Emerald Dairy extends notes sold in placements, increases coupon

Investors waive events of default, will receive loan extension fees

By Angela McDaniels

Tacoma, Wash., Sept. 6 - Emerald Dairy Inc. amended the terms of promissory notes and warrants issued in two private placements, extending the maturity dates of the notes and increasing the interest rates, according to an 8-K filed Tuesday with the Securities and Exchange Commission.

December 2009 placement

Under the amendment to the $1.75 million of promissory notes and three-year warrants issued in December 2009:

• The maturity date of the notes was extended to Aug. 31, 2011 from Feb. 22, 2011;

• Effective as of Feb. 23, 2011, the interest rate on the notes was increased to 15% from 10%;

• $136,644 of accrued interest on the notes was paid to the investors. This represents the full amount of interest payable through Aug. 31;

• The company was granted the option to further extend the maturity date to Dec. 31, 2011 by paying the investors $88,459 by Aug. 31. This represents the full amount of additional interest payable through Dec. 31;

• The exercise price of the warrants was reduced to $1.00 per share from $1.63 per share; and

• A $50,000 loan extension fee will be paid to the investors by Dec. 31.

The investors also waived any event of default resulting from the company's failure to pay any principal and/or interest when due and rescinded their written notice of default and their written demand for the shares pledged by Yang Yong Shan, the company's chairman, chief executive officer and president.

The investors continue to have the right to require AFH Holding & Advisory, LLC to purchase the notes and warrants under certain circumstances.

The amendment was completed on Aug. 30.

June 2008 placement

Under the amendment to the $1.72 million promissory note and warrants issued in June 2008:

• The maturity date of the note was extended to Dec. 31, 2012 from Dec. 31, 2010;

• Effective as of Dec. 31, 2010, the interest rate was increased to 15% from 10%;

• The company owes $343,282 of accrued interest on the note. It will pay $50,000 of this to the investor on the first day of each month until the amount is paid in full;

• The exercise price of the warrants was reduced to $1.00 per share from $1.63 per share;

• The expiration of the warrants was extended to Dec. 31, 2013;

• A $17,164 loan extension fee will be paid to the investor by Dec. 31, 2012.

The investor also waived any event of default resulting from the company's failure to pay any principal and/or interest when due and rescinded any notice of default delivered.

The amendment was completed on Aug. 31.

In addition, the company amended an $800,000 promissory note on Aug. 30, extending the maturity date to June 24, 2012 from June 24, 2011.

Based in Reston, Va., Emerald Dairy produces and distributes infant and children's formula, milk powder and soybean products in China.

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