Unassociated Document


    REGISTRATION
RIGHTS AGREEMENT

    


    THIS
REGISTRATION RIGHTS AGREEMENT (this “Agreement”) dated August
26th, 2009,
is made and entered into by and among American Dairy, Inc. (the “Company”), a company
incorporated in the State of Utah in the United States, and Sequoia Capital
China Growth Fund I, L.P. and its affiliates as set forth on the signature page
(collectively, the “Purchasers” and individually,
an “Purchaser”).  The
Company and the Purchasers are referred to herein collectively as the “Parties” and individually as a
“Party.” Capitalized
terms used herein but not otherwise defined herein shall have the respective
meanings set forth in the Subscription Agreement (as defined
below).

    


    WITNESSETH:

    


    WHEREAS,
pursuant to the Subscription Agreement dated August 11th, 2009
(the “Subscription
Agreement”) among the Company and the Purchasers, the Company has agreed
to issue and sell to the Purchasers, and the Purchasers have agreed to purchase,
2,100,000 shares of Common Stock of the Company;

    


    WHEREAS,
as set forth in Section 8 of the Subscription Agreement, the Company may issue
additional shares of Common Stock to the Purchasers; and

    


    WHEREAS,
to induce the Purchasers to execute and deliver the Subscription Agreement, the
Company has agreed to provide certain registration rights under the Securities
Act (as defined below), and applicable state securities laws, with respect to
the shares of the Company’s Common Stock issued and issuable to the
Purchasers.

    


    NOW,
THEREFORE, in consideration of the premises set forth above, the mutual
covenants and agreements set forth herein and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
Parties hereto hereby agree as follows:

    


    1. Certain
Definitions.

    


    As used
in this Agreement, the following terms shall have the following
meanings:

    


    “2009 Notes Registration Rights
Agreement” means the Registration Rights Agreement, dated October 2,
2006, by and between the Company and the investors that are parties thereto, as
amended or restated from time to time.

    


    “2012 Notes Registration Rights
Agreement” means the Registration Rights Agreement, dated June 1, 2007,
by and between the Company, Citadel Equity Fund Ltd. and other parties thereto,
as amended or restated from time to time.

    


    “Affiliate” means, with respect
to any Person, any other Person which directly or indirectly controls, is
controlled by, or is under common control with, such Person.

    


    “Business Day” means a day,
other than a Saturday or Sunday, on which banks in New York City are open for
the general transaction of business.

    


    “Closing Date” has the meaning
ascribed to it in the Subscription Agreement.

    


    “Effectiveness Date” means the
date on which the Registration Statement is declared effective by the
SEC.

    


    “Effectiveness Period” means a
period that will terminate upon the earlier of (i) the date on which all
Registrable Securities have been sold pursuant to the Registration Statement, as
amended from time to time, (ii) the date on which all Registrable Securities
covered by such Registration Statement are eligible to be sold pursuant to Rule
144 without limitations as to volume, or (iii) three (3) years from the Closing
Date as defined in the Subscription Agreement.

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    “Exchange Act” means the
Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder.

    


    “Filing Date” means the date on
which the Registration Statement is first filed with the SEC.

    


    “Person” means an individual,
corporation, partnership, limited liability company, trust, business trust,
association, joint stock company, joint venture, sole proprietorship,
unincorporated organization, governmental authority or any other form of entity
not specifically listed herein.

    


    “Prospectus” shall mean the
prospectus included in any Registration Statement, as amended or supplemented by
any prospectus supplement, with respect to the terms of the offering of any
portion of the Registrable Securities covered by such Registration Statement and
by all other amendments and supplements to the prospectus, including
post-effective amendments and all material incorporated by reference in such
prospectus.

    


    “Register,” “registered” and “registration” refer to a
registration made by preparing and filing a Registration Statement or similar
document in compliance with the Securities Act (as defined below), and the
declaration or ordering of effectiveness of such Registration Statement or
document.

    


    “Registrable Securities” shall
mean (i) the Shares, (ii) the Performance Adjustment Shares, if any, (iii) the
Participation Shares, if any, (each of them has the meaning ascribed to it in
the Subscription Agreement) and (iv) any other securities issued or issuable
with respect to or in exchange for any of (i), (ii) or (iii) above, including
shares issued in replacement therefor, whether upon any stock split, stock
dividend, recapitalization, subdivision or similar event or otherwise, provided, however, that a
security shall cease to be a Registrable Security upon sale pursuant to a
Registration Statement or upon eligibility for resale without volume limitations
pursuant to Rule 144 under the Securities Act.

    


    “Registration Statement” shall
mean any registration statement of the Company filed under the Securities Act
that covers the resale of any of the Registrable Securities pursuant to the
provisions of this Agreement, amendments and supplements to such Registration
Statement, including post-effective amendments, all exhibits and all material
incorporated by reference in such Registration Statement.

    


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

    


     “Securities Act” means the
Securities Act of 1933, as amended, and the rules and regulations promulgated
thereunder.

    


    2. Registration.

    


    (a) Mandatory
Registration.

    


    (i) The
Company agrees to file under the Securities Act with the SEC as promptly as
practicable but in any event within 15 days after the Closing Date (the “Filing Deadline”) a
Registration Statement on Form S-3 or, in the event the Company is not eligible
to use Form S-3, on Form S-1, covering the resale of the Registrable Securities
issued or issuable pursuant to the Subscription Agreement. For the avoidance of
doubt, the Registration Statement shall also cover the Performance Adjustment
Shares as may become issuable pursuant to Section 8.5 of the Subscription
Agreement. Accordingly, the number of shares of Common Stock initially included
in such Registration Statement shall be no less than 2,625,000, consisting of
(i) 2,100,000 shares immediately issuable pursuant to the Subscription Agreement
and (ii) 525,000 shares, which represents the maximum number of Performance
Adjustment Shares issuable pursuant to the Subscription Agreement. Such
Registration Statement (and each amendment or supplement thereto, and each
request for acceleration of effectiveness thereof) shall be provided in
accordance with Section 4(c) below to the Purchasers and their counsel prior to
its filing or other submission.

    


    
      
        
        

      

      
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    (ii) The
Company agrees to cause the Registration Statement to become effective as soon
as practicable but in any event no later than the date (the “Effectiveness Deadline”) of
the earlier of (x) the 90th
calendar day following the Closing Date, provided that if the SEC
reviews and has written comments to the filed Registration Statement that would
require the filing of a pre-effective amendment thereto with the SEC, then
Effectiveness Deadline shall be the 120th
calendar day following the Closing Date, or (y) the 5th trading
day following the date that the Company is notified by the SEC that the initial
Registration Statement will not be reviewed or it is no longer subject to review
and comments. The date on which the Registration Statement is actually declared
effective by the SEC shall be referred to herein as the “Effectiveness Date.” The
Company shall notify the Purchasers by facsimile or e-mail as promptly as
practicable, and in any event, within one (1) Business Day, after any such
Registration Statement is declared effective and shall provide the Purchasers
with copies of any related Prospectus to be used in connection with the sale or
other disposition of the securities covered thereby. The Company shall keep the
Registration Statement continuously effective during the Effectiveness
Period.

    


    (iii) In
the event of (x) the Registration Statement is not filed with the SEC on or
prior to the Filing Deadline,  or (y) the Registration Statement is
not declared effective by the SEC on or prior to the Effectiveness Deadline, the
Company shall make a monthly payment in an amount of US$[0.945 million], which
represents 1.5% of the Aggregate Purchase Price (as defined in the Subscription
Agreement), to the Purchasers as the exclusive remedy (at law or equity) for the
damages to the Purchasers by reason of any such delay in or reduction of their
ability to sell the Registrable Securities, until the filing or effectiveness,
as applicable. Such payments shall be paid in U.S. dollar in immediately
available funds at the end of each month during which any of (x) or (y) above
remains outstanding.

    


    (b) Demand Registration
Rights.

    


    (i) Generally. Subject to
the conditions set forth in this Section 2(b), if, at any time after the Filing
Deadline and prior to the expiration of the Effectiveness Period, (x) (I)
additional Registrable Securities which have not been included in the
Registration Statement of the Company pursuant to Section 2(a) above, including
without limitation the Participation Shares, are issued or issuable to the
Purchasers or (II) a Registration Statement covering the sale of all of the
Registrable Securities is not then effective and available for sales thereof by
the Purchasers, and (y) the Company receives from the Purchasers a written
request (the “Demand
Request”) requesting that the Company effect a registration with respect
to all or a part of the Registrable Securities (which request shall state the
number of shares of Registrable Securities to be disposed of and the intended
methods of disposition of such shares by the Purchasers), the Company shall as
soon as practicable, file and use commercially reasonable efforts to effect such
registration (including, without limitation, filing post-effective amendments,
appropriate qualifications under applicable U.S. blue sky or other state
securities laws, and appropriate compliance with the Securities Act) and to
permit or facilitate the sale and distribution of all or such portion of such
Registrable Securities as are specified in the Demand Request.

    


    (ii)
Limitations.
The Company shall not be obligated to effect, or to take any action to effect,
any such registration pursuant to this Section 2(b):

    


    (A) If
the Purchasers, together with the holders of any other securities of the Company
entitled to inclusion in such registration statement (the “Other Holders”), propose to
sell Registrable Securities and such other securities (if any) at an aggregate
offering price (after deduction of underwriters’ discounts and expenses related
to issuance) of less than U.S.$10,000,000;

    


    
      
        
        

      

      
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    (B) After
the Company has initiated one (1) such registrations pursuant to this Section
2(b) (counting for these purposes only (I) registrations which have been
declared or ordered effective, and (II) a demand registration right under this
Section 2(b) that the Purchasers have affirmatively forfeited); or

    


    (C)
During the period starting with the date sixty (60) days prior to the Company’s
good faith estimate of the date of filing of, and ending on a date one hundred
eighty (180) days after the effective date of, a Company-initiated registration;
provided that the
Company is actively employing commercially reasonable efforts to cause such
registration statement to become effective.

    


    (iii)
Deferral. If
(A) in the good faith judgment of the Board of Directors of the Company
(excluding any interested directors), the filing of a registration statement
under this Section 2(b) covering the Registrable Securities would be materially
detrimental to the Company and the Board of Directors of the Company (excluding
any interested directors) concludes, as a result, that it is in the best
interests of the Company to defer the filing of such registration statement at
such time, and (B) the Company shall furnish to such Purchasers a certificate
signed by the Chief Executive Officer or the Chief Financial Officer of the
Company stating that in the good faith judgment of the Board of Directors of the
Company (excluding any interested directors), it would be materially detrimental
to the Company for such registration statement to be filed in the near future
and that it is, therefore, in the best interests of the Company to defer the
filing of such registration statement, then (in addition to the limitations set
forth in Section 2(b)(ii) above) the Company shall have the right to defer such
filing for a period of not more than one hundred twenty (120) days after receipt
of the request of the Purchasers, and, provided further, that the
Company shall not defer its obligation in this manner more than twice in any
twelve (12) month period.

    


    (iv)
Underwriting.

    


    (A) If
the Purchasers intend to distribute the Registrable Securities covered by their
Demand Request by means of an underwriting, they shall so advise the Company as
a part of their request made pursuant to this Section 2(b). In such event, the
right of the Purchasers to include all or any portion of their Registrable
Securities in such registration pursuant to this Section 2(b) shall be
conditioned upon the Purchasers’ participation in such underwriting and the
inclusion of the Purchasers’ Registrable Securities to the extent provided
herein. If the Company shall request inclusion in any registration pursuant to
this Section 2(b) of securities being sold for its own account, or if Other
Holders shall request inclusion in any registration pursuant to this Section
2(b), the Purchasers shall offer to include such securities in the underwriting
and such offer shall be conditioned upon the participation of the Company or
such Other Holders in such underwriting and the inclusion of the Company’s and
such Other Holders’ other securities of the Company and their acceptance of the
further applicable provisions of this Section 2. The Company shall (together
with the Purchasers and Other Holders proposing to distribute their securities
through such underwriting) enter into an underwriting agreement in customary
form with the representative of the underwriter or underwriters selected for
such underwriting by the Company.

    


    (B)
Notwithstanding any other provision of this Section 2(b), if the underwriters
advise the Purchasers in writing that marketing factors require a limitation on
the number of shares to be underwritten, the number of Registrable Securities
and the securities held by Other Holders that may be so included shall be
allocated as follows: (I) first, to the Purchasers; (II) second, to Other
Holders electing to register shares in connection with such registration; and
(III) third, to the Company, which the Company may allocate, at its discretion,
for its own account, or for the account of others designated by the
Company.

    


    
      
        
        

      

      
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    (C) If a
person who has requested inclusion in a registration pursuant to this Section
2(b) does not agree to the terms of any underwriting in accordance with this
Section 2(b)(iv), such person shall be excluded from the underwriting by written
notice from the Company, the underwriters or the Purchasers. The securities so
excluded shall also be withdrawn from registration. If shares are so withdrawn
from the registration and if the number of shares to be included in such
registration was previously reduced as a result of marketing factors pursuant to
Section 2(b)(iv)(B) above, then the Company shall then offer to the Purchasers
and Other Holders who have elected to include and retained rights to include
securities in the registration the right to include additional Registrable
Securities or the securities held by Other Holders, as applicable, in the
registration in an aggregate amount equal to the number of shares so withdrawn,
with such shares to be allocated among such Investors and Other Holders
requesting additional inclusion, in order of priority as set forth in Section
2(b)(iv)(B) above.

    


    (c) Piggyback Registration
Rights.

    


    (i) Generally. If, at any
time after the Filing Deadline and prior to the expiration of the Effectiveness
Period, (A) the Company proposes to register shares of Common Stock under the
Securities Act in connection with the public offering of such shares for cash
other than a registration statement on Form S-8 or Form S-4 or any successor or
other forms promulgated for similar purposes (a “Proposed Registration”) and
(B) a Registration Statement covering the sale of all of the Registrable
Securities is not then effective and available for sales thereof by the
Purchasers, the Company shall, at such time, promptly give the Purchasers a
written notice of such Proposed Registration. The Purchasers shall have ten (10)
Business Days from their receipt of such notice to deliver to the Company a
written request specifying the amount of Registrable Securities that the
Purchasers intend to sell and the Purchasers’ intended method of distribution.
Upon receipt of such request, the Company shall use commercially reasonable
efforts to cause all Registrable Securities which the Company has been requested
to register to be registered under the Securities Act to the extent necessary to
permit their sale or other disposition in accordance with the intended methods
of distribution specified in the request of the Purchasers; provided, however, that the
Company shall have the right to postpone or withdraw any registration effected
pursuant to this Section 2(c) without obligation to the Purchasers.

    


    (ii)
Underwriting.

    


    (A) If
the Registration of which the Company gives notice is for a registered public
offering involving an underwriting, the Company shall so advise the Purchasers
as part of the written notice given pursuant to Section 2(c)(i). In such event,
the right of the Purchasers to include all or any portion of their Registrable
Securities in such registration pursuant to this Section 2(c) shall be
conditioned upon the Purchasers’ participation in such underwriting and the
inclusion of the Purchasers’ Registrable Securities to the extent provided
herein. If the Purchasers shall request inclusion in any registration pursuant
to this Section 2(c) of their Registrable Securities, the Company shall offer to
include such securities in the underwriting and such offer shall be conditioned
upon the participation of the Purchasers and the inclusion of the Purchasers’
Registrable Securities and their acceptance of the further applicable provisions
of this Section 2(c). The Purchasers whose shares are to be included in such
Registration shall (together with Other Holders proposing to distribute their
securities through such underwriting) enter into an underwriting agreement in
customary form with the representative of the underwriter or underwriters
selected for such underwriting by the Company.

    


    (B)
Notwithstanding any other provision of this Section 2(c), if the underwriters
advise the Company in writing that marketing factors require a limitation on the
number of shares to be underwritten, the Company shall be obligated to include
in the registration statement only such limited portion of the Registrable
Securities with respect to which the Purchasers have requested inclusion
hereunder as such underwriters shall permit. The Company shall not exclude any
Registrable Securities unless the Company has first excluded all outstanding
securities, the holders of which are not entitled to inclusion of such
securities in the registration statement or are not entitled to pro rata
inclusion with the Registrable Securities; and any exclusion of Registrable
Securities shall be made pro rata with holders of other securities that are
entitled to pro rata inclusion with the Registrable Securities, who have elected
to include such securities in the registration statement.

    


    
      
        
        

      

      
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    (C) If a
person who has requested inclusion in a registration pursuant to this Section
2(c) does not agree to the terms of any underwriting in accordance with this
Section 2(c)(ii), such person shall be excluded from the underwriting by written
notice from the Company or the underwriter. The securities so excluded shall
also be withdrawn from registration. If shares are so withdrawn from the
registration and if the number of shares to be included in such registration was
previously reduced as a result of marketing factors pursuant to Section
2(c)(ii)(B) above, then the Company shall then offer to the Purchasers and Other
Holders who have elected to include and retained rights to include securities in
the registration the right to include additional Registrable Securities or the
securities held by Other Holders, as applicable, in the registration in an
aggregate amount equal to the number of shares so withdrawn, with such shares to
be allocated among the Purchasers and Other Holders requesting additional
inclusion, in order of priority as set forth in Section 2(c)(ii)(B)
above.

    


    (d) Expenses.

    


    The
Company will pay all expenses associated with each registration, including
filing and printing fees, the Company’s counsel and accounting fees and
expenses, costs associated with clearing the Registrable Securities for sale
under applicable state securities laws and listing fees, but excluding fees and
expenses of counsel to the Purchasers, discounts, commissions, fees of
underwriters, selling brokers, dealer managers or similar securities industry
professionals with respect to the Registrable Securities being sold, provided that the Company
shall pay the reasonable fees and expenses of one counsel for the Purchasers not
to exceed U.S.$5,000.

    


    3. Suspension.

    


    (a)
Subject to Section 3(b) below, in the event: (i) of any request by the SEC or
any other federal or state governmental authority during the period of
effectiveness of the Registration Statement for amendments or supplements to the
Registration Statement or related prospectus or for additional information so
that the Registration Statement will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading or otherwise fail to
comply with the applicable rules and regulations of the federal securities laws;
(ii) of the issuance by the SEC or any other federal or state governmental
authority of any stop order suspending the effectiveness of the Registration
Statement or the initiation of any proceedings for that purpose; (iii) of the
receipt by the Company of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Registrable
Securities for resale in any jurisdiction or the initiation of any proceeding
for such purpose, provided that, considering
the advice of counsel, the Company reasonably believes that it must qualify in
such jurisdiction; (iv) of any event or circumstance that, considering the
advice of counsel, the Company reasonably believes necessitates the making of
any changes in the Registration Statement or related prospectus, or any document
incorporated or deemed to be incorporated therein by reference, so that, in the
case of the Registration Statement, it will not contain any untrue statement of
a material fact or any omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, and that in
the case of a related prospectus, it will not contain any untrue statement of a
material fact or any omission to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; or (v) that the
Company reasonably believes, considering the advice of counsel, that the Company
may, in the absence of a suspension described hereunder, be required under state
or federal securities laws to disclose any corporate development, the disclosure
of which could reasonably be expected to have a material adverse effect upon the
Company, its shareholders, a potentially material transaction or event involving
the Company, or any negotiations, discussions or proposals directly relating
thereto; then the Company shall deliver a certificate in writing (the “Suspension Notice”) to each
holder of Registrable Securities (the “Holder”) to the effect of the
foregoing (but in no event, without the prior written consent of the Purchasers,
shall the Company disclose to the Purchasers any of the facts or circumstances
regarding any material nonpublic information) and, upon receipt of such
Suspension Notice, the Holder will refrain from selling any Registrable
Securities pursuant to the Registration Statement (a “Suspension”) until the
Holder’s receipt of copies of a supplemented or amended prospectus prepared and
filed by the Company or until the Holder is advised in writing by the Company
that the current prospectus may be used and the Holder has received copies of
any additional or supplemental filings that are incorporated or deemed
incorporated by reference in any such prospectus.

    


    
      
        
        

      

      
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    (b)
Notwithstanding the foregoing, the Company shall not suspend any Registration
Statement or related prospectus for more than sixty (60) consecutive days or for
a total of more than one hundred twenty (120) days in any twelve (12) month
period.

    


    (c) The
Company will use commercially reasonable efforts to terminate a Suspension as
promptly as practicable after delivery of a Suspension Notice to the
Holders.

    


    4. Company
Obligations.

    


    The
Company will use commercially reasonable efforts to effect the registration of
the Registrable Securities in accordance with the terms hereof, and pursuant
thereto the Company will, at the expense of the Company:

    


    (a) use
commercially reasonable efforts to cause such Registration Statement to become
effective and to remain continuously effective for the Effectiveness Period and
advise the Purchasers in writing when the Effectiveness Period has
expired;

    


    (b)
prepare and file with the SEC such amendments and post-effective amendments to
the Registration Statement and such supplements to the Prospectus as may be
necessary to keep the Registration Statement effective for the period specified
in Section 4(a) and to comply with the provisions of the Securities Act and the
Exchange Act with respect to the distribution of all of the Registrable
Securities covered thereby;

    


    (c)
provide copies to and permit counsel designated by the Purchasers, if any, to
review the Registration Statement and any amendments or supplements thereto and
any comments made by the staff of the SEC and the Company’s responses thereto a
reasonable period of time prior to its filing with the SEC or its receipt from
the SEC as applicable and shall duly consider comments made by such counsel
thereon;

    


    (d)
furnish to the Purchasers and their legal counsel (i) promptly after any
Registration Statement is prepared and publicly distributed, filed with the SEC,
or received by the Company (but not later than two (2) Business Days after the
filing date, receipt date or sending date, as the case may be) an electronic
copy of any Registration Statement and any amendment thereto, each preliminary
prospectus and Prospectus and each amendment or supplement thereto, and each
letter written by or on behalf of the Company to the SEC or the staff of the
SEC, and each item of correspondence from the SEC or the staff of the SEC, in
each case relating to such Registration Statement (other than any portion of any
thereof which contains information for which the Company has sought confidential
treatment), and (ii) an electronic copy of a Prospectus, including a preliminary
prospectus, and all amendments and supplements thereto and such other documents
as each Purchaser may reasonably request in connection with the disposition of
the Registrable Securities owned by such Purchaser that are covered by the
related Registration Statement;

    


    
      
        
        

      

      
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    (e) use
commercially reasonable efforts to (i) prevent the issuance of any stop order or
other suspension of effectiveness and, (ii) if such order is issued, obtain the
withdrawal of any such order at the earliest practicable time and to notify the
Purchasers of the issuance of such an order and the resolution
thereof;

    


    (f) prior
to any public offering of Registrable Securities, use commercially reasonable
efforts to register or qualify or cooperate with the Purchasers and their
counsel in connection with the registration or qualification of such Registrable
Securities for offer and sale under the securities or blue sky laws of such
jurisdictions requested by the Purchasers and do any and all other reasonable
acts or things necessary or advisable to enable the distribution in such
jurisdictions of the Registrable Securities covered by the Registration
Statement; provided,
however, that the Company shall not be required in connection therewith
or as a condition thereto to (i) qualify to do business in any jurisdiction
where it would not otherwise be required to qualify but for this Section 4(f),
(ii) subject itself to general taxation in any jurisdiction where it would not
otherwise be so subject but for this Section 4(f), or (iii) file a general
consent to service of process in any such jurisdiction;

    


    (g) use
commercially reasonable efforts to cause all Registrable Securities covered by a
Registration Statement to be listed on the primary securities exchange,
interdealer quotation system or other market on which similar securities issued
by the Company are then listed;

    


    (h) as
soon as practicable notify the Purchasers, at any time when a Prospectus
relating to Registrable Securities is required to be delivered under the
Securities Act, upon discovery that, or upon the happening of any event as a
result of which, the Prospectus included in a Registration Statement, as then in
effect, includes an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing, and at the
request of any such holder, as soon as practicable, and subject to the Company’s
right to delay or refrain from filing as contemplated herein, prepare and
furnish to such holder an electronic copy of a supplement to or an amendment of
such Prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such Registrable Securities, such Prospectus shall not include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading in
light of the circumstances then existing;

    


    (i)
otherwise use commercially reasonable efforts to comply with all applicable
rules and regulations of the SEC under the Securities Act and the Exchange Act,
take such other actions as may be necessary to facilitate the registration of
the Registrable Securities hereunder; and make available to its security
holders, as soon as reasonably practicable, but not later than the Availability
Date (as defined below), an earnings statement covering a period of at least
twelve (12) months, beginning after the effective date of each Registration
Statement, which earnings statement shall satisfy the provisions of Section
11(a) of the Securities Act, including Rule 158 promulgated thereunder (for the
purpose of this subsection 4(i), “Availability Date” means the
45th day following the end of the fourth fiscal quarter that includes the
effective date of such Registration Statement, except that, if such fourth
fiscal quarter is the last quarter of the Company’s fiscal year, “Availability
Date” means the 90th day after the end of such fourth fiscal
quarter);

    


    (j) with
a view to making available to the Purchasers the benefits of Rule 144 (or its
successor rule) and any other rule or regulation of the SEC that may at any time
permit the Purchasers to sell shares of Common Stock to the public without
registration, the Company covenants and agrees to: (i) make and keep adequate
current public information available, as those terms are understood and defined
in Rule 144, during the Effectiveness Period; (ii) file with the SEC in a timely
manner all reports and other documents required of the Company under the
Exchange Act; and (iii) furnish to the Purchasers upon request, as long as the
Purchasers own any Registrable Securities, (A) a written statement by the
Company that it has complied with the reporting requirements of the Exchange
Act, (B) a copy of the Company’s most recent Annual Report on Form 10-K or
Quarterly Report on Form 10-Q, and (C) such other information as may be
reasonably requested in order to avail the Purchasers of any rule or regulation
of the SEC that permits the selling of any such Registrable Securities without
registration;

    


    
      
        
        

      

      
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    (k) hold
in confidence and not make any disclosure of information concerning the
Purchasers provided to the Company if at the time such information is provided
the Company is notified of the confidential nature of such information unless
(i) disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement that
includes the Purchasers’ Registrable Securities, (iii) the release of such
information is ordered pursuant to a subpoena or other order from a court or
governmental body of competent jurisdiction, (iv) such information has been made
generally available to the public other than by disclosure in violation of this
or any other agreement, or (v) the Purchasers consent to the form and content of
any such disclosure, which consent shall not be unreasonably withheld or
delayed. The Company shall, upon learning that disclosure of any information
concerning the Purchasers is sought in or by a court or governmental body of
competent jurisdiction or through other means, give prompt notice to the
Purchasers;

    


    (l)
provide a transfer agent and registrar, which may be a single entity, for the
Registrable Securities not later than the Effectiveness Date of the Registration
Statement;

    


    (m) if,
after the Closing Date, any Purchaser believes, based upon the written opinion
of its legal counsel, that it could reasonably be deemed to be an underwriter of
Registrable Securities, or if any Purchaser intends to distribute the
Registrable Securities covered by means of an underwriting, at the request of
such Purchaser, the Company shall (i) cause to be prepared and shall furnish to
such Purchaser or underwriters, on the date of the effectiveness of a
Registration Statement and thereafter from time to time on such dated as such
Purchaser or underwriter may reasonably request (A) a customary “comfort
letter,” dated as of such date, from the Company’s independent certified public
accountants to underwriters in an underwritten public offering, addressed to
such Purchaser or underwriters, and (B) an opinion, dated as of such date, of
legal counsel representing the Company for purposes of such Registration
Statement, in form, scope and substance as is customarily given in an
underwritten public offering, addressed to such Purchaser or underwriters, (ii)
make available by such Purchaser or underwriters, their legal counsel and one
firm of accountants or other agents retained by such Purchaser or underwriters
(collectively, the “Inspectors”) during regular
business hours and upon reasonable notice, all pertinent financial and other
records, and pertinent corporate documents and properties of the Company
(collectively, the “Records”), as shall be
reasonably deemed necessary or appropriate by each Inspector, and cause the
Company’s officers, directors and employees to supply all information which any
Inspector may reasonably request; provided, however, that each
Inspector shall agree to hold in strict confidence and shall not make any
disclosure (except to such Purchaser or underwriters and the other Inspectors)
or use of any Record or other information which the Company determines in good
faith to be confidential, and of which determination the Inspectors are so
notified, unless (x) the disclosure of such Records is necessary to avoid or
correct a misstatement or omission in any Registration Statement or is otherwise
required under the Securities Act, (y) ordered by a court of competent
jurisdiction or (z) the information in such Records has been made generally
available to the public other than by disclosure in violation of this Agreement,
and (iii) in the event of an underwritten offering, enter into an underwriting
agreement in customary form with the representative of the underwriter. Nothing
herein (or in any other confidentiality agreement between the Company and any
Purchaser) shall be deemed to limit any Purchaser’s ability to sell Registrable
Securities in a manner which is otherwise consistent with applicable laws and
regulations; and

    


    (n) if
requested by the Purchasers, the Company shall, as soon as practicable (i)
incorporate in a prospectus supplement or post-effective amendment such
information as the Purchasers reasonably requests to be included therein
relating to the sale and distribution of Registrable Securities, including,
without limitation, information with respect to the number of Registrable
Securities being offered or sold, the purchase price being paid therefor and any
other terms of the offering of the Registrable Securities to be sold in such
offering, (ii) make all required filings of such prospectus supplement or
post-effective amendment and (iii) supplement or make amendments to any
Registration Statement if reasonably requested by the Purchasers holding any
Registrable Securities.

    


    
      
        
        

      

      
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    5. Obligations of the
Purchasers.

    


    (a) Each
Purchaser shall furnish in writing to the Company such information regarding
itself, the Registrable Securities held by it and the intended method of
disposition of the Registrable Securities held by it, as shall be required to
effect the registration of such Registrable Securities and as shall be necessary
so that the Registration Statement, the Prospectus or any preliminary prospectus
or similar offering document shall not include any untrue statement or alleged
untrue statement of a material fact or any omission or alleged omission of a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and shall promptly notify the Company if any such
previously provided information shall contain or omit any such information. Each
Purchaser shall also execute such documents in connection with such registration
as the Company may reasonably request. At least five (5) Business Days prior to
the first anticipated filing date of any Registration Statement, the Company
shall notify each Purchaser of the information the Company requires from such
Purchaser if such Purchaser elects to have any of the Registrable Securities
included in the Registration Statement. A Purchaser shall provide such
information to the Company at least two (2) Business Days prior to the first
anticipated filing date of such Registration Statement if such Purchaser elects
to have any of the Registrable Securities included in the Registration
Statement.

    


    (b) Each
Purchaser, by its acceptance of the Registrable Securities, agrees to cooperate
with the Company as reasonably requested by the Company in connection with the
preparation and filing of a Registration Statement hereunder, unless such
Purchaser has notified the Company in writing of its election to exclude all of
its Registrable Securities from such Registration Statement.

    


    (c) Each
Purchaser agrees that, upon receipt of any notice from the Company of the
commencement of a Suspension pursuant to Section 3, such Purchaser will
immediately discontinue disposition of Registrable Securities pursuant to the
Registration Statement covering such Registrable Securities, until the
Purchaser’s receipt of the supplemented or amended prospectus filed with the SEC
and until any related post-effective amendment is declared effective and, if so
directed by the Company, the Purchaser shall deliver to the Company (at the
expense of the Company) or destroy (and deliver to the Company a certificate of
destruction) all copies in the Purchaser’s possession of the Prospectus covering
the Registrable Securities current at the time of receipt of such
notice.

    


    6. Indemnification.

    


    (a) Indemnification by the
Company.

    


    The
Company agrees to indemnify and hold harmless, to the fullest extent permitted
by law, the Purchasers and their respective directors, managers, officers,
employees, stockholders, members, and each Person who controls any Purchaser
(within the meaning of the Securities Act) against any losses, claims, damages,
judgments, amounts paid in settlement, liabilities and expenses (including,
without limitation, reasonable attorneys’ fees) resulting from or which arise
out of or are based upon (i) any untrue statement or alleged untrue statement of
a material fact in any Registration Statement or any post-effective amendment
thereto or in any filing made in connection with the qualification of the
offering under the securities or other “blue sky” laws of any jurisdiction in
which Registrable Securities are offered (“Blue Sky Filing”) or the
omission or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading, (ii) any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus if used prior to the effective date of such Registration
Statement or contained in the final prospectus (as amended or supplemented) or
the omission or alleged omission to state therein any material fact necessary to
make the statements made therein, in the light of the circumstances under which
the statements therein were made, not misleading (any of the foregoing, a “Violation”), and will
reimburse each Purchaser and their respective directors, managers, members,
officers, employees, stockholders or controlling Persons for any legal and other
expenses reasonably incurred as such expenses are reasonably incurred by such
Person in connection with investigating, defending, settling, compromising or
paying any such Violation; provided, however, that the
Company will not be liable in any such case if and to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission so made in
conformity with information furnished in writing by a Purchaser specifically for
use in such Registration Statement or Prospectus or any other offering
document.

    


    
      
        
        

      

      
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    (b) Indemnification by the
Purchasers.

    


    Each
Purchaser agrees, severally and jointly, to indemnify and hold harmless, to the
fullest extent permitted by law, the Company, its directors, officers,
employees, shareholders and each Person who controls the Company (within the
meaning of the Securities Act) against any losses, claims, damages, judgments,
amounts paid in settlement, liabilities and expenses (including, without
limitation, reasonable attorneys’ fees) resulting from or which arise out of or
are based upon (i) any untrue statement or alleged untrue statement of a
material fact or any omission or alleged omission of a material fact required to
be stated in the Registration Statement or Prospectus or preliminary prospectus
or amendment or supplement thereto or necessary to make the statements therein
not misleading, to the extent, but only to the extent that such untrue statement
or omission or alleged statement or omission is contained in any information
furnished in writing by such Purchaser to the Company specifically for inclusion
in such Registration Statement or Prospectus or amendment or supplement thereto,
and (ii) any inaccuracy in the representations and warranties of the Purchaser
contained in this Agreement, and will reimburse the Company, and its directors,
officers, employees, shareholders or controlling Persons for any legal and other
expenses reasonably incurred as such expenses are reasonably incurred by such
Person in connection with investigating, defending, settling, compromising or
paying any such loss, claim, damage, liability, expense or action. In no event
shall the liability of a Purchaser be greater in amount than the dollar amount
of the proceeds (net of all expenses paid by such Purchaser in connection with
any claim relating to this Section 6 and the amount of any damages such
Purchaser has otherwise been required to pay by reason of such untrue statement
or omission or alleged untrue statement or omission) received by such Purchaser
upon the sale of the Registrable Securities included in the Registration
Statement giving rise to such indemnification obligation.

    


    (c) Conduct of Indemnification
Proceedings.

    


    Any
Person entitled to indemnification hereunder shall (i) give prompt notice to the
indemnifying party of any claim with respect to which it seeks indemnification
and (ii) permit such indemnifying party to assume the defense of such claim with
counsel reasonably satisfactory to the indemnified party; provided that any Person
entitled to indemnification hereunder shall have the right to employ separate
counsel and to participate in the defense of such claim, but the fees and
expenses of such counsel shall be at the expense of such Person unless (a) the
indemnifying party has agreed to pay such fees or expenses, or (b) the
indemnifying party shall have failed to assume the defense of such claim within
five (5) Business Days after written notice thereof and employ counsel
reasonably satisfactory to such Person or (c) a conflict of interest exists
between such Person and the indemnifying party with respect to such claims (in
which case, if the Person notifies the indemnifying party in writing that such
Person elects to employ separate counsel at the expense of the indemnifying
party, the indemnifying party shall not have the right to assume the defense of
such claim on behalf of such Person); and provided, further, that the
failure of any indemnified party to give notice as provided herein shall not
relieve the indemnifying party of its obligations hereunder, except to the
extent that such failure to give notice shall materially adversely affect the
indemnifying party in the defense of any such claim or litigation. It is
understood that the indemnifying party shall not, in connection with any
proceeding in the same jurisdiction, be liable for fees or expenses of more than
one additional firm of attorneys at any time for all such indemnified parties.
No indemnifying party will, except with the consent of the indemnified party,
consent to entry of any judgment or enter into any settlement that does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such indemnified party of a release from all liability in respect of such
claim or litigation.

    


    
      
        
        

      

      
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    (d) Contribution.

    


    If for
any reason the indemnification provided for in the preceding paragraphs (a) and
(b) is unavailable to an indemnified party or insufficient to hold it harmless,
other than as expressly specified therein, then the indemnifying party shall
contribute to the amount paid or payable by the indemnified party as a result of
such loss, claim, damage or liability in such proportion as is appropriate to
reflect the relative fault of the indemnified party and the indemnifying party,
as well as any other relevant equitable considerations. No Person guilty of
fraudulent misrepresentation within the meaning of Section 11(f) of the
Securities Act shall be entitled to contribution from any Person not guilty of
such fraudulent misrepresentation. In no event shall the contribution obligation
of a Purchaser be greater in amount than the dollar amount of the proceeds (net
of all expense paid by such Purchaser in connection with any claim relating to
this Section 6 and the amount of any damages such Purchaser has otherwise been
required to pay by reason of such untrue statement or omission or alleged untrue
statement or omission) received by such Purchaser upon the sale of the
Registrable Securities included in the Registration Statement giving rise to
such contribution obligation.

    


    7. Miscellaneous.

    


    (a) Amendments and
Waivers. This Agreement may be amended only by a writing signed by the
Company and the Purchasers. The Company may take any action herein prohibited,
or omit to perform any act herein required to be performed by it, only if the
Company shall have obtained the written consent to such amendment, action or
omission to act, of the Purchasers.

    


    (b) Notices. All notices
and other communications provided for or permitted hereunder shall be made as
set forth in Section 10.6 of the Subscription Agreement.

    


    (c) Assignments and Transfers by
Purchasers. The provisions of this Agreement shall be binding upon and
inure to the benefit of the Purchasers and their respective successors and
permitted assigns. A Purchaser may transfer or assign, in whole or from time to
time in part, to one or more Persons its rights hereunder to whom such Purchaser
transfers the Registrable Securities in compliance with Section 10.13 of the
Subscription Agreement, provided that such Purchaser
complies with all laws applicable thereto and provides written notice of
assignment to the Company promptly after such assignment is
effected.

    


    (d) Assignments and Transfers by
the Company. This Agreement may not be assigned by the Company without
the prior written consent of the Purchasers, provided, however, that the
Company may assign their respective rights and delegate their respective duties
hereunder to any surviving or successor corporation in connection with a merger
or consolidation of the Company, as applicable, with another corporation, or a
sale, transfer or other disposition of all or substantially all of the Company’s
assets, as applicable, to another corporation, without the prior written consent
of the Purchasers, after notice duly given by the Company, as applicable, to
each Purchaser.

    


    (e) Benefits of the
Agreement. The terms and conditions of this Agreement shall inure to the
benefit of and be binding upon the respective permitted successors and assigns
of the Parties. Nothing in this Agreement, express or implied, is intended to
confer upon any Party other than the Parties hereto or their respective
successors and assigns any rights, remedies, obligations, or liabilities under
or by reason of this Agreement, except as expressly provided in this
Agreement.

    


    
      
        
        

      

      
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    (f) Counterparts; Faxes.
This Agreement may be executed in two or more counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and the
same instrument. This Agreement may also be executed and delivered via facsimile
or other electronic transmission, which shall be deemed due execution and
delivery for all purposes.

    


    (g) Titles and Subtitles.
The titles and subtitles used in this Agreement are used for convenience only
and are not to be considered in construing or interpreting this
Agreement.

    


    (h) Severability. Any
provision of this Agreement that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof but shall be interpreted as if it were written so as to be
enforceable to the maximum extent permitted by applicable law, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction. To the extent
permitted by applicable law, the Parties hereby waive any provision of law which
renders any provisions hereof prohibited or unenforceable in any
respect.

    


    (i) Further Assurances.
The Parties shall execute and deliver all such further instruments and documents
and take all such other actions as may reasonably be required to carry out the
transactions contemplated hereby and to evidence the fulfillment of the
agreements herein contained.

    


    (j) No Inconsistent
Agreements. The Company represents, warrants and agrees that (i) it has
not entered into, and shall not, on or after the date of this Agreement, enter
into any agreement that is inconsistent with the rights granted to the
Purchasers in this Agreement or otherwise conflicts with the provisions hereof,
and (ii) except for the 2009 Notes Registration Rights Agreement and the 2012
Notes Registration Rights Agreement, it has not previously entered into any
agreement which remains in effect granting any registration rights with respect
to any of its securities to any person.

    


    (k) Entire Agreement.
This Agreement, together with the Subscription Agreement, is intended by the
Parties as a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding of the Parties hereto
in respect of the subject matter contained herein. This Agreement, together with
the Subscription Agreement, supersedes all prior agreements and understandings
between the Parties with respect to such subject matter.

    


    (l) Governing Law; Jurisdiction;
Jury Trial. All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by the
internal laws of the State of New York, without giving effect to any choice of
law or conflict of law provision or rule (whether of the State of New York or
any other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of New York. Each Party hereby irrevocably
submits to the exclusive jurisdiction of the state and federal courts sitting in
The City of New York, Borough of Manhattan, for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein, and hereby irrevocably waives, and agrees not to assert in
any suit, action or proceeding, any claim that it is not personally subject to
the jurisdiction of any such court, that such suit, action or proceeding is
brought in an inconvenient forum or that the venue of such suit, action or
proceeding is improper. Each Party hereby irrevocably waives personal service of
process and consents to process being served in any such suit, action or
proceeding by mailing a copy thereof to such party at the address for such
notices to it under this Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve process in any
manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY
HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY
DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY
TRANSACTION CONTEMPLATED HEREBY.

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (m) Termination. This
Agreement, and all rights and obligations hereunder, shall terminate and be of
no further force and effect on the third anniversary of the Closing Date as
defined in the Subscription Agreement.

    


    


    [SIGNATURE
PAGE FOLLOWS]

    


     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    IN
WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed and
delivered on the date and year first above written.

     

     

    


     

    


    


    The
Company:

    American
Dairy, Inc.

    


    


    


    By: /s/
Leng You-Bin                                                                           

    Name: Leng You-Bin

    Title:
Chairman and Chief Executive Officer

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    The
Purchasers:

    SEQUOIA
CAPITAL CHINA I, L.P.

    SEQUOIA
CAPITAL CHINA PARTNERS FUND I, L.P.

    SEQUOIA
CAPITAL CHINA PRINCIPALS FUND I, L.P.

    


    By:
Sequoia Capital China Management I, L.P.

          
A Cayman Islands Exempted Limited partnership

          
General Partner of Each

    


    By: SC
China Holding Limited

          
A Cayman Islands limited liability company

          
Its General Partner

    


     

     

    /s/ Jimmy Wong                                                                       

    Name: 
Jimmy Wong

    Title:   
Authorized Signatory

    


    


    SEQUOIA
CAPITAL CHINA GROWTH FUND I, L.P.

    SEQUOIA
CAPITAL CHINA GROWTH PARTNERS FUND I, L.P.

    SEQUOIA
CAPITAL CHINA GF PRINCIPALS FUND I, L.P.

       

    By:
Sequoia Capital China Growth Fund Management I, L.P.

          
A Cayman Islands exempted limited partnership

          
General Partner of Each

    


    By: SC
China Holding Limited

          
A Cayman Islands limited liability company

          
Its General Partner

    


    


     

     

    /s/ Jimmy Wong                                                                       

    Name: 
Jimmy Wong

    Authorized
Signatory

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    SEQUOIA
CAPITAL U.S. GROWTH FUND IV, L.P.

    


    


    By:  /s/                                                                           

    Name:

    Title: