PROMISSORY NOTE

AND SECURITY AGREEMENT

  

 

US $300,000.00 Las Vegas, Nevada

October 22, , 2013

 

For good and valuable consideration, Crown Alliance Capital Limited, a Nevada
corporation with an address of 2985 Drew Road Suite 217, Mississauga, ON L4T
OA4, Canada (“Maker”), hereby makes and delivers this Promissory Note and
Security Agreement (this “Note”) in favor of Cyril Lacko in Trust, an individual
, or its assigns (“Holder”), and hereby agree as follows:

 

1. Principal Obligation and Interest. For value received, Maker promises to pay
to Holder at _______________[Holder Address], or at such other place as Holder
may designate in writing, in currently available funds of the United States, the
principal sum of Three Hundred Hundred Thousand U.S. DOLLARS ($300,000). Maker’s
obligation under this Note shall accrue simple interest at the rate of FIFTEEN
PERCENT (15%) per annum from the date hereof until paid in full. Interest shall
be computed on the basis of a 365-day year or 366-day year as applicable, and
actual days lapsed.

 

2. Payment Terms.

 

Monthly payments of accrued interest shall be made by the Maker to the Holder on
the last day of each calendar month, commencing November 30, 2013, each in the
amount of Three Thousand Seven Hundred US Dollars. (along with each monthly
payment, the Maker shall provide confirmation to the that the policy is in force
and that all premiums are current or allow the Holder direct access to John
Hancock's insurance system to confirm this directly. )

 

Payment of all remaining accrued and unpaid interest and principal shall be due
and payable as follows:

 

$300,000 plus any remaining interest shall be paid upon the maturity event of
the John Hancock life insurance policy which secures this obligation directly
from the insurer.

 

But in no event shall these amounts be paid later than March 30, 2017.

 

If not so paid, at the option of the Holder all principal and interest shall
become immediately due and payable. All payments shall be applied first to late
charges, then to interest, then to principal and shall be credited to the
Maker's account on the date that such payment is physically received by the
Holder.

 

 

 

Maker shall have the right to prepay this Note without penalty.

 

3. Grant of Security Interest. As collateral security for the prompt, complete,
and timely satisfaction of all present and future indebtedness, liabilities,
duties, and obligations of Maker to Holder evidenced by or arising under this
Note, and including, without limitation, all principal and interest payable
under this Note, any future advances added to the principal amount due
hereunder, and all attorneys’ fees, costs and expenses incurred by Holder in the
collection or enforcement of the same (collectively, the “Obligations”), Maker
hereby pledges, assigns and grants to Holder a continuing security interest and
lien in all of Maker’s right, title and interest in and to certain life
insurance policies, including the proceeds of any disposition thereof, described
on Exhibit “A” attached hereto and incorporated herein by this reference
(collectively, the “Collateral”). As applicable, the terms of this Note with
respect to Maker’s granting of a security interest in the Collateral to Holder
shall be deemed to be a security agreement under applicable provisions of the
Uniform Commercial Code (“UCC”), with Maker as the debtor and Holder as the
secured party.

 

4. Perfection. Upon the execution and delivery of this Note, Maker shall file an
instruction for change of Beneficiary of the Collateral with John Hancock Life
Insurance Co., adding Holder as a 15% direct payee on the secured policy
Collateral. Additionally, Holder shall be authorized to file such financing
statements and other documents in such offices as shall be necessary or as
Holder may reasonably deem necessary to perfect and establish the priority of
the liens granted by this Note, including any amendments, modifications,
extensions or renewals thereof. Maker agrees, upon Holder’s request, to take all
such actions as shall be necessary or as Holder may reasonably request to
perfect and establish the priority of the liens granted by this Note, including
any amendments, modifications, extensions or renewals thereof.

 

5. Representations and Warranties of Maker. Maker hereby represents and warrants
the following to Holder:

 

a. Maker and those executing this Note on its behalf have the full right, power,
and authority to execute, deliver and perform the Obligations under this Note,
which are not prohibited or restricted under the articles of incorporation or of
Maker. This Note has been duly executed and delivered by an authorized officer
Maker and constitutes a valid and legally binding obligation of Maker
enforceable in accordance with its terms.

 

b. The execution of this Note and Maker’s compliance with the terms, conditions
and provisions hereof does not conflict with or violate any provision of any
agreement, contract, lease, deed of trust, indenture, or instrument to which
Maker is a party or by which Maker is bound, or constitute a default thereunder
or result in the imposition of any lien, charge, encumbrance, claim or security
interest of any nature whatsoever upon any of the Collateral.

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c. The security interest granted hereby in and to the Collateral constitutes a
present, valid, binding and enforceable security interest as collateral security
for the Obligations, and, except as to leased equipment or purchase-money
encumbrances existing as of the date of this Note as expressly disclosed to
Holder in writing, such interests, upon perfection, will be senior and prior to
any liens, encumbrances, charges, title defects, interests and rights of any
others with respect to such Collateral.

 

6. Covenants of Maker. For so long as any Obligations remain outstanding:

 

a.                   Maker shall use the proceeds of this Note as working
capital for general corporate purposes;

 

b.                   Maker shall not sell, assign or transfer any of the
Collateral, or any part thereof or interest therein;

 

c.                    Maker shall pay or cause to be paid promptly when due all
taxes and assessments on the Collateral; and

 

d.                   Maker shall keep Holder apprised, in writing, as to the
current location of all of the Collateral, providing Holder with current
information including any identifying policy numbers with respect to the
Collateral so the Holder may perfect and maintain the priority of its security
interest therein.

 

7. Use of Collateral. For so long as no event of default shall have occurred and
be continuing under this Note, Maker shall be entitled to use and possess the
Collateral and to exercise its rights, title and interest in all contracts,
agreements, and licenses subject to the rights, remedies, powers and privileges
of Holder under this Note and to such use, possession or exercise not otherwise
constituting an event of default. Notwithstanding anything herein to the
contrary, Maker shall remain liable to perform its duties and obligations under
the contracts and agreements included in the Collateral in accordance with their
respective terms to the same extent as if this Note had not been executed and
delivered; the exercise by Holder of any right, remedy, power or privilege in
respect of this Note shall not release the Maker from any of its duties and
obligations under such contracts and agreements; and Holder shall have no duty,
obligation or liability under such contracts and agreements included in the
Collateral by reason of this Note, nor shall Holder be obligated to perform any
of the duties or obligations of Maker under any such contract or agreement or to
take any action to collect or enforce any claim (for payment) under any such
contract or agreement.

 

8. Defaults. The following shall be events of default under this Note:

 

a. Maker’s failure to remit any payment under this Note on before the date due,
if such failure is not cured in full within five (5) days of written notice of
default;

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b. Maker’s failure to perform or breach of any non-monetary obligation or
covenant set forth in this Note or in any other written agreement between Maker
and Holder if such failure is not cured in full within ten (10) days following
delivery of written notice thereof from Holder to Maker;

 

c. If Maker is dissolved, whether pursuant to any applicable articles of
incorporation or bylaws and/or any applicable laws, or otherwise;

 

d. Default in the Maker’s obligation for borrowed money, other than this Note,
which shall continue for a period of twenty (20) days;

 

e. The commencement of any action or proceeding which affects the Collateral or
title thereto or the interest of Holder therein, including, but not limited to
eminent domain, insolvency, code enforcement or arrangements or proceedings
involving a bankrupt or decedent;

 

f. The entry of a decree or order by a court having jurisdiction in the premises
adjudging the Maker bankrupt or insolvent, or approving as properly filed a
petition seeking reorganization, arrangement, adjustment or composition of or in
respect of the Maker under the federal Bankruptcy Code or any other applicable
federal or state law, or appointing a receiver, liquidator, assignee or trustee
of the Maker, or any substantial part if its property, or ordering the winding
up or liquidation of its affairs, and the continuance of any such decree or
order unstayed and in effect for a period of twenty (20) days;

 

g. Maker’s institution of proceedings to be adjudicated a bankrupt or insolvent,
or the consent by it to the institution of bankruptcy or insolvency proceedings
against it, or its filing of a petition or answer or consent seeking
reorganization or relief under the federal Bankruptcy Code or any other
applicable federal or state law, or its consent to the filing of any such
petition or to the appointment of a receiver, liquidator, assignee or trustee of
the company, or of any substantial part of its property, or its making of an
assignment for the benefit of creditors or the admission by it in writing of its
inability to pay its debts generally as they become due, or the taking of
corporate action by the Maker in furtherance of any such action; or

 

9. Rights and Remedies of Holder. Upon the occurrence of an event of default by
Maker under this Note then, in addition to all other rights and remedies at law
or in equity, Holder may exercise any one or more of the following rights and
remedies:

 

a. Accelerate the time for payment of all amounts payable under this Note by
written notice thereof to Maker, whereupon all such amounts shall be immediately
due and payable.

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b. Pursue and enforce all of the rights and remedies provided to a secured party
with respect to the Collateral under the Uniform Commercial Code.

 

c. Require Maker to assemble the Collateral and make it available to the Holder
at the place to be designated by the Holder which is reasonably convenient to
both parties. The Holder may sell all or any part of the Collateral as a whole
or in part either by public auction, private sale, or other method of
disposition. The Holder may bid at any public sale on all or any portion of the
Collateral. Unless the Collateral threatens to decline speedily in value, Holder
shall give Maker reasonable notice of the time and place of any public sale or
of the time after which any private sale or other disposition of the Collateral
is to be made, and notice given at least 10 days before the time of the sale or
other disposition shall be conclusively presumed to be reasonable.

 

d. Pursue any other rights or remedies available to Holder at law or in equity.

 

10. Full Recourse. The liability of Maker for the Obligations shall not be
limited to the Collateral, and Maker shall have full liability therefor beyond
the Collateral.

 

11. Representation of Counsel. Maker acknowledges that they have consulted with
or have had the opportunity to consult with Maker’s legal counsel prior to
executing this Note. This Note has been freely negotiated by Maker and Holder
and any rule of construction to the effect that any ambiguities are to be
resolved against the drafting party shall not be employed in the interpretation
of this Note.

 

12. Choice of Laws; Actions. This Note shall be constructed and construed in
accordance with the internal substantive laws of the State of Nevada, without
regard to the choice of law principles of said State. Maker acknowledges that
this Note has been negotiated in Clark County, Nevada. Accordingly, the
exclusive venue of any action, suit, counterclaim or cross claim arising under,
out of, or in connection with this Note shall be the state or federal courts in
Clark County, Nevada. Maker hereby consents to the personal jurisdiction of any
court of competent subject matter jurisdiction sitting in Clark County, Nevada.

 

13. Usury Savings Clause. Maker expressly agrees and acknowledges that Maker and
Holder intend and agree that this Note shall not be subject to the usury laws of
any state other than the State of Nevada. Notwithstanding anything contained in
this Note to the contrary, if collection from Maker of interest at the rate set
forth herein would be contrary to applicable laws of such State, then the
applicable interest rate upon default shall be the highest interest rate that
may be collected from Maker under applicable laws at such time.

 

14. Costs of Collection. Should the indebtedness represented by this Note, or
any part hereof, be collected at law, in equity, or in any bankruptcy,
receivership or other court proceeding, or this Note be placed in the hands of
any attorney for collection after default, Maker agrees to pay, in addition to
the principal and interest due hereon, all reasonable attorneys’ fees, plus all
other costs and expenses of collection and enforcement, including any fees
incurred in connection with such proceedings or collection of the Note and/or
enforcement of Holder’s rights with respect to the administration, supervision,
preservation or protection of, or realization upon, any Collateral securing
payment hereof. 

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15. Miscellaneous.

 

a. This Note shall be binding upon Maker and shall inure to the benefit of
Holder and its successors, assigns, heirs, and legal representatives.

 

b. Any failure or delay by Holder to insist upon the strict performance of any
term, condition, covenant or agreement of this Note, or to exercise any right,
power or remedy hereunder shall not constitute a waiver of any such term,
condition, covenant, agreement, right, power or remedy.

 

c. Any provision of this Note that is unenforceable shall be severed from this
Note to the extent reasonably possible without invalidating or affecting the
intent, validity or enforceability of any other provision of this Note.

 

d. This Note may not be modified or amended in any respect except in a writing
executed by the party to be charged.

 

e. Time is of the essence.

 

16. Notices. All notices required to be given under this Note shall be in
writing and shall be given as follows or at such other address as a party may
designate by written notice to the other parties:

 

To Maker:

Crown Alliance Capital Limited

Attn:

 

To Holders:

Cyril Lacko in Trust

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With a copy to (which shall not constitute notice):

 

Cane Clark LLP

Attn: Kyleen E. Cane

3273 E Warm Springs RD

Las Vegas, NV 89120

(702) 944-7100 (fax) 

 

Notices may be transmitted by facsimile, certified mail, private delivery, or
any other commercially reasonable means, and shall be deemed given upon receipt
by the Party to whom they are addressed.

 

 

17. Waiver of Certain Formalities. All parties to this Note hereby waive
presentment, dishonor, notice of dishonor and protest. All parties hereto
consent to, and Holder is hereby expressly authorized to make, without notice,
any and all renewals, extensions, modifications or waivers of the time for or
the terms of payment of any sum or sums due hereunder, or under any documents or
instruments relating to or securing this Note, or of the performance of any
covenants, conditions or agreements hereof or thereof or the taking or release
of collateral securing this Note. Any such action taken by Holder shall not
discharge the liability of any party to this Note.

 

18. Further Assurances. Maker shall execute and deliver all documents, provide
all information and take or forbear from all such action as may be necessary or
appropriate to achieve the purposes of this Note.

 

 

[signature pages follow] 

 

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IN WITNESS WHEREOF, this Note has been executed effective the date and place
first written above.

 

“Maker”: CROWN ALLIANCE CAPITAL LIMITED

 

By: /s/ Lorraine Fusco 

Its: President and CEO 

Print Name: Lorraine Fusco

Date: October 24, 2013

 

 

“Holder”:Cyril Lacko in Trust

 

 

By: /s/ Cyril Lacko in Trust

Its: Authorized Signatory

Print Name: Cyril Lacko in Trust

Date: October 25, 2013

 

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Exhibit “A”

 

Collateral

 

 

The Collateral shall constitute :

 

John Hancock life insurance policy #UL 1200324 1924 in the amount of
$2,000,000.00 USD (insured F. Kelly dob October 21, 1924);

 

 

And all proceeds thereof. 

 

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