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.

    


    


    AMENDED
AND RESTATED PROMISSORY NOTE

    


    
      	
              New
      York, New York

            	
              $___________

            


    

    


    Original
Issue Date: June ___, 2008

    Amended
As Of: December __, 2008

    


    THIS
NOTE AMENDS AND RESTATES IN ITS ENTIRETY THE 8% PROMISSORY NOTE, DATED AS OF
JUNE __, 2008 (THE “ORIGINAL NOTE”), ISSUED BY THE UNDERSIGNED TO THE
HOLDER.  THE EXECUTION AND DELIVERY OF THIS AMENDED AND RESTATED NOTE
IS NOT INTENDED TO BE A REPAYMENT OR NOVATION OF THE INDEBTEDNESS EVIDENCED BY
THE ORIGINAL NOTE.

    


    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, 2009 (the “Maturity Date”), and
to pay interest on the unpaid principal balance hereof: (a) at the rate of eight
percent (8%) per annum (the “Initial Interest
Rate”) from June __, 2008 (the “Issue Date”) through
December 31, 2008, and (b) at the rate of ten percent (10%) per annum (the
“Increased Interest
Rate”) 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 Amended and Restated Note (the “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 was originally issued pursuant to a Securities
Purchase Agreement entered into between the Borrower and Holder (the “Purchase Agreement”),
dated as of June __, 2008, as amended by an Amendment, dated as of December __,
2008.  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, with the exception
of offerings where the proceeds will be used primarily in connection with the
completion of the Borrower’s production facility currently under construction in
Hailun City, Heilongjiang Province, PRC.  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.


    
      
        
        

      

      
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    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.

    


    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 (d) borrowings, the proceeds of
which shall be used to repay this Note, or (e) borrowings where the funds will
be used primarily in connection with the completion of the Borrower’s production
facility currently under construction in Hailun City, Heilongjiang Province,
PRC.

    


    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.


    
      
        
        

      

      
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    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.

    


    (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 NYSE
Alternext.

    


    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.


    
      
        
        

      

      
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    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.

    


    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 December, 2008.

    


    
      
        	 	EMERALD DAIRY
    INC.	 
	 	 	 	 
	
                 

              	
                By:
      

              	                                                                                                            
    	 
	 	 	Name: 	 
	 	 	Title: 	 
	 	 	 	 


      



     

    
      
        
        

      

      
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