Document:

Exhibit 10.2

Exhibit 10.2

 

Investment AGREEMENT

THIS AGREEMENT is made as of the 6th day of April, 2011,

BETWEEN:

2245393 ONTARIO INC., a corporation existing
under the laws of the Province of Ontario

(“Investor”)

- and -

AMERICAN LITHIUM MINERALS, INC., a corporation existing under 

the laws of the State of Nevada

(the “Company”).

RECITALS

A.        On September 2, 2010, Investor made an
initial investment in the Company in the form of a secured convertible grid
promissory note having an aggregate principal amount of US$750,000 (the “Original
Note”) and warrants to purchase Common Shares.

B.        Investor and the Company have agreed
that Investor will make a further investment in the Company in the form of a
secured convertible grid promissory note and warrants, all in accordance with the terms and conditions set out herein.

C.        The
Parties wish to document their respective rights and obligations in connection
with the investment by Investor in the Company.

NOW THEREFORE in consideration of the mutual covenants and
agreements contained in this Agreement and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the Parties agree as follows:

Article
1

DEFINITIONS AND PRINCIPLES OF INTERPRETATION

1.1             
Definitions

Whenever used in this
Agreement, the following terms shall have the meanings set out below:

“Affiliate”
and “Affiliated” means, with respect to any Person, any Person
Controlled by, Controlling, or under common Control with, such Person;

“Agreement”
means this investment agreement, including all schedules, and all amendments or
restatements as permitted, and references to “Article” or “Section”
mean the specified Article or Section of this Agreement;

 

“Amended and Restated Note” means the
Original Note as amended and restated in accordance with the terms of this
Agreement, substantially in the form attached as Schedule C to this Agreement;

“Amended
and Restated Security Agreement” means the General Security Agreement as
amended and restated in accordance with the terms of this Agreement;

“Amended
and Restated Warrant Certificate” means the Original Warrant Certificate as
amended and restated in accordance with the terms of this Agreement,
substantially in the form attached as Schedule D to this Agreement;

“Board”
means the Board of Directors of the Company;

“Business
Day” means any day, other than a Saturday or Sunday, on which the main
branch of the Royal Bank
of Canada in Toronto, Ontario is open for commercial
banking business during normal banking hours;

“Closing
Date” means April 6, 2011 or such other date as the Parties may agree;

“Closing
Time” means 11:00 a.m. (Toronto
time) on the Closing Date or such other time as the Parties may agree;

“Collateral
Documents” means the Original Investment Agreement, the Notes, the
Warrant Certificate, the Amended and Restated Warrant Certificate, the Amended
and Restated Security Agreement, the Original Deeds of Trust, the Deeds of
Trust, any other agreement, instrument or document entered into in connection
with the transactions contemplated by this Agreement and the Original
Investment Agreement;

“Common
Share” means a common share in the capital stock of the Company with a par
value of US$0.001 per Common Share;

“Company
Disclosure Letter” means the
disclosure letter executed by the Company and delivered to Investor prior to
the execution of this Agreement;

“Company
Material Adverse Effect” means any change, effect, event, occurrence or
state of facts that is, or would reasonably be expected to be, material and
adverse to the assets, liabilities (including any contingent liabilities that
may arise through outstanding, pending or threatened litigation or otherwise),
business, projects, operations, capitalization, financial condition (including
cash resources) or prospects of the Company;

“Company Public Documents” means all forms,
reports, schedules, statements and other documents filed by the Company since
January 1, 2009, with all Governmental Entities;

“Control” means:

(a)               
in relation to a corporation, the beneficial
ownership at the relevant time of shares of such corporation carrying more than
50% of the voting rights ordinarily exercisable at meetings of shareholders of
the corporation where such voting rights are sufficient to elect a majority of
the directors of the corporation or, with respect to a
corporation without share capital, the sole control of such corporation;

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(b)              
in relation to a Person that is a partnership,
limited liability company or joint venture, the beneficial ownership at the
relevant time of more than 50% of the ownership interests of the partnership,
limited liability company or joint venture in circumstances where it can
reasonably be expected that the Person can direct the affairs of the
partnership, limited liability company or joint venture; and

(c)               
in relation to a trust, the beneficial ownership
at the relevant time of more than 50% of the property settled under the trust;

and the words “Controlled
by”, “Controlling” and similar words have corresponding meanings;
the Person who Controls a Controlled Entity shall be deemed to Control a
corporation, partnership, limited liability company, joint venture or trust
which is Controlled by the Controlled Entity, and so on;

“Current Market Price” means US$0.27;

“Deeds
of Trust” has the meaning given in Section 4.27;

 “Environmental Laws” means all
applicable laws relating to the protection of human health and safety or the
environment, or relating to hazardous or toxic substances or wastes, pollutants
or contaminants;

“Environmental Permits” means
authorizations prescribed by Environmental Laws;

“GAAP” means United States generally
accepted accounting principles;

“General Security Agreement” means the
general security agreement granted by the Company in favour of Investor in accordance with this Agreement and dated
September 2, 2010;

“Governmental Entity” means: (a) any
multinational, federal, provincial, territorial, state, regional, municipal,
local or other government, governmental or public department, central bank,
court, tribunal, arbitral body, commission, board, bureau, agency or entity,
domestic or foreign; (b) any stock exchange; (c) any subdivision, agent,
commission, board or authority of any of the foregoing; or (d) any
quasi-governmental or private body, including any tribunal, commission,
regulatory agency or self-regulatory organization, exercising any regulatory,
expropriation or taxing authority under or for the account of any of the
foregoing;

“Holdback
Date” means the second Business Day following satisfaction or waiver of the
conditions listed in Section 5.1 (other than those conditions that cannot by
their terms be satisfied until the Holdback Date);

“laws”
means applicable laws, statutes, by-laws, rules,
regulations, orders, ordinances, protocols, codes, guidelines, treaties,
policies, notices, directions, decrees, judgments, awards or requirements, in
each case of any Governmental Entity;

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“Material Contract” means a contract,
licence, lease, agreement, obligation, undertaking, arrangement, document,
commitment, entitlement or engagement to which the Company is a party or by
which it is bound or under which it has, or will have, any liability or
contingent liability (in each case, whether written or oral, express or
implied): (a) involving payments to or by such Person in excess of US$50,000 annually or US$100,000 in aggregate over the term of the contract;
(b) involving rights or obligations that may reasonably extend beyond
three years and which does not terminate or cannot be terminated without
penalty on less than three months’ notice; (c) which provide any rights to
one or more third parties with respect to any of the Company’s Property or
Mineral Rights; (d) which is outside the ordinary course of business;
(e) which  contain covenants that: (i) in any way purport to restrict
the business activity of the Company or any of its affiliates; or (ii) limit
the freedom of the Company or any of its affiliates to engage in any line of
business or to compete with any Person; (f) which, if terminated without
the consent of the Person, in the case of the Company, would result in a
Company Material Adverse Effect; (g) is with a Governmental Entity; or
(h) is a contract pursuant to which the Company or one of its Subsidiaries
provides any indemnification to any other Person. For greater certainty, with
respect to the Company, includes the Material Contracts listed in Schedule 4.24
of the Company Disclosure Letter;

“Mineral
Interests” has the meaning given in the Amended and Restated Security
Agreement;

“Mineral
Rights” has the meaning given in Section 4.13(a);

“Net
Proceeds” has the meaning given in Section 6.3;

“Note”
means the secured convertible grid promissory note issued by the Company to
Investor in accordance with this Agreement and dated as of the Closing Date,
substantially in the form attached as Schedule A to this Agreement; 

“Notes”
means the Note and the Amended and Restated Note;

“Note
Shares” means the Common Shares issuable on conversion of the Note;

“Original Deeds of Trust” means,
collectively: (i) the deed of trust, security agreement, assignment of rents,
fixture filing, and as-extracted collateral filing (unpatented claims)
agreement made as of the 10th day of September, 2010 by the Company,
Osler, Hoskin & Harcourt LLP as trustee, for the benefit of Investor, and
filed in each of Esmerelda County, Nevada, Nye County, Nevada, Mineral County,
Nevada and (ii) the deed of trust, security agreement, assignment of rents,
fixture filing, and as-extracted collateral filing (unpatented claims) made as
of the 10th day of September, 2010 by the Company, Landmark Title
Company as trustee, for the benefit of Investor, and filed in Grand  County,
Utah, each prepared and filed in connection with the purchase of the Original
Note and the Original Warrant Certificate pursuant to the Original Investment
Agreement;

“Original
Investment Agreement” means the investment agreement dated September 2,
2010 between Investor and the Company;

“Original
Note” has the meaning given to it in the recitals to this Agreement;

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“Original Warrant Certificate”
means the certificate evidencing the warrants to purchase Common Shares issued
by the Company on September 2, 2010 having an exercise price of US$0.54 per
Common Share;

“Parties”
means Investor and the Company collectively, and “Party” means any one
of them;

“Person”
means any individual, sole proprietorship, partnership, firm, entity,
unincorporated association, unincorporated syndicate, unincorporated
organization, trust, body corporate, limited liability company, unlimited liability
company, government, government regulatory authority, governmental department,
agency, commission, board, tribunal, dispute settlement panel or body, bureau,
court and, where the context requires, any of the foregoing when they are
acting as trustee, executor, administrator or other legal representative;

“Project”
means the Borate Hills Project in Nevada, comprised of the North Borate Hills
property and the South Borate Hills property;

“Property” has the meaning given in
Section 4.13(a);

“Securities Laws” means the U.S.
Securities Act, the Securities Act (Ontario), together with all other
applicable state, federal and provincial securities laws, rules and regulations
and published policies thereunder, as now in effect and as they may be
promulgated or amended from time to time;

“Shares”
means the Common Shares and includes any additional Common Shares that may be
created, but unless otherwise provided herein does not include Common Shares
for which other securities may be exercised or exchanged or into which other
securities may be converted unless and until such rights have been exercised
and such Common Shares issued; 

“Taxes” means: (a) any and all taxes, imposts, levies,
withholdings, duties, fees, premiums, assessments and other charges of any
kind, however denominated and instalments in respect thereof, including any
interest, penalties, fines or other additions that have been, are or will
become payable in respect thereof, imposed by any Governmental Entity, including
for greater certainty all income or profits taxes, payroll and employee
withholding taxes, employment taxes, unemployment insurance, disability taxes,
social insurance taxes, sales and use taxes, ad valorem taxes, excise taxes,
goods and services taxes, harmonized sales taxes, franchise taxes, gross
receipts taxes, capital taxes, business license taxes, alternative minimum
taxes, estimated taxes, abandoned or unclaimed (escheat) taxes, occupation
taxes, real and personal property taxes, stamp taxes, environmental taxes,
transfer taxes, severance taxes, workers’ compensation, government pension plan
premiums or contributions and other governmental charges, and other obligations
of the same or of a similar nature to any of the foregoing, which a Party or
any of its subsidiaries is required to pay, withhold or collect, together with
any interest, penalties or other additions to tax that may become payable in
respect of such taxes, and any interest in respect of such interest, penalties
and additions whether disputed or not; and (b) any liability for the payment of
any amount described in paragraph (a) of this definition as a result of being a
member of an affiliated, consolidated, combined or unitary group for any
period, as a result of any Tax sharing or Tax allocation agreement, arrangement
or understanding, or as a result of being liable for another person’s Taxes as
a transferee or successor, by contract or otherwise;

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“Tax Returns” includes all returns,
reports, declarations, elections, notices, filings, forms, statements and other
documents (whether in tangible, electronic or other form) and including any
amendments, schedules, attachments, supplements, appendices and exhibits
thereto, made, prepared, filed or required by a Governmental Entity to be made,
prepared or filed by law in respect of Taxes;

“UCC”
has the meaning given in the Amended and Restated Security Agreement;

“US$”
means United States dollars;

“U.S.
Exchange Act” means the United States Securities Exchange Act of 1934, as
amended;

“U.S.
Securities Act” means the United States Securities Act of 1933, as amended;

“Warrant
Certificate” means the certificate issued by the Company and dated as of
the Closing Date evidencing the Warrants, substantially in the form attached as
Schedule B to this Agreement;

“Warrants”
means the warrants to purchase Common Shares issued by the Company to Investor
pursuant to this Agreement; and

“Warrant
Shares” means the Common Shares issuable on exercise of the Warrants.

1.2             
Certain Rules of Interpretation

In this Agreement:

(a)               
Consent –
Whenever a provision of this Agreement requires an approval or consent and the
approval or consent is not delivered within the applicable time limit, then,
unless otherwise specified, the Party whose consent or approval is required
shall be conclusively deemed to have withheld its approval or consent.

(b)              
Headings –
Headings of Articles and Sections are inserted for convenience of reference
only and do not affect the construction or interpretation of this Agreement.

(c)               
Including – Where
the word “including” or “includes” is used in this Agreement, it means
“including (or includes) without limitation”.

(d)              
No Strict Construction – The language used in this Agreement is the language chosen by the
Parties to express their mutual intent, and no rule of strict construction
shall be applied against any Party.

(e)               
Number and Gender
– Unless the context otherwise requires, words importing the singular include
the plural and vice versa and words importing gender include all
genders. 

(f)               
Severability –
If, in any jurisdiction, any provision of this Agreement or its application to
any Party or circumstance is restricted, prohibited or unenforceable,
such provision shall, as to such jurisdiction, be ineffective only to the
extent of such restriction, prohibition or unenforceability without
invalidating the remaining provisions of this Agreement and without affecting
the validity or enforceability of such provision in any other jurisdiction or
without affecting its application to other Parties or circumstances.

6

 

 

(g)              
Statutory References – A reference to a statute includes all regulations and rules made
pursuant to the statute and, unless otherwise specified, the provisions of any
statute, regulation or rule which amends, supplements or supersedes any such
statute, regulation or rule.

(h)              
Time – Time is of
the essence in the performance of the Parties’ respective obligations.

(i)                
Time Periods –
Unless otherwise specified, time periods within or following which any payment
is to be made or act is to be done, shall be calculated by excluding the day on
which the period commences and including the day on which the period ends and
by extending the period to the next Business Day following if the last day of
the period is not a Business Day.

1.3             
Knowledge

Any reference to the
knowledge of any Party means to the best of the knowledge, information and
belief of the Party after reviewing all relevant records and making due
inquiries regarding the relevant matter of all relevant directors, officers and
employees of such Party and, in the case of the knowledge of the Company, the
management of the Company, and without limitation, includes Hugh Aird, Chief
Executive Officer, Judy Baker, Property Development, Production and
Acquisitions, and Chris Hobbs, Chief Financial Officer. 

1.4             
Entire Agreement

This Agreement, and the agreements and other
documents required to be delivered pursuant to this Agreement, constitute the
entire agreement between the Parties and set out all the covenants, promises,
warranties, representations, conditions and agreements between the Parties in
connection with the subject matter of this Agreement and supersede all prior
agreements, understandings, negotiations and discussions, whether oral or
written, pre-contractual or otherwise. There are no covenants, promises,
warranties, representations, conditions or other agreements, whether oral or
written, pre-contractual or otherwise, express, implied or collateral, whether
statutory or otherwise, between the Parties in connection with the subject
matter of this Agreement except as specifically set forth in this Agreement and
any document required to be delivered pursuant to this Agreement.

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Article 2

Purchase of note and warrants

2.1             
Closing 

(a)               
Subject to the terms and conditions hereof, Investor hereby agrees to purchase from the Company,
and the Company hereby agrees to sell to Investor on
the Closing Date, a Note in the aggregate principal amount of US$500,000.00
(the “Principal Amount”), for an aggregate purchase price equal to
US$500,000.00 (the “Aggregate Price”).

(b)              
On the Closing Date, Investor shall advance to the
Company the amount of US$350,000.00 (the “Initial Advance”) and the
Company shall deliver the Note to the Investor, with the grid attached to such
Note evidencing the advance by Investor and the borrowing by the Company under
the Note of an amount equal to the Initial Advance.

(c)               
Subject to the terms and conditions of this
Agreement, on the Holdback Date, Investor shall advance to the Company the
amount of US$150,000.00 (the “Holdback Amount”) and, in connection with
such payment, if any, Investor shall make a notation on the grid attached to
such Note evidencing the advance by Investor and the borrowing by the Company
under the Note of an amount equal to the Holdback Amount.

2.2             
Payment of Aggregate Price

The Initial
Advance and the Holdback Amount shall be paid by Investor in cash or by wire
transfer of immediately available funds to the following bank account of the
Company:

American Lithium Minerals Inc.

Bank:               Wachovia Bank

Address:          1525 WT Harris
Blvd

                        Charlotte
N.C., 28262

Account#:        2000041563782

SWIFT#:         PNBPUS33

ABA
#:           063000021

2.3             
Warrants

On the Closing Date, in consideration for the
purchase by Investor of the Note, the Company shall issue to and in favour of Investor Warrants to purchase that
number of Common Shares obtained by dividing the Aggregate Price by the
Current Market Price.  Such Warrants shall be exercisable into Common Shares at
an exercise price equal to the Current Market Price per Common Share (the “Warrant”).
The Warrants shall be exercisable until 5:00 p.m. on April 6, 2012. 

8

 

 

2.4             
Conversion or Exchange

The Note shall
be convertible in accordance with its terms into Note Shares.

2.5             
Conditions to Exchange

If any conversion referred to in Section 2.4 shall be subject to any approvals
required under applicable laws or the rules of an applicable stock exchange or
the rules of an applicable takeover code, the Company shall use its best
efforts to obtain such approvals.

2.6             
Amendments to Original Note

The Company and Investor acknowledge and
agree that the conversion price for the principal amount of the Original Note
shall be amended in accordance with the terms set forth in the Amended and
Restated Note.

2.7             
Amendments to Original Warrant Certificate

 The Company and Investor acknowledge and
agree that the exercise price for a Warrant under the Original Warrant
Certificate shall be amended in accordance with the terms set forth in the
Amended and Restated Warrant Certificate.

Article
3

REPRESENTATION AND WARRANTIES OF INVESTOR

Investor represents and warrants to and in
favour of the Company and acknowledges that the Company is relying on such
representations and warranties in connection with the Agreement and the
transactions contemplated therein.

3.1             
Organization and Qualification

Investor is a
corporation validly existing under the laws of the Province of Ontario.

3.2             
Authority Relative to this Agreement

Investor has the
requisite corporate power and authority to enter into this Agreement and to
perform its obligations hereunder. The execution and delivery of this Agreement
by Investor, and the performance of its obligations hereunder, have been duly
authorized.  This Agreement has been duly executed and delivered by Investor
and constitutes a legal, valid and binding obligation of Investor, enforceable
by the Company against Investor in accordance with its terms, except as the
enforcement thereof may be limited by bankruptcy, insolvency and other
applicable laws affecting the enforcement of creditors’ rights generally and
subject to the qualification that equitable remedies may be granted only in the
discretion of a court of competent jurisdiction. 

3.3             
No Conflict; Required Filings and Consent

The execution and
delivery of and performance by Investor of this Agreement do not and will not
(or would not with the giving of notice, the lapse of time or the happening of
any other event of condition) result in a breach or
violation of or a conflict with, or allow any other person to exercise any
rights under any of the terms or provisions of Investor’s articles or by-laws.

9

 

 

3.4             
Prospectus Exemption Under Canadian Securities
Laws

Investor is an “accredited investor” within the meaning of National
Instrument 45-106 of the Canadian Securities Administrators.

3.5             
U.S. Securities Act Compliance

Investor is an “accredited investor” within the meaning of Regulation D under
the U.S. Securities Act.  Investor represents
and warrants that it has the sophistication to evaluate an investment in the
Company without the benefit of a registration statement under the U.S.
Securities Act, that it has had the opportunity to obtain all information about
the Company necessary to make an informed investment decision and that it is
able to bear the full loss of its investment in the Company.  Investor acknowledges that the securities being
acquired by it pursuant to this Agreement, including the Note, the Warrant, the
Note Shares and the Warrant Shares, have not been registered under the
Securities Act and shall bear legends evidencing restrictions on transfer under
the Securities Act until such time as the holder thereof provides an opinion of
counsel to the Company to the effect that such legend is no longer required.

Article
4

Representations and Warranties of the Company

Except as disclosed in the Company Disclosure
Letter (which shall make reference to the applicable section, subsection,
paragraph or subparagraph below in respect of which such qualification is being
made), the Company hereby represents and warrants to Investor as set forth
below, and acknowledges that Investor is relying upon these representations and
warranties in connection with the entering into of this Agreement and the
consummation of the transactions contemplated herein.

4.1             
Organization and Qualification

The Company is duly incorporated and validly
existing under Chapter 78 of the Nevada Revised Statutes and has full
corporate power and authority to own its assets and conduct its business as now
owned and conducted. The Company is duly qualified to carry on business and is
in good standing in each jurisdiction in which the character of its properties
or the nature of its activities makes such qualification necessary, except
where the failure to be so qualified will not, individually or in the
aggregate, have a Company Material Adverse Effect. True and complete copies of
the constating documents of the Company have been delivered or made available
to Investor, and the Company has not taken any action to amend or supersede
such documents. 

4.2             
Authority Relative to this Agreement

The Company has the requisite corporate power
and authority to enter into this Agreement and the Collateral Documents and to
perform its obligations hereunder and thereunder. The execution and delivery of
this Agreement by the Company and the consummation by the Company of the
transactions contemplated by this Agreement and the Collateral Documents,
including the issuance of the Note, the Warrant
Certificate, the Amended and Restated Note, the Amended and Restated Warrant
Certificate, the Note Shares and the Warrant Shares, have been duly authorized
by the Board and no other corporate proceedings on the part of the Company are
necessary to authorize this Agreement. This Agreement and the Collateral
Documents have been duly executed and delivered by the Company and constitute
valid and binding obligations of the Company, enforceable by Investor against
the Company in accordance with their terms, except as the enforcement thereof
may be limited by bankruptcy, insolvency and other applicable laws affecting
the enforcement of creditors’ rights generally and subject to the qualification
that equitable remedies may be granted only in the discretion of a court of
competent jurisdiction. 

10

 

 

4.3             
No Conflict; Required Filings and Consent

The execution and delivery by the Company of
this Agreement and the Collateral Documents and the performance by it of its
obligations hereunder and thereunder and the completion of the transactions
contemplated by this Agreement will not violate, conflict with or result in a
breach of any provision of the constating documents of the Company, and except
as would not, individually or in the aggregate, have or reasonably be expected
to have a Company Material Adverse Effect, will not: (a) violate, conflict
with or result in a breach of: (i) any agreement, contract, indenture,
deed of trust, mortgage, bond, instrument, authorization, licence or permit to
which the Company is a party or by which the Company is bound; or (ii) any
law to which the Company is subject or by which the Company is bound;
(b) give rise to any right of termination, or the acceleration of any
indebtedness, under any such agreement, contract, indenture, authorization,
deed of trust, mortgage, bond, instrument, licence or permit; or (c) give
rise to any rights of first refusal or rights of first offer, trigger any
change in control or influence provisions or any restriction or limitation
under any such agreement, contract, indenture, authorization, deed of trust,
mortgage, bond, instrument, licence or permit, or result in the imposition of
any encumbrance, charge or lien upon any of the Company’s assets. No
authorization, consent or approval of, or filing with, any Governmental Entity
or any court or other authority is necessary on the part of the Company for the
consummation by the Company of its obligations in connection with the
transactions contemplated by this Agreement or for the completion of the
transactions contemplated by this Agreement not to cause or result in any loss
of any rights or assets or any interest therein held by the Company in any
material properties, except for such authorizations, consents, approvals and
filings as to which the failure to obtain or make would not, individually or in
the aggregate, prevent or materially delay consummation of the transactions
contemplated by this Agreement. 

4.4             
Subsidiaries

The Company does not have Subsidiaries or any
interests in any Person, including any rights to acquire any equity interest in
any Person.

4.5             
Compliance with Laws

(a)               
The operations of the Company have been and are
now conducted in compliance with all laws of each jurisdiction, the laws of
which have been and are now applicable to the operations of the Company and the
Company has not received any notice of any alleged violation of any such laws.

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(b)              
The Company is not in conflict with, or in
default (including cross defaults) under or in violation of: (a) its articles
or by-laws or equivalent organizational documents; or (b) any agreement or
understanding to which it or by which any of its properties or assets is bound
or affected, except for failures which, individually or in the aggregate, would
not have a Company Material Adverse Effect.

(c)               
The Company is in compliance with all of its
covenants and obligations set forth in the Original Investment Agreement, the
General Security Agreement, the Original Deeds of Trust, the Note and the
Warrant Certificate.

4.6             
Company Authorizations

The Company has obtained all authorizations
necessary for the ownership, operation, development, maintenance, or use of the
material assets of the Company or otherwise in connection with the material
business or operations of the Company as they are currently being conducted and
such authorizations are in full force and effect.  The Company has fully
complied with and is in compliance with all authorizations, except, in each
case, for such non-compliance which, individually or in the aggregate, would
not have a Company Material Adverse Effect.  There is no action, investigation
or proceeding pending or, to the knowledge of the Company, threatened regarding
any of the authorizations.  The Company has not received any notice, whether
written or oral, of revocation or non-renewal of any such authorizations, or of
any intention of any Person to revoke or refuse to renew any of such
authorizations, except in each case, for revocations or non-renewals which,
individually or in the aggregate, would not have a Company Material Adverse
Effect and, to the knowledge of the Company, all such authorizations continue
to be effective in order for the Company to continue to conduct its businesses
as they are currently being conducted.  No Person other than the Company owns
or has any proprietary, financial or other interest (direct or indirect) in any
of the authorizations.

4.7             
Capitalization and Listing

(a)               
The authorized share capital of the Company
consists of 75,000,000 Common Shares. As at the date of this Agreement there
are: (i) 60,590,740 Common Shares validly issued and outstanding as fully
paid and non-assessable shares of the Company; (ii) outstanding options
providing for the issuance of 8,775,000 Common Shares
upon the exercise thereof; and (iii) outstanding warrants providing for the
issuance of 2,361,111 Common Shares upon the exercise thereof. Except for the
options and warrants referred to in this Section 4.7(a), (x) there
are no options, warrants, conversion privileges, calls or other rights,
shareholder rights plans, agreements, arrangements, commitments, or obligations
of the Company to issue or sell any shares of the Company or securities or
obligations of any kind convertible into, exchangeable or exercisable for or
otherwise carrying the right or obligation to acquire any shares of the
Company, and there are no outstanding stock appreciation rights, phantom equity
or similar rights, agreements, arrangements or commitments of the Company based
upon the book value, income or any other attribute of the Company, and
(y) no Person is entitled to any pre-emptive or other similar right
granted by the Company or any of its Subsidiaries. The Common Shares are listed
on the Over-the-Counter Bulletin Board, and are not
listed or quoted on any market other than the Over-the-Counter Bulletin Board. 

12

 

 

(b)              
The Company has reserved for issuance the
maximum number of Note Shares and Warrant Shares issuable pursuant to the Note
and the Warrants, respectively, and shall at all times ensure that a sufficient
number of Common Shares are, and shall continue to be, authorized and reserved
for issuance to enable the Company to satisfy its obligations pursuant to the
Note and the Warrants. The Note Shares and Warrant Shares will, when issued in
accordance with the terms of the Note and the Warrants, respectively, be duly
authorized, validly issued, fully paid and non-assessable and are not and will
not be subject to or issued in violation of, any pre-emptive rights. 

(c)               
There are no outstanding contractual obligations
of the Company to repurchase, redeem or otherwise acquire any Common Shares.

(d)              
No order ceasing or suspending trading in
securities of the Company nor prohibiting the sale of such securities has been
issued and is outstanding against the Company or its directors, officers or
promoters. 

4.8             
Shareholder and Similar Agreements

The Company is not party to any shareholder,
pooling, voting trust or other similar agreement relating to the issued and
outstanding shares in the capital of the Company. 

4.9             
U.S. Securities Law Matters

The Company has not engaged in any “general
solicitation” or “general advertising” that would render the exemption from the
registration requirements of the U.S. Securities Act afforded by Section 4(2)
thereof or Regulation D promulgated thereunder unavailable in connection with
the offers and sales of securities contemplated by this Agreement.  The Company
has also not undertaken any other offerings of securities which would be
subject to integration with the offers and sales contemplated by this Agreement
so as to render such exemptions unavailable in connection with such offers and
sales.

4.10         
Reports

The Company has filed with all applicable
Governmental Entities true and complete copies of the Company Public Documents
that the Company is required to file therewith. The Company Public Documents at
the time filed: (a) did not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, and (b) complied in all
material respects with the requirements of applicable Securities Laws.

4.11         
Financial Statements

(a)               
The audited consolidated financial statements
for the Company as at and for each of the fiscal years ended on September 30,
2010, September 30, 2009, and September 30, 2008 including the notes thereto
and the report by the Company’s auditors thereon and
the interim consolidated financial statements for the Company for the period
ended December 31, 2010 including the notes thereto have been, and all
financial statements of the Company which are publicly disseminated by the
Company in respect of any subsequent periods prior to the Closing Date will be,
prepared in accordance with GAAP applied on a basis consistent with prior
periods and all applicable laws and present fairly, in all material respects,
the assets, liabilities (whether accrued, absolute, contingent or otherwise),
consolidated financial position and results of operations of the Company as of
the respective dates thereof and its results of operations and cash flows for
the respective periods covered thereby (except as may be indicated expressly in
the notes thereto). Such financial statements reflect appropriate and adequate
reserves in accordance with GAAP in respect of contingent liabilities of the
Company, if any, of the Company on a consolidated basis.  There are no
outstanding loans made by the Company to any executive officer or director of
the Company. 

13

 

 

(b)              
The management of the Company has established
and maintained a system of disclosure controls and procedures designed to
provide reasonable assurance that information required to be disclosed by the
Company in its annual filings, interim filings or other reports filed or
submitted by it under the applicable laws imposed by Governmental Entities is
recorded, processed, summarized and reported within the time periods specified
in such laws imposed by such Governmental Entities. Such disclosure controls
and procedures include controls and procedures designed to ensure that
information required to be disclosed by the Company in its annual filings,
interim filings or other reports filed or submitted under the applicable laws
imposed by Governmental Entities is accumulated and communicated to the
Company’s management, including its chief executive officers and chief
financial officers (or persons performing similar functions), as appropriate to
allow timely decisions regarding required disclosure.

(c)               
The Company maintains internal control over
financial reporting.  Such internal control over financial reporting is
effective in providing reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with GAAP and includes policies and procedures that:
(i) pertain to the maintenance of records that in reasonable detail
accurately and fairly reflect the transactions and dispositions of the assets
of the Company; (ii) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in
accordance with GAAP, and that receipts and expenditures of the Company are
being made only with authorizations of management and directors of the Company;
and (iii) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of the assets of the
Company that could have a material effect on its financial statements.  To the
knowledge of the Company, prior to the date of this Agreement: (x) there
are no significant deficiencies in the design or operation of, or material
weaknesses in, the internal controls over financial reporting of the Company
that are reasonably likely to adversely affect the ability of Investor to
record, process, summarize and report financial information;
and (y) there is no fraud, whether or not material, that involves
management or other employees who have a significant role in the internal
control over financial reporting of the Company.

14

 

 

(d)              
Since September 30, 2010, neither the Company
nor, to the Company’s knowledge, any director, officer, employee, auditor,
accountant or representative of the Company has received or otherwise had or
obtained knowledge of any complaint, allegation, assertion, or claim, whether
written or oral, regarding the accounting or auditing practices, procedures,
methodologies or methods of the Company or its internal accounting controls,
including any complaint, allegation, assertion, or claim that the Company has
engaged in questionable accounting or auditing practices, which has not been
resolved to the satisfaction of the audit committee of the Board. 

4.12         
Undisclosed Liabilities

Except as disclosed in Schedule 4.12
of the Company Disclosure Letter, the Company does not have any liabilities or
obligations of any nature, whether or not accrued, contingent or otherwise,
except for: (a) liabilities and obligations that are specifically
disclosed on the audited balance sheet of the Company as of September 30, 2010
(for the purposes of this Section 4.12, the “Company Balance Sheet”)
or in the notes thereto; or (b) liabilities and obligations incurred in
the ordinary course of business consistent with past practice since September
30, 2010, that are not and would not, individually or in the aggregate with all
other liabilities and obligations of the Company (other than those disclosed on
the Company Balance Sheet), reasonably be expected to have a Company Material
Adverse Effect, or have a Company Material Adverse Effect, or, as a consequence
of the consummation of the transactions contemplated by this Agreement, have a
Company Material Adverse Effect.  Without limiting the foregoing, the Company
Balance Sheet reflects reasonable reserves in accordance with GAAP for
contingent liabilities relating to pending litigation and other contingent
obligations of the Company except as disclosed in the Company Disclosure
Letter. 

4.13         
Interest in Properties and Mineral Rights

(a)               
All of the Company’s directly and indirectly
owned real properties (collectively, and where material, the “Property”)
and all of the Company’s mineral interests and rights (including any material
claims, concessions, exploration licences, exploitation licences, prospecting
permits, mining leases and mining rights, in each case, either existing under
contract, by operation of law or otherwise) (collectively, and where material,
the “Mineral Rights”), are set out in Schedule 4.13(a) of
the Company Disclosure Letter. Other than the Properties and the Mineral Rights
set out in Schedule 4.13(a) of the Company Disclosure Letter, the
Company does not own or have any interest in any real property or any mineral
interests and rights.

(b)              
Except as disclosed on Schedule 4.13(b)
of the Company Disclosure Letter, the Company is the sole legal and beneficial
owner of all right, title and interest in and to the Property and the Mineral
Rights, free and clear of any encumbrances. 

15

 

 

(c)               
All of the Mineral Rights have been properly
located and recorded in compliance with applicable law and are comprised of
valid and subsisting mineral claims.

(d)              
The Property and the Mineral Rights are in good
standing under applicable law and, to the knowledge of the Company, all work
required to be performed and filed in respect thereof has been performed and
filed, all Taxes, rentals, fees, expenditures and other payments in respect
thereof have been paid or incurred and all filings in respect thereof have been
made.

(e)               
There is no adverse claim against or challenge
to the title to or ownership of the Property or any of the Mineral Rights.

(f)               
The Company has the exclusive right to deal with
the Property and all of the Mineral Rights.

(g)              
Except as disclosed in Schedule 4.13(g)
of the Company Disclosure Letter, no person other than the Company has
any interest in the Property or any of the Mineral Rights or the production or
profits therefrom or any royalty in respect thereof or any right to acquire any
such interest.

(h)              
There are no back-in rights, earn-in rights,
rights of first refusal or similar provisions or rights which would affect the
Company’s interest in the Property or any of the Mineral Rights.

(i)                
There are no material restrictions on the
ability of the Company to use, transfer or exploit the Property or any of the
Mineral Rights, except pursuant to the applicable law.

(j)                
The Company has not received any notice, whether
written or oral, from any Governmental Entity of any revocation or intention to
revoke any interest of the Company in any of the Property or any of the Mineral
Rights.

(k)              
The Company has all surface rights, including
fee simple estates, leases, easements, rights of way and permits or licences
operations from landowners or Governmental Entities permitting the use of land
by the Company, and mineral interests that are required to exploit the development
potential of the Property and the Mineral Rights as contemplated in the Company
Public Documents filed on or before the date hereof and no third party or group
holds any such rights that would be required by the Company to develop the
Property or any of the Mineral Rights as contemplated in the Company Public
Documents filed on or before the date hereof.

(l)                
All mines located in or on the lands of the
Company or lands pooled or unitized therewith, which have been abandoned by the
Company, have been abandoned in accordance with good mining practices and in
compliance with all applicable laws, and all future abandonment, remediation
and reclamation obligations known to the Company as of the date hereof have
been accurately set forth in the Company Public
Documents without omission of information necessary to make the disclosure not
misleading

16

 

 

4.14         
Operational Matters

Except as
would not, individually or in the aggregate, be reasonably expected to result
in a Company Material Adverse Effect:

(a)               
all rentals, royalties, overriding royalty
interests, production payments, net profits, interest burdens, payments and
obligations due and payable, or performable, as the case may be, on or prior to
the date hereof under, with respect to, or on account of, any direct or
indirect assets of the Company have been: (i) duly paid; (ii) duly
performed; or (iii) provided for prior for the date hereof; and

(b)              
all costs, expenses, and liabilities payable on
or prior to the date hereof under the terms of any contracts to which the
Company is directly or indirectly bound have been properly and timely paid,
except for such expenses that are being currently paid prior to delinquency in
the ordinary course of business.

4.15         
Employment Matters

(a)               
Other than as disclosed in Schedule 4.15
of the Company Disclosure Letter, the Company has not entered into any written
or oral agreement or understanding providing for severance or termination
payments to any director, officer or employee in connection with the
termination of their position or their employment as a direct result of a
change in control of the Company.

(b)              
The Company is not (i) a party to any
collective bargaining agreement, or (ii) subject to any application for
certification or, to the knowledge of the Company, threatened or apparent
union-organizing campaigns for employees not covered under a collective
bargaining agreement.

(c)               
The Company is not subject to any claim for
wrongful dismissal, constructive dismissal or any other tort claim, actual or,
to the knowledge of the Company, threatened, or any litigation actual, or to
the knowledge of the Company, threatened, relating to employment or termination
of employment of employees or independent contractors, except for such claims
or litigation which individually or in the aggregate would not be reasonably to
be expected to have a Company Material Adverse Effect. To the knowledge of the
Company, no labour strike, lock-out, slowdown or work stoppage is pending or
threatened against or directly affecting the Company.

(d)              
The Company has operated in accordance with all
applicable laws with respect to employment and labour, including employment and
labour standards, occupational health and safety, employment equity, pay
equity, workers’ compensation, human rights, labour relations and privacy and
there are no current, pending, or to the knowledge of the Company, threatened
proceedings before any board or tribunal with respect
to any of the areas listed herein, except where the failure to so operate would
not have a Company Material Adverse Effect.

17

 

 

4.16         
Absence of Certain Changes or Events

Since
September 30, 2010:

(a)               
the Company has conducted its business in the
ordinary course of business and consistent with past practice;

(b)              
no liability or obligation of any nature
(whether absolute, accrued, contingent or otherwise) which has had or is
reasonably likely to have a Company Material Adverse Effect has been incurred;

(c)               
there has not been any event, circumstance or
occurrence which has had or is reasonably likely to give rise to a Company
Material Adverse Effect;

(d)              
there has not been any change in the accounting
practices used by the Company;

(e)               
except for ordinary course adjustments to
non-executive employees, there has not been any increase in the salary, bonus,
or other remuneration payable to any non-executive employees of any of the
Company;

(f)               
there has not been any redemption, repurchase or
other acquisition of Common Shares by the Company, or any declaration, setting
aside or payment of any dividend or other distribution (whether in cash, shares
or property) with respect to the Common Shares;

(g)              
there has not been a material change in the
level of accounts receivable or payable, inventories or employees, other than
those changes in the ordinary course of business consistent with past practice;

(h)              
except for the Material Contracts listed on Schedule
4.24 of the Company Disclosure Letter which have been entered into or
amended since September 30, 2010, there has not been any entering into, or an
amendment of, any Material Contract other than in the ordinary course of
business consistent with past practice;

(i)                
there has not been any satisfaction or
settlement of any claims or liabilities that were not reflected in the
Company’s audited financial statements, other than the settlement of claims or
liabilities incurred in the ordinary course of business consistent with past
practice; and 

(j)                
except for ordinary course adjustments, there
has not been any increase in the salary, bonus, or other remuneration payable
to any officers or senior or executive officers of the Company.

18

 

 

4.17         
Litigation

Except as disclosed in Schedule 4.17
of the Company Disclosure Letter, there is no claim, action, proceeding or
investigation pending or, to the knowledge of the Company, threatened against or
relating to the Company, the business of the Company or affecting any of their
properties, assets, before or by any Governmental Entity which, if adversely
determined, would have, or reasonably could be expected to have, a Company
Material Adverse Effect or prevent or materially delay the consummation of the
transactions contemplated by this Agreement, nor to knowledge of the Company
are there any events or circumstances which could reasonably be expected to
give rise to any such claim, action, proceeding or investigation. The Company
is not subject to any outstanding order, writ, injunction or decree which has
had or is reasonably likely to have a Company Material Adverse Effect or which
would prevent or materially delay consummation of the transactions contemplated
by this Agreement.

4.18         
Taxes

(a)               
Except as disclosed in Schedule 4.18, the
Company has duly and in a timely manner made or prepared all Tax Returns
required to be made or prepared by it, and duly and in a timely manner filed
all Tax Returns required to be filed by it with the appropriate Governmental
Entity, such Tax Returns were complete and correct in all material respects and
the Company has paid all Taxes, including instalments on account of Taxes for
the current year required by applicable law, which are due and payable by it
whether or not assessed by the appropriate Governmental Entity and the Company
has provided adequate accruals in accordance with GAAP in the most recently
published financial statements of the Company for any Taxes of the Company for
the period covered by such financial statements that have not been paid whether
or not shown as being due on any Tax Returns. Since such publication date, no
material liability in respect of Taxes not reflected in such statements or
otherwise provided for has been assessed, proposed to be assessed, incurred or
accrued, other than in the ordinary course of business.

(b)              
The Company has duly and timely withheld all
Taxes and other amounts required by law to be withheld by it (including Taxes
and other amounts required to be withheld by it in respect of any amount paid
or credited or deemed to be paid or credited by it to or for the benefit of any
Person) and has duly and timely remitted to the appropriate Governmental Entity
such Taxes or other amounts required by law to be remitted by it.  

(c)               
The Company has duly and timely collected all
amounts on account of any sales, use or transfer Taxes, including goods and
services, harmonized sales, provincial and territorial taxes and state and
local taxes, required by law to be collected by it and has duly and timely
remitted to the appropriate Governmental Entity such amounts required by law to
be remitted by it.  

(d)              
The Company has not made, prepared and/or filed
any elections, designations or similar filings relating to Taxes or entered
into any agreement or other arrangement in respect of
Taxes or Tax Returns that has effect for any period ending after the Effective
Date.

19

 

 

(e)               
There are no proceedings, investigations, audits
or claims now pending or threatened against the Company in respect of any Taxes
and there are no matters under discussion, audit or appeal with any
Governmental Entity relating to Taxes.

4.19         
Books and Records

The corporate records and minute books of the
Company have been maintained in accordance with all applicable laws, and the
minute books of the Company are complete and accurate in all material
respects.  The corporate minute books for the Company contain minutes of all
meetings and resolutions of the directors and securityholders held.  The
financial books and records and accounts of the Company in all material
respects: (a) have been maintained in accordance with good business
practices and in accordance with GAAP and with the accounting principles
generally accepted in the country of domicile of each such entity, on a basis
consistent with prior years; and (b) are stated in reasonable detail and
accurately and fairly reflect the transactions and dispositions of assets of
the Company. 

4.20         
Insurance

(a)               
The Company has in place reasonable and prudent
insurance policies appropriate for its size, nature and stage of development.
All premiums payable prior to the date hereof under such policies of insurance
have been paid and the Company has not failed to make a claim thereunder on a
timely basis.

(b)              
Each of such policies and other forms of
insurance is in full force and effect on the date hereof and shall (or
comparable replacement or substitutions therefore shall) be kept in full force
and effect by the Company through the Effective Date. No written (or to the
knowledge of the Company other) notice of cancellation or termination has been
received by the Company with respect to any such policy.

4.21         
Non-Arm’s Length Transactions

Except as disclosed in the Company’s Annual
Report on Form 10-K for the year ended September 30, 2010, there are no current
contracts, commitments, agreements, arrangements or other transactions
(including relating to indebtedness by the Company) between the Company on the
one hand, and any (a) officer or director of the Company, (b) any holder
of record or, to the knowledge of the Company, beneficial owner of five percent
or more of the voting securities of the Company, or (c) any affiliate or
associate of any officer, director or beneficial owner, on the other hand.

4.22         
Environmental

Except for any matters that, individually or
in the aggregate, would not have or would not reasonably be expected to have a
Company Material Adverse Effect:

(a)               
all facilities and operations of the Company
have been conducted, and are now, in compliance with all Environmental Laws;

20

 

 

(b)              
the Company is in possession of, and in
compliance with, all Environmental Permits that are required to own, lease and
operate the Property and Mineral Rights and to conduct its business as it is
currently being conducted; 

(c)               
no environmental, reclamation or closure
obligation, demand, notice, work order or other liabilities presently exist
with respect to any portion of any currently or formerly owned, leased, used or
otherwise controlled property, interests and rights or relating to the
operations and business of the Company and, to the knowledge of the Company,
there is no basis for any such obligations, demands, notices, work orders or
liabilities to arise in the future as a result of any activity in respect of
such property, interests, rights, operations and business; 

(d)              
the Company is not subject to any proceeding,
application, order or directive which relates to environmental, health or
safety matters, and which may require any material work, repairs, construction
or expenditures;

(e)               
to the knowledge of the Company, there are no
changes in the status, terms or conditions of any Environmental Permits held by
the Company or any renewal, modification, revocation, reassurance, alteration,
transfer or amendment of any such environmental approvals, consents, waivers,
permits, orders and exemptions, or any review by, or approval of, any
Governmental Entity of such environmental approvals, consents, waivers,
permits, orders and exemptions that are required in connection with the
execution or delivery of this Agreement, the consummation of the transactions
contemplated herein or the continuation of the business of the Company
following the Effective Date; 

(f)               
the Company has made available to Investor all
material audits, assessments, investigation reports, studies, plans, regulatory
correspondence and similar information with respect to environmental matters;
and

(g)              
to the knowledge of the Company, the Company is
not subject to any past or present fact, condition or circumstance that could
reasonably be expected to result in liability under any Environmental Laws that
would individually or in the aggregate, constitute a Company Material Adverse
Effect.

4.23         
Restrictions on Business Activities

There is no agreement, judgement, injunction,
order or decree binding upon the Company that has or could reasonably be
expected to have the effect of prohibiting, restricting or materially impairing
any business practice of the Company, any acquisition of property by the
Company or the conduct of business by the Company as currently conducted
(including following the transaction contemplated by this Agreement) other than
such agreements, judgements, injunctions, orders or decrees which would not,
individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect.

21

 

 

4.24         
Material Contracts

Schedule 4.24 of the Company Disclosure Letter sets forth all Material Contracts
of the Company.  The Company has performed in all material respects all
respective obligations required to be performed by them to date under the
Material Contracts.  The Company is not in breach or default under any Material
Contract to which it is a party or bound, nor does the Company have knowledge
of any condition that with the passage of time or the giving of notice or both
would result in such a breach or default, except in each case where any such
breaches or defaults would not, individually or in the aggregate, reasonably be
expected to result in, or result in, a Company Material Adverse Effect. The Company
does not know of, or has not received written notice of, any breach or default
under (nor, to the knowledge of the Company, does there exist any condition
which with the passage of time or the giving of notice or both would result in
such a breach or default under) any such Material Contract by any other party
thereto except where any such violation or default would not, individually or
in the aggregate, reasonably be expected to result in, or result in, a Company
Material Adverse Effect.  Prior to the date hereof, the Company has made
available to Investor true and complete copies of all of the Material Contracts
of the Company.  All Material Contracts are legal, valid, binding and in full
force and effect and are enforceable by the Company in accordance with their
respective terms (subject to bankruptcy, insolvency and other applicable laws
affecting creditors’ rights generally, and to general principles of equity) and
are the product of fair and arms’ length negotiations between the parties
thereto.  

4.25         
Relationships with Customers, Suppliers,
Distributors and Sales Representatives

The Company has not received any written (or
to the knowledge of the Company other) notice that any customer, supplier,
distributor or sales representative intends to cancel, terminate or otherwise
modify or not renew its relationship with the Company, and, to the knowledge of
the Company, no such action has been threatened, which, in either case,
individually or in the aggregate, would reasonably be expected to have a
Company Material Adverse Effect.

4.26         
No Expropriation

No property or asset of the Company
(including any Property or Mineral Rights) has been taken or expropriated by
any Governmental Entity nor has any notice or proceeding in respect thereof
been given or commenced nor, to the knowledge of the Company, is there any
intent or proposal to give any such notice or to commence any such proceeding.

4.27         
Perfection of Security Interest

Upon recording of the deeds of trust
referenced in Section 5.1(g) (the “Deeds of Trust”) in applicable
recording offices (the “Recording Offices”) and the proper indexing
thereof, the Deeds of Trust will create valid mortgage liens in favour of
Investor on all of the Mineral Claims, second only in priority to the Original
Deeds of Trust. The recording and proper indexing of the Deeds of Trust in the
Recording Offices are the only filing or recording necessary to give
constructive notice to subsequent purchasers and mortgagees of the Mineral
Claims of the liens created by the Deeds of Trust.

22

 

 

4.28         
Investment Company

The Company (a) does not hold itself out as, being primarily
engaged in, is not primarily engaged in, and does not propose to engage
primarily in, the business of investing, reinvesting, or trading in securities,
(b) is not engaged in, and does not propose to engage in, the business of
issuing face-amount certificates of the installment type (nor has it been
engaged in such business nor does it have any such certificate outstanding),
and (c) is not in the business of investing, reinvesting, owning, holding, or
trading in securities, and does not own or propose to acquire investment
securities having a value exceeding 40 percent of the value of the Company’s
total assets (exclusive of government securities and cash items) on an
unconsolidated basis.  

4.29         
Margin Stock

The Company is not engaged principally, or as one of its
important activities, in the business of buying or carrying margin stock,
within the meaning of Regulation X of the Board of Governors of the Federal
Reserve System or extending credit for the purpose of buying or carrying margin
stock.  No part of the proceeds from the sale of the Note will be used,
directly or indirectly, and whether immediately, incidentally or ultimately, to
purchase or carry any margin stock or to refinance any indebtedness originally
incurred for such purpose or for any purpose that entails a violation of, or
that is inconsistent with the provisions of regulations T. U or X of the Board
of Governors of the Federal Reserve System (12 CFR 224).

Article
5

CONDITIONS PRECEDENT

5.1             
Investor’s Conditions
Precedent for Closing on the Closing Date

Investor’s obligation to
consummate the transactions contemplated by this Agreement on the Closing Date
is subject to the following conditions being satisfied on or prior to the
Closing Date, which conditions are for the exclusive benefit of Investor: 

(a)               
the Company shall have filed such registrations,
if any, as may be necessary or desirable to perfect a security interest over
the Company’s assets in accordance with the terms of the Amended and Restated
Security Agreement;

(b)              
the Company and Investor shall have entered into
the Amended and Restated Security Agreement in form and substance satisfactory
to Investor;

(c)               
the Company shall have delivered to Investor originally
executed copies of the Note and the Warrant Certificate;

(d)              
the Company shall have delivered to Investor originally
executed copies of the Amended and Restated Note and the Amended and Restated
Warrant Certificate;

(e)               
the Company shall have delivered to Investor:

(i)                
one or more opinions from counsel to the Company
as to, among other things, existence, capacity, due authorization of this
Agreement, the Collateral Documents and the transactions contemplated by this Agreement, valid issuance of the Note, the Warrant
Certificate, the Amended and Restated Note and the Amended and Restated Warrant
Certificate, enforceability of this Agreement, the Amended and Restated
Security Agreement, the Deeds of Trust, the Note, the Warrant Certificate, the
Amended and Restated Note and the Amended and Restated Warrant Certificate,
that none of this Agreement, the Amended and Restated Security Agreement, the
Note, the Warrant Certificate, the Amended and Restated Note or the Amended and
Restated Warrant Certificate conflict with the Company’s constating documents, any
resolutions, any contract to which it is a party or applicable law, no
additional consents are required to perfect the security interest and the valid
authorization for the issuance of the Note Shares and Warrant Shares, in form
and substance acceptable to Investor, acting
reasonably; and

23

 

 

(ii)              
an opinion from counsel to the Company as to,
among other things, the obligations under the Note constituting “Secured
Obligations” under the Amended and Restated Security Agreement;

(f)               
the Company shall have delivered to Investor
searches of all financing statements, statements of amendment, notices of
federal tax liens, severance tax liens, producers lien or pending litigation at
the Secretary of State level and the relevant county level; and

(g)              
the Company shall, with respect to the Mineral
Interests, 

(A)            
have prepared, executed, delivered and
registered deeds of trust, in form and substance satisfactory to Investor, to
secure the obligations of the Company under the Note;

(B)             
have prepared and filed all UCC filings, if any,
necessary to perfect the security interest in the as-extracted collateral
related thereto, 

(C)             
have made all applicable water filings and all
other filings and registrations that are customarily made to perfect the
security interest in such Mineral Interests; and 

(D)            
deliver to Investor an opinion from counsel to
the Company dated as of the Closing Date as to, among other things, the
obligations under the Note being secured under the Amended and Restated Trust
Deeds.

5.2             
Investor’s Conditions
Precedent for Release of Holdback Amount

Investor’s obligation to
advance the Holdback Amount on the Holdback Date shall be subject to the
following conditions being satisfied on or prior to the Holdback Date, which
conditions are for the exclusive benefit of Investor:

24

 

 

(a)               
the Company shall have completed and closed one
or more convertible debt or equity financings from one or more third party
investors acting at arm’s length to the Company that raises an aggregate
minimum investment amount of US$100,000 for the Company;

(b)              
Investor shall have received, in form and
substance satisfactory to Investor, a technical report on the Project that has
been prepared in accordance with National Instrument 43-101 – Standards of
Disclosure for Mineral Projects, prepared by one or more independent
qualified persons, which technical report is capable of supporting an
application for listing of the Common Shares on the Toronto Stock Exchange (“TSX”)
or the TSX Venture Exchange (“TSX-V”) (the “43-101 Technical Report”);

(c)               
On or before July 31, 2011, the Company shall
have filed the 43-101 Technical Report with the TSX or the TSX-V, as the case
may be, in connection with: (i) the submission of a listing application to have
the Common Shares listed for trading; or (ii) its engagement with the TSX or
the TSX-V, as the case may be, for the purpose of exploring the possibility of
a stock exchange listing.

(d)              
at and as of the Holdback Date, all of the
representations and warranties of the Company made in or pursuant to this
Agreement: (i) that are qualified by a reference to Company Material Adverse
Effect or materiality shall be true and correct in all respects; and (ii) that
are not qualified by a reference to Company Material Adverse Effect or
materiality shall be true and correct in all material respects, and Investor shall have received a certificate of the
Company, signed by a senior officer (without personal liability), certifying
the foregoing after due inquiry;

(e)               
the Company shall have observed and performed
its obligations in the Agreement in all material respects to the extent that
such obligations were to have been observed or performed by the Company at or
prior to the Holdback Date (without giving effect to, applying or taking into
consideration any materiality qualification already contained in such
obligation) and Investor shall have received a
certificate of the Company, signed by a senior officer (without personal
liability), certifying the foregoing after due inquiry;

If any of the foregoing
conditions in this Section 5.1
has not been fulfilled, Investor shall not be required to advance any further
funds, including the Holdback Amount, to the Company and may exercise any and
all rights and remedies available to it, including rights to recover damages
for the breach of any representation, warranty, covenant or condition contained
in this Agreement and the Collateral Documents.

25

 

 

Article 6

COVENANTS 

6.1             
Actions to Satisfy Conditions Precedent to
Release of Holdback Amount

The Company shall take
reasonable commercial efforts to ensure satisfaction of each of the conditions
set forth in Article 5.

6.2             
Consents, Approvals and Authorizations

The Company covenants that it shall prepare,
file and diligently pursue all necessary consents, approvals and authorizations
of any Person and make such necessary filings, as are required to be obtained
under applicable law with respect to this Agreement and the transactions
contemplated hereby. The Company shall keep Investor informed
regarding the status of such approvals, and Investor,
its representatives and counsel shall have the right to participate in any
discussions with any other applicable regulatory authority and to provide input
into any applications for approval and related correspondence which input will
be incorporated by the Company, acting reasonably. On the date all such
consents, approvals and authorizations have been obtained by the Company and
all such filings have been made by the Company, the Company shall notify Investor of same. 

6.3             
Use of Proceeds

The Company acknowledges and agrees that the
funds representing the Aggregate Price are to be used exclusively for general
corporate purposes and the Company shall not declare or pay any dividend or
repurchase or seek to repurchase any of the Company’s securities.

6.4             
Information Rights and Reporting Obligations

(a)               
The Company shall keep Investor reasonably
informed about the Company’s efforts with respect to the exploration,
evaluation and future development of the Project including, without limitation,
any feasibility or pre-feasibility study, work programme and/or budget for the
Project and shall, at Investor’s request, provide copies of all technical and
financial information and each such feasibility study, work programme and/or
budget and supporting documents for same and other relevant documents relating
to the Project. Investor shall have the right from time to time on reasonable
notice to visit the Project and also have the right to consult with key
personnel of the Company from time to time, in each case at Investor’s cost.
Without limiting the foregoing:

(i)                
the Company shall deliver to Investor, (A)
within 90 days of each financial year end of the Company, one copy of its
annual report on Form 10-K and (B) within 60 days of each financial quarter of
the Company, one copy of its quarterly report on Form 10-Q;

(ii)              
prior to the end of each financial year end of
the Company, the Company shall deliver to Investor a copy of the Company’s
business plan for the following fiscal year;

26

 

 

(iii)            
the Company shall provide such other financial
and business information as Investor may reasonably request from time to time;
and

(iv)            
at Investor’s request, representatives of
Investor may conduct one or more site visits at the Project, which visit will
provide an update with respect to, among other things:

(A)            
project drilling results and scope of the
relevant feasibility studies;

(B)             
the status of required permits for drilling and
plan to procure permits (including environmental, explosives, water rights and
access, land use, construction/operating) to implement project development/construction/
operation;

(C)             
project power consumption, access to local grid
and alternatives; and

(D)            
any other project related technical,
environmental, government and public relations information and updates.

Article
7

INDEMNIFICATION 

7.1             
General Indemnification 

(a)               
The Company shall indemnify and save harmless Investor,
its directors, officers, agents, employees and shareholders (collectively
referred to as the “Purchaser Indemnified Parties”) from and against all
claims, whether or not arising due to third party claims, which may be made or
brought against the Purchaser Indemnified Parties, or which they may suffer or
incur, directly or indirectly, as a result of or in connection with or relating
to:

(i)                
any non-fulfilment or breach of any covenant or
agreement on the part of the Company contained in this Agreement, the
Collateral Documents or in any certificate or other document furnished by or on
behalf of the Company pursuant to this Agreement; and

(ii)              
any misrepresentation or any incorrectness in or
breach of any representation or warranty of the Company contained in this
Agreement or in any certificate or other document furnished by or on behalf of
the Company pursuant to this Agreement, disregarding any knowledge, materiality
or other qualification contained in any such representation or warranty.

7.2             
Indemnification Procedure

(a)               
Promptly after receipt by an indemnified party
under Section 7.1 of notice of
the commencement of any action, such indemnified party shall, if a claim in
respect thereof is to be made against any indemnifying party under Section 7.1, notify the
indemnifying party of the commencement thereof; provided, however, that failure
to so notify the indemnifying party shall not affect an indemnifying party’s
obligations hereunder, except to the extent that the indemnifying party is
materially prejudiced by such failure.  The indemnifying party shall be
entitled to appoint counsel of the indemnifying party’s choice at the
indemnifying party’s expense to represent the indemnified party in any action
for which indemnification is sought (in which case the indemnifying party shall
not thereafter be responsible for the fees and expenses of any separate counsel
retained by the indemnified party or parties except as set forth below);
provided, however, that such counsel shall be reasonably satisfactory to the
indemnified party.  Notwithstanding the indemnifying party’s election to
appoint counsel to represent the indemnified party in an action, the
indemnified party shall have the right to employ separate counsel (including
local counsel), and the indemnifying party shall bear the reasonable fees,
costs and expenses of such separate counsel if (i) the use of counsel chosen by
the indemnifying party to represent the indemnified party would present such
counsel with a conflict of interest, (ii) the actual or potential defendants
in, or targets of, any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be legal defences available to it and/or other indemnified
parties which are different from or additional to those available to the
indemnifying party, (iii) the indemnifying party shall not have employed
counsel reasonably satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after notice of the institution of
such action, or (iv) the indemnifying party shall authorize the indemnified
party to employ separate counsel at the expense of the indemnifying party.

27

 

 

(b)              
No indemnifying party shall, without the prior
express written consent of the indemnified party, consent to any judgment or
effect any settlement of any pending or threatened action, suit or proceeding
in respect of which any indemnified party is or could have been a party and
indemnity could have been sought hereunder by such indemnified party, unless
such settlement includes an unconditional release of such indemnified party
from all liability on claims that are the subject matter of such action, suit
or proceeding.

Article
8

GENERAL

8.1             
Assignment 

This Agreement shall not
be assignable by the Company without the prior written consent of Investor.
Investor may assign this Agreement in whole or in part to any Affiliate or
other assignee of the Note without the prior written consent of the Company,
but shall notify the Company in advance of any such assignment, and provided
that such assignee agrees to be bound by this Agreement.

28

 

 

8.2             
Survival 

Each Party hereto
acknowledges that the representations, warranties and agreements made by it
herein are made with the intention that they may be relied upon by the other
Parties. The Parties further agree that the representations, warranties and
agreements shall survive the transactions contemplated by this Agreement and
shall continue in full force and effect notwithstanding any subsequent
disposition by Investor of any Common Shares or any termination of this
Agreement. This Agreement shall be binding upon and shall enure to the benefit
of the Parties hereto, their respective successors, assigns and legal
representatives.

8.3             
Currency

All references to
dollars in this Agreement are references to U.S. dollars.

8.4             
Further Assurances

Each of the Parties
shall promptly do, make, execute, deliver, or cause to be done, made, executed
or delivered, all such further acts, documents and things as the other Parties
may reasonably require from time to time for the purpose of giving effect to
this Agreement and shall use reasonable efforts and take all such steps as may
be reasonably within its power to implement to their full extent the provisions
of this Agreement.

8.5             
Governing Law

This Agreement shall be
governed by and construed in accordance with the laws of the Province of
Ontario and the laws of Canada applicable therein. 

8.6             
Public Notices/Press Releases

(a)               
All public notices to third parties and all
other publicity concerning the transactions contemplated by this Agreement
shall be jointly planned by the Parties and no Party shall act unilaterally in
this regard without the prior written approval of the other Party, such
approval not to be unreasonably withheld, except where disclosure is required
by law or by the applicable regulations or policies of any regulatory agency of
competent jurisdiction or any stock exchange in circumstances where prior
consultation with the other Parties is not practicable. 

(b)              
The Company covenants that it shall not make,
and shall cause not to be made by any of its Affiliates, any press releases,
public announcements or other public or third party disclosures naming Investor
or its parent company or any other Affiliates of Investor, or otherwise in
respect of the group of companies to which Investor belongs, or describing this
Agreement or any other agreement between Investor and the Company without the
prior written consent of Investor. This obligation will continue in full force
and effect following completion of the transactions contemplated by this
Agreement. 

29

 

 

8.7             
Notices

All notices, requests,
demands and other communications under this Agreement (in this Section referred
to as “Notice”) shall be deemed to have been duly given and made if in
writing and if served by personal delivery upon the Party for whom it is
intended or delivered, or if sent by facsimile transmission or E‐mail,
upon confirmation that such transmission has been properly effected, to the
Person at the address set forth below, or such other address as may be
designated in writing hereafter, in the same manner, by such Person. The date
of receipt of any such notice or other communication if delivered personally
shall be deemed to be the date of delivery thereof, or if sent by facsimile
transmission or E‐mail, the date of such transmission if sent on a
business day, failing which it shall be deemed to have been received on the
next business day.

(a)               
in the case of a Notice to the Company at:

American Lithium Minerals, Inc.

2850 W. Horizon Ridge Parkway, Suite
200

Henderson, NV  89052

Attention:         Hugh
Aird

Fax:                 (702)
430-4507

E‐mail:            haird@americanlithium.com

(b)              
in the case of a Notice to Investor at:

2245393 Ontario Inc. 

c/o Osler, Hoskin & Harcourt LLP

Suite 6100, 1 First Canadian Place

Toronto, ON  M5X 1B8

Attention:         Emmanuel
Pressman

Fax:                 (416) 862-6666

E‐mail:            epressman@osler.com

8.8             
Counterparts

This Agreement may be signed by facsimile or
by E‐mailed scanned copy and in counterparts
and each such counterpart shall constitute an original document and such
counterparts, taken together, shall constitute one and the same instrument.

[Remainder of this page intentionally left blank]

30

 

 

IN WITNESS WHEREOF the Parties hereto have executed this Agreement as of the
date first above written.

	
   

  	
   

  	
  2245393 ONTARIO INC.

  
	
  By:

  	
   

  
	
   

  	
  Name: 

  
	
   

  	
  Title: 

  
	
  By:

  	
   

  
	
   

  	
  Name: 

  
	
   

  	
  Title: 

  

 

	
   

  	
   

  	
  AMERICAN LITHIUM MINERALS, INC.

  

  

  

  
	
  By:

  	
   

  
	
   

  	
  Name:  

  
	
   

  	
  Title:    

  

 

Schedule A

form of Note

(See
attached)

 

Schedule b

form of Warrant Certificate

(See
attached)

 

Schedule c

form of Amended and Restated Note

(See
attached)

 

Schedule D

form of Amended and Restated Warrant
Certificate

(See
attached)Exhibit 10.3

Exhibit 10.3

   

  AMENDED AND
    RESTATED SECURITY AGREEMENT

   

   

                          AMENDED
    AND RESTATED SECURITY AGREEMENT dated as of April 6, 2011, between American
    Lithium Minerals Inc., a corporation duly organized and validly existing under
    the laws of Nevada (the “Grantor”), and 2245393 Ontario Inc., a
      corporation duly organized and validly existing under the laws of Ontario (the
  “Secured Party”). 

   

   

  WITNESSETH

   

  WHEREAS, the Secured Party
    advanced credit to the Grantor in the principal amount of US$750,000.00 as
    evidenced by the secured senior convertible promissory note, dated as of
    September 2, 2010 and due August 31, 2015, which Note is being amended and
    restated on the date hereof (as so amended and restated and as further amended,
    restated or otherwise modified from time to time, the “2010 Note”);

   

  WHEREAS, the Grantor executed and
    delivered a Security Agreement dated as of September 2, 2010 (as amended,
    supplemented or otherwise modified prior to the date hereof, the “Original
      Security Agreement”) to the Secured Party in order to secure its
        obligations under the 2010 Note; 

   

  WHEREAS, on the date hereof the
    Secured Party has agreed to advance additional credit to the Grantor in the
    principal amount of US$500,000.00 as evidenced by a second secured senior
    convertible promissory note, dated as of the date hereof and due August 31,
    2015 (together with the 2010 Note, the “Notes”) and may in the future
      lend other amounts to the Grantor,

   

  WHEREAS, in order to induce the
    Secured Party to advance such additional credit and for other good and valuable
    consideration, the receipt and sufficiency of which are hereby acknowledged,
    the Grantor has agreed to grant a continuing security interest in and to the
    Collateral (as hereinafter defined) securing the prompt and complete payment,
    observance and performance of the Secured Obligations (as hereinafter
    defined),  

   

Security

Agreement 

‐

2 ‐

 

Accordingly, the parties hereto agree as
follows:

 

                        Section
1.  Definitions, Etc.

 

                        1.01     Certain
Uniform Commercial Code Terms.  As used herein, the terms “Accession”,
“Account”, “As-Extracted Collateral”, “Chattel Paper”, “Commodity
Account”, “Commodity Contract”, “Deposit Account”, “Document”,
“Electronic Chattel Paper”, “Equipment”, “Fixture”, “General
Intangible”, “Goods”, “Instrument”, “Inventory”, “Investment
Property”, “Letter-of-Credit Right”, “Payment Intangible”, “Proceeds”,
“Promissory Note”, “Software” and “Tangible Chattel Paper”
have the respective meanings set forth in Article 9 of the UCC, and the
terms “Certificated Security”, “Entitlement Holder”, “Financial
Asset”, “Instruction”, “Securities Account”, “Security”,
“Security Certificate”, “Security Entitlement” and “Uncertificated
Security” have the respective meanings set forth in Article 8 of the
UCC.

 

                        1.02     Additional
Definitions.  In addition, as used herein:

 

            “Casualty
Event” means, with respect to any property of any Person, any loss of or
damage to, or any condemnation or other taking of, such property for which such
Person or any of its subsidiaries receives insurance proceeds, or proceeds of a
condemnation award or other compensation.

 

                        “Collateral”
has the meaning assigned to such term in Section 3. 

 

                        “Collateral
Document” has the meaning assigned to such term in the Investment
Agreement.

 

                        “Contingent
Secured Obligations” means obligations of the Grantor in respect
of any claim that may be payable to the Secured Party by the Grantor under
any Transaction Document that is not yet due and payable.

 

                        “Copyright
Collateral” means all Copyrights of the Grantor, whether now owned or
hereafter acquired by the Grantor, including each Copyright identified in
Annex 4.

 

                        “Copyrights”
means all copyrights, copyright registrations and applications for copyright
registrations, including all renewals and extensions thereof, all rights to
recover for past, present or future infringements thereof and all other rights
whatsoever accruing thereunder or pertaining thereto. 

 

“Default”
means any event of default or termination (however described) under any
Transaction Document shall occur and be continuing.

 

“Financial
Accommodation” means any loan, advance, purchase of notes, security or other instrument or property, or any other kind of
agreement under which the Grantor may be indebted or obligated to the Secured
Party in any manner, whether now existing or hereafter arising, whether direct
or indirect, absolute or contingent, joint or several, due or not due, primary
or secondary, liquidated or unliquidated, secured or not secured, and however
acquired by the Secured Party.

Security

Agreement 

‐

3 ‐

 

 

                        “Foreign
Subsidiary” means any subsidiary of the Grantor with respect to which the
Secured Party determines that a pledge of more than 66-2/3% of the total number
of shares of voting stock of such subsidiary would result in material adverse
tax consequences under Section 956 of the Code.

 

                        “Intellectual
Property” means, collectively, all Copyright Collateral, all Patent
Collateral and all Trademark Collateral, together with (a) all inventions,
processes, production methods, proprietary information, know‐how and
trade secrets; (b) all licenses or user or other agreements granted to the
Grantor with respect to any of the foregoing, in each case whether now or
hereafter owned or used; (c) all information, customer lists,
identification of suppliers, data, plans, blueprints, specifications, designs,
drawings, recorded knowledge, surveys, engineering reports, test reports,
manuals, materials standards, processing standards, performance standards,
catalogs, computer and automatic machinery software and programs; (d) all
field repair data, sales data and other information relating to sales or
service of products now or hereafter manufactured; (e) all accounting
information and all media in which or on which any information or knowledge or
data or records may be recorded or stored and all computer programs used for
the compilation or printout of such information, knowledge, records or data;
(f) all licenses, consents, permits, variances, certifications and
approvals of governmental agencies now or hereafter held by the Grantor; and
(g) all causes of action, claims and warranties now or hereafter owned or
acquired by the Grantor in respect of any of the items listed above.

 

                        “Investment
Agreement” means the Investment Agreement dated as of the date hereof
between the Investor and the Grantor.

 

                        “Issuers”
means, collectively (a) any Person that shall at any time be a subsidiary
of the Grantor, and (b) the issuer of any equity securities hereafter
owned by the Grantor.

 

                        “Mineral
Interests” mean all mineral estates, mineral
claims under state law, patented and unpatented federal lode, placer, tunnel
and mill site mining claims, mining rights, mining leases, concessions,
exploration licenses, exploitation licenses, prospecting permits, surface and
subsurface leases, licenses, subleases, sublicenses, royalty interests,
overriding royalty interests, production payment interests, net profit
interests, net smelter return interests, joint venture agreements and other
rights in mineral estates, ore bodies or production, and any other interests
associated with the real property or rights to real property
of Borrower described on Annex 9, whether existing under contract or by
operation of law or otherwise;

Security

Agreement 

‐

4 ‐

 

 

                        “Motor
Vehicles” means motor vehicles, tractors, trailers and other like property,
if the title thereto is governed by a certificate of title or ownership.

 

                        “Patent
Collateral” means all Patents of the Grantor, whether now owned or
hereafter acquired by the Grantor, including each Patent identified in
Annex 5, and all income, royalties, damages and payments now or hereafter
due and/or payable under or with respect thereto.

 

                        “Patents”
means all patents and patent applications, including the inventions and
improvements described and claimed therein together with the reissues,
divisions, continuations, renewals, extensions and continuations‐in‐part
thereof, all income, royalties, damages and payments now or hereafter due
and/or payable with respect thereto, all damages and payments for past or
future infringements thereof and rights to sue therefor, and all rights
corresponding thereto throughout the world.

 

            “Person”
means any individual, corporation, company, voluntary association, partnership,
limited liability company, joint venture, trust, unincorporated organization or
government (or any agency, instrumentality or political subdivision thereof).

 

“Pledged
Shares” means, collectively(i) all Shares of any Issuer hereafter
owned by the Grantor, together in each case with (a) all certificates
representing the same, (b) all shares, securities, moneys or other
property representing a dividend on or a distribution or return of capital on
or in respect of the Pledged Shares, or resulting from a split-up, revision,
reclassification or other like change of the Pledged Shares or otherwise
received in exchange therefor, and any warrants, rights or options issued to
the holders of, or otherwise in respect of, the Pledged Shares, and
(c) without prejudice to any provision of any of the Transaction Documents
prohibiting any merger or consolidation by an Issuer, all Shares of any
successor entity of any such merger or consolidation.

 

“Secured
Obligations” means, collectively, the obligations of the Grantor to the
Secured Party in respect of the principal of and interest due on the Notes, and
all other amounts from time to time owing to the Secured Party by the Grantor
under the Transaction Documents or in respect of any Financial Accommodation
from time to time made available by the Secured Party to the Grantor, together
with in each case interest thereon and expenses related thereto, including any
interest or expenses accruing or arising after the commencement of any case
with respect to the Grantor under the United States Bankruptcy Code or any
other bankruptcy or insolvency law (whether or not such interest or expenses
are allowed or allowable as a claim in whole or in part in such case).

 

Security

Agreement 

‐

5 ‐

 

“Shares” means shares of capital stock of a
corporation, limited liability company interests, partnership interests and
other ownership or equity interests of any class in any Person.

 

                        “Trademark
Collateral” means all Trademarks of the Grantor, whether now owned or
hereafter acquired by the Grantor, including each Trademark identified in
Annex 6, together, in each case, with the product lines and goodwill of
the business connected with the use of, and symbolized by, each such trade
name, trademark and service mark.  Notwithstanding the foregoing, the Trademark
Collateral does not and shall not include any Trademark that would be rendered
invalid, abandoned, void or unenforceable by reason of its being included as
part of the Trademark Collateral.

 

                        “Trademarks”
means all trade names, trademarks and service marks, logos, trademark and
service mark registrations, and applications for trademark and service mark
registrations, including all renewals of trademark and service mark
registrations, all rights to recover for all past, present and future
infringements thereof and all rights to sue therefor, and all rights
corresponding thereto throughout the world. 

 

                        “Transaction
Documents” means collectively, this Agreement, the Notes, the Investment
Agreement and the other Collateral Documents, whether in existence on the date
hereof or entered into after the date hereof (and any amendments, restatements,
modifications or refinancing thereof). 

 

                        “UCC”
means the Uniform Commercial Code as in effect from time to time in the State
of Nevada.

 

 

                        Section
2.  Representations and Warranties.  The Grantor represents and warrants
to the Secured Party that:

 

2.01     Organizational
Matters; Enforceability, Etc.  The Grantor is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization.  The execution, delivery and performance of this Agreement, and
the grant of the security interests pursuant hereto, (a) are within the
Grantor’s powers and have been duly authorized by all necessary corporate or
other action, (b) do not require any consent or approval of, registration
or filing with, or any other action by, any governmental authority or court,
except for (i) such as have been obtained or made and are in full force
and effect, (ii) filings and recordings in respect of the security
interests created pursuant hereto, and (iii) filings which are required or
reasonably prudent pursuant to federal or state securities laws or applicable
stock exchanges rules, (c) will not violate any applicable law or
regulation or the charter, by‐laws or other organizational documents of
the Grantor or any order of any governmental authority or court binding upon
the Grantor or its property, (d) will not violate or result in a default
under any indenture, agreement or other instrument
binding upon the Grantor or any of its assets, or give rise to a right
thereunder to require any payment to be made by any such person, and
(e) except for the security interests created pursuant hereto, will not
result in the creation or imposition of any lien, charge or encumbrance on any
asset of the Grantor.

Security

Agreement 

‐

6 ‐

 

 

This Agreement has been duly
executed and delivered by the Grantor and constitutes, a legal, valid and
binding obligation of the Grantor, enforceable against the Grantor in
accordance with its terms, except as such enforceability may be limited by
(a) bankruptcy, insolvency, reorganization, moratorium or similar laws of
general applicability affecting the enforcement of creditors’ rights and
(b) the application of general principles of equity (regardless of whether
such enforceability is considered in a proceeding in equity or at law).

 

Neither the Grantor nor any of its
subsidiaries is (a) an “investment company” as defined in, or subject to
regulation under, the Investment Company Act of 1940 or (b) a “holding
company” as defined in, or subject to regulation under, the Public Utility
Holding Company Act of 1935.

 

                        2.02     Title. 
The Grantor is the sole beneficial owner of the Collateral and no lien exists
upon the Collateral (and no right or option to acquire the same exists in favor
of any other Person) other than the security interest created or provided
for herein, which security interest constitutes a valid first and prior
perfected lien on the Collateral.

 

                        2.03     Names,
Etc.  The full and correct legal name, type of organization, jurisdiction
of organization, organizational ID number (if applicable) and mailing address
of the Grantor as of the date hereof are correctly set forth in Annex 1. 
Said Annex 1 correctly specifies (a) the place of business of the
Grantor or, if the Grantor has more than one place of business, the location of
the chief executive office of the Grantor,  and (b) each location where
any financing statement naming the Grantor as debtor is currently on file.

 

                        2.04     Changes
in Circumstances.  The Grantor has not (a) within the period of four
months prior to the date hereof, changed its location (as defined in
Section 9‐307 of the UCC), (b) except as specified in
Annex 1, heretofore changed its name, or (c) except as specified in
Annex 2, heretofore become a “new debtor” (as defined in Section 9‐102(a)(56)
of the UCC) with respect to a currently effective security agreement previously
entered into by any other Person.

 

                        2.05     Pledged
Shares.  The Grantor has no subsidiaries and owns no equity securities of
any Person as of the date hereof.

 

                        2.06     Promissory
Notes.  Annex 3 sets forth a complete and correct list of all
Promissory Notes (other than any held in a Securities Account referred to in
Annex 7) held by the Grantor on the date hereof, other than the 2010 Note.

Security

Agreement 

‐

7 ‐

 

 

                        2.07     Intellectual
Property.  Annexes 4, 5 and 6, respectively, set forth a
complete and correct list of all copyright registrations, patents, patent
applications, trademark registrations and trademark applications owned by the
Grantor on the date hereof (or, in the case of any supplement to said
Annexes 4, 5 and 6, effecting a pledge thereof, as of the date
of such supplement).

 

                        Except
pursuant to licenses and other user agreements entered into by the Grantor in
the ordinary course of business that are listed in said Annexes 4, 5
and 6 (including as supplemented by any supplement effecting a pledge
thereof), the Grantor has done nothing to authorize or enable any other Person
to use any Copyright, Patent or Trademark listed in said Annexes 4, 5
and 6 (as so supplemented), and all registrations listed in said
Annexes 4, 5 and 6 (as so supplemented) are, except as noted
therein, in full force and effect.

 

                        To the
Grantor’s knowledge, (i) except as set forth in said
Annexes 4, 5 and 6 (as supplemented by any supplement effecting
a pledge thereof), there is no violation by others of any right of the Grantor
with respect to any Copyright, Patent or Trademark listed in said
Annexes 4, 5 and 6 (as so supplemented), respectively, and
(ii) the Grantor is not infringing in any respect upon any Copyright,
Patent or Trademark of any other Person; and no proceedings alleging such
infringement have been instituted or are pending against the Grantor  and no
written claim against the Grantor has been received by the Grantor, alleging
any such violation, except as may be set forth in said Annexes 4, 5
and 6 (as so supplemented).

 

                        The
Grantor does not own any Trademarks registered in the United States of America
to which the last sentence of the definition of Trademark Collateral applies.

 

                        2.08     Deposit
Accounts and Securities Accounts.  Annex 7 sets forth a complete and
correct list of all Deposit Accounts, Securities Accounts and Commodity
Accounts of the Grantor on the date hereof.

 

                        2.09     Commercial
Tort Claims.  Annex 8 sets forth a complete and correct list of all
commercial tort claims of the Grantor in existence on the date hereof.

 

                        2.10     Fair
Labor Standards Act.  Any goods now or hereafter produced by the Grantor or
any of its subsidiaries included in the Collateral have been and will be
produced in compliance with the requirements of the Fair Labor Standards Act,
as amended.

 

 

                        Section
3.  Collateral.  As collateral security for the payment in full when due
(whether at stated maturity, by acceleration or otherwise) of the Secured
Obligations, the Grantor hereby pledges and grants to the Secured Party as
hereinafter provided a security interest in all of the Grantor’s right, title
and interest in, to and under the following property, in each case whether tangible or intangible, wherever located, and whether now
owned by the Grantor or hereafter acquired and whether now existing or
hereafter coming into existence; (all of the property described in this
Section 3 being collectively referred to herein as “Collateral”):

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(a)        all
Accounts:

 

(b)        all
As-Extracted Collateral;

 

(c)        all Chattel
Paper;

 

(d)       all Deposit
Accounts;

 

(e)        all
Documents;

 

(f)        all
Equipment;

 

(g)        all
Fixtures;

 

(h)        all General
Intangibles;

 

(i)         all Goods
not covered by the other clauses of this Section 3;

 

(j)         the
Pledged Shares;

 

(k)        all
Instruments, including all Promissory Notes;

 

(l)         all
Intellectual Property;

 

(m)       all
Inventory;

 

(n)        all
Investment Property not covered by other clauses of this Section 3,
including all Securities, all Securities Accounts and all Security Entitlements
with respect thereto and Financial Assets carried therein, and all Commodity
Accounts and Commodity Contracts;

 

(o)        all
Letter-of-Credit Rights;

 

                        (p)        all
commercial tort claims, as defined in Section 9‐102(a)(13) of the
UCC, arising out of the events described in Annex 8;

 

                        (q)        all
other tangible and intangible personal property whatsoever of the Grantor; 

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                        (r)        to
the extent not covered above, all Mineral Interests; and

 

                        (s)        all
Proceeds of any of the Collateral, all Accessions to and substitutions and
replacements for, any of the Collateral, and all offspring, rents, profits and
products of any of the Collateral, and, to the extent related to any
Collateral, all books, correspondence, credit files, records, invoices and
other papers (including all tapes, cards, computer runs and other papers and
documents in the possession or under the control of the Grantor or any computer
bureau or service company from time to time acting for the Grantor),

 

IT BEING UNDERSTOOD, HOWEVER,
that (A) in the case of any of the foregoing that consists of general or
limited partnership interests in a general or limited partnership, the security
interest hereunder shall be deemed to be created only to the maximum extent
permitted under the applicable organizational instrument pursuant to which such
partnership is formed, (B) in no event shall the security interest granted
under this Section 3 attach to any lease, license, contract, or agreement
to which the Grantor is a party (or to any of its rights or interests
thereunder) if the grant of such security interest would constitute or result
in either (i) the abandonment, invalidation or unenforceability of any
right, title or interest of the Grantor therein or (ii) in a breach or
termination pursuant to the terms of, or a default under, any such lease, license,
contract, or agreement (other than to the extent that any such term would be
rendered ineffective by Section 9‐406, 9‐407, 9‐408 or 9‐409
of the Uniform Commercial Code as in effect in the relevant jurisdiction), and 
(C) the security interest created hereby in Shares constituting voting
stock of any Issuer that is a Foreign Subsidiary shall be limited to that
portion of such voting stock that does not exceed 65% of the aggregate issued
and outstanding voting stock of such Issuer.

 

 

                        Section
4.  Further Assurances; Remedies.  In furtherance of the grant of the
security interest pursuant to Section 3, the Grantor hereby agrees with
the Secured Party as follows:

 

                        4.01     Delivery
and Other Perfection.  The Grantor shall promptly from time to time give,
execute, deliver, file, record, authorize or obtain all such financing
statements, continuation statements, notices, instruments, documents,
agreements or consents or other papers as may be necessary or desirable in the
judgment of the Secured Party to create, preserve, perfect, maintain the
perfection of or validate the security interest granted pursuant hereto or to
enable the Secured Party to exercise and enforce its rights hereunder with
respect to such security interest, and without limiting the foregoing, shall:

 

                        (a)        if
any of the Pledged Shares, Investment Property or Financial Assets constituting
part of the Collateral are received by the Grantor, forthwith (x) deliver
to the Secured Party the certificates or instruments
representing or evidencing the same, duly endorsed in blank or accompanied by
such instruments of assignment and transfer in such form and substance as the
Secured Party may reasonably request, all of which thereafter shall be held by
the Secured Party, pursuant to the terms of this Agreement, as part of the
Collateral and (y) take such other action as the Secured Party may
reasonably deem necessary or appropriate to duly record or otherwise perfect
the security interest created hereunder in such Collateral;

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                        (b)        promptly
from time to time deliver to the Secured Party any and all Instruments
constituting part of the Collateral, endorsed and/or accompanied by such
instruments of assignment and transfer in such form and substance as the
Secured Party may request; provided that (other than in the case of the
promissory notes described in Annex 3 (Part B)) so long as no Default
shall have occurred and be continuing, the Grantor may retain for collection in
the ordinary course any Instruments received by the Grantor in the ordinary
course of business and the Secured Party shall, promptly upon request of the
Grantor, make appropriate arrangements for making any Instrument delivered by
the Grantor available to the Grantor for purposes of presentation, collection
or renewal (any such arrangement to be effected, to the extent requested by the
Secured Party, against trust receipt or like document);

 

(c)        promptly
from time to time enter into such control agreements, each in form and
substance reasonably acceptable to the Secured Party, as may be required to
perfect the security interest created hereby in any and all Deposit Accounts,
Investment Property, Electronic Chattel Paper and Letter-of-Credit Rights, and
will promptly furnish to the Secured Party true copies thereof;

 

(d)       promptly
from time to time upon the request of the Secured Party, execute and deliver
such short-form security agreements as the Secured Party may reasonably deem
necessary or desirable to protect the interests of the Secured Party in respect
of that portion of the Collateral consisting of Intellectual Property;

 

                        (e)        promptly
upon request of the Secured Party, cause the Secured Party to be listed as the
lienholder on any certificate of title or ownership covering any Motor Vehicle
(other than Motor Vehicles constituting Inventory) and within 120 days of such
request deliver evidence of the same to the Secured Party;

 

                        (f)        keep
full and accurate books and records relating to the Collateral, and stamp or
otherwise mark such books and records in such manner as the Secured Party may
reasonably require in order to reflect the security interests granted by this
Agreement; and

 

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                        (g)        permit representatives
of the Secured Party, upon reasonable notice, at any time during normal
business hours to inspect and make abstracts from its books and records
pertaining to the Collateral, and permit representatives of the Secured Party
to be present at the Grantor’s place of business to receive copies of
communications and remittances relating to the Collateral, and forward copies
of any notices or communications received by the Grantor with respect to the
Collateral, all in such manner as the Secured Party may require.

 

                        4.02     Other
Financing Statements or Control.  The Grantor shall not (a) file or
suffer to be on file, or authorize or permit to be filed or to be on file, in
any jurisdiction, any financing statement or like instrument with respect to
any of the Collateral in which the Secured Party is not named as the sole
secured party, or (b) cause or permit any Person other than the Secured
Party to have “control” (as defined in Section 9‐104, 9‐105, 9‐106
or 9‐107 of the NYUCC) of any Deposit Account, Electronic Chattel Paper,
Investment Property or Letter-of-Credit Right constituting part of the
Collateral.

 

                        4.03     Preservation
of Rights.  The Secured Party shall not be required to take steps necessary
to preserve any rights against prior parties to any of the Collateral. The Grantor shall, at its own cost and expense, defend title to the
Collateral and the first priority security interest and lien granted to the
Secured Party with respect thereto against all claims and demands of all
persons at any time claiming any interest therein  adverse to the Secured
Party. There is no agreement, order, judgment or decree, and the Grantor shall
not enter into any agreement or take any other action, that could restrict the
transferability of any of the Collateral or otherwise impair or conflict with
the Grantors' obligations or the rights of the Secured Party hereunder

 

                        4.04     Special
Provisions Relating to Certain Collateral.

 

                        (a)        Pledged
Shares.

 

(i)         So
long as no Default shall have occurred and be continuing, the Grantor shall
have the right to exercise all voting, consensual and other powers of ownership
pertaining to the Pledged Shares, provided that the Grantor agrees that
it will not vote the Pledged Shares in any manner that is inconsistent with the
terms of this Agreement; and the Secured Party shall execute and deliver to the
Grantor or cause to be executed and delivered to the Grantor all such proxies,
powers of attorney, dividend and other orders, and all such instruments,
without recourse, as the Grantor may reasonably request for the purpose of
enabling the Grantor to exercise the rights and powers that it is entitled to
exercise pursuant to this Section 4.04(a)(ii).

 

(ii)        Unless
and until a Default shall have occurred and be continuing, the Grantor shall be
entitled to receive and retain any dividends, distributions or proceeds on the
Pledged Shares paid in cash out of earned surplus.

Security

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(iii)       If
a Default shall have occurred and be continuing, whether or not the Secured
Party exercises any available right to declare any Secured Obligations due and
payable or seeks or pursues any other relief or remedy available to it under
applicable law or under this Agreement, the Transaction Documents or any other
agreement relating to such Secured Obligation, all dividends and other
distributions on the Pledged Shares shall be paid directly to the Secured Party
and, if the Secured Party shall so request in writing, the Grantor agrees to
execute and deliver to the Secured Party appropriate additional dividend,
distribution and other orders and documents to that end, provided that
if such Default is cured, any such dividend or distribution theretofore paid to
the Secured Party shall, upon request of the Grantor (except to the extent
theretofore applied to the Secured Obligations), be returned by the Secured
Party to the Grantor.

 

                        (b)        Intellectual
Property.

 

(i)         For
the purpose of enabling the Secured Party to exercise rights and remedies under
Section 4.05 at such time as the Secured Party shall be lawfully entitled
to exercise such rights and remedies, and for no other purpose, the Grantor
hereby grants to the Secured Party, to the extent assignable, an irrevocable,
non‐exclusive license (exercisable without payment of royalty or other
compensation to the Grantor) to use, assign, license or sublicense any of the
Intellectual Property now owned or hereafter acquired by the Grantor, wherever
the same may be located, including in such license reasonable access to all
media in which any of the licensed items may be recorded or stored and to all
computer programs used for the compilation or printout thereof.

 

(ii)        Notwithstanding
anything contained herein to the contrary, so long as no Default shall have
occurred and be continuing, the Grantor will be permitted to exploit, use,
enjoy, protect, license, sublicense, assign, sell, dispose of or take other
actions with respect to the Intellectual Property in the ordinary course of the
business of the Grantor.  In furtherance of the foregoing, so long as no
Default shall have occurred and be continuing, the Secured Party shall from
time to time, upon the request of the Grantor, execute and deliver any
instruments, certificates or other documents, in the form so requested, that
the Grantor shall have certified are appropriate in its judgment to allow it to
take any action permitted above (including relinquishment of the license
provided pursuant to clause (i) immediately above as to any specific
Intellectual Property).  Further, upon the payment in full of all of the
Secured Obligations and the expiration and termination of all obligations of
the Secured Party to make available any Financial Accommodation to the Grantor,
or earlier expiration of this Agreement or release of the Collateral, the
Secured Party shall grant back to the Grantor the license granted pursuant to
clause (i) immediately above.  The exercise of rights and remedies under
Section 4.05 by the Secured Party shall not terminate the rights of the
holders of any licenses or sublicenses theretofore
granted by the Grantor in accordance with the first sentence of this
clause (ii).

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(c)        Chattel
Paper.  The Grantor will (i) deliver to the Secured Party each original
of each item of Chattel Paper at any time constituting part of the Collateral,
and (ii) cause each such original and each copy thereof to bear a
conspicuous legend, in form and substance reasonably satisfactory to the
Secured Party, indicating that such Chattel Paper is subject to the security
interest granted hereby and that purchase of such Chattel Paper by a Person
other than the Secured Party without the consent of the Secured Party would
violate the rights of the Secured Party.

         

                        4.05     Remedies.

 

                        (a)        Rights
and Remedies Generally upon Default.  If a Default shall have occurred and
is continuing, the Secured Party shall have all of the rights and remedies with
respect to the Collateral of a secured party under the UCC (whether or not the Uniform
Commercial Code is in effect in the jurisdiction where the rights and remedies
are asserted) and such additional rights and remedies to which a secured party
is entitled under the laws in effect in any jurisdiction where any rights and
remedies hereunder may be asserted, including the right, to the fullest extent
permitted by law, to exercise all voting, consensual and other powers of
ownership pertaining to the Collateral as if the Secured Party were the sole
and absolute owner thereof (and the Grantor agrees to take all such action as
may be appropriate to give effect to such right); and without limiting the
foregoing:

 

                        (i)         the
Secured Party in its discretion may, in its name or in the name of the Grantor
or otherwise, demand, sue for, collect or receive any money or other property
at any time payable or receivable on account of or in exchange for any of the
Collateral, but shall be under no obligation to do so;

 

                        (ii)        the
Secured Party may make any reasonable compromise or settlement deemed desirable
with respect to any of the Collateral and may extend the time of payment,
arrange for payment in installments, or otherwise modify the terms of, any of
the Collateral;

 

(iii)       the
Secured Party may require the Grantor to notify (and the Grantor hereby
authorizes the Secured Party to so notify) each account debtor in respect of
any Account, Chattel Paper or General Intangible, and each obligor on any
Instrument, constituting part of the Collateral that such Collateral has been
assigned to the Secured Party hereunder, and to instruct that any payments due
or to become due in respect of such Collateral shall be made directly to the
Secured Party or as it may direct (and if any such payments, or any other
Proceeds of Collateral, are received by the Grantor they shall be held in trust by the Grantor for the benefit of the
Secured Party and as promptly as possible remitted or delivered to the Secured
Party for application as provided herein);

Security

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(iv)       the
Secured Party may require the Grantor to assemble the Collateral at such place
or places, reasonably convenient to the Secured Party and the Grantor, as the
Secured Party may direct;

 

(v)        the
Secured Party may require the Grantor to cause the Pledged Shares to be
transferred of record into the name of the Secured Party or its nominee (and
the Secured Party agrees that if any of such Pledged Shares is transferred into
its name or the name of its nominee, the Secured Party will thereafter promptly
give to the Grantor copies of any notices and communications received by it
with respect to such Pledged Shares); and

 

                        (vi)       the
Secured Party may sell, lease, assign or otherwise dispose of all or any part
of the Collateral, at such place or places as the Secured Party deems best, and
for cash or for credit or for future delivery (without thereby assuming any
credit risk), at public or private sale, without demand of performance or
notice of intention to effect any such disposition or of the time or place
thereof (except such notice as is required by applicable statute and cannot be
waived), and the Secured Party or anyone else may be the purchaser, lessee,
assignee or recipient of any or all of the Collateral so disposed of at any
public sale (or, to the extent permitted by law, at any private sale) and
thereafter hold the same absolutely, free from any claim or right of whatsoever
kind, including any right or equity of redemption (statutory or otherwise), of
the Grantor, any such demand, notice and right or equity being hereby expressly
waived and released.  In the event of any sale, assignment, or other
disposition of any of the Trademark Collateral, the goodwill connected with and
symbolized by the Trademark Collateral subject to such disposition shall be
included.  The Secured Party may, without notice or publication, adjourn any
public or private sale or cause the same to be adjourned from time to time by
announcement at the time and place fixed for the sale, and such sale may be
made at any time or place to which the sale may be so adjourned.

 

The Proceeds of each collection,
sale or other disposition under this Section 4.05, including by virtue of
the exercise of any license granted to the Secured Party in
Section 4.04(b), shall be applied in accordance with Section 4.09.

 

                        (b)        Certain
Securities Act Limitations.  The Grantor recognizes that, by reason of
certain prohibitions contained in the Securities Act of 1933, as amended, and
applicable state securities laws, the Secured Party may be compelled, with
respect to any sale of all or any part of the Collateral, to limit purchasers
to those who will agree, among other things, to acquire the Collateral for
their own account, for investment and not with a view to the distribution or
resale thereof.  The Grantor acknowledges that any such private sales may be at
prices and on terms less favorable to the Secured
Party than those obtainable through a public sale without such restrictions,
and, notwithstanding such circumstances, agrees that any such private sale
shall be deemed to have been made in a commercially reasonable manner and that
the Secured Party shall have no obligation to engage in public sales and no
obligation to delay the sale of any Collateral for the period of time necessary
to permit the issuer thereof to register it for public sale.

Security

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(c)        Notice. 
The Grantor agrees that to the extent the Secured Party is required by
applicable law to give reasonable prior notice of any sale or other disposition
of any Collateral, ten business days’ notice shall be deemed to constitute
reasonable prior notice.

 

                        4.06     Deficiency. 
If the proceeds of sale, collection or other realization of or upon the
Collateral pursuant to Section 4.05 are insufficient to cover the costs
and expenses of such realization and the payment in full of the Secured
Obligations, the Grantor shall remain liable for any deficiency.

 

            4.07     Locations;
Names, Etc.  Without at least 30 days’ prior written notice to the Secured
Party, the Grantor shall not (i) change its location (as defined in
Section 9‐307 of the UCC), (ii) change its name from the name
shown as its current legal name on Annex 1, or (iii) agree to or
authorize any modification of the terms of any item of Collateral that would
result in a change thereof from one Uniform Commercial Code category to another
such category (such as from a General Intangible to Investment Property), if
the effect thereof would be to result in a loss of perfection of, or diminution
of priority for, the security interests created hereunder in such item of
Collateral, or the loss of control (within the meaning of Section 9‐104,
9‐105, 9‐106 or 9‐107 of the UCC) over such item of
Collateral.

 

                        4.08     Private
Sale.  The Secured Party shall incur no liability as a result of the sale
of the Collateral, or any part thereof, at any private sale pursuant to
Section 4.05 conducted in a commercially reasonable manner.  The Grantor
hereby waives any claims against the Secured Party arising by reason of the
fact that the price at which the Collateral may have been sold at such a
private sale was less than the price that might have been obtained at a public
sale or was less than the aggregate amount of the Secured Obligations, even if
the Secured Party accepts the first offer received and does not offer the
Collateral to more than one offeree.

 

                        4.09     Application
of Proceeds.  Except as otherwise herein expressly provided and except as
provided below in this Section 4.09, the Proceeds of any collection, sale
or other realization of all or any part of the Collateral pursuant hereto, and
any other cash at the time held by the Secured Party under this Section 4,
shall be applied by the Secured Party:

 

                        First,
to the payment of the costs and expenses of such collection, sale or other
realization, including reasonable out‐of‐pocket costs and expenses
of the Secured Party and the fees and expenses of its agents and counsel, and
all expenses incurred and advances made by the Secured Party in connection
therewith;

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                        Next,
to the payment in full of the Secured Obligations (or, in the case of any
Contingent Secured Obligations, to the provision of cover as provided below),
in such order as the Secured Party shall in its sole discretion determine; and

 

                        Finally,
to the payment to the Grantor, or its successors or assigns, or as a court of
competent jurisdiction may direct, of any surplus then remaining.

 

For
purposes hereof, whenever this Agreement contemplates that cover shall be
provided for Contingent Secured Obligations, such cover shall be effected by
the payment to the Secured Party of any amount that will be deposited into an
account of the Secured Party to be held by the Secured Party as collateral
security for the payment of such Contingent Secured Obligations as and when
they become due and payable.

 

                        4.10     Attorney‐in‐Fact. 
Without limiting any rights or powers granted by this Agreement to the Secured
Party while no Default has occurred and is continuing, upon the occurrence and
during the continuance of any Default the Secured Party is hereby appointed the
attorney‐in‐fact of the Grantor for the purpose of carrying out the
provisions of this Section 5 and taking any action and executing any
instruments that the Secured Party may deem necessary or advisable to
accomplish the purposes hereof, which appointment as attorney‐in‐fact
is irrevocable and coupled with an interest.  Without limiting the generality
of the foregoing, so long as the Secured Party shall be entitled under this
Section 5 to make collections in respect of the Collateral, the Secured
Party shall have the right and power to receive, endorse and collect all checks
made payable to the order of Grantor representing any dividend, payment or
other distribution in respect of the Collateral or any part thereof and to give
full discharge for the same.

 

                        4.11     Perfection
and Recordation.  The Grantor authorizes the Secured Party to file Uniform
Commercial Code financing statements describing the Collateral as “all assets”
or “all personal property and fixtures” of the Grantor (provided that no such
description shall be deemed to modify the description of Collateral set forth
in Section 3).

 

                        4.12     Termination. 
When all Secured Obligations shall have been paid in full and all obligations
of the Secured Party to make available any Financial Accommodations to the
Grantor shall have expired or terminated, this Agreement shall terminate, and
the Secured Party shall forthwith cause to be assigned, transferred and
delivered, against receipt but without any recourse, warranty or representation
whatsoever, any remaining Collateral and money received in respect thereof, to
or on the order of the  Grantor and to be released and canceled all licenses
and rights referred to in Section 4.04(b).  The Secured Party shall also,
at the expense of the Grantor, execute and deliver to the Grantor upon such
termination such Uniform Commercial Code termination statements, certificates
for terminating the liens on the Motor Vehicles and such other documentation as
shall be reasonably requested by the Grantor to effect the termination and
release of the liens on the Collateral as required by this Section 4.12.

Security

Agreement 

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                        4.13     Further
Assurances.  The Grantor agrees that, from time to time upon the written
request of the Secured Party, the Grantor will execute and deliver such further
documents and do such other acts and things as the Secured Party may reasonably
request in order fully to effect the purposes of this Agreement.

 

                        Section
5.  Miscellaneous.

 

                        5.01     Notices. 
All notices, requests, consents and demands hereunder shall be in writing and
telecopied or delivered to the intended recipient at the “Address for Notices”
specified beneath its name on the signature pages hereto or, as to any party,
at such other address as shall be designated by such party in a notice to each
other party.  Except as otherwise provided in this Agreement, all such
communications shall be deemed to have been duly given when transmitted by
telecopier or personally delivered or, in the case of a mailed notice, upon
receipt, in each case given or addressed as aforesaid.

 

                        5.02     No
Waiver.  No failure on the part of Secured Party to exercise, and no course
of dealing with respect to, and no delay in exercising, any right, power or
remedy hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise by the Secured Party of any right, power or remedy hereunder preclude
any other or further exercise thereof or the exercise of any other right, power
or remedy.  The remedies herein are cumulative and are not exclusive of any
remedies provided by law.

 

                        5.03     Amendments,
Etc.  The terms of this Agreement may be waived, altered or amended only by
an instrument in writing duly executed by the Grantor and the Secured Party.

 

                        5.04     Expenses. 
The Grantor agrees to reimburse the Secured Party for all reasonable costs and
expenses incurred by it (including the reasonable fees and expenses of legal
counsel) in connection with (i) any Default and any enforcement or
collection proceeding resulting therefrom, including all manner of
participation in or other involvement with (w) performance by the Secured
Party of any obligations of the Grantor in respect of the Collateral that the
Grantor has failed or refused to perform, (x) bankruptcy, insolvency,
receivership, foreclosure, winding up or liquidation proceedings, or any actual
or attempted sale, or any exchange, enforcement, collection, compromise or
settlement in respect of any of the Collateral, and for the care of the
Collateral and defending or asserting rights and claims of the Secured Party in
respect thereof, by litigation or otherwise, including expenses of insurance, (y) judicial
or regulatory proceedings and (z) workout, restructuring or other
negotiations or proceedings (whether or not the workout, restructuring or
transaction contemplated thereby is consummated) and (ii) the enforcement
of this Section 5.04, and all such costs and expenses shall be Secured
Obligations entitled to the benefits of the collateral security provided
pursuant to Section 3.

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Agreement 

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                        5.05     Successors
and Assigns.  This Agreement shall be binding upon and inure to the benefit
of the respective successors and assigns of the Grantor and the Secured Party (provided
that the Grantor shall not assign or transfer its rights or obligations
hereunder without the prior written consent of the Secured Party).

 

                        5.06     Counterparts. 
This Agreement may be executed in any number of counterparts, all of which
taken together shall constitute one and the same instrument and either of the
parties hereto may execute this Agreement by signing any such counterpart.

 

                        5.07 
Governing Law; Submission to Jurisdiction; Etc.   

 

(a)        Governing Law.  This Agreement shall be construed in
accordance with and governed by the law of the State of Nevada.

 

(b)        Submission
to Jurisdiction.  The Grantor hereby irrevocably and unconditionally
submits, for itself and its property, to the nonexclusive jurisdiction of the
Nevada state district court located in the city of Las Vegas and Clark County,
Nevada and of the United States District Court of the District of Nevada, and
any appellate court from any thereof, in any action or proceeding arising out
of or relating to this Agreement, or for recognition or enforcement of any
judgment, and each of the parties hereto hereby irrevocably and unconditionally
agrees that all claims in respect of any such action or proceeding may be heard
and determined in such Nevada State or, to the extent permitted by law, in such
Federal court.  Each of the parties hereto agrees 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. 
Nothing in this Agreement shall affect any right that the Secured Party may
otherwise have to bring any action or proceeding relating to this Agreement
against the Grantor or its properties in the courts of any jurisdiction.

 

(c)        Waiver
of Venue.  The Grantor hereby irrevocably and unconditionally waives, to
the fullest extent it may legally and effectively do so, any objection which it
may now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement in any court referred to in
paragraph (b) of this Section.  Each of the parties hereto hereby
irrevocably waives, to the fullest extent permitted by law, the defense of an
inconvenient forum to the maintenance of such action or proceeding in any such
court.

 

(d)       Service
of Process.  Each party to this Agreement irrevocably consents to service
of process in the manner provided for notices in Section 5.01.  Nothing in
this Agreement will affect the right of any party to this Agreement to serve
process in any other manner permitted by law.

 

5.08     WAIVER OF JURY TRIAL. 
EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY
LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT,
TORT OR ANY OTHER THEORY).  EACH PARTY HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER
PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

Security

Agreement 

‐

19 ‐

 

 

                        5.09     Captions. 
The captions and section headings appearing herein are included solely for
convenience of reference and are not intended to affect the interpretation of
any provision of this Agreement.

 

                        5.10     Agents
and Attorneys‐in‐Fact.  The Secured Party may employ agents and
attorneys‐in‐fact in connection herewith and shall not be
responsible for the negligence or misconduct of any such agents or attorneys‐in‐fact
selected by it in good faith.

 

                        5.11     Severability. 
If any provision hereof is invalid and unenforceable in any jurisdiction, then,
to the fullest extent permitted by law, (a) the other provisions hereof
shall remain in full force and effect in such jurisdiction and shall be
liberally construed in favor of the Secured Party in order to carry out the
intentions of the parties hereto as nearly as may be possible and (b) the
invalidity or unenforceability of any provision hereof in any jurisdiction
shall not affect the validity or enforceability of such provision in any other
jurisdiction.

 

                        5.12     Effect
of Amendment and Restatement.  This Agreement amends and restates the
Original Security Agreement.  Nothing contained in this Agreement shall be
construed to release, cancel, terminate or otherwise adversely affect any line,
claim, right or security interest previously granted to or retained by the
Secured Party with respect to the Collateral or the proceeds thereof under the
Original Security Agreement.

 

 

[Remainder
of the Page Intentionally Left Blank]

Security

Agreement 

‐

20 ‐

 

 

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

 

AMERICAN
LITHIUM MINERALS, INC.

  

 

 

By:
________________________

       Name:   

       Title:

 

Address for
Notices:

 

American Lithium
Minerals Inc.

2850 W. Horizon Ridge Parkway, Suite 200

Henderson, NV  89052

Attention:  Hugh
Aird

Fax No.: (702)
430-4507

Email:
haird@americanlithium.com

 

 

2245393
ONTARIO INC.

 

By:
________________________

       Name:

       Title:

 

By:
________________________

       Name:

       Title:

 

Address for
Notices:

 

c/o Osler, Hoskin
& Harcourt LLP

Suite 6100, 1 First Canadian Place

Toronto, ON  M5X 1B8

Attention:  Emmanuel Pressman

Fax No.: (416)
862-6666

E‐mail:  epressman@osler.com

 

Security

Agreement 

 

ANNEX
1

FILING
DETAILS

 

Name:  American Lithium Minerals,
Inc.

Type of Organization: Corporation

Jurisdiction of Organization:
Nevada

Organizational ID Number:
NV20051222382

Mailing Address: 2870 W. Horizon
Ridge Parkway, Suite 200, Henderson, NV 89052

Prior Name: Nugget Resources,
Inc.

 

 

 

Annex

1 to Security Agreement

 

ANNEX
2

 

NEW
DEBTOR EVENTS

 

None.

 

 

Annex

2 to Security Agreement

 

ANNEX
3

PROMISSORY
NOTES

 

None.

 

 

Annex

3 to Security Agreement

 

ANNEX
4

LIST OF
COPYRIGHTS, COPYRIGHT REGISTRATIONS AND

APPLICATIONS
FOR COPYRIGHT REGISTRATIONS

 

None.

 

 

Annex

4 to Security Agreement

 

ANNEX
5

LIST
OF PATENTS AND PATENT APPLICATIONS

 

None.

 

 

Annex

5 to Security Agreement

 

ANNEX
6

LIST OF
TRADE NAMES, TRADEMARKS, SERVICES MARKS,

TRADEMARK
AND SERVICE MARK REGISTRATIONS AND

APPLICATIONS FOR
TRADEMARK AND SERVICE MARK REGISTRATIONS

 

 

None.

 

 

Annex

6 to Security Agreement

 

ANNEX
7

LIST
OF DEPOSIT ACCOUNTS, AND SECURITIES ACCOUNTS AND COMMODITY ACCOUNTS

 

 

American Lithium
Minerals Inc.

Banking
Information

Bank:  Wachovia
Bank, N.A.

Address: 1525 WT Harris Blvd

               
Charlotte N.C.

               
28262

Accounts:

2000041563782

2000041563630

 

 

Annex

7 to Security Agreement

 

ANNEX
8

LIST
OF COMMERCIAL TORT CLAIMS

 

 

None.

 

 

Annex

8 to Security Agreement

 

ANNEX 9

 

MINERAL
INTERESTS

 

	
  FLD
  CLAIMS

   

  The following unpatented mining
  claims located in Township 1 South, Range 35 South and 36 East and Township 2
  S, Range 35 East and 36 East, Esmeralda County, Nevada

  
	
  Claim Name

  	
  BLM Serial No.

  
	
  FLD # 46

  	
  NMC 1018078

  
	
  FLD # 47

  	
  NMC 1018079

  
	
  FLD # 48

  	
  NMC 1018080

  
	
  FLD # 49

  	
  NMC 1018081

  
	
  FLD # 1

  	
  NMC 1018082

  
	
  FLD # 2

  	
  NMC 1018083

  
	
  FLD # 3

  	
  NMC 1018084

  
	
  FLD # 4

  	
  NMC 1018085

  
	
  FLD # 5

  	
  NMC 1018086

  
	
  FLD # 6

  	
  NMC 1018087

  
	
  FLD # 7

  	
  NMC 1018088

  
	
  FLD # 8

  	
  NMC 1018089

  
	
  FLD # 9

  	
  NMC 1018090

  
	
  FLD # 10

  	
  NMC 1018091

  
	
  FLD # 11

  	
  NMC 1018092

  
	
  FLD # 12

  	
  NMC 1018093

  
	
  FLD # 13

  	
  NMC 1018094

  
	
  FLD # 14

  	
  NMC 1018095

  
	
  FLD # 15

  	
  NMC 1018096

  
	
  FLD # 16

  	
  NMC 1018097

  
	
  FLD # 17

  	
  NMC 1018098

  
	
  FLD # 18

  	
  NMC 1018099

  
	
  FLD # 19

  	
  NMC 1018100

  
	
  FLD # 20

  	
  NMC 1018101

  
	
  FLD # 21

  	
  NMC 1018102

  
	
  FLD # 22

  	
  NMC 1018103

  
	
  FLD # 23

  	
  NMC 1018104

  
	
  FLD # 24

  	
  NMC 1018105

  
	
  FLD # 25

  	
  NMC 1018106

  
	
  FLD # 26

  	
  NMC 1018107

  
	
  FLD # 30

  	
  NMC 1018108

  

 Annex

9 to Security Agreement

 

 	
  FLD #
  31

  	
  NMC 1018109

  
	
  FLD # 32

  	
  NMC 1018110

  
	
  FLD # 33

  	
  NMC 1018111

  
	
  FLD # 34

  	
  NMC 1018112

  
	
  FLD # 35

  	
  NMC 1018113

  
	
  FLD # 36

  	
  NMC 1018114

  
	
  FLD # 37

  	
  NMC 1018115

  
	
  FLD # 38

  	
  NMC 1018116

  
	
  FLD # 39

  	
  NMC 1018117

  
	
  FLD # 40

  	
  NMC 1018118

  
	
  FLD # 43

  	
  NMC 1018119

  
	
  FLD # 44

  	
  NMC 1018120

  
	
  FLD # 45

  	
  NMC 1018121

  
	
  SAR
  CLAIMS

   

  The following unpatented mining
  claims located in Township 8 South, Range 44 East, Nye County, Nevada

  
	
  Claim Name

  	
  BLM Serial No

  
	
  SAR # 21

  	
  NMC 1018122

  
	
  SAR # 22

  	
  NMC 1018123

  
	
  SAR # 23

  	
  NMC 1018124

  
	
  SAR # 24

  	
  NMC 1018125

  
	
  SAR # 25

  	
  NMC 1018126

  
	
  SAR # 26

  	
  NMC 1018127

  
	
  SAR # 27

  	
  NMC 1018128

  
	
  SAR # 28

  	
  NMC 1018129

  
	
  SAR # 1

  	
  NMC 1018130

  
	
  SAR # 2

  	
  NMC 1018131

  
	
  SAR # 3

  	
  NMC 1018132

  
	
  SAR # 4

  	
  NMC 1018133

  
	
  SAR # 5

  	
  NMC 1018134

  
	
  SAR # 6

  	
  NMC 1018135

  
	
  SAR # 7

  	
  NMC 1018136

  
	
  SAR # 8

  	
  NMC 1018137

  
	
  SAR # 9

  	
  NMC 1018138

  
	
  SAR # 10

  	
  NMC 1018139

  
	
  SAR # 11

  	
  NMC 1018140

  
	
  SAR # 12

  	
  NMC 1018141

  
	
  SAR # 13

  	
  NMC 1018142

  
	
  SAR # 14

  	
  NMC 1018143

  
	
  SAR # 15

  	
  NMC 1018144

  

Annex

9 to Security Agreement

 	
  SAR #
  16

  	
  NMC 1018145

  
	
  SAR # 17

  	
  NMC 1018146

  
	
  SAR # 18

  	
  NMC 1018147

  
	
  SAR # 19

  	
  NMC 1018148

  
	
  SAR # 20

  	
  NMC 1018149

  
	
  TEE
  CLAIMS

   

  The following unpatented mining
  claims located in Township 4 North, Range 33 East, Mineral County, Nevada

  
	
  Claim Name

  	
  BLM Serial No

  
	
  TEE # 7

  	
  NMC 1013830

  
	
  TEE # 8

  	
  NMC 1013831

  
	
  TEE # 9

  	
  NMC 1013832

  
	
  TEE # 10

  	
  NMC 1013833

  
	
  TEE # 14

  	
  NMC 1013834

  
	
  TEE # 15

  	
  NMC 1013835

  
	
  PAR
  CLAIMS

   

  The following unpatented mining
  claims located in Township 26 South, Range 20 East, Grand County, Utah

  
	
  Claim Name

  	
  BLM Serial No

  
	
  PAR # 1

  	
  UMC 409581

  
	
  PAR # 2

  	
  UMC 409582

  
	
  PAR # 3

  	
  UMC 409583

  
	
  PAR # 4

  	
  UMC 409584

  
	
  PAR # 6

  	
  UMC 409585

  
	
  PAR # 7

  	
  UMC 409586

  
	
  PAR # 8

  	
  UMC 409587

  
	
  PAR # 9

  	
  UMC 409588

  
	
  PAR # 10

  	
  UMC 409589

  
	
  PAR # 11

  	
  UMC 409590

  
	
  PAR # 12

  	
  UMC 409591

  
	
  PAR # 13

  	
  UMC 409592

  
	
  PAR # 14

  	
  UMC 409593

  
	
  PAR # 15

  	
  UMC 409594

  
	
  PAR # 18

  	
  UMC 409595

  
	
  PAR # 19

  	
  UMC 409596

  
	
  PAR # 20

  	
  UMC 409597

  
	
  PAR # 21

  	
  UMC 409598

  

 

 

Annex

9 to Security Agreement

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00188-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00188-of-00352.parquet"}]]