Document:

THIS
        NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT
        BEEN
        REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS NOTE AND THE
        COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT BE SOLD, OFFERED
        FOR
        SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
        STATEMENT AS TO THIS NOTE UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY
        SATISFACTORY TO AMERICAN DAIRY, INC. THAT SUCH REGISTRATION IS NOT
        REQUIRED.

      

      AMENDED
        AND RESTATED 

      7.75%
        CONVERTIBLE NOTE

      

      FOR
        VALUE
        RECEIVED, AMERICAN DAIRY, INC., a Utah corporation (the "Company"),
        hereby promises to pay to the order of [___________], whose address is
        _____________________________________________, or its assigns (the "Holder"),
        without demand, the sum of [____________
        Dollars ($________)],
        with
        simple interest accruing at the rate described below.

      

      This
        Note
        is being issued to amend, modify, restate and completely replace that certain
        7.75% Convertible Note between the parties dated October 3, 2006 in the original
        principal amount of [__________]
        Dollars ($[________])
        (the
“Existing
        Note”),
        it
        being the intention of the undersigned and the Holder that all of the terms
        of
        the Existing Note, as amended hereby, are restated in and are replaced by
        the
        terms of this Note, but this Note shall not be deemed or construed to have
        been
        issued in payment, satisfaction, cancellation or novation of the Existing
        Note.

      

      The
        Existing Note was entered into pursuant to the terms of a subscription agreement
        between the Company and the Holder, dated of as of October 2, 2006 (the
        "Subscription
        Agreement"),
        and
        the Existing Note was, and this Note shall be, governed by the terms of the
        Subscription Agreement. Unless otherwise separately defined herein, all
        capitalized terms used in this Note shall have the same meaning as is set
        forth
        in the Subscription Agreement.

      

      This
        Note
        is secured by a security interest in the Pledged Collateral (as defined in
        the
        Share Pledge Agreement) pursuant to the terms of that certain Share Pledge
        Agreement dated as of even date herewith (the “Share
        Pledge Agreement”),
        by
        and among Mr. Leng You-Bin, the Company, and The Bank of New York Mellon,
        in its
        capacity as Collateral Agent for the Secured Parties named therein.

      

      ARTICLE
        I

      GENERAL
        PROVISIONS

      

      1.1 Payments.
        Subject
        to Section 4.7 hereof, interest payable on this Note shall accrue from the
        Closing Date at a rate per annum (the "Interest
        Rate")
        equal
        to seven and three-fourths percent (7.75%) (the "Interest").
        Interest shall be compounded annually, and shall be payable on the Maturity
        Date
        (defined below) in common stock of the Company, $0.001 par value per share
        ("Common
        Stock").
        Interest shall be computed for actual days elapsed on the basis of a 360
        day
        year consisting of twelve 30-day months and be payable on the earlier of
        the
        Maturity Date, as hereinafter defined, or the date this Note is converted
        pursuant to Article 2. The principal of this Note (the "Principal")
        and
        accrued but unpaid Interest thereon shall unless earlier converted be payable
        in
        full on October 2, 2009 (the "Maturity
        Date").

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      

      Upon
        any
        conversion in part by the Holder in accordance with Article II, the Holder
        and
        the Company shall in good faith recalculate the outstanding Principal balance
        and the Interest payable with respect to the converted portion. Upon any
        full
        conversion by the Holder in accordance with Article II, all of the obligations
        to make payments of Principal due hereunder shall terminate and no further
        Interest shall accrue. All payments in respect of Principal shall be made
        in
        cash in U.S. dollars and in immediately available funds. Payments under this
        Note shall be applied first to costs of collection owing under or in connection
        with this Note, second to “Additional Interest” (as hereinafter defined, if
        any), and third to Principal.

      

      The
        number of shares of Common Stock issuable in payment of Interest will be
        determined based on a ratio of one share of Common Stock for each $14.50
        in
        accrued Interest, subject to adjustment as provided in Section 2.1(c) below.
        No
        fractional shares will be issued; therefore, in the event that the number
        of
        shares of Common Stock due hereunder is not a whole number, the Company shall
        round up to the nearest whole share the number of such shares due.

      

      1.2 Additional
        Interest. Additional
        interest (“Additional
        Interest”)
        shall
        be due and payable on this Note pursuant to Section 2(c) or Section 8 of
        the
        Registration Rights Agreement between the Company and the Holders dated as
        of
        October 2, 2006, as amended by the First Amendment to Registration Rights
        Agreement dated as of the date hereof (as amended, the “Registration
        Rights Agreement”).
        Such
        Additional Interest shall be due and payable monthly, within five (5) days
        of
        the last day of each month, in United States Dollars, in cash and in immediately
        available funds. 

      

      1.3 Conversion
        Rights.
        The
        conversion rights set forth in Article II shall remain in full force and
        effect
        immediately from the date hereof and until this Note is paid in full regardless
        of the occurrence of an Event of Default. This Note shall be payable in full
        on
        the Maturity Date, except to the extent amounts hereunder have been previously
        converted into Common Stock in accordance with Article II hereof.

      

      1.4 Default
        Interest.
        The
        Company shall pay, from time to time upon demand, interest (including
        post-petition interest in any proceeding under any bankruptcy law) accrued
        on
        overdue principal of this Note at a rate that is 5% per annum in excess of
        the
        rate then in effect under this Note, from the due date and ending on the
        date
        immediately preceding the date of payment (“default interest”). Any such default
        interest shall be due and payable in United States Dollars, in cash and in
        immediately available funds.

       

      
        
          
          

        

        
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      ARTICLE
        II

      CONVERSION
        RIGHTS

      

      The
        Holder shall have the right to convert the Principal and accrued and unpaid
        Interest due under this Note into shares of the Company's Common Stock, as
        set
        forth below.

      

      2.1 Conversion
        into the Company's Common Stock.

      

      (a) The
        Holder shall have the right from and after the date of the issuance of this
        Note, and then at any time until this Note is fully paid, to convert any
        outstanding and unpaid Principal portion of this Note, and accrued Interest
        on
        such portion, at the election of the Holder (the date of such conversion
        being a
        "Conversion
        Date")
        into
        fully paid and non-assessable shares of Common Stock as such stock exists
        on the
        date of issuance of this Note, or any shares of capital stock of the Company
        into which such Common Stock shall hereafter be changed or reclassified,
        at the
        conversion price as defined in Section 2.1(b) hereof (the "Conversion
        Price"),
        determined as provided herein. Upon delivery to the Company of a completed
        Notice of Conversion, a form of which is annexed hereto, the Company shall
        issue
        and deliver to the Holder within five (5) business days from the Conversion
        Date
        (such fifth day being the "Delivery
        Date")
        that
        number of shares of Common Stock for the portion of this Note and related
        Interest converted in accordance with the foregoing. The number of shares
        of
        Common Stock to be issued upon each conversion of this Note shall be determined
        by dividing that portion of the Principal of the Note and accrued Interest
        to be
        converted, by the Conversion Price.

      

      (b) Subject
        to adjustment as provided in Section 2.1(c) hereof, the Conversion Price
        per
        share shall be $14.50.

      

      (c) The
        Conversion Price and number and kind of shares of Common Stock or other
        securities to be issued upon conversion determined pursuant to Section 2.1(a),
        and the number and kind of shares of Common Stock to be issued pursuant to
        a
        payment of Interest pursuant to Section 1.1, shall be subject to adjustment
        from
        time to time upon the happening of certain events while this Note remains
        outstanding, as follows:

      

      (i) Reorganization,
        Consolidation, Merger, etc.
        In case
        at any time or from time to time, the Company shall (A) effect a reorganization,
        (B) consolidate with or merge into any other person or (C) transfer all or
        substantially all of its properties or assets to any other person under any
        plan
        or arrangement contemplating the dissolution of the Company, then, in each
        such
        case, as a condition to the consummation of such a transaction, notice shall
        be
        provided to the Holder of this Note as set forth in this Section 2.1(c)(i)
        and
        proper and adequate provision shall be made by the Company whereby the Holder
        of
        this Note, on the conversion hereof as provided in this Article II, at any
        time
        after the consummation of such reorganization, consolidation or merger or
        the
        effective date of such dissolution, as the case may be, shall receive, in
        lieu
        of the Common Stock (or other securities) issuable on such conversion prior
        to
        such consummation or such effective date, the stock and other securities
        and
        property, including cash (collectively, the "Other
        Securities and Property"),
        to
        which such Holder would have been entitled upon such consummation or in
        connection with such dissolution, as the case may be, if such Holder had
        so
        converted this Note, immediately prior thereto, all subject to further
        adjustment thereafter as provided in Section 2.1(c)(iv). In each case of
        (A),
        (B) or (C) in this Section 2.1(c)(i), the Company shall provide written notice
        to the Holder in accordance with Section 4.2 hereof at the earliest practicable
        time (in any event, not less than fifteen (15) days before any record date
        or
        other date set for definitive action) of the date on which the books of the
        Company will close or a record will be taken for determining holders of Common
        Stock entitled to participate in any such reorganization, consolidation,
        merger,
        sale or dissolution, as the case may be.

       

      
        
          
          

        

        
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      (ii) Dissolution.
        In the
        event of any dissolution of the Company following the transfer of all or
        substantially all of its properties or assets, the Company, prior to such
        dissolution, shall at its expense deliver or cause to be delivered the stock
        and
        Other Securities and Property entitled to be received by the Holder of this
        Note
        after the effective date of such dissolution pursuant to this Article II,
        to a
        bank or trust company (a "Trustee")
        having
        its principal office in New York, New York, as trustee for the Holder of
        this
        Note.

      

      (iii) Continuation
        of Terms.
        Upon
        any reorganization, consolidation, merger or transfer (and any dissolution
        following any transfer) referred to in this Article II, this Note shall continue
        in full force and effect and the terms hereof shall be applicable to the
        Other
        Securities and Property receivable on the conversion of this Note after the
        consummation of such reorganization, consolidation or merger or the effective
        date of dissolution following any such transfer, as the case may be, and
        shall
        be binding upon the issuer of any Other Securities and Property, including,
        in
        the case of any such transfer, the person acquiring all or substantially
        all of
        the properties or assets of the Company, whether or not such person shall
        have
        expressly assumed the terms of this Note as provided in Section 2.1(c)(iv).
        In
        the event this Note does not continue in full force and effect after the
        consummation of the transaction described in this Article II, then only in
        such
        event will the Company's securities and property (including cash, where
        applicable) receivable by the Holder of this Note be delivered to the Trustee
        as
        contemplated by Section 2.1(c)(ii).

      

      (iv) Extraordinary
        Events Regarding Common Stock.

       

      (1)
        In
        the
        event that the Company shall (A) issue additional shares of Common Stock
        as a
        dividend or other distribution on outstanding Common Stock, (B) subdivide
        its
        outstanding shares of Common Stock, or (C) combine its outstanding shares
        of
        Common Stock into a smaller number of shares of Common Stock, then, in each
        such
        event, the Conversion Price shall, simultaneously with the happening of such
        event, be adjusted by multiplying the then Conversion Price by a fraction,
        the
        numerator of which shall be the number of shares of Common Stock outstanding
        immediately prior to such event and the denominator of which shall be the
        number
        of shares of Common Stock outstanding immediately after such event, and the
        product so obtained shall thereafter be the Conversion Price then in effect.
        The
        Conversion Price, as so adjusted, shall be readjusted in the same manner
        upon
        the happening of any successive event or events described herein in this
        Section
        2.1(c)(iv).

      

      (2) In
        case
        the Company shall issue rights or warrants to all holders of its outstanding
        shares of Common Stock entitling them (for a period expiring within forty-five
        (45) days after the date fixed for determination of shareholders entitled
        to
        receive such rights or warrants) to subscribe for or purchase shares of Common
        Stock at a price per share less than the Conversion Price immediately
        preceding the date such distribution is first publicly announced by the Company,
        the Conversion Price shall be adjusted so that the same shall equal the rate
        determined by multiplying the Conversion Price in effect immediately prior
        to
        the date fixed for determination of shareholders entitled to receive such
        rights
        or warrants by a fraction,

      

      (A) the
        numerator of which shall be the sum of the number of shares of Common Stock
        outstanding at the close of business on the date fixed for determination
        of
        shareholders entitled to receive such rights or warrants plus the number
        of
        shares that the aggregate offering price of the total number of shares so
        offered would purchase at a price equal to the Conversion Price immediately
        preceding the date such distribution is first publicly announced by the Company,
        and

       

      
        
          
          

        

        
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      (B) the
        denominator of which shall be the number of shares of Common Stock outstanding
        on the date fixed for determination of shareholders entitled to receive such
        rights or warrants plus the total number of additional shares of Common Stock
        offered for subscription or purchase,

       

      such
        adjustment shall be successively made whenever any such rights or warrants
        are
        issued, and shall become effective immediately after the opening of business
        on
        the day following the date fixed for determination of shareholders entitled
        to
        receive such rights or warrants. To the extent that shares of Common Stock
        are
        not delivered after the expiration of such rights or warrants, the Conversion
        Price shall be readjusted to the Conversion Price that would then be in effect
        had the adjustments made upon the issuance of such rights or warrants been
        made
        on the basis of delivery of only the number of shares of Common Stock actually
        delivered. If such rights or warrants are not so issued, the Conversion Price
        shall again be adjusted to be the Conversion Price that would then be in
        effect
        if such date fixed for the determination of shareholders entitled to receive
        such rights or warrants had not been fixed. In determining whether any rights
        or
        warrants entitle the holders to subscribe for or purchase shares of Common
        Stock
        at a price less than the Conversion
        Price immediately
        preceding the date such distribution is first publicly announced by the Company,
        and in determining the aggregate offering price of such shares of Common
        Stock,
        there shall be taken into account any consideration received by the Company
        for
        such rights or warrants and any amount payable on exercise or conversion
        thereof, the value of such consideration, if other than cash, to be determined
        by the Board of Directors of the Company.

      

      Rights
        or
        warrants distributed by the Company to all holders of Common Stock entitling
        the
        holders thereof to subscribe for or purchase shares of the Company’s capital
        stock (either initially or under certain circumstances), which rights or
        warrants, until the occurrence of a specified event or events (“Trigger
        Event”):
        (i)
        are deemed to be transferred with such shares of Common Stock; (ii) are not
        exercisable; and (iii) are also issued in respect of future issuances of
        Common
        Stock, shall be deemed not to have been distributed for purposes of this
        Section
        2.1(c)(iv)(2) (and no adjustment to the Conversion Price under this Section
        2.1(c)(iv)(2) will be required) until the occurrence of the earliest Trigger
        Event, whereupon such rights and warrants shall be deemed to have been
        distributed and an appropriate adjustment (if any is required) to the Conversion
        Price shall be made under this Section 2.1(c)(iv)(2). If any such right or
        warrant, including any such existing rights or warrants distributed prior
        to the
        date of this Note, are subject to events, upon the occurrence of which such
        rights or warrants become exercisable to purchase different securities,
        evidences of indebtedness or other assets, then the date of the occurrence
        of
        any and each such event shall be deemed to be the date of distribution and
        record date with respect to new rights or warrants with such rights (and
        a
        termination or expiration of the existing rights or warrants without exercise
        by
        any of the holders thereof). In addition, in the event of any distribution
        (or
        deemed distribution) of rights or warrants, or any Trigger Event or other
        event
        (of the type described in the preceding sentence) with respect thereto that
        was
        counted for purposes of calculating a distribution amount for which an
        adjustment to the Conversion Price under this Section 2.1(c)(iv)(2) was made,
        (1) in the case of any such rights or warrants that shall all have been redeemed
        or repurchased without exercise by any holders thereof, the Conversion Price
        shall be readjusted upon such final redemption or repurchase to give effect
        to
        such distribution or Trigger Event, as the case may be, as though it were
        a cash
        distribution, equal to the per share redemption or repurchase price received
        by
        a holder or holders of Common Stock with respect to such rights or warrants
        (assuming such holder had retained such rights or warrants), made to all
        holders
        of Common Stock as of the date of such redemption or repurchase, and (2)
        in the
        case of such rights or warrants that shall have expired or been terminated
        without exercise by any holders thereof, the Conversion Price shall be
        readjusted as if such rights and warrants had not been issued.

       

      
        
          
          

        

        
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      No
        adjustment of the Conversion Price shall be made pursuant to this Section
        2.1(c)(iv)(2) in respect of rights or warrants distributed or deemed distributed
        on any Trigger Event to the extent that such rights or warrants are actually
        distributed, or reserved by the Company for distribution to holders of Notes
        upon conversion by such holders of Notes to Common Stock.

      

      (3)
         If
        the
        Company shall issue or sell its Common Stock at a price per share less than
        the
        Conversion Price then in effect, or shall issue or sell any securities
        convertible, exchangeable, or exercisable into Common Stock at a price per
        share
        less than the Conversion Price then in effect, the Conversion Price shall
        be
        decreased such that the Conversion Price is equal to the lowest price per
        share
        at which the Company has issued or sold its Common Stock after October 1,
        2008
        such adjustment to take effect as of the date of the issuance or sale of
        such
        Common Stock; provided, however, that no adjustment shall he made to the
        Conversion Price for (A) the issuance of Common Stock pursuant to the conversion
        or exercise of convertible or exercisable securities issued or outstanding
        on or
        prior to October 1, 2008 or the Notes, (B) the issuance of Common Stock or
        any
        other securities exercisable into shares of Common Stock pursuant to exercise
        of
        stock options granted or reserved under the Company’s employee stock options
        existing on October 1, 2008 or adopted thereafter, or (C) the issuance, after
        October 1, 2008, of Common Stock or any other securities exercisable into
        shares
        of Common Stock issued or granted to third-party consultants or employees
        of the
        Company and its subsidiaries under the Company’s employee stock options or
        pursuant to written contractual arrangements relating to the compensation
        for
        the services rendered to the Company or its subsidiaries by such consultants
        or
        employees, to the extent that all such shares or securities issued under
        subclauses (B) or (C) in this paragraph, in the aggregate, on a cumulative
        basis
        and without double counting, do not exceed five percent (5%) of the Common
        Stock
        of the Company issued and outstanding immediately prior to such
        issuance.

      

      (4) The
        Conversion Price, as so adjusted pursuant to Section 2.1(c)(iv), shall be
        readjusted in the same manner upon the happening of any successive event
        or
        events described herein in this Section 2.1(c)(iv). The number of shares
        of
        Common Stock that the Holder of this Note shall thereafter, on the conversion
        hereof as provided in Article II, or upon a payment of Interest as provided
        in
        Article I, be entitled to receive shall be adjusted to a number determined
        by
        multiplying the number of shares of Common Stock that would otherwise (but
        for
        the provisions of this Section 2.1(c)(iv)) be issuable on such conversion
        or
        payment of Interest (as applicable) by a fraction of which (x) the numerator
        is
        the Conversion Price that would otherwise (but for the provisions of this
        Section 2.1(c)(iv)) be in effect, and (y) the denominator is the Conversion
        Price in effect on the date of such conversion.

       

      
        
          
          

        

        
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      (5) The
        Company may make such increases in the Conversion Price, in addition to those
        required by Section
        2.1(c)(iv)
        as the
        Board of Directors considers to be advisable to avoid or diminish any income
        tax
        to holders of Common Stock or rights to purchase Common Stock resulting from
        any
        dividend or distribution of stock (or rights to acquire stock) or from any
        event
        treated as such for income tax purposes.

      

      (6) No
        adjustment in the Conversion Price shall be required unless such adjustment
        would require an increase or decrease of at least one percent (1%) in such
        rate;
        provided that any adjustments that by reason of Section
        2.1(c)(iv)
        are not
        required to be made shall be carried forward and taken into account in any
        subsequent adjustment. All calculations under this Article shall be made
        by the
        Company and shall be made to the nearest cent or to the nearest one-ten
        thousandth (1/10,000) of a share, as the case may be. No adjustment need
        be made
        for rights to purchase Common Stock pursuant to a Company plan for reinvestment
        of dividends or interest.

      

      (7) Whenever
        the Conversion Price is adjusted as herein provided, the Company shall follow
        the procedures for the issuance of a Certificate of Adjustments as set forth
        below in Section 2.1(c)(v).

       

      (8) For
        purposes of this Section, the number of shares of Common Stock at any time
        outstanding shall not include shares held in the treasury of the Company
        but
        shall include shares issuable in respect of scrip certificates issued in
        lieu of
        fractions of shares of Common Stock. The Company will not pay any dividend
        or
        make any distribution on shares of Common Stock held in the treasury of the
        Company.

      

      (v) Certificate
        as to Adjustments.
        In each
        case of any adjustment or readjustment in the shares of Common Stock (or
        Other
        Securities and Property) issuable on the conversion of this Note or issuable
        in
        payment of Interest, the Company at its expense will promptly cause its Chief
        Executive Officer or other appropriate designee to compute such adjustment
        or
        readjustment in accordance with the terms of the Note and prepare a certificate
        setting forth such adjustment or readjustment and showing in detail the facts
        upon which such adjustment or readjustment is based, including a statement
        of
        (A) the consideration received or receivable by the Company for any additional
        shares of Common Stock (or Other Securities and Property) issued or sold
        or
        deemed to have been issued or sold, (B) the number of shares of Common Stock
        (or
        Other Securities and Property) outstanding or deemed to be outstanding, and
        (C)
        the Conversion Price and the number of shares of Common Stock to be received
        upon conversion of this Note or upon a payment of Interest (as applicable),
        in
        effect immediately prior to such adjustment or readjustment and as adjusted
        or
        readjusted as provided in this Note. The Company will forthwith mail a copy
        of
        each such certificate to the Holder of this Note and the Company's transfer
        agent.

       

      
        
          
          

        

        
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      2.2 Method
        of Conversion.
        This
        Note may be converted by the Holder in whole or in part as described in Section
        2.1(a) hereof and the Subscription Agreement. Upon partial conversion of
        this
        Note, a new Note containing the same date and provisions of this Note shall,
        at
        the request of the Holder, be issued by the Company to the Holder for the
        remaining Principal balance of this Note and Interest which shall not have
        been
        paid.

      

      2.3 Conversion
        of Note.

      

      (a) Upon
        the
        conversion of this Note or part thereof, the Company shall, at its own cost
        and
        expense, take all necessary action, including obtaining and delivering an
        opinion of counsel, to assure that the Company's transfer agent shall issue
        stock certificates in the name of Holder (or its nominee) or such other persons
        as designated by Holder and in such denominations to be specified at conversion
        representing the number of shares of Common Stock issuable upon such conversion.
        The Company warrants that no instructions other than these instructions have
        been or will be given to the transfer agent of the Company's Common Stock
        and
        that, unless waived by the Holder, the shares of Common Stock will be
        free-trading, and freely transferable, and will not contain a legend restricting
        the resale or transferability of such shares provided the shares of Common
        Stock
        are being sold pursuant to an effective registration statement covering such
        shares or are otherwise exempt from registration.

      

      (b) Nothing
        contained herein or in any document referred to herein or delivered in
        connection herewith shall be deemed to establish or require the payment of
        a
        rate of interest or other charges in excess of the maximum permitted by
        applicable law.

      

      2.4 Reservation.
        During
        the period the conversion right exists, the Company will reserve from its
        authorized and unissued Common Stock a number of shares of Common Stock equal
        to
        100% of the amount of Common Stock issuable upon the full conversion of this
        Note and accrued Interest. The Company represents that upon issuance, such
        shares will be duly and validly issued, fully paid and non-assessable. The
        Company agrees that its issuance of this Note shall constitute full authority
        to
        its officers, agents, and transfer agents who are charged with the duty of
        executing and issuing stock certificates to execute and issue the necessary
        certificates for shares of Common Stock upon the conversion of this Note
        and
        accrued Interest.

       

      
        
          
          

        

        
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      ARTICLE
        III

      EVENTS
        OF DEFAULT

      

      The
        occurrence of any of the following events of default (an "Event
        of Default")
        shall,
        at the option of the Holder hereof, make all sums of Principal and Interest
        then
        remaining unpaid hereon and all other amounts payable hereunder immediately
        due
        and payable, upon demand, without presentment, or grace period, all of which
        hereby are expressly waived, except as set forth below:

       

      

      3.1 Failure
        to Pay Principal or Interest.
        

      

      (a) The
        Company fails to pay any installment of Principal or Interest or other sum
        due
        under this Note (other than Additional Interest) when due, whether at the
        Maturity Date or upon any Conversion Date.

      

      (b) The
        Company fails to pay any installment of Additional Interest under this Note
        when
        due, whether at the Maturity Date or upon any Conversion Date, and such failure
        is not cured by making such payment within five (5) days of the date it was
        due.

       

      3.2 Receiver
        or Trustee.
        The
        Company shall make an assignment for the benefit of creditors, or apply for
        or
        consent to the appointment of a receiver or trustee for it or for a substantial
        part of its property or business; or such a receiver or trustee shall otherwise
        be appointed.

      

      3.3 Bankruptcy.
        Bankruptcy, insolvency, reorganization or liquidation proceedings or other
        proceedings or relief under any bankruptcy law or any law, or the issuance
        of
        any notice in relation to such event, for the relief of debtors shall be
        instituted by or against the Company and if instituted against the Company
        are
        not dismissed within fifteen (15) days of initiation. If an Event of Default
        specified in this Section 3.3 occurs, the outstanding principal of this Note
        and
        the Interest and any Additional Interest accrued thereon shall be immediately
        and automatically due and payable without the necessity of further action.
        

      

      3.4 Delisting.
        Delisting of the Common Stock from the NYSE Archipelago Exchange ("ArcaEx")
        or
        such other principal exchange on which the Common Stock is listed for trading
        or
        quotation (“Principal
        Market”);
        or
        notification from the ArcaEx or any Principal Market that the Company is
        not in
        compliance with the conditions for such continued listing on the ArcaEx or
        other
        Principal Market.

      

      3.5 Failure
        to Deliver Common Stock or Replacement Note.
        The
        Company's failure to deliver Common Stock to the Holder pursuant to this
        Note
        and Section 2 of the Subscription Agreement, or, if required, a replacement
        Note.

      

      3.6 Reservation
        Default.
        Failure
        by the Company to have reserved for issuance upon conversion of the Note
        and
        accrued Interest the amount of Common Stock.

      

      3.7 Breach
        of Covenant.
        Failure
        on the part of the Company duly to observe or perform any other of the covenants
        or agreements in this Note (other than, in any such case, a covenant or
        agreement a default in whose performance or whose breach is elsewhere in
        this
        Article specifically dealt with) which failure continues for a period of
        thirty
        (30) days after the date on which the written notice of such failure, requiring
        the Company to remedy the same, shall have been given to the Company by the
        Holder.

      

      3.8 Default
        under Pledge Agreement.
        Default
        by the Company or any pledgor under the Share Pledge Agreement in any of
        its
        obligations thereunder which adversely affects the enforceability, validity,
        perfection or priority of the applicable lien on the collateral thereunder
        or
        which adversely affects the condition or value of the collateral, taken as
        a
        whole, in any material respect; the security interest under the Share Pledge
        Agreement shall, at any time, cease to be in full force and effect for any
        reason other than satisfaction in full of the Principal, Interest and any
        Additional Interest due under this Note; or the security interest created
        thereunder shall be declared invalid or unenforceable.

       

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

       

      3.9 Guarantee.
        Any
        guarantee of this Note ceases to be in full force and effect (other than
        in
        accordance with the terms of such guarantee) or any guarantor denies or
        disaffirms in writing its obligations under its guarantee.

      

      3.10 Cross-Default.
        (i)
        An
“Event of Default” under any of the 1% Guaranteed Senior Secured Convertible
        Notes due 2012 of the Company issued pursuant to Indentures between the Company
        and The Bank of New York Mellon (as Trustee) dated June 1, 2007 and June
        27,
        2007, respectively (the “Indentures”)
        in an
        aggregate principal amount of $80,000,000, or under either of the Indentures
        (as
        the term “Event of Default” is defined in either of the Indentures), (ii) a
        default under any other indebtedness of the Company or any of its subsidiaries
        that results in acceleration of the maturity of such indebtedness in an
        aggregate amount greater than $2.0 million or its foreign currency equivalent
        at
        the time, or (iii) failure of the Company or any of its subsidiaries to pay
        any
        indebtedness when due, in an aggregate amount greater than $2.0 million or
        its
        foreign currency equivalent at the time. 

      

      3.11 Judgments. Any
        final, non-appealable judgment or judgments for, the payment of money in
        the
        aggregate amount in excess of $2.0 million (or its foreign equivalent at
        the
        time) that shall be rendered against the Company or any of its subsidiaries.
        

       

      ARTICLE
        IV

      MISCELLANEOUS

      

      4.1 Failure
        or Indulgence Not Waiver.
        No
        failure or delay on the part of Holder hereof in the exercise of any power,
        right or privilege hereunder shall operate as a waiver thereof, nor shall
        any
        single or partial exercise of any such power, right or privilege preclude
        other
        or further exercise thereof or of any other right, power or privilege. All
        rights and remedies existing hereunder are cumulative to, and not exclusive
        of,
        any rights or remedies otherwise available.

      

      4.2 Notices.
        All
        notices, demands, requests, consents, approvals, and other communications
        required or permitted hereunder shall be in writing and, unless otherwise
        specified herein, shall be (i) personally served or hand delivered, (ii)
        deposited in the mail, registered or certified, return receipt requested,
        postage prepaid, (iii) delivered by express courier service with charges
        prepaid, or (iv) transmitted by facsimile, addressed as set forth below or
        to
        such other address as such party shall have specified most recently by written
        notice. Any notice or other communication required or permitted to be given
        hereunder shall be deemed effective (i) if personally served, when served,
        or
        upon hand delivery, (ii) if mailed, on the third business day after deposit
        in
        first class mail with postage prepaid and properly addressed, (iii) if by
        express courier service, when received, and (iv) if by facsimile, with accurate
        confirmation generated by the transmitting facsimile machine, at the address
        or
        number designated below, on the day transmitted (if delivered on a business
        day
        during normal business hours where such notice is to be received), or the
        first
        business day following such transmittal (if delivered other than on a business
        day during normal business hours where such notice is to be received). The
        addresses for such communications shall be: (i) if to the Company, to: American
        Dairy, Inc., Star City International Building, 10, Jiuxianqiuo Road,
        C-16th
        Floor,
        Chaoyang, Beijing, People's Republic of China, Attn: Jonathan Chou, Chief
        Financial Officer, facsimile number: 86 10 6435 4831, with a copy by facsimile
        only to: Mark L. Hanson, Esq., Jones Day, 1420 Peachtree Street, N.E., Suite
        800, Atlanta, Georgia 30309, facsimile number: (404) 581-8330, or to such
        other
        address as may be hereafter notified in accordance with this Section 4.2
        by the
        Company to the Holder; and (ii) if to the Holder, to the address and facsimile
        number indicated in the first paragraph of this Note, or to such other address
        as may be hereafter notified in accordance with this Section 4.2 by the Holder
        to the Company.

       

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

      

      4.3 Amendment
        Provision.
        The
        term "Note" and all reference thereto, as used throughout this instrument,
        shall
        mean this instrument as originally executed, or if later amended or
        supplemented, then as so amended or supplemented.

       

      4.4 Assignability.
        This
        Note shall be binding upon the Company and its successors and assigns, and
        shall
        inure to the benefit of the Holder and its successors and assigns.

      

      4.5 Cost
        of Collection.
        If
        default is made in the payment of this Note, the Company shall pay the Holder
        hereof reasonable costs of collection, including reasonable attorneys'
        fees.

      

      4.6 Governing
        Law.
        This
        Note shall be governed by and construed in accordance with the laws of the
        State
        of New York. Each party hereto: (a) submits for itself and its property in
        any
        legal action or proceeding relating to this Agreement, or for recognition
        and
        enforcement of any judgment in respect thereof, to the non-exclusive
        jurisdiction of the courts of the State of New York, in New York County,
        City of
        New York, the courts of the United States of America for the Southern District
        of New York, and appellate courts from any thereof; (b) consents that any
        such
        action or proceeding may be brought in such courts and waives any objection
        that
        it may now or hereafter have to the venue of any such action or proceeding
        in
        any such court and agrees not to plead or claim the same; and (c) agrees
        that
        nothing herein shall affect the right to effect service of process in any
        manner
        permitted by law or shall limit the right to sue in any other jurisdiction.
        The
        prevailing party shall be entitled to recover from the other party its
        reasonable attorney's fees and costs.

      

      4.7 Redemption.
        This
        Note may not be redeemed or prepaid without the consent of the Holder except
        as
        described in this Note or in the Subscription Agreement.

      

      4.8 Stockholder
        Status.
        The
        Holder shall not have rights as a stockholder of the Company with respect
        to
        unconverted portions of this Note. However, the Holder will have all the
        rights
        of a stockholder of the Company with respect to the shares of Common Stock
        to be
        received by Holder after delivery by the Holder of a Conversion Notice to
        the
        Company.

      

      4.9 Entire
        Agreement.
        This
        Note, the Subscription Agreement, the Registration Rights Agreement, the
        Share
        Pledge Agreement, the Guarantee and the Warrant (including all schedules
        and
        exhibits thereto) constitute the entire agreement among the parties hereto
        with
        respect to the subject matter hereof and thereof. There are no restrictions,
        promises, warranties or undertakings, other than those set forth or referred
        to
        herein and therein. 

       

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

       

      IN
        WITNESS
        WHEREOF, the Company has caused this Note to be signed in its name by an
        authorized officer as of the ______ day of November, 2008.

       

      
        	Witness: 	 AMERICAN DAIRY,
                INC.
	 	 	 	 
	 	 By:
                	 
	 	 	 Name:
	 
	 	 	 Title:THIS
        WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
        NOT
        BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS WARRANT
        AND
        THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD,
        OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
        REGISTRATION STATEMENT UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY
        SATISFACTORY TO AMERICAN DAIRY, INC. THAT SUCH REGISTRATION IS NOT
        REQUIRED.

       

      Right
        to
        Purchase [______] shares of Common Stock

      of
        American Dairy, Inc.

      (subject
        to adjustment as provided herein)

       

      AMENDED
        AND RESTATED

      COMMON
        STOCK PURCHASE WARRANT

       

      
        	
                No.

              	
                Issue
                  Date: November __, 2008

              

      

       

      AMERICAN
        DAIRY, INC., a corporation organized under the laws of the State of Utah
        (the
        "Company"),
        hereby certifies that [_______________], whose address is
        _________________________________________, or its assigns (the "Holder"),
        is
        entitled, subject to the terms set forth below, to purchase from the Company
        at
        any time after October 3, 2006 (the "Issue
        Date"),
        until
        5:00 p.m., E.S.T on October 3, 2012 (the "Expiration Date"), up to [_____]
        fully
        paid and non-assessable shares of common stock of the Company, par value
        $0.001
        per share (the "Common
        Stock"),
        at a
        per share price of $14.50. The aforedescribed price per share, as adjusted
        from
        time to time as herein provided, is referred to herein as the "Exercise
        Price."
        The
        number and character of such shares of Common Stock and the Exercise Price
        are
        subject to adjustment as provided herein. The Company may reduce the Exercise
        Price without the consent of the Holder. Capitalized terms used and not
        otherwise defined herein shall have the meanings set forth in that certain
        Subscription Agreement (the "Subscription
        Agreement"),
        dated
        of October 2, 2006, entered into by the Company and the original holders
        of the
        Warrants. 

       

      This
        Warrant amends and restates it is entirety that certain Warrant (the
“Existing
        Warrant”)
        between the parties dated October 2, 2006 (the “Closing
        Date”),
        it
        being the intention of the parties that all of the terms of the Existing
        Warrant, as amended hereby, are restated in and are replaced by the terms
        of
        this Warrant, but this Warrant shall not be deemed or construed to have been
        issued in payment, satisfaction, cancellation or novation of the Existing
        Warrant.

       

      As
        used
        herein the following terms, unless the context otherwise requires, have the
        following respective meanings:

       

      (a) The
        term
"Company"
        shall
        include American Dairy, Inc. and any corporation which shall succeed or assume
        the obligations of American Dairy, Inc. hereunder.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      (b) The
        term
        "Common
        Stock"
        includes (i) the Company's Common Stock, $0.001 par value per share, as
        authorized on the date of the Subscription Agreement, and (ii) any other
        securities into which or for which any of the securities described in (i)
        may be
        converted or exchanged pursuant to a plan of recapitalization, reorganization,
        merger, sale of assets or otherwise.

       

      (c) The
        term
        "Other
        Securities"
        refers
        to any stock (other than Common Stock) and other securities of the Company
        or
        any other person (corporate or otherwise) which the holder of the Warrant
        at any
        time shall be entitled to receive, or shall have received, on the exercise
        of
        the Warrant, in lieu of or in addition to Common Stock, or which at any time
        shall be issuable or shall have been issued in exchange for or in replacement
        of
        Common Stock or Other Securities pursuant to Section 2 or
        otherwise.

       

      1. Exercise
        of Warrant.

       

      1.1 Number
        of Shares Issuable upon Exercise.
        From
        and after the Issue Date through and including the Expiration Date, the Holder
        hereof shall be entitled to receive, upon exercise of this Warrant in whole
        in
        accordance with the terms of Sub-section 1.2 or upon exercise of this Warrant
        in
        part in accordance with Sub-section 1.3, the number of shares of Common Stock
        of
        the Company set forth in the first paragraph of this Warrant, subject to
        adjustment pursuant to Section 2. No fractional shares will be issued;
        therefore, in the event that the number of shares of Common Stock due hereunder
        is not a whole number, the Company shall round up to the nearest whole share
        the
        number of such shares due. 

       

      1.2 Full
        Exercise.
        This
        Warrant may be exercised in full by the Holder hereof by delivery of an original
        or facsimile copy of the form of subscription attached as Exhibit
        A hereto
        (the "Subscription
        Form")
        duly
        executed by such Holder and surrender of this Warrant to the Company at its
        principal office or at the office of its Warrant Agent (as provided
        hereinafter), accompanied by (subject to Sub-section 1.7) payment, in cash,
        wire
        transfer or by certified or official bank check payable to the order of the
        Company, in the amount obtained by multiplying the number of shares of Common
        Stock for which this Warrant is then exercisable by the Exercise Price then
        in
        effect.

       

      1.3 Partial
        Exercise.
        This
        Warrant may be exercised in part (but not for a fractional share) by surrender
        of this Warrant in the manner and at the place provided in Sub-section 1.2
        except that the amount payable by the Holder on such partial exercise shall
        be
        the amount obtained by multiplying (a) the number of whole shares of Common
        Stock designated by the Holder in the Subscription Form by (b) the Exercise
        Price then in effect. On any such partial exercise, the Company, at its expense,
        will forthwith issue and deliver to or upon the order of the Holder hereof
        a new
        Warrant of like tenor, in the name of the Holder hereof or as such Holder
        (upon
        payment by such Holder of any applicable transfer taxes) may request, the
        whole
        number of shares of Common Stock remaining for which such Warrant may still
        be
        exercised.

       

      1.4 Company
        Acknowledgment.
        The
        Company will, at the time of the exercise of the Warrant, upon the request
        of
        the Holder hereof, acknowledge in writing its continuing obligation to afford
        to
        such Holder any rights to which such Holder shall continue to be entitled
        after
        such exercise in accordance with the provisions of this Warrant. If the Holder
        shall fail to make any such request, such failure shall not affect the
        continuing obligation of the Company to afford to such Holder any such
        rights.

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

      1.5 Trustee
        for Warrant Holders.
        In the
        event that a bank or trust company shall have been appointed as trustee for
        the
        Holder of the Warrants pursuant to Sub-section 2.2, such bank or trust company
        shall have all the powers and duties of a warrant agent (as hereinafter
        described) and shall accept, in its own name for the account of the Company
        or
        such successor person as may be entitled thereto, all amounts otherwise payable
        to the Company or such successor, as the case may be, on exercise of this
        Warrant pursuant to this Section 1.

       

      1.6 Delivery
        of Stock Certificates, etc. on Exercise.
        The
        Company agrees that the shares of Common Stock purchased upon exercise of
        this
        Warrant shall be deemed to be issued to the Holder hereof as the record owner
        of
        such shares as of the close of business on the date on which this Warrant
        shall
        have been surrendered and payment made for such shares as provided for in
        Sub-sections 1.2, 1.3 or 1.7. As soon as practicable after the exercise of
        this
        Warrant in full or in part, the Company, at its expense (including the payment
        by it of any applicable issue taxes), will cause to be issued in the name
        of and
        delivered to the Holder hereof, or as such Holder (upon payment by such Holder
        of any applicable transfer taxes) may direct in compliance with applicable
        securities laws, a certificate or certificates for the number of duly and
        validly issued, fully paid and non-assessable shares of Common Stock (or
        Other
        Securities or property) to which such Holder shall be entitled on such
        exercise.

       

      1.7  Cashless
        Exercise.
        

      

      (a) Notwithstanding
        anything to the contrary in this Section 1, in lieu of making the payments
        specified in accordance with Sub-sections 1.2
        and
        1.3 of this Warrant, the Holder may elect, in the Subscription Form, to exercise
        without paying in cash (“Cashless
        Exercise”)
        all or
        part of this Warrant and to receive, a number of shares of Common Stock equal
        to
        the number of shares of Common Stock that the Holder would receive had the
        Holder paid the aggregate Exercise Price reduced by that number of shares
        of
        Common Stock equal to the quotient obtained by dividing (x) the aggregate
        Exercise Price (assuming no Cashless Exercise) to be paid by (y) the Current
        Market Price in effect on such day of election of Cashless Exercise under
        this
        Section 1.7 for one share of Common Stock.

      

      (b) For
        purposes of this Section 1.7, the following terms shall have the meaning
        indicated:

       

      (i) “Current
        Market Price”
shall
        mean the average of the daily Closing Sale Prices per share of Common Stock
        for
        the ten (10) consecutive Trading Days ending on the earlier of the Trading
        Day
        immediately preceding the relevant date and the day before the “ex” date. For
        purpose of this paragraph, the term “ex” date, (1) when used with respect to any
        issuance or distribution, means the first date on which the Common Stock
        trades,
        regular way, on the relevant exchange or in the relevant market from which
        the
        Closing Sale Price was obtained without the right to receive such issuance
        or
        distribution, and (2) when used with respect to any subdivision or combination
        of shares of Common Stock, means the first date on which the Common Stock
        trades, regular way, on such
        exchange or in such market after the time at which such subdivision or
        combination becomes effective. If another issuance, distribution, subdivision
        or
        combination to which this Sub-section applies occurs during the period
        applicable for calculating “Current Market Price”, “Current Market Price” shall
        be calculated for such period in a manner determined by the Board of Directors
        to reflect the impact of such issuance, distribution, subdivision or combination
        on the Closing Sale Price of the Common Stock during such period.

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

       

      (ii) “Closing
        Sale Price”
of
        the
        shares of Common Stock on any date means (i) if the Common Stock is primarily
        traded on a national securities exchange, the last sale price on such national
        securities exchange on the applicable day, or if no sale occurred on such
        day,
        the mean between the closing “bid” and “asked” prices on such day, (ii) if the
        principal market for Common Stock is in the over-the-counter market, the
        closing
        sale price on the applicable day as published by The NASDAQ Stock Market,
        Inc.
        or similar organization, or if such price is not so published on such day,
        the
        mean between the closing “bid” and “asked” priced, if available on such day,
        which prices may be obtained from any reputable pricing service, broker or
        dealer, and (ii) if neither clause (i) nor clause (ii) is applicable, the
        fair
        market value as determined in good faith by the Board of Directors of the
        Company. The Closing Sale Price shall be determined based on regular market
        hours without reference to extended after hours trading or pre-market
        trading.

       

      (iii) “Trading
        Day”
shall
        mean (x) if the applicable security is quoted on NYSE Euronext or another
        national securities exchange, a day on which NYSE Euronext, or other applicable
        national securities exchange is open for business, or (y) if the applicable
        security is not so listed, admitted for trading or quoted, any day other
        than a
        Saturday or Sunday or a day in which banking institutions in the State of
        New
        York are authorized or obligated by law or executive order to
        close.

       

      2. Adjustment
        for Reorganization, Consolidation, Merger, etc.

       

      2.1 Reorganization,
        Consolidation, Merger, etc.
        In case
        at any time or from time to time, the Company shall (a) effect a reorganization,
        (b) consolidate with or merge into any other person or (c) transfer all or
        substantially all of its properties or assets to any other person under any
        plan
        or arrangement contemplating the dissolution of the Company, then, in each
        such
        case, as a condition to the consummation of such a transaction, notice shall
        be
        provided to the Holder of this Warrant as set forth in this Section 2.1 and
        proper and adequate provision shall be made by the Company whereby the Holder
        of
        this Warrant, on the exercise hereof as provided in Section 1, at any time
        after
        the consummation of such reorganization, consolidation or merger or the
        effective date of such dissolution, as the case may be, shall receive, in
        lieu
        of the Common Stock (or Other Securities) issuable on such exercise prior
        to
        such consummation or such effective date, the stock and Other Securities
        and
        property (including cash) to which such Holder would have been entitled upon
        such consummation or in connection with such dissolution, as the case may
        be, if
        such Holder had so exercised this Warrant, immediately prior thereto, all
        subject to further adjustment thereafter as provided in this Section 2. In
        each
        case of (a), (b) or (c) in this Section 2.1, the Company shall provide written
        notice to the Holder in accordance with Section 9 hereof at the earliest
        practicable time (in any event, not less than fifteen (15) days before any
        record date or other date set for definitive action) of the date on which
        the
        books of the Company will close or a record will be taken for determining
        holders of Common Stock entitled to participate in any such reorganization,
        consolidation, merger, sale or dissolution, as the case may be.

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

      

      2.2 Dissolution.
        In the
        event of any dissolution of the Company following the transfer of all or
        substantially all of its properties or assets, the Company, prior to such
        dissolution, shall at its expense deliver or cause to be delivered the stock
        and
        Other Securities and property (including cash, where applicable) receivable
        by
        the Holder of this Warrant upon exercise of this Warrant after the effective
        date of such dissolution pursuant to this Section 2, to a bank or trust company
        (a "Trustee")
        having
        its principal office in New York, NY, as trustee for the Holder of the
        Warrants.

       

      2.3 Continuation
        of Terms.
        Upon
        any reorganization, consolidation, merger or transfer (and any dissolution
        following any transfer) referred to in this Section 2, this Warrant shall
        continue in full force and effect and the terms hereof shall be applicable
        to
        the Other Securities and property receivable on the exercise of this Warrant
        after the consummation of such reorganization, consolidation or merger or
        the
        effective date of dissolution following any such transfer, as the case may
        be,
        and shall be binding upon the issuer of any Other Securities, including,
        in the
        case of any such transfer, the person acquiring all or substantially all
        of the
        properties or assets of the Company, whether or not such person shall have
        expressly assumed the terms of this Warrant as provided in this Section 2.
        In
        the event this Warrant does not continue in full force and effect after the
        consummation of the transaction described in this Section 2, then only in
        such
        event will the Company's securities and property (including cash, where
        applicable) receivable by the Holder of the Warrants be delivered to the
        Trustee
        as contemplated by Sub-section 2.2.

       

      2.4 Extraordinary
        Events Regarding Common Stock.
        (a) In
        the event that the Company shall (i) issue additional shares of the Common
        Stock
        as a dividend or other distribution on outstanding Common Stock, (ii) subdivide
        its outstanding shares of Common Stock, or (iii) combine its outstanding
        shares
        of the Common Stock into a smaller number of shares of the Common Stock,
        then,
        in each such event, the Exercise Price shall, simultaneously with the happening
        of such event, be adjusted by multiplying the then Exercise Price by a fraction,
        the numerator of which shall be the number of shares of Common Stock outstanding
        immediately prior to such event and the denominator of which shall be the
        number
        of shares of Common Stock outstanding immediately after such event, and the
        product so obtained shall thereafter be the Exercise Price then in effect.
        The
        Exercise Price, as so adjusted, shall be readjusted in the same manner upon
        the
        happening of any successive event or events described herein in this Sub-section
        2.4. 

       

      (b) In
        case
        the Company shall issue rights or warrants to all holders of its outstanding
        shares of Common Stock entitling them (for a period expiring within forty-five
        (45) days after the date fixed for determination of shareholders entitled
        to
        receive such rights or warrants) to subscribe for or purchase shares of Common
        Stock at a price per share less than the Exercise Price immediately preceding
        the date such distribution is first publicly announced by the Company, the
        Exercise Price shall be adjusted so that the same shall equal the rate
        determined by multiplying the Exercise Price in effect immediately prior
        to the
        date fixed for determination of shareholders entitled to receive such rights
        or
        warrants by a fraction,

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

       

      (i) the
        numerator of which shall be the sum of the number of shares of Common Stock
        outstanding at the close of business on the date fixed for determination
        of
        shareholders entitled to receive such rights or warrants plus the number
        of
        shares that the aggregate offering price of the total number of shares so
        offered would purchase at a price equal to the Exercise Price immediately
        preceding the date such distribution is first publicly announced by the Company,
        and

       

      (ii) the
        denominator of which shall be the number of shares of Common Stock outstanding
        on the date fixed for determination of shareholders entitled to receive such
        rights or warrants plus the total number of additional shares of Common Stock
        offered for subscription or purchase,

       

      such
        adjustment shall be successively made whenever any such rights or warrants
        are
        issued, and shall become effective immediately after the opening of business
        on
        the day following the date fixed for determination of shareholders entitled
        to
        receive such rights or warrants. If such rights or warrants are not so issued,
        the Exercise Price shall again be adjusted to be the Exercise Price that
        would
        then be in effect if such date fixed for the determination of shareholders
        entitled to receive such rights or warrants had not been fixed. In determining
        whether any rights or warrants entitle the holders to subscribe for or purchase
        shares of Common Stock at a price less than the Exercise Price immediately
        preceding the date such distribution is first publicly announced by the Company,
        and in determining the aggregate offering price of such shares of Common
        Stock,
        there shall be taken into account any consideration received by the Company
        for
        such rights or warrants and any amount payable on exercise or conversion
        thereof, the value of such consideration, if other than cash, to be determined
        by the Board of Directors of the Company.

       

      Rights
        or
        warrants distributed by the Company to all holders of Common Stock entitling
        the
        holders thereof to subscribe for or purchase shares of the Company’s capital
        stock (either initially or under certain circumstances), which rights or
        warrants, until the occurrence of a specified event or events (“Trigger
        Event”):
        (i)
        are deemed to be transferred with such shares of Common Stock; (ii) are not
        exercisable; and (iii) are also issued in respect of future issuances of
        Common
        Stock, shall be deemed not to have been distributed for purposes of this
        Sub-section (and no adjustment to the Exercise Price under this Sub-section
        will
        be required) until the occurrence of the earliest Trigger Event, whereupon
        such
        rights and warrants shall be deemed to have been distributed and an appropriate
        adjustment (if any is required) to the Exercise Price shall be made under
        this
        Sub-section 2.4(b). If any such rights or warrants, including any such existing
        rights or warrants distributed prior to the date of this Warrant, are subject
        to
        events, upon the occurrence of which such rights or warrants become exercisable
        to purchase different securities, evidences of indebtedness or other assets,
        then the date of the occurrence of any and each such event shall be deemed
        to be
        the date of distribution and record date with respect to new rights or warrants
        with such rights (and a termination or expiration of the existing rights
        or
        warrants without exercise by any of the holders thereof). In addition, in
        the
        event of any distribution (or deemed distribution) of rights or warrants,
        or any
        Trigger Event or other event (of the type described in the preceding sentence)
        with respect thereto that was counted for purposes of calculating a distribution
        amount for which an adjustment to the Exercise Price under this Sub-section
        was
        made, (1) in the case of any such rights or warrants that shall all have
        been
        redeemed or repurchased without exercise by any holders thereof, the Exercise
        Price shall be readjusted upon such final redemption or repurchase to give
        effect to such distribution or Trigger Event, as the case may be, as though
        it
        were a cash distribution, equal to the per share redemption or repurchase
        price
        received by a holder or holders of Common Stock with respect to such rights
        or
        warrants (assuming such holder had retained such rights or warrants), made
        to
        all holders of Common Stock as of the date of such redemption or repurchase,
        and
        (2) in the case of such rights or warrants that shall have expired or been
        terminated without exercise by any holders thereof, the Exercise Price shall
        be
        readjusted as if such rights and warrants had not been issued.

       

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

       

      No
        adjustment of the Exercise Price shall be made pursuant to this Sub-section
        2.4(b) in respect of rights or warrants distributed or deemed distributed
        on any
        Trigger Event to the extent that such rights or warrants are actually
        distributed, or reserved by the Company for distribution to holders of the
        Company’s 7.75% Convertible Notes (the “Notes”)
        upon
        conversion by such holders of Notes to Common Stock.

       

      (c)
        If
        the
        Company shall issue or sell its Common Stock at a price per share less than
        the
        Exercise Price then in effect, or shall issue or sell any securities
        convertible, exchangeable, or exercisable into Common Stock at a price per
        share
        less than the Exercise Price then
        in
        effect, the Exercise Price shall be decreased such that the Exercise Price
        is
        equal to the lowest price or per share at which the Company has issued or
        sold
        its Common Stock after October 1, 2008 such adjustment to take effect as
        of the
        date of the issuance or sale of such Common Stock; provided, however, that
        no
        adjustment shall he made to the Exercise Price for (i) the issuance of Common
        Stock pursuant to the conversion or exercise of convertible or exercisable
        securities issued or outstanding on or prior to October 1, 2008 or the Notes,
        (ii) the issuance of Common Stock or any other securities exercisable into
        shares of Common Stock pursuant to exercise of stock options granted or reserved
        under the Company’s employee stock options existing on October 1, 2008 or
        adopted thereafter, or (iii) the issuance, after October 1, 2008, of Common
        Stock or any other securities exercisable into shares of Common Stock issued
        or
        granted to third-party consultants or employees of the Company and its
        subsidiaries under the Company’s employee stock options or pursuant to written
        contractual arrangements relating to the compensation for the services rendered
        to the Company or its subsidiaries by such consultants or employees, to the
        extent that all such shares or securities issued under subclauses (ii) or
        (iii)
        in this paragraph, in the aggregate, on a cumulative basis and without double
        counting, do not exceed five percent (5%) of the Common Stock of the Company
        issued and outstanding immediately prior to such issuance.

       

      (d) The
        Company may make such increases in the Exercise Price, in addition to those
        required by Sub-section 2.4 as the Board of Directors considers to be advisable
        to avoid or diminish any income tax to holders of Common Stock or rights
        to
        purchase Common Stock resulting from any dividend or distribution of stock
        (or
        rights to acquire stock) or from any event treated as such for income tax
        purposes.

      

      (e)
        The
        Exercise Price, as so adjusted pursuant to Sub-section 2.4, shall be readjusted
        in the same manner upon the happening of any successive event or events
        described herein in this Sub-section 2.4. The number of shares of Common
        Stock
        that the Holder of this Warrant shall thereafter, on the exercise hereof
        as
        provided in Section 1, be entitled to receive shall be adjusted to a number
        determined by multiplying the number of shares of Common Stock that would
        otherwise (but for the provisions of this Sub-section 2.4) be issuable on
        such
        exercise by a fraction of which (a) the numerator is the Exercise Price that
        would otherwise (but for the provisions of this Sub-section 2.4) be in effect,
        and (b) the denominator is the Exercise Price in effect on the date of such
        exercise.

       

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

       

      (f) No
        adjustment in the Exercise Price shall be required unless such adjustment
        would
        require an increase or decrease of at least one percent (1%) in such rate;
        provided that any adjustments that by reason of this Sub-section 2.4 are
        not
        required to be made shall be carried forward and taken into account in any
        subsequent adjustment. All calculations under this Sub-section 2.4 shall
        be made
        by the Company and shall be made to the nearest cent or to the nearest one-ten
        thousandth (1/10,000) of a share, as the case may be. No adjustment need
        be made
        for rights to purchase Common Stock pursuant to a Company plan for reinvestment
        of dividends or interest.

       

      (g) Whenever
        the Exercise Price is adjusted as herein provided, the Company shall follow
        the
        procedures for the issuance of a Certificate of Adjustments as set forth
        below
        in Sub-section 2.5. 

       

      (h) For
        purposes of this Section, the number of shares of Common Stock at any time
        outstanding shall not include shares held in the treasury of the Company
        but
        shall include shares issuable in respect of scrip certificates issued in
        lieu of
        fractions of shares of Common Stock. The Company will not pay any dividend
        or
        make any distribution on shares of Common Stock held in the treasury of the
        Company.

       

      2.5 Certificate
        as to Adjustments.
        In each
        case of any adjustment or readjustment in the shares of Common Stock (or
        Other
        Securities) issuable on the exercise of the Warrants, the Company at its
        expense
        will promptly cause its Chief Executive Officer or other appropriate designee
        to
        compute such adjustment or readjustment in accordance with the terms of the
        Warrant and prepare a certificate setting forth such adjustment or readjustment
        and showing in detail the facts upon which such adjustment or readjustment
        is
        based, including a statement of (a) the consideration received or receivable
        by
        the Company for any additional shares of Common Stock (or Other Securities)
        issued or sold or deemed to have been issued or sold, (b) the number of shares
        of Common Stock (or Other Securities) outstanding or deemed to be outstanding,
        and (c) the Exercise Price and the number of shares of Common Stock to be
        received upon exercise of this Warrant, in effect immediately prior to such
        adjustment or readjustment and as adjusted or readjusted as provided in this
        Warrant. The Company will forthwith mail a copy of each such certificate
        to the
        Holder of the Warrant and any Warrant Agent of the Company (appointed pursuant
        to Section 8 hereof).

       

      3. Reservation
        of Stock, etc. Issuable on Exercise of Warrant; Financial
        Statements.
        The
        Company will at all times reserve and keep available, solely for issuance
        and
        delivery on the exercise of the Warrants, all shares of Common Stock (or
        Other
        Securities) from time to time issuable on the exercise of the Warrant. This
        Warrant entitles the Holder hereof to receive copies of all financial and
        other
        information distributed or required to be distributed to the holders of the
        Company's Common Stock.

       

      4. Assignment;
        Exchange of Warrant.
        Subject
        to compliance with applicable securities laws, this Warrant, and the rights
        evidenced hereby, may be transferred by any registered holder hereof (a
        "Transferor").
        On
        the surrender for exchange of this Warrant, with the Transferor's endorsement
        in
        the form of Exhibit
        B
        attached
        hereto (the "Transferor
        Endorsement Form"),
        the
        Company at its expense, but with payment by the Transferor of any applicable
        transfer taxes, will issue and deliver to or on the order of the Transferor
        thereof a new Warrant or Warrants of like tenor, in the name of the Transferor
        and/or the transferee(s) specified in such Transferor Endorsement Form (each
        a
        "Transferee"),
        calling in the aggregate on the face or faces thereof for the number of shares
        of Common Stock called for on the face or faces of the Warrant so surrendered
        by
        the Transferor. No such transfers shall result in a public distribution of
        the
        Warrant.

       

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

       

      5. Replacement
        of Warrant.
        On
        receipt of evidence reasonably satisfactory to the Company of the loss, theft,
        destruction or mutilation of this Warrant and, in the case of any such loss,
        theft or destruction of this Warrant, on delivery of an indemnity agreement
        or
        security reasonably satisfactory in form and amount to the Company or, in
        the
        case of any such mutilation, on surrender and cancellation of this Warrant,
        the
        Company at its expense, will execute and deliver, in lieu thereof, a new
        Warrant
        of like tenor.

       

      6. Registration
        Rights.
        The
        Holder of this Warrant has been granted certain registration rights by the
        Company. These registration rights are set forth in the Subscription Agreement
        and the Registration Rights Agreement. The terms of the Subscription Agreement
        and the Registration Rights Agreement are incorporated herein by this
        reference.

       

      7. Warrant
        Agent.
        The
        Company may, by written notice to the Holder of the Warrant, appoint an agent
        (a
“Warrant
        Agent”)
        for
        the purpose of issuing Common Stock (or other Securities) on the exercise
        of
        this Warrant pursuant to Section 1, exchanging this Warrant pursuant to Section
        4, and replacing this Warrant pursuant to Section 5, or any of the foregoing,
        and thereafter any such issuance, exchange or replacement, as the case may
        be,
        shall be made at such office by such Warrant Agent.

       

      8. Transfer
        on the Company's Books.
        Until
        this Warrant is transferred on the books of the Company, the Company may
        treat
        the registered holder hereof as the absolute owner hereof for all purposes,
        notwithstanding any notice to the contrary.

       

      9. Notices.
        All
        notices, demands, requests, consents, approvals, and other communications
        required or permitted hereunder shall be in writing and, unless otherwise
        specified herein, shall be (i) personally served or hand delivered, (ii)
        deposited in the mail, registered or certified, return receipt requested,
        postage prepaid, (iii) delivered by express courier service with charges
        prepaid, or (iv) transmitted by facsimile, addressed as set forth below or
        to
        such other address as such party shall have specified most recently by written
        notice. Any notice or other communication required or permitted to be given
        hereunder shall be deemed effective (i) if personally served, when served,
        or
        upon hand delivery, (ii) if mailed, on the third business day after deposit
        in
        first class mail with postage prepaid and properly addressed, (iii) if by
        express courier service, when received, and (iv) if by facsimile, with accurate
        confirmation generated by the transmitting facsimile machine, at the address
        or
        number designated below, on the day transmitted (if delivered on a business
        day
        during normal business hours where such notice is to be received), or the
        first
        business day following such transmittal (if delivered other than on a business
        day during normal business hours where such notice is to be received). The
        addresses for such communications shall be: (i) if to the Company, to: American
        Dairy, Inc., Star City International Building, 10, Jiuxianqiuo Road,
        C-16th
        Floor,
        Chaoyang, Beijing, People's Republic of China, Attn: Jonathan Chou, Chief
        Financial Officer, facsimile number: 86 10 6435 4831, with a copy by facsimile
        only to: Mark L. Hanson, Esq., Jones Day, 1420 Peachtree Street, N.E., Suite
        800, Atlanta, Georgia 30309, facsimile number: (404) 581-8330, or to such
        other
        address as may be hereafter notified in accordance with this Section 9 by
        the
        Company to the Holder; and (ii) if to the Holder, to the address and facsimile
        number indicated
        in the first paragraph of this Warrant, or to such other address as may be
        hereafter notified in accordance with this Section 9 by the Holder to the
        Company.

       

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

      

      10. Miscellaneous.
        This
        Warrant and any term hereof may be changed, waived, discharged or terminated
        only by an instrument in writing signed by the party against which enforcement
        of such change, waiver, discharge or termination is sought. This Warrant
        shall
        be construed and enforced in accordance with and governed by the laws of
        New
        York. Each party hereto: (a) submits for itself and its property in any legal
        action or proceeding relating to this Agreement, or for recognition and
        enforcement of any judgment in respect thereof, to the non-exclusive
        jurisdiction of the courts of the State of New York in New York County, City
        of
        New York, the courts of the United States of America for the Southern District
        of New York, and appellate courts from any thereof; (b) consents that any
        such
        action or proceeding may be brought in such courts and waives any objection
        that
        it may now or hereafter have to the venue of any such action or proceeding
        in
        any such court and agrees not to plead or claim the same; and (c) agrees
        that
        nothing herein shall affect the right to effect service of process in any
        manner
        permitted by law or shall limit the right to sue in any other jurisdiction.
        The
        headings in this Warrant are for purposes of reference only, and shall not
        limit
        or otherwise affect any of the terms hereof. The invalidity or unenforceability
        of any provision hereof shall in no way affect the validity or enforceability
        of
        any other provision. 

       

      

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          10

          
            

          

        

        
          
          

        

      

       

      IN
        WITNESS WHEREOF, the Company has executed this Warrant as of the date first
        written above.

       

      
        	 Witness: 	 	AMERICAN DAIRY,
                INC.
	 	 	 	 	 
	 	 	By:  	 
	 	 	 	 Name:
	 
	 	 	 	 Title:
	 
	 	 	 	 	 

      

       

      
        
          
          

        

        
          11

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