CONVERTIBLE PROMISSORY
NOTE





$500,000
                Issue
      Date: May 12, 2009





FOR VALUE RECEIVED, GoldSpring, Inc., a Nevada
corporation, having an address at 1200 American Flat Road, P.O. Box 1118,
Virginia City, NV 89440  (the “Borrower”), promises to pay to
the order of Grenville Finance LTD, an entity having an address at C/o LH
Financial Services Corp 150 CPS New York, NY 10019 (the “Lender”), the principal sum of
Five Hundred Thousand ($500,000) DOLLARS (the “Principal”).





This Note is being issued in accordance
with the terms and conditions set forth in a Loan Agreement, by and between the
Borrower and the Lender, dated May 12, 2009 (the “Loan
Agreement”).  All of the agreements, conditions, covenants,
provisions and stipulations contained in the Loan Agreement are hereby made a
part of this Note to the same extent and with the same force and effect as if
they were fully set forth herein.  Each capitalized term used herein,
and not otherwise defined, shall have the meaning ascribed thereto in the Loan
Agreement.





The Principal shall be due and payable
on May 12, 2012, representing the third anniversary of the Issue Date (the
“Maturity Date”), to be
accompanied by payment of any remaining accrued and unpaid Interest thereon (as
determined below).





The unpaid Principal from time to time
outstanding on this Note shall bear interest at the rate of Nine (9%) Percent
per annum (“Interest”),
computed on the basis of the actual number of days elapsed in a year of 360
days.  Interest shall be payable quarterly in arrears on the unpaid
Principal of on each March 31, June 30, September 30 and December 31, after the
date of this Note, up until the Maturity Date (each such payment, an “Interest
Payment”).  Each Interest Payment shall be made, at the
Lender’s option, in either cash or shares of Common Stock of the
Borrower.  If the Interest Payment is made in shares of the Borrower’s
Common Stock, the number of shares to be received by the Lenders shall be
determined as set forth in Article I, Section 2(d)(ii) of the Loan
Agreement.





Any Interest not paid when due
hereunder shall be added to the Principal of this Note and shall bear interest
from its due date at the applicable interest rate specified above.





Upon the maturity hereof, by
acceleration or otherwise, and/or after judgment, interest shall be payable at
the rate of Twelve (12%) Percent per annum or at the judgment rate, whichever is
higher, until the obligation is paid in full.  In addition, all costs
and expenses incurred by the Lender, including, but not limited to, reasonable
attorneys' fees and disbursements, as a result of a default hereunder, shall be
added to the Principal due hereunder.


1





Notwithstanding any provision contained
herein or in the Loan Agreement, the total liability of Borrower for payment
pursuant hereto, including, without limitation late charges, shall not exceed
the maximum amount of interest permitted by law to be charged, collected, or
received from Borrower, and if any payments by Borrower include interest in
excess of such a maximum amount, the Lender shall apply such excess to the
reduction of the unpaid Principal due pursuant hereto, or if none is due, such
excess shall be refunded to Borrower.





The Principal amount of this Note, and
any Interest accrued thereon, shall be convertible into shares of Common Stock
of the Borrower pursuant to Article I, Section 2(d) of the Loan
Agreement.





The Borrower shall have the right to
prepay all or any portion of the Principal of this Note, pursuant to Article I,
Section 4 of the Loan Agreement.





All payments made by the Borrower to
the Lender hereunder shall be applied as further set forth in the Loan
Agreement.





The entire unpaid Principal balance,
together with accrued Interest, shall become forthwith due and payable on demand
of the holder upon the occurrence of any Event of Default, as further set forth
in Article VI of the Loan Agreement.  The failure to assert this right
shall not be deemed a waiver thereof.





This Note is secured by a Security
Agreement, by and between the Borrower and the Lender, dated as of May 7, 2009
(the “Security
Agreement”).  All of the agreements, conditions, covenants,
provisions and stipulations contained in the Security Agreement are hereby made
a part of this Note to the same extent and with the same force and effect as if
they were fully set forth herein.  In addition, the Lender and certain
other lenders of the Borrower’s (the “Additional Lenders”) have
entered into an Intercreditor Agreement, dated as of May 7, 2009 (the “Intercreditor Agreement”),
pursuant to which they have agreed that their security interests in, and lien
against, the collateral referred to in the Security Agreement be in the same
priority position, notwithstanding the different dates and times of recording
and/or perfection of their respective security interests.  All of the
agreements, conditions, covenants, provisions and stipulations contained in the
Intercreditor Agreement are hereby made a part of this Note to the same extent
and with the same force and effect as if they were fully set forth
herein.





The
Borrower shall pay all of Lender’s reasonable expenses incurred to enforce or
collect any of the amounts due under this Note including, without limitation,
reasonable arbitration, paralegals’, attorneys’ and experts’ fees and expenses,
whether incurred without the commencement of a suit, in any trial, arbitration,
or administrative proceeding, or in any appellate or bankruptcy
proceeding.





The
Borrower and all endorsers, sureties, and guarantors hereof, jointly and
severally waive presentment, demand for payment, notice of dishonor, notice of
protest and protest, and all other notices or demands in connection with the
delivery, acceptance, performance, default, endorsement or guaranty of this
instrument.


2





Notwithstanding
any provision contained herein or in the Loan Agreement, the total liability of
Borrower for payment of interest pursuant hereto, including late charges, shall
not exceed the maximum amount of such interest permitted by law to be charged,
collected, or received from Borrower, and if any payments by Borrower include
interest in excess of such a maximum amount, Lender shall apply such excess to
the reduction of the unpaid principal amount due pursuant hereto, or if none is
due, such excess shall be refunded to Borrower.





This Note
shall be construed and enforced in accordance with the laws of the State of New
York.  The undersigned hereby consents to the in personam jurisdiction
of the courts of the State of New York.  Wherever possible each
provision of this Note shall be interpreted in such manner as to be effective
and valid under applicable law, but if any provision of this Note shall be
prohibited by or invalid under applicable law, such provisions shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provisions or the remaining provisions of
this Note.


GOLDSPRING,
      INC.By:Name:
      Robert T. FaberTitle:
      President







LOAN
AGREEMENT





THIS LOAN AGREEMENT(the
“Loan
Agreement”), is dated as of the 12 day of May, 2009, by and among
GoldSpring, Inc., a Nevada corporation, having an address at 1200 American Flat
Road, P.O. Box 1118, Virginia City, NV 89440 (the “Borrower”) and
Grenville Finance LTD, a Liechtenstein corporation, having an address at C/o LH
Financial Services Corp, 150 CPS, New York, NY 10019 (the “Lender”).





WITNESSETH:





WHEREAS, the Lender wishes to
loan the Borrower up to an aggregate of $1,000,000 (collectively, the “Loans”) and, in
consideration therefor, the Borrower wishes to issue to the Lender, upon the
terms and conditions stated in this Loan Agreement: (a) convertible promissory
notes of up to an aggregate principal amount of $1,000,000 (each, a “Note” and,
collectively, the “Notes”), in
substantially the form attached hereto as Exhibit
A; and (b) warrants to purchase up to an aggregate of 40,000,000 shares
of the Company’s Common Stock, at an exercise price of $0.02 per share (“Warrants”), in
substantially the form attached hereto as Exhibit
B; and


3





WHEREAS, (a) not less than an
aggregate of $250,000 of Notes and 10,000,000 Warrants; and (b) not more than an
aggregate of $1,000,000 of Notes (the “Maximum Loan Amount”)
and 40,000,000 Warrants, may be issued in connection with the Loans;
and





WHEREAS, in order to further
induce the Lender to make the Loans to the Borrower, the Borrower is willing to
grant to the Lender a security interest in all of its assets, pari passu with the existing
security interests the Borrower granted to (a) Brockbank Trust (the “Brockbank Interest”);
and (b) certain lenders (the “Additional Lenders”)
as of March 31, 2005, July 15, 2005, August 23, 2006, December 12, 2007 and June
23, 2008, as set forth on Schedule
A hereto (the “Additional Lenders’
Interests”).





NOW, THEREFORE, it is agreed
as follows:





ARTICLE
I





COMMITMENT
OF LENDER;


BORROWING
CONDITIONS





1.Commitment.  Subject to the
terms and conditions of this Loan Agreement, the Lender hereby agrees to make
Loans to the Borrower as follows:





(a)On
the date of execution of this Agreement (the “Effective Date”), the
Borrower shall request a Loan from the Lender, and the Lender shall make a Loan
to the Borrower, of not less than an aggregate of $250,000, or greater than an
aggregate of $500,000.





(b)At
any time between the Effective Date and the sooner to occur of (a) such time as
the Maximum Loan Amount has been made, or (b) the 120th day
following the Effective Date (the “Termination Date”),
the Borrower shall have the right, upon 30 days prior written notice, to request
additional Loans from the Lender of not less than an aggregate principal amount
of $250,000, or more than an aggregate principal amount of $500,000, and upon
receipt of such written notice, the Lender shall make such additional Loans to
the Borrower.





(c)The
obligation of the Lender to make additional Loans to the Borrower, and of the
Borrower to issue additional Notes and Warrants to the Lender, shall terminate
automatically on the Termination Date.





(d)The
actual date on which the Borrower receives any Loans from the Lender shall be
referred to herein on a case-by-case basis as the “Loan Date.”


4





(e)It
shall be a condition precedent to the Lender’s obligation to make any Loans to
the Borrower, as detailed in this Article I, Section 1, that at the time such
Loan is requested, there shall be no Event of Default, or event which with the
passage of time would become an Event of Default, as such term is defined
hereunder, or under any other agreement between the Borrower and the
Lender.





2.           Promissory
Notes.





(a)General.  The Loans shall
be evidenced by the Notes issued by the Borrower to the Lender, in the aggregate
principal amount of up to $1,000,000 (the “Principal”).  The
Principal of each Note, shall be payable on or prior to the three (3) year
anniversary of the respective Loan Date (each, a “Maturity
Date”).





(b)Interest.  The unpaid
Principal from time to time outstanding on the Notes shall bear interest at the
rate of Nine (9%)Percent per annum
(“Interest”),
computed on the basis of the actual number of days elapsed in a year of 360
days.  Interest shall be payable quarterly in arrears on the unpaid
Principal of each Note on each March 31, June 30, September 30 and December 31,
after the date of each Note, up until the respective Maturity Date (each such
payment, an “Interest
Payment”).  Each Interest Payment shall be made, at the
Lender’s option, in either cash or Common Stock of the Borrower.  If
the Interest Payment is made in shares of Common Stock, the number of shares to
be received by the Lender shall be determined as set forth in Section 2(d)(ii)
hereof.  If an Interest Payment is made in Common Stock of the
Borrower, the Borrower covenants such Common Stock shall be freely transferable
and issued without a restrictive legend, subject to the Lender’s compliance with
Rule 144 (“Rule
144”) of the Securities Act of 1933, as amended (the “Act”).





Upon the maturity of a Note, by
acceleration or otherwise, and/or after judgment, interest shall be payable at
the rate of Twelve (12%) Percent per annum or at the judgment rate, whichever is
higher, until the obligation is paid in full.





(c)           Maximum
Payment.  Notwithstanding
any provision contained herein or in the Notes, the total liability of Borrower
for payment pursuant hereto, including, without limitation late charges, shall
not exceed the maximum amount of interest permitted by law to be charged,
collected, or received from Borrower, and if any payments by Borrower include
interest in excess of such a maximum amount, Lender shall apply such excess to
the reduction of the unpaid principal amount due pursuant hereto, or if none is
due, such excess shall be refunded to Borrower.


5





(d)Conversion
Rights.




(i)Conversion.  Subject
to Section 2(d)(iii) below, the Lender shall have the right at any time,
and from time to time, commencing on the six (6) month anniversary of each Loan
Date, and on or prior to such time as all Principal and Interest due under the
Lender’s Note has been repaid, to convert all or any part of the outstanding and
unpaid Principal of a Note issued on each such Loan Date, and any Interest, when
due and payable, into fully paid and non-assessable shares of Common Stock (the
“Conversion
Shares”) of the Borrower, as such Common Stock exists on the Loan Date,
or any shares of capital stock or other securities of the Borrower into which
such Common Stock shall hereafter be changed or reclassified at the Conversion
Price (as defined in Section 2(d)(ii) below) determined as provided herein (a
“Conversion”);
provided, however, that in no
event shall the Lender be entitled to convert any portion of the Principal or
Interest in excess of that portion upon conversion of which the sum of (1) the
number of shares of Common Stock beneficially owned by the Lender and its
affiliates (other than shares of Common Stock which may be deemed beneficially
owned through the ownership of the unconverted portion of the Principal or
Interest, or the unexercised or unconverted portion of any other security of the
Borrower subject to a limitation on conversion or exercise analogous to the
limitations contained herein) and (2) the number of Conversion Shares issuable
upon the Conversion of the portion of the Principal or Interest due under the
Note with respect to which the determination of this proviso is being made,
would result in beneficial ownership by the Lender and its affiliates of more
than 4.9% of the outstanding shares of Common Stock.  For purposes of
the proviso to the immediately preceding sentence, beneficial ownership shall be
determined in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended, and Regulations 13D-G thereunder, except as otherwise provided
in clause (1) of such proviso.  The Lender may waive the
limitations set forth herein at its sole and absolute discretion by written
notice of not less than sixty-one (61) days to the
Borrower.





The
number of Conversion Shares to be issued upon each Conversion shall be
determined by dividing the Conversion Amount (as defined below) by the
applicable Conversion Price in effect on the date of the notice of conversion,
in the form attached hereto as ExhibitC
(the “Notice of
Conversion”), is delivered to the Borrower by the Lender in accordance
with subsection (v) below (the “Conversion
Date”).  The term “Conversion Amount” means, with respect to
any Conversion, the sum of (1) the outstanding Principal of such Note to be
converted in such Conversion, plus (2) accrued and
unpaid Interest, if any, on such outstanding Principal at the interest rates
provided in such Note to the Conversion Date, plus (3) default
interest, if any, on the amounts referred to in the immediately preceding
clauses (1) and/or (2) plus (4) at the
Lender’s option, any other amounts owed to the Lender pursuant to such Note.


6




(ii)Conversion
Price. The
term “Conversion Price” as used herein shall be equal to the lesser of (A)
$.0125 per share, or (B) .85 multiplied by the “Volume Weighted Average Price”
for the Borrower’s Common Stock for the five trading days immediately prior to
the Conversion Date.  For the purposes hereof, the “Volume Weighted
Average Price” or “VWAP” for any security as of any date means the volume
weighted average sale price on the Principal Market, as reported by, or as
calculated based upon data reported by, Bloomberg Financial Markets or an
equivalent, reliable reporting service mutually acceptable to and hereafter
designated by Lender of a majority in interest of the Notes and the Borrower
(“Bloomberg”)
or, if no volume weighted average sale price is reported for such security, then
the last closing trade price of such security as reported by Bloomberg, or, if
no last closing trade price is reported for such security by Bloomberg, the
average of the closing trade prices of any market makers for such security that
are listed in the “pink sheets” by the National Quotation Bureau,
Inc.  If the Volume Weighted Average Price is to be determined over a
period of more than one Trading Day, then Volume Weighted Average Price for the
period shall mean the volume weighted average of the daily Volume Weighted
Average Prices, determined as set forth above, for each Business Day during the
period.





Upon a Conversion, in the event of any
deficiency of any amounts due the Lender hereunder, Borrower agrees to pay
Lender, at Lender’s option any such deficiency in cash.  If the Lender
elects to be paid such deficiency in Common Stock, such Common Stock shall be
valued at the Conversion Price then in effect.




(iii)Application
of Conversion Amounts. Unless otherwise specified by the Lender or set
forth herein, any amounts converted by the Lender pursuant to subsection
(i) or paid by the Borrower shall be deemed to constitute payments of and
applied, (1) first, to any amounts owed other than accrued and unpaid Interest
(2) second, against accrued and unpaid Interest, and (3) third, against the
Principal.


7




(iv)Authorized
Shares.  For so long as the conversion right exists, the
Borrower has reserved and will continue to reserve (and, from time to time,
amend its governing documents so as to maintain reserved) from its authorized
and unissued Common Stock a sufficient number of shares, free from preemptive
rights, to provide for the issuance of Common Stock upon the full conversion of
such Note and all other convertible securities, options or warrants of the
Borrower.  As of the date of issuance of such Note, the Borrower has a
sufficient number of authorized and unissued shares of Common Stock that have
been duly reserved for issuance upon conversion of such Note and such other
securities  (the “Reserved
Amount”).  The Borrower represents that upon issuance, such
shares will be duly and validly issued, fully paid and
non-assessable.  In addition if the Borrower shall issue any
securities or make any change to its capital structure which would change the
number of shares of Common Stock into which such Note shall be convertible at
their then current conversion price, the Borrower shall at the same time make
proper provision so that thereafter there shall be a sufficient number of shares
of Common Stock authorized and reserved, free from preemptive rights, for
conversion of such Note.  The Borrower agrees that the issuance of
such Note by Borrower and execution hereof by Borrower shall constitute full
authority to its officers and agents who are charged with the duty of executing
stock certificates to execute and issue the necessary certificates for shares of
Common Stock in accordance with the terms and conditions of such
Note.





If, at any time the Lender submits
a Notice of Conversion, and the Borrower does not have sufficient authorized but
unissued shares of Common Stock available to effect such Conversion in
accordance with the provisions of this Section 2(d) (a “Conversion Default”),
the Borrower shall issue to the Lender all of the shares of Common Stock which
are then available to effect such Conversion.  The portion of such
Note which the Lender included in its Conversion Notice and which exceeds the
amount which is then convertible into available shares of Common Stock (the
“Excess
Amount”) shall, notwithstanding anything to the contrary contained
herein, not be convertible into Common Stock in accordance with the terms hereof
until (and at the Lender’s option at any time after) the date additional shares
of Common Stock are authorized by the Borrower to permit such
Conversion.  The Borrower shall use its best efforts to authorize a
sufficient number of shares of Common Stock as soon as practicable following the
earlier of (A) such time that the Lender notifies the Borrower or that the
Borrower or Borrower otherwise becomes aware that there are or likely will be
insufficient authorized and unissued shares to allow full conversion thereof and
(B) a Conversion Default.  The Borrower shall send notice to the
Lender of the authorization of additional shares of Common Stock, and the
authorization date.





Nothing herein shall limit the Lender’s
right to pursue actual damages against Borrower for the Borrower’s failure to
maintain a sufficient number of authorized shares of Common Stock or to repay
such Note, and the Lender shall have the right to pursue all remedies
available at law or in equity (including degree of specific performance and/or
injunctive relief or under any of the Loan
Documents).


8





(v)Method of
Conversion.




(A)Mechanics
of Conversion.Subject to subsection (i), such Note may be converted by the Lender in
whole or in part at any time from time to time, commencing on the six (6) month
anniversary of the Loan Date, by (1) submitting to the Borrower a Notice of
Conversion (by facsimile or other reasonable means of communication dispatched
on the Conversion Date prior to 5:00 p.m., New York, New York time) and (2)
subject to subsection (v)(B), surrendering such Note at the principal office of
the Borrower.




(B)Surrender
of Note Upon Conversion.Notwithstanding
anything to the contrary set forth herein, upon conversion of such Note in
accordance with the terms hereof, the Lender shall not be required to physically
surrender such Note to the Borrower unless the entire unpaid principal amount,
and any interest, penalties and fees due thereon, of such Note is so
converted.  The Borrower shall maintain records showing the principal
amount so converted and the dates of such conversions or shall use such other
method, reasonably satisfactory to the Lender and the Borrower, so as not to
require physical surrender of such Note upon each such
conversion.  Notwithstanding the foregoing, if any portion of such
Note is converted as aforesaid, the Lender may not transfer such Note unless the
Lender first physically surrenders such Note to the Borrower, whereupon the
Borrower will forthwith issue and deliver upon the order of the Lender a new
Note of like tenor, registered as the Lender (upon payment by the Lender of any
applicable transfer taxes) may request, representing in the aggregate the
remaining unpaid principal amount of such Note.  Lender shall have 60
days post transfer in which to return the old Note to Borrower.




THE LENDER AND ANY ASSIGNEE, BY ACCEPTANCE OF SUCH NOTE, ACKNOWLEDGE AND AGREE
THAT, BY REASON OF THE PROVISIONS OF THIS PARAGRAPH, FOLLOWING CONVERSION OF A
PORTION OF SUCH NOTE, THE UNPAID AND UNCONVERTED PRINCIPAL AMOUNT OF SUCH NOTE
REPRESENTED BY SUCH NOTE MAY BE LESS THAN THE AMOUNT STATED ON THE FACE
HEREOF.




(C)Payment
of Taxes.The
Borrower shall not be required to pay any tax which may be payable in respect of
any transfer involved in the issue and delivery of shares of Common Stock or
other securities or property on conversion of such Note in a name other than
that of the Lender (or in street name), and the Borrower or its transfer agent
(the “Transfer
Agent”), as the case may be, shall not be required to issue or deliver
any such shares or other securities or property unless and until the person or
persons (other than the Lender or the custodian in whose street name such shares
are to be held for the Lender’s account) requesting the issuance thereof shall
have paid to the Borrower or the Transfer Agent, as the case may be, the amount
of any such tax or shall have established to the satisfaction of the Transfer
Agent, as the case may be, that such tax has been paid.


9




(D)Delivery
of Common Stock Upon Conversion.Upon receipt by
the Borrower from the Lender of a facsimile transmission (or other reasonable
means of communication) of a Notice of Conversion meeting the requirements for
conversion as provided in this subsection (vi), the Borrower shall issue and
deliver or cause to be issued and delivered to or upon the order of the Lender
certificates for the Common Stock issuable upon such conversion within three (3)
business days (the “Deadline”) after such
receipt in accordance with the terms hereof.




(E)Obligation
of Borrower to Deliver Common Stock.  Upon receipt by the
Borrower of a Notice of Conversion, the Lender shall be deemed to be the holder
of record of the Common Stock issuable upon such conversion (the “Conversion Shares”),
the outstanding Principal and the amount of accrued and unpaid Interest (and any
other unpaid amounts) on such Note shall be reduced to reflect such Conversion,
and, unless the Borrower defaults on its obligations under this Section 2(d),
all rights with respect to the portion of such Note being so converted shall
forthwith terminate except the right to receive the Common Stock or other
securities, cash or other assets, as herein provided, on such
Conversion.  If the Lender shall have given a Notice of Conversion as
provided herein, the Borrower’s obligation to issue and deliver the certificates
for Common Stock shall be absolute and unconditional, irrespective of the
absence of any action by the Lender to enforce the same, any waiver or consent
with respect to any provision thereof, the recovery of any judgment against any
person or any action to enforce the same, any failure or delay in the
enforcement of any other obligation of the Borrower to the holder of record, or
any setoff, counterclaim, recoupment, limitation or termination, or any breach
or alleged breach by the Lender of any obligation to the Borrower, and
irrespective of any other circumstance which might otherwise limit such
obligation of the Borrower to the Lender in connection with such
Conversion.  The Conversion Date with respect to a Notice of
Conversion shall be the date on which the Notice of Conversion is given so long
as the Notice of Conversion is received by the Escrow Agent before 5:00 p.m.,
New York, New York time, on such date; or if received after 5:00 p.m. New York,
New York time the Conversion Date shall be the following date.  Upon
failure of the Borrower to timely deliver the shares of Common Stock issuable
upon any such Conversion, the Lender shall be entitled, as liquidated damages
and not as a penalty, to a cash payment equal to 1.5% of the dollar amount of
any such Conversion for each 30-day period (or pro-rata for any portion thereof)
following the Conversion Date until delivery of the Conversion Shares.


10





(vi)Concerning
the Shares.  The shares of Common Stock issuable upon
conversion of Principal or Interest due pursuant to a Note may not be sold or
transferred unless (A) such shares are sold pursuant to an effective
registration statement under the Act or (B) the Borrower or its Transfer Agent
shall have been furnished with an opinion of counsel (which opinion shall be in
form, substance and scope customary for opinions of counsel in comparable
transactions) to the effect that the shares to be sold or transferred may be
sold or transferred pursuant to an exemption from such registration or (C) such
shares are sold or transferred pursuant to Rule 144 (or a successor rule) or (D)
such shares are transferred to an “affiliate” (as defined in Rule 144) of the
Borrower who agrees to sell or otherwise transfer the shares only in accordance
with this Section 2(d)(vi) and who is an Accredited Investor (as defined in the
Act).  Except as otherwise provided in this Loan Agreement (and
subject to the removal provisions set forth below), until such time as the
shares of Common Stock issuable upon conversion of such Note have been
registered under the Act as contemplated by Article IV hereof or otherwise may
be sold pursuant to Rule 144 without any restriction as to the number of
securities as of a particular date that can then be immediately sold, each
certificate for shares of Common Stock issuable upon conversion of such Note
that has not been so included in an effective registration statement or that has
not been sold pursuant to an effective registration statement or an exemption
that permits removal of the legend, shall bear a legend substantially in the
following form, as appropriate:





“THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED.  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 UNLESS SOLD PURSUANT TO RULE 144
UNDER SAID ACT.”





The
legend set forth above shall be removed and the Borrower shall issue to the
Lender a new certificate therefore free of any transfer legend if (A) the
Borrower or its Transfer Agent shall have received an opinion of counsel, in
form, substance and scope customary for opinions of counsel in comparable
transactions, to the effect that a public sale or transfer of such Common Stock
may be made without registration under the Act, including the provisions of Rule
144 and the shares are so sold or transferred, or (B) in the case of the Common
Stock issuable upon conversion of such Note, such security is registered for
sale by the Lender under an effective registration statement filed under the Act
or otherwise may be sold pursuant to Rule 144 without any restriction as to the
number of securities as of a particular date that can then be immediately
sold.  Nothing in such Note shall limit the Borrower’s obligation
under the Loan Agreement or affect in any way the Lender’s obligations to comply
with applicable prospectus delivery requirements upon the resale of the
securities referred to herein.


11





For
purposes of determining the original date of issuance for Rule 144 “tacking”
purposes, each conversion request shall be construed to apply against that
portion of the principal amount of the Note as of the original Loan
Date.





(vii)Effect of
Certain Events.




(A)Effect of
Merger, Consolidation, Etc.  The sale, conveyance or
disposition of all or substantially all of the assets of the Borrower to any
Person (as defined below) other than to a wholly-owned subsidiary of the
Borrower, the effectuation by the Borrower of a transaction or series of related
transactions in which more than 50% of the voting power of the Borrower is
disposed of, or the consolidation, merger or other business combination of the
Borrower with or into any other Person or Persons when the Borrower is not the
survivor shall:  (i) be deemed to be an Event of Default (as defined
in Article VI) and, at the sole and absolute discretion of Lender, may be
treated pursuant to Section 2(d)(vii)(B) hereof.  “Person” shall mean
any individual, corporation, limited liability company, partnership,
association, trust or other entity or organization.




(B)Adjustment
Due to Merger, Consolidation, Etc.If, at any time when
such Note is issued and outstanding, there shall be any merger, consolidation,
exchange of shares, recapitalization, reorganization, or other similar event, as
a result of which shares of Common Stock of the Borrower shall be changed into
the same or a different number of shares of another class or classes of stock or
securities of the Borrower or another entity, or in case of any sale or
conveyance of all or substantially all of the assets of the Borrower other than
in connection with a plan of complete liquidation of the Borrower and other than
to a wholly-owned subsidiary of the Borrower, then the Lender of such Note shall
thereafter have the right to receive upon conversion of such Note, upon the
basis and upon the terms and conditions specified herein and in lieu of the
shares of Common Stock immediately theretofore issuable upon conversion, such
stock, securities or assets which the Lender would have been entitled to receive
in such transaction had such Note been converted in full immediately prior to
such transaction (without regard to any limitations on conversion set forth
herein), and in any such case appropriate provisions shall be made with respect
to the rights and interests of the Lender of such Note to the end that the
provisions hereof (including, without limitation, provisions for adjustment of
the Conversion Price and of the number of shares issuable upon conversion of the
Note) shall thereafter be applicable, as nearly as may be practicable in
relation to any securities or assets thereafter deliverable upon the conversion
hereof.  The Borrower shall not effect any transaction described in
this Section 2(d)(vii)(B) unless (a) it first gives, to the extent practicable,
thirty (30) days prior written notice (but in any event at least fifteen (15)
days prior written notice) of the record date of the special meeting of
stockholders to approve, or if there is no such record date, the consummation
of, such merger, consolidation, exchange of shares, recapitalization,
reorganization or other similar event or sale of assets (during which time the
Lender shall be entitled to convert such Note or, if such transaction results in
an Event of Default, declare such an Event of Default) and (b) the resulting
successor or acquiring entity (if not the Borrower) assumes by written
instrument the obligations of this Section 2(d)(vii)(B). The above provisions
shall similarly apply to successive consolidations, mergers, sales, transfers or
share exchanges.


12




(C)Adjustment
Due to Distribution.If the Borrower shall
declare or make any distribution of its assets (or rights to acquire its assets)
to holders of Common Stock as a dividend, stock repurchase, by way of return of
capital or otherwise (including any dividend or distribution to the Borrower’s
shareholders in cash or shares (or rights to acquire shares) of capital stock of
a subsidiary (i.e., a spin-off)) (a “Distribution”), then
the Lender of such Note shall be entitled, upon any conversion of such Note
after the date of record for determining shareholders entitled to such
Distribution, to receive the amount of such assets which would have been payable
to the Lender with respect to the shares of Common Stock issuable upon such
conversion had such Lender been the holder of such shares of Common Stock on the
record date for the determination of shareholders entitled to such
Distribution.




(D)Reclassification,
etc.  If the Borrower at any time shall, by reclassification or
otherwise, change the Common Stock into the same or a different number of
securities of any class or classes, such Note, as to the unpaid principal
portion thereof and accrued interest thereon, shall thereafter be deemed to
evidence the right to purchase an adjusted number of such securities and kind of
securities as would have been issuable as the result of such change with respect
to the Common Stock immediately prior to such reclassification or other
change.




(E)Stock
Splits, Combinations and Dividends.  If the shares of Common
Stock are subdivided or combined into a greater or smaller number of shares of
Common Stock, or if a dividend is paid on the Common Stock in shares of Common
Stock, the Conversion Price shall be proportionately reduced in case of
subdivision of shares or stock dividend or proportionately increased in the case
of combination of shares, in each such case by the ratio which the total number
of shares of Common Stock outstanding immediately after such event bears to the
total number of shares of Common Stock outstanding immediately prior to such
event.


13




(F)Purchase
Rights.  If, at any time when such Note is issued and
outstanding, the Borrower issues any convertible securities or rights to
purchase stock, warrants, securities or other property (the “Purchase Rights”) pro
rata to the record holders of its Common Stock, then the Lender of such Note
will be entitled to acquire, upon the terms applicable to such Purchase Rights,
the aggregate Purchase Rights which such Lender could have acquired if such
Lender had held the number of shares of Common Stock acquirable upon complete
conversion of such Note (without regard to any limitations on conversion
contained herein) immediately before the date on which a record is taken for the
grant, issuance or sale of such Purchase Rights or, if no such record is taken,
the date as of which the record holders of Common Stock are to be determined for
the grant, issue or sale of such Purchase Rights.




(G)Spin-Off.
If, at any time while any portion of such Note remains outstanding, the Borrower
spins off or otherwise divests itself of a part of its business or operations or
disposes of all or of a part of its assets in a transaction (the "Spin Off") in which
the Borrower, in addition to or in lieu of any other compensation received and
retained by the Borrower for such business, operations or assets, causes
securities of another entity (the "Spin Off Securities")
to be issued to security holders of the Borrower, the Borrower shall cause to be
reserved Spin Off Securities equal to the number thereof which would have been
issued to the Lender had all of the Lender's Note outstanding on the record date
(the "Record
Date") for determining the amount and number of Spin Off Securities to be
issued to security holders of the Borrower,(the "Outstanding Notes")
been converted as of the close of business on the trading day immediately before
the Record Date (the "Reserved Spin Off
Shares"). Notwithstanding the foregoing, nothing herein shall be demand
to permit any spin off that would result in any Event of Default.




(H)Stock
Issuance.  So long as the Notes are outstanding, if the
Borrower shall issue any Common Stock, prior to the complete repayment or
conversion of the Notes for a consideration less than the Conversion Price that
would be in effect at the time of such issuance, then, and thereafter
successively upon each such issuance, the Conversion Price shall be reduced to
such other lower issue price.  For purposes of this adjustment, the
issuance of any security or debt instrument of the Borrower, carrying the right
to convert such security or debt instrument into Common Stock or of any warrant,
right or option to purchase Common Stock or the modification of any of the
foregoing which may be outstanding shall result in an adjustment to the
Conversion Price upon the modification or issuance of the above-described
security, debt instrument, warrant, right, or option and again upon the issuance
of shares of Common Stock upon exercise of such conversion or purchase rights if
such issuance is at a price lower than the then applicable Conversion
Price.


14





(I)Notice of
Adjustments.  Upon the occurrence of each adjustment or readjustment
of the Conversion Price as a result of the events described herein, the
Borrower, at its expense, shall promptly compute such adjustment or readjustment
and prepare and furnish to the holder of a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based.  The Borrower shall, upon the written
request at any time of the Lender, furnish to such Lender a like certificate
setting forth (i) such adjustment or readjustment, (ii) the Conversion Price at
the time in effect and (iii) the number of shares of Common Stock and the
amount, if any, of other securities or property which at the time would be
received upon conversion of the Note.





(viii)Status as
Stockholder.Upon submission of a Notice of Conversion by the Lender, (A) the shares
covered thereby (other than the shares, if any, which cannot be issued because
their issuance would exceed the Lender’s allocated portion of the Reserved
Amount or Maximum Share Amount) shall be deemed converted into shares of Common
Stock and (B) the Lender’s rights as a Lender of such converted portion of such
Note shall cease and terminate, excepting only the right to receive certificates
for such shares of Common Stock and to any remedies provided herein or otherwise
available at law or in equity to the Lender because of a failure by the Borrower
to comply with the terms of such Note.  Notwithstanding the foregoing, if the
Lender has not received certificates for all shares of Common Stock prior to the
third (3rd) business day after the expiration of the Deadline with respect to a
conversion of any portion of such Note for any reason, then (unless the Lender
otherwise elects to retain its status as a holder of Common Stock by so
notifying the Borrower) the Lender shall regain the rights of a Lender of such
Note with respect to such unconverted portions of such Note and the Borrower
shall, as soon as practicable, return such unconverted Note to the Lender or, if
the Note has not been surrendered, adjust its records to reflect that such
portion of such Note has not been converted.  In all cases, the Lender shall
retain all of its rights and remedies for the Borrower’s failure to convert such
Note including ability to rescind the Notice if delivery is not made in a timely
manner.


15





(ix)Injunction;Posting
of Bond.  In the event the Lender shall elect to convert a Note
or part thereof, the Borrower may not refuse conversion based on any claim that
the Lender or any one associated or affiliated with the Lender has been engaged
in any violation of law, or for any other reason, unless, a final non-appealable
injunction from a court made on notice to the Lender, restraining and or
enjoining conversion of all or part of such Note shall have been sought and
obtained by the Borrower and the Borrower has posted a surety bond for the
benefit of the Lender in the amount of 120% of the outstanding Principal and
accrued but unpaid Interest of the Note, or aggregate purchase price of the
shares which are sought to be subject to the injunction, which bond shall remain
in effect until the completion of arbitration/litigation of the dispute and the
proceeds of which shall be payable to the Lender to the extent the judgment or
decision is in the Lender’s favor.




3.Warrants.  In
connection with each Loan made by the Lender, the Borrower shall issue to the
Lender Warrants to purchase such number of shares of the Borrower’s Common Stock
equal to fifty (50%) percent of the number determined by dividing the applicable
Loan Amount by $.0125, in substantially the form attached hereto as Exhibit
B.  In each case, the Warrants shall have at an exercise price
of $0.02 per share and will expire on the four year anniversary of the date of
issuance.  Pursuant to the terms of this Agreement, not less than an
aggregate of 10,000,000 Warrants, and not more than an aggregate of 40,000,000
Warrants, may be issued in connection with the Loans.




4.Prepayment.  Provided an Event
of Default has not occurred, whether or not such Event of Default has been
cured, the Borrower will have the option of prepaying any or all of the
outstanding Principal (“Optional
Redemption”), in whole or in part, commencing on the six (6) month
anniversary of the applicable Loan Date, and up until the one (1) year
anniversary of the applicable Loan Date, by paying to the Lender a sum of money
equal to one hundred twenty (120%) percent of the Principal Amount to be
redeemed, together with accrued but unpaid interest thereon and any and all
other sums due, accrued or payable to the Lender arising under the Note, this
Agreement or any other document through the Redemption Payment Date, as defined
below (in each case, the "Redemption
Amount").  Borrower’s election to exercise its right to prepay
must be by notice in writing to the Lender (“Notice of
Redemption”).  The Notice of Redemption shall specify the date
for such Optional Redemption (the "Redemption Payment
Date"), which date shall be not less than thirty (30) business days after
the receipt of the Notice of Redemption (the "Redemption Period")
by the Lender.





(b)Within
fifteen (15) days after receipt of a Notice of Redemption, the Lender shall give
written notice to the Borrower electing to do one of the following: (i) convert
the Redemption Amount pursuant to Article I, Section 2(d); or (ii) accept the
Borrower’s offer to prepay the Redemption Amount in accordance with the Notice
of Redemption.  The closing date (in this case, the “Closing Date”) shall
be the last day of the thirty (30) day Redemption Period.  If the
Lender exercises its right to convert the Redemption Amount, then the Borrower’s
offer to prepay the Redemption Amount contained in the Notice of Redemption
shall terminate and shall be of no further force and effect.  In the
event the Lender shall not timely provide the written notice set forth in the
first sentence of this Article I, Section 4(b), then the Borrower shall be
conclusively deemed to have made the election to prepay the Redemption Amount
pursuant to the Notice of Redemption.


16




(c)Following
the one (1) year anniversary of any Loan Date, the Borrower’s right to prepay
the respective Note shall automatically terminate.





5.Additional
Documentation.  In addition to the execution and delivery of
this Loan Agreement, the Notes and the Warrants, the Borrower shall deliver a
Security Agreement to the Lender on or prior to the Closing Date, in
substantially the form of Exhibit
D attached hereto (the “Security Agreement”),
the Intercreditor Agreement (as defined below) and any other documents,
instruments or agreements reasonably requested by the Lender in order to
effectuate the purposes of this Loan Agreement (together with this Loan
Agreement, the Notes, the Warrants, and the Security Agreement, all such
documents and agreements to be hereinafter referred to as the “Loan
Documents”).





ARTICLE
II





SECURITY





All of
the obligations of the Borrower under this Loan Agreement and the Notes shall be
secured by a security interest in and to all assets of the Borrower
(hereinafter, the “Collateral”), pari passu with (a) the
Brockbank Interest, and (b) the Additional Lenders’ Interests, as further set
forth in the Security Agreement and an Intercreditor Agreement by and among the
Borrower, Lender, Brockbank Trust and the Additional Lenders (the “Intercreditor
Agreement”).  The Borrower hereby irrevocably authorizes the
Lender at any time and from time to time to file in any Uniform Commercial Code
jurisdiction any initial financing statements and amendments thereto that (i)
indicate the Collateral regardless of whether any particular asset comprised in
the Collateral falls within the scope of Article 9 of the Uniform Commercial
Code of the State of New York as amended from time to time (“NYUCC”), or any other
Uniform Commercial Code jurisdiction; and (ii) contain any other information
required by part 5 of Article 9 of the NYUCC for the sufficiency or filing
office acceptance of any financing statement or amendment, including whether the
Borrower is an organization, the type of organization and any organization
identification number issued to the Borrower. The Borrower agrees to furnish any
such information to the Lender promptly upon request.  The Borrower
also ratifies its authorization for the Lender to have filed in any Uniform
Commercial Code jurisdiction any like initial financing statements or amendments
thereto if filed prior to the date hereof with respect to the
Collateral.


17





ARTICLE
III





REPRESENTATIONS AND
WARRANTIES OF THE BORROWER





The
Borrower makes the following representations and warranties:





(a)Organization
and Authorization.  The Borrower is a
corporation duly organized, validly existing and in good standing under the laws
of the state of its formation, is duly authorized to transact business and is in
good standing in every other jurisdiction where the failure to qualify to do
business would have a material adverse effect upon the Borrower, and the
Borrower is duly authorized and empowered to create, grant and issue the Notes,
and to execute and deliver this Loan Agreement and the other Loan
Documents.  The Borrower has the authority to own, lease and operate
its assets, and to carry on its business as presently conducted.  All
action on the part of the Borrower requisite for the due creation, issuance and
delivery of this Loan Agreement, the Notes, the Warrants and the other Loan
Documents has been duly and effectively taken.  This Loan Agreement,
the Notes, the Warrants and the other Loan Documents upon the granting, issuance
and delivery thereof, will be, valid, binding and enforceable obligations of the
Borrower in accordance with their respective terms and compliance herewith will
not violate any provision of law, the Certificate of Incorporation or By-Laws of
the Borrower, or any agreement, judgment, order or decree to which the Borrower
is a party or otherwise bound, subject to applicable bankruptcy, insolvency, or
reorganization, moratorium or other similar laws relating to or affecting
generally the enforcement of creditors’ rights.  No approval or
consent of any governmental agency or body of the United States or any state
thereof or of any other entity or person is required as of the Closing Date for
the legal and valid execution and delivery by the Borrower of this Loan
Agreement, the Notes and the Warrants pursuant to this Loan Agreement, or the
performance of any obligation of the Borrower hereunder.





(b)Litigation.  Except as set
forth in Schedule
B hereto, there is no litigation, legal or administrative proceeding,
investigation or other action of any nature pending or, to the knowledge of
Borrower, threatened, against or affecting the Borrower and/or its subsidiaries
which (i) involves the possibility of any judgments or liabilities aggregating
more than Five Thousand ($5,000) Dollars not fully covered by insurance or (ii)
which may materially and adversely affect the assets of the Borrower or the
right of the Borrower to carry on its business as now conducted or as
contemplated.


18





(c)Other
Documents.  Unless this
requirement is waived by the Lender, the following further documents shall be
delivered herewith, all of which are true, complete and accurate:




(i)     Copies
of the Certificate of Incorporation and By-Laws (and all amendments thereto) of
the Borrower.




(ii)    Certificate
of Good Standing of the Borrower to be supplied within thirty (30) days of the
Effective Date.





(d)Taxes.  All tax returns
of the Borrower and its subsidiaries, if any, which are shown to be due and
payable thereon have been paid.  The Borrower does not know of any
ongoing tax audit, proposed tax deficiency, assessment, charge or levy against
it, the payment of which is not adequately provided for on the books of the
Borrower.





(e)Full
Disclosure.  This Loan
Agreement and all of the exhibits or schedules attached hereto do not contain
any statement that is false or misleading with respect to any material fact and
do not omit to state a material fact necessary in order to make the statements
therein not false or misleading.





(f)Compliance
with Instruments; etc.  Other than
previously disclosed to the Lender by the Borrower, the Borrower is not (i) in
default under any indenture, agreement or instrument to which it is a party or
by which it is bound, (ii) in violation of its Certificate of Incorporation,
By-Laws or of any applicable law, (iii) in default with respect to any order,
writ, injunction or decree of any court, administrative agency or arbitrator, or
(iv) in default under any order, license, regulation or demand of any government
agency, which default or violation would materially and adversely affect the
business, properties, condition (financial or otherwise) or business prospects
of the Borrower.





ARTICLE
IV





AFFIRMATIVE COVENANTS OF THE
BORROWER





Except as
specifically set forth herein, so long as any part of the principal of or
interest on the Notes remains outstanding, without the prior written consent of
the Lender:


19





(a)           Discharge
Taxes and Indebtedness.  The Borrower will
pay and discharge, as they become due, all taxes, assessments, debts, claims and
other governmental or non-governmental charges lawfully imposed upon or incurred
by it or the properties and assets of the Borrower, except taxes, assessments,
debts, claims and charges contested in good faith in appropriate proceedings for
which the Borrower shall have set aside adequate reserves for the payment of
such tax, assessment, debt, claim or charge.  The Borrower shall
provide the Lender, upon the Lender’s request, evidence of payment of such
taxes, assessments, debts, claims and charges satisfactory to the
Lender.





(b)           Insurance.  The Borrower
shall maintain such insurance on its properties and assets with financially
sound and responsible insurance companies, in such amounts as from time to time
are reasonably required by the Lender.  The Borrower shall (i) deliver
to the Lender, upon their request, a detailed list of insurance then in effect,
stating (A) the names of the insurance companies, (B) the amounts and rates of
the insurance, (C) dates of expiration thereof and the properties and risks
covered thereby; (ii) upon request, provide to the Lender copies of all
insurance policies.





(c)           Maintain
Properties.  The Borrower
shall maintain in full force and effect its corporate existence, rights and
franchises and all material terms of licenses and other rights to use licenses,
trademarks, trade names, service marks, copyrights, patents or processes owned
or possessed by it and necessary to the conduct of its business.  The
Borrower will maintain, preserve and keep all of its properties, equipment and
assets in good repair, working order and condition, and make, or cause to be
made, all necessary or appropriate repairs, renewals, replacements,
substitutions, additions, betterments and improvements thereto.





(d)           Furnish
Information.  Promptly on
request of the Lender, the Borrower will furnish such information as may
reasonably be necessary to determine whether (i) the Borrower is complying with
its covenants and agreements contained in this Loan Agreement or (ii) an Event
of Default (as hereunder defined) has occurred hereunder.





(e)           Maintain
Office.  The Borrower will
maintain an office at the address set forth in this Loan Agreement or at such
other place as it shall determine upon not less than fifteen (15) days prior
notice to the Lender, where notices, presentations and demands to or upon it
with respect to this Loan Agreement can be made.


20





(f)           Copies of
Legal Process and Claims.  The Borrower
shall, within ten (10) days after receipt, forward to the Lender at its address
set forth on the signature page hereto, a copy of any communication, notice,
legal process or other notification relating to an uninsured claim or alleged
claim against it in excess of Five Thousand ($5,000) Dollars and any proceedings
relating to the replevin of any personal property, or to recover possession of
any real property, leased or owned by the Borrower.  The Borrower
shall, within ten (10) days after receipt, forward to the Lender notice of any
proceeding or hearing or threat thereof before any state or federal bureau,
agency, commission, board or department which could materially affect the
operation of its business.  With respect to any legal process,
proceeding or hearing, the return date of which is less than such ten (10) days,
notice shall be given forthwith.





(g)           Additional
Documentation.  In furtherance of
the transactions herein contemplated, the Borrower will execute and cause to be
delivered to the Lender such other certificates, documents, statements,
agreements and opinions as may be reasonably requested by the Lender during the
term of this Loan Agreement.





(h)           Notice of
Adverse Change.  The Borrower
shall promptly give notice to the Lender (but in any event within seven (7)
business days) after becoming aware of the existence of any condition or event
which constitutes, or the occurrence of, any of the following:





(i)      any
Event of Default as hereunder defined; or





(ii)      the
institution or threatening of institution of an action, suit or proceeding
against the Borrower before any court, administrative agency or arbitrator,
which, if adversely decided, could materially adversely affect the business,
prospects, properties, financial condition or results of operations of the
Borrower, whether or not arising in the ordinary course of
business.





Any notice given hereunder shall
specify the nature and period of existence of the condition, event, information,
development or circumstance, the anticipated effect thereof and what actions the
Borrower has taken and/or proposes to take with respect thereto.





(i)           Use of
Proceeds.  The parties agree
that the Borrower intends to use the proceeds of the Loan for general working
capital purposes.





(j)           Compliance
With Agreements; Compliance With Laws.  The Borrower
shall comply with the terms and conditions of all material agreements,
commitments or instruments to which the Borrower is a party or by which it may
be bound.  The Borrower shall duly comply in all respects with any
relevant laws, ordinances, rules and regulations of any foreign, federal, state
or local government or any agency thereof, or any writ, order or decree, and
conform to all valid requirements of governmental authorities relating to the
conduct of its business, properties or assets.


21





(k)         Negative
Covenants of the Borrower.  On and after the
date hereof, and for so long as any part of the principal of or interest on the
Notes shall remain unpaid, without the prior written consent of the
Lender:





(i)      
No
Distribution of Profits or Assets.  The Borrower will
not declare or pay any distribution, in cash or otherwise, of any of its profits
or assets or redeem, return, purchase or otherwise acquire directly or
indirectly any of its shares of common stock now or hereafter
outstanding.





(ii)      No
Indebtedness.  Except for
indebtedness owing to the Lender hereunder, the Borrower will not incur any
indebtedness for borrowed money.





(iii)     No
Guarantees.  The Borrower will
not assume, endorse or become liable for or guarantee the obligations of any
corporation, partnership, limited liability company, individual or other entity
excluding the endorsement of negotiable instruments for deposit or collection in
the ordinary course of business.





(iv)     No
Liens.  The Borrower will
not allow the mortgage or pledge of, or creation of a security interest in, any
of its assets except as set forth herein.





(v)      No
Transfer of Assets.  The Borrower will
not (i) enter into any acquisition, merger, consolidation, reorganization, or
recapitalization, or reclassify its capital stock, or liquidate, wind up, or
dissolve itself (or suffer any liquidation or dissolution), (ii) convey, sell,
assign, lease, transfer, or otherwise dispose of, in one transaction or a series
of transactions, all or any substantial part of the business, property, or
assets, whether now owned or hereafter acquired, of Borrower, or (iii) acquire
by purchase or otherwise all or substantially all of the property, assets,
stock, or other evidence of beneficial ownership of any person or
entity.





(vi)     Extraordinary
Transactions and Disposal of Assets.The Borrower will not enter
into any transaction not in the ordinary and usual course of Borrower’s
business, including the sale, lease, or other disposition of, moving,
relocation, or transfer, whether by sale or otherwise, of any of Borrower’s
properties or assets.


22





ARTICLE
V





LIMITED
WAIVER





To the extent any of the provisions set
forth in this Loan Agreement are inconsistent with those of any prior documents
entered into by and between the Borrower and the Lender or Additional Lenders,
the Lender and/or Additional Lenders hereby grant a limited waiver of such
provisions in order to carry out the purposes set forth herein.





ARTICLE
VI





DEFAULTS AND
REMEDIES





1.Events of
Default.  Any one of the
following events shall be considered an event of
default ("Event of
Default") as that term is used herein:




(a)       If the
Borrower defaults in the payment of the Principal or Interest on the Notes after
the same shall become payable as therein or herein set forth and such failure
continues for a period of five (5) days; or




(b)       If default beyond ten (10) days
from notice provided in accordance herewith shall occur under the terms of the
Notes (other than a default covered by clause (a) above), of this Loan
Agreement, or of any of the other Loan Documents, or in any other document or
instrument executed and delivered in connection herewith, or under any agreement
or instrument between the Borrower and any third party, which upon default
results in an acceleration of the making of Borrower’s obligation to such third
party or in the termination of such agreement or results in the Borrower
becoming immediately liable for any amount to a third party in excess of
$10,000; or




(c)       If any representation, warranty or
covenant made by the Borrower herein proves to have been untrue in any material
respect as of any Closing Date, or any information, statement, certificate or
data furnished hereunder proves to have been untrue in any material respect as
of the date as of which the facts therein set forth were stated or certified;
or




(d)       Except for a default covered by
clauses (a), (b), (c) and (e) hereof, if a default shall be made in the due
observance or performance of any other covenant, affirmative or negative, or
condition to be kept or performed by the Borrower contained in this Loan
Agreement; or


23




(e)       If the Borrower shall (i) make a
general assignment for the benefit of creditors, or (ii) apply for or consent to
the appointment of a receiver, trustee, or liquidator of the Borrower or of all
or a substantial part of its assets, or (iii) be adjudicated as bankrupt, or
(iv) file a voluntary petition in bankruptcy or a voluntary petition seeking
reorganization or to effect a plan or other arrangement with creditors or file a
petition or answer seeking to take advantage of any law (whether federal or
state) relating to the relief of debtors.




(f)       A default by the Borrower of a
material term, covenant, warranty or undertaking of any other agreement to which
the Borrower and Lender are parties, or the occurrence of a material event of
default under any such other agreement which is not cured after any required
notice and/or cure period.





2.Acceleration
of Loan.  During the continuation of any Event of Default
specified in Article VI, Section 1 hereof, the Lender or any other holder of the
Notes may, by notice in writing delivered to the Borrower, declare the entire
outstanding Principal on the Notes held by the Lender, and the Interest accrued
thereon, immediately due and payable, and said Principal and Interest shall
thereupon become and be immediately due and payable without presentment, demand,
protest, notice of protest or other notice of dishonor of any kind, all of which
are hereby expressly waived by the Borrower.  Any Principal and
Interest not paid when due and payable shall bear interest thereafter at the
lesser of Twelve (12%) Percent per month or the maximum rate permitted by
applicable law.





3.Enforcement
of Rights.  Upon the happening of any Event of Default
specified in Article VI, Section 1 hereof, the Lender or any other holder of the
Notes may proceed to protect and enforce its rights with respect to the Notes
and the other documents referred to herein either by suit in equity or action at
law, and proceed to obtain judgment or any other relief whatsoever.





4.Payment
of Expenses.   The Borrower shall pay all expenses, court
costs and reasonable attorneys’ fees which may be incurred by the Lender or any
other holder of the Notes in connection with or arising out of any Event of
Default hereunder upon a final nonappealable determination in Lender’s
favor.





ARTICLE
VII





CONDITIONS
PRECEDENT





1.Conditions
of Lender’s Obligations.  The obligations of the Lender
hereunder shall be subject to the performance by the Borrower of all its
agreements theretofore to be performed hereunder and to the following further
conditions, or the waiver thereof by the Lender:


24





(a)       Officer's
Certificate.The Lender shall
have received a certificate or certificates of the Chief Executive Officer of
the Borrower dated as of the Closing Date to the effect that:




(i)      The
representations and warranties of Borrower herein and in any of the Loan
Documents executed in connection with this Loan Agreement are true and correct
in all material respects at and as of each of the Closing Dates;
and




(ii)     The
Borrower has performed all agreements herein contained to be performed at or
prior to the Closing Date.





(b)       Certified
Copies of Resolutions.  The Lender shall have received
certified copies of resolutions of the board of directors of the Borrower, in
form and substance satisfactory to the Lender and its counsel, with respect to
the authorization and execution of this Loan Agreement and the issuance of the
Notes and Warrants.





(c)       Delivery
of Instruments and Other Documents.  The Lender shall have
received in form and content satisfactory to Lender and its counsel, originally
executed Notes and Warrants and such other documents or instruments as the
Lender may reasonably request.





ARTICLE
VIII





CLOSING





Each
closing of this transaction and the issuance of the applicable Notes and
Warrants to the Lender shall occur at the offices of Blank Rome LLP, The
Chrysler Building, 405 Lexington Avenue, New York, NY 10174, at such time as the
parties shall agree (the date the closing actually takes place shall be referred
to as the “Closing
Date’).





ARTICLE
IX





LEGAL
FEES





The parties hereto shall pay their own
costs and expenses in connection herewith; provided, however, that, the
Borrower shall pay the Lender’s legal fees and costs in an aggregate of up to
$5,000.





25


ARTICLE
X





MISCELLANEOUS





1.Representation
to Survive Closing.  All warranties, representations, covenants
and agreements made by the Borrower herein shall survive the
Closing.





2.Specific
Enforcement, Consent to Jurisdiction.  The Borrower and
Lender acknowledge and agree that irreparable damage would occur in the event
that any of the provisions of this Loan Agreement were not performed in
accordance with their specific terms or were otherwise breached.  It is
accordingly agreed that the parties shall be entitled to seek an injunction or
injunctions to prevent or cure breaches of the provisions of this Loan Agreement
and to enforce specifically the terms and provisions hereof, this being in
addition to any other remedy to which any of them may be entitled by law or
equity.  Subject to Article X, Section 6 hereof, the Borrower hereby
irrevocably waives, and agrees not to assert in any such suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction in
New York of such court, that the suit, action or proceeding is brought in an
inconvenient forum or that the venue of the suit, action or proceeding is
improper.  Nothing in this Article X, Section 2 shall affect or limit any
right to serve process in any other manner permitted by law.





3.Notice.  All
notices, requests, demands and communications under or in respect hereof shall
be deemed to have been duly given and made if in writing (including fax) if
delivered by hand or left at or posted by pre-paid registered or certified mail
(airmail if dispatched to a foreign county) to the party concerned at its
address appearing below or sent by fax to the number and with copy as below
indicated.  Service shall be deemed to be effective: so far as
delivery by hand is concerned when handed to the recipient or left at the
recipient’s address; by post three days after posting (seven days if sent to a
foreign country); by fax on the same day as dispatch and receipt is
confirmed.  The said addresses and fax numbers shall continue in force
until alternatives are notified and receipt of such notification has been
acknowledged:





If to the Lender, to the addresses
first set forth above.





With copies to:





Grushko
      & Mittman PC551
      Fifth AvenueNew
      York, NY 10176Phone:
      (212) 697-9500Fax:Attn.:
      Ed Grushko, Esq.




26




If to Borrower, to its address first
set forth at the beginning of this Loan Agreement.





With copies to:




Jolie
      G. Kahn, Esq.61
      Broadway, Suite 2820New
      York, NY 10006Phone:
      (212) 422-4910Fax:
      (866) 705-3071




4.Binding
upon Successors.  All covenants and agreements herein contained
by or on behalf of the Borrower shall bind its successors and assigns and shall
inure to the benefit of the Lender and its successors and assigns; Borrower may
not assign this Loan Agreement or any rights or duties hereunder without
Lender’s prior written consent and any prohibited assignment shall be absolutely
void.  Lender reserves the right to sell, assign, transfer, negotiate,
or grant participation in all or any part of, or any interest in Lender’s rights
and benefits hereunder; provided, however, that Lender
shall, for informational purposes but not as a requirement, notify the Borrower
of the identity of all other assignees or participants who have acquired an
ownership interest in the Notes, and upon conversion, in the equity of the
Borrower as a result thereof.  In connection with any such assignment
or participation, Lender may disclose all documents and information which Lender
now or hereafter may have relating to Borrower’s business.





5.Counterparts.  The
terms of the Loan Agreement are contractual and not merely recital. The Loan
Agreement may be executed in one or more counterparts, at one time or at
different times, each of which shall be deemed an
original.  Furthermore, facsimile copies shall be deemed the same as
originals.  The Loan Agreement shall be deemed fully executed and
effective when all Parties have executed at least one of the counterparts, even
though no single counterpart bears all such signatures.





6.Governing
Law; Jurisdiction.  This Loan Agreement and the performance of
the parties hereunder shall be construed and interpreted in accordance with the
internal laws of the State of New York, wherein it was negotiated and executed,
and the parties hereunder consent and agree that the state and federal courts
which sit in the State of New York and the County of New York shall have
exclusive jurisdiction with respect to all controversies and disputes arising
hereunder.


27





7.Severability.  If
any provision of this Loan Agreement is held to be unenforceable for any reason,
the remainder of this Loan Agreement shall, nevertheless, remain in full force
and effect.





8.No Waiver
of Rights.  No course of dealing on the part of the Lender, nor
any failure or delay on the part of the Lender with respect to the exercise of
any right, power or privilege given or granted hereunder, the Notes or any other
document or instrument executed in connection herewith shall operate as a waiver
thereof as to any future defaults, or any single or partial exercise by the
Lender of any right, power or privilege granted or contained herein or therein
shall preclude the Lender from later or further exercise of any right, power or
privilege as to any future defaults.  The rights and remedies of the
Lender are cumulative and not exclusive of any other remedies under
law.





9.Construction.  Unless
the context of this Loan Agreement clearly requires otherwise, references to the
plural include the singular, references to the singular include the plural, the
term “including” is not limiting, and the term “or” has, except where otherwise
indicated, the inclusive meaning represented by the phrase
“and/or.”  The words, “hereof,” “herein,” “hereby,” “hereunder,” and
similar terms in this Loan Agreement refer to this Loan Agreement as a whole and
not to any particular provision of this Loan Agreement.  Article,
Section, subsection, paragraph, clause, schedule, and exhibit references are to
this Loan Agreement unless otherwise specified.  Any reference in this
Loan Agreement to this Loan Agreement shall include all alterations, amendments,
changes, extension, modifications, renewals, replacement, substitutions and
supplements, thereto and thereof, as applicable.





10.Indemnification.  In
the event the Lender is required to appear before, or participate in, or become
involved with, any proceeding initiated by or brought with respect to the
Borrower by any government or administrative agency, federal, state or local,
investigating the business operations or activities of the Borrower, the Lender
shall be reimbursed by the Borrower for all expenses incurred by it in
connection therewith, including, but not limited to, attorney’s
fees.  Additionally, the Borrower will indemnify and hold harmless the
Lender from each and every liability, loss, obligation, cost or expense which
may be imposed or arising out of (a) any such proceeding, or (b) any of the
transactions evidenced hereby, except for the Lender’s gross negligence or
willful misconduct.




11.Confidentiality.  The
Borrower agrees that it will not disclose, and will not
include in any public announcement, the name of the Lender, unless expressly
agreed to by the
Lender unless and until disclosure is required by law or regulations, and then,
only to the extent of
such requirement.


28





12.         Term.  This
Loan Agreement shall become effective upon execution and delivery hereof by
Borrower and Lender and shall continue in full force and effect until all
amounts of principal and interest on the Notes have been paid in
full.





[The
Remainder Of This Page Is Left Blank Intentionally]




29


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





BORROWER:GOLDSPRING,
      INC.By:Name:  Robert
      T. FaberTitle:     
      PresidentLENDER:GRENVILLE
      FINANCE LTDBy:Name:Title:





With
respect only to Article V hereof:





John
      V. WinfieldTHE
      INTERGROUP CORPORATIONBy:Name:Title:PORTSMOUTH
      SQUARE, INC.By:Name:Title:SANTA
      FE FINANCIAL CORP.By:Name:Title:LONGVIEW
      FUND, L.P.By:Name:Title:


30


SCHEDULE
A





The Additional
Lenders


(as of May 7,
2009)





Amount of PrincipalName and Address
                                                        
                                                        IndebtednessRemainingJohn V. Winfield
                                                          820 Moraga Drive
                                                          Los Angeles, CA 90049
                                                        
                                                        $
                                                        3,052,152John V. Winfield IRA-1
                                                          820 Moraga Drive
                                                          Los Angeles, CA 90049
                                                          Attn.: John V. Winfield
                                                        
                                                        $
                                                        1,147,530John V. Winfield IRA-2
                                                          820 Moraga Drive
                                                          Los Angeles, CA 90049
                                                          Attn.: John V. Winfield
                                                        
                                                        $
                                                        573,765Santa Fe Financial Corp.
                                                          820 Moraga Drive
                                                          Los Angeles, CA 90049
                                                          Attn.: John V. Winfield
                                                        
                                                        $
                                                        1,674,231Portsmouth Square, Inc.
                                                          820 Moraga Drive
                                                          Los Angeles, CA 90049
                                                          Attn.: John V. Winfield
                                                        
                                                        $
                                                        2,032,733The InterGroup Corporation
                                                          820 Moraga Drive
                                                          Los Angeles, CA 90049
                                                          Attn.: John V. Winfield
                                                        
                                                        $
                                                        3,889,574Longview Fund, L.P.
                                                          600 Montgomery Street, 44th Floor
                                                          San Francisco, CA 94111
                                                          Attn.:
                                                        
                                                        $
                                                        3,722,791TOTAL:
                                                        
                                                        $
                                                        16,092,776




31


SCHEDULE
B





Litigation





None


32





EXHIBIT
A





Form of
Note


33


EXHIBIT
B





Form of
Warrant




34




Exhibit
C





Form of Notice of
Conversion





(To be
Executed by the Registered Holder


in order
to Convert the Notes)





The undersigned hereby irrevocably
elects to convert $___________ of the principal amount and/or $__________ of the
accrued and unpaid interest of the Note (defined below) into shares of common
stock, par value $______ per share ("Common Stock"), of GoldSpring,
Inc., a Nevada Corporation (the "Company") according to the
conditions of the Loan Agreement entered into between the Company and the
Lender, dated as of May __, 2009 (the "Notes"), as of the date
written below.  If securities are to be issued in the name of a person
other than the undersigned, the undersigned will pay all transfer taxes payable
with respect thereto and is delivering herewith such certificates.  No
fee will be charged to the Holder for any conversion, except for transfer taxes,
if any.  A copy of each Note is attached hereto (or evidence of loss,
theft or destruction thereof).





The undersigned hereby requests that
the Company issue a certificate or certificates for the number of shares of
Common Stock set forth below (which numbers are based on the Holder's
calculation attached hereto) in the name(s) specified immediately below or, if
additional space is necessary, on an attachment hereto:





Name:_________________________________________________________________________________________


Address:________________________________________________________________________________





The
undersigned represents and warrants that all offers and sales by the undersigned
of the securities issuable to the undersigned upon conversion of the Notes shall
be made pursuant to registration of the securities under the Securities Act of
1933, as amended (the "Act"), or pursuant to an
exemption from registration under the Act.





Date of
Conversion:____________________________________________________________________________


Applicable Conversion
Price:_____________________________________________________________________


Number of Shares of Common Stock to be
Issued:_____________________________________________________


Pursuant to Conversion of the
Notes:_______________________________________________________________


Signature:______________________________________________________________________________________


Name:_________________________________________________________________________________________


Address:_________________________________________________________________________________


35


EXHIBIT
D





Form of Security
Agreement


36


EXHIBIT
E





Form
of Intercreditor Agreement





SECURITY
AGREEMENT




THIS SECURITY AGREEMENT (this
“Agreement”),
is made as of May 12, 2009, by and between GoldSpring, Inc., a Nevada
corporation, having an address at 1200 American Flat Road, P.O. Box 1118,
Virginia City, NV 89440 (the “Obligor” or “Company”), and
Grenville Finance LTD, a Liechtenstein corporation, having an address at C/o LH
Financial Services Corp, 150 CPS, New York, NY 10019 (the “Secured Party”). (The
Company and the Secured Party may hereinafter be referred to singularly as a
“party,” and collectively as the “parties”).




WITNESSETH




WHEREAS, concurrently herewith
the Company is entering into a Loan Agreement  with the Secured Party
(the “Loan
Agreement”), pursuant to which the Secured Party will loan the Company up
to an aggregate of $1,000,000 (collectively, the “Loan”) and, in
consideration therefor, the Company will issue to the Secured Party, upon the
terms and conditions stated in the Loan Agreement: (a) convertible promissory
notes up to an aggregate principal amount of $2,000,000 (each, a “Note” and,
collectively, the “Notes”); and (b)
warrants to purchase up to an aggregate of 40,000,000 shares of the Company’s
Common Stock (“Warrants”);
and




WHEREAS, in order to further
induce the Secured Party to make the Loan, the Company has agreed to execute and
deliver to the Secured Party this Agreement for the benefit of the Secured Party
and to grant to it a security interest in all of its assets (pari passu with the existing
security interests the Borrower granted to (a) Brockbank Trust (the “Brockbank Interest”);
and (b) certain lenders (the “Additional Lenders”)
as of March 31, 2005, July 15, 2005, August 23, 2006, December 12, 2007 and June
23, 2008, as set forth on Schedule
A hereto (the “Additional Lenders’
Interests”), to secure the prompt payment, performance and discharge in
full of all of Company’s obligations under the Loan Agreement, the Notes and the
Warrants; and




WHEREAS, simultaneously
herewith, the Secured Party and the Additional Lenders are executing an
Intercreditor Agreement (the “Intercreditor Agreement”),
pursuant to which they have agreed that their security interests in, and lien
against, the collateral referred to in the Security Agreement be in the same
priority position, notwithstanding the different dates and times of recording
and/or perfection of their respective security interests.




NOW, THEREFORE, in
consideration of the agreements herein contained and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto hereby agree as follows:




Certain
Definitions.  As used in this Agreement, the following terms
shall have the meanings set forth in this Section 1.  Terms used but
not otherwise defined in this Agreement that are defined in Article 9 of the UCC
(such as “general
intangibles” and “proceeds”) shall have
the respective meanings given such terms in Article 9 of the
UCC.  Each capitalized term used herein, and not otherwise defined,
shall have the meaning ascribed thereto in the Loan Agreement.


37





“Collateral” means the
collateral in which the Secured Party is granted a security interest by this
Agreement (pari
passuwith the
Brockbank Interest and Additional Lenders’ Interests) and which shall include
the following, whether presently owned or existing or hereafter acquired or
coming into existence, and all additions and accessions thereto and all
substitutions and replacements thereof, and all proceeds, products and accounts
thereof, including, without limitation, all proceeds from the sale or transfer
of the Collateral and of insurance covering the same and of any tort claims in
connection therewith:


All
Goods of the Obligor, including, without limitations, all machinery, equipment,
computers, motor vehicles, trucks, tanks, boats, ships, appliances, furniture,
special and general tools, fixtures, test and quality control devices and other
equipment of every kind and nature and wherever situated, together with all
documents of title and documents representing the same, all additions and
accessions thereto, replacements therefor, all parts therefor, and all
substitutes for any of the foregoing and all other items used and useful in
connection with the Obligor’s businesses and all improvements thereto
(collectively, the “Equipment”);
and


All
Inventory of the Obligor; and


All
of the Obligor’s contract rights and general intangibles, including, without
limitation, all partnership interests, stock or other securities, licenses,
distribution and other agreements, computer software development rights, leases,
franchises, customer lists, quality control procedures, grants and rights,
goodwill, trademarks, service marks, trade styles, trade names, patents, patent
applications, copyrights, deposit accounts, and income tax refunds
(collectively, the “General
Intangibles”); and


All
Receivables of the Obligor including all insurance proceeds, and rights to
refunds or indemnification whatsoever owing, together with all instruments, all
documents of title representing any of the foregoing, all rights in any
merchandising, goods, equipment, motor vehicles and trucks which any of the same
may represent, and all right, title, security and guaranties with respect to
each Receivable, including any right of stoppage in transit; and


All
of the Obligor’s documents, instruments and chattel paper, files, records, books
of account, business papers, computer programs and the products and proceeds of
all of the foregoing Collateral set forth in clauses (i)-(iv)
above.


“Obligations” means all of
the Obligor’s obligations under this Agreement, the Loan Agreement, the Notes
and the Warrants, in each case, whether now or hereafter existing, voluntary or
involuntary, direct or indirect, absolute or contingent, liquidated or
unliquidated, whether or not jointly owed with others, and whether or not from
time to time decreased or extinguished and later decreased, created or incurred,
and all or any portion of such obligations or liabilities that are paid, to the
extent all or any part of such payment is avoided or recovered directly or
indirectly from the Secured Party as a preference, fraudulent transfer or
otherwise as such obligations may be amended, supplemented, converted, extended
or modified from time to time.


“UCC” means the Uniform
Commercial Code, as currently in effect in the State of New
York.


38





Grant
of Security Interest.  As an inducement for
the Secured Party to make the Loan and to secure the complete and timely
payment, performance and discharge in full, as the case may be, of all of the
Obligations, except for Permitted Liens (as hereinafter defined), the Obligor
hereby, unconditionally and irrevocably, pledges, grants and hypothecates to the
Secured Party, a continuing security interest (pari passuwith the Brockbank Interest and
Additional Lenders’ Interests) in, a continuing lien upon, an unqualified right
to possession and disposition of and a right of set-off against, in each case to
the fullest extent permitted by law, all of the Obligor’s right, title and
interest of whatsoever kind and nature in and to the Collateral (the
“Security
Interest”).


Representations,
Warranties, Covenants and Agreements of the Obligor.  The
Obligor represents and warrants to, and covenants and agrees with, the Secured
Party as follows:


The Obligor has the
requisite corporate power and authority to enter into this Agreement and
otherwise to carry out its obligations hereunder.  The execution,
delivery and performance by the Obligor of this Agreement and the filings
contemplated herein have been duly authorized by all necessary action on the
part of the Obligor and no further action is required by the
Obligor.  This Agreement constitutes a legal, valid and binding
obligation of the Obligor enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of creditor’s rights
generally.


The
Obligor represents and warrants that it has no place of business or offices
where its respective books of account and records are kept (other than
temporarily at the offices of its attorneys or accountants), except as set forth
onSchedule
Battached
hereto;


Except as
to those liens existing as of the date hereof that were disclosed to the Secured
Party by the Obligor and are set forth on the attachedSchedule C(the
“Permitted Liens”), the Obligor is the sole owner of the Collateral (except for
non-exclusive licenses granted by the Obligor in the ordinary course of
business), free and clear of any liens, security interests, encumbrances, rights
or claims, and is fully authorized to grant the Security Interest in and to
pledge the Collateral.  Except as to the Permitted Liens, there is not
on file in any governmental or regulatory authority, agency or recording office
an effective financing statement, security agreement, license or transfer or any
notice of any of the foregoing (other than those that have been filed in favor
of the Secured Party pursuant to this Agreement) covering or affecting any of
the Collateral.  Except as to the Permitted Liens, so long as this
Agreement shall be in effect, the Obligor shall not execute and shall not
knowingly permit to be on file in any such office or agency any such financing
statement or other document or instrument (except to the extent filed or
recorded in favor of the Secured Party pursuant to the terms of this
Agreement).


No part of the Collateral
has been judged invalid or unenforceable.  No written claim has been
received that any Collateral or the Obligor’s use of any Collateral violates the
rights of any third party. There has been no adverse decision to the Obligor’s
claim of ownership rights in or exclusive rights to use the Collateral in any
jurisdiction or to the Obligor's right to keep and maintain such Collateral in
full force and effect, and there is no proceeding involving said rights pending
or, to the best knowledge of the Obligor, threatened before any court, judicial
body, administrative or regulatory agency, arbitrator or other governmental
authority.


The Obligor shall at all
times maintain its books of account and records relating to the Collateral at
its principal place of business and may not relocate such books of account and
records unless it delivers to the Secured Party at least 30 days prior to such
relocation (i) written notice of such relocation and the new location thereof
(which must be within the United States) and (ii) evidence that appropriate
financing statements and other necessary documents have been filed and recorded
and other steps have been taken to perfect the Security Interest to create in
favor of the Secured Party a valid, perfected and continuing lien in the
Collateral.


39





This
Agreement creates in favor of the Secured Party a valid security interest
(pari
passuwith the
Brockbank Interest and Additional Lenders’ Interests) in the Collateral securing
the payment and performance of the Obligations and, upon making the filings
described in the immediately following sentence, a perfected security interest
in such Collateral (pari
passuwith the
Brockbank Interest and Additional Lenders’ Interests).  Except for the
filing of financing statements on Form-1 under the UCC with the jurisdictions
indicated onSchedule D,
attached hereto, no authorization or approval of or filing with or notice to any
governmental authority or regulatory body is required either (i) for the grant
by the Obligor of, or the effectiveness of, the Security Interest granted hereby
or for the execution, delivery and performance of this Agreement by the Obligor
or (ii) for the perfection of or exercise by the Secured Party of its rights and
remedies hereunder.


The Obligor hereby
irrevocably authorizes the Secured Party at any time and from time to time to
file in any Uniform Commercial Code jurisdiction any initial financing
statements and amendments thereto that (a) indicate the Collateral regardless of
whether any particular asset comprised in the Collateral falls within the scope
of Article 9 of the Uniform Commercial Code of the State of New York as amended
from time to time (“NYUCC”), or any other Uniform Commercial Code jurisdiction;
and (b) contain any other information required by part 5 of Article 9 of the
NYUCC for the sufficiency or filing office acceptance of any financing statement
or amendment, including whether the Obligor is an organization, the type of
organization and any organization identification number issued to the Obligor.
The Obligor agrees to furnish any such information to the Secured Party promptly
upon request.  The Obligor also ratifies its authorization for the
Secured Party to have filed in any Uniform Commercial Code jurisdiction any like
initial financing statements or amendments thereto if filed prior to the date
hereof with respect to the Collateral.


The execution, delivery and
performance of this Agreement does not conflict with or cause a breach or
default, or an event that with or without the passage of time or notice, shall
constitute a breach or default, under any agreement to which the Obligor is a
party or by the Obligor is bound.  No consent (including, without
limitation, from stockholders or creditors of the Obligor) is required for the
Obligor to enter into and perform its obligations hereunder.


The Obligor shall at all
times maintain the liens and Security Interest provided for hereunder as valid
and perfected liens and security interests in the Collateral in favor of the
Secured Party until this Agreement and the Security Interest hereunder shall be
terminated pursuant to Section 11.  The Obligor hereby agrees to
defend the same against any and all persons.  The Obligor shall
safeguard and protect all Collateral for the account of the Secured
Party.  At the request of the Secured Party, the Obligor will pay the
cost of filing one or more financing statements pursuant to the UCC (or any
other applicable statute) in form reasonably satisfactory to the Secured Party
in all public offices wherever filing is, or is deemed by the Secured Party to
be, necessary or desirable to effect the rights and obligations provided for
herein. Without limiting the generality of the foregoing, the Obligor shall pay
all fees, taxes and other amounts necessary to maintain the Collateral and the
Security Interest hereunder, and the Obligor shall obtain and furnish to the
Secured Party from time to time, upon demand, such releases and/or
subordinations of claims and liens which may be required to maintain the
priority of the Security Interest hereunder.


40





The Obligor will not
transfer, pledge, hypothecate, encumber, license (except for non-exclusive
licenses granted by the Obligor in the ordinary course of business), sell
(except for sales of inventory in the ordinary course of business) or otherwise
dispose of any of the Collateral without the prior written consent of the
Secured Party.


The Obligor shall keep and
preserve its Equipment, Inventory and other tangible Collateral in good
condition, repair and order and shall not operate or locate any such Collateral
(or cause to be operated or located) in any area excluded from insurance
coverage.


The Obligor shall, within
ten (10) days of obtaining knowledge thereof, advise the Secured Party promptly,
in sufficient detail, of any substantial change in the Collateral, and of the
occurrence of any event which would have a material adverse effect on the value
of the Collateral or on the Secured Party’s security interest
therein.


The Obligor shall promptly
execute and deliver to the Secured Party such further deeds, mortgages,
assignments, security agreements, financing statements or other instruments,
documents, certificates and assurances and take such further action as the
Secured Party may from time to time request and may in its sole discretion deem
necessary to perfect, protect or enforce its security interest in the
Collateral.


The Obligor shall permit the
Secured Party and their representatives and agents to inspect the Collateral at
any time, and to make copies of records pertaining to the Collateral as may be
requested by the Secured Party from time to time.


The Obligor will take all
steps reasonably necessary to diligently pursue and seek to preserve, enforce
and collect any rights, claims, causes of action and accounts receivable in
respect of the Collateral.


The Obligor shall promptly
notify the Secured Party in sufficient detail upon becoming aware of any
attachment, garnishment, execution or other legal process levied against any
Collateral and of any other information received by the Obligor that may
materially affect the value of the Collateral, the Security Interest or the
rights and remedies of the Secured Party hereunder.


All information heretofore,
herein or hereafter supplied to the Secured Party by or on behalf of the Obligor
with respect to the Collateral is accurate and complete in all material respects
as of the date furnished.


Defaults.  The following
events shall be “Events of
Default”:


A breach by the Obligor of
its material obligations under the Loan Agreement, Notes or Warrants, and
failure to cure such breach for ten (10) days after receipt by the Obligor of
notice of such breach from the Secured Party;


Any representation or
warranty of the Obligor in this Agreement shall prove to have been incorrect in
any material respect when made; and


The material failure by the
Obligor to observe or perform any of its material obligations hereunder for ten
(10) days after receipt by the Obligor of notice of such failure from the
Secured Party.


41





Duty To
Hold In Trust.  Upon the
occurrence of any Event of Default and at any time thereafter, the Obligor
shall, upon receipt by it of any revenue, income or other sums subject to the
Security Interest, whether payable pursuant to the Loan Agreement, the Note, or
otherwise, or of any check, draft, debenture, trade acceptance or other
instrument evidencing an obligation to pay any such sum, hold the same in trust
for the Secured Party and shall forthwith endorse and transfer any such sums or
instruments, or both, to the Secured Party for application to the satisfaction
of the Obligations.


Rights
and Remedies Upon Default.  Upon occurrence of any Event of
Default and at any time thereafter, the Secured Party shall have the right to
exercise all of the remedies conferred hereunder and under the Loan Agreement,
and the Secured Party shall have all the rights and remedies of a secured party
under the UCC and/or any other applicable law (including the Uniform Commercial
Code of any jurisdiction in which any Collateral is then
located).  Subject only to the Brockbank Interest and Additional
Lenders’ Interests, the Secured Party shall have the following rights and
powers:


The Secured Party shall have
the right to take possession of the Collateral and, for that purpose, enter,
with the aid and assistance of any person, any premises where the Collateral, or
any part thereof, is or may be placed and remove the same, and the Obligor shall
assemble the Collateral and make it available to the Secured Party at places
which the Secured Party shall reasonably select, whether at the Obligor's
premises or elsewhere, and make available to the Secured Party, without rent,
all of the Obligor’s respective premises and facilities for the purpose of the
Secured Party taking possession of, removing or putting the Collateral in
saleable or disposable form.


The Secured Party shall have
the right to operate the business of the Obligor using the Collateral and shall
have the right to assign, sell, lease or otherwise dispose of and deliver all or
any part of the Collateral, at public or private sale or otherwise, either with
or without special conditions or stipulations, for cash or on credit or for
future delivery, in such parcel or parcels and at such time or times and at such
place or places, and upon such terms and conditions as the Secured Party may
deem commercially reasonable, all without (except as shall be required by
applicable statute and cannot be waived) advertisement or demand upon or notice
to the Obligor or right of redemption of the Obligor, which are hereby expressly
waived.  Upon each such sale, lease, assignment or other transfer of
Collateral, the Secured Party may, unless prohibited by applicable law which
cannot be waived, purchase all or any part of the Collateral being sold, free
from and discharged of all trusts, claims, right of redemption and equities of
the Obligor, which are hereby waived and released.


Applications
of Proceeds.


(a)           Pari
passuwith the Brockbank
Interest and Additional Lenders’ Interests, the proceeds of any such sale, lease
or other disposition of the Collateral hereunder shall be applied first, to the
expenses of retaking, holding, storing, processing and preparing for sale,
selling, and the like (including, without limitation, any taxes, fees and other
costs incurred in connection therewith) of the Collateral, to the reasonable
attorneys' fees and expenses incurred by the Secured Party in enforcing its
rights hereunder and in connection with collecting, storing and disposing of the
Collateral, and then to satisfaction of the Obligations, and to the payment of
any other amounts required by applicable law, after which the Secured Party
shall pay to the Obligor any surplus proceeds.  If, upon the sale,
license or other disposition of the Collateral, the proceeds thereof are
insufficient to pay all amounts to which the Secured Party is legally entitled,
the Obligor will be liable for the deficiency, together with interest thereon,
at the rate of 18% per annum (the “Default
Rate”), and the
reasonable fees of any attorneys employed by the Secured Party to collect such
deficiency.  To the extent permitted by applicable law, the Obligor
waives all claims, damages and demands against the Secured Party arising out of
the repossession, removal, retention or sale of the Collateral, unless due to
the gross negligence or willful misconduct of the Secured
Party.


(b)           All ordinary costs and
expenses incurred by the Secured Party in collection of the Obligations shall be
borne exclusively by the Obligor including, without limitation, any costs,
expenses, fees or disbursements incurred by outside agencies or attorneys
retained by the Secured Party to effect collections of the Obligations or any
Collateral securing the Obligations.  The provisions of this paragraph
shall not apply to any suits, actions, proceedings or claims of the nature
referred to herein or otherwise which are based upon or related to the repayment
of, or the taking of security for, any loans and/or advances made by the Secured
Party to the Company that do not arise under the Loan Agreement or that are not
participated in by the Secured Party, and the party making such loans and/or
advances shall be exclusively responsible for such suits, actions, proceedings
or claims and the payment of all such expenses in connection
therewith.


42





Costs and
Expenses.   The
Obligor agrees to pay all reasonable out-of-pocket fees, costs and expenses
incurred in connection with any filing required hereunder, including without
limitation, any financing statements, continuation statements, partial releases
and/or termination statements related thereto or any expenses of any searches
reasonably required by the Secured Party.  The Obligor shall also pay
all other claims and charges which in the reasonable opinion of the Secured
Party might prejudice, imperil or otherwise affect the Collateral or the
Security Interest therein.  The Obligor will also, upon demand, pay to
the Secured Party the amount of any and all reasonable expenses, including the
reasonable fees and expenses of its counsel and of any experts and agents, which
the Secured Party may incur in connection with (i) the enforcement of this
Agreement, (ii) the custody or preservation of, or the sale of, collection from,
or other realization upon, any of the Collateral, or (iii) the exercise or
enforcement of any of the rights of the Secured Party under the Loan
Agreement.  Until so paid, any fees payable hereunder shall be added
to the principal amount of the Note and shall bear interest at the Default
Rate.


Responsibility
for Collateral.  The Obligor assumes all liabilities and
responsibility in connection with all Collateral, and the obligations of the
Obligor hereunder or under the Loan Agreement shall in no way be affected or
diminished by reason of the loss, destruction, damage or theft of any of the
Collateral or its unavailability for any reason.


Security
Interest Absolute.  All rights of the
Secured Party and all Obligations of the Obligor hereunder, shall be absolute
and unconditional (pari passuthe Brockbank Interest and
Additional Lenders’ Interests), irrespective of: (a) any lack of validity or
enforceability of this Agreement, the Loan Agreement, or any agreement entered
into in connection with the foregoing, or any portion hereof or thereof; (b) any
change in the time, manner or place of payment or performance of, or in any
other term of, all or any of the Obligations, or any other amendment or waiver
of or any consent to any departure from the Loan Agreement, or any other
agreement entered into in connection with the foregoing; (c) any exchange,
release or nonperfection of any of the Collateral, or any release or amendment
or waiver of or consent to departure from any other collateral for, or any
guaranty, or any other security, for all or any of the Obligations; (d) any
action by the Secured Party to obtain, adjust, settle and cancel in its sole
discretion any insurance claims or matters made or arising in connection with
the Collateral; or (e) any other circumstance which might otherwise constitute
any legal or equitable defense available to the Obligor, or a discharge of all
or any part of the Security Interest granted hereby.  Until the
Obligations shall have been paid and performed in full, the rights of the
Secured Party shall continue even if the Obligations are barred for any reason,
including, without limitation, the running of the statute of limitations or
bankruptcy.  The Obligor expressly waives presentment, protest, notice
of protest, demand, notice of nonpayment and demand for performance. In the
event that at any time any transfer of any Collateral or any payment received by
the Secured Party hereunder shall be deemed by final order of a court of
competent jurisdiction to have been a voidable preference or fraudulent
conveyance under the bankruptcy or insolvency laws of the United States, or
shall be deemed to be otherwise due to any party other than the Secured Party,
then, in any such event, the Obligor’s obligations hereunder shall survive
cancellation of this Agreement, and shall not be discharged or satisfied by any
prior payment thereof and/or cancellation of this Agreement, but shall remain a
valid and binding obligation enforceable in accordance with the terms and
provisions hereof.  The Obligor waives all right to require the
Secured Party to proceed against any other person or to apply any Collateral
which the Secured Party may hold at any time, or to marshal assets, or to pursue
any other remedy.  The Obligor waives any defense arising by reason of
the application of the statute of limitations to any obligation secured
hereby.


Term of
Agreement.  This Agreement and the Security Interest shall
terminate on the repayment of all amounts due the Secured Party under the Loan
Agreement and the Notes.  Upon such termination, the Secured Party, at
the request and at the expense of the Obligor, will join in executing any
termination statement with respect to any financing statement executed and filed
pursuant to this Agreement.


Power of
Attorney; Further Assurances.


The Obligor authorizes the
Secured Party, and does hereby make, constitute and appoint the Secured Party,
and the Secured Party’s officers, agents, successors or assigns with full power
of substitution, as the Obligor’s true and lawful attorney-in-fact, with power,
in its own name or in the name of the Obligor, to, after the occurrence and
during the continuance of an Event of Default, (i) endorse any debentures,
checks, drafts, money orders, or other instruments of payment (including
payments payable under or in respect of any policy of insurance) in respect of
the Collateral that may come into possession of the Secured Party; (ii) to sign
and endorse any UCC financing statement or any invoice, freight or express bill,
bill of lading, storage or warehouse receipts, drafts against debtors,
assignments, verifications and notices in connection with accounts, and other
documents relating to the Collateral; (iii) to pay or discharge taxes, liens,
security interests or other encumbrances at any time levied or placed on or
threatened against the Collateral; (iv) to demand, collect, receipt for,
compromise, settle and sue for monies due in respect of the Collateral; and (v)
generally, to do, at the option of the Secured Party, and at the Obligor’s
expense, at any time, or from time to time, all acts and things which the
Secured Party deems necessary to protect, preserve and realize upon the
Collateral and the Security Interest granted therein in order to effect the
intent of this Agreement and the Loan Agreement, all as fully and effectually as
the Obligor might or could do; and the Obligor hereby ratifies all that said
attorney shall lawfully do or cause to be done by virtue hereof.  This
power of attorney is coupled with an interest and shall be irrevocable for the
term of this Agreement and thereafter as long as any of the Obligations shall be
outstanding.


43





On a
continuing basis, the Obligor will make, execute, acknowledge, deliver, file and
record, as the case may be, in the proper filing and recording places in any
jurisdiction, including, without limitation, the jurisdictions indicated onSchedule
C,
attached hereto, all such instruments, and take all such action as may
reasonably be deemed necessary or advisable, or as reasonably requested by the
Secured Party, to perfect the Security Interest granted hereunder and otherwise
to carry out the intent and purposes of this Agreement, or for assuring and
confirming to the Secured Party the grant or perfection of a security interest
in all the Collateral.


The Obligor hereby
irrevocably appoints the Secured Party as the Obligor’s attorney-in-fact, with
full authority in the place and stead of the Obligor and in the name of the
Obligor, from time to time at the discretion of the Secured Party, to take any
action and to execute any instrument which the Secured Party may deem necessary
or advisable to accomplish the purposes of this Agreement, including the filing,
in its sole discretion, of one or more financing or continuation statements and
amendments thereto, relative to any of the Collateral without the signature of
the Obligor where permitted by law.


Notices.  All
notices, requests, demands and other communications hereunder shall be in
writing, with copies to all the other parties hereto, and shall be deemed to
have been duly given when (i) if delivered by hand, upon receipt, (ii) if sent
by facsimile, upon receipt of proof of sending thereof, (iii) if sent by
nationally recognized overnight delivery service (receipt requested), the next
business day or (iv) if mailed by first-class registered or certified mail,
return receipt requested, postage prepaid, four days after posting in the U.S.
mails, in each case if delivered to the following addresses:


44


If to the
Obligor: to the address first set forth in the Preambles to this
Agreement.





With
      copies to:
                  Jolie
      G. Kahn, Esq.61
      Broadway, Suite 2820New
      York, NY 10006Phone:
      (212) 422-4910Fax:
      (866) 705-3071





If to the
Secured Party: to the address first set forth above.





With
      copies to:
                Grushko
      & Mittman PC551
      Fifth AvenueNew
      York, NY 10176Phone:
      (212) 697-9500Fax:
      _______________Attn.:
      Ed Grushko, Esq.





Other
Security.  To the extent that the Obligations are now or
hereafter secured by property other than the Collateral or by the guarantee,
endorsement or property of any other person, firm, corporation or other entity,
then the Secured Party shall have the right, in its sole discretion, to pursue,
relinquish, subordinate, modify or take any other action with respect thereto,
without in any way modifying or affecting any of the Secured Party’s rights and
remedies hereunder.


Miscellaneous.


No course of dealing between
the Obligor and the Secured Party, nor any failure to exercise, nor any delay in
exercising, on the part of the Secured Party, any right, power or privilege
hereunder or under the Loan Agreement shall operate as a waiver thereof; nor
shall any single or partial exercise of any right, power or privilege hereunder
or thereunder preclude any other or further exercise thereof or the exercise of
any other right, power or privilege.


All of the rights and
remedies of the Secured Party with respect to the Collateral, whether
established hereby or by the Loan Agreement or by any other agreements,
instruments or documents or by law shall be cumulative and may be exercised
singly or concurrently.


This Agreement constitutes
the entire agreement of the parties with respect to the subject matter hereof
and is intended to supersede all prior negotiations, understandings and
agreements with respect thereto.  Except as specifically set forth in
this Agreement, no provision of this Agreement may be modified or amended except
by a written agreement specifically referring to this Agreement and signed by
the parties hereto.


In the event that any
provision of this Agreement is held to be invalid, prohibited or unenforceable
in any jurisdiction for any reason, unless such provision is narrowed by
judicial construction, this Agreement shall, as to such jurisdiction, be
construed as if such invalid, prohibited or unenforceable provision had been
more narrowly drawn so as not to be invalid, prohibited or
unenforceable.  If, notwithstanding the foregoing, any provision of
this Agreement is held to be invalid, prohibited or unenforceable in any
jurisdiction, such provision, as to such jurisdiction, shall be ineffective to
the extent of such invalidity, prohibition or unenforceability without
invalidating the remaining portion of such provision or the other provisions of
this Agreement and without affecting the validity or enforceability of such
provision or the other provisions of this Agreement in any other
jurisdiction.


No waiver of any breach or
default or any right under this Agreement shall be considered valid unless in
writing and signed by the party giving such waiver, and no such waiver shall be
deemed a waiver of any subsequent breach or default or right, whether of the
same or similar nature or otherwise.


45





This Agreement shall be
binding upon and inure to the benefit of each party hereto and its successors
and assigns.


Each party shall take such
further action and execute and deliver such further documents as may be
necessary or appropriate in order to carry out the provisions and purposes of
this Agreement.


This Agreement shall be
construed in accordance with the laws of the State of New York, except to the
extent the validity, perfection or enforcement of a security interest hereunder
in respect of any particular Collateral which are governed by a jurisdiction
other than the State of New York in which case such law shall
govern.  Each of the parties hereto irrevocably submit to the
exclusive jurisdiction of any New York State or United States federal court
sitting in New York county over any action or proceeding arising out of or
relating to this Agreement, and the parties hereto hereby irrevocably agree that
all claims in respect of such action or proceeding may be heard and determined
in such New York State or Federal court.  The parties hereto agree
that a final judgment in any such action or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law.  The parties hereto further waive any
objection to venue in the State of New York and any objection to an action or
proceeding in the State of New York on the basis of forum non
conveniens.


EACH PARTY HERETO HEREBY
AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRAIL OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT.  THE SCOPE OF THIS
WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY DISPUTES THAT MAY BE FILED IN
ANY COURT AND THAT RELATE TO THE SUBJECT MATER OF THIS AGREEMENT, INCLUDING
WITHOUT LIMITATION CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS AND ALL
OTHER COMMON LAW AND STATUTORY CLAIMS.  EACH PARTY HERETO ACKNOWLEDGES
THAT THIS WAIVER IS A MATERIAL INDUCEMENT FOR EACH PARTY TO ENTER INTO A
BUSINESS RELATIONSHIP, THAT EACH PARTY HAS ALREADY RELIED ON THIS WAIVER IN
ENTERING INTO THIS AGREEMENT AND THAT EACH PARTY WILL CONTINUE TO RELY ON THIS
WAIVER IN THEIR RELATED FUTURE DEALINGS. EACH PARTY FURTHER WARRANTS AND
REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT
SUCH PARTY HAS KNOWINGLY AND VOLUNTARILY WAIVED ITS RIGHTS TO A JURY TRIAL
FOLLOWING SUCH CONSULTATION.  THIS WAIVER IS IRREVOCABLE, MEANING
THAT, NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, IT MAY NOT BE MODIFIED
EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, RENEWALS AND SUPPLEMENTS OR MODIFICATIONS TO THIS
AGREEMENT.  IN THE EVENT OF A LITIGATION, THIS AGREEMENT MAY BE FILED
AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.


46





This Agreement may be
executed in any number of counterparts, each of which when so executed shall be
deemed to be an original and, all of which taken together shall constitute one
and the same Agreement.  In the event that any signature is delivered
by facsimile transmission, such signature shall create a valid binding
obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
were the original thereof.




[THE
REMAINDER OF THIS PAGE IS LEFT BLANK INTENTIONALLY]


47


IN WITNESS WHEREOF, the
parties hereto have caused this Agreement to be duly executed on the day and
year first above written.




OBLIGOR:GOLDSPRING,
      INC.By:Name:  Robert
      T. FaberTitle:         PresidentSECURED
      PARTY:GRENVILLE
      FINANCE LTDBy:Name:Title:


48


SCHEDULE
A





Name and Address
                    
                    Amount of Principal
                      Indebtedness
                      RemainingJohn
      V. Winfield
                      820
      Moraga Drive
                      Los
      Angeles, CA 90049
                    
                    $
                    3,052,152John
      V. Winfield IRA-1
                      820
      Moraga Drive
                      Los
      Angeles, CA 90049
                      Attn.:
      John V. Winfield
                    
                    $
                    1,147,500John
      V. Winfield IRA-2
                      820
      Moraga Drive
                      Los
      Angeles, CA 90049
                      Attn.:
      John V. Winfield
                    
                    $
                    573,765Santa
      Fe Financial Corp.
                      820
      Moraga Drive
                      Los
      Angeles, CA 90049
                      Attn.:
      John V. Winfield
                    
                    $
                    1,674,231Portsmouth
      Square, Inc.
                      820
      Moraga Drive
                      Los
      Angeles, CA 90049
                      Attn.:
      John V. Winfield
                    
                    $
                    2,032,733The
      InterGroup Corporation
                      820
      Moraga Drive
                      Los
      Angeles, CA 90049
                      Attn.:
      John V. Winfield
                    
                    $
                    3,889,574Longview
      Fund, L.P.
                      600
      Montgomery Street, 44th Floor
                      San
      Francisco, CA 94111
                      Attn.:
                    
                    $
                    3,722,791TOTAL:
                    
                    $
                    16,092,776


49


SCHEDULE
B





Offices





American
Flat Road


P.O. Box
1118


Virginia
City, NV 89440


50


SCHEDULE
C





Permitted
Liens





Name and Address
                                  
                                  Amount of Principal
                                    Indebtedness
                                    RemainingBrockbank Trust
                                  
                                  $
                                  250,000John V. Winfield
                                    820 Moraga Drive
                                    Los Angeles, CA 90049
                                  
                                  $
                                  2,364,224John V. Winfield IRA-1
                                    820 Moraga Drive
                                    Los Angeles, CA 90049
                                    Attn.: John V. Winfield
                                  
                                  $
                                  1,147,530John V. Winfield IRA-2
                                    820 Moraga Drive
                                    Los Angeles, CA 90049
                                    Attn.: John V. Winfield
                                  
                                  $
                                  573,765Santa Fe Financial Corp.
                                    820 Moraga Drive
                                    Los Angeles, CA 90049
                                    Attn.: John V. Winfield
                                  
                                  $
                                  1,169,231Portsmouth Square, Inc.
                                    820 Moraga Drive
                                    Los Angeles, CA 90049
                                    Attn.: John V. Winfield
                                  
                                  $
                                  2,317,733The InterGroup Corporation
                                    820 Moraga Drive
                                    Los Angeles, CA 90049
                                    Attn.: John V. Winfield
                                  
                                  $
                                  3,859,575Longview Fund, L.P.
                                    600 Montgomery Street, 44th
      Floor
                                    San Francisco, CA 94111
                                    Attn.:
                                  
                                  $
                                  550,000TOTAL:
                                  
                                  $
                                  11,982,058


51


SCHEDULE
D





Jurisdictions





Nevada





INTERCREDITOR
AGREEMENT





THIS INTERCREDITOR AGREEMENT(this “Agreement”) dated as
of May 1, 2009, is made by, between and among those parties whose names appear
on the signature pages to this Agreement (each such party may hereinafter be
referred to individually, as a “Lender”, and
collectively, as the “Lenders”).





RECITALS





WHEREAS, each of the Lenders
(a) has loaned, or shall loan, funds to GoldSpring, Inc., a Nevada corporation
(the “Borrower”), in the
amounts set forth on Schedule
A hereto, pursuant to those certain Loan Agreements by and between each
Lender and the Borrower (the “Loan Agreements”),
(b) has, or shall, receive promissory notes in connection with such loans
(“Promissory
Notes”, (c) has received, or shall receive, a security interest in
certain assets of the Borrower, pursuant to those certain Security Agreements by
and between each Lender and the Borrower (the Loan Agreements, Notes, Security
Agreements, and all other documents related to this transaction shall be
referred to herein collectively as the "Loan Documents");
and





WHEREAS, it is the intention
of each of the Lenders that their security interests in, and lien against, the
collateral referred to in each of the Loan Documents be in the same priority
position, notwithstanding the different dates and times of recording and/or
perfection of their respective security interests;





NOW, THEREFORE, for good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, each of the Lenders hereby agree as follows:





1.           Equal
Priority. Effective the date hereof, notwithstanding the dates and times
of perfection thereof, each Lender’s security interest in and lien against the
collateral referred to in such Lender’s respective Loan Documents (collectively
referred to as the “Collateral”) shall
rank in the same and equal priority position with each other.





2.           Payments
Before Event of Default.  Prior to the receipt by any Lender of
an Enforcement Notice (as defined below) from any of the other Lenders to this
Agreement, such Lender may accept payments made by or on behalf of Borrower
pursuant to the terms of such Lender=s
Loan Documents.  “Enforcement Notice”
means a written notice delivered by any Lender to the other Lenders notifying
the other Lenders that the sender is commencing an Enforcement Action (as
defined below) and specifying the event of default and the actions proposed to
be taken by the sender.


52





3.           Enforcement
Action.  Each of the Lenders hereto agrees not to commence an
Enforcement Action (as defined below) prior to its delivery to each of the other
Lenders of an Enforcement Notice.  “Enforcement Action”
means the enforcement of any of such Lender’s rights and/or remedies pursuant to
such Lender’s Loan Documents or permitted by law.  Nothing in this
Agreement shall be deemed to be a waiver of any rights that a non-enforcing
Lender may have under its Loan Documents.





4.           Distribution
of Proceeds.  Any and all funds received by any Lender upon its
foreclosure or other disposition of any of the Collateral, including, without
limitation, any proceeds (after deduction for all costs and expenses incurred by
such Lender and permitted by law and/or under such Lender’s Loan Documents)
(“Proceeds”)
shall be shared by, between and among each of the Lenders on a pro rata basis
pursuant to this section, and the foreclosing Lender shall promptly distribute
to each of the other Lenders their respective pro rata share (“Pro Rata Share”) of
the Proceeds.  The Pro Rata Share shall be computed using the
outstanding balance of Borrower to each of the Lenders, as of the date of such
distribution. Until the Proceeds are so distributed, the foreclosing Lender
shall hold the Proceeds in trust for the benefit of each of the other
Lenders.





5.           Excess
Payments.  If subsequent to any Enforcement Notice given
pursuant to Section 3 hereinabove, any Lender shall receive out of the assets of
Borrower or otherwise, any payment to reduce any amount outstanding under such
Lender’s Loan Documents, then such Lender’s respective Pro Rata Share of the
payment computed in accordance with Section 4 hereinabove shall be reduced by
the amount so received; provided, however, that if any
such payment (or any portion thereof) is subsequently recovered in whole or in
part from such Lender, then each of the other Lenders shall promptly return the
portion of such payment received to such Lender, without interest unless such
Lender shall be required to pay interest therefor.





6.           Notices.  All
notices and other communications required or permitted to be given to or made
pursuant hereto shall be in writing and shall be personally delivered or sent by
registered or certified mail, postage prepaid, with a copy by telecopier, and
shall be deemed to be given for purposes of this Agreement on the date that such
writing is delivered to the intended recipient thereof in accordance with the
provisions of this Section. Unless otherwise specified in a notice sent or
delivered in accordance with the forgoing provisions of this section, notices
and other communications shall be given to or made upon the respective parties
hereto at their respective addresses indicated below their respective names on
Schedule
A hereto.





7.           Other
Security/Waiver of Marshaling.  Nothing contained in this
Agreement is intended to affect or limit the security interest that any of the
Lenders has or may have in Borrower’s or any third parties’ assets as security
for its loan or loans made pursuant to the Loan Documents. Subject to the terms
of this Agreement, each of the Lenders waives any rights it may have, whether at
law or in equity, to require any of the other Lenders to marshall its collateral
or any portion thereof, or otherwise to seek satisfaction from any particular or
other assets of Borrower or from any third parties prior to an Enforcement
Action by any of the other lenders against the Collateral.


53





8.           Independent
Credit Investigations.  No Lender, nor any of its respective
directors, officers, agents or employees, shall be responsible to any of the
other Lenders or to any other person firm or corporation, for the Borrower’s
solvency, financial condition or otherwise, or for any statements of Borrower,
oral or written, or for the validity, sufficiency or enforeablility of any liens
or security interests granted by Borrower to any of the other
Lenders.  Each of the Lenders has entered into its respective
agreements with Borrower based upon its own independent investigation, and makes
no warranty or representation to any of the other Lenders nor does it rely upon
any representation of any of the other Lenders with respect to matters
identified or referred to in this Agreement.





9.           Limitations
of Liability of Lenders to Each Other.  Except as provided in
this Agreement, none of the Lenders shall have any liability to any of the other
Lenders except for gross negligence or willful misconduct, regarding the subject
matter of this Agreement.





10.        Relation
of the Parties.  This Agreement does not create a partnership
or joint venture by, between and among the parties and no Lender shall have the
power to obligate or bind any of the other Lenders in any manner
whatsoever.





11.        Amendments
to Agreement.  All modifications, amendments or supplements of
this Agreement must be in writing and duly executed by each of the Lenders
including, without limitation, any termination of this Agreement.





12.        Integration
with Loan Documents. The provisions of this Agreement shall be
incorporated in and be deemed a part of the Loan Documents between the Borrower
and each Lender.  In the event of a conflict between the provisions of
the Loan Documents and this Agreement, the provisions of this Agreement shall
prevail.





13.        Successors
and Assigns. This Agreement shall be binding upon and inure to the
benefit of the respective successors and assigns of each of the parties hereto.
The terms and provisions of this Agreement shall be for the sole benefit of the
parties hereto and their respective successors and assigns, and no other person,
firm, entity or corporation shall have any right, benefit, priority, or interest
under, or because of this Agreement.





14.        Severabili1y.
In case any provision of this Agreement shall be invalid, illegal or
unenforceable, such provision shall be severable from the rest of this Agreement
and the validity, legality and enforceability of the remaining provisions shall
not in any way be affected or impaired thereby.





15.       
 Headings.  Headings
of the Sections of this Agreement are inserted for convenience only and shall
not be deemed to constitute a part hereof.


54





16.        Applicable
Law. This Agreement is and shall be governed by and construed in
accordance with the laws of the State of New York, without regard to its choice
of law or conflicts of law principles.  All actions related to this
Agreement shall be venued in any State or Federal Court in the State of New York
and all parties waive any claim that any such suit, action or proceeding brought
in any such court has been brought in an inconvenient forum.





17.        Counterparts.
The terms of the Agreement are contractual and not merely recital. The Agreement
may be signed in one or more counterparts, each of which shall be deemed an
original.  Furthermore, facsimile copies shall be deemed the same as
originals.  The Agreement shall be deemed fully executed and effective
when all Parties have executed at least one of the counterparts, even though no
single counterpart bears all such signatures.





18.        Effect of
Bankruptcy of Borrower.  It is the intention of the parties
hereto that this Agreement shall continue to be effective between and among the
parties without regard to actions of the Borrower in seeking protection under
any applicable federal or state bankruptcy laws or laws affecting the rights of
creditors generally.





[THE
REMAINDER OF THIS PAGE IS LEFT BLANK INTENTIONALLY]


55


IN WITNESS WHEREOF, the
parties herein have executed this Agreement as of the date first set forth
above.





JOHN
      V. WINFIELD IRA-1
                                
                                JOHN
      V. WINFIELD IRA-2By:
                                
                                
                                By:Name:
                                
                                Name:Its:
                                
                                Its:SANTA
      FE FINANCIAL CORP.
                                
                                PORTSMOUTH
      SQUARE, INC.By:
                                
                                
                                By:Name:
                                
                                Name:Its:
                                
                                Its:THE
      INTERGROUP CORPORATION
                                
                                LONGVIEW
      FUND, L.P.By:
                                
                                
                                By:Name:
                                
                                Name:Its:
                                
                                Its:GRENVILLE
      FINANCE LTDBy:Name:
                                
                                John
      V. WinfieldIts:















GOLDSPRING,
      INC.By:Name:  Robert
      T. FaberTitle:  President


56


SCHEDULE
A





The
Lenders





Name and Address
                        
                        Amount of Principal Indebtedness
                          RemainingJohn
      V. Winfield
                          820
      Moraga Drive
                          Los
      Angeles, CA 90049
                        
                        $
                        3,052,152John
      V. Winfield IRA-1
                          820
      Moraga Drive
                          Los
      Angeles, CA 90049
                          Attn.:
      John V. Winfield
                        
                        $
                        1,147,530John
      V. Winfield IRA-2
                          820
      Moraga Drive
                          Los
      Angeles, CA 90049
                          Attn.:
      John V. Winfield
                        
                        $
                        573,765Santa
      Fe Financial Corp.
                          820
      Moraga Drive
                          Los
      Angeles, CA 90049
                          Attn.:
      John V. Winfield
                        
                        $
                        1,674,231Portsmouth
      Square, Inc.
                          820
      Moraga Drive
                          Los
      Angeles, CA 90049
                          Attn.:
      John V. Winfield
                        
                        $
                        2,032,733The
      InterGroup Corporation
                          820
      Moraga Drive
                          Los
      Angeles, CA 90049
                          Attn.:
      John V. Winfield
                        
                        $
                        3,889,574Longview
      Fund, L.P.
                          600
      Montgomery Street, 44th Floor
                          San
      Francisco, CA 94111
                          Attn.:
                        
                        $
                        3,722,791Grenville
      Finance LTD
                          ____________________
                          ____________________
                          Attn.:_______________
                        
                        $
                        1,000,000
                        *TOTAL:
                        
                        $
                        17,092,776
                        *





*
Pursuant to a Loan Agreement, dated of even date herewith, Grenville Finance LTD
has agreed to make loans to the Borrower in the aggregate principal amount of up
to $1,000,000.


57