EXECUTION
        COPY

       

    

     

    AMENDED
      AND RESTATED NOTES PURCHASE AGREEMENT

    


    by
      and
      among

    


    AMERICAN
      DAIRY, INC.

    as
      the
      Company

    


    AMERICAN
      FLYING CRANE CORPORATION

    LANGFANG
      FEIHE DAIRY COMPANY LIMITED

    GANHAN
      FEIHE DAIRY COMPANY LIMITED

    SHANXI
      FEIHESANTAI BIOTECHNOLOGY SCIENTIFIC AND COMMERCIAL CO., LIMITED

    HEILONGJIANG
      FEIHE DAIRY CO., LIMITED

    BAIQUAN
      FEIHE DAIRY CO., LIMITED

    BEIJING
      FEIHE BIOTECHNOLOGY SCIENTIFIC AND COMMERCIAL CO., LIMITED

    as
      the
      Subsidiaries

    


    LENG
      YOU-BIN

    LIU
      HUA

    as
      the
      Controlling Shareholders

    


    AND

    


    CITADEL
      EQUITY FUND LTD.

    as
      the
      Purchaser

    


    


    Dated:
      June 1, 2007

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    This
      Amended and Restated Notes Purchase Agreement (this “Agreement”)
      is
      dated as of June 1, 2007, by and between American Dairy, Inc., a Utah
      corporation (the “Company”),
      the
      other Group Companies listed on the signature pages hereto, the Controlling
      Shareholders (as defined below), and Citadel Equity Fund Ltd. (the “Purchaser”).

     

    WHEREAS,
      the Company, the Group Companies, the Controlling Shareholders and the Purchaser
      entered into the Notes Purchase Agreement, dated May 25, 2007 (the “Prior
      Agreement");
      

     

    WHEREAS,
      the parties to the Prior Agreement desire to amend and restate the Prior
      Agreement in its entirety pursuant to the terms set forth in this Agreement;
      

     

    WHEREAS,
      the parties to the Prior Agreement have agreed that the Prior Agreement shall
      be
      of no further force and effect upon the execution and delivery of this Agreement
      and further that the rights granted to the parties hereto under this Agreement
      shall supersede the rights granted to such parties under the Prior Agreement;
      

    


    WHEREAS,
      the Company proposes to issue, and the Purchaser proposes to purchase, the
      Company’s Guaranteed Senior Secured Convertible Notes due 2012 in an aggregate
      principal amount not exceeding US$80,000,000 (the “Note
      Purchase Amount”)
      on the
      terms of this Agreement; and

     

    WHEREAS,
      the Company and the Purchaser acknowledge and agree that subject to and upon
      the
      exercise of the right of first refusal (the “Prior
      ROFR”)
      held
      by certain investors named in the signature pages to the Subscription Agreement,
      dated October 2, 2006 (the “Prior
      Subscription Agreement”),
      between the Company and such investors, the Note Purchase Amount may be reduced
      by the aggregate principal amount of the Other Notes (as defined below) to
      be
      purchased by such investors who exercise the Prior ROFR with respect to the
      Notes (as defined below) (the “Other
      Investors”),
      but
      in no event by an amount more than US$20,000,000.

     

    NOW,
      THEREFORE, in consideration of the mutual covenants and promises contained
      herein and for other good and valuable consideration the receipt and adequacy
      of
      which are hereby acknowledged, the parties hereto agree as follows:

     

    1.  Definitions

     

    For
      all
      purposes of this Agreement, except as otherwise expressly provided or unless
      the
      context otherwise requires the following terms shall have the meanings set
      forth
      below. Defined terms used but not otherwise defined herein shall have the
      meanings given to such terms in the other Sections of this Agreement or the
      Indenture (as defined below).

     

    “Accession
      Letter”
has
      the
      meaning given in Section 3(c).

     

    “Act”
means
      the Securities Act of 1933, as amended from time to time, and the rules and
      regulations promulgated thereunder from time to time in effect.

     

    “AFC”
means
      American Flying Crane Corporation, a wholly owned subsidiary of the Company,
      a
      Delaware corporation.

     

    “Affiliate”
of
      any
      specified Person means:

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

    
      	 	
              (a)

            	
              any
                other Person directly or indirectly controlling or controlled by
                or under
                direct or indirect common control with such specified Person, or
                

            


    

     

    
      	 	
              (b)

            	
              any
                other Person who is a director or officer
                of:

            


    

     

    
      	 	
              (1)

            	
              such
                specified Person, 

            


    

     

    
      	 	
              (2)

            	
              any
                Subsidiary of such specified Person,
                or

            


    

     

    
      	 	
              (3)

            	
              any
                Person described in clause (a) above.


            


    

     

    For
      the
      purposes of this definition, “control” when used with respect to any Person,
      means the power to direct the management and policies of such Person, directly
      or indirectly, whether through the ownership of voting securities, by contract
      or otherwise; and the terms “controlling” and “controlled” have meanings
      correlative to the foregoing. 

     

    “Agreement”
has
      the
      meaning given in the recitals.

     

    “AI”
has
      the
      meaning given in Section 3(b).

     

    “Applicable
      Agreements”
has
      the
      meaning given in Section 6(i).

     

    “Applicable
      Law”
has
      the
      meaning given in Section 6(i).

     

    “BaiQuan”
means
      BaiQuan Feihe Dairy Co., Limited, a wholly-owned subsidiary of Feihe,
      incorporated under the laws of PRC.

     

    “Beijing
      Feihe”
means
      Beijing Feihe Biotechnology Scientific and Commercial Co., Limited, 95% of
      the
      registered capital of which is owned by Feihe and 5% of the registered capital
      of which is held in trust for the Company, incorporated under the laws of
      PRC.

     

    “Business
      Day”
has
      the
      meaning given in the Conditions.

     

    “Capital
      Stock”
means,
      with respect to any Person, any shares or other equivalents (however designated)
      of any class of corporate stock or partnership interests or any other
      participations, rights, warrants, options or other interests in the nature
      of an
      equity interest in such Person, including preferred stock, but excluding any
      debt security convertible or exchangeable into such equity
      interest.

     

    “Charter
      Documents”
has
      the
      meaning given in Section 6(i).

     

    “Clearing
      Facilities”
means
      Clearstream and Euroclear.

     

    “Clearstream”
means
      Clearstream Banking, société anonyme, and any successor thereto.

     

    “Closing”
means,
      unless otherwise specified herein, the First Closing or the Second Closing,
      as
      the context may require.

     

    “Closing
      Date”
means,
      unless otherwise specified herein, the First Closing Date or the Second Closing
      Date, as the context may require.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    “Collateral
      Agents”
means
      the Offshore Collateral Agent and the Onshore Collateral Agent.

     

    “Commission”
means
      the Securities and Exchange Commission.

     

    “Common
      Stock”
means
      shares of common stock of the Company, par value US$0.001 per
      share.

     

    “Company”
has
      the
      meaning given in the recitals.

     

    “Conditions”
means
      the terms and conditions of the Notes.

     

    “Controlling Shareholder”
means
      any of Mr. Leng You-Bin and Mr. Liu Hua.

     

    “Conversion
      Shares”
means
      shares of Common Stock issuable under the conversion of the Notes.

     

    “Disclosure
      Schedule”
has
      the
      meaning given in Section 6.

     

    “Environmental
      Laws”
has
      the
      meaning given in Section 6(cc).

     

    “Euroclear”
means
      Euroclear Bank, S.A./N.V. and any successor thereto.

     

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

     

    “Feihe”
means
      Heilongjiang Feihe Dairy Co., Limited, a wholly-owned subsidiary of AFC,
      incorporated under the laws of PRC.

     

    “FCPA”
has
      the
      meaning given in Section 6(ee).

     

    “Filing
      Agent”
has
      the
      meaning given in Section 9(j). 

     

    “Filing
      Statements”
has
      the
      meaning given in Section 9(j). 

     

    “First
      Closing”
      has the
      meaning given in Section 5(a).

     

    “First
      Closing Amount”
      has the
      meaning given in Section 3(a).

     

    “First
      Closing Date”
      means
      the date of the First Closing.

     

    “Fully-Diluted”
has
      the
      meaning given in Section 6(d)(ii).

     

    “GAAP”
has
      the
      meaning given in Section 6(a)(i).

     

    “GanHan”
means
      GanHan Feihe Dairy Company Limited, a wholly-owned subsidiary of the Company,
      incorporated under the laws of PRC.

     

    “Governmental
      Authority”
has
      the
      meaning given in Section 6(i).

     

    “Group
      Companies”
means
      the Company, AFC, LangFang, GanHan, Shanxi, Feihe, BaiQuan, Beijing Feihe and
      the Company’s other existing and future, direct and indirect, Subsidiaries.


     

    “Guarantees”
has
      the
      meaning given in Section 4. 

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    “Guarantor”
has
      the
      meaning given in Section 4. 

     

    “Indemnified
      Party”
has
      the
      meaning given in Section 10(a).

     

    “Indemnifying
      Party”
has
      the
      meaning given in Section 10(a).

     

    “Indenture”
means
      an indenture dated as of the First Closing Date by and among the Company, other
      Group Companies and the Trustee, a form of which is attached hereto as
Exhibit
      A.

     

    “Intellectual
      Property”
has
      the
      meaning given in Section 6(r)(i).

     

    “Investor
      Rights Agreement”
means
      the investor rights agreement dated the First Closing Date by and among the
      Company, the other Group Companies, the Controlling Shareholders and the
      Purchaser, a form of which is attached hereto as Exhibit
      B.

     

    “LangFang”
means
      LangFang Feihe Dairy Company Limited, a wholly-owned subsidiary of the Company,
      incorporated under the laws of PRC.

     

    “Lien”
means
      a
      mortgage, charge, pledge, lien, hypothecation or other security interest
      securing any obligation of any person or any other agreement or arrangement
      having a similar effect.

     

    “Material
      Adverse Change”
has
      the
      meaning given in Section 6(t)(ii).

     

    “Material
      Adverse Effect”
means
      a
      material adverse effect on:

     

    (a) the
      business, management, operations, prospects, property, earnings, assets,
      regulatory status, liabilities or condition (financial or otherwise) of the
      Group Companies taken as a whole;

     

    (b) the
      ability of the Group Companies or any Controlling Shareholder to perform its
      material obligations under the Transaction Documents; or

     

    (c) the
      validity or enforceability of the Transaction Documents or the rights and
      remedies of any holder of the Notes under the Notes.

     

    “Money
      Laundering Laws”
has
      the
      meaning given in Section 6(jj).

     

    “Most
      Recent Balance Sheet”
has
      the
      meaning given in Section 6(t)(iii).

     

    “Non-Competition
      Agreements”
means
      (i) a non-competition agreement dated as of the First Closing Date between
      Mr.
      Leng You-Bin and the Company and (ii) a non-competition agreement dated as
      of
      the First Closing Date between Mr. Liu Hua and the Company, a form of which
      is
      attached hereto as Exhibit
      C.

     

    “Notes”
has
      the
      meaning given in Section 3.

     

    “Note
      Purchase Amount”
has
      the
      meaning given in the recitals.

     

    “OFAC”
has
      the
      meaning given in Section 6(ii).

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    “Offshore
      Collateral Agent”
      means
      The
      Bank of New York, acting as collateral agent under the Offshore Share Pledge
      Agreement.

     

    “Offshore
      Collateral Agent”
      means
      the
      collateral agent under the Offshore Share Pledge Agreement.

     

    “Offshore
      Share Pledge Agreement”
means
      a
      share pledge agreement dated as of the First Closing Date among Mr. Leng
      You-Bin, the Company and the Offshore Collateral Agent, a form of which is
      attached hereto as Exhibit
      D.

     

    “Onshore
      Share Pledge Agreement”
means
      a
      share pledge agreement to be entered into subject
      to the completion of the undertakings and conditions set forth in Section 7(p),
      pursuant to which a perfected first-priority Lien on all of the equity interests
      of the PRC Subsidiaries will be pledged for the benefit of the holders of the
      Notes. 

     

    “Other
      Conversion Shares” has
      the
      meaning given in Section 3(b).

     

    “Other
      Indenture”
has
      the
      meaning given in Section 3(b).

     

    “Other
      Investors”
has
      the
      meaning given in the recitals.

     

    “Other
      Notes”
has
      the
      meaning given in Section 3(b).

     

    “Other
      Note Purchase Amount”
      has the
      meaning given in Section 3(b).

     

    “Outside
      Financing”
has
      the
      meaning given in Section 7(l).

     

    “Permits”
has
      the
      meaning given in Section 6(n).

     

    “Person”
means
      any individual, corporation, company (including any limited liability company),
      association, partnership, joint venture, trust, unincorporated organization,
      government or any agency or political subdivision thereof or any other
      entity.

     

    “PFIC”
has
      the
      meaning given in Section 6(hh).

     

    “PRC”
means
      the People’s Republic of China, not including Taiwan, Hong Kong and
      Macau.

     

    “PRC
      Subsidiaries”
means
      LangFang, GanHan, Shanxi, Feihe, BaiQuan and Beijing Feihe.

     

    “Prior
      ROFR”
has
      the
      meaning given in the recitals.

     

    “Prior
      Subscription Agreement”
has
      the
      meaning given in the recitals.

     

    “Proceedings”
has
      the
      meaning given in Section 6(m).

     

    “Proposal”
has
      the
      meaning given in Section 7(bb).

     

    “Purchaser”
has
      the
      meaning given in the recitals.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    “Registration
      Rights Agreement”
means
      a
      registration rights agreement dated as of the First Closing Date between the
      Company, the Controlling Shareholders and the Purchaser, a form of which is
      attached hereto as Exhibit
      E.
      

     

    “Regulation
      S”
      has the
      meaning given in Section 3(a).

     

    “SEC
      Reports”
has
      the
      meaning given in Section 6(a)(i).

     

    “Second
      Closing”
      has the
      meaning given in Section 5(b).

     

    “Second
      Closing Amount”
      has the
      meaning given in Section 3(a).

     

    “Second
      Closing Date”
      means
      the date of the Second Closing.

     

    “Securities”
means,
      collectively, the Notes, the Conversion Shares and the Guarantees.

     

    “Security
      Documents”
means
      the Offshore Share Pledge Agreement, the relevant Uniform Commercial Code
      financing statements and the Onshore Share Pledge Agreement.

     

    “Shanxi”
means
      Shanxi Feihesantai Biotechnology Scientific and Commercial Co., Limited, a
      wholly-owned subsidiary of the Company, incorporated under the laws of
      PRC.

     

    “Subsidiary”
means,
      in respect of any Person, any corporation, company (including any limited
      liability company), association, partnership, joint venture or other business
      entity of which at least a majority of the total voting power of the voting
      stock is at the time owned or controlled, directly or indirectly,
      by:

     

    (a) such
      Person, 

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

       

    

    (b) such
      Person and one or more Subsidiaries of such Person, or 

     

    (c) one
      or
      more Subsidiaries of such Person. 

     

    “Tax”
has
      the
      meaning given in Section 6(q).

     

    “Trading
      Market”
has
      the
      meaning given in Section 5.

     

    “Transaction
      Documents”
means
      this Agreement, the Indenture, the Notes, the Guarantees, the Investor Rights
      Agreement, the Non-Competition Agreements, the Registration Rights Agreement
      and
      the Offshore Share Pledge Agreement, or any of them as the context may so
      require.

     

    “Trustee”
means
      The Bank of New York, acting as trustee under the Indenture.

     

    “US$”
means
      the lawful currency of the United States from time to time.

     

    2.  Rules
      of Construction.

     

    Unless
      the context otherwise requires:

    


    (a)  a
      term
      has the meaning assigned to it;

     

    (b)  “or”
is
      not exclusive;

     

    (c)  words
      in
      the singular include the plural, and in the plural include the
      singular;

     

    (d)  all
      references in this Agreement to “Sections”, “Exhibits” and other subdivisions
      are to the designated Sections, Exhibits and subdivisions of this Agreement
      as
      originally executed;

     

    (e)  a
      reference to any person is, where relevant, deemed to be a reference to or
      to
      include, as appropriate, that person’s successors and permitted assignees or
      transferees;

     

    (f)  a
      reference to (or to any specified provision of) any agreement or document
      (including any Transaction Document) is to be construed as a reference to that
      agreement or document as it may be amended from time to time;

     

    (g)  the
      words
“herein,” “hereof” and “hereunder” and other words of similar import refer to
      this Agreement as a whole and not to any particular Section or other
      subdivision.

     

    (h)  “including”
      means “including without limitation;”

     

    (i)  provisions
      apply to successive events and transactions; and

     

    (j)  references
      to a statute or statutory provision are to be construed as a reference to that
      statute or statutory provision as it may be amended from time to
      time.

     

    3.  Issuance
      of Notes.
      

     

    (a) The
      Notes.

     

    Subject
      to the terms and conditions of this Agreement, the Company will, on the First
      Closing Date, (i) issue and sell to the Purchaser, and the Purchaser will
      purchase from the Company, the Company’s 600 Guaranteed Senior Secured
      Convertible Notes due 2012 (the “Notes”)
      of
      US$100,000 principal amount each, representing an aggregate principal amount
      of
      US$60,000,000 (the “First
      Closing Amount”),
      convertible into shares of Common Stock at an initial conversion price of
      US$24.00 per share, and (ii) cause the Guarantors to issue the Guarantees.
      

     

    Subject
      to the terms and conditions of this Agreement, the Company will, on the Second
      Closing Date, (i) issue and sell to the Purchaser, and the Purchaser will
      purchase from the Company, such number of the Notes as will represent an
      aggregate principal amount (the “Second
      Closing Amount”)
      equal
      to (x) US$20,000,000 less (y) the Other Note Purchase Amount (as defined below),
      convertible into shares of Common Stock at an initial conversion price of
      US$24.00 per share.

     

    The
      Notes
      will be issued pursuant to the provisions of the Indenture. The Notes will
      be
      offered and sold to the Purchaser pursuant to Regulation S (“Regulation
      S”)
      under
      the Act. Upon original issuance thereof, and until such time as the same is
      no
      longer required under the applicable requirements of the Act, the Notes and
      the
      Conversion Shares shall bear the legends relating to the offer and the sale
      of
      the Notes and the Conversion Shares as required by (i) Regulation S under the
      Act or (ii) any other applicable laws or regulations relating to the issuance
      of
      the Notes.

     

    (b) The
      Other Notes.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

       

    

    On
      the
      Second Closing Date, subject to Section 3(c), the Company will issue to the
      Other Investors certain notes (the “Other
      Notes”)
      of
      US$100,000 principal amount each, representing an aggregate principal amount
      equal to no more than 25% of the Note Purchase Amount, with respect to which
      the
      Other Investors have exercised their Prior ROFR in the aggregate (the
“Other
      Note Purchase Amount”).
      

     

    The
      Other
      Notes will be issued pursuant to the provisions of a separate indenture between
      the Company and the Trustee (the “Other
      Indenture”)
      and
      will be offered and sold in the United States to certain accredited investors
      (“AIs”)
      as
      defined in Rule 501(a) under the Securities Act in a manner exempt from the
      registration requirements of the Securities Act. Upon original issuance thereof,
      and until such time as the same is no longer required under the applicable
      requirements of the Act, the Other Notes and the Conversion Shares into which
      the Other Notes are convertible (the “Other
      Conversion Shares”)
      shall
      bear the legends relating to the offer and the sale of such securities as
      required by (i) Regulation D under the Act or (ii) any other applicable laws
      or
      regulations relating to the issuance of such securities. The Other Notes sold
      in
      the United States to certain AIs will be constituted by private placement
      definitive certificates, substantially in the form to be set out in an exhibit
      to the Other Indenture.

     

    The
      Other
      Notes and the Other Indenture will have terms and conditions that are identical
      to those of the Notes and the Indenture, respectively, except for the transfer
      restrictions and related provisions required for the Other Notes to be in
      compliance with the Act. 

     

    
      	(c)  	
              Accession.

            


    

     

    Notwithstanding
      anything to the contrary herein, unless waived by the Purchaser, the Company
      shall not issue and sell Other Notes to any Other Investor unless such Other
      Investor executes and delivers an accession letter, in the form attached hereto
      as Exhibit
      F
      (the
“Accession
      Letter”),
      with
      a copy to the Purchaser. Upon the execution and delivery of the Accession
      Letter, such Other Investor shall be a party to this Agreement and be bound
      by
      the terms and conditions herein, except as set forth in such Accession Letter.
      

     

    4.  Guarantees
      and Pledges.

     

    Pursuant
      to the Indenture and to the fullest extent permitted by Applicable Laws,
      AFC and
      all
      of the Company’s other existing and future direct and indirect Subsidiaries
      (only to the extent such Subsidiary is permitted under Applicable Laws to do
      so)
      (each, a “Guarantor”)
      shall
      irrevocably and unconditionally guarantee, on a senior secured basis, to the
      Purchaser and to the Trustee the payment and performance of the Company’s
      obligations under the Transaction Documents (collectively, the “Guarantees”).

     

    The
      Notes
      and the Guarantees will be secured by (i) a perfected first-priority Lien on
      all
      of the equity interests of AFC and 30% of the equity interests of the Company
      held by Mr. Leng You-Bin pursuant to the Offshore Share Pledge Agreement and
      (ii) subject to the completion of the undertakings and conditions set forth
      in
      Section 7(p), a perfected first-priority Lien on all of the equity interests
      of
      the PRC Subsidiaries pursuant to the Onshore Share Pledge Agreement

     

    5.  Purchase,
      Sale and Delivery.

     

    (a) First
      Closing.
      

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

       

    

    Subject
      to the satisfaction or waiver of all the conditions to closing set forth in
      Section 9, the issue and sale to the Purchaser of the Notes in an aggregate
      principal amount of US$60,000,000 (the “First
      Closing Amount”)
      shall
      occur at the Hong Kong office of Simpson Thacher & Bartlett LLP, on or about
      9:00 a.m., Chicago time, at a closing (the “First Closing”)
      on
      June 1, 2007 or on such other time or Business Day thereafter on or prior to
      June 15, 2007 as may be agreed upon by the Company and the Purchaser. At the
      First Closing, the Company shall deliver to the Purchaser one or more global
      certificates representing the Notes, registered in such names and denominations
      as the Purchaser may request, against payment by the Purchaser of the First
      Closing Amount as the purchase price therefor by immediately available federal
      funds bank wire transfer to such bank account or accounts as the Company shall
      have beforehand designated to the Purchaser. The Notes in an aggregate principal
      amount equal to the First Closing Amount will be represented by one or more
      global certificates in book-entry form and will be deposited on the First
      Closing Date, by or on behalf of the Company, with the Trustee as common
      depositary for Clearstream and Euroclear, or its designated custodian, and
      registered in the name of the Trustee. The Common Stock is traded on the NYSE
      Archipelago Exchange (the “Trading
      Market”).

     

    
      	(b)  	
              Second
                Closing.

            


    

     

    Subject
      to the satisfaction or waiver of all the conditions to closing set forth in
      Section 9, the issue and sale to the Purchaser of the Notes in an aggregate
      principal amount (the “Second
      Closing Amount”)
      of (x)
      US$20,000,000 less (y) the aggregate principal amount of the Other Notes to
      be
      issued and sold to the Other Investors on the same date as the date of the
      Second Closing (as defined below) shall occur at the Hong Kong office of Simpson
      Thacher & Bartlett LLP, on or about 9:00 a.m., Chicago time, at a closing
      (the “Second Closing”,
      and
      together with the First Closing, the “Closings”,
      or
      each such Closing, a “Closing”)
      on the
      date on which the Company will issue and sell the Other Notes to the Other
      Investors. The Second Closing shall occur as soon as reasonably practicable
      after the First Closing Date, but in any event without prejudice to the notice
      and acceptance periods in respect of the Prior ROFR in Section 8(m) of the
      Prior
      Subscription Agreement. At the Second Closing, the Company shall deliver to
      the
      Purchaser one or more global certificates representing the Notes, registered
      in
      such names and denominations as the Purchaser may request, against payment
      by
      the Purchaser of the Second Closing Amount as the purchase price therefor by
      immediately available federal funds bank wire transfer to such bank account
      or
      accounts as the Company shall have beforehand designated to the Purchaser.
      The
      Notes in an aggregate principal amount equal to the Second Closing Amount will
      be represented by one or more global certificates in book-entry form (which
      may
      be identical to the global certificate used for the First Closing, subject
      to
      the terms and conditions of the Indenture) and will be deposited on the Second
      Closing Date, by or on behalf of the Company, with the Trustee as common
      depositary for Clearstream and Euroclear, or its designated custodian, and
      registered in the name of the Trustee. 

     

    6.  Representations
      and Warranties of the Group Companies and the Controlling
      Shareholders.
      Except
      as set forth in the Disclosure Schedule to be made part of this Agreement upon
      delivery thereof to the Purchaser on or prior to the Closing (“Disclosure
      Schedule”)
      which
      exceptions shall be deemed part of the representations and warranties made
      hereunder, each of the Group Companies and the Controlling Shareholders, jointly
      and severally, represents and warrants to the Purchaser the following as of
      the
      date of this Agreement, and such representations and warranties shall be deemed
      to be made as of the First Closing Date (if different from the date of this
      Agreement) and the Second Closing Date, provided
      that
      each representation or warranty deemed to be made after the date of this
      Agreement shall be deemed to be made by reference to the facts and circumstances
      existing at the date on which such representation or warranty is deemed to
      be
      made (except that, for the avoidance of doubt, any representation or warranty
      that is expressed to be made by reference to the facts and circumstances
      existing as at a specific date shall be made by reference to the facts and
      circumstances existing as at such specific date): 

     

    
      
        
        

      

      
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      	(a)  	
              SEC
                Reports; Financial Statements.
                

            


    

     

    (i)
       The
      Company has filed all reports, schedules, forms, statements and other documents
      required to be filed by it under the Act and the Exchange Act (the foregoing
      materials, including the exhibits thereto and documents incorporated by
      reference therein, being collectively referred to herein as the “SEC
      Reports”)
      on a
      timely basis or has received a valid extension of such time of filing and has
      filed any such SEC Reports prior to the expiration of any such extension on
      a
      timely basis, except where the failure to file, or receive a valid extension
      of
      the timing of filing for, any SEC Reports would not be reasonably expected
      to
      have a material adverse effect, and to the Company’s best knowledge after due
      inquiry, no disciplinary actions or proceedings have been initiated against
      the
      Company and no such actions are threatened. As of the date of filing, in the
      case of SEC Reports filed pursuant to the Exchange Act, including pursuant
      to
      Section 13(a) or 15(d) thereof, for the twenty-four months preceding the date
      hereof (or such shorter period as the Company was required by law to file such
      reports, forms or other information) (and to the extent any such SEC Report
      was
      amended, then as of the date of filing of such amendment), and as of the date
      of
      effectiveness in the case of SEC Reports filed pursuant to the Act (and to
      the
      extent any such SEC Report was amended, then as of the date of effectiveness
      of
      such amendment), the SEC Reports complied in all material respects with the
      requirements of the Act and the Exchange Act and the rules and regulations
      of
      the Commission promulgated thereunder, as applicable, and none of the SEC
      Reports, as of the date of filing, in the case of SEC Reports filed pursuant
      to
      the Exchange Act (and to the extent any such SEC Report was amended, then as
      to
      the date of filing of such amendment), and as of the date of effectiveness
      in
      the case of SEC Reports filed pursuant to the Act (and to the extent any such
      SEC Report was amended, then as of the date of effectiveness of such amendment),
      contained any untrue statement of a material fact or omitted to state a material
      fact required to be stated therein or necessary in order to make the statements
      therein, in the light of the circumstances under which they were made, not
      misleading. The financial statements of the Company included in the SEC Reports
      have been prepared in accordance with the applicable accounting requirements
      and
      the rules and regulations of the Commission with respect thereto as in effect
      at
      the time of filing. Such financial statements have been prepared in accordance
      with United States generally accepted accounting principles applied on a
      consistent basis during the periods involved (“GAAP”),
      except as may be otherwise specified in such financial statements or the notes
      thereto and except that unaudited financial statements may not contain all
      footnotes required by GAAP, and fairly present in all material respects the
      financial condition, results of operations and cash flows of the Company and
      its
      consolidated Subsidiaries as of and for the dates thereof and the results of
      operations and cash flows for the periods then ended, subject, in the case
      of
      unaudited statements, to normal, immaterial, year-end audit adjustments. All
      other financial, statistical, and market and industry-related data included
      in
      the SEC Reports are based on or derived from sources that the Company reasonably
      believes to be reliable and accurate. For the purposes of this Agreement, the
      term “filed” (or any derivations thereof) includes filing, furnishing or
      otherwise providing any reports, forms or other information provided to the
      Commission.

     

    (ii)
       The
      Company has not, in the 12 months preceding the date hereof, received notice
      from the Trading Market to the effect that the Company is not in compliance
      with
      the requirements of the Trading Market, and to the Company’s best knowledge
      after due inquiry, no disciplinary actions or proceedings have been initiated
      against the Company and no such actions are threatened. The Company is, and
      upon
      consummation of the transactions contemplated hereby expects to be, in
      compliance with all of the listing requirements of the Trading Market.


     

    
      
        
        

      

      
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      	(b)  	
              Ownership
                of Shares of Subsidiaries;
                Affiliates.

            


    

     

    (i)
       Schedule
      6(b)(i) of the Disclosure Schedule contains complete and correct lists of each
      Person in which the Company owns, directly or indirectly, any Capital Stock
      or
      similar equity interests, showing, as to each Subsidiary, the correct name
      thereof, the jurisdiction of its organization, and the percentage of shares
      of
      each class of its Capital Stock or similar equity interests outstanding owned
      by
      the Company and each other Subsidiary.

     

    (ii)
       All
      of
      the outstanding shares of Capital Stock or similar equity interests of each
      Subsidiary shown in Schedule 6(b)(i) of the Disclosure Schedule as being owned
      by the Company and its Subsidiaries have been validly issued, are fully paid
      and
      non-assessable and are owned by the Company or another Subsidiary free and
      clear
      of any Lien.

     

    (iii)
       Except
      as
      disclosed in Schedule 6(b)(iii) of the Disclosure Schedule, no Subsidiary is
      a
      party to, or otherwise subject to any legal or regulatory restriction or any
      agreement (other than this Agreement) restricting the ability of such Subsidiary
      to pay dividends out of profits or make any other similar distributions of
      profits to the Company or any of its Subsidiaries that owns outstanding shares
      of Capital Stock or similar equity interests of such Subsidiary.

     

    (c)  Organization.
      Except
      as disclosed in Schedule 6(c) of the Disclosure Schedule, each of the Group
      Companies (i) has been duly organized, is validly existing and is in good
      standing under the laws of its jurisdiction of organization, (ii) has all
      requisite power and authority to carry on its business and to own, lease and
      operate its properties and assets, and (iii) is duly qualified or licensed
      to do
      business and is in good standing as a domestic or foreign corporation or limited
      liability company, as the case may be, authorized to do business in each
      jurisdiction in which the nature of such business or the ownership or leasing
      of
      such properties requires such qualification, except where, for the purposes
      of
      (ii) or (iii) only, the failure to have all such requisite power and authority
      or to be so duly qualified or licensed does not, and would not, individually
      or
      in the aggregate, have a Material Adverse Effect.
      The
      constitutional documents and certificates of each of the PRC Subsidiaries are
      valid and have been duly approved or registered (as applicable) by competent
      PRC
      Governmental Authorities.

     

    (d)  Capitalization
      and Voting Rights.
      

     

    (i)  Capital
      Stock.
      All of
      the outstanding shares of Capital Stock or similar equity interests of the
      Company have been validly issued, are fully paid and non-assessable, and are
      free and clear of any Lien.

     

    (ii)  Issued
      and Issuable Shares.
      Except
      as set forth on Schedule 6(d)(ii) of the Disclosure Schedule, as at the date
      hereof and immediately prior to the Closing, there is no Capital Stock issued
      or
      issuable pursuant to any exercise, conversion, exchange, subscription or
      otherwise in connection with any warrants, options (including pursuant to the
      Company’s stock option plan), convertible securities or any agreement to sell or
      issue Capital Stock or securities which may be exercised, converted or exchanged
      for Capital Stock, other than the shares of the Company’s common stock to be
      issued upon the conversion of the Notes (collectively, “Fully-Diluted”).
      Prior
      to the Closing Date, the Conversion Shares issuable upon conversion of the
      Notes
      will have been duly reserved for issuance, which will constitute such percentage
      of the Company’s Capital Stock on a Fully Diluted basis immediately following
      the Closing, assuming no exercise of the Prior ROFR, as disclosed in Schedule
      6(d) of the Disclosure Schedule. When duly issued upon conversion of the Notes
      in accordance with the terms of the Notes, the Conversion Shares will have
      been
      validly issued, fully paid and non-assessable, and the issuance of the
      Conversion Shares will not be subject to any preemptive or similar right. Except
      as set forth on Schedule 6(d)(ii), all of the issued and outstanding shares
      of
      each of the Group Company’s Capital Stock as of the Closing are duly authorized,
      validly issued, fully paid and non-assessable, were issued in accordance with
      the registration or qualification provisions of the Act, if applicable, and
      any
      relevant “blue sky” laws of the United States, if applicable, or pursuant to
      valid exemptions therefrom and were issued in compliance with other applicable
      laws (including, without limitation, applicable PRC laws, rules and regulations)
      and are not subject to any rescission right or put right on the part of the
      holder thereof nor does any holder thereof have the right to require the Company
      to repurchase such Capital Stock.

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    (iii)  Voting
      and Other Agreements.
      Except
      as set forth on Schedule 6(d)(iii) of the Disclosure Schedule, as at the date
      hereof and immediately prior to the Closing, there are no outstanding (A)
      options, warrants or other rights to purchase from any Group Company, (B)
      agreements, contracts, arrangements or other obligations of any Group Company
      to
      issue, or (C) other rights to convert any obligation into or exchange any
      securities for, in the case of each of clauses (A) through (C), shares of
      Capital Stock of, or other ownership or equity interests in, any Group Company.
      Except as set forth on Schedule 6(d)(iii) of the Disclosure Schedule, the
      Company is not a party or subject to any agreement or understanding and there
      is
      no agreement or understanding with any Person that affects or relates to (x)
      the
      voting or giving of written consents with respect to any security of the Company
      (including, without limitation, any voting agreements, voting trust agreements,
      shareholder agreements or similar agreements) or the voting by a director of
      the
      Company, (y) the sale, transfer or other disposition with respect to any
      security of the Company or (z) any restrictions with respect to the issuance
      or
      sale of the Notes or the consummation of the transactions contemplated under
      the
      Transaction Documents, or any provisions that would adversely affect the
      interests of the holders of the Notes or the consummation of the transactions
      contemplated under the Transaction Documents, including without limitation
      any
      right of first refusal or right to be consulted or to make a comparable offer
      with respect to the Notes, held by any security holder, creditor or anyone
      who
      holds similar rights in the Company (other than the holders of the
      Notes).

     

    (e)  No
      Registration Rights.
      Except
      as set forth on Schedule 6(e) of the Disclosure Schedule, no holder of
      securities of any of the Group Companies is or will be entitled to have any
      registration rights with respect to such securities.

     

    (f)  Authorization.
      (i)
      Each of the Group Companies has all requisite corporate power and authority
      to
      execute, deliver and perform its obligations under each of the Transaction
      Documents to which it is a party and to consummate the transactions contemplated
      thereby, (ii) this Agreement has been duly authorized, executed and delivered
      by
      the Group Companies and the Controlling Shareholders. and (iii) each of the
      Transaction Document has been duly authorized and when executed and delivered
      by
      the Group Companies and the Controlling Shareholders (to the extent they are
      parties thereto) shall constitute a legal, valid and binding obligation of
      each
      of the Group Companies and the Controlling Shareholders (to the extent they
      are
      parties thereto) enforceable against the Group Companies and the Controlling
      Shareholders (to the extent they are parties thereto) in accordance with its
      terms, except as limited by applicable bankruptcy, insolvency, reorganization,
      moratorium and other laws of general application affecting enforcement of
      creditors’ rights generally.

     

    (g)  Valid
      Issuance of Notes and the Guarantees.
      The
      Notes, when issued, sold and delivered in accordance with the terms thereof
      and
      for the consideration set forth herein, will be free of restrictions on
      transfer, other than restrictions on transfer under applicable state and federal
      securities laws. Assuming the accuracy of the Purchaser’s representations in
      Section 8 below, the Notes will be issued in compliance with applicable state
      and federal securities laws. The Notes have been duly authorized by the Company
      and, when executed and delivered by the Company, authenticated by the Trustee,
      and delivered to the Purchaser, in accordance with the terms of this Agreement,
      the Notes will have been duly executed, issued and delivered by the Company
      and
      will constitute legal, valid and binding obligations of the Company, enforceable
      against the Company in accordance with their terms, except as limited by
      applicable bankruptcy, insolvency, reorganization, moratorium and other laws
      of
      general application affecting enforcement of creditors’ rights generally. The
      Guarantees have been duly authorized, and, when the Notes have been duly
      executed, authenticated and issued in accordance with the provisions of the
      Indenture and delivered to and paid for by the Purchaser with the Guarantees
      endorsed thereon by the Guarantors, will constitute the legal, valid and binding
      obligations of each Guarantor entitled to the benefits of the
      Indenture.

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    (h)  Valid
      Issuance of Conversion Shares.
      The
      conversion rights attached to the Notes, when the Notes are issued on the
      applicable Closing Date, will provide for the right to convert the Notes into
      (i) up to 2,500,000 shares of Common Stock of the Company (subject to
      subdivision or consolidation thereof) as of the first Closing Date (as
      calculated immediately following the First Closing and assuming the conversion
      of all the Notes for an aggregate principal amount equal to the First Closing
      Amount) and (ii) up to such number of Common Stock of the Company (subject
      to
      subdivision or consolidation thereof) as of the Second Closing Date as will
      permit conversion of all the Notes for an aggregate principal amount equal
      to
      the sum of the First Closing Amount and the Second Closing Amount. The
      Conversion Shares have been duly and validly authorized for issuance by the
      Company, and when issued pursuant to the terms of the Notes and the Indenture,
      will be validly issued, fully paid and non-assessable, not subject to any
      preemptive or similar rights, free from all taxes, Liens, charges and security
      interests with respect to the issuance thereof and free of restrictions on
      transfer other than as expressly contemplated by the Transaction
      Documents.

     

    (i)  Compliance
      with Instruments.
      None of
      the Group Companies is in violation of its respective articles of incorporation,
      certificate of incorporation, by-laws or other organizational documents (the
      “Charter
      Documents”).
      None
      of the Group Companies is, nor does any condition exist (with the passage of
      time or otherwise) that could reasonably be expected to cause any of the Group
      Companies to be, (i) in violation of any statute, rule, regulation, law or
      ordinance, or any judgment, decree or order applicable to any of the Group
      Companies or any of their properties (collectively, “Applicable
      Law”)
      of any
      federal, state, national, provincial, local or other governmental authority,
      governmental or regulatory agency or body, court, arbitrator or self-regulatory
      organization of applicable jurisdictions (each, a “Governmental
      Authority”),
      or
      (ii) except as disclosed in Schedule 6(i) of the Disclosure Schedule, in breach
      of or in default in any material respect under any bond, debenture, note or
      other evidence of indebtedness, indenture, mortgage, deed of trust, lease or
      any
      other agreement or instrument to which any of them is a party or by which any
      of
      them or their respective property is bound (collectively, “Applicable
      Agreements”).

     

    (j)  No
      Conflicts.
      Neither
      the execution, delivery or performance of this Agreement or any other
      Transaction Document nor the consummation of any of the transactions
      contemplated herein or therein will conflict with, 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 (other than consents already
      obtained) or result in the imposition of a Lien (other than a Lien arising
      under
      the Security Documents and the transactions contemplated by the Transaction
      Documents) on any assets of any of the Group Companies under or pursuant to
      (i)
      the Charter Documents, (ii) any Applicable Agreement, or (iii) any Applicable
      Law. Except as disclosed in Schedule 6(j) of the Disclosure Schedule,
      immediately following consummation of the transactions contemplated in the
      Transaction Documents, no default will exist under the Indenture.

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    (k)  Security
      Interests.
      When
      executed and delivered, the Offshore Share Pledge Agreement will create valid
      and enforceable first-priority security interests in favor of the Offshore
      Collateral Agent in all the Pledged Collateral (as defined therein), which
      security interests will secure the repayment of the Notes and the other
      obligations purported to be secured thereby and when the share certificates
      representing such Pledged Collateral, together with the Powers (as defined
      therein) are delivered to the Offshore Collateral Agent, such security interests
      will be perfected. Except
      as
      disclosed in Schedule 6(k) of the Disclosure Schedule, when
      executed and delivered and subject to the approval by and filing with the
      relevant Governmental Authority, the Onshore Share Pledge Agreement will create
      valid and enforceable first-priority security interests in favor of the
      collateral agent appointed thereunder in all the equity interest in the PRC
      Subsidiaries which security interests will secure the repayment of the Notes
      and
      the other obligations purported to be secured thereby. 

     

    (l)  Governmental
      Filings.
      Except
      as set forth in Schedule 6(l) of the Disclosure Schedule, no filing with,
      consent, approval, authorization or order of, any Governmental Authority is
      required to be made by any of the Group Companies for the consummation of the
      transactions contemplated by the Transaction Documents, except (i) as have
      been
      made or obtained prior to the date of this Agreement or obtained after the
      Closing in accordance with the terms of the Transaction Documents, (ii) as
      may
      be necessary to perfect security interest granted pursuant to the Security
      Documents (and for the avoidance of doubt, the security interest granted under
      the Offshore Share Pledge Agreement shall be perfected as described in Section
      6(k) above) and (iii) as may be required under the Act or state securities
      or
“blue sky” laws. 

     

    (m)  Proceedings.
      There
      is no action, claim, suit, demand, hearing, notice of violation or deficiency,
      or proceeding, domestic or foreign (collectively, “Proceedings”),
      pending or, to the best knowledge of the Company after due inquiry, threatened,
      that seeks to restrain, enjoin, prevent the consummation of, or otherwise
      challenges any of the Transaction Documents or any of the transactions
      contemplated therein.

     

    (n)  Permits.
      Except
      as set forth in Schedule 6(n) of the Disclosure Schedule, each of the Group
      Companies possesses all material licenses, permits, certificates, consents,
      orders, approvals and other authorizations from, and has made all declarations
      and filings with, all Governmental Authorities, presently required or necessary
      to own or lease, as the case may be, and to operate their respective properties
      and to carry on their respective businesses as now conducted (“Permits”).
      All
      of the Permits are valid and in full force and effect. Each of the Group
      Companies has fulfilled and performed all of its respective obligations with
      respect to such Permits and no event has occurred which allows, or after notice
      or lapse of time could allow, revocation or termination thereof or result in
      any
      other material impairment of the rights of the holder of any such Permit. None
      of the Group Companies has received actual notice of any Proceeding relating
      to
      revocation or modification of any such Permit.

     

    (o)  Title
      to Property.
      Except
      as set forth in Schedule 6(o) of the Disclosure Schedule, each of the Group
      Companies has good and marketable title to all real property and personal
      property owned by it that is material to their respective businesses, in each
      case free and clear of any Liens as of the Closing Date, except such Liens
      as
      permitted under the Transaction Documents. For real property not owned by any
      of
      the Group Companies and currently used or planned to be used for the business
      operations of the Group Companies, each of such Group Companies has good and
      marketable title to all leasehold estates in real and personal property being
      leased by it that is material to their respective businesses and, in each case
      free and clear of all Liens as of the Closing Date.

     

    (p)  Insurance.
      Schedule 6(p) of the Disclosure Schedule contains a complete and correct list
      of
      insurance policies insuring the Group Companies and their respective businesses,
      assets, employees, officers and directors. All such insurance policies insuring
      the Group Companies and their respective businesses, assets, employees, officers
      and directors are in full force and effect. Each of the Group Companies is
      in
      compliance with the terms of such policies and instruments in all material
      respects, and there are no claims by any of the Group Companies under any such
      policy or instrument as to which, to the Company’s best knowledge after due
      inquiry, any insurance company is denying liability or defending under a
      reservation of rights clause. None of the Group Companies has been refused
      any
      insurance coverage sought or applied for, and none of the Group Companies has
      any reason to believe that it will not be able to renew its existing insurance
      coverage as and when such coverage expires or to obtain similar coverage from
      similar insurers as may be necessary to continue its business.

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

    (q)  Taxes.
      All Tax
      returns required to be filed by each of the Group Companies have been filed
      (taking into account all extensions of due dates), and all such returns are
      true, complete and correct in all material respects. All Taxes that are due
      from
      each of the Group Companies have been paid other than those (i) currently
      payable without penalty or interest or (ii) being diligently contested in good
      faith and by appropriate proceedings and for which adequate reserves have been
      established in accordance with GAAP. To the best knowledge of the Company after
      due inquiry, there are no proposed Tax assessments against any of the Group
      Companies. The accruals and reserves on the books and records of each of Group
      Companies in respect of any Tax liability for any Taxable period not finally
      determined are adequate to meet any assessments of Tax for any such period.
      For
      purposes of this Agreement, the term “Tax”
and
      “Taxes”
shall
      mean all federal, state, national, provincial, local and foreign taxes, and
      other assessments of a similar nature (whether imposed directly or through
      withholding), including any interest, additions to tax, or penalties applicable
      thereto.

     

    (r)  Intellectual
      Property. 

     

    (i) Each
      of
      the Group Companies owns, or is validly licensed under, or has the right to
      use,
all
      patents, patent rights, licenses, inventions, copyrights, know-how (including
      trade secrets and other unpatented and/or unpatentable proprietary or
      confidential information, systems, software or procedures), trademarks, service
      marks, trade names or master works, whether or not
      registered, filed, or issued under the authority of any governmental
      authority,
      (collectively, “Intellectual
      Property”)
      necessary
      for the conduct of its business and, except as set forth in Schedule 6(r) of
      the
      Disclosure Schedule, all Intellectual Properties owned by the Group Companies
      necessary for the conduct of their businesses are valid and in full force and
      effect. As of the Closing Date, such Intellectual Property is or will be free
      and clear of all Liens, except where the failure to own, possess, or have the
      right to use such Intellectual Property does not, and would not, individually
      or
      in the aggregate, have a Material Adverse Effect. To the Company’s best
      knowledge after due inquiry, no Proceedings have been asserted by any Person
      challenging the use of any such Intellectual Property by any of the Group
      Companies or questioning the validity or effectiveness of the Intellectual
      Property or any license or agreement related thereto, and, to the Company’s best
      knowledge after due inquiry, there are no facts which would form a valid basis
      for any such Proceeding. To the Company’s best knowledge after due inquiry, the
      use of such Intellectual Property any of the Group Companies will not infringe
      on the Intellectual Property rights of any other Person. 

     

    (ii) To
      the
      extent permitted by applicable law, each of the Group Companies has taken
      reasonable steps and measures to establish and preserve ownership of or right
      to
      use all Intellectual Property material to the operation of its business,
      including any Intellectual Property that was jointly developed with any
      third-parties, or any Intellectual Property for which improper or unauthorized
      disclosure would impair its value or validity, and has made all appropriate
      filings, registrations and payments of fees in connection with the foregoing.
      To
      the Company’s best knowledge after due inquiry, there is no infringement or
      misappropriation by any other Person of any Intellectual Property of any of
      the
      Group Companies. No Proceedings in which any of the Group Companies alleges
      that
      any Person is infringing upon, or otherwise violating, any Intellectual Property
      of any of the Group Companies are pending, and none has been served, instituted
      or asserted by any of the Group Companies.

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

    (iii) To
      the
      best knowledge of the Company after due inquiry, no former or current employee,
      no former or current consultant, and no third-party joint developer of any
      of
      the Group Companies has any rights in any Intellectual Property made, developed,
      conceived, created or written by the aforesaid employee or consultant during
      the
      period of his or her retention by the Group Companies which can be asserted
      against any Group Company.

     

    (iv) No
      Intellectual Property owned by any Group Company is the subject of any Lien,
      license or other contract granting rights or security interest therein to any
      other Person, except for Liens, licenses or other contracts granting rights
      or
      security interest that do not materially interfere with the use made and
      proposed to be made of such Intellectual Property by any Group Company. Each
      of
      the Group Companies has not (A) transferred or assigned, (B) granted an
      exclusive license to or (C) provided or licensed, any Intellectual Property
      owned by the Group Companies and necessary for the conduct of their business
      to
      any Person.

     

    (s)  Internal
      Controls.
      Each of
      the Group Companies maintains a system of internal accounting controls
      sufficient to provide reasonable assurance that (i) transactions are
      executed in accordance with management’s general or specific authorization, (ii)
      transactions are recorded as necessary to permit preparation of financial
      statements in conformity with GAAP and to maintain asset accountability, (iii)
      access to assets is permitted only in accordance with management’s general or
      specific authorization and (iv) the recorded accountability for assets is
      compared with the existing assets at reasonable intervals and appropriate action
      is taken with respect to any material differences.

     

    (t)  Financial
      Statements; No Undisclosed Liabilities.
      

     

    (i)  The
      audited consolidated financial statements and related notes of the Company
      contained in the Form 10-K for the three years ended December 31, 2006
present
      fairly in all material respects the financial position, results of operations
      and cash flows of the Company and its Subsidiaries, as of the respective dates
      and for the respective periods to which they apply and have been prepared in
      accordance with GAAP and comply as to form with the applicable requirements
      of
      Regulation S-X of the Act. 

     

    (ii)  Subsequent
      to the date of the Company’s audited financial statements filed for the year
      ended December 31, 2006, except as disclosed therein or in any subsequent SEC
      Report, (A) none of the Group Companies has incurred any liabilities, direct
      or
      contingent, that are material, individually or in the aggregate, to such Group
      Company, or has entered into any material transactions not in the ordinary
      course of business, (B) there has not been any material decrease in the Capital
      Stock or any material increase in long-term indebtedness or any material
      increase in short-term indebtedness of the Group Companies, or any payment
      of or
      declaration to pay any dividends or any other distribution with respect to
      the
      Group Companies, and (C) there has not been any material adverse change in
      the
      properties, business, prospects, operations, regulatory status, earnings,
      assets, liabilities or condition (financial or otherwise) of the Group Companies
      taken as a whole; excluding any changes caused by (x) the condition of the
      industry of the Company that do not disproportionately affect the Company,
      (y)
      the failure of the Company to meet its financial projections or (z) the
      execution and delivery of this Agreement and consummation of the transactions
      contemplated hereby (each of clauses (A), (B) and (C), a “Material
      Adverse Change”).
      To
      the best knowledge of the Company after due inquiry, there is no event that
      is
      reasonably likely to occur in the foreseeable future, which if it were to occur,
      could, individually or in the aggregate, have a Material Adverse
      Change.

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

    (iii)  Without
      limiting the generality of the foregoing paragraph (ii), the Company has no
      liabilities or obligations (whether actual, accrued, absolute, fixed,
      contingent, liquidated, unliquidated or otherwise, and whether due or to become
      due), except for (i) liabilities or obligations shown on the balance sheet
      as of
      December 31, 2006 (the “Most
      Recent Balance Sheet”),
      (ii)
      liabilities under any agreements, contracts, commitments, licenses or leases
      which have arisen prior to the date of the Most Recent Balance Sheet and which
      are not required to be reflected in a balance sheet, or the notes thereto,
      prepared in accordance with GAAP (none of which relates to a breach of contract,
      breach of warranty, tort, infringement, environmental, health or safety matter,
      violation of Applicable Laws or proceeding brought by Governmental Authorities),
      (iii) liabilities incurred in the ordinary course of business since December
      31,
      2006 (none of which relates to a breach of contract, breach of warranty, tort,
      infringement, environmental, health or safety matter, violation of Law or
      proceeding brought by Governmental Authorities) and/or (iv) other liabilities
      that are, individually and in the aggregate, immaterial.

     

    (u)  Debt.
      All
      Debt represented by the Notes and the Guarantees is being incurred for proper
      purposes and in good faith. Based on the financial condition of the Company
      as
      of the Closing Date after giving effect to the receipt by the Company of the
      proceeds from the sale of the Securities hereunder, (i) the fair saleable value
      of the Group Companies’ assets exceeds the amount that will be required to be
      paid on or in respect of the Group Companies’ existing Debts and other
      liabilities (including contingent liabilities) as they mature; (ii) the present
      fair saleable value of the assets of the Group Companies is greater than the
      amount that will be required to pay the probable liabilities of the Group
      Companies on their respective Debt as they become absolute and mature; (iii)
      the
      Group Companies are able to realize upon their assets and pay their Debt and
      other liabilities (including contingent obligations) as they mature; (iv) the
      Group Companies’ assets do not constitute unreasonably small capital to carry on
      their respective businesses as now conducted and as proposed to be conducted
      including their respective capital needs taking into account the particular
      capital requirements of the business conducted by the Group Companies, and
      projected capital requirements and capital availability thereof; and (v) the
      current cash flow of each of the Group Companies, together with the proceeds
      the
      Company would receive, were it to liquidate all of its assets, after taking
      into
      account all anticipated uses of the cash, would be sufficient to pay all amounts
      on or in respect of its liabilities when such amounts are required to be paid.
      None of the Group Companies intends to incur Debt beyond its ability to pay
      such
      Debt as they mature (taking into account the timing and amounts of cash to
      be
      payable on or in respect of its Debt). The Company has no knowledge of any
      facts
      or circumstances which lead it to believe that it or any other Group Companies
      will file for reorganization or liquidation under the bankruptcy or
      reorganization laws of any jurisdiction within one year from the Closing Date.
      Except as set forth in Schedule 6(u) of the Disclosure Schedule, none of the
      Group Companies is, or has reason to believe it is likely to be, in default
      with
      respect to any Debt and no waiver of default is currently in effect. Except
      as
      set forth in Schedule 6(u) of the Disclosure Schedule, none of the Group
      Companies has agreed or consented to cause or permit in the future (upon the
      happening of a contingency or otherwise) any of its property, whether now owned
      or hereafter acquired, to be subject to a Lien. Except as set forth in Schedule
      6(u) of the Disclosure Schedule, none of the Group Companies is a party to,
      or
      otherwise subject to any provision contained in, any instrument evidencing
      Debt
      of any of the Group Companies, any agreement relating thereto or any other
      agreement (including, but not limited to, its charter or other organizational
      document) which limits the amount of, or otherwise imposes restrictions on
      the
      incurring of, Debt of the Company. 

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

    (v)  No
      Stabilization.
      None of
      the Group Companies has and, to each of its best knowledge after due inquiry,
      no
      one acting on its behalf has, (i) taken, directly or indirectly, any action
      designed to cause or to result in, or that has constituted or which might
      reasonably be expected to constitute, the stabilization or manipulation of
      the
      price of any security of any of the Group Companies to facilitate the sale
      or
      resale of any of the Securities, (ii) sold, bid for, purchased, or paid anyone
      any compensation for soliciting purchases of, the Notes, or (iii) paid or agreed
      to pay to any person any compensation for soliciting another to purchase any
      other securities of the Group Companies.

     

    (w)  No
      Sale to the U.S.
      None of
      the Group Companies, their respective Affiliates, or any person acting on its
      or
      their behalf has, directly or indirectly, made offers or sales of any security,
      or solicited offers to buy, sell or offer to sell or otherwise negotiate in
      respect of, in the United States or to any United States citizen or resident,
      any security which is or would be integrated with the sale of the Securities
      in
      a manner or under circumstances that would require the registration of the
      Securities under the Act.

     

    (x)  No
      Directed Selling Efforts.
      None of
      the Group Companies, their respective Affiliates, or any person acting on its
      or
      their behalf (other than the Purchaser, its Affiliates or persons acting on
      its
      behalf, as to whom the Company makes no representation) has engaged in any
      directed selling efforts (within the meaning of Regulation S) with respect
      to
      the Securities; and each of the Company, its Subsidiaries, their respective
      Affiliates and each person acting on its or their behalf has complied with
      the
      offering restrictions requirement of Regulation S. 

     

    (y)  No
      Registration.
      Assuming the accuracy of the Purchaser’s representations and warranties set
      forth in Section 8, no registration under the Act of the Securities is required
      for the offer and sale of the Securities in the manner contemplated herein
      or to
      qualify the Indenture under the Trust Indenture Act of 1939, as
      amended.

     

    (z)  Eligibility.
      The
      Notes satisfy the eligibility requirements of Rule 144A(d)(3) under the
      Act.

     

    (aa)  Labor
      Matters.
      None of
      the Group Companies is bound by or subject to (and none of its assets or
      properties is bound by or subject to) any written or oral, express or implied,
      contract, commitment or arrangement with any labor union, and no labor union
      has
      requested or, to the best knowledge of the Company after due inquiry, has sought
      to represent any of the employees, representatives or agents of the Group
      Companies. There is no strike or other labor dispute involving any of the
Group
      Companies pending
      or threatened, which could, individually or in the aggregate, have a Material
      Adverse Effect. There is no employment related charge, complaint, grievance,
      investigation, unfair labor practice claim or inquiry of any kind, pending
      against any of the Group
      Companies that
      could, individually or in the aggregate, have a Material Adverse Effect.


     

    (bb)  Brokers
      and Finders.
      The
      Company has not engaged any broker, finder, commission agent or other similar
      person in connection with the transactions contemplated under the Transaction
      Documents, and the Company is not under any obligation to pay any broker’s fee
      or commission in connection with such transactions.

     

    (cc)  Environmental
      Matters.
      Each of
      the Group Companies (i) is in compliance with any and all currently applicable
      foreign, federal, state, national, provincial, and local laws and regulations
      relating to the protection of the environment or hazardous or toxic substances
      or wastes, pollutants or contaminants (“Environmental
      Laws”),
      (ii) has received and is in compliance with all permits, licenses or other
      approvals required of it under applicable Environmental Laws to conduct its
      business, (iii) has not received actual notice of any actual or potential
      liability for the investigation or remediation of any disposal or release of
      hazardous or toxic substances or wastes, pollutants or contaminants, (iv) none
      of the Group Companies has knowledge of any facts which would give rise to
      any
      Proceedings, public or private, against it or any violation of Environmental
      Laws arising out of the operations of the Group Companies, except, in each
      case,
      such as would not reasonably be expected to result in a Material Adverse Effect;
      and (v) none of the Group Companies has stored any hazardous materials on real
      properties now or formerly owned, leased or operated by any of them, and has
      not
      disposed of any hazardous materials, in a manner contrary to any Environmental
      Laws except as would not reasonably be expected to result in a Material Adverse
      Effect

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

    (dd)  Encumbrances.
      As of
      the Closing Date, except for any such restrictions provided under the laws
      of
      the jurisdiction of incorporation of any of the Group Companies, as applicable,
      there will be no encumbrances or restrictions on the ability of any of the
      Group
      Companies (i) to pay dividends or make other distributions on such parties’
Capital Stock or to make loans or advances or pay any indebtedness to, or
      investments in, any of the Group Companies, or (ii) to transfer any of its
      property or assets to any of the Group Companies, except for such restrictions
      set forth in the Transaction Documents.

     

    (ee)  Foreign
      Corrupt Practices Act.
      None of
      the Group Companies, nor to the best knowledge of the Company after due inquiry,
      any agent or other person acting on behalf of any of the Group Companies, has,
      directly or indirectly, (i) has used any funds, or will use any proceeds from
      the sale of the Notes, for unlawful contributions, gifts, entertainment or
      other
      unlawful expenses related to foreign or domestic political activity, (ii) has
      made any unlawful payment to foreign or domestic government officials or
      employees or to any foreign or domestic political parties or campaigns from
      corporate funds, (iii) has failed to disclose fully any contribution made by
      the
      Group Companies (or made by any person acting on its behalf of which the Company
      is aware) which is in violation of law, or (iv) has violated in any material
      respect any provision of the Foreign Corrupt Practices Act of 1977, as amended,
      and the rules and regulations thereunder (the “FCPA”).

     

    (ff)  Related
      Party Transactions.
      Other
      than as set forth in the SEC Reports, no material relationship, direct or
      indirect, exists between or among any of the Group Companies or any Affiliate
      of
      the Group Companies, on the one hand, and any former or current director,
      officer, stockholder, customer or supplier of any of them (including any member
      of their immediate family), on the other hand.

     

    (gg)  Investment
      Company.
      None of
      the Group Companies is, and as a result of the offer and sale of the Securities
      contemplated herein will not be, required to register as an “investment company”
under, and as such term is defined in, the U.S. Investment Company Act of 1940,
      as amended in connection with or as a result of the offer and sale of the
      Securities.

     

    (hh)  PFIC.None
      of
      the Group Companies is or intends to become a “passive foreign investment
      company” within the meaning of Section 1297 of the Code (“PFIC”). 

     

    (ii)  OFAC.
      Neither
      the Company nor, to the best knowledge of the Company after due inquiry, any
      director, officer, agent, employee, Affiliate or Person acting on behalf of
      the
      Company is currently subject to any U.S. sanctions administered by the Office
      of
      Foreign Assets Control of the U.S. Treasury Department (“OFAC”);
      and
      the Company will not directly or indirectly use the proceeds of the sale of
      the
      Notes, or lend, contribute or otherwise make available such proceeds to any
      Subsidiary, joint venture partner or other Person or entity, towards any sales
      or operations in Cuba, Iran, Syria, Sudan, Myanmar or any other
      country sanctioned by OFAC or for the purpose of financing the activities of
      any
      person currently subject to any U.S. sanctions administered by
      OFAC.

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

    (jj)  Money
      Laundering Laws.
      The
      operations of each of the Group Companies are and have been conducted at all
      times in compliance with the money laundering statutes of applicable
      jurisdictions, the rules and regulations thereunder and any related or similar
      rules, regulations or guidelines, issued, administered or enforced by any
      applicable governmental agency (collectively, the “Money
      Laundering Laws”)
      and no
      action, suit or proceeding by or before any court or governmental agency,
      authority or body or any arbitrator involving any of the Group Companies with
      respect to the Money Laundering Laws is pending or, to the best knowledge of
      the
      Company after due inquiry, threatened.

     

    (kk)  Other
      Representations and Warranties Relating to the
      PRC
      Subsidiaries.
      

     

    (iv)  All
      material consents, approvals, authorizations or licenses requisite under PRC
      law
      for the due and proper establishment and operation of each of the
      PRC
      Subsidiaries
      has been
      duly obtained from the relevant PRC Governmental Authorities and are in full
      force and effect.

     

    (v)  All
      filings and registrations with the PRC Governmental Authorities required in
      respect of each of the
      PRC
      Subsidiaries
      and its
      operations including, without limitation, the registrations with the Ministry
      of
      Commerce, the State Administration of Industry and Commerce, the State
      Administration for Foreign Exchange, tax bureau and customs authorities have
      been duly completed in accordance with the relevant PRC rules and
      regulations.

     

    (vi)  Each
      of
the
      PRC
      Subsidiaries
      has
      complied with all relevant PRC laws and regulations regarding the contribution
      and payment of its registered share capital, the payment schedule of which
      has
      been approved by the relevant PRC Government Authorities. There are no
      outstanding rights of, or commitments made by the Company or any Subsidiary
      to
      sell any equity interest in the
      PRC
      Subsidiaries.

     

    (vii)  None
      of
the
      PRC
      Subsidiaries
      is in
      receipt of any letter or notice from any relevant PRC Governmental Authority
      notifying it of revocation of any licenses or qualifications issued to it or
      any
      subsidy granted to it by any PRC Governmental Authority for non-compliance
      with
      the terms thereof or with applicable PRC laws, or the need for compliance or
      remedial actions in respect of the activities carried out by any of the
      PRC
      Subsidiaries.

     

    (viii)  Each
      of
the
      PRC
      Subsidiaries
      has
      conducted its business activities within the permitted scope of business or
      has
      otherwise operated its business in compliance with all relevant legal
      requirements and with all requisite licenses and approvals granted by competent
      PRC Governmental Authorities. As to licenses, approvals and government grants
      and concessions requisite or useful for the conduct of any part of the
      business
      of any of the PRC
      Subsidiaries
      which
      are subject to periodic renewal, the Company has no knowledge of any grounds
      on
      which such requisite renewals will not be granted by the relevant PRC
      Governmental Authorities.

     

    (ix)  With
      regard to employment and staff or labor, each of the PRC Subsidiaries has
      complied with all applicable PRC laws and regulations in all material respects,
      including without limitation, laws and regulations pertaining to welfare funds,
      social benefits, medical benefits, insurance, retirement benefits, pensions
      or
      the like.

     

    (ll)  Full
      Disclosure.
      All
      disclosure furnished by or on behalf of the Company to the Purchaser regarding
      any of the Group Companies, their respective businesses and the transactions
      contemplated under the Transaction Documents, including the SEC Reports and
      the
      Disclosure Schedules to this Agreement, with respect to the representations
      and
      warranties made herein are true and correct with respect to such representations
      and warranties and do not contain any untrue statement of a material fact or
      omit to state any material fact necessary in order to make the statements made
      therein, in light of the circumstances under which they were made, not
      misleading. The Company acknowledges and agrees that the Purchaser does not
      make
      any representations or warranties with respect to the transactions contemplated
      hereby other than those specifically set forth in Section 8 hereof.

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

    7.  Covenants
      of the Group Companies and the Controlling Shareholders.

     

    Each
      of
      the Group Companies and, to the extent permitted under applicable law, the
      Controlling Shareholders, jointly and severally, hereby agrees: 

     

    (a)  To
      (i)
      advise the Purchaser promptly after obtaining knowledge (and, if requested
      by
      the Purchaser, confirm such advice in writing) of the issuance by any state
      securities commission of any stop order suspending the qualification or
      exemption from qualification of the Securities for offer or sale in any
      jurisdiction, or the initiation of any proceeding for such purpose by any state
      securities commission or other regulatory authority, (ii) use its commercially
      reasonable efforts to prevent the issuance of any stop order or order suspending
      the qualification or exemption from qualification of the Securities under any
      state securities or “blue
      sky”
laws,
      and (iii) if at any time any state securities commission or other regulatory
      authority shall issue an order suspending the qualification or exemption from
      qualification of the Securities under any such laws, use its commercially
      reasonable efforts to obtain the withdrawal or lifting of such order at the
      earliest possible time.

     

    (b)  So
      long
      as any of the Securities are “restricted securities” within the meaning of Rule
      905 under the Act, to, during any period in which the Company is not subject
      to
      and in compliance with Section 13 or 15(d) of the Exchange Act, provide to
      each
      holder of such restricted securities and to each prospective purchaser (as
      designated by such holder) of such restricted securities, upon the request
      of
      such holder or prospective purchaser, any information required to be provided
      by
      Rule 144A(d)(4) under the Act.

     

    (c)  Whether
      or not any of the transactions contemplated under the Transaction Documents
      are
      consummated or this Agreement is terminated, to pay (i) all costs, expenses,
      fees and taxes incident to and in connection with the preparation, issuance
      and
      delivery of the Securities, (ii) all fees and expenses of counsels, accountants
      and any other advisors, if any, retained by the Company, (iii) all expenses
      in
      connection with qualifying the Notes for settlement in the Clearing Facilities,
      (iv) all fees and expenses of the Company in connection with approval of the
      Notes for “book entry” transfer, and (v) all fees and expenses of the Trustee,
      the Conversion Agent, the Paying Agent, the Registrar and any other agents
      contemplated in the Transaction Documents.

     

    (d)  To
      do and
      perform all things required to be done and performed under the Transaction
      Documents prior to and after each Closing Date.

     

    (e)  Prior
      to
      making any public disclosure or filings as may be required by Applicable Laws
      with respect to any of the Transaction Documents and the transactions
      contemplated hereby and thereby, to provide the Purchaser and its counsels
      with
      the reasonable opportunity to review and comment on such public disclosure
      documents and consider in good faith any comments received by the Purchaser
      or
      its counsels.

     

    (f)  The
      Company shall use it best efforts to effect, and each of the Controlling
      Shareholders shall cause the Company to use its best efforts to effect, a
      Qualifying IPO on or prior to December 1, 2008. 

     

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

    (g)  To
      maintain the listing and trading of the Common Stock on the Trading Market
      or on
      an alternative trading market reasonably acceptable to the Purchaser, until
      the
      time of a Qualifying IPO.

     

    (h)  For
      so
      long as the Purchaser owns any of the Securities, the Company will furnish
      to
      the Purchaser copies of all reports and other communications (financial or
      otherwise) furnished by the Company to the Trustee or to the holders of its
      Securities and, as soon as available, copies of any reports or financial
      statements furnished to or filed by the Company with the Commission or any
      national securities exchange on which any class of securities of the Company
      may
      be listed; provided,
      however,
      that
      any such report or financial statements filed on the Commission’s EDGAR database
      need not be separately furnished.

     

    (i)  During
      the two-year period after the applicable Closing Date (or such shorter period
      as
      may be provided for in Rule 144(k) under the Act, as the same may be in effect
      from time to time), not to, and not to permit any current or future Subsidiaries
      of the Company or any other affiliates (as defined in Rule 144(a) under the
      Act)
      controlled by the Company to, resell any of the Securities (issued as of such
      Closing Date) which constitute “restricted securities” under Rule 144 that have
      been reacquired by the Company, any current or future Subsidiaries of the
      Company or any other affiliates (as defined in Rule 144(a) under the Act)
      controlled by the Company, except pursuant to an effective registration
      statement under the Act.

     

    (j)  To
      pay
      all stamp, documentary and transfer taxes and other duties, if any, which may
      be
      imposed by any Governmental Authorities or any political subdivision thereof
      or
      taxing authority thereof or therein with respect to the issuance of the Notes
      or
      the sale thereof to the Purchaser.

     

    (k)  The
      Company will use its commercially reasonable efforts not to become, and cause
      its Subsidiaries not to become, a PFIC. If the Company determines that it or any
      of its Subsidiaries has become a PFIC, the Company will promptly notify the
      Purchaser and provide all information requested by the Purchaser that is
      necessary for it to make a qualified electing fund (QEF) election.

     

    (l)  Not
      register any transfer of the Notes that is not (i) made in accordance with
      the
      provisions of Regulation S, (ii) made pursuant to registration under the Act,
      or
      (iii) made pursuant to an available exemption under the Act.

     

    (m)  Prior
      to
      each Closing Date, the Company shall not, without the express prior written
      consent of the Purchaser (which consent shall be at the Purchaser’s sole
      discretion), pursue or discuss any capital raising transaction or transactions
      with any Person other than the Purchaser or its Affiliates (“Outside
      Financing”).
      

     

    (n)  Prior
      to
      each Closing Date, the Company shall not, and shall procure that its
      Subsidiaries shall not, do anything or take any step, action or measure (or
      omit
      to take the same), that has or could be reasonably expected to have,
      individually or in the aggregate, a Material Adverse Effect.

     

    (o)  The
      Company and the Mr. Leng You-Bin shall use their best efforts to have the
      financing statements timely filed under Article 9 of the Uniform Commercial
      Code
      of Utah or the District of Columbia, as applicable, with the Secretary of the
      State of the State of Utah or the District of Columbia, as applicable, in
      accordance with the Offshore Share Pledge Agreement, which initial filing shall
      be completed or caused to be completed within 10 days from the date of the
      First
      Closing.

     

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

    (p)  Each
      of
      the Company and the Controlling Shareholders shall, as soon as reasonably
      practicable and to
      the
      extent permitted under PRC law,
      use
      its reasonable
      efforts
      to (i) procure a collateral agent acceptable to the Purchaser to serve as a
      collateral agent under the Onshore Share Pledge Agreement, which agreement
      shall
      be in a form acceptable to the Purchaser, (ii) obtain approvals from, and
      complete filing procedures with, relevant Governmental Authorities in order
      to
      create a valid and enforceable first-priority security interest over all of
      the
      equity interests issued by the PRC Subsidiaries, including the approval from
      the
      regional offices of the Foreign Trade & Economic Cooperation Bureau and the
      registration with the regional offices of Industrial and Commercial
      Administration Bureau or other offices to the extent required under PRC law
      or
      regulations.

     

    (q)  The
      Company shall not use the net proceeds from the sale of the Notes, in any
      amount, for any purpose other than as set forth in Section 4.23 of the
      Indenture.

     

    (r)  In
      the
      event that any of the Group Companies acquires any Person following the First
      Closing Date, such Group Company shall obtain, and the Company shall cause
      such
      Group Company to obtain, as a condition precedent to the consummation of such
      acquisition, an opinion of counsel, which includes, among others, opinions
      substantially to the effect that (i) the transaction documents governing such
      acquisition are enforceable according to their terms and (ii) neither the
      execution, delivery or performance of such transaction documents nor the
      consummation of any of the transactions contemplated therein will conflict
      with,
      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
      (other than consents already obtained) or result in an imposition of a Lien
      (other than a Lien arising under the transactions contemplated in such
      transaction documents) on any assets of any of such Group Company under or
      pursuant to (x) the Charter Documents, (y) the Applicable Agreements or (z)
      any
      Applicable Law. In addition, in the event that any acquisition of a Person
      by a
      Group Company is disclosed in a SEC Report filed by the Company, the Company
      shall provide, or cause to provide, a copy of such report to the Purchaser
      promptly as reasonably practicable after filing thereof. 

     

    (s)  The
      Company shall authorize and at all times keep reserved for issuance and delivery
      upon conversion of the Notes such number of Conversion Shares or other shares
      of
      the Company as are from time to time issuable upon conversion of any Notes
      and
      will, from time to time, take all necessary steps to amend its articles of
      incorporation to provide a sufficient reserve of Conversion Shares for issuance
      upon conversion of the Notes.

     

    (t)  In
      connection with the conversion of the Notes into Conversion Shares, neither
      the
      Company nor any Person acting on its behalf will take any action which would
      result in the Conversion Shares being delivered by the Company other than to
      the
      then existing holders of the Notes exclusively where no commission or other
      remuneration is paid or given directly or indirectly for soliciting the exchange
      in compliance with Section 3(a)(9) of the Act.

     

    (u)  Each
      of
      the Group Companies and the Controlling Shareholders undertakes that (i) they
      will comply with the FCPA, including, without limitation, not making use of
      the
      mails or any means or instrumentality of interstate commerce corruptly in
      furtherance of an offer, payment, promise to pay or authorization of the payment
      of any money, or other property, gift, promise to give, or authorization of
      the
      giving of value to any “foreign official” (as the term is defined in the FCPA)
      or any foreign political party or official thereof or any candidate for foreign
      political office, in contravention of the FCPA, (ii) they will conduct its
      business in compliance with the FCPA, and (iii) they will institute and maintain
      policies and procedures designed to ensure, and which are reasonably expected
      to
      continue to ensure, continued compliance therewith.

     

    
      
        
        

      

      
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    (v)  Promptly
      as reasonably practicable but in no event later than 90 days following the
      First
      Closing Date, each of the Group Companies shall obtain reasonably adequate
      insurance covering its material properties, operations, personnel and business,
      and is insured by insurers of recognized financial responsibility against such
      losses and risks and in such amounts as are prudent and customary in the
      businesses in which it is engaged.

     

    (w)  Promptly
      as reasonably practicable following the First Closing Date, each of the Group
      Companies shall execute appropriate nondisclosure and confidentiality agreements
      with their respective employees (excluding employees acting solely as sales
      representatives and without any access to Intellectual Property of any of the
      Group Companies), consultants and other Persons as necessary to establish and
      preserve ownership of or right to use all Intellectual Property material to
      the
      operation of its business, including any Intellectual Property jointly developed
      with any third parties, or any Intellectual Property for which improper or
      unauthorized disclosure would impair its value or validity and shall ensure
      that
      such agreements remain in full force and effect. 

     

    (x)  Promptly
      and to the extent reasonably practicable following the First Closing Date,
      each
      Group Company, to the extent applicable as set forth below, shall consummate
      the
      following: 

     

    (i)  payment
      by the Company of the consideration in United States dollars for the purchase
      of
      40% equity interest in Shanxi Feihe; 

     

    (ii)  amendment
      of the land use right certificates with respect to the use of the land located
      at Xiangqing Street 016, Kedo, Xiangqing Street 3-4-2, Kedo, Nutricia-related
      land and Nantong Street, Baiquan to the reasonable satisfaction of the
      Purchaser; 

     

    (iii)  payment
      of the consideration for the acquisition by Feihe of land use rights from Kedong
      BeiBei Food Plant with respect to the use of the land located at the address
      set
      forth in Schedule 7(x)(iii) of the Disclosure Schedule and procurement of the
      related land use rights certificate to the reasonable satisfaction of the
      Purchaser; 

     

    (iv)  procurement
      of the requisite approvals or waiver by the Hebei Provincial Government with
      respect to the acquisition by Langfang of the land located at the address set
      forth in Schedule 7(x)(iv) of the Disclosure Schedule; and

     

    (v)  execution
      of employment agreements with the senior officers of each of the Group
      Companies, which agreements shall contain standard non-competition,
      confidentiality and assignment of inventions provisions as customary in the
      businesses in which it is engaged.

     

    (y)  Promptly
      and to the extent reasonably practicable following the applicable Closing Date,
      Mr. Leng You-Bin shall deliver to the Offshore Collateral Agent the certificate
      representing the Pledged Stock (as defined in the Offshore Share Pledge
      Agreement) to be pledged by Mr. Leng, accompanied by undated stock powers duly
      executed in blank by Mr. Leng You-Bin pursuant to the Offshore Share Pledge
      Agreement;

     

    (z)  The
      Company covenants to timely file (or obtain extensions in respect thereof and
      file within the applicable grace period) all reports required to be filed by
      the
      Company after the date hereof pursuant to the Exchange Act. As long as the
      Conversion Shares are “restricted securities” as defined in Rule 144(a)(3), if
      the Company is not required to file reports pursuant to the Exchange Act, it
      will prepare and make publicly available in accordance with Rule 144(c) (and,
      if
      the Purchaser owns any Conversion Shares, furnish to the Purchaser) such
      information as is required to sell such Conversion Shares under Rule 144. The
      Company further covenants that it will take such further action as any holder
      of
      the Conversion Shares may reasonably request, to the extent required from time
      to time to enable such person to sell such Conversion Shares without
      registration under the Securities Act within the requirements of the exemption
      provided by Rule 144.

     

    
      
        
        

      

      
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    (aa)  The
      Company shall, by no later than the four (4) business days (in the City of
      New
      York) following each Closing Date, file a Form 8-K announcing the respective
      Closing of the transactions contemplated hereby and the material terms thereof,
      which must be reviewed and consented to by the Purchaser prior to the filing,
      which consent shall not be unreasonably withheld or delayed; and to provide
      the
      draft of such Form 8-K to the Purchaser reasonably in advance for review. The
      Company and the Purchaser shall consult with each other in issuing any other
      press releases with respect to the transactions contemplated hereby, and neither
      the Company nor the Purchaser shall issue any such press release or otherwise
      make any such public statement (i) without the prior consent of the Company,
      with respect to any press release of the Purchaser, or (ii) without the prior
      consent of the Purchaser, with respect to any press release of the Company,
      in
      either case of (i) and (ii), which consent shall not unreasonably be withheld
      or
      delayed, except if such disclosure is required by law, in which case the
      disclosing party shall promptly provide the other party with prior notice of
      such public statement or communication. Notwithstanding
      the foregoing, the Company shall not publicly disclose the name of the
      Purchaser, or include the name of the Purchaser in any other filing with the
      Commission or any regulatory agency or Trading Market, without the prior written
      consent of the Purchaser, except (x) as required by federal securities law
      in
      connection with the filing of the Documents (including signature pages thereto)
      with the Commission and (y) to the extent such disclosure is required by law
      or
      Trading Market regulations, in which case the Company shall provide the
      Purchaser with prior notice of such disclosure permitted hereunder.

     

    (bb)  From
      the
      date of this Agreement to the Second Closing Date, each of the Group Companies
      and their respective officers and directors and the Controlling Shareholders
      will not, and each of the Company and the Controlling Shareholders will cause
      its other representatives not to, directly or indirectly, (i) solicit, or
      initiate any proposal (a “Proposal”)
      relating to (A) direct or indirect acquisition or purchase of any equity
      securities (any and all shares of Capital Stock of the Group Companies,
      securities of the Group Companies convertible into, or exchangeable or
      exercisable for, such shares, and options, warrants or other rights to acquire
      such shares and any securities that represent the right to receive such equity
      securities) or any tender offer or exchange offer or (B) a merger, amalgamation,
      share exchange or consolidation or (C) a sale of all or substantially all of
      the
      assets of the Group Companies, (ii) participate in any discussions or
      negotiations regarding or furnish to any Person any information or otherwise
      facilitate any inquiries or the making of any proposal that constitutes, or
      may
      reasonably be expected to lead to, any Proposal (other than a modified Proposal
      of the Purchaser, if any, and without prejudice to the Prior ROFR), or (iii)
      authorize, engage in, or enter into any agreement or understanding with respect
      to, any Proposal. Each of the Group Companies and their respective officers
      and
      directors and the Controlling Shareholders will, and each of the Group Companies
      will cause its other representatives to, terminate any existing activities
      or
      discussions in relation to any Proposal with any other party other than the
      Purchaser and its representatives.

     

    The
      Company and the Controlling Shareholders will immediately (within one Business
      Day) advise the Purchaser of, and inform the Purchaser of the terms of, and
      the
      identity of the Person making any Proposal that any of the Group
      Companies
      or
      Controlling Shareholders or any of their representatives or Affiliates may
      receive from
      the
      date of this Agreement to the Second Closing Date.

     

    (cc)  Prior
      to
      the Second Closing Date, if the Group Companies or their respective officers
      and
      directors or the Controlling Shareholders violate any of the obligations set
      forth in Section 7(bb) above, the Company and the Controlling Shareholders,
      on a
      joint and several basis, shall pay to the Purchaser all fees and expenses
      incurred by the Purchaser in connection with the transactions contemplated
      by
      the Transaction Documents, including, without limitation, any amounts payable
      under Section 11(b) hereof and all legal and accounting fees and expenses,
      travel and accommodation fees and expenses, and due diligence fees and
      expenses.

     

    
      
        
        

      

      
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    8.  Purchaser’s
      Representations, Warranties and Agreements.
      The
      Purchaser represents and warrants to the Company that:

     

    (a)  The
      Purchaser is not a “U.S. Person” (as defined in Rule 902 of Regulation S) and it
      understands that no action has been or will be taken in any jurisdiction by
      the
      Company that would permit a public offering of the Notes or the Conversion
      Shares in any country or jurisdiction where action for that purpose is required.
      The Purchaser is not acquiring the Notes or the Conversion Shares for the
      account or benefit of any U.S. persons except in accordance with exemption
      from
      registration requirements of the Act below or in a transaction not subject
      thereto.

     

    (b)  The
      Purchaser is not acquiring the Notes or the Conversion Shares with a view to
      any
      distribution thereof that would violate the Act or the securities laws of any
      state of the United States or any other applicable jurisdiction.

     

    (c)  The
      Purchaser (A) agrees on its own behalf and on behalf of any investor account
      for
      which it has purchased the Notes and/or the Conversion Shares that it will
      not
      offer, sell or otherwise transfer any of the Notes and/or the Conversion Shares
      prior to (x) the date which is 1 year after the later of the date of the
      commencement of the offering and the date of original issuance (or of any
      predecessor of any Security proposed to be transferred by the Purchaser) and
      (y)
      such later date, if any, as may be required by applicable law, except (a) to
      the
      Company, (b) pursuant to a registration statement that has been declared
      effective under the Act, (c) for so long as any Security is eligible for resale
      pursuant to Rule 144A under the Act, to a person it reasonably believes is
      a
“qualified institutional buyer” as defined in Rule 144A that purchases for its
      own account or for the account of another qualified institutional buyer to
      whom
      notice is given that the transfer is being made in reliance on Rule 144A, (d)
      pursuant to offers and sales to Persons who are not “U.S. Persons” (within the
      meaning of Regulation S) that occur outside the United States within the meaning
      of Regulation S or (e) pursuant to any other available exemption from the
      registration requirements of the Act, and (B) agrees that it will give to each
      person to whom such Security is transferred a notice substantially to the effect
      of this paragraph. 

     

    (d)  The
      Purchaser acknowledges that the Notes and the Conversion Shares are “restricted
      securities” as defined in Rule 144 under the Act.

     

    (e)  No
      form
      of “directed selling efforts” (as defined in Rule 902 of Regulation S), general
      solicitation or general advertising in violation of the Act has been or will
      be
      used nor will any offers by means of any directed selling efforts in the United
      States be made by the Purchaser or any of its representatives in connection
      with
      the offer and sale of any of the Notes and/or the Conversion
      Shares.

     

    (f)  The
      Notes
      and/or the Conversion Shares to be acquired by the Purchaser will be acquired
      for investment for the Purchaser’s own account, not as a nominee or agent, and
      not with a view to the resale or distribution of any part thereof, and that
      the
      Purchaser has no present intention of selling, granting any participation in,
      or
      otherwise distributing the same. The Purchaser does not presently have any
      contract, undertaking, agreement or arrangement with any Person to sell,
      transfer or grant participations to such Person or to any third Person, with
      respect to any of the Notes or the Conversion Shares. 

     

    
      
        
        

      

      
        26

        
          

        

      

      
        
        

      

    

    9.  Conditions
      Precedent to the Obligation of the Purchaser to Purchase the
      Notes.

     

    The
      Purchaser’s obligation to purchase the Notes under this Agreement at a Closing
      is subject to the satisfaction or waiver of each of the following conditions
      on
      or prior to such Closing:

     

    (a)  All
      the
      representations and warranties of each of the Group Companies and the
      Controlling Shareholders contained in each Transaction Document shall be true
      and correct as of the date hereof and at the Closing Date. Each of the Group
      Companies and the Controlling Shareholders shall have performed, satisfied
      and
      complied with, to the Purchaser’s satisfaction in its sole discretion, all
      covenants, agreements and conditions required by the Transaction Documents
      to be
      performed, satisfied or complied with by them at or prior to the Closing.


     

    (b)  No
      injunction, restraining order or order of any nature by a Governmental Authority
      shall have been issued as of the Closing Date that could prevent or materially
      interfere with the consummation of the transactions contemplated under the
      Transaction Documents; and no stop order suspending the qualification or
      exemption from qualification of any of the Securities in any jurisdiction shall
      have been issued and no Proceeding for that purpose shall have been commenced
      or, to the best knowledge of the Company after due inquiry, be pending or
      threatened as of the Closing Date.

     

    (c)  No
      action
      shall have been taken and no Applicable Law shall have been enacted, adopted
      or
      issued that could, as of the Closing Date, reasonably be expected to prevent
      the
      consummation of the transactions contemplated under the Transaction Documents.
      No Proceeding shall be pending or, to the best knowledge of the Company after
      due inquiry, threatened other than Proceedings that if adversely determined
      could not, individually or in the aggregate, adversely affect the issuance
      or
      marketability of the Notes or the Conversion Shares, or could not, individually
      or in the aggregate, have a Material Adverse Effect. None of the Group Companies
      has taken any step, action or measure (or omitted to take the same), which
      has
      or could be reasonably expected to have, individually or in the aggregate,
      a
      Material Adverse Effect.

     

    (d)  The
      Company shall have obtained any and all approvals, consents and waivers
      necessary for consummation of the transactions contemplated by the Transaction
      Documents, including, but not limited to, all Permits, authorizations, approvals
      or consents of any Governmental Authority.

     

    (e)  The
      Purchaser shall have received on the Closing Date:

     

    (i)  a
      certificate dated the Closing Date, signed by the Chief Executive Officer of
      the
      Company on behalf of the Company to the effect that (a) the representations
      and
      warranties set forth in Section 6 are true and correct with the same force
      and
      effect as though expressly made at and as of the Closing Date, (b) the Company
      has complied with all agreements and satisfied all conditions on its part to
      be
      performed or satisfied hereunder at or prior to the Closing Date, (c) at the
      Closing Date, since the date hereof or since the date of the most recent
      financial statements in the SEC Reports, no event or events have occurred,
      no
      information has become known nor does any condition exist that could,
      individually or in the aggregate, have a Material Adverse Effect, (d) since
      the
      date of the most recent financial statements in the SEC Reports, none of the
      Group Companies has incurred any liabilities or obligations, direct or
      contingent, not in the ordinary course of business, or entered into any other
      transactions not in the ordinary course of business, and there has not been
      any
      change in the Capital Stock or long-term indebtedness of any of the Group
      Companies, in each case, which could, individually or in the aggregate, have
      a
      Material Adverse Effect, and (e) the sale of any of the Notes has not been
      enjoined (temporarily or permanently);

     

    
      
        
        

      

      
        27

        
          

        

      

      
        
        

      

    

    (ii)  certificates
      dated the Closing Date, signed by each of the Controlling Shareholders, to
      the
      effect that (a) the representations and warranties set forth in the Transaction
      Documents which are given by the Controlling Shareholders are true and correct
      with the same force and effect as though expressly made at and as of the Closing
      Date, and (b) each of the Controlling Shareholders has complied with all
      agreements and satisfied all conditions on its part to be performed or satisfied
      under the Transaction Documents at or prior to the Closing Date,

     

    (iii)  a
      certificate dated the Closing Date, signed by each of the Group Companies other
      than the Company, to the effect that (a) the representations and warranties
      set
      forth in the Transaction Documents which are given by such Group Company are
      true and correct with the same force and effect as though expressly made at
      and
      as of the Closing Date, and (b) such Group Company has complied with all
      agreements and satisfied all conditions on its part to be performed or satisfied
      under the Transaction Documents at or prior to the Closing Date,

     

    (iv)  a
      certificate dated the Closing Date, signed by the Secretary of the Company,
      including specimen signatures of those officers of the Company authorized to
      sign the Transaction Documents, to which the Company is a party, on behalf
      of
      the Company, attaching true, complete and up to date copies of the certificate
      of incorporation and by-laws of the Company, attaching the certificate of good
      standing of the Company and certifying as to such other maters as the Purchaser
      may reasonably require;

     

    (v)  certificates
      dated the Closing Date, signed by the Secretary or another authorized officer
      of
      each of the Group Companies other than the Company, including specimen
      signatures of those officers of such Group Company authorized to sign the
      Transaction Documents, to which such Group Company is a party, on behalf of
      such
      Group Company, attaching true, complete and up to date copies of the certificate
      of incorporation and by-laws (or other comparable constitutional documents,
      and
      including business licenses, in the case of the PRC Subsidiaries, and also
      certificates of approval, in the case of the PRC Subsidiaries that are wholly
      foreign owned entities) of such Group Company, attaching the certificate of
      good
      standing (only in the case of the Company and AFC) of such Group Company and
      certifying as to such other maters as the Purchaser may reasonably
      require;

     

    (vi)  the
      opinions of Hodgson Russ LLP, U.S. counsel to the Company and the Controlling
      Shareholders, dated the Closing Date, in the form and substance reasonably
      satisfactory to the Purchaser; and

     

    (vii)  the
      opinions of
      the
      PRC counsel
      to the
      Company and the Controlling Shareholders, dated the Closing Date, in the form
      and substance reasonably satisfactory to the Purchaser.

     

    (f)  Each
      of
      the Transaction Documents shall have been executed and delivered by all parties
      thereto, and the Purchaser shall have received a fully executed original (or
      clearly legible facsimile copy) of each Transaction Document.

     

    (g)  The
      Purchaser shall have received copies of all documents delivered under or in
      connection with the transactions contemplated in the Transaction Documents
      that
      are required to be delivered at or prior to the Closing Date.

     

    (h)  The
      Purchaser shall have received the Disclosure Schedule in form and substance
      satisfactory to the Purchaser in its sole discretion; 

     

    
      
        
        

      

      
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    (i)  None
      of
      the other parties to any of the Transaction Documents shall be in breach or
      default under their respective obligations thereunder.

     

    (j)  The
      Offshore Collateral Agent shall have received on the Closing Date:

     

    (i)  the
      certificate representing the Pledged Stock (as defined in the Offshore Share
      Pledge Agreement) to be pledged by the Company, accompanied by undated stock
      powers duly executed in blank by the Company pursuant to the Offshore Share
      Pledge Agreement;

     

    (ii)  any
      appropriately
      completed copies, which have been duly authorized for filing by the appropriate
      Person, of Uniform Commercial Code financing statements naming the Company
      and
      Mr. Leng You-Bin as debtors and the Offshore Collateral Agent as the secured
      party, or other similar instruments or documents to be filed under the Uniform
      Commercial Code of all jurisdictions as may be necessary or desirable to perfect
      the security interests of the Offshore Collateral Agent pursuant to the
      Indenture and the Share Pledge Agreement;

     

    (iii)  any
      certified
      copies of Uniform Commercial Code Requests for Information or Copies (Form
      UCC-11), or a similar search report certified by a party acceptable to the
      Offshore Collateral Agent, dated a date reasonably near to
      the
      Closing Date, listing all effective financing statements which name the Company,
      AFC or Mr. Leng You-Bin (under its present name and any previous names) as
      the
      debtor, together with copies of such financing statements (none of which shall
      cover any collateral described in the Indenture and the Share Pledge
      Agreement);

     

    (iv)  such
      other approvals, opinions, or documents as the Offshore Collateral Agent may
      reasonably request in form and substance reasonably satisfactory to the Offshore
      Collateral Agent; and

     

    (v)  the
      Offshore Collateral Agent and its counsel shall be satisfied that
      (i)
      the Lien
      granted to the Offshore Collateral Agent, for the benefit of the Secured Parties
      (as defined in the Offshore Share Pledge Agreement) in the collateral described
      above is a first priority Lien; and
      (ii)
      no Lien
      exists on any of the collateral described above other than the Lien created
      in
      favor of the Offshore Collateral Agent, for the benefit of the Secured Parties,
      pursuant to the Indenture and the Offshore Share Pledge Agreement.

     

    (k)  All
      Uniform Commercial Code financing statements or other similar financing
      statements required pursuant to Section
      9(i)
      (i),
      (ii) and
      (iii) above (collectively, the “Filing
      Statements”)
      shall
      have been delivered to CT Corporation System or another similar filing service
      company acceptable to the Offshore Collateral Agent (the “Filing
      Agent”).
      The
      Filing Agent shall have acknowledged in a writing reasonably satisfactory to
      the
      Offshore Collateral Agent and its counsel (i) the Filing Agent’s receipt of all
      Filing Statements, (ii) that the Filing Statements have either been submitted
      for filing in the appropriate filing offices or will be submitted for filing
      in
      the appropriate offices within ten days following the Closing Date and (iii)
      that the Filing Agent will notify the Offshore Collateral Agent and its counsel
      of the results of such submissions within 30 days following the Closing
      Date.

     

    (l)  The
      respective board of directors of each of the Group Companies shall have approved
      and authorized by all necessary corporate or other action (i) the execution
      and
      delivery of the Transaction Documents, (ii) all actions to be performed or
      satisfied under the Transaction Documents (including, without limitation, the
      reserve for issuance of the Conversion Shares issuable upon exercise of the
      Notes), (iii) the consummation of the transactions contemplated by the
      Transaction Documents, (iv) the pricing terms of the Notes, and (v) all other
      actions necessary in connection with the transactions contemplated by the
      Transaction Documents and the offering of the Notes, and shall have provided
      the
      Purchaser with a copy of such authorizations. 

     

    
      
        
        

      

      
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    (m)  The
      Purchaser shall have completed and be satisfied with the results of all
      business, legal and financial due diligence, and any items requiring correction
      identified by the Purchaser shall have been corrected to the Purchaser’s
      satisfaction.

     

    (n)  The
      Purchaser shall have received all necessary internal approval for the
      transactions contemplated hereunder or under the Transaction
      Documents.

     

    (o)  The
      Purchaser shall have approved a fund flow chart setting forth how the proceeds
      from the issue of the Notes will be transferred to its direct or indirect PRC
      Subsidiaries and how such PRC Subsidiaries will transfer the funds to the
      Company for purposes of the performance of the Company’s obligations under the
      Transaction Documents. 

     

    (p)  Except
      for the Prior ROFR and as set forth on Schedule 9(o) of the Disclosure Schedule,
      the Company shall have received due and proper waivers, or shall have entered
      into amendments or agreements effecting such waivers, by the security holder,
      creditor or anyone who holds similar rights in the Company (other than the
      holders of the Notes), of any restrictions with respect to the issuance or
      sale
      of the Notes or the consummation of the transactions contemplated under the
      Transaction Documents, or any provisions that would adversely affect the
      interests of the holders of the Notes or the consummation of the transactions
      contemplated under the Transaction Documents, including without limitation
      any
      right of first refusal or right to be consulted or to make a comparable offer
      with respect to the Notes, held by any such security holder, creditor or
 holder of similar rights.

     

    10.  Indemnification.

     

    (a)  Each
      of
      the Group Companies and the Controlling Shareholders (each such Person being
      referred to as an “Indemnifying
      Party”),
      jointly and severally, agrees to indemnify and hold harmless the Purchaser,
      each
      of its Affiliates and their respective officers, directors, partners,
      shareholders, counsel, employees and agents (the Purchaser and each such other
      person being referred to as an “Indemnified
      Party”),
      to
      the fullest extent lawful, from and against any losses, claims, damages,
      liabilities and reasonable expenses (or actions in respect thereof) other than
      those arising from the Purchaser’s gross negligence or willful misconduct, as
      incurred, related to or arising out of or in connection with:

     

    
      	(i)  	
              actions
                taken or omitted to be taken by any of the Group Companies or the
                Controlling Shareholders or their respective Affiliates, officers,
                directors, employees or agents (including, without limitation, the
                failure
                to take any required actions pursuant to Circular No. 75 of the PRC’s
                State Administration of Foreign Exchange, by any Controlling Shareholder
                or the shareholders, executive officers or directors of any Group
                Company); or

            


    

     

    
      	 	
              (ii)
                

            	
              any
                breach by any of the Group Companies or the Controlling Shareholders
                or
                their respective Affiliates of any of the representations, warranties,
                covenants and agreements set forth in any Transaction
                Document,

            


    

     

    
      
        
        

      

      
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    and
      will
      reimburse the Indemnified Parties for all reasonable expenses (including,
      without limitation, fees and expenses of counsel) as they are incurred in
      connection with investigating, preparing, defending or settling any such action
      or claim, whether or not in connection with litigation in which any Indemnified
      Party is a named party. If any of the Indemnified Parties’ personnel appears as
      witnesses, are deposed or are otherwise involved in the defense of any action
      against an Indemnified Party, the Indemnifying Parties will reimburse the
      Purchaser for all reasonable expenses incurred by the Purchaser by reason of
      any
      of the Indemnified Parties being involved in any such action. 

     

    (b)  As
      promptly as reasonably practical after receipt by an Indemnified Party under
      this Section 10 of notice of the commencement of any action for which such
      Indemnified Party is entitled to indemnification under this Section 10, such
      Indemnified Party will, if a claim in respect thereof is to be made against
      the
      Indemnified Party under this Section 10, notify the Indemnifying Party of the
      commencement thereof in writing; but the omission to so notify the Indemnifying
      Party (i) will not relieve such Indemnifying Party from any liability under
      paragraph (a) above unless and only to the extent it is materially prejudiced
      as
      a result thereof and (ii) will not, in any event, relieve the Indemnifying
      Party
      from any obligations to any Indemnified Party otherwise than the indemnification
      obligation provided in paragraph (a) above. In case any such action is brought
      against any Indemnified Party, and it notifies the Indemnifying Party of the
      commencement thereof, the Indemnifying Party will be entitled to participate
      therein and, to the extent that it may determine, jointly with any other
      Indemnifying Party similarly notified, to assume the defense thereof, with
      counsel satisfactory to such Indemnified Party (who shall not, except with
      the
      consent of the Indemnified Party, be counsel to the Indemnifying Party) at
      the
      expense of the Indemnifying Party; provided,
      however,
      that if
      (i) the use of counsel chosen by the Indemnifying Party to represent the
      Indemnified Party would present such counsel with a conflict of interest, (ii)
      the actual or potential defendants in, or targets of, any such action include
      both the Indemnified Party and the Indemnifying Party and the Indemnified Party
      shall have been advised by counsel that there may be one or more legal defenses
      available to it and/or other Indemnified Party that are different from or
      additional to those available to the Indemnifying Party, (iii) the Indemnifying
      Party shall not have employed counsel satisfactory to the Indemnified Party
      to
      represent the Indemnified Party within a reasonable time after notice of the
      institution of such action or (iv) the Indemnifying Party shall authorize the
      Indemnified Party to employ separate counsel at the expense of the Indemnifying
      Party, then, in each such case, the Indemnifying Party shall not have the right
      to direct the defense of such action on behalf of such Indemnified Party or
      parties and such Indemnified Party or parties shall have the right to select
      separate counsel (including local counsel) to defend such action on behalf
      of
      such Indemnified Party or parties at the expense of the Indemnifying Party.
      After notice from the Indemnifying Party to such Indemnified Party of its
      election so to assume the defense thereof and approval by such Indemnified
      Party
      of counsel appointed to defend such action, the Indemnifying Party will not
      be
      liable to such Indemnified Party under this Section 10 for any legal or other
      expenses, other than reasonable costs of investigation, subsequently incurred
      by
      such Indemnified Party in connection with the defense thereof, unless the
      Indemnified Party shall have employed separate counsel in accordance with the
      proviso to the immediately preceding sentence (it being understood, however,
      that in connection with such action the Indemnifying Party shall not be liable
      for the expenses of more than one separate counsel (in addition to local
      counsel) in any one action or separate but substantially similar actions in
      the
      same jurisdiction arising out of the same general allegations or circumstances,
      representing the Indemnified Party who are parties to such action or actions).
      The Indemnifying Party shall not, without the prior written consent of the
      Indemnified Party, effect the settlement or compromise of, or consent to the
      entry of any judgment with respect to, any pending or threatened action or
      claim
      in respect of which indemnification or contribution may be sought hereunder
      (whether or not the Indemnified Party is an actual or potential party to such
      action or claim) unless such settlement, compromise or judgment (i) includes
      an
      unconditional release of the Indemnified Party from all liability arising out
      of
      such action or claim and (ii) does not include a statement as to or an admission
      of fault, culpability or a failure to act, by or on behalf of any Indemnified
      Party.

     

    
      
        
        

      

      
        31

        
          

        

      

      
        
        

      

    

    (c)  The
      indemnity and expense reimbursement obligations set forth herein (i) shall
      be in
      addition to any liability any of the Group Companies or the Controlling
      Shareholders may otherwise have to any Indemnified Party, (ii) shall remain
      operative and in full force and effect regardless of any investigation made
      by
      or on behalf of the Purchaser or any other Indemnified Party and (iii) shall
      be
      binding on any successor or assign of the Group Companies or their respective
      business and assets. 

     

    11.  Termination.
      

     

    (a)  The
      Purchaser may terminate this Agreement at any time prior to the Closing Date
      by
      written notice to the Company if any of the following has occurred:

     

    (i)  since
      the
      date hereof, any Material Adverse Change or any development involving or
      reasonably expected to result in a Material Adverse Effect that could, in the
      Purchaser’s sole judgment, be expected to (A) make it impracticable or
      inadvisable to proceed with the offering or delivery of the Notes on the terms
      and in the manner contemplated in this Agreement and the Indenture or (B)
      materially impair the investment quality of any of the Securities;

     

    (ii)  the
      failure of any of the Group Companies or the Controlling Shareholders to satisfy
      the conditions contained in Section 9 on or prior to the Closing
      Date;

     

    (iii)  any
      outbreak or escalation of hostilities or other national or international
      calamity or crisis, including acts of terrorism, or material adverse change
      or
      disruption in economic conditions in, or in the financial markets of, the United
      States, the European Union, the Peoples’ Republic of China or Hong Kong (it
      being understood that any such change or disruption shall be relative to such
      conditions and markets as in effect on the date hereof), if the effect of such
      outbreak, escalation, calamity, crisis, act or material adverse change in the
      economic conditions in, or in the financial markets of, the United States,
      the
      European Union, the Peoples’ Republic of China or Hong Kong could be reasonably
      expected to make it, in the Purchaser’s sole judgment, impracticable or
      inadvisable to proceed with the consummation of the transactions on the terms
      and in the manner contemplated in this Agreement or the Indenture;

     

    (iv)  suspension
      of trading in the Common Stock by the Trading Market or the suspension or
      limitation of trading generally in securities on the New York Stock Exchange,
      the American Stock Exchange, the London Stock Exchange, the Hong Kong Stock
      Exchange, the NASDAQ Capital Market or the NASDAQ Global Market or any setting
      of limitations on prices for securities on any such exchange or the NASDAQ
      Capital Market or the NASDAQ Global Market;

     

    (v)  the
      enactment, publication, decree or other promulgation after the date hereof
      of
      any Applicable Law that could be reasonably expected to have a Material Adverse
      Effect; or

     

    (vi)  the
      declaration of a banking moratorium by any federal or New York state
      Governmental Authority; or the taking of any action by any Governmental
      Authority after the date hereof in respect of its monetary or fiscal affairs
      that could reasonably be expected to have a material adverse effect on the
      financial markets in the United States, European Union, the Peoples’ Republic of
      China, Hong Kong or elsewhere.

     

    (b)  The
      Company may terminate this Agreement at any time prior to the Closing Date
      by
      written notice to the Purchaser based upon the Purchaser’s intentional breach of
      its representations, warranties, covenants and obligations under this
      Agreement.

     

    
      
        
        

      

      
        32

        
          

        

      

      
        
        

      

    

    12.  Survival
      of Representations and Indemnities.
      The
      representations and warranties, covenants, indemnities and contribution and
      expense reimbursement provisions and other agreements of any of the Group
      Companies and the Controlling Shareholders set forth in this Agreement shall
      remain operative and in full force and effect, and will survive, regardless
      of
      (i) any investigation, or statement as to the results thereof, made by or on
      behalf of the parties hereto, and (ii) acceptance of the Notes, and payment
      for
      them hereunder.

     

    13.  Substitution
      of Purchaser.
      The
      Purchaser shall have the right to substitute any one of its Affiliates as the
      purchaser of the Notes, by written notice to the Company, which notice shall
      be
      signed by both the Purchaser and such Affiliate, shall contain such Affiliate’s
      agreement to be bound by this Agreement and shall contain a confirmation by
      such
      Affiliate of the accuracy with respect to it of the representations and
      warranties set forth in Section 8. Upon receipt of such notice, wherever the
      word “Purchaser” is used in this Agreement (other than in this Section 13), such
      word shall be deemed to refer to such Affiliate in lieu of the original
      Purchaser. In the event that such Affiliate is so substituted as a purchaser
      hereunder and such Affiliate thereafter transfers to the original Purchaser
      all
      of the Notes then held by such Affiliate, upon receipt by the Company of notice
      of such transfer, wherever the word “Purchaser” is used in this Agreement (other
      than in this Section 13), such word shall no longer be deemed to refer to such
      Affiliate, but shall refer to the original Purchaser, and the original Purchaser
      shall have all the rights of an original holder of the Notes under this
      Agreement. 

     

    14.  Miscellaneous.
      

     

    (a)  Notices
      given pursuant to any provision of this Agreement shall be addressed as follows:
      (i) if to the Company, to: Star
      City
      International Building, No. 10 Jiuxianqiao Road, C-16th
      Floor,
      Chaoyang District, Beijing, People’s Republic of China 100016,
      Fax:
      (86)
      10
      8456 7768,
      Attention:
      Mr. Leng You-Bin, with a copy to Hodgson Ross LLP, 1540 Broadway, 24th Floor,
      New York, New York 10036, Fax: 212-751-0928, Attention: Jeffrey A. Rinde, Esq.,
      and (ii) if to the Purchaser, to: c/o 131 South Dearborn Street, Chicago,
      Illinois 60609, USA, Fax: (1-312) 267 7300, Attention: Mr. Adam C. Cooper,
      with
      a copy to 18/F Chater House, 8
      Connaught Road, Central, Hong Kong, Fax: (852) 3667 5511, Attention: Mr. Andrew
      Fong and Mr. Max Liu,
      and with
      a copy to Simpson Thacher & Bartlett LLP, ICBC Tower 35th Floor, 3 Garden
      Road, Central, Hong Kong SAR, China, Fax: (852) 2869 7694, Attention: Mr.
      Youngjin Sohn, Esq.

     

    (b)  Except
      with respect to the material terms and conditions of the transactions
      contemplated by the Transaction Documents, the Company covenants and agrees
      that
      neither it nor any other person acting on its behalf will provide the Purchaser
      or its agents or counsel with any information that the Company believes
      constitutes material non-public information, unless prior thereto the Purchaser
      shall have executed a written agreement regarding the confidentiality and use
      of
      such information. The Company understands and confirms that the Purchaser shall
      be relying on the foregoing representations in effecting transactions
      contemplated hereunder.

     

    (c)  This
      Agreement has been and is made solely for the benefit of and shall be binding
      upon the parties hereto and, to the extent provided in Section 10 hereof, the
      controlling persons and their respective agents, employees, officers, directors,
      partners, counsel, and shareholders referred to in Section 10, and their
      respective heirs, executors, administrators, successors and assigns, all as
      and
      to the extent provided in this Agreement, and no other person shall acquire
      or
      have any right under or by virtue of this Agreement.

     

    (d)  THIS
      AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
      OF
      THE STATE OF NEW YORK.

     

    
      
        
        

      

      
        33

        
          

        

      

      
        
        

      

    

    (e)  The
      parties hereto agree that any suit, action or proceeding arising out of or
      based
      upon this Agreement or the transactions contemplated hereby may be instituted
      in
      any State or U.S. federal court in The City of New York and County of New York,
      and waives any objection which it may now or hereafter have to the laying of
      venue of any such proceeding, and irrevocably submits to the non-exclusive
      jurisdiction of such courts in any suit, action or proceeding.

     

    (f)  The
      parties hereto each hereby waive any right to trial by jury in any action,
      proceeding or counterclaim arising out of or relating to this
      Agreement.

     

    (g)  No
      failure to exercise, and no course of dealing with respect to, and no delay
      in
      exercising, any right, power or remedy hereunder shall operate as a waiver
      thereof; nor shall any single or partial exercise of any right, power or remedy
      hereunder preclude any other or further exercise thereof or the exercise of
      any
      other right, power or remedy.

     

    (h)  This
      Agreement may be signed in various counterparts which together shall constitute
      one and the same instrument. In the event that any signature is delivered by
      facsimile transmission, such signature shall create a valid and binding
      obligation of the party executing (or on whose behalf such signature is
      executed) with the same force and effect as if such facsimile signature page
      were an original thereof.

     

    (i)  The
      headings in this Agreement are for convenience of reference only and shall
      not
      constitute part of this Agreement nor limit or otherwise affect the meaning
      of
      any provision of this Agreement.

     

    (j)  If
      any
      term, provision, covenant or restriction of this Agreement is held by a court
      of
      competent jurisdiction to be invalid, illegal, void or unenforceable, the
      remainder of the terms, provisions, covenants and restrictions set forth herein
      shall remain in full force and effect and shall in no way be affected, impaired
      or invalidated, in each case to the extent permitted by applicable law, and
      the
      parties hereto shall use their best efforts to find and employ an alternative
      means to achieve the same or substantially the same result as that contemplated
      by such term, provision, covenant or restriction. It is hereby stipulated and
      declared to be the intention of the parties that they would have executed the
      remaining terms, provisions, covenants and restrictions without including any
      of
      such that may be hereafter declared invalid, illegal, void or unenforceable,
      to
      the extent permitted by applicable law.

     

    (k)  This
      Agreement may be amended, modified or supplemented, and waivers or consents
      to
      departures from the provisions hereof may be given; provided
      that the
      same are in writing and signed by all of the signatories hereto.

     

    15.  Further
      Assurances.
      Notwithstanding anything contained in this Agreement to the contrary, the
      parties hereto hereby agree to, and shall, enter into all such additional
      agreements or instruments, or to make such modifications to this Agreement
      and
      the other agreements, documents and instruments contemplated hereby and by
      the
      transactions provided for herein, and to take such further actions, as are
      necessary or appropriate in connection with, and in order to ensure, the full
      and complete compliance by the Company of its obligations to, and the
      fulfillment of the rights of, the Other Investors pursuant to the Prior ROFR,
      and the Prior Subscription Agreement and the transactions contemplated
      thereby.

     

    [Signature
      Page(s) to Follow]

     

    
      
        
        

      

      
        34

        
          

        

      

      
        
        

      

    

    


    
      	 	 	 
	 	AMERICAN
              DAIRY, INC.
	 
 	 
 	 
 
	 	By:  	/s/ Leng
              You-Bin
	 	
              
Name: Leng
              You-Bin
	 	Title: Chief
              Executive Officer


    

     

    
      
        	 	 	 
	 	AMERICAN
                FLYING CRANE CORPORATION
	 
 	 
 	 
 
	 	By:  	/s/ Leng
                You-Bin
	 	
                
Name: Leng
                You-Bin
	 	Title:Legal
                Representative


      

    

     

    
      
        	 	 	 
	 	LANGFANG
                FEIHE DAIRY COMPANY LIMITED
	 
 	 
 	 
 
	 	By:  	/s/ Leng
                You-Bin
	 	
                
Name: Leng
                You-Bin
	 	Title:Legal
                Representative


      

    

     

    
      
        	 	 	 
	 	GANHAN
                FEIHE DAIRY COMPANY LIMITED
	 
 	 
 	 
 
	 	By:  	/s/ Leng
                You-Bin
	 	
                
Name: Leng
                You-Bin
	 	Title:Legal
                Representative


      

    

    
       

    

    
      
        	 	 	 
	 	SHANXI
                FEIHESANTAI BIOTECHNOLOGY SCIENTIFIC AND COMMERCIAL CO.,
                LIMITED
	 
 	 
 	 
 
	 	By:  	/s/ Leng
                You-Bin
	 	
                
Name: Leng
                You-Bin
	 	Title:Legal
                Representative


      

    

    
      


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      
        	 	 	 
	 	HEILONGJIANG
                FEIHE DAIRY CO., LIMITED
	 
 	 
 	 
 
	 	By:  	/s/ Leng
                You-Bin
	 	
                
Name: Leng
                You-Bin
	 	Title:Legal
                Representative


      

       

    

    
      
        	 	 	 
	 	BAIQUAN
                FEIHEI DAIRY CO., LIMITED
	 
 	 
 	 
 
	 	By:  	/s/ Leng
                You-Bin
	 	
                
Name: Leng
                You-Bin
	 	Title:Legal
                Representative


      

    

     

    
      
        	 	 	 
	 	BEIJING
                FEIHE BIOTECHNOLOGY SCIENTIFIC AND COMMERCIAL CO., LIMITED
	 
 	 
 	 
 
	 	By:  	/s/ Leng
                You-Bin
	 	
                
Name: Leng
                You-Bin
	 	Title:Legal
                Representative


      

    

    
      
        


        
          	 	 	 
	 	CONTROLLING
                  SHAREHOLDERS:
	 
 	 
 	 
 
	 	  	/s/ Leng
                  You-Bin
	 	 	
                  
Leng
                  You-Bin
	 	 	 
	 	 	 
	 	 	/s/ Liu Hua
	 	
                  
Liu
                  Hua
	 	 


        

        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

          
            	 	 	 
	 	
                    CITADEL
                      EQUITY FUND LTD.

                  
	 	 
	 	By: Citadel Limited Partnership,
                    its Portfolio
                    Manager
	 	 
	 	By: Citadel Investment Group,
                    L.L.C., its
                    General Partner
	 	 
	 
 	 
 	 
 
	 	By:  	/s/ Andrew
                    Fong
	 	
                    
Name: Andrew
                    Fong
	 	Title: Authorized
                    Signatory


          

        

      

    

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    Exhibit
      F

    


    Form
      of the Accession Letter

    


    
      	
              To:

            	
              American
                Dairy, Inc. (the “Company”), the Group Companies, the Controlling
                Shareholders, Citadel Equity Fund Ltd. and any other parties to the
                Amended Purchase Agreement 

            


    

     

    
      	
              Date:

            	
              [●]

            


    

    


    


    THIS
      UNDERTAKING is made as of the date above written by the undersigned (the
“Acceding Party”) in relation to that certain Amended and Restated Notes
      Purchase Agreement, dated June
      1,
      2007
      (the “Amended
      Purchase Agreement”),
      by
      and among the Company, the Group Companies, the Controlling Shareholders and
      Citadel Equity Fund Ltd., as amended from time to time. Capitalized terms used
      herein but not otherwise defined in this letter shall have the respective
      meanings set forth in the Amended Purchase Agreement.

     

    In
      consideration of the undersigned being accepted as a party to the Amended
      Purchase Agreement in connection with the issuance and sale of the Other Notes,
      the undersigned hereby agrees with the parties to the Amended Purchase Agreement
      that it will abide by the terms of, and be a party to, the Amended Purchase
      Agreement (a copy of which it acknowledges that it has received).

     

    The
      undersigned hereby represents, acknowledges and agrees that:

     

    1. It
      is an
      AI, purchasing the Other Notes for its own account or for the account of one
      or
      more AIs and not acquiring the Other Notes or the Other Conversion Shares with
      a
      view to any distribution thereof that would violate the Act or the securities
      laws of any state of the United States or any other applicable
      jurisdiction.

     

    2. It
      acknowledges, and each beneficial owner of the Other Notes has been advised,
      that any sale to it is being made in reliance on an exemption from the
      registration requirements of the Act.

     

    3. It
      acknowledges that no Other Notes, Guarantees or Other Conversion Shares have
      been or will be registered under the Securities Act or any applicable U.S.
      state
      securities laws, that the Other Notes, the Guarantees and the Other Conversion
      Shares are “restricted securities” within the meaning of Rule 144(a)(3) under
      the Securities Act and that no Other Notes, Guarantees or Other Conversion
      Shares may be offered or sold within the United States or to, or for the account
      or benefit of, U.S. persons (as defined in Regulation S) except as set forth
      below.

     

    4. If
      in the
      future it decides to resell, pledge or otherwise transfer the Other Notes or
      the
      Other Conversion Shares or any beneficial interests therein, it will do so,
      only
      (a) inside the United States to a person whom the Purchaser reasonably believes
      is a qualified institutional buyer (a “QIB”)
      as
      defined in Rule 144A of the Securities Act pursuant to an exemption from
      registration under the Act, (b) outside the United States to a non-U.S. person
      in compliance with Regulation S, (c) pursuant to another exemption from
      registration under the Act (if available) or (d) pursuant to an effective
      registration statement under the Act, in each case, in accordance with all
      applicable U.S. state securities laws.

     

    
      
        
        

      

      
        F-1

        
          

        

      

      
        
        

      

       

    

    5. It
      will,
      and will require each subsequent holder of the Other Notes or the Other
      Conversion Shares to, notify any purchaser of an interest in an Other Note
      or
      Other Conversion Shares of the resale restrictions referred to in paragraphs
      (iii) and (iv) above, if then applicable.

     

    6. It
      acknowledges that the Other Notes will be in certificated form.

     

    7. The
      Other
      Conversion Shares will bear a legend setting forth the resale restrictions
      referred to in paragraphs (iii) and (iv) above.

     

    8. The
      Other
      Notes and/or the Other Conversion Shares to be acquired by such Other Investor
      will be acquired for investment for its own account, not as a nominee or agent,
      and not with a view to the resale or distribution of any part thereof, and
      that
      it has no present intention of selling, granting any participation in, or
      otherwise distributing the same. Such Other Investor does not presently have
      any
      contract, undertaking, agreement or arrangement with any Person to sell,
      transfer or grant participations to such Person or to any third Person, with
      respect to any of the Other Notes or the Other Conversion Shares.

     

    9. On
      each
      day from the date on which it acquires the Other Notes, through and including
      the date on which it disposes of its interests in such Other Notes, either
      that
      (a) it is not an “employee benefit plan” as defined in Section 3(3) of ERISA,
      subject to Title I of ERISA, a “plan” (defined in Section 4975(e)(1) of the
      Code, subject to Section 4975 of the Code (including without limitation, an
      individual retirement account), an entity whose underlying assets include the
      assets of any such employee benefit plan or plan by reason of Department of
      Labor Regulation section 2510.3-10 or otherwise, or a governmental or church
      plan which is subject to any federal, state or local law that is substantially
      similar to the provisions of Section 406 of ERISA or Section 4975 of the Code
      or
      (b) its purchase, holding and disposition of such Notes will not result in
      a
      prohibited transaction under Section 406 of ERISA or Section 4975 of the Code
      (or, in the case of a governmental or church plan, any substantially similar
      federal, state or local law) unless an exemption is available with respect
      to
      such transactions and all the conditions of such exemption have been
      satisfied.

     

    This
      undertaking shall be governed by, and construed in accordance with, the laws
      of
      the State of New York.

     

    
      	 	
              [Name
                of the Other Investor]

              


              


              By:
                ___________________________

              Name:

              Title:

            


    

     

     

    
      
        
        

      

      
        F-2