PROMISSORY NOTE CONVERSION AGREEMENT

 

THIS PROMISSORY NOTE CONVERSION AGREEMENT (the “Agreement”) is entered into as
of March 8, 2013, by and between Loreto Resources Corporation, a Nevada
corporation (the “Company”), and person identified on the signature page hereto
(the “Noteholder”). The Company and the Noteholder may be referred to herein
individually as a “Party” and collectively referred as the “Parties.”

 

Recitals:

 

A.       The Company executed a Promissory Note or Promissory Notes in favor of
the Noteholder in the principal amount shown on the signature page hereto, dated
the date shown on the signature page hereto (the “Note(s)”).

 

B.       The Parties desire to convert the entire amount outstanding under the
Note(s) into shares of the Company’s common stock, $0.001 par value per share
(the “Common Stock”).

 

C.      The Company presently intends to undertake certain actions as described
herein that will have the effect of greatly diluting the number of shares of
Common Stock to be held by Noteholder after such conversion, and the Parties
desire to set forth their agreements and understandings with respect thereto.

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties agree as follows:

 

1.   Conversion to Common Stock. Effective as of the date hereof, the entire
amount of outstanding principal and accrued but unpaid interest under the
Note(s) (as shown on the signature page hereto) shall be converted into the
number shares of Common Stock shown on the signature page hereto, at a
conversion rate of $0.0075 per share (with any fraction rounded up the nearest
whole number of shares) (the “Conversion Shares”). Upon execution of this
Agreement and return of the original Note(s) as described below, the Company
shall instruct its transfer agent to issue such Conversion Shares to the
Noteholder at the address on the signature page hereto.

 

2.   Waiver and Release. For and in consideration of the issuance of the
Conversion Shares to Noteholder, and for other good and valuable consideration,
Noteholder hereby waives its right to receive any other amounts due or payable
under the Note, releases the Company from all obligations under the Note(s) and
deems the Note(s) satisfied in full; and further, the Noteholder, on behalf of
itself and its successors, assigns, representatives and agents, hereby covenants
not to sue and fully, finally and forever completely releases the Company and
its present, future and former officers, directors, stockholders, members,
employees, agents, attorneys and representatives (collectively, the “Company
Released Parties”) of and from any and all claims, actions, obligations,
liabilities, demands and/or causes of action, of whatever kind or character,
whether now known or unknown, which Noteholder has or might claim to have
against the Company Released Parties for any and all injuries, harm, damages
(actual and punitive), costs, losses, expenses, attorneys’ fees and/or liability
or other detriment, if any, whenever incurred or suffered by Noteholder arising
from, relating to, or in any way connected with, any fact, event, transaction,
action or omission that occurred or failed to occur on or prior to the date of
this Agreement.

 

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3.    Return of Note. Upon execution of this Agreement, the Note(s) shall be
deemed to be paid in full. Upon the execution of this Agreement, the Noteholder
shall return the original Note(s) to the Company marked “CANCELLED: PAID IN
FULL”.

 

4.    Restricted Stock. (a) The Conversion Shares to be issued hereunder have
not been registered with the United States Securities and Exchange Commission,
or with the securities regulatory authority of any state. The Conversion Shares
are subject to restrictions imposed by federal and state securities laws and
regulations on transferability and resale, and may not be transferred assigned
or resold except as permitted under the Securities Act of 1933, as amended (the
“Act”), and the applicable state securities laws, pursuant to registration
thereunder or exemption therefrom.

 

(b)          Noteholder understands that the certificates representing the
Conversion Shares shall bear a restrictive legend in substantially the following
form (and a stop-transfer order may be placed against transfer of such
certificates or other instruments):

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES
LAWS, AND NEITHER SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD,
PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT
WITH RESPECT THERETO IS EFFECTIVE UNDER THE ACT AND ANY APPLICABLE STATE
SECURITIES LAWS, OR (2) AN EXEMPTION FROM SUCH REGISTRATION EXISTS AND THE
COMPANY RECEIVES AN OPINION OF COUNSEL TO THE HOLDER OF SUCH SECURITIES, WHICH
COUNSEL AND OPINION ARE SATISFACTORY TO THE COMPANY, THAT SUCH SECURITIES MAY BE
OFFERED, SOLD, PLEDGED, ASSIGNED OR TRANSFERRED IN THE MANNER CONTEMPLATED
WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR APPLICABLE STATE
SECURITIES LAWS.

 

The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Shares upon which it is
stamped, if (a) such Shares are sold pursuant to a registration statement under
the Securities Act, or (b) such holder delivers to the Company an opinion of
counsel, reasonably acceptable to the Company, that a disposition of the Shares
is being made pursuant to an exemption from such registration and that the
Shares, after such transfer, shall no longer be “restricted securities” within
the meaning of Rule 144.

 

5.   Noteholder Representations. The Company is issuing the Conversion Shares to
the Noteholder in reliance upon the following representations made by the
Noteholder:

 

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(a)      Noteholder is an “accredited investor” within the meanings set forth in
Regulation D under the Act, for the reason(s) specified on the Investor
Certification attached hereto as completed by Noteholder, and Noteholder shall
submit to the Company such further assurances of such status as may be
reasonably requested by the Company. Noteholder is acquiring the Conversion
Shares for investment for its own account and not with the view to, or for
resale in connection with, any distribution thereof. Noteholder understands and
acknowledges that the Conversion Shares have not been registered under the Act
or any state securities laws, by reason of a specific exemption from the
registration provisions of the Securities Act and applicable state securities
laws, which depends upon, among other things, the bona fide nature of the
investment intent and other representations of Noteholder as expressed herein.
Noteholder further represents that it does not have any contract, undertaking,
agreement or arrangement with any person to sell, transfer or grant
participation to any third person with respect to any of the Shares.

 

(b)       Noteholder (i) has had, and continues to have, access to detailed
information with respect to the business, financial condition, results of
operations and prospects of the Company; (ii) has received or has been provided
access to all material information concerning an investment in the Company; and
(iii) has been given the opportunity to obtain any additional information or
documents from, and to ask questions and receive answers of, the officers,
directors and representatives of the Company to the extent necessary to evaluate
the merits and risks related to an investment in the Company represented by the
Conversion Shares.

 

(c)       As a result of Noteholder’s study of the aforementioned information
and Noteholder’s prior overall experience in financial matters, and Noteholder’s
familiarity with the nature of businesses such as the Company, Noteholder is
properly able to evaluate the capital structure of the Company, the business of
the Company, and the risks inherent therein.

 

(d)       Noteholder’s investment in the Company pursuant to this Agreement is
consistent, in both nature and amount, with Holder’s overall investment program
and financial condition.

 

(e)       Noteholder’s financial condition is such that Noteholder can afford to
bear the economic risk of holding the Conversion Shares, and to suffer a
complete loss of Noteholder’s investment in the Company represented by the
Conversion Shares.

 

(f)       Noteholder’s principal residence is as set forth on the signature page
hereto.

 

(g)      Noteholder understands that no public market now exists, and there may
never be a public market for, the Company’s Common Stock, including the
Conversion Shares.

 

(h)      All action on the part of Noteholder, and its officers, directors and
partners, if applicable, necessary for the authorization, execution and delivery
of this Agreement and the performance of all obligations of Noteholder hereunder
and thereunder has been taken, and this Agreement, assuming due execution by the
parties hereto, constitutes valid and legally binding obligations of Noteholder,
enforceable in accordance with its terms, subject to: (i) judicial principles
limiting the availability of specific performance, injunctive relief, and other
equitable remedies and (ii) bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereafter in effect generally relating to or
affecting creditors’ rights.

 

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(i)      Noteholder represents that neither it nor, to its knowledge, any person
or entity controlling, controlled by or under common control with it, nor any
person having a beneficial interest in it, nor any person on whose behalf
Noteholder is acting: (i) is a person listed in the Annex to Executive Order No.
13224 (2001) issued by the President of the United States (Executive Order
Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten
to Commit, or Support Terrorism); (ii) is named on the List of Specially
Designated Nationals and Blocked Persons maintained by the U.S. Office of
Foreign Assets Control; (iii) is a non-U.S. shell bank or is providing banking
services indirectly to a non-U.S. shell bank; (iv) is a senior non-U.S.
political figure or an immediate family member or close associate of such
figure; or (v) is otherwise prohibited from investing in the Company pursuant to
applicable U.S. anti-money laundering, anti-terrorist and asset control laws,
regulations, rules or orders (categories (i) through (v), each a “Prohibited
Noteholder”). Noteholder agrees to provide the Company, promptly upon request,
all information that the Company reasonably deems necessary or appropriate to
comply with applicable U.S. anti-money laundering, anti-terrorist and asset
control laws, regulations, rules and orders. Noteholder consents to the
disclosure to U.S. regulators and law enforcement authorities by the Company and
its affiliates and agents of such information about Noteholder as the Company
reasonably deems necessary or appropriate to comply with applicable U.S.
antimony laundering, anti-terrorist and asset control laws, regulations, rules
and orders. If Noteholder is a financial institution that is subject to the USA
Patriot Act, Noteholder represents that it has met all of its obligations under
the USA Patriot Act. Noteholder acknowledges that if, following its investment
in the Company, the Company reasonably believes that Noteholder is a Prohibited
Noteholder or is otherwise engaged in suspicious activity or refuses to promptly
provide information that the Company requests, the Company has the right or may
be obligated to prohibit additional investments, segregate the assets
constituting the investment in accordance with applicable regulations or
immediately require Noteholder to transfer the Shares. Noteholder further
acknowledges that Noteholder will have no claim against the Company or any of
its affiliates or agents for any form of damages as a result of any of the
foregoing actions.

 

(j)      If Noteholder is affiliated with a non-U.S. banking institution (a
“Foreign Bank”), or if Noteholder receives deposits from, makes payments on
behalf of, or handles other financial transactions related to a Foreign Bank,
Noteholder represents and warrants to the Company that: (1) the Foreign Bank has
a fixed address, other than solely an electronic address, in a country in which
the Foreign Bank is authorized to conduct banking activities; (2) the Foreign
Bank maintains operating records related to its banking activities; (3) the
Foreign Bank is subject to inspection by the banking authority that licensed the
Foreign Bank to conduct banking activities; and (4) the Foreign Bank does not
provide banking services to any other Foreign Bank that does not have a physical
presence in any country and that is not a regulated affiliate.

 

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(k)      Noteholder realizes that because of the inherently speculative nature
of businesses of the kind conducted and contemplated by the Company, the
Company’s financial results may be expected to fluctuate from month to month and
from period to period and will, generally, involve a high degree of financial
and market risk that could result in substantial or, at times, even total losses
for investors in securities of the Company.

 

(o)      (For ERISA plans only) The fiduciary of the ERISA plan (the “Plan”)
represents that such fiduciary has been informed of and understands the
Company’s investment objectives, policies and strategies, and that the decision
to invest “plan assets” (as such term is defined in ERISA) in the Company is
consistent with the provisions of ERISA that require diversification of plan
assets and impose other fiduciary responsibilities. Noteholder fiduciary or Plan
(a) is responsible for the decision to invest in the Company; (b) is independent
of the Company or any of its affiliates; (c) is qualified to make such
investment decision; and (d) in making such decision, the Purchaser fiduciary or
Plan has not relied primarily on any advice or recommendation of the Company or
any of its affiliates.

 

6.     Vote of the Noteholder.

 

(a)      Noteholder shall, if and when directed in writing by the Company, cause
all outstanding shares of the Company’s Common Stock that are owned by the
Noteholder, including the Conversion Shares (collectively, the “Noteholder’s
Shares”), to be voted in favor of the approval of (i) a 1:100 reverse split of
the Common Stock, (ii) the issuance by the Company shares of convertible
preferred stock (the “Series A Preferred Stock”) convertible into 99% or more of
the total number of shares of Common Stock to be outstanding assuming they are
convertible in full, (iii) the change of the Company’s name to such name as the
Company’s President or the majority of the holders of Series A Preferred Stock
shall designate, and (iv) the increase of the Company’s authorized shares of
Common Stock to up to 3,000,000,000, and in favor of each of the other action
necessary or advisable, in the Company’s sole discretion, in connection
therewith. In the event written consents are solicited or otherwise sought from
stockholders of the Company with respect to the approval of any of the
foregoing, the Noteholder shall (unless otherwise directed in writing by the
Company) cause to be validly executed, with respect to all of the Noteholder’s
Shares, a written consent or written consents to such proposed action.

 

(b)      To secure the Noteholder’s obligations to vote all of the Noteholder’s
Shares in accordance with this Agreement, the Noteholder appoints the Chief
Executive, President or Secretary of the Company, or any of them from time to
time, or their designees, as the Noteholder’s true and lawful proxy and
attorney, with the power to act alone and with full power of substitution, to
vote all of the Noteholder’s Shares as set forth in this Agreement and to
execute all appropriate instruments consistent with this Agreement on behalf of
the Noteholder if, and only if, the Noteholder fails to vote all of the
Noteholder’s Shares, or execute such other instruments in accordance with the
provisions of this Agreement within two (2) days of the Company’s, or any other
party’s written request for the Noteholder’s written consent or signature. The
proxy and power granted by the Noteholder pursuant to this Section are coupled
with an interest and are given to secure the performance of such party’s duties
under this Agreement. Each such proxy and power will be irrevocable. The proxy
and power, so long as any party hereto is an individual, will survive the death,
incompetency and disability of such party or any other individual holder of the
Noteholder’s Shares and, so long as any party hereto is an entity, will survive
the merger or reorganization of such party or any other entity holding any of
the Noteholder’s Shares.

 

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(c)      Noteholder acknowledges that after giving effect to the transactions
described in Section 6(a) above, Noteholder’s percentage interest in the Common
Stock (after giving effect to the conversion in full of the Preferred Stock) and
the percentage of the total votes it will be entitled to cast on matters to be
voted on by the shareholders of the Company voting together will be reduced by
more than99%. The Company reserves all rights to make further dilutive issuances
of stock of any class or series in the future.

 

7.   Miscellaneous.

 

(a)       This Agreement shall be construed and enforced in accordance with the
laws of the State of New York.

 

(b)       This Agreement constitutes the entire agreement between the Parties
and supersedes all prior oral or written negotiations and agreements between the
Parties with respect to the subject matter hereof. No modification, variation or
amendment of this Agreement (including any exhibit hereto) shall be effective
unless made in writing and signed by both Parties.

 

(c)       Each Party to this Agreement hereby represents and warrants to the
other Party that it has had an opportunity to seek the advice of its own
independent legal counsel with respect to the provisions of this Agreement and
that its decision to execute this Agreement is not based on any reliance upon
the advice of any other Party or its legal counsel. Each Party represents and
warrants to the other Party that in executing this Agreement such Party has
completely read this Agreement and that such Party understands the terms of this
Agreement and its significance. This Agreement shall be construed neutrally,
without regard to the Party responsible for its preparation.

 

(d)       Each Party to this Agreement hereby represents and warrants to the
other Party that (i) the execution, performance and delivery of this Agreement
has been authorized by all necessary action by such Party; (ii) the
representative executing this Agreement on behalf of such Party has been granted
all necessary power and authority to act on behalf of such Party with respect to
the execution, performance and delivery of this Agreement; and (iii) the
representative executing this Agreement on behalf of such Party is of legal age
and capacity to enter into agreements which are fully binding and enforceable
against such Party.

 

(e)       This Agreement may be executed in any number of counterparts, all of
which taken together shall constitute a single instrument.

 

[The Remainder of this Page is Left Blank Intentionally. Signature Page
Follows.]

 

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IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the day
and year first above written.             

 

COMPANY:       NOTEHOLDER:       LORETO RESOURCES CORPORATION                
By:             Name:   Luis F. Saenz         Its:   President                  
        Principal amount of Promissory Note 1:             Date of Promissory
Note 1:             Total principal and accrued but unpaid interest under the
Promissory Note 1:             Number of Conversion Shares Note 1:              
            Principal amount of Promissory Note 2:             Date of
Promissory Note 2:             Total principal and accrued but unpaid interest
under the Promissory Note 2:             Number of Conversion Shares Note 2:    
                      Principal amount of Promissory Note 3:             Date of
Promissory Note 3:             Total principal and accrued but unpaid interest
under the Promissory Note 3:             Number of Conversion Shares Note 3:    
                              Noteholder address:

 

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LORETO RESOURCES CORPORATION

 

INVESTOR CERTIFICATION

 

For Individual Accredited Investors Only
(all Individual Accredited Investors must INITIAL where appropriate):

 

Initial _______ I have a net worth a net worth (including homes, furnishings and
automobiles, but excluding for these purposes the value of my primary residence)
in excess of US$1 million either individually or through aggregating his
individual holdings and those in which he has a joint, community property or
other similar shared ownership interest with my spouse. (For purposes of
calculating your net worth under this paragraph, (a) your primary residence
shall not be included as an asset; (b) indebtedness secured by your primary
residence, up to the estimated fair market value of your primary residence at
the time of your purchase of the securities, shall not be included as a
liability (except that if the amount of such indebtedness outstanding at the
time of your purchase of the securities exceeds the amount outstanding 60 days
before such time, other than as a result of the acquisition of your primary
residence, the amount of such excess shall be included as a liability); and (c)
indebtedness that is secured by your primary residence in excess of the
estimated fair market value of your primary residence at the time of your
purchase of the securities shall be included as a liability.)     Initial
_______   I have had an annual gross income for the past two years of at least
$200,000 (or $300,000 jointly with my spouse) and expect my income (or joint
income, as appropriate) to reach the same level in the current year.     Initial
_______ I am a director or executive officer of the Company.

 

For Non-Individual Accredited Investors

(all Non-Individual Accredited Investors must INITIAL where appropriate):

 

Initial _______   The investor certifies that it is a partnership, corporation,
limited liability company or business trust that is 100% owned by persons who
meet at least one of the criteria for Individual Investors set forth above.    
Initial _______   The investor certifies that it is a partnership, corporation,
limited liability company or business trust that has total assets of at least $5
million and was not formed for the purpose of investing in the Company.    
Initial _______   The investor certifies that it is an employee benefit plan
whose investment decision is made by a plan fiduciary (as defined in ERISA
§3(21)) that is a bank, savings and loan association, insurance company or
registered investment adviser.     Initial _______ The investor certifies that
it is an employee benefit plan whose total assets exceed $5,000,000 as of the
date of this Agreement.     Initial _______ The undersigned certifies that it is
a self-directed employee benefit plan whose investment decisions are made solely
by persons who meet either of the criteria for Individual Investors.     Initial
_______   The investor certifies that it is a U.S. bank, U.S. savings and loan
association or other similar U.S. institution acting in its individual or
fiduciary capacity.     Initial _______   The undersigned certifies that it is a
broker-dealer registered pursuant to §15 of the Securities Exchange Act of 1934.
    Initial _______ The investor certifies that it is an organization described
in §501(c)(3) of the Internal Revenue Code with total assets exceeding
$5,000,000 and not formed for the specific purpose of investing in the Company.
    Initial _______ The investor certifies that it is a trust with total assets
of at least $5,000,000, not formed for the specific purpose of investing in the
Company, and whose purchase is directed by a person with such knowledge and
experience in financial and business matters that he is capable of evaluating
the merits and risks of the prospective investment.     Initial _______ The
investor certifies that it is a plan established and maintained by a state or
its political subdivisions, or any agency or instrumentality thereof, for the
benefit of its employees, and which has total assets in excess of $5,000,000.  
  Initial _______ The investor certifies that it is an insurance company as
defined in §2(13) of the Securities Act, or a registered investment company.

 

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