Document:

Unassociated Document

Exhibit 4.8

 

THE SECURITIES REPRESENTED HEREBY MAY NOT BE TRANSFERRED UNLESS (I) SUCH SECURITIES HAVE BEEN REGISTERED FOR SALE PURSUANT TO THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR (II) THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT THAT SUCH TRANSFER MAY LAWFULLY BE MADE WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933 OR QUALIFICATION UNDER APPLICABLE STATE SECURITIES LAWS.

THIS WARRANT SHALL BE VOID AFTER 5:00 P.M. EASTERN TIME ON DECEMBER 31, 2013 (THE “EXPIRATION DATE”).

No. C-8               

EMERALD DAIRY INC.

AMENDED AND RESTATED

WARRANT TO PURCHASE 526,506 SHARES OF

COMMON STOCK, PAR VALUE $0.001 PER SHARE

Originally Issued: December 31, 2009

Amended As Of: August 31, 2011

FOR VALUE RECEIVED, JAG MULTI INVESTMENTS, LLC (“Warrantholder”), is entitled to purchase, subject to the provisions of this Amended and Restated Warrant (“Warrant”), from Emerald Dairy Inc., a Nevada corporation (“Company”), at any time not later than 5:00 P.M., Eastern time, on the Expiration Date (as defined above), at an exercise price per share equal to $1.00 (the exercise price in effect being herein called the “Warrant Price”), 526,506 shares (“Warrant Shares”) of the Company’s Common Stock, par value $0.001 per share (“Common Stock”).  The number of Warrant Shares purchasable upon exercise of this Warrant and the Warrant Price shall be subject to adjustment from time to time as described herein.  This Warrant is being issued pursuant the Third Amendment to Securities Purchase Agreement, dated as of August 31, 2011 (the “Third Amendment”), between the Company and the Warrantholder, in exchange for a warrant originally issued pursuant to the Securities Purchase Agreement, dated as of June 12, 2008 (the “Purchase Agreement”), as previously amended on December 31, 2008 and December 31, 2009.  Capitalized terms used herein have the respective meanings ascribed thereto in the Purchase Agreement and/or the Third Amendment, unless otherwise defined herein.

Section 1.         Registration.  The Company shall maintain books for the transfer and registration of the Warrant.  Upon the initial issuance of this Warrant, the Company shall issue and register the Warrant in the name of the Warrantholder.

  

  

  

Section 2.         Transfers.  As provided herein, this Warrant may be transferred only pursuant to a registration statement filed under the Securities Act of 1933, or an exemption from such registration.  Subject to such restrictions, the Company shall transfer this Warrant from time to time upon the books to be maintained by the Company for that purpose, upon surrender hereof for transfer, properly endorsed or accompanied by appropriate instructions for transfer and such other documents as may be reasonably required by the Company, including, if required by the Company, an opinion of its counsel to the effect that such transfer is exempt from the registration requirements of the Securities Act, to establish that such transfer is being made in accordance with the terms hereof, and a new Warrant shall be issued to the transferee and the surrendered Warrant shall be canceled by the Company.

Section 3.         Exercise of Warrant.

(a)      Subject to the provisions hereof, the Warrantholder may exercise this Warrant, in whole or in part, at any time prior to its expiration upon surrender of the Warrant, together with delivery of a duly executed Warrant exercise form, in the form attached hereto as “Appendix A” (the “Exercise Agreement”) and payment by cash, certified check or wire transfer of funds of the aggregate Warrant Price for that number of Warrant Shares then being purchased, to the Company during normal business hours on any business day at the Company’s principal executive offices (or such other office or agency of the Company as it may designate by notice to the Warrantholder).  The Warrant Shares so purchased shall be deemed to be issued to the Warrantholder or the Warrantholder’s designee, as the record owner of such shares, as of the close of business on the date on which this Warrant shall have been surrendered (or the date evidence of loss, theft or destruction thereof and security or indemnity satisfactory to the Company has been provided to the Company), the Warrant Price shall have been paid and the completed Exercise Agreement shall have been delivered.  Certificates for the Warrant Shares so purchased shall be delivered to the Warrantholder within a reasonable time, not exceeding three (3) business days, after this Warrant shall have been so exercised.  The certificates so delivered shall be in such denominations as may be requested by the Warrantholder and shall be registered in the name of the Warrantholder or such other name as shall be designated by the Warrantholder, as specified in the Exercise Agreement.  If this Warrant shall have been exercised only in part, then, unless this Warrant has expired, the Company shall, at its expense, at the time of delivery of such certificates, deliver to the Warrantholder a new Warrant representing the right to purchase the number of shares with respect to which this Warrant shall not then have been exercised.  As used herein, “business day” means a day, other than a Saturday or Sunday, on which banks in New York City are open for the general transaction of business.  Each exercise hereof shall constitute the re-affirmation by the Warrantholder that the representations and warranties contained in Section 5 of the Purchase Agreement are true and correct in all material respects with respect to the Warrantholder as of the time of such exercise.

  

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(b)      Notwithstanding anything in this Warrant to the contrary, in no event shall the Holder of this Warrant be entitled to exercise a number of Warrants (or portions thereof) in excess of the number of Warrants (or portions thereof) upon exercise of which the sum of (i) the number of shares of Common Stock beneficially owned by the Holder and its affiliates (other than shares of Common Stock which may be deemed beneficially owned through the ownership of the unexercised Warrants and the unexercised or unconverted portion of any other securities of the Company (subject to a limitation on conversion or exercise analogous to the limitation contained herein) and (ii) the number of shares of Common Stock issuable upon exercise of the Warrants (or portions thereof) with respect to which the determination described herein is being made, would result in beneficial ownership by the Holder and its affiliates of more than 9.99% of the outstanding shares of Common Stock.  For purposes of the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended, and Regulation 13D-G thereunder, except as otherwise provided in clause (i) of the preceding sentence.  Notwithstanding anything to the contrary contained herein, the limitation on exercise of this Warrant may be waived by written agreement between the Holder and the Company; provided, however, such waiver may not be effective less than sixty-one (61) days from the date thereof.

(c)      The Company agrees that any proceeds it receives from the exercise of this Warrant shall be used to repay the outstanding principal amount of the Third Amended Note and any accrued and unpaid interest due thereon.  Any amounts paid to the Warrantholder by the Company pursuant to this Section 3(c) shall be deemed to constitute payments of and applied, (i) first, against additional accrued and unpaid interest due under the Third Amended Note, and (ii) second, against the outstanding principal balance due under the Third Amended Note.

Section 4.         Compliance with the Securities Act of 1933. Except as provided in the Purchase Agreement, the Company may cause the legend set forth on the first page of this Warrant to be set forth on each Warrant, and a similar legend on any security issued or issuable upon exercise of this Warrant, unless counsel for the Company is of the opinion as to any such security that such legend is unnecessary.

Section 5.         Payment of Taxes.  The Company will pay any documentary stamp taxes attributable to the initial issuance of Warrant Shares issuable upon the exercise of the Warrant; provided, however, that the Company shall not be required to pay any tax or taxes which may be payable in respect of any transfer involved in the issuance or delivery of any certificates for Warrant Shares in a name other than that of the Warrantholder in respect of which such shares are issued, and in such case, the Company shall not be required to issue or deliver any certificate for Warrant Shares or any Warrant until the person requesting the same has paid to the Company the amount of such tax or has established to the Company’s reasonable satisfaction that such tax has been paid.  The Warrantholder shall be responsible for income taxes due under federal, state or other law, if any such tax is due.

Section 6.         Mutilated or Missing Warrants.  In case this Warrant shall be mutilated, lost, stolen, or destroyed, the Company shall issue in exchange and substitution of and upon surrender and cancellation of the mutilated Warrant, or in lieu of and substitution for the Warrant lost, stolen or destroyed, a new Warrant of like tenor and for the purchase of a like number of Warrant Shares, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction of the Warrant, and with respect to a lost, stolen or destroyed Warrant, reasonable indemnity or bond with respect thereto, if requested by the Company.

  

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Section 7.         Reservation of Common Stock.  The Company shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of providing for the exercise of the Warrants, such number of shares of Common Stock as shall from time to time equal the number of shares sufficient to permit the exercise of the Warrants in accordance with their respective terms.  The Company agrees that all Warrant Shares issued upon due exercise of the Warrant shall be, at the time of delivery of the certificates for such Warrant Shares, duly authorized, validly issued, fully paid and non-assessable shares of Common Stock of the Company.

Section 8.         Adjustments.  Subject and pursuant to the provisions of this Section 8, the Warrant Price and number of Warrant Shares subject to this Warrant shall be subject to adjustment from time to time as set forth hereinafter.

(a)      If the Company shall, at any time or from time to time while this Warrant is outstanding, pay a dividend or make a distribution on its Common Stock in shares of Common Stock, subdivide its outstanding shares of Common Stock into a greater number of shares or combine its outstanding shares of Common Stock into a smaller number of shares or issue by reclassification of its outstanding shares of Common Stock any shares of its capital stock (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing corporation), then (i) the Warrant Price in effect immediately prior to the date on which such change shall become effective shall be adjusted by multiplying such Warrant Price by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such change and the denominator of which shall be the number of shares of Common Stock outstanding immediately after giving effect to such change and (ii) the number of Warrant Shares purchasable upon exercise of this Warrant shall be adjusted by multiplying the number of Warrant Shares purchasable upon exercise of this Warrant immediately prior to the date on which such change shall become effective by a fraction, the numerator of which is shall be the Warrant Price in effect immediately prior to the date on which such change shall become effective and the denominator of which shall be the Warrant Price in effect immediately after giving effect to such change, calculated in accordance with clause (i) above.  Such adjustments shall be made successively whenever any event listed above shall occur.

  

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(b)      If any capital reorganization or reclassification of the capital stock of the Company, consolidation or merger of the Company with another corporation in which the Company is not the survivor, or sale, transfer or other disposition of all or substantially all of the Company’s assets to another corporation shall be effected, then, as a condition of such reorganization, reclassification, consolidation, merger, sale, transfer or other disposition, lawful and adequate provision shall be made whereby each Warrantholder shall thereafter have the right to purchase and receive upon the basis and upon the terms and conditions herein specified and in lieu of the Warrant Shares immediately theretofore issuable upon exercise of the Warrant, such shares of stock, securities or assets as would have been issuable or payable with respect to or in exchange for a number of Warrant Shares equal to the number of Warrant Shares immediately theretofore issuable upon exercise of the Warrant, had such reorganization, reclassification, consolidation, merger, sale, transfer or other disposition not taken place, and in any such case appropriate provision shall be made with respect to the rights and interests of each Warrantholder to the end that the provisions hereof (including, without limitation, provision for adjustment of the Warrant Price) shall thereafter be applicable, as nearly equivalent as may be practicable in relation to any shares of stock, securities or assets thereafter deliverable upon the exercise hereof.  The Company shall not effect any such consolidation, merger, sale, transfer or other disposition unless prior to or simultaneously with the consummation thereof the successor corporation (if other than the Company) resulting from such consolidation or merger, or the corporation purchasing or otherwise acquiring such assets or other appropriate corporation or entity shall assume the obligation to deliver to the Warrantholder, at the last address of the Warrantholder appearing on the books of the Company, such shares of stock, securities or assets as, in accordance with the foregoing provisions, the Warrantholder may be entitled to purchase, and the other obligations under this Warrant.  The provisions of this paragraph (b) shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers, sales, transfers or other dispositions.

(c)      In case the Company shall fix a payment date for the making of a distribution to all holders of Common Stock (including any such distribution made in connection with a consolidation or merger in which the Company is the continuing corporation) of evidences of indebtedness or assets (other than cash dividends or cash distributions payable out of consolidated earnings or earned surplus or dividends or distributions referred to in Section 8(a)), or subscription rights or warrants, the Warrant Price to be in effect after such payment date shall be determined by multiplying the Warrant Price in effect immediately prior to such payment date by a fraction, the numerator of which shall be the total number of shares of Common Stock outstanding multiplied by the Market Price (as defined below) per share of Common Stock immediately prior to such payment date, less the fair market value (as determined by the Company’s Board of Directors in good faith) of said assets or evidences of indebtedness so distributed, or of such subscription rights or warrants, and the denominator of which shall be the total number of shares of Common Stock outstanding multiplied by such Market Price per share of Common Stock immediately prior to such payment date.  “Market Price” as of a particular date (the “Valuation Date”) shall mean the following: (a) if the Common Stock is then listed on a national stock exchange, the closing sale price of one share of Common Stock on such exchange on the last trading day prior to the Valuation Date; (b) if the Common Stock is then quoted on the OTC Bulletin Board (the “Bulletin Board”) or such similar quotation system or association, the closing sale price of one share of Common Stock on the Bulletin Board or such other quotation system or association on the last trading day prior to the Valuation Date or, if no such closing sale price is available, the average of the high bid and the low asked price quoted thereon on the last trading day prior to the Valuation Date; or (c) if the Common Stock is not then listed on a national stock exchange or quoted on the Bulletin Board or such other quotation system or association, the fair market value of one share of Common Stock as of the Valuation Date, as determined in good faith by the Board of Directors of the Company and the Warrantholder.  If the Common Stock is not then listed on a national securities exchange, the Bulletin Board or such other quotation system or association, the Board of Directors of the Company shall respond promptly, in writing, to an inquiry by the Warrantholder prior to the exercise hereunder as to the fair market value of a share of Common Stock as determined by the Board of Directors of the Company.  In the event that the Board of Directors of the Company and the Warrantholder are unable to agree upon the fair market value in respect of subpart (c) of this paragraph, the Company and the Warrantholder shall jointly select an appraiser, who is experienced in such matters.  The decision of such appraiser shall be final and conclusive, and the cost of such appraiser shall be borne equally by the Company and the Warrantholder.  Such adjustment shall be made successively whenever such a payment date is fixed.

  

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(d)      An adjustment to the Warrant Price shall become effective immediately after the payment date in the case of each dividend or distribution and immediately after the effective date of each other event which requires an adjustment.

(e)      In the event that, as a result of an adjustment made pursuant to this Section 8, the Warrantholder shall become entitled to receive any shares of capital stock of the Company other than shares of Common Stock, the number of such other shares so receivable upon exercise of this Warrant shall be subject thereafter to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Warrant Shares contained in this Warrant.

(f)       To the extent permitted by applicable law and the listing requirements of any stock market or exchange on which the Common Stock is then listed, the Company from time to time may decrease the Warrant Price by any amount for any period of time if the period is at least twenty (20) days, the decrease is irrevocable during the period and the Board shall have made a determination that such decrease would be in the best interests of the Company, which determination shall be conclusive.  Whenever the Warrant Price is decreased pursuant to the preceding sentence, the Company shall provide written notice thereof to the Warrantholder at least five (5) days prior to the date the decreased Warrant Price takes effect, and such notice shall state the decreased Warrant Price and the period during which it will be in effect.

Section 9.         Fractional Interest.  The Company shall not be required to issue fractions of Warrant Shares upon the exercise of this Warrant.  If any fractional share of Common Stock would, except for the provisions of the first sentence of this Section 9, be deliverable upon such exercise, the Company, in lieu of delivering such fractional share, shall pay to the exercising Warrantholder an amount in cash equal to the Market Price of such fractional share of Common Stock on the date of exercise.

Section 10.       Benefits.  Nothing in this Warrant shall be construed to give any person, firm or corporation (other than the Company and the Warrantholder) any legal or equitable right, remedy or claim, it being agreed that this Warrant shall be for the sole and exclusive benefit of the Company and the Warrantholder.

Section 11.       Notices to Warrantholder.  Upon the happening of any event requiring an adjustment of the Warrant Price, the Company shall promptly give written notice thereof to the Warrantholder at the address appearing in the records of the Company, stating the adjusted Warrant Price and the adjusted number of Warrant Shares resulting from such event and setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based.  Failure to give such notice to the Warrantholder or any defect therein shall not affect the legality or validity of the subject adjustment.

  

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Section 12.       Identity of Transfer Agent.  The Transfer Agent for the Common Stock is Computershare, Inc., located at 350 Indiana Street, Suite 800, Golden, CO 80401. Upon the appointment of any subsequent transfer agent for the Common Stock or other shares of the Company’s capital stock issuable upon the exercise of the rights of purchase represented by the Warrant, the Company will mail to the Warrantholder a statement setting forth the name and address of such transfer agent.

Section 13.       Notices.  Unless otherwise provided, any notice required or permitted under this Warrant shall be given in writing and shall be deemed effectively given as hereinafter described (i) if given by personal delivery, then such notice shall be deemed given upon such delivery, (ii) if given by telex or facsimile, then such notice shall be deemed given upon receipt of confirmation of complete transmittal, (iii) if given by mail, then such notice shall be deemed given upon the earlier of (A) receipt of such notice by the recipient or (B) three days after such notice is deposited in first class mail, postage prepaid, and (iv) if given by an internationally recognized overnight air courier, then such notice shall be deemed given one business day after delivery to such carrier.  All notices shall be addressed as follows: if to the Warrantholder, at its address as set forth in the Company’s books and records and, if to the Company, at the address as follows, or at such other address as the Warrantholder or the Company may designate by ten days’ advance written notice to the other:

If to the Company:

Emerald Dairy Inc.

11990 Market Street, Suite 205

Reston, VA 20190

Attn:  Shu Kaneko, Chief Financial Officer

Fax:  (678) 868-0633

With a copy to:

Blank Rome LLP

The Chrysler Building

405 Lexington Ave.

New York, NY 10174

Attn: Jeffrey A. Rinde, Esq.

Fax: (212) 885-5001

Section 14.       Registration Rights.  The initial Warrantholder is entitled to the benefit of certain registration rights with respect to the shares of Common Stock issuable upon the exercise of this Warrant as provided in Section 7.7 of the Purchase Agreement, and any subsequent Warrantholder may be entitled to such rights.

  

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Section 15.       Successors.  All the covenants and provisions hereof by or for the benefit of the Warrantholder shall bind and inure to the benefit of its respective successors and assigns hereunder.

Section 16.       Governing Law; Consent to Jurisdiction; Waiver of Jury Trial.  This Warrant shall be governed by, and construed in accordance with, the internal laws of the State of New York, without reference to the choice of law provisions thereof.  The Company and, by accepting this Warrant, the Warrantholder, each irrevocably submits to the exclusive jurisdiction of the courts of the State of New York located in New York County and the United States District Court for the Southern District of New York for the purpose of any suit, action, proceeding or judgment relating to or arising out of this Warrant and the transactions contemplated hereby.  Service of process in connection with any such suit, action or proceeding may be served on each party hereto anywhere in the world by the same methods as are specified for the giving of notices under this Warrant.  The Company and, by accepting this Warrant, the Warrantholder, each irrevocably consents to the jurisdiction of any such court in any such suit, action or proceeding and to the laying of venue in such court.  The Company and, by accepting this Warrant, the Warrantholder, each irrevocably waives any objection to the laying of venue of any such suit, action or proceeding brought in such courts and irrevocably waives any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. EACH OF THE COMPANY AND, BY ITS ACCEPTANCE HEREOF, THE WARRANTHOLDER HEREBY WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO THIS WARRANT AND REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER.

Section 17.       No Rights as Stockholder.  Prior to the exercise of this Warrant, the Warrantholder shall not have or exercise any rights as a stockholder of the Company by virtue of its ownership of this Warrant.

Section 18.       Amendment; Waiver.  Any term of this Warrant may be amended or waived upon the written consent of the Company and the Warrantholder.

Section 19.       Section Headings.  The section headings in this Warrant are for the convenience of the Company and the Warrantholder and in no way alter, modify, amend, limit or restrict the provisions hereof.

[The remainder of this page is left blank intentionally.  Signature page follows.]

  

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IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed, as of the ____ day of August, 2011.

	  	
EMERALD DAIRY INC.

	  	  
	  	
By:

	  
	  	  	
Name:

	  	  	
Title:

  

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APPENDIX A

EMERALD DAIRY INC.

WARRANT EXERCISE FORM

To: Emerald Dairy Inc.:

The undersigned hereby irrevocably elects to exercise the right of purchase represented by the within Warrant (“Warrant”) for, and to purchase thereunder by the payment of the Warrant Price and surrender of the Warrant, _______________ shares of Common Stock (“Warrant Shares”) provided for therein, and requests that certificates for the Warrant Shares be issued as follows:

	  	  	  
	  	
Name

	  
	  	  	  
	  	
Address

	  
	  	  	  
	  	
Federal Tax ID or Social Security No.

	  

and delivered by:           certified mail to the above address, or

electronically (provide DWAC

Instructions:___________________), or

other (specify):__________________________________________).

and, if the number of Warrant Shares shall not be all the Warrant Shares purchasable upon exercise of the Warrant, that a new Warrant for the balance of the Warrant Shares purchasable upon exercise of this Warrant be registered in the name of the undersigned Warrantholder or the undersigned’s Assignee as below indicated and delivered to the address stated below.

Dated: ___________________, ____

Note:  The signature must correspond with

Signature:______________________________

	
the name of the Warrantholder as written

	  	  
	
on the first page of the Warrant in every

	  	  
	
particular, without alteration or enlargement

	  	
Name (please print)

	
or any change whatever, unless the Warrant

	  	  
	
has been assigned.

	  	
Address

	  	  	  
	  	  	
Federal Identification or

	  	  	
Social Security No.

	  	  	  
	  	  	
Assignee:Exhibit 10.1

SECOND AMENDMENT TO SECURITIES PURCHASE AGREEMENT

THIS SECOND AMENDMENT TO SECURITIES PURCHASE AGREEMENT is dated as of August 30, 2011 (this “Second Amendment”), by and among Emerald Dairy Inc., a Nevada corporation (the “Company”), and the investors set forth on the signature page hereto (each an “Investor” and collectively the “Investors”).

RECITALS:

A.           On December 24, 2009 (the “Closing Date”), pursuant to the terms and conditions of a Securities Purchase Agreement (the “Purchase Agreement”), the Company sold to the Investors, for an aggregate purchase price of $1,750,000: (i) promissory notes in the aggregate principal amount of $1,750,000 (the “Original Notes”), with an interest rate of 10% per annum (the “Interest Rate”), due on December 24, 2010 (the “Original Maturity Date”); and (ii) three-year warrants to purchase an aggregate of 536,809 shares of the Company’s Common Stock, at an exercise price of $1.63 per share (the “Original Warrants”).

B.           As of the Closing Date, the Company prepaid to the Investors an aggregate of $175,000, representing the full amount of interest payable through the Original Maturity Date.

C.           The Company’s obligations under the Original Notes are secured by a pledge of 5,883,329 shares (the “Pledged Shares”) of the Company’s common stock beneficially owned by Yang Yong Shan (the “Pledgor”), the Company’s Chief Executive Officer, pursuant to the terms and conditions of a Pledge Agreement entered into, as of the Closing Date, by and among the Company, the Investors and the Pledgor (the “Pledge Agreement”).

D.           As further inducement to the Investors to purchase the Original Notes and Original Warrants from the Company, as of the Closing Date: (i) the Company delivered to the Investors an Irrevocable Payment Instruction instructing the underwriters in any public offering the Company consummates to pay all amounts due under the Original Notes from the proceeds of such public offering directly to the Investors (the “Irrevocable Payment Instruction”); and (ii) AFH Holding & Advisory, LLC (“AFH Advisory”) and the Investors entered into a Put Agreement, pursuant to which the Investors have the right, but not the obligation, to require AFH Advisory to purchase the Original Notes and Original Warrants from the Investors under certain circumstances (the “Put Agreement”)  (the Purchase Agreement, Original Notes, Original Warrants, Pledge Agreement, Irrevocable Payment Instruction and Put Agreement may hereinafter be referred to collectively as the “Original Transaction Documents”).

E.           On December 24, 2010, the Company and the Investors entered into an Amendment to the Purchase Agreement (the “First Amendment”), pursuant to which, among other things: (i) the Original Maturity Date of each Original Note was extended to February 22, 2011 (the “Amended Maturity Date”); and (ii) the Company prepaid to the Investors an aggregate of $43,150.68, representing the full amount of interest payable through the Amended Maturity Date.

  

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F.           The parties desire to further amend and restate the Original Transaction Documents, as amended by the First Amendment (hereinafter referred to as the “Transaction Documents”) in order to modify the terms and conditions thereof upon the terms and subject to the conditions set forth in this Second 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 Investors acknowledges and agrees that the foregoing Recitals are true and accurate and are incorporated herein by reference.  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 Investors hereby agree as follows:

	 	
2.1

	
Amendments to Original Notes.

(a)           The Amended Maturity Date of each Original Note is hereby further extended from February 22, 2011 to August 31, 2011 (the “New Repayment Date”).

(b)           Effective as of February 23, 2011, the Interest Rate on each Original Note is increased from 10% per annum, to 15% per annum (the “Increased Interest Rate”), which Increased Interest Rate shall continue until the Amended Notes (as defined in Section 2.1(c) below) become 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 each Investor, against delivery by such Investor of its Original 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 “Amended Notes”).

(d)           On or prior to August 30, 2011, the Company shall pay the Investors an aggregate of $136,643.84 (the “Additional Prepaid Interest Amount”), representing the full amount of interest payable at the Increased Interest Rate for the period from February 23, 2011 through the New Repayment Date, by a single wire transfer of immediately available funds to a bank account designated by the Investors.

(e)           The Company has the option, in its sole discretion, to further extend the maturity dates of the Amended Notes to December 31, 2011 (the “Extended Repayment Date”) by making payment to the Investors, on or before the New Repayment Date, of an aggregate of $88,458.90, representing the full amount of interest payable at the Increased Interest Rate for the period from September 1, 2011 through the Extended Repayment Date, by a single wire transfer of immediately available funds to the bank account designated by the Investors.

  

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2.2

	
Amendments to Original Warrants.

(a)           The exercise price of the Original Warrants is hereby reduced from $1.63 per share, to $1.00 per share.

(b)           The Company shall issue and deliver, or cause to be delivered, to each Investor, against delivery by such Investor of its Original Warrants to the Company for cancellation, duly executed Amended and Restated Warrants reflecting the change set forth in Section 2.2 (a) above, in the form attached hereto as Exhibit B (the “Amended Warrants”).

(c)           The Investors shall have Piggyback Registration Rights with respect to the shares of Common Stock underlying the Amended Warrants, pursuant to Section 7.7 of the Purchase Agreement.

	 	
2.3

	
Amendment and Restatement of Original Transaction Documents.

(a)           The Company, the Pledgor, the Investors and the Pledge Agent shall enter into an Amended and Restated Pledge Agreement in the form attached hereto as Exhibit C (the “Amended Pledge Agreement”).

(b)           The Company shall execute and deliver to the Investors an Amended and Restated Irrevocable Payment Instruction in the form attached hereto as Exhibit D (the “Amended Irrevocable Payment Instruction”).

(c)           AFH Advisory and the Investors shall enter into an Amended and Restated Put Agreement in the form attached hereto as Exhibit E (the “Amended Put Agreement”) (the Second Amendment, Amended Notes, Amended Warrants, Amended Pledge Agreement, Amended Irrevocable Payment Instructions, and Amended Put Agreement may hereinafter be referred to collectively as the “Amended Transaction Documents”).

2.4           Payment of Loan Extension Fee.  As additional consideration for the Investors’ agreement to provide for the further extension of the Amended Maturity Dates of the Original Notes (pursuant to Sections 2.1(a) and (e) hereof), the Company shall pay to the Investors, on or before December 31, 2011, a loan extension fee in an aggregate amount of $50,000 (the “Loan Extension Fee”), by a single wire transfer of immediately available funds to a bank account designated by the Investors.  If the Loan Extension Fee is not timely paid, it shall be added to the outstanding principal of the Amended Note executed by the Company in favor of Hankey Investment Company, L.P.  Further in this event, interest on the Loan Extension Fee shall accrue from January 1, 2012, at the rate specified in said Amended Note.

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

  

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3.1         The representations and warranties made by the Company in this Second 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 Original Notes.

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         Each 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 Second Amendment;

	
  

	
(b)

	
its original Amended Note;

(c)           its pro rata share of the Additional Prepaid Interest Amount, pursuant to Section 2.1(d) hereof;

	
  

	
(d)

	
its original Amended Warrants;

	
  

	
(e)

	
a copy of the Amended Pledge Agreement;

(f)           a copy of the Amended Irrevocable Payment Instruction;

	
  

	
(g)

	
a copy of the Amended Put Agreement; and

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

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

	
  

	
(a)

	
a copy of this Second Amendment;

	
  

	
(b)

	
such Investor’s Original Note (for cancellation);

	
  

	
(c)

	
such Investor’s Original Warrant (for cancellation);

  

4

  

	
  

	
(d)

	
a copy of the Amended Pledge Agreement;

	
  

	
(e)

	
a copy of the Amended Put Agreement; and

(f)            evidence that the execution, delivery and performance of this Second Amendment by such 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 Second 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 Second Amendment by or against the Company.

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

5.5           This Second 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

  

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 Second 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. 

6.1           Subject to the satisfaction of the conditions set forth in Section 3 hereof, the Investors hereby jointly and severally (a) waive any Event of Default resulting from (i) the Company’s failure to pay any principal and/or interest when due pursuant the terms of the Original Notes, as amended (as set forth in Section 3.1(a) of the Original Notes) and/or (ii) any cross-default pursuant the terms of the Original Notes, as amended (as set forth in Section 3.1(h) of the Original Notes), and (b) rescind their written notice of default dated May 19, 2011, delivered to the Company and/or its officers, directors, shareholders, employees, agents, advisors and other representatives, including, without limitation, its accountants, attorneys and financial advisors, in connection therewith, and their written demand for the Pledged Shares, dated June 13, 2011, delivered to the Pledge Agent.  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 Original Notes, Amended Notes 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 by the Amended Transaction Documents.

6.2           Subject to the terms and conditions contained in the Amended Pledge Agreement, with respect to an Event of Default arising after the date hereof, the Company hereby acknowledges the Investors’ unconditional and absolute right, at any time following the occurrence and during the continuance of such Event of Default, to take possession of all of the Pledged Shares without regard to the aggregate amount of the Obligations (as defined in the Amended Pledge Agreement) then outstanding and owing to the Investors.

7.           Miscellaneous.

7.1           The execution, delivery and effectiveness of this Second 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 Investors, 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 Second 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.

  

6

  

7.2           This Second 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 Second 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.

7.3           This Second 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 Amended Transaction Documents.  In the event of any inconsistency between this Second Amendment and any of the other Transaction Documents, the terms of this Second 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 Second 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 Second Amendment which shall be given effect so far as possible.

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

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.

[The remainder of this page is left blank intentionally. Signature pages follow.]

  

7

  

 

IN WITNESS WHEREOF, the parties have caused this Second 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: Yang Yong Shan

	  	
Title: Chief Executive Officer

	  	  	  
	  	
By:

	
/s/ Shu Kaneko

	  	
Name: Shu Kaneko

	  	
Title: Chief Financial Officer

	  	  	  
	  	
INVESTORS:

	  	  	  
	  	
HANKEY INVESTMENT COMPANY, L.P.

	  	  	  
	  	
By: Knight Services, Inc., its General Partner

	  	  	  
	  	
By:

	
/s/ Don R. Hankey

	  	
Name: Don R. Hankey

	  	
Title: President

	  	  	  
	  	
KNIGHT INSURANCE COMPANY, LTD.

	  	  	  
	  	
By:

	
/s/ Eric D. Jarvis

	  	
Name: Eric D. Jarvis

	  	
Title: President

	  	  	  
	  	
HANKEY, LLC

	 	 
	  	
By:

	
/s/ Deborah Bowles

	  	
Name: Deborah Bowles

	  	
Title: Manager

 

	
ACKNOWLEDGED:

	  
	  	  	  
	
AFH HOLDING AND ADVISORY LLC

	  
	  	  	  
	
By: 

	
/s/ Amir F. Heshmatpour

	  
	
Name: Amir F. Heshmatpour

	  
	
Title: Chairman and Managing Director

	  

  

 

  

 

EXHIBIT INDEX

	
Exhibit A -

	
Form of Amended and Restated Note

	  	  
	
Exhibit B -

	
Form of Amended and Restated Warrants

	  	  
	
Exhibit C -

	
Form of Amended and Restated Pledge Agreement

	  	  
	
Exhibit D -

	
Form of Amended and Restated Irrevocable Payment Instruction

	  	  
	
Exhibit E -

	
Form of Amended and Restated Put Agreement

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