Unassociated Document


    

      SHARE
        PLEDGE AGREEMENT

      


      This
        SHARE
        PLEDGE AGREEMENT, dated
        as
        of November 12, 2008 (this “Agreement”),
        is
        executed among Mr. Leng You-Bin, being an individual resident in the People’s
        Republic of China (“Mr.
        Leng”),
        and
        American Dairy, Inc., a Utah corporation (the “Company”,
        and
        together with Mr. Leng, the “Pledgors”),
        and
        The Bank of New York Mellon, in its capacity as collateral agent (with its
        successors in such capacity, the “Collateral
        Agent”)
        for
        the benefit of the Secured Parties (as defined below).

      


      WITNESSETH:

      


      (1) The
        Company issued certain 7.75% Convertible Notes due October 2, 2009 (the
“Original
        Notes”)
        pursuant to a Subscription Agreement dated October 2, 2006 (the “Subscription
        Agreement”)
        between
        the Company and the subscribers identified on the signature page attached
        thereto (the “Holders”);

      


      (2) The
        Pledgors own the issued and outstanding equity interests in the Company and
        American Flying Crane Corporation, a Delaware Corporation (“AFC”),
        as
        applicable, set forth on Exhibit
        A
        attached
        hereto and made a part hereof (the “Equity
        Interests”);

       

      (3) The
        Company is entering into this Agreement as part of the inducement to Holders
        to
        accept 216,639 shares of Company common stock issued to the Holders
        contemporaneously with execution of this Agreement in settlement and compromise
        of a claim of the Holders for amounts due from the Company under Section
        2(c) of
        that certain Registration Rights Agreement between the Company and the Holders
        dated October 2, 2006 (the “Registration
        Rights Agreement”)
        for
        the period from October 1, 2007 through September 30, 2008; and

      


      (4) In
        connection with the transactions contemplated herein, on the date hereof,
        the
        Company is issuing its Amended and Restated 7.75% Convertible Notes due October
        2, 2009 (the “Notes”),
        which
        will amend and restate the Original Notes, and AFC is issuing its guarantee
        of
        the Notes (the “Guarantee”).

       

      NOW,
        THEREFORE, for
        and
        in consideration of the foregoing and for other good and valuable consideration,
        the receipt and sufficiency of which are hereby acknowledged, the Pledgors
        and
        the Collateral Agent hereby agree as follows:

      


      1. Defined
        Terms.
        Unless
        otherwise defined herein, each capitalized term used herein that is defined
        in
        the Subscription Agreement shall have the meaning specified for such term
        in the
        Subscription Agreement. Unless otherwise defined, herein or in the Subscription
        Agreement, terms used in Article 8 or Article 9 of the Uniform Commercial
        Code
        as in effect from time to time in the State of New York are used herein as
        therein defined. In addition, the following terms used in this Agreement
        shall
        have the meanings set forth below:

       

      
        
           

        

        
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      “2007
        Note Documents”
shall
        mean, collectively, (i) those certain 1.0% Guaranteed Senior Secured Convertible
        Notes due 2012 issued by the Company on June 1, 2007 and June 27, 2007 (the
        “2007
        Notes”);
        (ii)
        that certain Indenture dated June 1, 2007 by and among the Company, AFC,
        and The
        Bank of New York Mellon, as Trustee, which governs certain of the 2007 Notes
        (the “June
        1, 2007 Indenture”);
        (iii)
        that certain Indenture dated June 27, 2007 by and among the Company, AFC,
        and
        The Bank of New York Mellon, as Trustee, which governs certain of the 2007
        Notes
        (the “June
        27, 2007 Indenture”);
        (iv)
        that certain Share Pledge Agreement dated June 1, 2007 by and among the Company,
        Mr. Leng, and the Bank of New York Mellon, as Collateral Agent (the
“2007
        Pledge Agreement”);
        and
        (v) the other documents executed in connection therewith, in each case as
        the
        same may be amended, restated or otherwise supplemented from time to
        time.

       

      “Event
        of Default” shall
        mean an Event of Default as set forth in Section Article III of the
        Notes.

      


      “Indentures”
shall
        mean the June 1, 2007 Indenture and the June 27, 2007 Indenture.

      


      “Secured
        Obligations” shall
        mean all obligations owing by the Company under the Notes and under this
        Agreement, including, without limitation, interest accruing during the pendency
        of any bankruptcy, insolvency, receivership or other similar proceeding,
        regardless of whether allowed or allowable in such proceeding.

      


      “Secured
        Parties” shall
        mean each of the Collateral Agent, the holders of any Note (“Holders”)
        and
        each other party to whom any Secured Obligation is owed.

      


      2. Pledge.
        Each
        Pledgor hereby pledges to the Collateral Agent, for the benefit of the Secured
        Parties, and grants to the Collateral Agent for the benefit of the Secured
        Parties, a security interest in, the following (collectively, the “Pledged
        Collateral”):

      


      (a) All
        of
        the right, title and interest of such Pledgor in the Equity Interests, whether
        now existing or hereafter arising, and the certificates evidencing the shares
        of
        such capital stock (such now-existing shares being identified on Exhibit
        A
        attached
        hereto and made a part hereof), and (in the case of the Company as the Pledgor)
        all options and warrants for the purchase of additional equity interests
        in AFC
        now or hereafter held in the name of the Company (all of said Equity Interests
        and (in the case of the Company as the Pledgor) options and warrants and
        all
        capital stock held in the name of the Company as a result of the exercise
        of
        such options or warrants being hereinafter collectively referred to as the
        “Pledged
        Stock”),
        herewith delivered to the Collateral Agent, accompanied by undated Powers
        (as
        defined below) executed in blank by such Pledgor, and, subject to Section
        9
        hereof,
        all dividends, distributions, cash, instruments and other property from time
        to
        time received, receivable or otherwise distributed in respect of, or in exchange
        for, any or all of the Pledged Stock;

       

      
        
           

        

        
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      (b) All
        Additional Equity Interests (as defined below) from time to time acquired
        by the
        Company from the date hereof in any manner, and the certificates representing
        such Additional Equity Interests (any such additional equity interests shall
        constitute part of the Pledged Stock and the Collateral Agent is irrevocably
        authorized to amend Exhibit
        A
        from
        time to time to reflect such additional equity interests), and subject to
        Section
        9
        hereof,
        all options, warrants, dividends, distributions, cash, instruments and other
        rights and options from time to time received, receivable or otherwise
        distributed in respect of or in exchange for any or all of the Equity Interests
        or Additional Equity Interests; and

      


      (c) All
        proceeds of the foregoing.

      


      3. Security
        for Liabilities.
        The
        Pledged Collateral secures the full and prompt payment, performance and
        observance when due (whether at stated maturity, by acceleration or otherwise)
        of the Secured Obligations.

      


      4. Delivery
        of Pledged Collateral; Registration and Acknowledgments.
        All
        certificates representing or evidencing the Pledged Collateral, if any, and
        a
        copy of the UCC financing statements filed with the State of Utah or the
        District of Columbia, as applicable, pursuant to Section 27 below, shall
        be
        physically delivered to and held by or on behalf of the Collateral Agent,
        pursuant hereto and shall be in suitable form for transfer by delivery and
        shall
        be accompanied by duly executed instruments of transfer, powers, or assignments
        in blank as appropriate (such instruments of transfer, powers, or assignments
        in
        blank, in the form of Exhibit
        B
        attached
        hereto and made a part hereof, being the “Powers”),
        all
        in form and substance satisfactory to the Collateral Agent. After the occurrence
        and during the continuance of a an Event of Default, the Collateral Agent
        shall
        have the right, at any time in its discretion and without notice to any Pledgor,
        to transfer to or to register in the name of the Collateral Agent or any
        of its
        nominees any or all of the Pledged Collateral, subject only to the revocable
        rights specified in Sections
        8
        and
9.
        In
        addition, the Collateral Agent shall have the right at any time to exchange
        certificates or instruments representing or evidencing Pledged Collateral
        for
        certificates or instruments of smaller or larger denominations.

      


      5. Pledged
        Collateral Adjustments.
        If,
        during the term of this Agreement:

      


      (a) Any
        stock
        dividend, reclassification, readjustment or other change, is declared or
        made in
        the capital structure of any Pledged Entity (as defined below) which affects
        the
        Pledged Collateral, or any option included within the Pledged Collateral
        is
        exercised, or both, or

      


      (b) Any
        subscription warrants, shares, or any other rights or options or other
        securities shall be issued in connection with the Pledged
        Collateral,

      


      then
        all
        new, substituted and additional shares, warrants, rights, options or other
        securities, issued by reason of any of the foregoing, shall be immediately
        delivered to and held by the Collateral Agent, under the terms of this Agreement
        and shall constitute Pledged Collateral hereunder.

       

      
        
           

        

        
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      6. Subsequent
        Changes Affecting Pledged Collateral.
        Each
        Pledgor represents and warrants that it has made its own arrangements for
        keeping itself informed of changes or potential changes affecting the Pledged
        Collateral (including, but not limited to, rights to convert, rights to
        subscribe, payment of distributions, reorganization or other exchanges, offers
        to purchase and voting rights), and each Pledgor agrees that none of the
        Collateral Agent or any of the Secured Parties shall have any obligation
        to
        inform such Pledgor of any such changes or potential changes or to take any
        action or omit to take any action with respect thereto. The Collateral Agent
        may, after the occurrence and during the continuance of an Event of Default,
        without notice and at its option, transfer or register the Pledged Collateral
        or
        any part thereof into its or its nominee’s name with or without any indication
        that such Pledged Collateral is subject to the security interest
        hereunder.

      


      7. Representations
        and Warranties.
        Each
        Pledgor represents and warrants, severally and not jointly, as follows, in
        each
        case as of the date hereof:

      


      (a) Such
        Pledgor is the sole legal and beneficial owner of the Equity Interests set
        forth
        opposite its name on Exhibit
        A
        attached
        hereto and made a part hereof, free and clear of any Lien except for the
        Lien
        created by this Agreement and the 2007 Note Documents;

      


      (b) All
        of
        the Pledged Stock pledged by such Pledgor has been duly authorized and validly
        issued, is fully paid and non-assessable; such Pledgor has acquired its
        ownership in such Pledged Collateral in good faith without notice of any
        adverse
        claims, other than the 2007 Note Documents;

      


      (c) All
        of
        the Pledged Stock pledged by such Pledgor is presently represented by the
        certificates listed on Exhibit
        A
        hereto
        and are a “Certificated Security” within the meaning given to such term in
        Section 8-102(a)(4) of the UCC (as defined below). As of the date hereof,
        there
        are no existing options, warrants, calls or commitments of any character
        whatsoever relating to such Pledged Stock, other than as set forth in the
        2007
        Note Documents;

      


      (d) Such
        Pledgor has full power and authority to enter into this Agreement and perform
        the obligations hereunder;

      


      (e) Other
        than as set forth in the 2007 Note Documents, there are no restrictions upon
        the
        voting rights associated with, or upon the transfer of, any of the Pledged
        Collateral pledged by such Pledgor;

      


      (f) Other
        than as set forth in the 2007 Note Documents, such Pledgor has the right
        to
        vote, pledge, assign and grant a security interest in or otherwise transfer
        the
        Pledged Collateral pledged by such Pledgor free of any Liens;

      


      (g) Other
        than for consents by the holders of the 2007 Note Documents and such filing
        or
        registration, if any, as may be required by the Secured Parties under Regulation
        U on Federal Reserve Form FR G-1, no authorization, approval, or other action
        by, and no notice to or filing with, any Governmental Authority and no consent
        from any other party (including, without limitation, any stockholder, partner,
        member or creditor of such Pledgor or any of its Affiliates) is required
        either
        (i) for the pledge of the Pledged Collateral pledged by such Pledgor pursuant
        to
        this Agreement or for the execution, delivery or performance of this Agreement
        by such Pledgor or (ii) for the exercise by the Collateral Agent of the voting
        or other rights provided for in this Agreement or the remedies in respect
        of
        such Pledged Collateral pursuant to this Agreement (except as may be required
        in
        connection with such disposition by laws affecting the offering and sale
        of
        securities generally);

       

      
        
           

        

        
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      (h) The
        pledge of the Pledged Collateral pursuant to this Agreement, together with
        the
        delivery of the stock certificates in accordance with Section
        4
        hereof
        to the Collateral Agent, creates a valid and perfected security interest
        in the
        Pledged Collateral, in favor of the Collateral Agent for the benefit of the
        Secured Parties, securing the payment and performance of the Secured
        Obligations, subject only to the pledge and security interest created under
        the
        2007 Note Documents; the Collateral Agent shall have “control” (within the
        meaning given to such term in Section 8-106 of the UCC) of the Pledged
        Collateral and the Collateral Agent will be a “protected purchaser” (within the
        meaning given to such term in Section 8-303 of the UCC);

      


      (i) This
        Agreement has been duly executed and delivered by and on behalf of such Pledgor
        and constitutes the legal, valid and binding obligation of such Pledgor,
        enforceable against such Pledgor in accordance with its terms;

      


      (j) There
        is
        no action, suit, proceeding, governmental investigation or arbitration, at
        law
        or in equity, or before or by any Governmental Authority, pending, or to
        the
        knowledge of such Pledgor, threatened against such Pledgor, the respective
        Pledged Entity (as defined below) or any of its property which will materially
        and adversely affect the value of the Pledged Collateral pledged by such
        Pledgor
        or the ability of such Pledgor to perform its obligations under this
        Agreement;

      


      (k) Other
        than for consents by the holders of the 2007 Note Documents, the execution,
        delivery and performance of this Agreement by such Pledgor (i) does not violate,
        constitute a breach of or a default (with the passage of time or otherwise)
        under, require the consent of any person or a Governmental Authority or result
        in the imposition of a Lien (other than the Lien created by this Agreement)
        on
        any assets of such Pledgor under or pursuant to (x) any indenture, mortgage,
        or
        any other agreement to which such Pledgor is a party or by which any of its
        properties or assets may be bound or (y) any statute, rule, regulation, law
        or
        ordinance, or any judgment, decree or order applicable to such Pledgor; (ii)
        complies with all corporate organization documents of such Pledgor; and (iii)
        does not violate any restriction on such transfer or encumbrance of the Pledged
        Collateral pledged by such Pledgor;

      


      (l) The
        Powers delivered by such Pledgor are effective endorsements duly executed
        by an
        appropriate person and give the Collateral Agent the authority they purport
        to
        confer;

      


      (m) The
        Pledged Stock pledged by such Pledgor (i) in the case of the Company as the
        Pledgor, constitutes all of the equity interests in AFC held by the Company
        as
        of the date hereof and (ii) in the case of Mr. Leng as the Pledgor, constitutes
        all of the equity interests in the Company held by Mr. Leng that have been
        pledged under the 2007 Note Documents; and

       

      
        
           

        

        
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      (n) The
        respective Pledged Entity has been duly incorporated and is validly existing
        as
        a corporation in good standing under the laws of its jurisdiction of
        incorporation (i.e.,
        Utah in
        the case of the Company as the Pledged Entity, and Delaware in the case of
        the
        AFC as the Pledged Entity).

      


      8. Voting
        Rights.
        During
        the term of this Agreement, and except as provided in this Section
        8
        below,
        each Pledgor shall have the right to vote the Pledged Stock pledged by such
        Pledgor on all corporate questions in a manner not inconsistent with the
        terms
        of this Agreement to which it is a party; provided,
        however,
        that no
        such vote shall be cast, and no consent as a stockholder shall be given or
        action taken, which would have the effect of impairing the position or interest
        of any Secured Party in respect of the Pledged Collateral or which would
        authorize, effect or consent to (i) the dissolution or liquidation, in whole
        or
        in part, of the issuer of Pledged Stock (a “Pledged
        Entity”,
        i.e.
        the
        Company in the context of the pledge of its shares by Mr. Leng, and AFC in
        the
        context of the pledge of its shares by the Company); (ii) the consolidation
        or
        merger of a Pledged Entity with any other Person; (iii) the sale, disposition
        or
        encumbrance of all or substantially all of the assets of a Pledged Entity,
        except for Liens in favor of the Collateral Agent for the benefit of the
        Secured
        Parties; (iv) any change in the authorized number of shares, the stated capital
        or the authorized share capital of a Pledged Entity or the issuance of any
        additional shares of its Equity Interests; or (v) the alteration of the voting
        rights with respect to the Equity Interests of a Pledged Entity. After the
        occurrence and during the continuation of an Event of Default, the Collateral
        Agent shall have the right to, following written notice from the Collateral
        Agent to each Pledgor, exercise all voting rights pertaining to the Pledged
        Collateral, including the right to take action by shareholder
        consent.

      


      9. Dividends
        and Other Distributions.
        (a) So
        long as no Event of Default shall have occurred and be continuing:

      


      (i) Each
        Pledgor shall be entitled to receive and retain any and all dividends and
        distributions paid in respect of the Pledged Collateral, notwithstanding
        such
        dividends and distributions being subject to the pledge and assignment thereof
        pursuant to Section
        2,
        provided,
        however,
        that
        any and all

      


      (A) dividends
        and distributions paid or payable other than in cash with respect to, and
        instruments and other property received, receivable or otherwise distributed
        with respect to, or in exchange for, any of the Pledged Collateral;

      


      (B) dividends
        and other distributions paid or payable in cash with respect to any of the
        Pledged Collateral on account of a partial or total liquidation or dissolution
        or in connection with a reduction of capital, capital surplus or paid-in
        surplus; and

       

      
        
           

        

        
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      (C) cash
        paid, payable or otherwise distributed with respect to principal of, or in
        redemption of, or in exchange for, any of the Pledged Collateral;

      


      shall
        be
        Pledged Collateral, and shall be forthwith delivered to the Collateral Agent
        to
        hold, for the benefit of the Secured Parties, as Pledged Collateral and shall,
        if received by such Pledgor, be received in trust for the Collateral Agent,
        for
        the benefit of the Secured Parties; and

      


      (ii) The
        Collateral Agent shall execute and deliver (or cause to be executed and
        delivered) to the relevant Pledgor all such proxies and other instruments
        as
        such Pledgor may reasonably request for the purpose of enabling such Pledgor
        to
        receive the dividends which it is authorized to receive and retain pursuant
        to
        clause (i) above.

      


      (b) After
        the
        occurrence and during the continuation of an Event of Default:

      


      (i)All
        rights of each Pledgor to receive the dividends and other distributions which
        it
        would otherwise be authorized to receive and retain pursuant to Section
        9(a)(i)
        hereof
        shall cease, and all such rights shall thereupon become vested in the Collateral
        Agent, for the benefit of the Secured Parties, which shall thereupon, subject
        only to the 2007 Note Documents, have the sole right to receive and hold
        as
        Pledged Collateral such dividends and other distributions;

      


      (ii)All
        dividends and other distributions which are received by each Pledgor contrary
        to
        the provisions of clause (i) of this Section
        9(h)
        shall be
        received in trust for the Collateral Agent, for the benefit of the Secured
        Parties, subject only to the 2007 Note Documents;

      


      (iii)Each
        Pledgor shall, upon the reasonable request of the Collateral Agent, at the
        Company’s expense, execute and deliver, and cause the respective Pledged Entity
        and its officers and directors to execute and deliver, all such instruments
        and
        documents, and do or cause to be done all such other acts and things, as
        may be
        required by applicable law or may be necessary or, in the opinion of the
        holders
        of at least a majority in aggregate principal amount of the Notes then
        outstanding or their counsel, advisable to register the applicable Pledged
        Collateral under the provisions of the Securities Act, and to exercise its
        best
        efforts to cause the registration statement relating thereto to become effective
        and to remain effective for such period as prospectuses are required by law
        to
        he furnished, and to make all amendments and supplements thereto and to the
        related prospectus which, in the opinion of the Holders of at least a majority
        in aggregate principal amount of the Notes then outstanding or their counsel,
        are necessary or advisable, all in conformity with the requirements of the
        Securities Act and the rules and regulations of the Commission applicable
        thereto;

      


      (iv)Each
        Pledgor shall, at the Company’s expense, use its best efforts to qualify the
        Pledged Collateral pledged by such Pledgor under U.S. state securities or
“Blue
        Sky” laws and to obtain all necessary governmental approvals for the sale of
        such Pledged Collateral;

       

      
        
           

        

        
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      (v)The
        Company shall, at the Company’s expense, cause the respective Pledged Entity to
        make available to the holders of its securities, as soon as practicable,
        earning
        statements which will satisfy the provisions of Section 11(a) of the Securities
        Act; and

      


      (vi)Each
        Pledgor shall, at the Company’s expense, do or cause to be done all such other
        acts and things as may be necessary to make such sale of the Pledged Collateral
        pledged by such Pledgor or any part thereof valid and binding and in compliance
        with applicable law.

      


      The
        Company will reimburse the Collateral Agent for all expenses incurred by
        the
        Collateral Agent, including, without limitation, reasonable attorneys’ and
        accountants’ fees and expenses in connection with the foregoing. Upon or at any
        time after the occurrence and during the continuation of an Event of Default,
        if
        the Secured Parties (pursuant to the terms of the Indenture) determines that,
        prior to any public offering of any securities constituting part of the Pledged
        Collateral, such securities should be registered under the Securities Act
        and/or
        registered or qualified under any other federal or state law and such
        registration and/or qualification is not practicable, then each Pledgor agrees
        that it will be commercially reasonable if a private sale, upon at least
        ten
        (10) Business Days’ notice to each Pledgor, is arranged so as to avoid a public
        offering, even though the sales price established and/or obtained at such
        private sale may be substantially less than prices which could have been
        obtained for such security on any market or exchange or in any other public
        sale.

      


      10. Transfers
        and other Liens.
        Each
        Pledgor agrees that it will not, without the prior written consent of the
        Collateral Agent: (i) sell, transfer or otherwise dispose of or grant any
        option
        with respect to, or create or permit to exist any Lien upon or with respect
        to,
        any of the Pledged Collateral, except as expressly permitted by this Agreement;
        or (ii) take any action in connection with any of the Pledged Collateral
        which
        would materially impair the value of the Pledged Collateral or otherwise
        materially and adversely affect the interest or rights of the Collateral
        Agent
        or the Secured Parties hereunder.

      


      Each
        Pledgor further agrees that it will procure, or take reasonable efforts to
        procure, that the respective Pledged Entity and any other direct or indirect
        subsidiary thereof shall carry on business only in the ordinary course and
        will
        not dispose of or agree to dispose of a substantial part of its assets or
        undertaking or take any action in connection with any of the Pledged Collateral
        pledged by such Pledgor which would materially impair the value of such Pledged
        Collateral or otherwise materially and adversely affect the interest or rights
        of the Collateral Agent or the Secured Parties hereunder.

      


      11. Defense
        of Title.
        Each
        Pledgor will defend the title to the Pledged Collateral pledged by such Pledgor
        and the Liens of the Collateral Agent in such Pledged Collateral against
        the
        claim of any Person and will maintain and preserve such Liens.

       

      
        
           

        

        
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      12. Additional
        Equity Interests.
        The
        Pledgors will, upon the Company obtaining ownership of any additional equity
        interests in AFC, which equity interests are not already Pledged Collateral
        (the
“Additional
        Equity Interests”),
        promptly (and in any event within three (3) Business Days) deliver to the
        Collateral Agent an amendment to this Agreement, duly executed by the Pledgors
        and in form and substance reasonably satisfactory to the Secured Parties,
        in
        respect of any such Additional Equity Interests, pursuant to which the Company
        shall pledge to the Collateral Agent all of such Additional Equity Interests.
        The Pledgors hereby authorize the Collateral Agent to attach such amendment
        to
        this Agreement and agrees that all Pledged Stock listed on any such amendment
        delivered to the Collateral Agent shall for all purposes hereunder be considered
        Pledged Collateral.

      


      13. Remedies.
        (a) The
        Collateral Agent shall have, in addition to any other rights given under
        this
        Agreement or by law, all of the rights and remedies with respect to the Pledged
        Collateral of a secured party under the Uniform Commercial Code as in effect
        in
        the State of New York (the “UCC”)
        (whether or not the UCC applies to the affected Pledged Collateral). In
        addition, after the occurrence and during the continuation of an Event of
        Default, the Collateral Agent shall have such powers of sale and other powers
        as
        may be conferred by applicable law. With respect to the Pledged Collateral
        or
        any part thereof which shall then be in or shall thereafter come into the
        possession or custody of the Collateral Agent or which the Collateral Agent
        shall otherwise have the ability to transfer under applicable law, the
        Collateral Agent may, with the consent of the holders of a majority in aggregate
        principal amount of the Notes at the time outstanding, without notice except
        as
        specified below, after the occurrence and during the continuation of an Event
        of
        Default, sell or cause the same to be sold at any exchange, broker’s board or at
        public or private sale, in one or more sales or lots, at such price as the
        Collateral Agent or the Secured Parties (acting as the holders of a majority
        in
        aggregate principal amount of the Notes at the time outstanding) may deem
        best,
        for cash or on credit or for future delivery, without assumption of any credit
        risk, and the purchaser of any or all of the Pledged Collateral so sold shall
        thereafter own the same, absolutely free from any claim, encumbrance or right
        of
        any kind whatsoever. The Collateral Agent or any Secured Party may, in its
        own
        name, or in the name of a designee or nominee, buy the Pledged Collateral
        at any
        public sale and, if permitted by applicable law, buy the Pledged Collateral
        at
        any private sale. The Company agrees to pay to the Collateral Agent all
        reasonable expenses (including, without limitation, court costs and reasonable
        attorneys’ and paralegals’ fees and expenses) of, or incident to, the
        enforcement of any of the provisions hereof. The Collateral Agent agrees
        to
        distribute any proceeds of the sale of the Pledged Collateral to the Holders,
        and the Company and AFC, as the guarantor under the Guarantee, and any other
        guarantor that shall have executed a written guarantee of the Notes, shall
        remain liable for any deficiency following the sale of the Pledged
        Collateral.

      


      (b) Unless
        any of the Pledged Collateral threatens to decline speedily in value or is
        or
        becomes of a type sold on a recognized market, the Collateral Agent will
        give
        the Pledgors reasonable notice of the time and place of any public sale thereof,
        or of the time after which any private sale or other intended disposition
        is to
        be made. Any sale of the Pledged Collateral conducted in conformity with
        reasonable commercial practices of banks, commercial finance companies,
        insurance companies or other financial institutions disposing of property
        similar to the Pledged Collateral shall be deemed to be commercially reasonable.
        Notwithstanding any provision to the contrary contained herein, each Pledgor
        agrees that any requirements of reasonable notice shall be met if such notice
        is
        received by such Pledgor as provided in Section
        30
        below at
        least ten (10) Business Days before the time of the sale or disposition.
        Any
        other requirement of notice, demand or advertisement for sale is waived,
        to the
        extent permitted by law. The Collateral Agent shall not be obligated to make
        any
        sale of the Pledged Collateral regardless of notice of sale having been given.
        The Collateral Agent may adjourn any public or private sale from time to
        time by
        announcement at the time and place fixed therefor, and such sale may, without
        further notice, be made at the time and place to which it was so
        adjourned.

       

      
        
           

        

        
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      (c)In
        view
        of the fact that U.S. federal and state securities laws may impose certain
        restrictions on the method by which a sale of the Pledged Collateral may
        be
        effected after an Event of Default, each Pledgor agrees that after the
        occurrence and during the continuation of an Event of Default, the Collateral
        Agent may, from time to time, attempt to sell all or any part of the Pledged
        Collateral by means of a private placement restricting the bidders and
        prospective purchasers to those who are qualified and will represent and
        agree
        that they are purchasing for investment only and not for distribution. In
        so
        doing, the Collateral Agent may solicit offers to buy the Pledged Collateral,
        or
        any part of it, from a limited number of investors deemed by the Collateral
        Agent, in its reasonable judgment, to be financially responsible parties
        who
        might be interested in purchasing the Pledged Collateral. If the Collateral
        Agent solicits such offers from not less than four (4) such investors, then
        the
        acceptance by the Collateral Agent of the highest offer obtained therefrom
        shall
        be deemed to be a commercially reasonable method of disposing of such Pledged
        Collateral; provided,
        however,
        that
        this Section
        13
        does not
        impose a requirement that the Collateral Agent solicit offers from four (4)
        or
        more investors in order for the sale to be commercially reasonable.

      


      (d) Each
        Pledgor agrees to the maximum extent permitted by applicable law that, following
        the occurrence and during the continuance of an Event of Default, it will
        not at
        any time plead, claim or take the benefit of any appraisal, valuation, stay,
        extension, moratorium or redemption law now or hereafter in force in order
        to
        prevent or delay the enforcement of this Agreement, or the absolute sale
        of the
        whole or any part of the Pledged Collateral or the possession thereof by
        any
        purchaser at any sale hereunder, and each Pledgor waives the benefit of all
        such
        laws to the extent it lawfully may do so. Each Pledgor agrees that it will
        not
        interfere with any right, power and remedy of the Collateral Agent provided
        for
        in this Agreement or now or hereafter existing at law or in equity or by
        statute
        or otherwise, or the exercise or beginning of the exercise by the Collateral
        Agent of any one or more of such rights, powers or remedies. No failure or
        delay
        on the part of the Collateral Agent to exercise any such right, power or
        remedy
        and no notice or demand which may be given to or made upon any Pledgor by
        the
        Collateral Agent with respect to any such remedies shall operate as a waiver
        thereof, or limit or impair the Collateral Agent’s right to take any action or
        to exercise any power or remedy hereunder, without notice or demand, or
        prejudice its rights as against any Pledgor in any respect.

      


      (e) Each
        Pledgor further agrees that a breach of any of the covenants by the Pledgor
        contained in this Section
        13
        will
        cause irreparable injury to the Collateral Agent, that the Collateral Agent
        shall have no adequate remedy at law in respect of such breach and, as a
        consequence, agrees that each and every covenant contained in this Section
        13
        shall be
        specifically enforceable against such Pledgor, and each Pledgor hereby waives
        and agrees not to assert any defenses against an action for specific performance
        of such covenants.

       

      
        
           

        

        
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      14. Security
        Interest Absolute.
        All
        rights of the Collateral Agent and security interests hereunder, and all
        obligations of each Pledgor hereunder, shall be absolute and unconditional
        irrespective of:

      


      (i) any
        lack
        of validity or enforceability of the Notes or any other agreement or instrument
        relating thereto;

      


      (ii) any
        change in the time, manner or place of payment of, or in any other term of,
        all
        or any part of the Secured Obligations, or any other amendment or waiver
        of or
        any consent to any departure from the Notes or this Agreement;

      


      (iii) any
        exchange, release or non-perfection of any other collateral, or any release
        or
        amendment or waiver of or consent to departure from any guaranty, for all
        or any
        part of the Secured Obligations;

      


      (iv) the
        insolvency of any of the Pledgors or the Pledged Entities; or

      


      (v) any
        other
        circumstance which might otherwise constitute a defense available to, or
        a
        discharge of, such Pledgor in respect of the Secured Obligations or of this
        Agreement.

      


      15. Collateral
        Agent Appointed Attorney-in-Fact.
        Each
        Pledgor hereby appoints the Collateral Agent its attorney-in-fact, with full
        authority, in the name of such Pledgor or otherwise, after the occurrence
        and
        during the continuation of an Event of Default, from time to time in the
        Collateral Agent’s sole discretion, to take any action and to execute any
        instrument which the Collateral Agent or any Secured Party may deem necessary
        or
        advisable to accomplish the purposes of this Agreement, including, without
        limitation, to receive, endorse and collect all instruments made payable
        to such
        Pledgor representing any dividend or other distribution in respect of the
        Pledged Collateral or any part thereof and to give full discharge for the
        same
        and to arrange for the transfer of all or any part of the Pledged Collateral
        on
        the books of the respective Pledged Entity to the name of the Collateral
        Agent
        or the Collateral Agent’s nominee.

       

      
        
           

        

        
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      16. The
        Intercreditor Agreement.
        Notwithstanding any provision to the contrary in this Agreement, this Agreement,
        the Liens and security interests granted to the Collateral Agent pursuant
        to
        this Agreement, and the exercise of any right or remedy by the Collateral
        Agent
        and the other Secured Parties hereunder are subject to the provisions of
        that
        certain Intercreditor Agreement of even date herewith by and among the Pledgors,
        Citadel Equity Fund Ltd. and RFA Management Company, LLC (as the same may
        be
        amended, supplemented, modified or replaced from time to time, the “Intercreditor
        Agreement”).
        The
        Collateral Agent and each Secured Party acknowledge and agree to be bound
        by the
        provisions of the Intercreditor Agreement. In the event of any conflict between
        the terms of the Intercreditor Agreement and this Agreement, the terms of
        the
        Intercreditor Agreement shall govern and prevail. Without limiting the
        generality of the foregoing, and notwithstanding anything herein to the
        contrary, all rights and remedies of the Collateral Agent (and the Secured
        Parties) shall be subject to the terms of the Intercreditor Agreement, and
        until
        the First Priority Obligations Payment Date (as used and defined in the
        Intercreditor Agreement), (a)
        no
        Pledgor shall take any action that is inconsistent with such Pledgor’s
        obligations under the First Priority Documents (as used and defined in the
        Intercreditor Agreement) and (b)
        any
        obligation of any Pledgor hereunder with respect to the delivery or control
        of
        any Pledged Collateral, the notation of any Lien on any certificate of title,
        bill of lading or other document, the giving of any notice to any bailee
        or
        other Person, the provision of voting rights or the obtaining of any consent
        of
        any Person shall be deemed to be satisfied if (i)
        the
        Pledgor complies with the requirements of the similar provision of the
        applicable First Priority Document
        and (ii)
        where applicable, the Pledgor includes the Collateral Agent, as agent for
        the
        Secured Parties hereunder, as lienholder or secured party with respect to
        any
        documentation for each item of Pledged Collateral perfected by endorsement,
        notation or control or for which consent is obtained. Except for matters
        pertaining to the filing, amendment and continuation of financing statements,
        until
        the
        First Priority Obligations Payment Date, neither the Collateral Agent nor
        any
        other Secured Party may require any Pledgor to take any action with respect
        to
        the creation, perfection or priority of its security interest, whether pursuant
        to the express terms hereof or pursuant to the further assurances provisions
        hereof, unless the First Priority Representative (as used and defined in
        the
        Intercreditor Agreement) shall have authorized
        such
        Pledgor to take similar action, and delivery of any Pledged Collateral to
        the
        First Priority Representative pursuant to the First Priority Documents shall
        satisfy any delivery requirement hereunder.

      


      17. Waivers.
        Each
        Pledgor waives to the fullest extent permitted by applicable laws presentment
        and demand for payment of any of the Liabilities, protest and notice of dishonor
        or an Event of Default with respect to any of the Liabilities and all other
        notices to which the Pledgor might otherwise be entitled except as otherwise
        expressly provided herein or in the Notes.

      


      18. Term.
        This
        Agreement shall remain in full force and effect until the final payment in
        full,
        in cash, of the Secured Obligations. Upon the termination of this Agreement
        as
        provided above (other than as a result of the sale of the Pledged Collateral),
        the Collateral Agent will release the security interest created hereunder
        and,
        if it then has possession of any Pledged Stock pledged hereunder, will deliver
        such Pledged Stock previously delivered to it and the Powers to the relevant
        Pledgor.

      


      19. Reinstatement.
        This
        Agreement shall remain in full force and effect and continue to be effective
        should any petition be filed by or against any Pledgor or the Pledged Entity
        for
        liquidation or reorganization, should any Pledgor or any Pledged Entity become
        insolvent or make an assignment for the benefit of creditors or should a
        receiver or trustee be appointed for all or any significant part of any
        Pledgor’s or any Pledged Entity’s assets, and shall continue to be effective or
        be reinstated, as the case may be.

      


      20. Definitions.
        The
        singular shall include the plural and vice versa and any gender shall include
        any other gender as the context may require.

       

      
        
           

        

        
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      21. Binding
        Effect; Successors and Assigns.
        This
        Agreement shall be binding upon each Pledgor and its successors and assigns,
        and
        shall inure to the benefit of the Collateral Agent and the Secured Parties,
        and
        their respective successors and assigns. Nothing set forth herein is intended
        or
        shall be construed to give any other Person any right, remedy or claim under,
        to
        or in respect of this Agreement, the Notes, or any Collateral. Each Pledgor’s
        successors shall include, without limitation, a receiver, trustee or
        debtor-in-possession of or for such Pledgor.

      


      22. Governing
        Law.
        This
        Agreement has been executed and delivered by the parties hereto in New York,
        New
        York. Any dispute between the Collateral Agent and the Pledgor arising out
        of or
        related to the relationship established between them in connection with this
        Agreement, and whether arising in contract, tort, equity, or otherwise, shall
        be
        resolved in accordance with the laws of the State of New York.

      


      23. Consent
        to Jurisdiction and Service of Process.
        THE
        COLLATERAL AGENT HEREBY CONSENTS TO THE NON-EXCLUSIVE JURISDICTION OF THE
        STATE
        OR FEDERAL COURTS LOCATED IN NEW YORK COUNTY, CITY OF NEW YORK, NEW YORK.
        EACH
        PLEDGOR HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED
        IN
        NEW YORK COUNTY, CITY OF NEW YORK, NEW YORK SHALL HAVE EXCLUSIVE JURISDICTION
        TO
        HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN ANY PLEDGOR AND THE COLLATERAL
        AGENT PERTAINING TO THIS AGREEMENT OR TO ANY MATTER ARISING OUT OF OR RELATING
        TO THIS AGREEMENT; PROVIDED
        THAT THE
        COLLATERAL AGENT AND EACH PLEDGOR ACKNOWLEDGE THAT ANY APPEALS FROM THOSE
        COURTS
        MAY HAVE TO BE HEARD
        BY
        A COURT LOCATED OUTSIDE OF NEW YORK COUNTY; AND, PROVIDED,
        FURTHER,
        NOTHING
        IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE THE COLLATERAL AGENT
        FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION
        TO
        REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE SECURED OBLIGATIONS,
        OR
        TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE COLLATERAL AGENT.
        EACH PLEDGOR EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION
        IN
        ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND EACH PLEDGOR HEREBY WAIVES
        ANY OBJECTION WHICH IT MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION,
        IMPROPER VENUE OR FORUM NON CONVENIENS
        AND
        HEREBY CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED
        APPROPRIATE BY SUCH COURT. EACH PLEDGOR HEREBY WAIVES PERSONAL SERVICE OF
        THE
        SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND
        AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINTS AND OTHER PROCESS MAY BE
        MADE BY
        REGISTERED OR CERTIFIED MAIL ADDRESSED TO SUCH PLEDGOR AT THE ADDRESS SET
        FORTH
        IN THIS AGREEMENT FOR SUCH PLEDGOR AND THAT SERVICE SO MADE SHALL BE DEEMED
        COMPLETED UPON THE EARLIER OF ACTUAL RECEIPT THEREOF OR FIVE (5) DAYS AFTER
        DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE PREPAID.
        The
        Collateral Agent shall have the right to proceed against each Pledgor or
        its
        personal property in a court in any location to enable the Collateral Agent
        to
        obtain personal jurisdiction over such Pledgor, to realize on the Pledged
        Collateral or any other security for the Secured Obligations or to enforce
        a
        judgment or other court order entered in favor of the Collateral
        Agent.

       

      
        
           

        

        
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      24. WAIVER
        OF JURY TRIAL.
        EACH PLEDGOR AND THE COLLATERAL AGENT WAIVES, TO THE EXTENT PERMITTED BY
        APPLICABLE LAW, ANY RIGHT TO TRIAL BY JURY IN ANY DISPUTE, WHETHER SOUNDING
        IN
        CONTRACT, TORT, OR OTHERWISE, BETWEEN THE COLLATERAL AGENT AND ANY PLEDGOR
        ARISING OUT OF OR RELATED TO THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT
        OR
        ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION
        HEREWITH. EITHER OF THE PLEDGORS OR THE COLLATERAL AGENT MAY FILE AN ORIGINAL
        COUNTERPART OR A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE
        OF
        THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY
        JURY.

      


      25. Advice
        of Counsel.
        Each
        Pledgor represents and warrants to the Collateral Agent that it has discussed
        this Agreement and, specifically, the provisions of Sections 22 through 24
        hereof, with its counsel.

      


      26. Severability.
        If any
        provision of this Agreement is held to be prohibited or unenforceable in
        any
        jurisdiction the substantive laws of which are held to he applicable hereto,
        such prohibition or unenforceability shall not affect the validity or
        enforceability of the remaining provisions hereof, to the extent permitted
        by
        applicable law, and shall not invalidate or render unenforceable such provision
        in any other jurisdiction, to the extent permitted by applicable
        law.

      


      27. Further
        Assurances.
        Each
        Pledgor agrees that at any time and from time to time, at the expense of
        such
        Pledgor, such Pledgor will promptly execute and deliver all further instruments
        and documents, and take all further action, that may be required by applicable
        law or may be necessary or desirable, or that the Collateral Agent or any
        Secured Party may reasonably request, in order to perfect and protect any
        security interest granted or purported to be granted hereby or to enable
        the
        Collateral Agent to exercise and enforce its rights and remedies hereunder
        with
        respect to any of the Pledged Collateral, including, without limitation,
        the
        filing of financing statements under Article 9 of the Uniform Commercial
        Code of
        (i) the State of Utah, in the case of the Company as the Pledgor, and (ii)
        the
        District of Columbia, in the case of Mr. Leng as the Pledgor, which initial
        filing shall be completed or caused to be completed by such Pledgor within
        ten
        (10) days from the date hereof. Each Pledgor hereby further agrees that it
        shall
        not make any change to its name, jurisdiction, the form of its organization
        or
        principal residence without prior written notice or otherwise permitted under
        the Indenture. Each Pledgor authorizes the Collateral Agent to file any
        financing statements and amendments thereto relating to the Pledged Collateral,
        in form and substance required by the Collateral Agent (acting at the direction
        of the Holders of the Notes), which describe the Pledged Collateral and include
        therein all other information which is required by Article 9 of the UCC or
        other
        applicable law with respect to the preparation or filing of a financing
        statement or amendment.

       

      
        
           

        

        
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      28. The
        Collateral Agent’s Duty of Care.

      


      (a) The
        Collateral Agent shall not be liable for any acts, omissions, errors of judgment
        or mistakes of fact or law including, without limitation, acts, omissions,
        errors or mistakes with respect to the Pledged Collateral, except for those
        arising out of or in connection with the Collateral Agent’s (i) gross negligence
        or willful misconduct, or (ii) failure to use reasonable care with respect
        to
        the safe custody of the Pledged Collateral in the Collateral Agent’s possession.
        Without limiting the generality of the foregoing, the Collateral Agent shall
        be
        under no obligation to take any steps necessary to preserve rights in the
        Pledged Collateral against any other parties but may do so at its option.
        All
        expenses incurred in connection therewith shall be for the sole account of
        the
        Company, and shall constitute part of the Secured Obligations secured
        hereby.

      


      (b) Without
        limiting the generality of the foregoing, (i) the Collateral Agent shall
        not be
        subject to any fiduciary or other implied duties, regardless of whether an
        Event
        of Default has occurred and is continuing and (ii) the Collateral Agent shall
        not have any duty to take any discretionary action or exercise any discretionary
        powers, except discretionary rights and powers expressly contemplated hereby,
        provided that it shall not amount to gross negligence or willful misconduct
        or a
        failure to use reasonable care.

      


      (c) No
        provision of this Agreement shall require the Collateral Agent to expend
        or risk
        its own funds or otherwise incur any financial liability in the performance
        of
        any of its duties hereunder, or in the exercise of any of its rights or powers,
        if it shall have reasonable grounds for believing that repayment of such
        funds
        or adequate indemnity against such risk or liability is not reasonably assured
        to it. The Collateral Agent shall have no duties or responsibilities except
        those expressly set forth in this Agreement or the Indenture. The Collateral
        Agent shall not be liable for any delay or failure to act as may be required
        hereunder when such delay or failure is due to any act of God, interruption
        or
        other circumstances beyond its control provided
        it
        exercises such diligence as the circumstances may reasonably require. The
        Collateral Agent shall be entitled to rely on any communication, instrument,
        paper or other document reasonably believed by it to be genuine and correct
        and
        to have been signed or sent by the proper person. After receiving any direction
        from the Pledgors or the Secured Parties, the Collateral Agent may (at the
        expense of the Pledgors) consult with legal counsel of its selection (provided
        that such counsel shall be a firm of nationally recognized reputation), and
        the
        written advice of such counsel (or any Opinion of Counsel caused by the Pledgors
        to be furnished by the Company to the Collateral Agent) shall be full and
        complete protection in respect of any action taken, suffered or omitted by
        it
        hereunder in good faith and in reliance thereon.

      


      (d) The
        Collateral Agent shall not be deemed to have notice of any Event of Default
        unless an officer of the Collateral Agent has actual knowledge thereof or
        unless
        written notice of any such Event of Default is received by the Collateral
        Agent
        at the office of the Collateral Agent specified in or pursuant to Section
        30
        hereof.

       

      
        
           

        

        
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      (e) The
        Collateral Agent’s sole duty with respect to the custody, safekeeping and
        physical preservation of the Pledged Collateral shall be to deal with it
        in the
        same manner as the Collateral Agent deals with similar property for its own
        account.

      


      (f) In
        no
        event shall the Collateral Agent be liable for special, indirect or
        consequential loss or damage of any kind whatsoever (including but not limited
        to lost profits), even if the Collateral Agent has been advised of the
        likelihood of such loss or damage and regardless of the form of
        action.

      


      (g) The
        Collateral Agent shall not be responsible for or have any duty to ascertain
        or
        inquire into (i) any statement, warranty or representation made herein or
        in
        connection herewith, (ii) the contents of any certificate, report or other
        document delivered thereunder or in connection therewith, (iii) the performance
        or observance of any of the covenants, agreements or other terms or conditions
        set forth herein, or (iv) the validity, enforceability, effectiveness or
        genuineness of this Agreement or any other agreement, instrument or
        document.

      


      (h) The
        Collateral Agent is authorized to take such actions and to exercise such
        powers
        as are delegated to the Collateral Agent by the terms hereof, together with
        such
        actions and powers as are reasonably incidental thereto.

      


      (i) The
        bank
        or other entity serving as the Collateral Agent shall, in its capacity as
        a
        Secured Party, have the same rights and powers as any other Secured Party
        and
        may exercise the same as though it were not the Collateral Agent. The Collateral
        Agent and its Affiliates may accept deposits from, lend money to and generally
        engage in any kind of business with the Pledgor or any of its Affiliates
        as if
        it were not the Collateral Agent hereunder.

      


      29.Additional
        Provisions Relating to the Collateral Agent.

      


      (a) Any
        corporation, bank, trust company or association into which the Collateral
        Agent
        may be merged or converted or with which it may be consolidated, or any
        corporation, bank, trust company or association resulting from any merger,
        conversion or consolidation to which the Collateral Agent shall be a party,
        or
        any corporation, bank, trust company or association succeeding to all or
        substantially all the corporate trust business of the Collateral Agent, shall
        be
        the successor of the Collateral Agent hereunder, without the execution or
        filing
        of any paper or any further act on the part of any of the parties
        hereto.

      


      (b) The
        following procedures shall be utilized for the resignation or removal of
        the
        Collateral Agent:

      


      (i) The
        Collateral Agent may at any time resign by giving written notice of such
        resignation to the Company and to the Holders of the Notes. Upon receiving
        such
        notice of resignation, the Company shall promptly appoint a successor collateral
        agent by written instrument, in duplicate, executed by order of the Board
        of
        Directors, one copy of which instrument shall be delivered to the resigning
        Collateral Agent and one copy to the successor collateral agent. If no successor
        collateral agent shall have been so appointed and have accepted appointment
        sixty (60) days after the mailing of such notice of resignation to the Holders,
        the resigning Collateral Agent may, upon ten (10) Business Days’ notice to the
        Company and the Holders, petition, at the expense of the Company, any court
        of
        competent jurisdiction for the appointment of a successor collateral agent,
        or,
        any Holder who has been a bona fide holder of a Note or Notes for at least
        six
        (6) months may, petition any such court for the appointment of a successor
        collateral agent. Such court may thereupon, after such notice, if any, as
        it may
        deem proper and prescribe, appoint a successor collateral agent.

       

      
        
           

        

        
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      (ii) In
        case
        at any time any of the following shall occur:

      


      (a) the
        Collateral Agent shall cease to be eligible in accordance with the provisions
        of
        Section 29(c) and shall fail to resign after written request therefor by
        the
        Company or by any such Holder; or

      


      (b) the
        Collateral Agent shall become incapable of acting, or shall be adjudged a
        bankrupt or insolvent, or a receiver of the Collateral Agent or of its property
        shall be appointed, or any public officer shall take charge or control of
        the
        Collateral Agent or of its property or affairs for the purpose of
        rehabilitation, conservation or liquidation;

      


      then,
        in
        any such case, the Company may remove the Collateral Agent and appoint a
        successor collateral agent by written instrument, in duplicate, executed
        by
        order of the Board of Directors, one copy of which instrument shall be delivered
        to the Collateral Agent so removed and one copy to the successor collateral
        agent, or, any Holder who has been a bona fide holder of a Note or Notes
        for at
        least six (6) months may, on behalf of himself and all others similarly
        situated, petition any court of competent jurisdiction for the removal of
        the
        Collateral Agent and the appointment of a successor collateral agent;
provided
        that if
        no successor collateral agent shall have been appointed and have accepted
        appointment sixty (60) days after either the Company or such Holder has removed
        the Collateral Agent, or the Collateral Agent resigns, the Collateral Agent
        so
        removed may petition, at the expense of the Company, any court of competent
        jurisdiction for an appointment of a successor collateral agent. Such court
        may
        thereupon, after such notice, if any, as it may deem proper and prescribe,
        remove the Collateral Agent and appoint a successor collateral
        agent.

      


      (iii) The
        holders of a majority in aggregate principal amount of the Notes at the time
        outstanding may at any time remove the Collateral Agent and nominate a successor
        collateral agent which shall be deemed appointed as successor collateral
        agent
        unless, within ten (10) days after notice to the Company of such nomination,
        the
        Company objects thereto, in which case the Collateral Agent so removed or
        any
        Holder, or, if such Collateral Agent so removed or any Holder fails to act,
        the
        Company, upon the terms and conditions and otherwise as in Section
        29(b)
        provided, may petition any court of competent jurisdiction for an appointment
        of
        a successor collateral agent.

      


      (iv) Any
        resignation or removal of the Collateral Agent and appointment of a successor
        collateral agent pursuant to any of the provisions of this Section shall
        become
        effective upon acceptance of appointment by the successor collateral agent
        as
        provided in Section
        29(c).

       

      
        
           

        

        
          17

          
            

          

        

        
           

        

      

      


      (c)
         Any
        successor collateral agent appointed as provided in Section
        29(b)
        shall
        execute, acknowledge and deliver to the Company and to its predecessor
        collateral agent an instrument accepting such appointment hereunder, and
        thereupon the resignation or removal of the predecessor collateral agent
        shall
        become effective and such successor collateral agent, without any further
        act,
        deed or conveyance, shall become vested with all the rights, powers, duties
        and
        obligations of its predecessor hereunder, with like effect as if originally
        named as collateral agent herein; but, nevertheless, on the written request
        of
        the Company or of the successor collateral agent, the collateral agent ceasing
        to act shall execute and deliver an instrument transferring to such successor
        collateral agent all of the rights and powers of the collateral agent so
        ceasing
        to act. Upon request of any successor collateral agent, the Company shall
        execute any and all instruments in writing for more fully and certainly vesting
        in and confirming to such successor collateral agent all such rights and
        powers.


      


      Upon
        acceptance of appointment by a successor collateral agent as provided in
        this
        Section, the Company (or the former collateral agent, at the written direction
        of the Company) shall mail or cause to be mailed notice of the succession
        of
        such collateral agent hereunder to the Holders of the Notes. If the Company
        fails to mail such notice within ten (10) days after acceptance of appointment
        by the successor collateral agent, the successor collateral agent shall cause
        such notice to be mailed at the expense of the Company.

      


      (d) At
        any
        time or times, for the purpose of meeting any legal requirements of any
        jurisdiction in which any of the Pledged Collateral may at the time be located,
        the Collateral Agent shall have the power to appoint any Person or Persons
        either to act as co-collateral agent, or co-collateral agents, jointly with
        the
        Collateral Agent of all or any part of the Pledged Collateral or to act as
        separate collateral agent or separate collateral agents of all or any part
        of
        the Pledged Collateral and to vest in such Person or Persons, in such capacity,
        such title to the Pledged Collateral or any part thereof, and such rights,
        powers, duties or obligations as the Collateral Agent may consider necessary
        or
        desirable, subject to the other provisions of this Section
        29.

      


      (e)
         Unless
        otherwise provided in the instrument appointing such co-collateral agent
        or
        separate collateral agent, every co-collateral agent or separate collateral
        agent in respect of the custody, control or management of the Pledged Collateral
        shall, to the extent permitted by law, be appointed subject to the following
        terms:

      


      (i) All
        rights, power, duties and obligations under this Agreement conferred upon
        the
        Collateral Agent shall be exercised solely by the Collateral Agent;

      


      (ii) All
        rights, powers, duties and obligations conferred or imposed upon the collateral
        agents shall be conferred or imposed upon and exercised or performed by the
        Collateral Agent, or by the Collateral Agent and such co-collateral agent
        or
        co-collateral agents, or separate collateral agent or separate collateral
        agents
        jointly, except to the extent that, under the law of any jurisdiction in
        which
        any particular act or acts are to be performed, the Collateral Agent shall
        be
        incompetent or unqualified to perform such act or acts, in which event such
        act
        or acts shall be performed by such co-collateral agent or co-collateral agents
        or separate collateral agent or separate collateral agents;

       

      
        
           

        

        
          18

          
            

          

        

        
           

        

      

      


      (iii) Any
        request in writing by the Collateral Agent to any co-collateral agent or
        separate collateral agent to take or to refrain from taking any action hereunder
        shall be sufficient warrant for the taking, or the refraining from taking,
        of
        such action by such co-collateral agent or separate collateral
        agent;

      


      (iv) Any
        co-collateral agent or separate collateral agent to the extent permitted
        by law
        may delegate to the Collateral Agent the exercise of any right, power, duty
        or
        obligation, discretionary or otherwise;

      


      (v) The
        Collateral Agent at any time, by an instrument in writing, may accept the
        resignation of, or remove, any co-collateral agent or separate collateral
        agent
        appointed under this Section
        29.
        As
        successor to any co-collateral agent or separate collateral agent so resigned
        or
        removed may be appointed in the manner provided in this Section
        29;

      


      (vi) No
        collateral agent hereunder shall be personally liable by reason of any act
        or
        omission of any other collateral agent hereunder;

      


      (vii) Any
        demand, request, direction, appointment, removal, notice, consent, waiver
        or
        other action in writing delivered to the Collateral Agent shall be deemed
        to
        have been delivered to each such co-collateral agent or separate collateral
        agent; and

      


      (viii) Any
        Collateral received by any such co-collateral agent or separate collateral
        agent
        hereunder shall forthwith, so far as may be permitted by law, be turned over
        to
        the Collateral Agent to be held pursuant to the terms hereof.

      


      (f) Upon
        the
        acceptance in writing of such appointment by any such co-collateral agent
        or
        separate collateral agent, it or he shall be vested with the estate, right,
        title and interest in the Pledged Collateral, or any portion thereof; and
        with
        such rights, powers, duties, trusts or obligations, jointly or separately
        with
        the Collateral Agent, all as shall be specified in the instrument of
        appointment, subject to all the terms hereof.

      


      (g) In
        case
        any co-collateral agent or separate collateral agent shall become incapable
        of
        acting, resign or be removed, the right, title and interest in the Pledged
        Collateral and all rights, powers, duties and obligations of said co-collateral
        agent or separate collateral agent shall, so far as permitted by law, vest
        in
        and be exercised by the Collateral Agent unless and until a successor
        co-collateral agent or separate collateral agent shall be appointed pursuant
        to
        this Section 29.

       

      
        
           

        

        
          19

          
            

          

        

        
           

        

      

      


      30. Notices.
        All
        notices, demands, requests, consents, approvals, and other communications
        required or permitted hereunder shall be in writing and, unless otherwise
        specified herein, shall be (i) personally served or hand delivered, (ii)
        deposited in the mail, registered or certified, return receipt requested,
        postage prepaid, (iii) delivered by express courier service with charges
        prepaid, or (iv) transmitted by facsimile, addressed as set forth below or
        to
        such other address as such party shall have specified most recently by written
        notice. Any notice or other communication required or permitted to be given
        hereunder shall be deemed effective (i) if personally served, when served,
        or
        upon hand delivery, (ii) if mailed, on the third business day after deposit
        in
        first class mail with postage prepaid and properly addressed, (iii) if by
        express courier service, when received, and (iv) if by facsimile, with accurate
        confirmation generated by the transmitting facsimile machine, at the address
        or
        number designated below, on the day transmitted (if delivered on a business
        day
        during normal business hours where such notice is to be received), or the
        first
        business day following such transmittal (if delivered other than on a business
        day during normal business hours where such notice is to be received). The
        addresses for such communications shall be: (i) if to Mr. Leng or the Company,
        to: Star City International Building, 10, Jiuxianqiuo Road, C-16th
        Floor,
        Chaoyang, Beijing, People's Republic of China, Attn: Mr. Leng You-Bin, facsimile
        number: 86 10 8456 7768, with a copy by facsimile only to: Mark Hanson, Jones
        Day, 1420 Peachtree Street, N.E., Suite 800, Atlanta, Georgia 30309, facsimile
        number: (404) 581-8330; and (ii) if to the Collateral Agent, to: The Bank
        of New
        York Mellon, 101 Barclay Street, 4E, New York, New York 10286,
        Fax:
        (212) 815-5802/5803, Attention: Global Finance Americas.

      


      31. Indemnity
        and Expenses.
        The
        Company agrees, upon demand, to indemnify the Collateral Agent against any
        and
        all losses, claims, damages, penalties, fines, liabilities or expenses,
        including incidental and out-of-pocket expenses and reasonable attorneys
        fees
        incurred by it arising out of or in connection with the acceptance or
        administration of its duties under this Agreement and to pay to the Collateral
        Agent the amount of any and all expenses, including the reasonable fees and
        expenses of its counsel and of any experts and agents, which the Collateral
        Agent may incur in connection with (i) the administration of this Agreement,
        (ii) the custody, preservation, use or operation of, or the sale of, collection
        from, or other realization upon, any of the Pledged Collateral, (iii) the
        exercise or enforcement of any of the rights of
        the
        Collateral Agent hereunder or (iv) the failure by any Pledgor to perform
        or
        observe any of the provisions hereof.

      


      32. Amendments,
        Waivers and Consents.
        None of
        the terms or provisions of this Agreement may be waived, altered, modified
        or
        amended, and no consent to any departure by any Pledgor herefrom shall be
        effective, except by or pursuant to an instrument in writing which is duly
        executed by each Pledgor and the Collateral Agent and (ii) complies with
        the
        terms of the Notes. Any such waiver shall be valid only to the extent set
        forth
        therein. A waiver by the Collateral Agent of any right or remedy under this
        Agreement on any one occasion shall not be construed as a waiver of any right
        or
        remedy which the Collateral Agent would otherwise have on any future occasion.
        No failure to exercise or delay in exercising any right, power or privilege
        under this Agreement on the part of the Collateral Agent shall operate as
        a
        waiver thereof; and no single or partial exercise of any right, power or
        privilege under this Agreement shall preclude any other or further exercise
        thereof or the exercise of any other right, power or privilege.

      


      33. Section
        Headings.
        The
        section headings herein are for convenience of reference only, and shall
        not
        affect in any way the interpretation of any of the provisions
        hereof.

       

      
        
           

        

        
          20

          
            

          

        

        
           

        

      

      


      34. Execution
        in Counterparts.
        This
        Agreement may be executed in any number of counterparts, each of which shall
        be
        an original, but all of which shall together constitute one and the same
        agreement.

      


      35. Merger.
        This
        Agreement embodies the entire agreement and understanding, between the Pledgors
        and the Collateral Agent or any holder of the Notes and supersedes all prior
        agreements and understandings, written and oral, relating to the subject
        matter
        hereof.

      


      36. Termination;
        Release of Collateral.
        Notwithstanding anything in this Agreement to the contrary, unless an Event
        of
        Default shall be in existence, the Company may, sell, assign, transfer or
        otherwise dispose of any Pledged Collateral pledged by the Company in a bona
        fide sale transaction to an unaffiliated third party so long as (i) the Company
        receives consideration at least equal to the fair market value of such Pledged
        Collateral, (ii) at least 75% of the consideration paid to the Company is
        in the
        form of cash or the assumption of liabilities of the Company or its subsidiaries
        (other than contingent liabilities or liabilities that are by their terms
        subordinated to the Notes or Guarantee) as a result of which the Company
        (and
        its subsidiaries) are no longer obligated with respect to such liabilities,
        and
        (iii) the Company delivers a certificate of its President or Chief Financial
        Officer to the Collateral Agent and the Secured Parties certifying that such
        sale or other disposition complies with the foregoing. The proceeds of any
        such
        sale of the Pledged Collateral shall be applied in accordance with the terms
        of
        Section 4.12 of the June 27, 2007 Indenture, if applicable, and in the event
        that the Company is required to make an offer to repurchase the 2007 Notes
        (or
        any refinancing thereof to the extent permitted by the Intercreditor Agreement
        and the Subscription Agreement (the “Refinanced
        Notes”))
        pursuant to said Section 4.12 (or any successor provision in respect of any
        Refinanced Notes), the Allocable Excess Proceeds (as defined in the June
        27,
        2007 Indenture) shall be applied to the 2007 Notes or the Refinanced Notes,
        as
        applicable, in accordance with said Section 4.12 (or such successor provision
        in
        respect of any Refinanced Notes) and the balance of such Allocable Excess
        Proceeds, if any, shall be applied to any accrued and unpaid interest and
        then
        to the outstanding principal balance of the Notes on a pari passu basis among
        the Holders; provided,
        however,
        if the
        First Priority Obligations Payment Date shall have occurred, the entire
        Allocable Excess Proceeds that would exist under the June 27, 2007 Indenture
        if
        the 2007 Notes were outstanding under the June 27, 2007 Indenture, shall
        be
        applied to pay any accrued and unpaid interest on the Notes and then to the
        outstanding principal amount of the Notes, on a pari passu basis. In addition,
        the Pledged Collateral pledged by the Company shall be subject to release
        in
        accordance with Section 10.04 of the June 27, 2007 Indenture (such Pledged
        Collateral referred to in the immediately preceding sentence being the
“Released
        Collateral”)
        The
        Liens under this Agreement shall terminate with respect to such Pledged
        Collateral upon such sale, transfer, assignment, disposition and payment
        as
        aforesaid pursuant to this Section 36, and upon the written request of the
        Company, the Collateral Agent shall execute and deliver, at the cost of the
        Company, such instrument or document as may be necessary to release the Liens
        granted hereunder; provided
        further however,
        that
        (i) the Collateral Agent shall not be required to execute any such documents
        on
        terms which would expose the Collateral Agent or any holder of the Notes
        to
        liability or create any obligation or entail any consequence other than the
        release of such Liens without recourse or warranty, and (ii) such release
        shall
        not in any manner discharge, affect or impair the Secured Obligations or
        any
        Liens on (or obligations of the Company in respect of) all interests retained
        by
        the Company, including without limitation, the proceeds of any sale, all
        of
        which shall continue to constitute part of the Pledged Collateral pledged
        by the
        Company.

       

      
        
           

        

        
          21

          
            

          

        

        
           

        

      

      


      37. Non-Recourse
        Obligations.
        Notwithstanding any other provision in this Agreement, the Subscription
        Agreement or any other document relating to this Agreement or the Subscription
        Agreement, except for any damages, costs and expenses attributable to willful
        misconduct, bad faith or breach of this Agreement by Mr. Leng, (i) Mr. Leng
        shall not be personally liable, and neither the Collateral Agent nor any
        of the
        Secured Parties shall commence or prosecute any action against Mr. Leng,
        for
        payment or performance of any Secured Obligations, and any indemnification
        or
        expense reimbursement provided for herein or therein; (ii) neither the
        Collateral Agent nor any of the Secured Parties shall seek, obtain, or enforce
        a
        deficiency judgment against Mr. Leng; (iii) the Collateral Agent’s and the
        Secured Party’s recourse against Mr. Leng for the Secured Obligations shall be
        limited to the Pledged Collateral; and (iv) the Collateral Agent and each
        Secured Party waive any right to exercise any banker’s right of set-off, arising
        from any of the Secured Obligations, against any funds of Mr. Leng in the
        Collateral Agent’s custody, control, or possession.

      


      38. Margin
        Stock Representations.
        The
        Pledors represent and confirm that the Company used the proceeds of the sale
        of
        the Notes for general corporate purposes, including the expansion of the
        Company's and its subsidiaries' business and general working capital. No
        part of
        the proceeds from the sale of the Notes was used, directly or indirectly,
        for
        the purpose of buying or carrying any margin stock within the meaning of
        Regulation U of the Board of Governors of the Federal Reserve System (12
        CFR
        221) or to involve the Company in a violation of Regulation X of said Board
        (12
        CFR 224). As used in this Section, the terms “margin stock” and “buying or
        carrying margin stock” shall have the meanings assigned to them in said
        Regulation U. The Company does not own any margin stock. 

      


      39. Consent
        of The Bank of New York Mellon.
        By
        signing below, The Bank of New York Mellon, in its capacity as collateral
        agent
        under the 2007 Pledge Agreement and the Indentures, hereby in accordance
        with
        the consent of the holders of the 2007 Notes, upon which it will conclusively
        rely, consents to this Agreement. 

      


      


      


       

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          22

          
            

          

        

        
           

        

         

        
          IN
            WITNESS WHEREOF, each
            Pledgor and the Collateral Agent have executed this Agreement as of the
            date set
            forth above. 

           

          
            	 	 	 
	 	MR.
                    LENG
                    YOU-BIN
	 
 	 
 	 
 
	 	By:  	/s/ Leng
                    You-Bin
	 	Name:  	 Leng You-Bin


          

           

          
            	
                  	 	 
	 	AMERICAN
                    DAIRY, INC
	 
 	 
 	 
 
	 	By:  	/s/ Jonathan
                    Chou
	 	Name:  	 Jonathan Chou
	 	Title: 	 Chief Financial Officer


             

            Acknowledged
              and agreed to

          

          as
            of the
            date first written above.

           

          The
            Bank
            of New York Mellon, as Collateral Agent

           

          
            	By: 	 /s/
                    Lici Zhu
	Name:  	 Lici Zhu
	Title: 	 Assistant Vice
                    President


          

           

          For
            purposes of Section 39 of this Agreement:

          


          The
            Bank
            of New York Mellon, as collateral agent under the 2007 Pledge Agreement
            and the
            Indentures

           

          
            
              	By: 	 /s/
                      Lici Zhu
	Name:  	 Lici Zhu
	Title: 	 Assistant Vice
                      President