Unassociated Document


    THE
      SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
      SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”). THE SECURITIES MAY NOT BE SOLD,
      TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
      FOR THE SECURITIES UNDER SAID ACT, OR AN OPINION OF COUNSEL IN FORM, SUBSTANCE
      AND SCOPE CUSTOMARY FOR OPINIONS OF COUNSEL IN COMPARABLE TRANSACTIONS THAT
      REGISTRATION IS NOT REQUIRED UNDER SAID ACT.

     

    


    8%
      PROMISSORY NOTE

    

      
        	
                New
                  York, New York

              	 
	
                June
                  ___, 2008

              	
                $________________

              


      

    

    


    FOR
      VALUE RECEIVED,
      EMERALD DAIRY INC.,
      a Nevada
      corporation (hereinafter called the “Borrower”),
      hereby promises to pay to the order of ____________________, a __________,
      or
      its registered assigns (the “Holder”)
      the
      sum of __________________ Dollars ($______), on December 31, 2008 (the
“Maturity
      Date”),
      and
      to pay interest on the unpaid principal balance hereof at the rate of eight
      percent (8%) per annum (the “Initial
      Interest Rate”)
      from
      June __, 2008 (the “Issue
      Date”)
      until
      the same becomes due and payable, whether at maturity or upon acceleration
      or by
      prepayment or otherwise. Any amount of principal or interest on this Note which
      is not paid when due shall bear interest at the rate of twelve percent (12%)
      per
      annum from the due date thereof until the same is paid (“Default
      Interest”).
      Interest shall commence accruing on the Issue Date, shall be computed on the
      basis of a 365-day year and the actual number of days elapsed and shall be
      payable, at the Maturity Date. All payments due hereunder shall be made in
      lawful money of the United States of America. All payments shall be made at
      such
      address as the Holder shall hereafter give to the Borrower by written notice
      made in accordance with the provisions of this Note. Whenever any amount
      expressed to be due by the terms of this Note is due on any day which is not
      a
      business day, the same shall instead be due on the next succeeding day which
      is
      a business day. As used in this Note, the term “business day” shall mean any day
      other than a Saturday, Sunday or a day on which commercial banks in the city
      of
      New York, New York are authorized or required by law or executive order to
      remain closed. This Note is being issued pursuant to a Securities Purchase
      Agreement entered into between the Borrower and Holder (the “Purchase
      Agreement”),
      dated
      of even date herewith. Each capitalized term used herein, and not otherwise
      defined, shall have the meaning ascribed thereto in the Purchase
      Agreement.

    


    The
      following terms shall apply to this Note: 

    


    
      
         

      

      
         

        
          

        

      

      
         

      

    


    ARTICLE
      I. 

    PREPAYMENT

    


    1.1 Borrower’s
      Prepayment Option.
      Notwithstanding
      anything to the contrary contained herein, at Borrower’s option at any time
      following the Issue Date, upon fifteen (15) days prior written notice, the
      Borrower shall have the right to prepay the entire principal amount of the
      Note
      (the “Prepayment
      Option”).
      On
      the 16th day following such notice, the Borrower shall make payment to the
      Holder of an amount in cash equal to the sum of (a) the principal amount of
      the
      Note outstanding on such day plus (b) accrued and unpaid interest on such unpaid
      principal amount plus (c) Default Interest, if any, on the amounts referred
      to
      in clauses (a) and (b) plus (d) any amounts owed to the Holder pursuant to
      this
      Note (the “Prepayment
      Amount”).
      If
      the Borrower fails to make such payment within one (1) business day of such
      date
      the Borrower shall be subject to a penalty of .005 multiplied by the Prepayment
      Amount for every additional business day on which such payment is not
      made.

    


    1.2 Holder’s
      Prepayment Option.
      Notwithstanding anything to the contrary contained herein, at Holder’s option,
      Holder shall have the right at any time to be prepaid, in whole or in part,
      any
      amounts due under the terms of this Note from the proceeds of any offering
      of
      the Borrower’s securities resulting in gross proceeds of $4,500,000 or more. In
      order to exercise such right, Holder shall deliver a written notice of
      prepayment to the Borrower. The Borrower shall make payment to the Holder of
      an
      amount in cash equal to the sum indicated in such notice within three (3)
      business days following the date on which notice of prepayment is
      delivered.

    


    ARTICLE
      II. 

    CERTAIN
      COVENANTS

    


    2.1 Distributions
      on Capital Stock.
      So long
      as the Borrower shall have any obligation under this Note, the Borrower shall
      not without the Holder’s written consent (a) pay, declare or set apart for such
      payment, any dividend or other distribution (whether in cash, property or other
      securities) on shares of capital stock other than dividends on shares of Common
      Stock solely in the form of additional shares of Common Stock or (b) directly
      or
      indirectly or through any subsidiary make any other payment or distribution
      in
      respect of its capital stock except for distributions pursuant to any
      shareholders’ rights plan which is approved by a majority of the Borrower’s
      disinterested directors.

    


    2.2 Restriction
      on Stock Repurchases.
      So long
      as the Borrower shall have any obligation under this Note, the Borrower shall
      not without the Holder’s written consent redeem, repurchase or otherwise acquire
      (whether for cash or in exchange for property or other securities or otherwise)
      in any one transaction or series of related transactions any shares of capital
      stock of the Borrower or any warrants, rights or options to purchase or acquire
      any such shares, with the exception of the Company’s obligations under the Put
      Call Agreements described in the Company’s SEC Filings.

     

    
      
         

      

      
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    2.3 Borrowings.
      So long
      as the Borrower shall have any obligation under this Note, the Borrower shall
      not, without the Holder’s written consent, create, incur, assume or suffer to
      exist any liability for borrowed money, except (a) borrowings in existence
      or
      committed on the date hereof and of which the Borrower has informed Holder
      in
      writing prior to the date hereof, (b) indebtedness to trade creditors or
      financial institutions incurred in the ordinary course of business or (c)
      borrowings from financial institutions where the primary purpose of the proceeds
      is for the general corporate use of the Borrower or (d) borrowings, the proceeds
      of which shall be used to repay this Note.

    


    2.4 Sale
      of Assets.
      So long
      as the Borrower shall have any obligation under this Note, the Borrower shall
      not, without the Holder’s written consent, sell, lease or otherwise dispose
      (collectively, a “Disposition”)
      of any
      significant portion of its assets, other than to a wholly-owned subsidiary
      of
      the Borrower, outside the ordinary course of business unless the proceeds of
      such Disposition shall be used to repay this Note. Any consent to the
      disposition of any assets may be conditioned on a specified use of the proceeds
      of disposition.

    


    2.5 Advances
      and Loans.
      So long
      as the Borrower shall have any obligation under this Note, the Borrower shall
      not, without the Holder’s written consent, lend money, give credit or make
      advances to any person, firm, joint venture or corporation, including, without
      limitation, officers, directors, employees, subsidiaries and affiliates of
      the
      Borrower, except loans, credits or advances (a) in existence or committed on
      the
      date hereof and which the Borrower has informed Holder in writing prior to
      the
      date hereof or (b) made in the ordinary course of business. 

    


    2.6 Contingent
      Liabilities.
      So long
      as the Borrower shall have any obligation under this Note, the Borrower shall
      not, without the Holder’s written consent, assume, guarantee, endorse,
      contingently agree to purchase or otherwise become liable upon the obligation
      of
      any person firm, partnership, joint venture or corporation, except by the
      endorsement of negotiable instruments for deposit or collection and except
      assumptions, guarantees, endorsements and contingencies (a) in existence or
      committed on the date hereof and which the Borrower has informed Holder in
      writing prior to the date hereof, and (b) similar transactions in the ordinary
      course of business. 

    


    ARTICLE
      III. EVENTS OF DEFAULT

    


    3.1 Events
      of Default.
      Each of
      the following events shall be deemed an “Event of Default” under this
      Note:

    


    (a) Failure
      to Pay Principal or Interest.
      The
      Borrower fails to pay the principal hereof or interest thereon when due on
      this
      Note, whether at maturity, upon acceleration, or otherwise.

    


    (b) Breach
      of Covenants.
      The
      Borrower breaches any material covenant or other material term or condition
      contained herein, or in the Purchase Agreement, and such breach continues for
      a
      period of thirty (30) days after written notice thereof to the Borrower from
      the
      Holder.

     

    
      
         

      

      
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    (c) Breach
      of Representations and Warranties.
      Any
      representation or warranty of the Borrower made herein or in any agreement,
      statement or certificate given in writing pursuant hereto or in connection
      herewith (including, without limitation, the Purchase Agreement), shall be
      false
      or misleading in any material respect when made and the breach of which has
      (or
      with the passage of time will have) a material adverse effect on the rights
      of
      the Holder with respect to this Note or the Purchase Agreement.

    


    (d) Receiver
      or Trustee.
      The
      Borrower or any subsidiary of the Borrower 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;

    


    (e) Judgments.
      Any
      money judgment, writ or similar process shall be entered or filed against the
      Borrower or any subsidiary of the Borrower or any of its property or other
      assets for more than $250,000, and shall remain un-vacated, un-bonded or
      un-stayed for a period of twenty (20) days unless otherwise consented to by
      the
      Holder, which consent will not be unreasonably withheld;

    


    (f) Bankruptcy.
      Bankruptcy, insolvency, reorganization or liquidation proceedings or other
      proceedings for relief under any bankruptcy law or any law for the relief of
      debtors shall be instituted by or against the Borrower or any subsidiary of
      the
      Borrower and if instituted against Borrower is not dismissed within sixty (60)
      days; or

    


    (g) Delisting
      of Common Stock.
      The
      Borrower shall fail to maintain the listing of the Common Stock on at least
      one
      of the OTCBB, the Nasdaq National Market, the Nasdaq SmallCap Market, the New
      York Stock Exchange, or the American Stock Exchange.

    


    3.2 Effect
      of Event of Default.
      Upon
      the
      happening of any Event of Default, as set forth in Section 3.1 above, then,
      or
      at any time thereafter, and in each and every such case, unless such Event
      of
      Default shall have been waived in writing by the Holder (which waiver shall
      not
      serve as a waiver of any subsequent default) at the option of the Holder and
      in
      the Holder’s sole discretion, the Holder may consider this Note immediately due
      and payable, without presentment, demand, protest or notice of any kind, all
      of
      which are hereby expressly waived, anything herein notwithstanding, and the
      Holder may immediately enforce any and all of the Holder’s rights and remedies
      provided herein or any other right or remedy afforded by law.

    


    ARTICLE
      IV. MISCELLANEOUS

    


    4.1 Failure
      or Indulgence Not Waiver.
      No
      failure or delay on the part of the Holder 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 privileges. All rights
      and remedies existing hereunder are cumulative to, and not exclusive of, any
      rights or remedies otherwise available.

     

    
      
         

      

      
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    4.2 Notices.
      Any
      notice herein required or permitted to be given shall be in writing and may
      be
      personally served or delivered by courier or sent by United States mail and
      shall be deemed to have been given upon receipt if personally served (which
      shall include telephone line facsimile transmission) or sent by courier or
      three
      (3) days after being deposited in the United States mail, certified, with
      postage pre-paid and properly addressed, if sent by mail. For the purposes
      hereof, the address of the Holder shall be as shown on the records of the
      Borrower; and the address of the Borrower shall be 11990 Market Street, Suite
      205, Reston, VA 20190, Fax #: (678) 868-0633. Both the Holder and the Borrower
      may change the address for service by service of written notice to the other
      as
      herein provided.

    


    4.3 Amendments.
      This
      Note and any provision hereof may only be amended by an instrument in writing
      signed by the Borrower and the Holder. The term “Note” and all reference
      thereto, as used throughout this instrument, shall mean this instrument (and
      the
      other Notes issued pursuant to the Purchase Agreement) 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 Borrower and its successors and assigns, and
      shall inure to the benefit of the Holder and its successors and assigns. Each
      transferee of this Note must be an “accredited investor” (as defined in Rule
      501(a) of the 1933 Act). Notwithstanding anything in this Note to the contrary,
      this Note may be pledged as collateral in connection with a bona fide
      margin
      account or other lending arrangement.

    


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

    


    4.6 Governing
      Law.
      THIS
      NOTE SHALL BE ENFORCED, GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
      OF
      THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY
      WITHIN SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS. THE
      BORROWER HEREBY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES
      FEDERAL COURTS LOCATED IN NEW YORK, NEW YORK WITH RESPECT TO ANY DISPUTE ARISING
      UNDER THIS NOTE, THE AGREEMENTS ENTERED INTO IN CONNECTION HEREWITH OR THE
      TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. BOTH PARTIES IRREVOCABLY WAIVE
      THE
      DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH SUIT OR PROCEEDING.
      BOTH PARTIES FURTHER AGREE THAT SERVICE OF PROCESS UPON A PARTY MAILED BY FIRST
      CLASS MAIL SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON
      THE PARTY IN ANY SUCH SUIT OR PROCEEDING. NOTHING HEREIN SHALL AFFECT EITHER
      PARTY’S RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW. BOTH
      PARTIES AGREE THAT A FINAL NON-APPEALABLE JUDGMENT IN ANY SUCH SUIT OR
      PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY
      SUIT ON SUCH JUDGMENT OR IN ANY OTHER LAWFUL MANNER. THE PARTY WHICH DOES NOT
      PREVAIL IN ANY DISPUTE ARISING UNDER THIS NOTE SHALL BE RESPONSIBLE FOR ALL
      FEES
      AND EXPENSES, INCLUDING ATTORNEYS’ FEES, INCURRED BY THE PREVAILING PARTY IN
      CONNECTION WITH SUCH DISPUTE.

     

    
      
         

      

      
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    4.7 Denominations.
      At the
      request of the Holder, upon surrender of this Note, the Borrower shall promptly
      issue new Notes in the aggregate outstanding principal amount hereof, in the
      form hereof, in such denominations as the Holder shall request.

    


    4.8 Purchase
      Agreement.
      By its
      acceptance of this Note, each Holder agrees to be bound by the applicable terms
      of the Purchase Agreement.

    


    4.9 Remedies.
      The
      Borrower acknowledges that a breach by it of its obligations hereunder will
      cause irreparable harm to the Holder, by vitiating the intent and purpose of
      the
      transaction contemplated hereby. Accordingly, the Borrower acknowledges that
      the
      remedy at law for a breach of its obligations under this Note will be inadequate
      and agrees, in the event of a breach or threatened breach by the Borrower of
      the
      provisions of this Note, that the Holder shall be entitled, in addition to
      all
      other available remedies at law or in equity, and in addition to the penalties
      assessable herein, to an injunction or injunctions restraining, preventing
      or
      curing any breach of this Note and to enforce specifically the terms and
      provisions thereof, without the necessity of showing economic loss and without
      any bond or other security being required.

     

    


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    IN
      WITNESS WHEREOF,
      Borrower has caused this Note to be signed in its name by its duly authorized
      representative this ____ day of June, 2008.

    


    
      	 	 	 
	 	EMERALD
              DAIRY INC.
	 
 	 
 	 
 
	
            	By:  	 
	 	
              
                
Name:
                Shu Kaneko

            
	 	Title:
              Chief Financial Officer




    
      
         

      

      
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