Exhibit 10.3

PLEDGE AGREEMENT (THIS “AGREEMENT”) ENTERED INTO AS OF NOVEMBER __, 2009, BY AND
BETWEEN U.S. PRECIOUS METALS DE MEXICO, S.A. DE C.V., REPRESENTED HEREIN BY ITS
LEGAL REPRESENTATIVE, MR. DAVID WAYNE BURNEY (HEREINAFTER THE “PLEDGOR”), AND
DUANE MORRIS LLP, A DELAWARE LIMITED LIABILITY PARTNERSHIP, REPRESENTED HEREIN
BY ITS LEGAL REPRESENTATIVE, MS. KELI B. ISAACSON (HEREINAFTER THE “PLEDGEE”),
PURSUANT TO THE FOLLOWING BACKGROUND, REPRESENTATIONS AND CLAUSES:

B A C K G R O U N D

          WHEREAS, , the Pledgor, together with its parent company, U.S.
Precious Metals, Inc., a Delaware corporation (the “Parent” and together with
the Pledgor, each a “Company” and collectively, the “Companies”), previously
sought and obtained legal counsel and related services from the Pledgee,
including, without limitation, legal counsel and related services performed in
connection with regulatory and securities compliance, various financing
arrangements, and general corporate representation (collectively, the
“Engagement”);

          WHEREAS, as of the date hereof, the Companies owe the amount of
$1,297,678.39 (the “Existing Debt”) to the Pledgee for legal counsel and related
services rendered and disbursements not yet paid to the Pledgee in connection
with the Engagement;

          WHEREAS, the Companies have requested that the Pledgee make certain
financial accommodations to the Companies with respect to payment of the
Existing Debt and to continue to provide professional services to the Companies
in connection with the Engagement (the “Continued Engagement”);

          WHEREAS, the Companies have agreed, on a joint and several basis, to
pay the Pledgee for any professional services rendered in connection with the
Continued Engagement immediately upon invoice thereof and that all such amounts,
together with any and all interest due and owing to the Pledgee and any and all
other additional costs and fees under the terms of the Engagement, shall
constitute additional indebtedness of the Companies to the Pledgee and shall be
secured indebtedness pursuant to the terms of this Agreement (such indebtedness,
together with the Existing Debt, the “Debt”); and

          WHEREAS, in order to guarantee payment of and provide security for,
the Debt, the Pledgor wishes to pledge in first priority and degree in favor of
the Pledgee all the mining concession titles of which the Pledgor is holder and
which are described in Exhibit A of this Agreement, as well as any other mining
concession titles that the Pledgor may acquire in the future and all Pledgor’s
rights and products of any kind derived from or related to all the mining
concession titles of which the Pledgor is or becomes holder (jointly, the
“Mining Titles”).

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R E P R E S E N T A T I O N S

 

 

I.

The Pledgor hereby represents, through its legal representative, that:

 

 

 

a) It is a company duly organized and existing pursuant to the laws of the
United Mexican States, as evidenced in public deed number 15,970, dated March 5,
2003, granted before Ms. Maria Guadalupe Perez Palomino, notary public number 91
of the Federal District, which first true copy was duly registered before the
Public Registry of Commerce of the Federal District under mercantile file number
306,255.

 

 

 

b) Its legal representative has the necessary authority to enter into this
Agreement and that such authority has not been limited, modified or revoked in
any manner whatsoever, as evidenced in the public deed number 103,172, dated
March 24, 2009, granted before Mr. Javier Arce Gargollo, notary public number 74
of the Federal District, which first true copy was duly registered before the
Public Registry of Commerce of the Federal District on April 6, 2009, under
mercantile file number 306,255.

 

 

 

c) It is sole holder of the Mining Titles, which are free of all liens,
encumbrances and ownership and transfer limitations.

 

 

 

d) Its execution of this Agreement and the granting of the pledge subject matter
hereof do not violate and do not conflict with, or result in any breach pursuant
to (i) its by-laws; (ii) any other agreement, contract or obligation to which
the Pledgor is a party or to which the Pledgor or its properties or assets are
subject; or (iii) any order, regulation, rule, attachment, decree, litigation,
statute, law or resolution of any governmental authority applicable to the
Pledgor or the Mining Titles.

 

 

 

e) No consent or approval by any third party or governmental authority is
required for (i) the execution, delivery, performance, granting or enforcement
of this Agreement; (ii) the creation of a security interest in the Mining
Titles; nor (iii) the fulfillment of its obligations pursuant to this Agreement.

 

 

 

f) In order to guarantee payment of and provide security for, the Debt, it
hereby pledges in first priority and degree in favor of the Pledgee the Mining
Titles pursuant to the terms of this Agreement.

 

II.

The Pledgee hereby represents, through its legal representative, that:

 

 

 

a) It is a limited liability partnership organized and existing pursuant to the
laws of the State of Delaware, United States of America.

 

 

 

b) Its legal representative has the necessary authority to enter into this
Agreement and that such authority has not been limited, modified or revoked in
any manner whatsoever.

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c) Its intention is to enter into this Agreement and accept the security
interest in first priority and degree to be granted in its favor over the Mining
Titles to secure payment of the Debt by the Pledgor.

 

 

 

Pursuant to the forgoing background and representations, the parties agree as
follows:

C L A U S E S

          FIRST. Acknowledgement of Debt. The Pledgor hereby acknowledges,
affirms and agrees that (a) the Pledgor receives direct and indirect benefits
from the legal counsel and related services provided by Pledgee to the Parent,
(ii) all legal counsel and related services provided by the Pledgee to the
Pledgor and the Parent were provided for the benefit of both Companies, (iii)
the Existing Debt is validly due and owing to the Pledgee by both Companies on a
joint and several basis, (iv) such Existing Debt has been documented by the
Pledgee through the provision of invoices to the Parent, which invoices have not
been paid (to the extent of the Existing Debt) or otherwise adjusted as of the
date hereof, and (v) any additional Debt incurred shall be owing to the Pledgee
by both Companies on a joint and several basis.

          SECOND. Pledge. As security for and to guarantee payment of, the Debt,
and pursuant to the provisions of articles 354 and 355 of the General Law of
Negotiable Instruments and Credit Operations (the “Credit Law”), the Pledgor
hereby pledges in first priority and degree in favor of the Pledgee the Mining
Titles.

          Pursuant to the provisions of articles 365, 366 and 376 of the Credit
Law and the provisions of article 46 of the Mining Law, the Pledgor hereby
undertakes to perform any and all necessary or convenient acts in order for this
Agreement to be registered, either by the Pledgor or the Pledgee or either of
their designated representatives, with the Public Registry of Mining. The
Pledgor shall pay (or reimburse the Pledgee, if applicable) for all the
registration fees, taxes, legal fees and notarial expenses related to such
registration.

          THIRD. Possession of the Mining Titles. The Pledgor shall keep the
physical possession of the Mining Titles and shall exercise all rights derived
therefrom in the ordinary course of its activities, subject to the terms and
conditions of this Agreement, and shall be responsible for any loss,
cancellation or revocation of the Mining Titles and shall immediately notify the
Pledgee in writing upon the occurrence of any of the foregoing. Likewise, the
Pledgor shall pay all fees, taxes or other obligations which are necessary to
maintain in force and effect the Mining Titles in accordance with the Mining Law
and applicable regulations. All titles, assets or rights replacing or
substituting the Mining Titles shall form part of the Mining Titles and shall be
secured in terms of the pledge granted herein.

          FOURTH. Obligations of the Pledgor. As long as any portion of the Debt
is outstanding or the Continued Representation is ongoing, the Pledgor shall:

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a)

Not sell, assign, pledge, secure or transfer in any other manner, total or
partially, the ownership and rights of the Mining Titles, without the prior
written consent of the Pledgee;

 

 

 

 

b)

Not cancel or revoke or permit or allow the cancellation or revocation of, all
or any part of the Mining Titles, without the prior written consent of the
Pledgee;

 

 

 

 

c)

Pay all fees, taxes, quotas and other obligations that are necessary in order to
maintain the Mining Titles in force and effect pursuant to the Mining Law and
applicable regulations;

 

 

 

 

d)

Deliver to the Pledgee all information related to the Mining Titles which the
Pledgee may request in the future and allow the Pledgee and its representatives
to inspect, audit and make copies of all registries and all other documents of
the Pledgor related to the Mining Titles, and if requested by the Pledgee,
deliver to the Pledgee certified copies of such registries and documents; and

 

 

 

 

e)

Execute and deliver all instruments or documents, and carry out all acts, which
are necessary or convenient, or which may be reasonably requested by the
Pledgee, in order to perfect and protect the pledge granted herein or allow the
Pledgee to exercise its rights and actions pursuant to this Agreement.

          In the event that the Pledgor encumbers or transfers or purports to
encumber or transfer, totally or partially, the ownership and rights of the
Mining Titles in contravention of the provisions of this Agreement, such
purported encumbrance or transfer shall be null and void and without any legal
effect.

          FIFTH. Term. The pledge subject matter of this Agreement shall not be
cancelled or reduced until the total amount of the Debt is paid in its entirety
and the Continued Representation has permanently ceased. The foregoing shall be
binding without prejudice of (a) the Pledgor granting any other pledges or
guarantees, totally or partially, now or in the future, to secure the Debt, and
(b) the Debt being paid partially to the Pledgee on behalf of the Pledgor.
Likewise, the parties agree that the Mining Titles secure and guarantee in their
entirety the Debt, therefore, the Pledgor shall not have the right to request
reduction of the Mining Titles for any partial payment made in order to secure
or guarantee the Debt. The Pledgor expressly waives any right to which it may be
entitled under article 349 of the Credit Law.

          Once the Debt is indefeasibly paid in full to the Pledgee and the
Continued Representation has permanently ceased, the pledge of the Mining Titles
shall be released without the need of any action or guarantee by the Pledgee and
shall be released by the Pledgee, all without recourse, representation or
warranty whatsoever and at the Pledgor’s sole expense.

          SIXTH. Default and Enforcement. In the event of a breach by the
Pledgor of any of its obligations under this Agreement, the Pledgee may enforce
the pledge granted herein, at the Pledgor’s sole cost and expense, including,
without limitation, all legal fees and expenses incurred by the Pledgee,
pursuant to the applicable procedures set forth in the Commerce Code. For such
purposes, the Pledgee shall appoint a Mexican individual or company organized
pursuant to Mexican laws to whom the Mining Titles shall be transferred in order
to comply with the provisions set forth in articles 10 and 11 of the Mining Law.

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          SEVENTH. Indemnification. The Pledgor shall indemnify and hold
harmless the Pledgee and its beneficiaries, assignees, partners, directors,
officers, employees, agents and representatives (hereinafter, the
“Indemnitees”), from and against any liability, obligation, loss, damage,
penalty, claim, action, suit, resolution, order, costs and expenses of any
nature (including reasonable attorneys’ fees and expenses) incurred by or
imposed upon any Indemnitee arising from or related in any manner to the
execution and enforcement of, and compliance with, this Agreement, or otherwise
related to the fulfillment of any of the terms of this Agreement or the
preservation of the rights granted herein; provided, however, that no Indemnitee
shall be indemnified pursuant to this clause for any expense, loss, damage or
liability caused by its own gross negligence or willful misconduct. The Pledgor
agrees that upon receipt of a notice from any Indemnitee of any event of
liability, obligation, loss, damage, penalty, claim, action, suit, resolution,
order, costs and expenses of any nature, the Pledgor shall assume full
responsibility for the defense of the same at its sole cost and expense. Each
Indemnitee agrees to make its best efforts to notify the Pledgor in a timely
manner with respect of any of such events of which the Indemnitee has knowledge.

          The Pledgor shall pay or reimburse the Pledgee for any fees, costs and
expenses incurred by the Pledgee in connection with the creation and protection
of the pledge granted in this Agreement, including, without limitation, all fees
and expenses of legal counsel. All amounts paid by any Indemnitee pursuant to
which the Indemnitee has a right to be reimbursed shall constitute part of the
Debt guaranteed and secured by the Mining Titles hereunder.

          EIGHT. Taxes. The parties expressly agree that any taxes, fees and
other tax obligations established or imposed by applicable tax regulations as
consequence of this Agreement, shall be borne by solely by the Pledgor and to
the extent imposed upon or paid by the Pledgee, shall be a reimbursable
obligation of the Pledgor that constitutes part of the Debt guaranteed and
secured by the Mining Titles hereunder.

          NINTH. Notices. The parties agree that any notice, requirement or any
other communication between the parties in connection with this Agreement shall
be made in writing and shall be delivered personally, by registered or certified
mail, by internationally recognized courier service or by electronic mail (with
written confirmation of receipt), to the contact information indicated below:

 

 

Pledgee:

Pledgor:

 

 

Duane Morris, LLP

U.S. Precious Metals de México, S.A. de C.V.

111 S. Calvert Street, Suite, 2000

Jacaranda 119

Baltimore, MD 21202

Col. Los Angeles

Estados Unidos de América

Michoacan, Morelia, C.P. 58100

Tel.: 410-949-2912

Tel.: 443-343-04-60

Email: kbisaacson@duanemorris.com

Email: dwburney@usprgold.com

Attn: Keli B. Isaacson y/o
Eduardo Ramos Gomez

Attn: David Wayne Burney

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TENTH. Modifications. This Agreement constitutes the entire understanding
between the parties with respect to the subject matter hereof and supersedes any
prior discussions, negotiations or agreements, whether verbally or in writing.
The parties expressly agree that this Agreement may not be modified in whole or
in part unless by written agreement between the parties. There are no other
terms or conditions, whether expressed or implied, written or verbal, between
the parties with respect to the subject matter hereof.

ELEVENTH. Headings. The parties agree that the headings of each clause of this
Agreement are for reference purposes only and that such headings shall not
affect the interpretation of this Agreement.

TWELFTH. Governing Law and Jurisdiction. This Agreement shall be governed and
construed pursuant to the applicable provisions of the Commerce Code and the
Credit Law in force and effect, and for the interpretation and enforcement of
this Agreement both parties submit themselves to the jurisdiction of the courts
located in Mexico City, Federal District, expressly waiving any other
jurisdiction which may correspond to them by reason of their present or future
domiciles or otherwise.

THIRTEENTH. Assignment. The Pledgor may not assign this Agreement or any of its
rights or obligations hereunder without the prior written consent of the
Pledgee. The Pledgee may freely assign this Agreement and/or any of its rights
or obligations hereunder without the consent of the Pledgor.

FOURTEENTH. Waiver. No waiver by any of the parties of any of the provisions of
this Agreement shall be deemed a waiver of any other provision or any subsequent
breach of such provision or any other provision, including the time of execution
of such provision. The exercise by one of the parties of any right set forth in
this Agreement or provided by law shall not impede the exercise by such party of
any other right set forth herein or provided by law.

FIFTEENTH. Severability. If any provision or part of any provision of this
Agreement shall for any reason be held invalid, illegal, or unenforceable in any
applicable jurisdiction, such invalidity, illegality, or unenforceability shall
not affect any other provisions or the remaining part of any effective
provisions of this Agreement, and such invalidity, illegality, or
unenforceability shall not invalidate such provision in any other jurisdiction,
and this Agreement shall be construed as if such invalid, illegal, or
unenforceable provision or part thereof had never been contained herein, but
only to the extent of its invalidity, illegality, or unenforceability.

SIXTEENTH. Counterparts. This Agreement is executed in two or more counterparts
in English and Spanish versions, each of the same is and shall remain one and
the same instrument. In the event of controversy in the interpretation of this
Agreement, the Spanish version shall prevail.

SEVENTEENTH. Incorporation of Background and Representations. The Background
paragraphs and Representations paragraphs set forth above are true and correct
and are incorporated herein by reference and made a binding part of this
Agreement as though fully set forth herein.

[SIGNATURE PAGE FOLLOWS]

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          IN VIEW OF THE FOREGOING, the parties have executed this Agreement as
of the date first written above.

 

 

 

 

 

 

“PLEDGEE”

 

 

“PLEDGOR”

 

Duane Morris LLP

 

 

U.S. Precious Metals de México,

 

 

 

 

S.A de C.V.

 

 

 

 

 

By:

/s/ Keli B. Isaacson

 

By:

/s/ David Wayne Burney

 

 

 

 

 

Name: Keli B. Isaacson

 

Name: David Wayne Burney

Title: Partner

 

Title: Attorney-In-Fact

Mining Titles Pledge Agreement

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EXHIBIT A

MINING CONCESSION TITLES

 

 

 

 

 

 

 

 

 

LOT

 

HECTARES

TITLE

TYPE OF CONCESSION

TERM

LOCATION

               

1

Solidaridad

 

174.5408

220315

Exploitation

July 10, 2053

Caracuaro Michoacan

               

2

Solidaridad II

 

2,162.2311

220503

Exploitation

August 13,2053

Caracuaro Michoacan

               

3

Solidaridad II Fracción A

 

1.4544

220504

Exploitation

August 13,2053

Caracuaro Michoacan

               

4

Solidaridad II Fracción B

 

0.0072

220505

Exploitation

August 13,2053

Caracuaro Michoacan

               

5

Solidaridad III

 

294.0620

223444

Exploitation

December 13, 2054

Caracuaro Michoacan

               

6

Solidaridad 4

 

149.4244

220612

Exploitation

September 3, 2053

Caracuaro Michoacan

               

7

La Ceiba

 

921.3201

223119

Exploitation

October 18, 2054

Caracuaro Michoacan

               

8

La Sabila

 

11405

227272

Exploitation

June 1st, 2056

Caracuaro Michoacan

               

Mining Titles Pledge Agreement

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