Exhibit 10.7

THIRD AMENDMENT TO SECURITIES PURCHASE AGREEMENT
 
THIS THIRD AMENDMENT TO SECURITIES PURCHASE AGREEMENT is dated and effective as
of August 31, 2011 (the “Third Amendment”), by and among Emerald Dairy Inc., a
Nevada corporation (the “Company”), and JAG Multi Investments, LLC, a New York
limited liability company (the “Investor”).

RECITALS:

A.           On June 12, 2008, the Investor purchased from the Company, for a
purchase price of $1,500,000, (i) an 8% promissory note in the principal amount
of $1,500,000 (the “Original Principal Amount”), due on December 31, 2008 (the
“Original Note”), and (ii) three-year warrants to purchase 150,000 shares of the
Company’s common stock, at an exercise price of $2.61 per share (the “Original
Warrants”), pursuant to the terms and conditions of a Securities Purchase
Agreement (the “Purchase Agreement”).

B.           On December 31, 2008, the Company and the Investor entered into an
Amendment to the Purchase Agreement (the “First Amendment”), pursuant to which,
among other things: (i) the maturity date of the Original Note was extended from
December 31, 2008 to December 31, 2009 (the “First Amended Maturity Date”); (ii)
as of December 31, 2008, the initial interest rate of the Original Note of 8%
per annum was increased to 10% per annum (the “Increased Interest Rate”); (iii)
in exchange for the Original Note, the Company issued and delivered to the
Investor an Amended and Restated Promissory Note (the “First Amended Note”)
reflecting the changes set forth in (i) and (ii) above; (iv) the expiration date
of the Original Warrants was extended from the third anniversary of their
original issue date to the fifth anniversary of their original issue date; (v)
the per share exercise price of the Original Warrants was reduced from $2.61 to
$1.63; and (vi) in exchange for the Original Warrants, the Company issued and
delivered to the Investor Amended and Restated Warrants (the “Amended Warrants”)
reflecting the changes set forth in (iv) and (v) above.

C.           On December 31, 2009, the Company and the Investor entered into a
Second Amendment to the Purchase Agreement (the “Second Amendment”), pursuant to
which, among other things: (i) the First Amended Maturity Date was extended from
December 31, 2009 to December 31, 2010 (the “Second Amended Maturity Date”);
(ii) all accrued and unpaid interest on the Original Note and First Amended
Note, in the aggregate amount of $216,411, was added to the Original Principal
Amount, resulting in a new principal balance of $1,716,411 (the “New Principal
Balance”); (iii) in exchange for the First Amended Note, the Company issued and
delivered to the Investor a Second Amended and Restated Promissory Note (the
“Second Amended Note”) reflecting the changes set forth in (i) and (ii) above;
(iv) the Company issued and delivered to the Investor additional three-year
warrants to purchase 526,506 shares of the Company’s common stock, at
an  exercise price of $1.63 per share (the “Additional Warrants”); and (v) the
Company’s obligations under the Second Amended Note were secured by a pledge of
2,104,950 shares of common stock of the Company beneficially owned by Yang Yong
Shan (the Pledged Shares”), the Company’s Chief Executive Officer (the
“Pledgor”).

 
1

--------------------------------------------------------------------------------

 

D.           The parties desire to further amend the Transaction Documents (as
defined in Section 1 below), in order to, among other things, modify the terms
and conditions thereof upon the terms and subject to the conditions set forth in
this Third Amendment.

NOW, THEREFORE, in consideration of the premises and the other mutual covenants
contained herein, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows:

1.           Accuracy of Recitals; Definitions.  Each of the Company and the
Investor acknowledges and agrees that the foregoing Recitals are true and
accurate and are incorporated herein by reference.  The Purchase Agreement,
Original Note, Original Warrants, First Amendment, First Amended Note, Amended
Warrants, Second Amendment, Second Amended Note and Additional Warrants shall be
referred to herein collectively as the “Transaction Documents”.  Capitalized
terms used and not otherwise defined herein are used as defined in the
Transaction Documents.

2.           Amendments to Transaction Documents.  Subject to the satisfaction
of the conditions set forth in Section 3 below, the Company and the Investor
hereby agree as follows:

2.1         Amendments to Second Amended Note.

(a)           The Second Amended Maturity Date is hereby further extended from
December 31, 2010 to December 31, 2012 (the “New Repayment Date”).

(b)           As of the Second Amended Maturity Date, the interest rate on the
Second Amended Note is increased from 10% per annum, to 15% per annum (the
“Second Increased Interest Rate”), which Second Increased Interest Rate shall
continue until the Third Amended Note (as defined in Section 2.1(c) below),
becomes due and payable, whether at maturity or upon acceleration or by
prepayment or otherwise.

(c)           The Company shall issue and deliver, or cause to be delivered, to
the Investor, against delivery by the Investor of its Second Amended Note to the
Company for cancellation, a duly executed amended and restated promissory note
reflecting the changes set forth in Sections 2.1(a) and 2.1(b) above, in the
form attached hereto as Exhibit A (the “Third Amended Note”).

(d)           Commencing on September 1, 2011, and continuing until such time as
accrued and unpaid interest in the aggregate amount of $343,282.20 (the “Accrued
Interest”), representing the full amount of accrued and unpaid interest payable
under the Second Amended Note for the period from January 1, 2010 through August
31, 2011, has been paid by the Company, the Company shall pay $50,000 (or such
lesser amount of Accrued Interest as is then remaining) to the Investor, its
successors or assigns, on the first day of each month, to be applied against
such Accrued Interest (each, a “Required Interest Payment”).  The Company shall
use best efforts to make the Required Interest Payments when due pursuant to
this Section 2.1(d) (and Section 1.1 of the Third Amended Note).  In the event
that a Required Interest Payment is not paid by the Company when due, the
Company shall have a forty-five (45) day cure period within which to make such
payment (in each case, the “Cure Period”).  The Company’s failure to pay such
Required Interest Payment prior to the end of the applicable Cure Period shall
be deemed to be an “Event of Default” pursuant to Section 3.1(a) of the Third
Amended Note.

 
2

--------------------------------------------------------------------------------

 

2.2         Amendments to Amended Warrants.

(a)           The per share exercise price of the Amended Warrants (150,000
originally issued on June 12, 2008, as previously amended on December 31, 2008)
is hereby reduced from $1.63, to $1.00.

(b)           The expiration date of the Amended Warrants is hereby changed to
December 31, 2013.

(c)           The Company shall issue and deliver, or cause to be delivered, to
the Investor, against delivery by the Investor of the signed, original Amended
Warrants to the Company for cancellation, duly executed Amended and Restated
Warrants reflecting the changes set forth in this Section 2.2 (a) and (b), in
the form attached hereto as Exhibit B (the “Amended June 2008 Warrants”).

2.3         Amendments to Additional Warrants.

(a)           The per share exercise price of the Additional Warrants (526,506
originally issued on December 31, 2009) is hereby reduced from $1.63, to $1.00.

(b)           The expiration date of the Additional Warrants is hereby changed
to December 31, 2013.

(c)           The Company shall issue and deliver, or cause to be delivered, to
the Investor, against delivery by the Investor of the signed, original
Additional Warrants to the Company for cancellation, duly executed Amended and
Restated Warrants reflecting the changes set forth in this Section 2.3 (a) and
(b), in the form attached hereto as Exhibit C (the “Amended December 2009
Warrants”).

2.4         Amendment to Number of Pledged Shares.

(a)           The number of Pledged Shares is hereby increased from 2,104,950
shares to 4,000,000 shares.

(b)           The Pledgor, the Company, the Investor and Legend Merchant Group,
Inc., as Pledge Agent on behalf of the Investor, shall, concurrently herewith,
execute a Pledge Agreement (“Pledge Agreement”), in the form attached hereto as
Exhibit D, with respect to the Pledgor’s pledge of 4,000,000 shares of common
stock of the Company to secure the Company’s obligations under the Third Amended
Note (The Third Amendment, the Third Amended Note, the Amended June 2008
Warrants, the Amended December 2009 Warrants and the Pledge Agreement may
hereinafter be referred to collectively as the “Amended Transaction Documents”).

 
3

--------------------------------------------------------------------------------

 

2.5         Payment of Loan Extension Fee.  As additional consideration for the
Investor’s agreement to provide for the further extension of the Second Amended
Maturity Date of the Second Amended Note (pursuant to Sections 2.1(a) hereof),
the Company shall pay to the Investor, on or before December 31, 2012, a loan
extension fee in an aggregate amount of $17,164.11 (the “Loan Extension Fee”).

3.           Conditions Precedent.  The effectiveness of this Third Amendment is
subject to satisfaction of each of the following conditions precedent, or waiver
of such conditions precedent by the appropriate party or parties:

3.1         The representations and warranties made by the Company in this Third
Amendment are accurate in all respects.

3.2         Except as otherwise set forth herein, or as previously disclosed by
the Company in its reports filed with the Securities and Exchange Commission, no
Event of Default shall be in existence under the Second Amended Note.
 
3.3         No Material Adverse Effect shall have occurred since the date of
filing of the Company’s Quarterly Report on Form 10-Q for the fiscal quarter
ended March 31, 2011.

3.4         No suit, proceeding or action shall have been commenced against or
involving the Company which, if successful, would result in a Material Adverse
Effect.

3.5         The Investor shall have received the following documents and other
items, duly executed by an authorized representative of the Company, as
necessary:

 
(a)
a copy of this Third Amendment;

 
(b)
the original Third Amended Note;

 
(c)
the original Amended June 2008 Warrants;

 
(d)
the original Amended December 2009 Warrants;

 
(e)
a copy of the Pledge Agreement; and

(f)           if requested, evidence that the execution, delivery and
performance of this Third Amendment by the Company have been duly authorized by
all necessary corporate action.

3.6         The Company shall have received the following documents and other
items from the Investor, duly executed by an authorized representative of the
Investor, as necessary:

 
4

--------------------------------------------------------------------------------

 

 
(a)
a copy of this Third Amendment;

 
(b)
the original Second Amended Note (for cancellation);

 
(c)
the original Amended Warrants (for cancellation);

 
(d)
the original Additional Warrants (for cancellation);

 
(e)
a copy of the Pledge Agreement; and

(f)           if requested, evidence that the execution, delivery and
performance of this Third Amendment by the Investor have been duly authorized by
all necessary corporate action.

4.           Transaction Documents in Full Force and Effect as Amended.  Except
as specifically amended by the Amended Transaction Documents, the Transaction
Documents shall remain in full force and effect and hereby are ratified and
confirmed as so amended.  The Amended Transaction Documents shall not constitute
a novation, satisfaction and accord, cure, release and/or satisfaction of the
Transaction Documents, but shall constitute an amendment thereof.  The parties
hereto agree to be bound by the terms and conditions of the Transaction
Documents, as amended by the Amended Transaction Documents, as though such terms
and conditions were set forth herein and therein in full.  Each reference in the
Transaction Documents or any other document or instrument to any Transaction
Documents, or words of similar import, shall mean and be a reference to the
Transaction Documents, as amended by the Amended Transaction Documents.

5.           Representations and Warranties.  The Company hereby represents and
warrants to the Investors as follows:

5.1          The Company is duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization.

5.2          The execution, delivery and performance by the Company of this
Third Amendment are within its powers, have been duly authorized, and do not
contravene (i) its articles of incorporation, bylaws or other organizational
documents, or (ii) any applicable law, statute, regulation, ordinance, tariff or
order.

5.3          No consent, license, permit, approval or authorization of, or
registration, filing or declaration with any governmental authority or other
person is required in connection with the execution, delivery, performance,
validity or enforceability of this Third Amendment by or against the Company.

5.4          This Third Amendment has been duly executed and delivered by the
Company.

 
5

--------------------------------------------------------------------------------

 

5.5           This Third Amendment constitutes the Company’s legal, valid and
binding obligations enforceable against it in accordance with its terms, except
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors’ rights generally or by general principles of equity.

5.6            To the best of the Company’s knowledge, except as otherwise set
forth herein, it is in compliance with all covenants and agreements in the
Transaction Documents and it is not in default under the Transaction Documents,
and no Event of Default exists, has occurred and is continuing or would result
by the execution, delivery or performance of this Third Amendment.

5.7           The representations and warranties contained in the Transaction
Documents are true and correct in all material respects as of the date hereof as
if made on the date hereof.

6.           Waiver.  Subject to the satisfaction of the conditions set forth in
Section 3 hereof, the Investor hereby (a) waives any Event of Default (as
defined in Section 3.1 of the Second Amended Note) resulting from the Company’s
failure to pay any principal and/or interest when due pursuant to the terms of
the Second Amended Note, and (b) rescinds any oral and/or written Notice of
Default delivered to the Company in connection therewith.  The foregoing waiver
is limited to the matters and by the terms set forth herein and shall not be
deemed to constitute a waiver of any other Event of Default existing as of the
date hereof, or any Event of Default arising after the date hereof, whether as a
result of a breach of the terms and conditions of the Third Amended Note or
otherwise, and shall not prejudice the exercise of any or all of the rights and
remedies of the Investors under the Transaction Documents, as amended.

7.           Miscellaneous.

7.1           The execution, delivery and effectiveness of this Third Amendment
shall not, except as expressly provided herein, be deemed to be an amendment or
modification of, or operate as a waiver of, any provision of the Transaction
Documents, or any right, power or remedy of the Investor, nor constitute a
waiver of any provision of the Transaction Documents, or any other document,
instrument and/or agreement executed or delivered in connection therewith or of
any Event of Default under any of the foregoing, in each case whether arising
before or after the date hereof or as a result of performance hereunder or
thereunder.  Except as otherwise set forth herein, this Third Amendment shall
not preclude the future exercise of any right, remedy, power or privilege
available to the parties whether under the Transaction Documents, at law, or
otherwise.

7.2           This Third Amendment may be executed in any number of counterparts
(including by facsimile), and by the different parties hereto or thereto on the
same or separate counterparts, each of which shall be deemed to be an original
instrument but all of which together shall constitute one and the same
agreement.  Each party agrees that it will be bound by its own facsimile
signature and that it accepts the facsimile signature of each other party.  The
descriptive headings of the various sections of this Third Amendment are
inserted for convenience of reference only and shall not be deemed to affect
the meaning or construction of any of the provisions hereof or
thereof.  Whenever the context and construction so require, all words herein in
the singular number herein shall be deemed to have been used in the plural, and
vice versa, and the masculine gender shall include the feminine and neuter and
the neuter shall include the masculine and feminine.

 
6

--------------------------------------------------------------------------------

 

7.3           This Third Amendment may not be changed, amended, restated,
waived, supplemented, discharged, canceled, terminated or otherwise modified
orally or by any course of dealing or in any manner other than as provided in
the applicable Transaction Documents.  This Third Amendment shall be considered
part of the Transaction Documents for all purposes under the Transaction
Documents.  In the event of any inconsistency between this Third Amendment and
any of the other Transaction Documents, the terms of this Third Amendment shall
control.

7.4           The Transaction Documents, as amended by the Amended Transaction
Documents, constitute the final, entire agreement and understanding between the
parties with respect to the subject matter hereof and thereof and may not be
contradicted by evidence of prior, contemporaneous or subsequent oral agreements
between the parties, and shall be binding upon and inure to the benefit of the
successors and assigns of the parties hereto and thereto.  There are no
unwritten oral agreements between the parties with respect to the subject matter
hereof and thereof.  If any provision of this Third Amendment is adjudicated to
be invalid under applicable laws or regulations, such provision shall be
inapplicable to the extent of such invalidity without affecting the validity or
enforceability of the remainder of this Third Amendment which shall be given
effect so far as possible.

7.5           THIS THIRD AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH
THE GOVERNING LAW PROVISIONS SET FORTH IN THE TRANSACTION DOCUMENTS, AS AMENDED
BY THIS THIRD AMENDMENT.

7.6           Each party shall execute and deliver such other documents,
certificates and/or instruments and take such other actions as reasonably
requested by the other party in order more effectively to consummate the
transactions contemplated hereby.

[SIGNATURES APPEAR ON THE NEXT PAGES]

 
7

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, the parties have caused this Third Amendment to be executed
under seal by their respective officers thereunder duly authorized, as of the
date first above written.
 

 
COMPANY:
     
EMERALD DAIRY INC.
         
By:
  /s/ Yang Yong Shan
   
Name:
  
     
Title:
  
           
INVESTOR:
     
JAG MULTI INVESTMENTS, LLC
         
By:
  /s/ Alexander M. Goren
   
Name:
  Alexander M. Goren
   
Title:
  Managing Member
 

 
 

--------------------------------------------------------------------------------

 
 
Exhibit A
 
Form of Third Amended Note

 
 

--------------------------------------------------------------------------------

 
 
Exhibit B
 
Form of Amended and Restated June 2008 Warrants

 
 

--------------------------------------------------------------------------------

 

 
Exhibit C
 
Form of Amended and Restated December 2009 Warrants

 
 

--------------------------------------------------------------------------------

 
 
Exhibit D
 
Form of Pledge Agreement

 
 

--------------------------------------------------------------------------------