10% PROMISSORY NOTE

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.

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 November __, 2009 (the “ Maturity Date ”), and to pay interest on the unpaid principal balance hereof at the rate of ten percent (10%) per annum (the “ Initial Interest Rate ”) from November __, 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:

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 $6,500,000 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.

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.

2.3   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.

2.4   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 advance