Document:

Unassociated Document

    Form
      of 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 and Restated Notes Purchase Agreement

            

    

     

    
      	
              Date:

            	
              June
                27, 2007

            

    

    

    

    THIS
      UNDERTAKING is made as of the date above written by entities identified as
      Acceding Parties in the signature pages hereto (the “Acceding
      Parties”)
      in
      relation to that certain Amended and Restated Notes Purchase Agreement, (the
      “Amended
      Purchase Agreement”),
      dated
      May 31, 2007 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 Acceding Parties being accepted as parties to the Amended
      Purchase Agreement, in connection with the issuance and sale of the Other Notes
      (as such term is defined in the Amended Purchase Agreement), each of the
      Acceding Parties hereby agrees with the parties to the Amended Purchase
      Agreement that such Acceding Party 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).

     

    Each
      Acceding Party hereby represents, acknowledges and agrees, severally and not
      jointly, that:

     

    1. It
      is an
      AI (as such term is defined in the Amended Purchase Agreement), 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.

     

    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.

     

    
      	 	 	 
	 	
              ACCEDING
                PARTIES:

            
	 	 
	 	[Name
              of the Other Investor]
	 
 	 
 	 
 
	
            	By:  	 
	 	
              

              Name:

              Title:

            
	 	 

    

     

    
      	 	 	 
	 	
              [Name
                of the Other Investor]

            
	 
 	 
 	 
 
	
            	By:  	 
	 	
              

              Name:

              Title:

            
	 	 

    

     

    
      	 	 	 
	 	
              [Name
                of the Other Investor]

            
	 
 	 
 	 
 
	
            	By:  	
            
	 	
              

              Name:

              Title:NON-COMPETITION
      AGREEMENT

     

    THIS
      NON-COMPETITION AGREEMENT (this “Agreement”)
      is
      made and entered into as of June 1, 2007, by and among Mr. Leng You-Bin, an
      individual residing in the People’s Republic of China (“PRC”)
      (the
“Executive”),
      and
      American Dairy, Inc., a Utah corporation (the “Company”).

     

    RECITALS

     

    WHEREAS,
      the Executive serves as the Chief Executive Officer, President and the Chairman
      of the Board of Directors of the
      Company;

     

    WHEREAS,
      the Executive is a shareholder of the Company, directly owning 8,881,135
      shares
      of
      common stock of the Company as of the date hereof;

     

    WHEREAS,
      pursuant to an amended and restated notes purchase agreement dated as of June
      1,
      2007 between the Company, the Executive, Citadel Equity Fund Ltd. (the
“Purchaser”)
      and
      the other parties thereto, and other related documents pertaining thereto,
      the
      Company shall issue and sell to the Purchaser, and the Purchaser shall purchase,
      up to US$80,000,000 guaranteed senior secured convertible notes due 2012 of
      the
      Company to be issued pursuant to that certain Indenture dated as of the date
      hereof by and among the Company, The Bank of New York, as trustee, and the
      other
      parties thereto (the “Notes”
and
      together with the other documents referred to in this paragraph and this
      Agreement, the “Transaction
      Documents”);
      and

     

    WHEREAS,
      it
      is a condition to the closing of the issuance and sale of the Notes under the
      Notes Purchase Agreement that the parties hereto shall have executed this
      Agreement.

     

    AGREEMENT

     

    NOW,
      THEREFORE, in consideration of the mutual agreements contained herein, and
      for
      other good and valuable consideration, the receipt and sufficiency of which
      is
      hereby acknowledged, the parties hereto, intending to be legally bound, hereby
      agree as follows:

     

    Section
      1.  Definitions. Capitalized
      terms used in this Agreement shall have the meanings set forth
      below.

     

    1.1  Affiliate”
shall
      refer to: (1) any Person directly or indirectly controlling, controlled by
      or
      under common control with another Person, (2) any Person owning or controlling
      50% or more of the outstanding voting securities of such other Person, (3)
      any
      officer, director or partner of such Person, or (4)
      a
      trust for the benefit of such Person referred to in the foregoing clause (2)
      of
      this definition

     

    1.2  “Business”
shall
      mean the business of processing, manufacturing, marketing and/or distributing
      of
      soybean powder, walnut powder, rice cereal, milk powder, and other dairy and
      related food products in the PRC or any other country, including any other
      activities related thereto.

     

    1.3  “Company
      Affiliate”
shall
      mean any entity engaged in the Business which is controlled by or under common
      control with the Company or the Executive. 

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    1.4  “Competitive
      Business”
shall
      mean any business that (1) currently competes with or is reasonably likely
      to
      compete with the Business in the future or (2) is engaged in an undertaking
      or
      enterprise which is substantially similar to the Business (whether in the United
      States, the PRC or any other country).

     

    1.5  “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.

     

    1.6  “Trade
      Secret”
shall
      mean any information, including, but not limited to, technical or nontechnical
      data, formulas, patterns, compilations, programs, devices, methods, techniques,
      drawings, processes, financial data, financial plans, product plans, actual
      or
      future services, or lists of actual or potential customers or suppliers that
      (1)
      derive economic value, actual or potential, from not being generally known
      to,
      and not being readily ascertainable by proper means by, other persons who can
      obtain economic value from their disclosure or use, and (2) are the subject
      of
      efforts that are reasonable under the circumstances to maintain their
      secrecy.

     

    1.7  “Work
      Product”
shall
      mean all intellectual property rights, including all Trade Secrets, United
      States, PRC and international copyrights, patentable inventions, discoveries
      and
      improvements, and other intellectual property rights, in any documentation,
      programming, technology, or other work that relates to the business and
      interests of the Company and that was or is conceived or developed by the
      Executive, or delivered by the Executive to the Company at any time during
      the
      term of the Executive’s employment with the Company.

     

    Section
      2.  Covenants.

     

    2.1  Noncompetition
      and Nonsolicitation.
      During
      the Term (as defined in Section 2.4), the Executive hereby agrees that the
      Executive will not, directly or indirectly, engage in, or have any interest
      in,
      any person, firm, corporation, undertaking or business (whether as an executive,
      officer, director, employee, agent, security holder, consultant, investor or
      similar position) that engages in a Competitive Business. In addition, during
      the Term, the Executive agrees that he will not: 

     

    (a)
       either
      on
      the Executive’s own behalf or on behalf of any other person, solicit Competitive
      Business from any customer, supplier, distributor of, or a person in a similar
      commercial relationship with, the Company or the Company
      Affiliates;

     

    (b)
       either
      on
      the Executive’s own behalf or on behalf of any other person, solicit, employ or
      otherwise engage as an employee, independent contractor, or otherwise any person
      who is and was, at any time during one year prior to such solicitation,
      employment or engagement, an employee of the Company or any Company Affiliate,
      or in any manner induce any employee of the Company or any Company Affiliate
      to
      terminate his or her employment therewith (except, in each case, as a result
      of
      general solicitations for employment not directed specifically at employees
      of
      the Company or any Company Affiliate); or

     

    (c)
       otherwise
      materially and adversely interfere with the Business of the Company or any
      Company Affiliate.

     

    Notwithstanding
      the foregoing paragraphs of this Section 2.1: 

     

    (i)
       the
      Executive may own, as an investor, holdings as part of a portfolio investment
      through mutual funds or other funds pooling investments in different
      corporations (the stock of which is publicly traded) some of which may be
      engaging in a Competitive Business, in each case when any and all the investment
      and voting decisions with respect to such voting stock are made by an
      unaffiliated third party fund manager; and

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (ii) the
      Executive may serve as a shareholder, director, employee or officer of any
      entity that is not engaged in a Competitive Business.

     

    2.2  Continued
      Employment.
      The
      Executive agrees that during the Term, (a) except in the event of termination
      of
      the Executive’s employment with the Company for reasons other than voluntary
      resignation by the Executive, the Executive shall continue to serve as the
      Chief
      Executive Officer, President and the Chairman of the Board of Directors of
      the
      Company; and (b) the Executive shall not voluntarily resign as a director of
      the
      Company.

     

    2.3  Confidentiality
      and Other Covenants.
      The
      Executive agrees that: 

     

    (a)
       the
      Executive shall keep confidential any information, including Trade Secrets,
      relating to the Company, any Company Affiliate and the Business (unless such
      disclosure is permitted in writing by the Company, required under law or by
      order of any governmental or regulatory authority, or relates to information
      already in the public domain, or is rightfully obtained from a third party
      without breach of any confidentiality obligation); 

     

    (b)
       all
      Work
      Product of the Executive conceived (whether solely or jointly with others)
      within the scope of the Executive’s employment with the Company belongs to the
      Company and any and all of the Executive’s rights to such Work Product, to the
      extent not yet assigned, are hereby assigned to the Company; 

     

    (c) upon
      the
      termination of the Executive’s employment with the Company, at the request of
      the Company, the Executive shall return to the Company all of the Company’s
      proprietary items in the Executive’s possession or under the Executive’s control
      and shall not retain any copies or other physical embodiment of any of such
      items; and 

     

    (d)
       upon
      the
      termination of the Executive’s employment with the Company, the Executive shall
      not hold the Executive out as an employee, agent or representative of the
      Company. 

     

    2.4  Term.
      The
      parties agree that the term of this Agreement (the “Term”)
      shall
      be from the date hereof until June 1, 2012.

     

    2.5  Specific
      Enforcement.
      Upon a
      breach by the Executive of Section 2.1, 2.2 or 2.3, in addition to such
      damages as the Company may demonstrate they have sustained, directly or
      indirectly, by reason of said breach, the Company shall be entitled to
      injunctive relief against the Executive if such relief is applicable and
      available, as a remedy at law would be inadequate and insufficient. Nothing
      in
      this Agreement shall be construed as limiting the Company’s remedies or rights
      in any way.

     

    Section
      3.  Miscellaneous.

     

    3.1  Severability.  In
      the event that a court of competent jurisdiction concludes that the scope of
      the
      covenants contained herein is unenforceable, the parties agree to be bound
      by
      those restrictions which the court determines in fact to be enforceable under
      the circumstances. Any other provision hereof prohibited by, or unlawful or
      unenforceable under, any applicable law of any jurisdiction shall as to such
      jurisdiction and to such extent be ineffective, without affecting any other
      provision of this Agreement or its effectiveness under any other laws, to the
      extent permitted by applicable law. To the full extent, however, that any
      provision of such applicable law may be waived, it is hereby waived, such that
      this Agreement shall be deemed to be a valid and binding agreement enforceable
      in accordance with its terms.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    3.2  Counterparts.
      This
      Agreement may be executed in counterparts, each of which shall be deemed to
      be
      an original, and all such counterparts together shall constitute one and the
      same instrument.

     

    3.3  Governing
      Law; Arbitration.
      This
      Agreement shall be governed by and construed in accordance with the laws of
      the
      State of New York. Any controversy or claim arising out of or relating to this
      Agreement, or any breach of this Agreement, shall be initiated, maintained
      and
      finally determined by binding arbitration under the rules of conciliation and
      arbitration of the International Chamber of Commerce (the “ICC”).
       The arbitral tribunal shall be appointed within thirty (30) days of the
      notice of dispute, and shall consist of three arbitrators appointed as follows:
      one arbitrator shall be appointed by the Executive, one arbitrator shall be
      appointed by the Company, and the third arbitrator shall be appointed jointly
      by
      such two arbitrators; provided,
      however,
      that if
      the two arbitrators shall be unable to select the third arbitrator within such
      thirty (30)-day period, such third arbitrator shall be chosen by the
      International Court of Arbitration of the ICC.
      The
      place of arbitration shall be in Hong Kong SAR, PRC. The arbitration shall
      be
      conducted in English. The arbitrators shall be experienced and have knowledge
      in
      the subject matter of the dispute. Judgment upon any award rendered may be
      entered in any court having jurisdiction thereof, or application may be made
      to
      such court for a judicial acceptance of the award and an order of enforcement,
      as the case may be.  Any award pursuant to such proceeding shall be granted
      in U.S. Dollars. The arbitration awards shall be non-appealable, final, binding
      and conclusive upon parties. Each of the parties hereby irrevocably agrees
      that
      any service of process made with respect to a dispute under this Agreement
      may
      be made pursuant to the notice procedures set forth in this
      Agreement.

     

    3.4  Third
      Party Beneficiary; Successors and Assigns.
      The
      Purchaser is an intended third party beneficiary of the provisions of this
      Agreement. The provisions of this Agreement shall inure to the benefit of,
      and
      shall be binding upon, the successors and assigns of the parties hereto and
      the
      Purchaser; it being understood that the Purchaser shall be permitted to assign
      its rights under this Agreement to any Affiliate of the Purchaser who purchases
      the Notes or the common shares into which the Notes may be converted,
provided
      that
      such Affiliate shall be subject to the same terms as those set forth in this
      Agreement and provided
      that
      notice of such assignment is given to the Executive. The Executive shall not
      be
      entitled to assign or otherwise transfer any of their rights or obligations
      under this Agreement or any other party.

     

    3.5  Notice.
      Any
      notices to be given hereunder by either party to the other shall be in writing
      and may be effectuated either by personal delivery, by facsimile or by mail,
      postage prepaid, with return receipt requested. Notices shall be addressed
      to
      the parties as follows:

     

    If
      to
      the Company:

     

    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
      Russ LLP

    1540
      Broadway, 24th
      Floor

    New
      York,
      New York 10036

    

    Fax:
      (212)
      751-0928

    Attention:
      Jeffrey A. Rinde, Esq.

    

    If
      to
      the Executive:

     

    

     

    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

     

    or
      to
      such other address as either the parties may designate by written notice to
      each
      other. Notices delivered personally shall be deemed duly given on the date
      of
      actual receipt; mailed notices shall be deemed duly given as of the fifth day
      after the date so mailed. Notices hereunder may be delivered by electronic
      facsimile transmission (fax) if confirmation by sender is made within three
      business days by mail or personal delivery.

     

    3.6  Attorney’s
      Fees.
      If any
      party shall bring an action to enforce this Agreement, the prevailing party
      shall be entitled to recover the reasonable attorneys’ fees and costs incurred
      by such party from the unsuccessful party.

     

     
      [Signature page(s) to follow.] 

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    
 

    IN
      WITNESS WHEREOF, the parties hereto have executed this Non-Competition Agreement
      as of the date first set forth above.

     

    

    
      	 	 	 
	 	COMPANY:
	 	 
	 	AMERICAN DAIRY, INC.
	 
 	 
 	 
 
	 	By:  	 
	 	
              

            
	 	 

    

    
      

      
        	 	 	 
	 	EXECUTIVE:
	 	 
	 
 	 
 	 
 
	 	 	 
	 	
                
Leng
                You-Bin

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