AMENDED AND RESTATED
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 Xx. Xxxx 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.
2
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.
3
(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
4
(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.
5
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.
6
(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.
7
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.
8
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, 00, Xxxxxxxxxxx Xxxx,
X-00xx
Xxxxx,
Xxxxxxxx, Xxxxxxx, Xxxxxx'x Xxxxxxxx xx Xxxxx, Attn: Xxxxxxxx Xxxx, Chief
Financial Officer, facsimile number: 86 10 6435 4831, with a copy by facsimile
only to: Xxxx X. Xxxxxx, Esq., Xxxxx Day, 0000 Xxxxxxxxx Xxxxxx, X.X., Xxxxx
000, Xxxxxxx, Xxxxxxx 00000, facsimile number: (000) 000-0000, 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: | |||
