws. At the option of the Company, a
stop-transfer order against any such shares may be placed on the official stock
books and records of the Company, and a legend indicating that such shares may
not be pledged, sold or otherwise transferred, unless an opinion of counsel is
provided (concurred in by counsel for the Company) stating that such transfer is
not in violation of any applicable law or regulation, may be stamped on stock
certificates to ensure exemption from registration. The Plan Administrator may
also require such other action or agreement by the Participant as may from time
to time be necessary to comply with the federal and state securities
laws.

     

    14.4           No Rights As A
Stockholder.  No Option or Award shall entitle the Participant
to any dividend, voting or other right of a stockholder unless and until the
date of issuance under the Plan of the shares that are the subject of such
Award, free of all applicable restrictions.

     

    14.5           Compliance With Laws And
Regulations.  No Shares of Common Stock shall be issued
pursuant to an Award unless such issuance complies with all applicable laws and
regulations. Notwithstanding anything in the Plan to the contrary, the Board, in
its sole discretion, may bifurcate the Plan so as to restrict, limit or
condition the use of any provision of the Plan to Participants who are officers
or directors subject to Section 16 of the Exchange Act without so restricting,
limiting or conditioning the Plan with respect to other
Participants.

     

    Additionally,
in interpreting and applying the provisions of the Plan, any Option granted as
an Incentive Stock Option pursuant to the Plan shall, to the extent permitted by
law, be construed as an “incentive stock option” within the meaning of Section
422 of the Code.

     

    14.6           No Trust Or
Fund.  The Plan is intended to constitute an “unfunded” plan.
Nothing contained herein shall require the Company to segregate any monies or
other property, or shares of Common Stock, or to create any trusts, or to make
any special deposits for any immediate or deferred amounts payable to any
Participant, and no Participant shall have any rights that are greater than
those of a general unsecured creditor of the Company.

     

    14.7           Severability.  If
any provision of the Plan or any Option is determined to be invalid, illegal or
unenforceable in any jurisdiction, or as to any person, or would disqualify the
Plan or any Option under any law deemed applicable by the Plan Administrator,
such provision shall be construed or deemed amended to conform to applicable
laws, or, if it cannot be so construed or deemed amended without, in the Plan
Administrator’s determination, materially altering the intent of the Plan or the
Option, such provision shall be stricken as to such jurisdiction, person or
Option, and the remainder of the Plan and any such Option shall remain in full
force and effect.


    
      
         


      

      
        13

        
          

        

      

      
         


      

    

     

    14.8           Participants In Foreign
Countries.  The Plan Administrator shall have the authority to
adopt such modifications, procedures and subplans as may be necessary or
desirable, after consideration of the provisions of the laws of the PRC or other
foreign countries in which the Company or its Subsidiaries may operate, to
ensure the viability of the benefits from Awards granted to Participants
employed in such countries and to meet the objectives of the
Plan.   The Plan Administrator may restrict the issuance of
shares of Common Stock pursuant to any Awards or delay the removal of
restrictions on shares of Common Stock pursuant to any Awards until it
determines in its discretion that  the Company or its Subsidiaries has
satisfied the legal or regulatory  procedures or requirements as may
be necessary or desirable to ensure the viability of the benefits of the
Awards.

     

    14.9           Choice Of Law.  The
Plan and all determinations made and actions taken pursuant hereto, to the
extent not otherwise governed by the federal laws of the United States, shall be
governed by the laws of the State of Utah without giving effect to principles of
conflicts of laws.

     

    
      	
            	
              15.

            	
              Effective
      Date. 

            


    

     

    The
Plan’s effective date is the date on which it is adopted by the Board, so long
as it is approved by the Company’s stockholders at any time within 12 months of
such adoption.

     


    
      
         


      

      
        14

        
          

        

      

      
         


      

    

     

    AMERICAN
DAIRY, INC.

     

    2009
STOCK INCENTIVE PLAN

     

    PERFORMANCE
OPTION AGREEMENT

     

    (Cashless
Exercise)

     

    American
Dairy, Inc., a Utah corporation (the “Company”), has granted to the Participant
named on the Notice of Grant of Performance Options (the “Notice of Grant”),
which is attached hereto, an option (the “Option”) to purchase that number of
Shares set forth on the Notice of Grant at the exercise price per Share set
forth on the Notice of Grant (the “Exercise Price”), subject to all of the
terms, definitions and provisions in this Agreement and the Company’s 2009 Stock
Incentive Plan (the “Plan”), which is incorporated herein by
reference.  Notwithstanding the foregoing, the grant of the Option
contemplated herein and the Notice of Grant are subject to and conditioned upon
the approval of the Plan by the Company’s shareholders at a duly constituted
meeting, and shall have no force or effect until such approval is
received.  In the event of a conflict between the terms and conditions
of the Plan and the terms and conditions of this Agreement, the terms and
conditions of the Plan shall prevail.  The terms defined in the Plan
shall have the same defined meanings in this Agreement.

     

    1.           Nature of
Option.  This Option is not intended to qualify as an Incentive
Stock Option under Section 422 of the Code. This Option is intended to be a
Nonstatutory Stock Option.

     

    2.           Vesting
Schedule.  Subject to the Performance Conditions provided in
Section 3, the Option awarded by this Agreement shall vest in accordance with
the vesting provisions set forth in the Notice of Grant.  Shares
scheduled to vest on a certain date or upon the occurrence of a certain
condition shall not vest in Participant in accordance with any of the provisions
of this Agreement, unless Participant shall have been continuously an Employee
from the Grant Date until the date such vesting occurs.

     

    3.           Performance
Conditions.  The Option is subject to the performance
requirements set forth in the Notice of Grant, which must be satisfied as a
condition of the Option becoming vested and exercisable.

     

    4.           Administrator
Discretion.  The Plan Administrator, in its discretion, may
accelerate the vesting of the balance, or some lesser portion of the balance, of
the unvested Option at any time, subject to the terms of the Plan.  If
so accelerated, such Option shall be considered as having vested as of the date
specified by the Plan Administrator.

     

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


    
      
         


      

      
         


        
          

        

      

      
         


      

    

     

    This
Option shall be exercisable in a manner and pursuant to such procedures as the
Plan Administrator may determine, which shall state the election to exercise the
Option, the number of Shares in respect of which the Option is being exercised
(the “Exercised Shares”), and such other representations and agreements as may
be required by the Company pursuant to the provisions of the Plan (the “Exercise
Notice”).  Such Exercise Notice shall be properly completed and
delivered in such manner as the Plan Administrator may determine (including
electronically).  Payment of the Exercise Price may only be made in
such manner as described below, and if appropriate, shall accompany the written
notice.  This Option shall be deemed to be exercised upon receipt by
the Company (or its designated representative) of the Exercise Notice and
completion of payment of the Exercise Price.

     

    In
connection with the payment procedure described in Section 6 below, the
Participant will be required to sell all of the Shares the Participant elects to
exercise and will not be permitted to retain any of the Exercised
Shares.  No Shares shall be issued pursuant to the exercise of this
Option unless such issuance and exercise complies with applicable
laws.  This Option may not be exercised for a fraction of a
share.

     

    6.           Method of
Payment.  Notwithstanding any provisions in the Plan to the
contrary, the methods of exercise available to the Participant may be
restricted.  Subject to the discretion of the Plan Administrator, full
payment of the Exercise Price for the Shares to be purchased on exercise of the
Option may be subject to a mandatory “cashless” exercise method. Pursuant to the
cashless exercise method, upon the Participant’s delivery of a properly executed
Exercise Notice together with irrevocable instructions to a broker, agent or
other third party approved by the Company, such broker, agent or other third
party will simultaneously sell all of the Shares that the Participant is
entitled to upon exercise, use the proceeds to pay the Exercise Price (plus any
applicable fees and/or taxes) and remit the balance to the Participant in
cash.

     

    7.           Termination
Period.   Subject to applicable laws, if the Participant
ceases to be an Employee, he or she may, but only within three (3) months after the
date Participant ceases to be an Employee, exercise this Option to the extent
that he or she was entitled to exercise it as of the date of such
cessation.  To the extent he or she was not entitled to exercise this
Option as of the date of such cessation, or if he or she does not exercise the
Option within the time specified herein, the Option shall
terminate.

     

    Notwithstanding the provisions above,
if Participant ceases to be an employee as a result of his or her Disability, he
or she may, but only within twelve (12) months from the
date of such cessation, exercise his or her Option to the extent he or she was
entitled to exercise it at the date of cessation.  To the extent that
he or she was not entitled to exercise this Option at the date of such
cessation, or if he or she does not exercise such Option within the time
specified herein, the Option shall terminate.

     

    In the event of the death of the
Participant during the term of this Option and while an employee, the Option
shall become fully exercisable, including as to Shares for which it would not
otherwise be exercisable, and may be exercised, at any time within twelve (12) months following
the date of death, by Participant’s estate or by a person who acquired the right
to exercise the Option by bequest or inheritance.


    
      
         


      

      
        2

        
          

        

      

      
         


      

    

     

    Notwithstanding
the foregoing, in no event may this Option be exercised after the expiration
date as provided above and may be subject to earlier termination as provided in
Section 13 of the Plan.

     

    8.           Tax
Obligations.   The Company and its Subsidiaries shall
assess tax and social insurance contribution liability and requirements in
connection with the Participant’s participation in the Plan, including, without
limitation, tax liability and social insurance contribution liability associated
with the grant or exercise of the Option or sale of the underlying Shares (the
“Tax Liability”).  These requirements may change from time to time as
laws or interpretations change.  Regardless of the Company’s or any
Subsidiary’s actions in this regard, the Participant hereby acknowledges and
agrees that the Tax Liability shall be the Participant’s ultimate responsibility
and liability.  The Participant agrees as a condition of his or her
participation in the Plan to make arrangements satisfactory to the Company and
its Subsidiaries to enable it to satisfy all withholding, payment and/or
collection requirements associated with the satisfaction of the Tax Liability,
including authorizing the Company or the Subsidiary to: (i) withhold all
applicable amounts from the Participant’s wages or other cash compensation due
to the Participant, in accordance with any requirements under the laws, rules,
and regulations of the country of which the Participant is a resident, and/or
(ii) act as the Participant’s agent to sell sufficient Shares for the proceeds
to settle such requirements.  Furthermore, the Participant agrees to
pay the Company or the Subsidiary any amount the Company or any Subsidiary may
be required to withhold, collect or pay as a result of the Participant’s
participation in the Plan or that cannot be satisfied by deduction from the
Participant’s wages or other cash compensation paid to the Participant by the
Company or the Subsidiary or sale of the Shares acquired under the Plan. The
Participant acknowledges that he or she may not participate in the Plan and the
Company and the Subsidiary shall have no obligation to deliver Shares until the
Tax Liability has been satisfied by the Participant.

     

    9.           Rights as
Stockholder.  Neither Participant nor any person claiming under
or through Participant shall have any of the rights or privileges of a
stockholder of the Company in respect of any Shares deliverable hereunder unless
and until certificates representing such Shares shall have been issued, recorded
on the records of the Company or its transfer agents or registrars, and
delivered to Participant.  After such issuance, recordation and
delivery, Participant shall have all the rights of a stockholder of the Company
with respect to voting such Shares and receipt of dividends and distributions on
such Shares.

     

    10.           Acknowledgments.  In accepting the
Option, the Participant acknowledges that:

     

    (a)           Any
notice period mandated under applicable laws shall not be treated as continuous
service for the purpose of determining the vesting of the Option; and the
Participant’s right to receive Shares in settlement of the Option after
termination of service, if any, will be measured by the date of termination of
the Participant’s service and will not be extended by any notice period mandated
under applicable laws.  Subject to the foregoing and the provisions of
the Plan, the Company, in its sole discretion, shall determine whether the
Participant’s service has terminated and the effective date of such
termination.


    
      
         


      

      
        3

        
          

        

      

      
         


      

    

     

    (b)           The
Plan is established voluntarily by the Company.  It is discretionary
in nature and it may be modified, amended, suspended or terminated by the
Company at any time, unless otherwise provided in the Plan and this
Agreement.

     

    (c)           All
decisions with respect to future Option grants, if any, will be at the sole
discretion of the Company.

     

    (d)           The
Participant’s participation in the Plan shall not create a right to continued
service with the Company (or any Subsidiary).

     

    (e)           The
Participant is voluntarily participating in the Plan.

     

    (f)           The
Option is an extraordinary item that does not constitute compensation of any
kind for service of any kind rendered to the Company (or any Subsidiary), and
which is outside the scope of the Participant’s employment contract, if
any.

     

    (g)           The
Option is not part of normal or expected compensation or salary for any purpose,
including, but not limited to, calculating any severance payments, resignation,
termination, redundancy, end-of-service payments, bonuses, long-service awards,
pension or retirement benefits or similar payments.  This applies to
any payment even in those jurisdictions requiring such payments upon termination
of employment.

     

    (h)           In
the event that the Participant is not an employee of the Company, the Option
grant will not be interpreted to form an employment contract or relationship
with the Company; and furthermore the Option grant will not be interpreted to
form an employment contract with any Subsidiary .

     

    (i)           The
future value of the underlying Shares is unknown and cannot be predicted with
certainty.  If the Participant obtains Shares upon exercise of the
Option, the value of those Shares may increase or decrease.

     

    11.           Address for
Notices.  Any notice to be given to the Company under the terms
of this Agreement shall be addressed to the Company at Star City International
Building, 10 Jiuxianqiao Road, C-16th Floor, Chaoyang District, Beijing, China
or at such other address as the Company may hereafter designate.

     

    12.           Grant is Not
Transferable.  This Option may not be transferred in any manner
otherwise than by will or by the laws of descent or distribution and may be
exercised during the lifetime of Participant only by Participant.

     

    13.           Binding
Agreement.  Subject to the limitation on the transferability of
this grant contained herein, this Agreement shall be binding upon and inure to
the benefit of the heirs, legatees, legal representatives, successors and
assigns of the parties hereto.

     

    14.           Data Privacy Consent.
The Participant hereby
explicitly and unambiguously consents to the collection, use and transfer, in
electronic or other form, of the Participant’s personal data as described in
this document by and among the Company and each Subsidiary for the exclusive
purpose of implementing, administering and managing the
Participant’s  participation in the Plan.


    
      
         


      

      
        4

        
          

        

      

      
         


      

    

     

    (a)           The
Participant understands that the Company (or any Subsidiary) holds certain
personal information about the Participant, including, but not limited to, the
Participant’s name, home address and telephone number, date of birth, social
insurance number or other identification number, salary, nationality, job title,
any shares or directorships held in the Company, details of all Options or any
other entitlement to Shares awarded, canceled, exercised, vested, unvested or
outstanding in the Participant’s favor, for the purpose of implementing,
administering and managing the Plan (“Data”).

     

    (b)           
The Participant understands that Data may be transferred to any third parties
assisting in the implementation, administration and management of the Plan, that
these recipients may be located in the Participant’s country or elsewhere, and
that the recipient’s country may have different data privacy laws and
protections than the Participant’s country.  The Participant
understands that he or she may request a list with the names and addresses of
any potential recipients of the Data by contacting the Participant’s local human
resources representative.  The Participant authorizes the recipients
to receive, possess, use, retain and transfer the Data, in electronic or other
form, for the purposes of implementing, administering and managing the
Participant’s participation in the Plan, including any requisite transfer of
such Data as may be required to a broker or other third party with whom the
Participant may elect to deposit any Shares acquired upon settlement of the
Option.  The Participant understands that Data will be held only as
long as is necessary to implement, administer and manage the Participant’s
participation in the Plan.  The Participant understands that he or she
may, at any time, view Data, request additional information about the storage
and processing of Data, require any necessary amendments to Data or refuse or
withdraw the consents herein, in any case without cost, by contacting in writing
the Participant’s local human resources representative.  The
Participant understands, however, that refusing or withdrawing the Participant’s
consent may affect the Participant’s ability to participate in the
Plan.  For more information on the consequences of the Participant’s
refusal to consent or withdrawal of consent, the Participant understands that he
or she may contact the Participant’s local human resources
representative.

     

    15.           Additional Conditions to
Issuance of Stock.  If at any time the Company shall determine,
in its discretion, that the listing, registration or qualification of the Shares
upon any securities exchange or under any national, local or applicable law, or
the consent or approval of any governmental regulatory authority is necessary or
desirable as a condition to the issuance of Shares to Participant (or his or her
estate), such issuance shall not occur unless and until such listing,
registration, qualification, consent or approval shall have been effected or
obtained free of any conditions not acceptable to the Company.  The
Company shall make all reasonable efforts to meet the requirements of any such
state or federal law or securities exchange and to obtain any such consent or
approval of any such governmental authority.

     

    16.           Special Administration in
China.  The grant of the Option, the Participant’s ability to
exercise the Option and sale of the Shares shall all be contingent upon the
Company or any Subsidiary obtaining approval from SAFE for the related foreign
exchange transaction and the establishment of a SAFE-approved bank account. The
receipt of funds by the Participant from the sale of the Shares and the
conversion of those funds to the local currency must be approved by SAFE.
 In order to comply with the SAFE regulations, the proceeds from the sale
of the Shares must be repatriated into China through a SAFE-approved bank
account set up and monitored by the Company.  


    
      
         


      

      
        5

        
          

        

      

      
         


      

    

     

    17.           Currency Exchange
Risk.    The Participant agrees and acknowledges that
the Participant shall bear any and all risk associated with the exchange or
fluctuation of currency associated with the Option, including without limitation
the exercise of the Option or sale of the Shares (the “Currency Exchange
Risk”).  The Participant waives and releases the Company and its
Subsidiaries from any potential claims arising out of the Currency Exchange
Risk.

     

    18.           Exchange Control
Requirements.  The Participant agrees and acknowledges that the
Participant shall comply with any and all exchange control requirements
applicable to the Option and the sale of Shares and any resulting funds
including, without limitation, reporting or repatriation
requirements.

     

    19.           Plan
Governs.  This Agreement is subject to all terms and provisions
of the Plan.  In the event of a conflict between one or more
provisions of this Agreement and one or more provisions of the Plan, the
provisions of the Plan shall govern.  Capitalized terms used and not
defined in this Agreement shall have the meaning set forth in the
Plan.

     

    20.           Administrator
Authority.  The Plan Administrator shall have the power to
interpret the Plan and this Agreement and to adopt such rules for the
administration, interpretation and application of the Plan as are consistent
therewith and to interpret or revoke any such rules (including, but not limited
to, the determination of whether or not any Shares subject to the Option have
vested).  All actions taken and all interpretations and determinations
made by the Plan Administrator
in good faith shall be final and binding upon Participant, the Company and all
other interested persons.  The Plan Administrator shall not be
personally liable for any action, determination or interpretation made in good
faith with respect to the Plan or this Agreement.  The Plan
Administrator shall, in its absolute discretion, determine when such conditions
have been fulfilled.

     

    21.           Electronic
Delivery.  The Company may, in its sole discretion, decide to
deliver any documents related to Options awarded under the Plan or future
Options that may be awarded under the Plan by electronic means or request
Participant’s consent to participate in the Plan by electronic
means.  Participant hereby consents to receive such documents by
electronic delivery and agrees to participate in the Plan through any on-line or
electronic system established and maintained by the Company or another third
party designated by the Company.

     

    22.           Captions.  Captions
provided herein are for convenience only and are not to serve as a basis for
interpretation or construction of this Agreement.

     

    23.           Agreement
Severable.  In the event that any provision in this Agreement
shall be held invalid or unenforceable, such provision shall be severable from,
and such invalidity or unenforceability shall not be construed to have any
effect on, the remaining provisions of this Agreement.


    
      
         


      

      
        6

        
          

        

      

      
         


      

    

     

    24.           Modifications to the
Agreement.  This Agreement constitutes the entire understanding
of the parties on the subjects covered.  Participant expressly
warrants that he or she is not accepting this Agreement in reliance on any
promises, representations, or inducements other than those contained
herein.  Modifications to this Agreement or the Plan can be made only
in an express written contract executed by a duly authorized officer of the
Company.

     

    25.           Amendment, Suspension or
Termination of the Plan.  By accepting this Award, Participant
expressly warrants that he or she has received an Option under the Plan, and has
received, read and understood a description of the Plan.  Participant
understands that the Plan is discretionary in nature and may be amended,
suspended or terminated by the Company at any time.

     

    26.           Governing
Law.  Subject to applicable laws, this Agreement and all
determinations made and actions taken pursuant hereto, to the extent not
otherwise governed by the federal laws of the United States, shall be governed
by the laws of the State of Utah without giving effect to principles of
conflicts of laws.


    
      
         


      

      
        7

        
          

        

      

      
         


      

    

     

    AMERICAN
DAIRY, INC.

     

    2009
STOCK INCENTIVE PLAN

     

    NOTICE
OF GRANT OF PERFORMANCE OPTION

    


     

    Unless
otherwise defined herein, the terms defined in the American Dairy, Inc. 2009
Stock Incentive Plan (the “Plan”) will have the same defined meanings in this
Notice of Grant of Performance Option (the “Notice of Grant”) and the American
Dairy, Inc. 2009 Stock Incentive Plan Performance Option Agreement (together,
the “Agreement”).

     

    
      
        
          
            
              
                	
                        Participant:

                      	 
      
	
                        Mailing
      Address:

                      	 
      
	 	 


              

            

          

        

      

    

     

    Participant
has been granted, subject to and conditioned upon the approval of the Plan by
the Company’s shareholders at a duly constituted meeting, a Performance Option
to purchase Shares of common stock, subject to the terms and conditions of the
Plan and this Agreement, as follows:

     

    
      
        
          
            
              
                
                  
                    
                      
                        
                          	
                                  Date
      of Grant

                                	
                                     
      

                                
	
                                  Number
      of Shares Granted

                                	 
      
	
                                  Exercise
      Price per Share

                                	
                                     
      

                                
	
                                  Total
      Exercise Price

                                	
                                   
      

                                
	
                                  Type
      of Option

                                	
                                     
      

                                
	
                                  Term/Expiration
      Date

                                	
                                    
      

                                


                        

                      

                    

                  

                

              

            

          

        

      

    

     

    Vesting
Schedule:

     

    Subject
to the terms of the Plan and the performance conditions described below, this
Performance Option will become exercisable in tranches on the vesting dates set
forth in the table below under the heading “Vesting Dates” (each a “Vesting
Date”).  As of each Vesting Date, the number of shares that become
exercisable under this Option (the “Option Shares”) shall be the product of (i)
the number of shares set forth above corresponding to the heading “Number of
Shares Granted and (ii) the percentage corresponding to the relevant Vesting
Date set forth in the table below under the heading “Vesting Percentage” (each a
“Vesting Percentage”).


    
      
         


      

      
        8

        
          

        

      

      
         


      

    

     

    
      
        
          
            
              
                
                  
                    	
                            Vesting
      Date

                          	 	
                            Vesting
      Percentage

                          	 
	
                             
      

                          	 	 	 
      	 
      
	
                             
      

                          	 	 	 
      	 
      


                  

                

              

            

          

        

      

    

     

    Performance
Conditions

    


    The vesting and exercisability of
this  Performance Option is subject to the following performance
conditions:

     

    The
Option shall vest in tranches as of the Vesting Dates in accordance with the
Vesting Percentages set forth above if the Participant (a) continues to be
employed by the Company as of the relevant Vesting Date, and (b) with respect to
the period preceding the Vesting Date (each, a ”Relevant Period”), has met the
performance goals established by the Vice President of the Participant’s
business unit for the Relevant Period and received satisfactory performance
reviews conducted by the Chairman and the Vice Chairman (the “Performance
Criteria”).  The Plan Administrator shall have the right to adjust the
Performance Criteria at anytime if the Plan Administrator determines that
external changes or other unanticipated business conditions have materially
affected the fairness of the Performance Criteria and have unduly influenced the
Company’s ability to meet them.

     

    If the
Participant fails to satisfy the Performance Criteria in any Relevant Period,
the Option Shares that would otherwise vest on the corresponding Vesting Date
shall be forfeited and cancelled.

     

    [Remainder
of Page Intentionally Left Blank]


    
      
         


      

      
        9

        
          

        

      

      
         


      

    

     

    By
Participant’s signature and the signature of the Company’s representative below,
Participant and the Company agree that this Performance Option is granted under
and governed by the terms and conditions of the Plan and this
Agreement.  Participant has reviewed the Plan and this Agreement in
their entirety, has had an opportunity to obtain the advice of counsel prior to
executing this Agreement and fully understands all provisions of the Plan and
Agreement.  Participant hereby agrees to accept as binding, conclusive
and final all decisions or interpretations of the Administrator upon any
questions relating to the Plan and Agreement.  Participant further
agrees to notify the Company upon any change in the residence address indicated
below.

     

    


    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              	
                                      PARTICIPANT

                                    	 
      	
                                      AMERICAN
      DAIRY, INC.

                                    
	 
      	 
      	 
      	 
      
	 	 	 	 
	
                                      Signature

                                    	 
      	
                                      By:

                                    	
                                      Liu
      Hua

                                    
	 
      	 
      	 
      	 
      
	 	 	 	 
	
                                      Print
      Name

                                    	 
      	
                                      Title:

                                    	
                                      Vice
      Chairman, Treasurer and Secretary

                                    
	 	 	 	 
	
                                      PRC ID Card # and Address:

                                    	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      


                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

     

    [Signature
Page to Performance Option Agreement]


    
      
         


      

      
         


        
          

        

      

      
         


      

    

                                        For
Use in U.S.

     

    AMERICAN
DAIRY, INC.

     

    2009
STOCK INCENTIVE PLAN

     

    PERFORMANCE
OPTION AGREEMENT

     

    American
Dairy, Inc., a Utah corporation (the “Company”), has granted to the Participant
named on the Notice of Grant of Performance Options (the “Notice of Grant”)
which is attached hereto an option (the “Option”) to purchase that number of
Shares set forth on the Notice of Grant at the exercise price per Share set
forth on the Notice of Grant (the “Exercise Price”), subject to all of the
terms, definitions and provisions in this Agreement and the Company’s 2009 Stock
Incentive Plan (the “Plan”), which is incorporated herein by
reference.  Notwithstanding the foregoing, the grant of the Option
contemplated herein and the Notice of Grant are subject to and conditioned upon
the approval of the Plan by the Company’s shareholders at a duly constituted
meeting, and shall have no force or effect until such approval is
received.  In the event of a conflict between the terms and conditions
of the Plan and the terms and conditions of this Agreement, the terms and
conditions of the Plan shall prevail.  The terms defined in the Plan
shall have the same defined meanings in this Agreement.

     

    1.           Nature of
Option.  The Option will either be designated as an Incentive
Stock Option (“ISO”) or a Nonstatutory Stock Option (“NSO”). If designated in
the Notice of Grant as an ISO, this Option is intended to qualify as an ISO
under Section 422 of the Code. However, if this Option is intended to be an
ISO, to the extent that it exceeds the $100,000 rule of Code Section 422(d) it
shall be treated as an NSO.

     

    2.           Vesting
Schedule.  Subject to the Performance Conditions provided in
Section 3, the Option awarded by this Agreement shall vest in accordance with
the vesting provisions set forth in the Notice of Grant.  Shares
scheduled to vest on a certain date or upon the occurrence of a certain
condition shall not vest in Participant in accordance with any of the provisions
of this Agreement, unless Participant shall have been continuously an Employee
from the Grant Date until the date such vesting occurs.

     

    3.           Performance
Conditions.  The Option is subject to the performance
requirements set forth in the Notice of Grant, which must be satisfied as a
condition of the Option becoming vested and exercisable.

     

    4.           Administrator
Discretion.  The Plan Administrator, in its discretion, may
accelerate the vesting of the balance, or some lesser portion of the balance, of
the unvested Option at any time, subject to the terms of the Plan.  If
so accelerated, such Option shall be considered as having vested as of the date
specified by the Plan Administrator.

     

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


    
      
         


      

      
         


        
          

        

      

      
         


      

    

     

    This
Option shall be exercisable in a manner and pursuant to such procedures as the
Plan Administrator may determine, which shall state the election to exercise the
Option, the number of Shares in respect of which the Option is being exercised
(the “Exercised Shares”), and such other representations and agreements as may
be required by the Company pursuant to the provisions of the Plan (the “Exercise
Notice”).  Such Exercise Notice shall be properly completed and
delivered in such manner as the Plan Administrator may determine (including
electronically).  Payment of the Exercise Price may only be made in
such manner as described below, and if appropriate, shall accompany the written
notice.  This Option shall be deemed to be exercised upon receipt by
the Company (or its designated representative) of the Exercise Notice and
completion of payment of the Exercise Price.

     

    No Shares
shall be issued pursuant to the exercise of this Option unless such issuance and
exercise complies with applicable laws.  Assuming such compliance, for
income tax purposes the Exercised Shares shall be considered transferred to the
Participant on the date the Option is exercised with respect to such Exercised
Shares.  This Option may not be exercised for a fraction of a
share.

     

    6.           
Method of
Payment.  Payment of the aggregate Exercise Price shall be by
any of the following, or a combination thereof, at the election of the
Participant:

     

    (a)           cash;

     

    (b)           check;

     

    (c)           delivery
of a properly executed Exercise Notice together with irrevocable instructions to
an agent of the Company to sell the Shares and promptly deliver to the Company
that portion of the sale proceeds required to pay the Exercise Price (and any
applicable withholding taxes).

     

    7.           Termination
Period.   If the Participant ceases to be an Employee, he
or she may, but only within three (3) months after the
date Participant ceases to be an Employee, exercise this Option to the extent
that he or she was entitled to exercise it as of the date of such
cessation.  To the extent he or she was not entitled to exercise this
Option as of the date of such cessation, or if he or she does not exercise the
Option within the time specified herein, the Option shall
terminate.

     

    Notwithstanding the provisions above,
if Participant ceases to be an Employee as a result of his or her Disability, he
or she may, but only within twelve (12) months from the
date of such cessation, exercise his or her Option to the extent he or she was
entitled to exercise it at the date of cessation.  To the extent that
he or she was not entitled to exercise this Option at the date of such
cessation, or if he or she does not exercise such Option within the time
specified herein, the Option shall terminate.

     

    In the
event of the death of the Participant during the term of this Option and while
an Employee, the Option shall become fully exercisable, including as to Shares
for which it would not otherwise be exercisable, and may be exercised, at any
time within twelve (12)
months following the date of death, by Participant’s estate or by a
person who acquired the right to exercise the Option by bequest or
inheritance.


    
      
         


      

      
         


        
          

        

      

      
         


      

    

     

    Notwithstanding
the foregoing, in no event may this Option be exercised after the Expiration
Date as provided above and may be subject to earlier termination as provided in
Section 13 of the Plan.

     

    8.          
 Tax
Obligations.

     

    (a)           Withholding
Taxes.  Notwithstanding any contrary provision of this
Agreement, no certificate representing the Shares shall be issued to
Participant, unless and until satisfactory arrangements (as determined by the
Plan Administrator) shall have been made by Participant with respect to the
payment of income, employment and other taxes which the Company determines must
be withheld with respect to such Shares.  To the extent determined
appropriate by the Company in its discretion, it shall have the right (but not
the obligation) to satisfy any tax withholding obligations by reducing the
number of Shares otherwise deliverable to Participant.  If Participant
fails to make satisfactory arrangements for the payment of any required tax
withholding obligations hereunder at the time of the Option exercise,
Participant acknowledges and agrees that the Company may refuse to honor the
exercise and refuse to deliver Shares if such withholding amounts are not
delivered at the time of exercise.

     

    (b)           Notice of Disqualifying
Disposition of ISO Shares.  If the Option granted to
Participant herein is an ISO, and if Participant sells or otherwise disposes of
any of the Shares acquired pursuant to the ISO on or before the later of
(i) the date two (2) years after the Grant Date, or (ii) the date one
(1) year after the date of exercise, Participant shall immediately notify the
Company in writing of such disposition.  Participant agrees that he or
she may be subject to income tax withholding by the Company on the compensation
income recognized by Participant.

     

    9.          
 Rights as
Stockholder.  Neither Participant nor any person claiming under
or through Participant shall have any of the rights or privileges of a
stockholder of the Company in respect of any Shares deliverable hereunder unless
and until certificates representing such Shares shall have been issued, recorded
on the records of the Company or its transfer agents or registrars, and
delivered to Participant.  After such issuance, recordation and
delivery, Participant shall have all the rights of a stockholder of the Company
with respect to voting such Shares and receipt of dividends and distributions on
such Shares.

     

    10.           No Guarantee of Continued
Employment.  PARTICIPANT ACKNOWLEDGES AND AGREES THAT THE
VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY
CONTINUING AS AN EMPLOYEE AT THE WILL OF THE COMPANY (OR THE PARENT OR
SUBSIDIARY EMPLOYING PARTICIPANT) AND NOT THROUGH THE ACT OF BEING HIRED, BEING
GRANTED AN OPTION OR PURCHASING SHARES HEREUNDER.  PARTICIPANT FURTHER
ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED
HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS
OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS AN EMPLOYEE FOR THE VESTING
PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE IN ANY WAY WITH
PARTICIPANT’S RIGHT OR THE RIGHT OF THE COMPANY (OR THE PARENT OR SUBSIDIARY
EMPLOYING PARTICIPANT) TO TERMINATE PARTICIPANT’S RELATIONSHIP AS AN EMPLOYEE AT
ANY TIME, WITH OR WITHOUT CAUSE.


    
      
         


      

      
         


        
          

        

      

      
         


      

    

     

    11.           Address for
Notices.  Any notice to be given to the Company under the terms
of this Agreement shall be addressed to the Company at Star City International
Building, 10 Jiuxianqiao Road, C-16th Floor, Chaoyang District, Beijing, Chinaor
at such other address as the Company may hereafter designate in
writing.

     

    12.           Grant is Not
Transferable.  This Option may not be transferred in any manner
otherwise than by will or by the laws of descent or distribution and may be
exercised during the lifetime of Participant only by Participant.

     

    13.           Binding
Agreement.  Subject to the limitation on the transferability of
this grant contained herein, this Agreement shall be binding upon and inure to
the benefit of the heirs, legatees, legal representatives, successors and
assigns of the parties hereto.

     

    14.           Additional Conditions to
Issuance of Stock.  If at any time the Company shall determine,
in its discretion, that the listing, registration or qualification of the Shares
upon any securities exchange or under any state or federal law, or the consent
or approval of any governmental regulatory authority is necessary or desirable
as a condition to the issuance of Shares to Participant (or his or her estate),
such issuance shall not occur unless and until such listing, registration,
qualification, consent or approval shall have been effected or obtained free of
any conditions not acceptable to the Company.  The Company shall make
all reasonable efforts to meet the requirements of any such state or federal law
or securities exchange and to obtain any such consent or approval of any such
governmental authority.

     

    15.           Plan
Governs.  This Agreement is subject to all terms and provisions
of the Plan.  In the event of a conflict between one or more
provisions of this Agreement and one or more provisions of the Plan, the
provisions of the Plan shall govern.  Capitalized terms used and not
defined in this Agreement shall have the meaning set forth in the
Plan.

     

    16.           Administrator
Authority.  The Plan Administrator shall have the power to
interpret the Plan and this Agreement and to adopt such rules for the
administration, interpretation and application of the Plan as are consistent
therewith and to interpret or revoke any such rules (including, but not limited
to, the determination of whether or not any Shares subject to the Option have
vested).  All actions taken and all interpretations and determinations
made by the Plan Administrator in good faith shall be final and binding upon
Participant, the Company and all other interested persons.  The Plan
Administrator shall not be personally liable for any action, determination or
interpretation made in good faith with respect to the Plan or this
Agreement.  The Plan Administrator shall, in its absolute discretion,
determine when such conditions have been fulfilled.

     

    17.           Electronic
Delivery.  The Company may, in its sole discretion, decide to
deliver any documents related to Options awarded under the Plan or future
Options that may be awarded under the Plan by electronic means or request
Participant’s consent to participate in the Plan by electronic
means.  Participant hereby consents to receive such documents by
electronic delivery and agrees to participate in the Plan through any on-line or
electronic system established and maintained by the Company or another third
party designated by the Company.

     

    18.           Captions.  Captions
provided herein are for convenience only and are not to serve as a basis for
interpretation or construction of this Agreement.


    
      
         


      

      
         


        
          

        

      

      
         


      

    

     

    19.           Agreement
Severable.  In the event that any provision in this Agreement
shall be held invalid or unenforceable, such provision shall be severable from,
and such invalidity or unenforceability shall not be construed to have any
effect on, the remaining provisions of this Agreement.

     

    20.           Modifications to the
Agreement.  This Agreement constitutes the entire understanding
of the parties on the subjects covered.  Participant expressly
warrants that he or she is not accepting this Agreement in reliance on any
promises, representations, or inducements other than those contained
herein.  Modifications to this Agreement or the Plan can be made only
in an express written contract executed by a duly authorized officer of the
Company.

     

    21.           Amendment, Suspension or
Termination of the Plan.  By accepting this Award, Participant
expressly warrants that he or she has received an Option under the Plan, and has
received, read and understood a description of the Plan.  Participant
understands that the Plan is discretionary in nature and may be amended,
suspended or terminated by the Company at any time.

     

    22.           Governing
Law.  Subject to applicable laws, this Agreement and all
determinations made and actions taken pursuant hereto, to the extent not
otherwise governed by the federal laws of the United States, shall be governed
by the laws of the State of Utah without giving effect to
principles of conflicts of laws.


    
      
         


      

      
         


        
          

        

      

      
         


      

    

     

    AMERICAN
DAIRY, INC.

     

    2009
STOCK INCENTIVE PLAN

     

    NOTICE
OF GRANT OF PERFORMANCE OPTION

     

    Unless
otherwise defined herein, the terms defined in the American Dairy, Inc. 2009
Stock Incentive Plan (the “Plan”) will have the same defined meanings in this
Notice of Grant of Performance Option (the “Notice of Grant”) and the American
Dairy, Inc. 2009 Stock Incentive Plan Performance Option Agreement (together,
the “Agreement”).

     

    
      
        
          
            
              
                	
                        Participant:

                      	 
      
	
                        Mailing
      Address:

                      	 
      
	 	 


              

            

          

        

      

    

     

    Participant
has been granted, subject to and conditioned upon the approval of the Plan by
the Company’s shareholders at a duly constituted meeting, a Performance Option
to purchase Shares of common stock, subject to the terms and conditions of the
Plan and this Agreement, as follows:

     

    
      
        
          
            
              
                
                  
                    	
                            Date
      of Grant

                          	
                             
      

                          
	
                            Number
      of Shares Granted

                          	 
      
	
                            Exercise
      Price per Share

                          	
                             
      

                          
	
                            Total
      Exercise Price

                          	
                             
      

                          
	
                            Type
      of Option

                          	
                             

                          
	
                            Term/Expiration
      Date

                          	
                             
      

                          


                  

                

              

            

          

        

      

    

     

    Vesting
Schedule:

     

    Subject
to the terms of the Plan and the performance conditions described below, this
Performance Option will become exercisable in tranches on the vesting dates set
forth in the table below under the heading “Vesting Dates” (each a “Vesting
Date”).  As of each Vesting Date, the number of shares that become
exercisable under this Option (the “Option Shares”) shall be the product of (i)
the number of shares set forth above corresponding to the heading “Number of
Shares Granted and (ii) the percentage corresponding to the relevant Vesting
Date set forth in the table below under the heading “Vesting Percentage” (each a
“Vesting Percentage”).


    
      
         


      

      
         


        
          

        

      

      
         


      

    

     

    
      
        
          
            
              
                	
                        Vesting
      Date

                      	 	
                        Vesting
      Percentage

                      	 
	
                         
      

                      	 	 	 
      	 
      
	
                         
      

                      	 	 	 
      	 
      


              

            

          

        

      

    

     

    Performance
Conditions

    


    The vesting and exercisability of
this  Performance Option is subject to the following performance
conditions:

     

    The
Option shall vest in tranches as of the Vesting Dates in accordance with the
Vesting Percentages set forth above if the Participant (a) continues to be
employed by the Company as of the relevant Vesting Date, and (b) with respect to
the period preceding the Vesting Date (each, a ”Relevant Period”), has met the
performance goals established by the Vice President of the Participant’s
business unit for the Relevant Period and received satisfactory performance
reviews conducted by the Chairman and the Vice Chairman (the “Performance
Criteria”).  The Plan Administrator shall have the right to adjust the
Performance Criteria at anytime if the Plan Administrator determines that
external changes or other unanticipated business conditions have materially
affected the fairness of the Performance Criteria and have unduly influenced the
Company’s ability to meet them.

     

    If the
Participant fails to satisfy the Performance Criteria in any Relevant Period,
the Option Shares that would otherwise vest on the corresponding Vesting Date
shall be forfeited and cancelled.

     

     [Remainder
of Page Intentionally Left Blank]


    
      
         


      

      
        2

        
          

        

      

      
         


      

    

     

    By
Participant’s signature and the signature of the Company’s representative below,
Participant and the Company agree that this Performance Option is granted under
and governed by the terms and conditions of the Plan and this
Agreement.  Participant has reviewed the Plan and this Agreement in
their entirety, has had an opportunity to obtain the advice of counsel prior to
executing this Agreement and fully understands all provisions of the Plan and
Agreement.  Participant hereby agrees to accept as binding, conclusive
and final all decisions or interpretations of the Administrator upon any
questions relating to the Plan and Agreement.  Participant further
agrees to notify the Company upon any change in the residence address indicated
below.

    


    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    	
                                            PARTICIPANT

                                          	 
      	
                                            AMERICAN
      DAIRY, INC.

                                          
	 	 	 
	 
      	 
      	 
      	 
      
	
                                            Signature

                                          	 
      	
                                            By:

                                          	
                                            Liu
      Hua

                                          
	 	 	 	 
	 
      	 
      	 
      	 
      
	
                                            Print
      Name

                                          	 
      	
                                            Title:

                                          	
                                            Vice
      Chairman, Treasurer and Secretary

                                          
	 	 	 	 
	
                                            Address: