Document:

ex101.htm

    EXHIBIT
10.1

     

    SECURITIES
PURCHASE AGREEMENT

     

    This
Securities Purchase Agreement (this “Agreement”) is made as of April 4, 2008
between Tao Minerals, Ltd., a Nevada corporation (the “Company”), and the
investor listed on Exhibit A hereto (the
“Investor”).

     

    RECITALS:

     

    WHEREAS,
the Investor desires to purchase and the Company desires to issue and sell, upon
the terms and conditions set forth in this Agreement 10% convertible notes (the
“Notes”) of the Company, in the form attached hereto as Exhibit B in the
aggregate principal amount of One Million ($1,000,000) Dollars (the “Purchase
Price”) convertible into shares of common stock, par value $0.001 per share of
the Company (the “Conversion Shares”), upon the terms and subject to the
limitations set forth in the Notes;

     

    WHEREAS,
the parties contemplate that $125,000 of the Purchase Price will be advanced
within five (5) days of the execution of this Agreement and the remainder of the
Purchase Price will be advanced within five (5) days of the effectiveness of the
Registration Statement (as defined below);

     

    NOW,
THEREFORE, in consideration of the premises and mutual covenants contained
herein, the parties hereto agree as follows:

     

    1. PURCHASE
AND SALE OF NOTES.

     

    1.1 Purchase and Sale of
Notes.  Upon the terms and subject to the conditions of this
Agreement, the Company agrees to issue and sell to the Investor, and the
Investor agrees to purchase from the Company, the Notes set forth in the amounts
set forth on Exhibit A
hereto, at an aggregate purchase price of $1,000,000 (“Purchase
Price”).

     

    1.2 Closing.  The
Initial closing of the purchase and sale of the Notes (the “Initial Closing”)
shall take place at the offices of the Company within five (5) days of the
execution of this Agreement at 12:00 noon, Eastern time or such other location,
time or date as the parties shall mutually agree, but only after the
satisfaction or waiver of each of the conditions set forth in Sections 6 and 7.
The final closing (the “Final Closing” and together with the Initial Closing,
the “Closing”) shall take place within five (5) days of the effectiveness of the
Registration Statement (as defined below) at the offices of the Company at 12:00
noon, Eastern time or such other location, time or date as the parties shall
mutually agree, but only after the satisfaction or waiver of each of the
conditions set forth in Sections 6 and 7.  At each Closing, the
Company shall deliver to the Investor at the address set forth on Exhibit A
hereto, a Note in the name of the Investor, representing the Note purchased, and
the Investor shall deliver to the Company the applicable portion of the Purchase
Price, by wire transfer of immediately available funds to the following
account:

     

    ______________________

     

    ______________________

     

     

    
      
         

      

      
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      2.  REPRESENTATIONS
AND WARRANTIES OF THE COMPANY.

    

     

    For
purposes of this Section, all references to “Company” in Sections 2.1, 2.4 (with
the exception of subsection (a) thereof), 2.7, 2.9 through 2.12, and 2.14
through 2.17 shall be deemed to be a reference to the Company and all of its
direct and indirect subsidiaries.  The Company hereby represents and
warrants to each Investor that, except as set forth on a Schedule of Exceptions
(the “Company Schedule of Exceptions”) attached hereto as Schedule A, which
exceptions shall be deemed to be representations and warranties as if made
hereunder:

     

    2.1 Corporate
Organization.  The Company is a corporation duly organized,
validly existing and in good standing under the laws of its state of
incorporation, and has the requisite corporate power and authority to own or
lease its properties and to carry on its business as now being
conducted.  The Company is duly qualified as a foreign corporation to
do business and is in good standing in every jurisdiction in which the property
owned or leased by it or the nature of the business conducted by it makes such
qualification necessary, except to the extent that the failure to be so
qualified or in good standing would not have, individually or in the aggregate,
a Material Adverse Effect.  For purposes of this Agreement, “Material
Adverse Effect” shall mean, as to any entity, any material adverse effect on the
business, operations, conditions (financial or otherwise), assets, results of
operations or prospects of that entity individually or of the Company and its
subsidiaries as a whole.

     

    2.2 Capitalization;
Organizational Documents.

     

    (a) The
authorized capital stock of the Company consist of 552,000,000 shares of Common
Stock, of which as of the date hereof, 57,106,909 shares are issued and
outstanding, and 1,000,000 shares of preferred stock of the Company, of which,
as of the date hereof, no shares are issued or outstanding.  All of
the issued and outstanding shares have been duly and validly issued and are
fully paid and nonassessable and have been issued in accordance with all
applicable federal and state securities laws.  No shares of Common
Stock are subject to preemptive rights or any other similar rights or any liens
suffered or permitted by the Company.  There are no preemptive rights
or rights of first refusal or similar rights which are binding on the Company
permitting any person to subscribe for or purchase from the Company shares of
its capital stock pursuant to any provision of applicable law, the Certificate
of Incorporation (as defined below) or the Company’s By-laws.  There
are no securities or instruments containing anti-dilution or similar provisions
that will be triggered by the issuance of the Notes and the Conversion
Shares.  The Company has made available to each Investor true and
correct copies of the Company’s Certificate of Incorporation, as amended and as
in effect on the date hereof (the “Certificate of Incorporation”), and the
Company’s By-laws, as in effect on the date hereof (the “By-laws”).

     

    (b) Upon
issuance of the Notes and payment of the Purchase Price therefor in accordance
with the terms of this Agreement, the Conversion Shares will be duly authorized,
validly issued, fully paid and nonassessable, and free and clear of any
restrictions on transfer and any taxes, claims, liens, pledges, options,
security interests, purchase rights, preemptive rights, trusts, encumbrances or
other rights or interests of any other person (other than any restrictions under
the Securities Act of 1933, as amended (the “Securities Act”).

     

    
      
         

      

      
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    2.3 Authorization;
Enforcement.  (a) The Company has the requisite corporate power
and authority to enter into and perform its obligations under this Agreement and
to issue, sell and perform its obligations with respect to the Notes in
accordance with the terms hereof, (b) the execution and delivery of this
Agreement by the Company and the consummation by it of the transactions
contemplated hereby have been duly authorized by the Company’s Board of
Directors and no further consent or authorization is required by the Company,
its Board of Directors or its stockholders, and (c) this Agreement has been duly
executed and delivered by the Company.  This Agreement, when executed
and delivered by the Company, constitutes a valid and binding obligation of the
Company enforceable against the Company in accordance with its terms, except as
such enforceability may be limited by general principles of equity or applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally, the enforcement of creditors’ rights and
remedies.

     

    2.4 No
Conflicts.  The execution, delivery and performance of this
Agreement by the Company, and the consummation by the Company of the
transactions contemplated hereby, will not (a) result in a violation of the
Certificate of Incorporation or By-laws of the Company, or (b) violate or
conflict with, or result in a breach of, any provision of, or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of any lien on or
against any of the properties of the Company, any note, bond, mortgage,
agreement, license, indenture or instrument to which the Company is a party, or
result in a violation of any statute, law, rule, regulation, writ, injunction,
order, judgment or decree applicable to the Company or by which any property or
asset of the Company is bound or affected, except where such violation,
conflict, breach or other consequence would not have a Material Adverse
Effect.   Except as specifically contemplated by this Agreement,
the Company is not required to obtain any consent, authorization or order of, or
make any filing or registration with, any court or governmental or regulatory or
self-regulatory agency in order for it to execute, deliver or perform any of its
obligations under or contemplated by this Agreement in accordance with the terms
hereof.  All consents, authorizations, orders, filings and
registrations that the Company is required to obtain pursuant to the preceding
sentence have been obtained or effected on or prior to the date
hereof.

     

    2.5 SEC Documents; Financial
Statements.  The Company has filed all reports, schedules,
forms, statements and other documents required to be filed by it with the
Securities and Exchange Commission (the “SEC”) pursuant to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”) (all of the foregoing, and all other documents and registration statements
heretofore filed by the Company with the SEC being hereinafter referred to as
the “SEC Documents”).  The Company has delivered or made available to
the Investor true and complete copies of the SEC Documents.  As of
their respective dates, the SEC Documents complied in all material respects with
the requirements of the Securities Act, and the Exchange Act and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents,
and none of the SEC Documents, at the time they were filed with the SEC (except
those SEC Documents that were subsequently amended), contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.  As of
their respective dates, the financial statements of the Company and its
subsidiaries included (or incorporated by reference) in the SEC Documents
complied as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC or other
applicable rules and regulations with respect thereto.  Such financial
statements have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis during the periods involved (except (a)
as may be otherwise indicated in such financial statements or the notes thereto,
or (b) in the case of unaudited interim statements, to the extent they may
exclude footnotes or may be condensed or summary statements) and fairly present
the financial position of the Company and its subsidiaries as of the dates
thereof and the results of its operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments).

     

    
      
         

      

      
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    2.6 Securities Law
Exemption.  Assuming the truth and accuracy of each Investor’s
representations set forth in this Agreement, the offer, sale and issuance of the
Shares as contemplated by this Agreement are exempt from the registration
requirements of the Securities Act and applicable state securities laws, and
neither the Company nor any authorized agent acting on its behalf has taken or
will take any action hereafter that would cause the loss of such
exemption.

     

    2.7 Litigation.  All
actions, suits, arbitrations or other proceedings or, to the Company’s
knowledge, investigations pending or threatened against the Company that would
have a Material Adverse Effect on the Company, are disclosed in the SEC
Documents.  There is no action, suit, proceeding or, to the Company’s
knowledge, investigation that questions this Agreement or the right of the
Company to execute, deliver and perform under same.

     

    2.8 Use of
Proceeds.  The net proceeds from the sale of the Notes shall be
used solely for general corporate and working capital purposes; provided
however, the Company shall utilize $25,000 for investor relations program
reasonably acceptable to the Investor.

     

    2.9 Intellectual
Property.  The Company owns, or has the contractual right to
use, sell or license all intellectual property necessary or required for the
conduct of its business as presently conducted and as proposed to be conducted,
including, without limitation, all trade secrets, processes, source code,
licenses, trademarks, service marks, trade names, logos, brands, copyrights,
patents, franchises, domain names and permits.  The Company has not
received any communications alleging that the Company has violated or, by
conducting its business presently conducted or as proposed to be conducted,
violates or will violate any intellectual property rights of any other person or
entity.

     

    2.10 Title to Property and
Assets.  The Company has good and marketable title to or, in
the case of leases and licenses, has valid and subsisting leasehold interests or
licenses in, all of its properties and assets (whether real or personal,
tangible or intangible) free and clear of any liens or other encumbrances,
except for liens or other encumbrances that do not, individually or in the
aggregate, have a Material Adverse Effect.  With respect to property
leased by the Company, the Company has a valid leasehold interest in such
property pursuant to leases which are in full force and effect, and the Company
is in compliance in all material respects with the provisions of such
leases.

     

    
      
         

      

      
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    2.11 Compliance with
Laws.  The Company is and has been in compliance with all laws,
rules, regulations, orders, judgments or decrees that are applicable to the
Company, the conduct of its business as presently conducted and as proposed to
be conducted, and the ownership of its property and assets (including, without
limitation, all Environmental Laws (as defined below) and laws related to
occupational safety, health, wage and hour, and employment
discrimination).  All required reports and filings with governmental
authorities have been properly made as and when required, except where the
failure to report or file would not, individually or in the aggregate, have a
Material Adverse Effect.  “Environmental Laws” means all federal,
state, local and foreign laws, ordinances, treaties, rules, regulations,
guidelines and permit conditions relating to contamination or pollution of the
environment (including ambient air, surface water, ground water, land surface or
subsurface strata) or the protection of human health and worker safety,
including, without limitation, laws and regulations relating to transportation,
storage, use, manufacture, disposal or release of, or exposure of employees or
others to, Hazardous Materials (as defined below) or emissions, discharges,
releases or threatened releases of Hazardous Materials.  “Hazardous
Materials” means any substance that has been designated by any governmental
entity or by applicable Environmental Laws to be radioactive, toxic, hazardous
or otherwise a danger to health or the environment, including, without
limitation, PCBs, asbestos, petroleum, urea formaldehyde and all substances
listed as hazardous substances pursuant to the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended, or defined as a
hazardous waste pursuant to the Resource Conservation and Recovery Act of 1976,
as amended, and the regulations promulgated pursuant to Environmental Laws, but
excluding office and janitorial supplies maintained in accordance with
Environmental Laws.

     

    2.12 Licenses and
Permits.  The Company has obtained and maintains all material
federal, state, local and foreign licenses, permits, consents, approvals,
registrations, memberships, authorizations and qualifications required to be
maintained in connection with the operations of the Company as presently
conducted and as proposed to be conducted, the lack of which could have a
Material Adverse Effect.  The Company is not in default in any
material respect under any of such licenses, permits, consents, approvals,
registrations, memberships, authorizations and qualifications.

     

    2.13 Related
Entities.  Except as disclosed on the Company Schedule of
Exceptions, the Company does not presently own or control, directly or
indirectly, any interest in any other subsidiary, corporation, association or
other business entity.  The Company is not a party to any joint
venture, partnership or similar arrangement.

     

    2.14 Taxes.  The
Company has timely filed all tax returns and reports (federal, state and local)
required to be filed and these returns and reports are true and correct in all
material respects.  The Company has paid all taxes and other
assessments shown to be due on such returns or reports.  Neither the
Internal Revenue Service nor any state or local taxing authority has, during the
past three (3) years, examined or informed the Company it is in the process of
examining any such tax returns and reports.  The provision for taxes
of the Company as shown on the financial statements included in the most recent
SEC Filing, is adequate for taxes due or accrued as of the date thereof and
since that date the Company has provided adequate accruals in accordance with
generally accepted accounting principals in its financial statements for any
taxes incurred that have not been paid, whether or not shown as being due on any
tax returns.  The Company has not elected, pursuant to the Code, to be
treated as a collapsible corporation pursuant to Section 341(f) of the Code, nor
has it made any other elections pursuant to the Code (other than elections that
relate solely to methods of accounting, depreciation or amortization) that would
have a Material Adverse Effect.

     

    
      
         

      

      
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    2.15 Employees.  The
Company does not have any collective bargaining agreements with any of its
employees.  There is no labor union organizing activity pending or, to
the Company’s knowledge, threatened with respect to the Company.

     

    2.16 Material
Contracts.  All contracts, agreements, instruments, leases,
licenses, arrangements, understandings or other documents filed with or required
to be filed as exhibits to the SEC Documents to which the Company therein is a
party or by which it may be bound have been so filed (the “Material
Contracts”).  The Material Contracts that have been filed as exhibits
are complete and correct copies of the contracts, agreements, instruments,
leases, licenses, arrangement, understanding or other documents of which they
purport to be copies.  The Material Contracts are valid and in full
force and effect as to the Company, and, to the Company’s knowledge, to the
other parties thereto.  Except as otherwise disclosed herein, the
Company is not in violation of, or default under (and there does not exist any
event or condition which, after notice or lapse of time or both, would
constitute such a default under), the Material Contracts, except to the extent
that such violations or defaults, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect.  The Company
has not received any notice of cancellation or any written communication
threatening cancellation of any Material Contract by any other party
thereto.  The Company is not a party to and is not bound by any
contract, agreement or instrument, or subject to any restriction under the
Certificate of Incorporation, its bylaws or other governing documents that would
have a Material Adverse Effect.

     

    2.21 Brokers and
Finders.  The Company has not employed any broker, finder,
consultant or intermediary in connection with the transactions contemplated by
this Agreement that would be entitled to a broker’s, finder’s or similar fee or
commission in connection herewith and therewith.

     

    2.22 Disclosure.  This
Agreement, Schedules and Exhibits hereto and all other documents delivered to
the Investor in connection herewith or therewith at the Closing, do not contain
any untrue statement of a material fact, or omit to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.  There are no facts that,
individually or in the aggregate, would have a Material Adverse Effect that have
not been disclosed to each Investor in this Agreement (including the Schedules
and Exhibits hereto), the SEC Documents or any other documents delivered to the
Investor in connection herewith or therewith at the Closing.

     

    3. REPRESENTATIONS
AND WARRANTIES OF INVESTOR.

     

    The
Investor, hereby represents and warrants to the Company, that:

     

    3.1 Organization.  The
Investor is a corporation, limited liability company or limited partnership, as
the case may be, duly organized, validly existing and in good standing in the
jurisdiction of its formation.  The Investor has all requisite power
and authority to execute, deliver and perform all of its obligations of this
Agreement.

     

    
      
         

      

      
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    3.2 Authorization;
Enforcement.  (a) The Investor has the requisite power and
authority to enter into and perform its obligations under this Agreement, (b)
the execution and delivery of this Agreement by the Investor and the
consummation by it of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of the Investor, and
(c) this Agreement has been duly executed and delivered by the
Investor.  To the knowledge of the Investor, no other proceedings on
the part of the Investor are necessary to approve and authorize the execution
and delivery of this Agreement.  This Agreement, when executed and
delivered, constitutes a valid and binding obligation of the Investor,
enforceable against the Investor in accordance with its terms, except as such
enforceability may be limited by general principles of equity or applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally, the enforcement of creditors’ rights and
remedies.

     

    3.3 No
Conflicts.  The execution, delivery and performance of this
Agreement by the Investor, and the consummation by the Investor of the
transactions contemplated hereby will not (a) result in a violation of the
organizational documents of the Investor, or (b) result in a violation of
any statute, law, rule, regulation, writ, injunction, order, judgment or decree
applicable to the Investor, except where such violation, conflict, breach or
other consequence would not have a Material Adverse Effect.  The
Investor is not required to obtain any consent, authorization or order of, or
make any filing or registration with, any court or governmental or regulatory or
self-regulatory agency in order for it to execute, deliver or perform any of its
obligations under or contemplated by this Agreement in accordance with the terms
hereof.

     

    3.4 Investment
Representations.

     

    (a) The
Investor is an “accredited investor”, as defined in Regulation D promulgated
under the Securities Act, and has such knowledge, sophistication and experience
in financial and business matters that the Investor is capable of evaluating the
merits and risks of the investment in the Shares.

     

    (b) The
Investor (i) has adequate means of providing for its current financial needs and
possible contingencies, and has no need for liquidity of investment in the
Company, (ii) can afford to hold unregistered Shares for an indefinite period of
time and sustain a complete loss of the entire amount of the subscription, and
(iii) has not made an overall commitment to investments which are not readily
marketable that is so disproportionate as to cause such overall commitment to
become excessive.

     

    (c) The
Investor agrees and understands that the Notes are being offered and sold to the
Investor in reliance upon specific exemptions from the registration requirements
of the Securities Act and the rules and regulations promulgated thereunder and
that, in order to determine the availability of such exemptions and the
eligibility of the Investor to acquire the Notes and the Conversion Shares, the
Company is relying upon the truth and accuracy of the Investor’s representations
and warranties, and compliance with the Investor’s covenants and agreements, set
forth in this Agreement.  The Investor further agrees with the Company
that (i) the Notes are not being offered or sold to the Investor by means of any
form of general solicitation or general advertising, and in connection
therewith, the Investor did not (1) receive or review any advertisement,
article, notice or other communication published in a newspaper or magazine or
similar media or broadcast over television or radio, whether closed circuit or
generally available; or (2) attend any seminar meeting or industry investor
conference whose attendees were invited by any general solicitation or general
advertising.  The Investor hereby acknowledges that the offering of
the Notes have not been reviewed by the SEC or any state regulatory authority
since the offering of the Notes is intended to be exempt from the registration
requirements of Section 5 of the Securities Act pursuant to Regulation D
promulgated thereunder.  The Investor understands that the Notes and
the Conversion Shares have not been registered under the Securities Act and
agrees not to sell or otherwise transfer the Conversion Shares unless they are
registered under the Securities Act or unless an exemption from such
registration is available.

     

    
      
         

      

      
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    (d) The Notes
are being purchased by the Investor for its own account, for investment purposes
only, not for the account of any other person, or corporation and not with a
view to distribution, assignment or resale to others in whole or in
part.  The Investor has no present intention of selling, granting any
participation in, or otherwise distributing the Notes and the Conversion
Shares.  The Investor does not have any contract, undertaking,
agreement or arrangement with any person to sell, transfer, pledge, hypothecate,
grant any option to purchase or otherwise dispose of any of the Conversion
Shares.  Nothing herein shall prevent the distribution of any
Conversion Shares to any subsidiary, member, partner, stockholder, affiliate or
former member, partner, stockholder or affiliate of the Investor in compliance
with the Securities Act and applicable state “blue sky” laws.

     

    (e) The
Investor has had access to the Company’s SEC Documents and other public
filings.

     

    (f) With
respect to corporate tax and other economic considerations involved in an
investment in the Notes, the Investor is not relying on the
Company.  The Investor has carefully considered and has, to the extent
the Investor believes such discussion necessary, discussed with its professional
legal, tax, accounting and financial advisors the suitability of an investment
in the Notes for its particular tax and financial situation and has determined
that the Notes are a suitable investment for the Investor.

     

    (g) The
Company has made available to the Investor all documents and information that
the Investor has requested relating to an investment in the Notes.

     

    (h) Subject
to the Company’s disclosures in this Agreement and the SEC Documents, the
Investor recognizes that that investment in the Company involves substantial
risks, including loss of the entire amount of such investment and has taken full
cognizance of and understands all of the risk factors relating to the purchase
of the Shares.

     

    (i) The
Investor has not been formed for the specific purpose of acquiring the
Shares.

     

    4. COVENANTS.

     

    4.1 Confidentiality.  The
Investor hereby acknowledges that unauthorized disclosure of information
regarding the offering of the Shares pursuant to this Agreement may cause the
Company to violate Regulation FD and the Investor agrees to keep such
information confidential. The Company shall not publicly disclose the name of
the Investor, or include the name of the Investor in any filing with the
Commission or any regulatory agency or trading market, without the prior written
consent of such Investor, except (i) as required by the federal securities laws
and in connection with the registration statement contemplated by this Agreement
and (ii) to the extent such disclosure is required by law or trading market
regulations.

     

    
      
         

      

      
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    4.2 Restrictions on
Transfer. The Investor acknowledge that (a) the Notes and the Conversion
Shares have not been registered under the provisions of the 1933 Act, and may
not be transferred unless (i) subsequently registered thereunder or (ii) the
Investor shall have delivered to the Company an opinion of counsel, reasonably
satisfactory in form, scope and substance to the Company, to the effect that the
Conversion Shares to be sold or transferred may be sold or transferred pursuant
to an exemption from such registration; and (b) any sale of the Conversion
Shares made in reliance on Rule 144 promulgated under the 1933 Act may be made
only in accordance with the terms of said Rule and further, if said Rule is not
applicable, any resale of such securities under circumstances in which the
seller, or the person through whom the sale is made, may be deemed to be an
underwriter, as that term is used in the 1933 Act, may require compliance with
some other exemption under the 1933 Act or the rules and regulations of the SEC
thereunder.

     

    4.3 Restrictive
Legend. The
Investor acknowledges and agrees that the Notes and the Conversion Shares shall
bear a restrictive legend and a stop-transfer order may be placed against
transfer of any such Securities except that the requirement for a restrictive
legend shall not apply to Conversion Shares sold pursuant to a current and
effective registration statement or a sale pursuant Rule 144 or any successor
rule.

     

    4.4 Securities
Compliance.  The Company shall take all action necessary to
comply with any federal or state securities laws applicable to the transactions
contemplated hereunder.

     

    5. REGISTRATION
RIGHTS.

     

    5.1 Registrable
Shares.  As used herein the term “Registrable Shares” means the
shares of common stock into which the Notes are convertible.

     

    5.2 Mandatory
Registration.

     

    (a) On or
before forty-five (45) days of the date hereof, the Company shall prepare and
file with the Commission a Registration Statement covering the resale of all of
the Registrable Shares for an offering to be made on a continuous basis pursuant
to Rule 415 (the “Required Filing Date”).  The Registration Statement
required hereunder shall be on Form S-1  (except if the Company is not
then eligible to register for resale the Registrable Shares on Form S-1, in
which case the Registration Statement shall be on another appropriate form in
accordance herewith).  The Company shall use its commercially
reasonable efforts to cause the Registration Statement to be declared effective
under the Securities Act as promptly as possible after the filing thereof, but
in any event not later than the 120th day after filing thereof (the
“Effectiveness Date”), and shall use its commercially reasonable efforts to keep
the Registration Statement continuously effective under the Securities Act until
the earlier of the date when all Registrable Shares covered by the Registration
Statement (a) have been sold pursuant to the Registration Statement or an
exemption from the registration requirements of the Securities Act or (b) may be
sold without restrictions pursuant to Rule 144 counsel to the Company pursuant
to a written opinion letter to such effect, addressed and acceptable to the
Company’s transfer agent and the affected Investors or (c) the second
anniversary of the date on which the Registration Statement is declared
effective (the “Effectiveness
Period”) or such longer time as the Company may determine.

     

    
      
         

      

      
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    (b)  If: (i) the Registration
Statement is not filed on or prior to its Required Filing Date, or (ii) the
Company fails to file with the Commission a request for acceleration in
accordance with Rule 461 promulgated under the Securities Act, within five
business days of the date that the Company is notified (orally or in writing,
whichever is earlier) by the Commission that a Registration Statement will not
be “reviewed”, or not subject to further review, or (iii) a Registration
Statement filed or required to be filed hereunder is not declared effective by
the Commission on or before the required Effectiveness Date, or (iv) after a
Registration Statement is first declared effective by the Commission, it ceases
for any reason to remain continuously effective as to all Registrable Securities
for which it is required to be effective, or the Investor is not permitted to
utilize the Prospectus therein to resell such Registrable Securities, for in any
such cases 30 business days (which need not be consecutive days) in the
aggregate during any 12-month period (any such failure or breach being referred
to as an “Event”) and for
purposes of clause (i) or (iii) the date on which such Event occurs, or for
purposes of clause (ii) the date on which such five business day period is
exceeded, or for purposes of clause (iv) the date on which such 30 business day
period is exceeded, being referred to as “Event Date”, then in
addition to any other rights the Investors may have hereunder or under
applicable law, the Company shall pay to the Investor liquidated damages, in
cash or shares of Common Stock at the option of the Company, at a rate equal to
one (1%) percent  per month (pro rata on a 30-day basis) of the total
Purchase Price, up to a maximum of ten (10%) percent of the total principal
amount of the Notes.  Such liquidated damages shall be payable within
ten (10) days of the end of each one-month anniversary of the filing deadline
set forth in this section 5(c).

     

    5.3 Covenants of the Company
With Respect to Registration.

     

    The
Company covenants and agrees as follows:

     

    (a)
Not less than one (1) business day prior to the filing of the
Registration Statement or any related Prospectus or any amendment or supplement
thereto, furnish to the Investors copies of all such documents proposed to be
filed (including documents incorporated or deemed incorporated by reference to
the extent requested by such person), which documents will be subject to the
review of such Investors within such five business days. The Company shall not
file the Registration Statement or any such Prospectus or any amendments or
supplements thereto to which the Investor shall reasonably object in good faith
based on the advice of counsel and the Company shall make reasonable efforts to
address the objections raised.

     

    (b) The Company shall prepare and file with the
SEC such amendments and supplements to such Registration Statement and the
prospectus used in connection with such Registration Statement as may be
necessary to comply with the Securities Act with respect to the disposition of
all Shares covered by such Registration Statement during the period of time such
Registration Statement remains effective;

     

    (c) The Company shall use its commercially
reasonable efforts to register and qualify the Shares covered by such
Registration Statement under such other securities or Blue Sky laws of such
jurisdictions as shall be reasonably requested by the Investors; provided that
the Company shall not be required in connection therewith or as a condition
thereto to qualify to do business or to file a general consent to service of
process in any such states or jurisdictions;

     

    (d) During the period of time such
Registration Statement remains effective, the Company shall notify each Investor
of Registrable Shares covered by such registration statement at any time when a
prospectus relating thereto is required to be delivered under the Securities Act
or the happening of any event as a result of which the prospectus included in
such Registration Statement, as then in effect, includes an untrue statement of
a material fact or omits to state a material fact required to be stated therein
or necessary to make the statements therein not misleading in the light of the
circumstances then existing;

     

    5.4 Expenses.  All
expenses incurred in effecting a registration pursuant to this Agreement
(including, without limitation, all registration, qualification and filing fees,
printing expenses, fees and disbursements of counsel for the Company, blue sky
fees and expenses) shall be borne by the Company.  All transfer taxes,
underwriting discounts and selling commissions applicable to the sale of the
Registrable Shares shall be borne by the Investors thereof.

     

    5.5 Indemnification.  In
the event any Registrable Shares are included in a Registration Statement under
this Section 5:

     

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

     

    (a) To the
extent permitted by law, the Company will indemnify and hold harmless each
Investor, the partners, officers, directors, stockholders, members and managers
of such Investor, each person, if any, who controls such Investor within the
meaning of the Securities Act or the Exchange Act, against any losses, claims,
damages, or liabilities (joint or several) to which they may become subject
under the Securities Act, the Exchange Act or other federal or state law,
insofar as such losses, claims, damages, or liabilities (or actions in respect
thereof) arise out of or are based upon any of the following statements,
omissions or violations (each, a “Violation”): (i) any untrue statement or
alleged untrue statement of a material fact contained in such Registration
Statement, including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto, (ii) the omission or alleged
omission to state therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading, or (iii) any violation
or alleged violation by the Company of the Securities Act, the Exchange Act, any
state securities law or any rule or regulation promulgated under the Securities
Act, the Exchange Act or any state securities law; and the Company will pay to
each such Investor, underwriter or controlling person, as incurred, any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided, however, that the
indemnity agreement contained in this Section 5.5(a) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability, or action if such
settlement is effected without the consent of the Company (which consent shall
not be unreasonably withheld or delayed), nor shall the Company be liable to any
Investor, underwriter or controlling person for any such loss, claim, damage,
liability, or action to the extent that it arises out of or is based upon a
Violation which occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration by
any such Investor, underwriter or controlling person.

     

    (b) To the
extent permitted by law, each selling Investor will indemnify and hold harmless
the Company, each of its directors, each of its officers who has signed the
Registration Statement, each person, if any, who controls the Company within the
meaning of the Securities Act, against any losses, claims, damages, or
liabilities (joint or several) to which any of the foregoing persons may become
subject, under the Securities Act, the Exchange Act or other federal or state
law, insofar as such losses, claims, damages, or liabilities (or actions in
respect thereto) arise out of or are based upon any Violation, in each case to
the extent (and only to the extent) that such violation occurs in reliance upon
and in conformity with written information furnished by such Investor expressly
for use in connection with such registration; and each such Investor will pay,
as incurred, any legal or other expenses reasonably incurred by any person
indemnified pursuant to this Section 5.5(b), in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided, however, that the
indemnity agreement contained in this Section 5.5(b) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Investor (which consent shall
not be unreasonably withheld or delayed); provided further that in no
event shall any indemnity under this Section 5.5(b) exceed the net proceeds from
the offering received by such Investor.

     

    (c) Promptly
after receipt by an indemnified party under this Section 5.5 of notice of the
commencement of any action (including any governmental action), such indemnified
party will, if a claim in respect thereof is to be made against any indemnifying
party under this Section 5.5, deliver to the indemnifying party a written notice
of the commencement thereof and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume the defense
thereof with counsel mutually satisfactory to the parties; provided, however, that an
indemnified party (together with all other indemnified parties which may be
represented without conflict by one counsel) shall have the right to retain one
separate counsel, with the reasonable fees and expenses to be paid by the
indemnifying party, if representation of such indemnified party by the counsel
retained by the indemnifying party would be inappropriate due to actual or
potential differing interests between such indemnified party and any other party
represented by such counsel in such proceeding. The failure to deliver written
notice to the indemnifying party within a reasonable time after receipt of
notice of the commencement of any such action, if prejudicial to its ability to
defend such action, shall relieve such indemnifying party of any liability to
the indemnified party under this Section 5.5, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section
5.5.

     

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

     

    (d) If the
indemnification provided for in this Section 5.5 is held by a court of competent
jurisdiction to be unavailable to an indemnified party with respect to any loss,
liability, claim, damage or expense referred to therein, then the indemnifying
party, in lieu of indemnifying such indemnified party hereunder, shall
contribute to the amount paid or payable by such indemnified party as a result
of such loss, liability, claim, damage, or expense in such proportion as is
appropriate to reflect the relative fault of the indemnifying party on the one
hand and of the indemnified party on the other in connection with the statements
or omissions that resulted in such loss, liability, claim, damage or expense as
well as any other relevant equitable considerations; provided that in no event
shall any contribution by an Investor under this Section 5.5(d) exceed the net
proceeds from the offering received by such Investor.  The relative
fault of the indemnifying party and of the indemnified party shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact relates to
information supplied by the indemnifying party or by the indemnified party and
the parties’ relative intent, knowledge, access to information, and opportunity
to correct or prevent such statement or omission.

     

    (e) Notwithstanding
the foregoing, to the extent that the provisions on indemnification and
contribution contained in the underwriting agreement entered into in connection
with the underwritten public offering are in conflict with the foregoing
provisions, the provisions in the underwriting agreement shall
control.

     

    (f) The
obligations of the Company and Investors under this Section 5.5 shall survive
the completion of any offering of Registrable Shares in a registration statement
and the termination of this Agreement.

     

    5.6 Reports Under Exchange
Act.  With a view to making available to the Investors the
benefits of Rule 144 promulgated under the Securities Act and any other rule or
regulation of the SEC that may at any time permit an Investor to sell Shares of
the Company to the public without registration, the Company agrees
to:

     

    (a) Make and
keep public information available, as those terms are used in SEC Rule 144, at
all times;

     

    (b) File with
the SEC in a timely manner all reports and other documents required of the
Company under the Securities Act and the Exchange Act;

     

    (c) Furnish
to any Investor, so long as the Investor owns any Registrable Shares, forthwith
on request, (i) a written statement by the Company that it has complied with the
reporting requirements of SEC Rule 144, the Securities Act and the Exchange Act,
(ii) a copy of the most recent annual or quarterly report of the Company and
such other reports and documents so filed by the Company, and (iii) such other
information as may be reasonably requested in availing any Investor of any rule
or regulation of the SEC that permits the selling of any such securities without
registration; and

     

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

     

    (iv) Undertake
any additional actions reasonably necessary to maintain the availability of the
use of Rule 144.

     

    6. CONDITIONS
TO INVESTOR OBLIGATIONS AT CLOSING.

     

    The
obligations of the Investor to purchase the Notes at the Closing are subject to
the fulfillment on or prior to the Closing of each of the following
conditions:

     

    6.1 Representations and
Warranties.  The representations and warranties of the Company
contained in Section 2 shall be true in all material respects on and as of the
Closing Date with the same effect as though such representations and warranties
had been made on and as of the Closing Date, except that any representations and
warranties stated as being true and correct as of a date other than the date
hereof shall be true and correct as of such other date.

     

    6.2 Performance.  The
Company shall have performed and complied with all agreements, obligations and
conditions contained in this Agreement that are required to be performed or
complied with by it on or before the Closing.

     

    6.3 Qualifications.  All
authorizations, approvals, or permits, if any, of any governmental authority or
regulatory body of the United States or of any state of the United States that
are required in connection with the lawful issuance and sale of the Shares to
the Investors pursuant to this Agreement shall have been duly obtained and shall
be effective on and as of the Closing.

     

    6.4 Proceedings and
Documents.  All corporate and other proceedings undertaken in
connection with the transactions contemplated at the Closing and all documents
incident thereto shall be reasonably satisfactory in form and substance to each
Investor, and they shall have received all such counterpart original and
certified or other copies of such documents as they may reasonably
request.

     

    6.5 Absence of
Litigation.  No proceeding challenging this Agreement or the
transactions contemplated hereby or thereby, or seeking to prohibit, alter,
prevent or delay the Closing, shall have been instituted against the Company
before any court, arbitrator or governmental body, agency or official and shall
be pending.

     

    6.6 Registration
Statement. With respect to the Final Closing, the Registration Statement
shall have been declared effective by the SEC.

     

    6.7 Legal
Prohibition.  The purchase of the Notes by the Investors shall
not be prohibited by any law or governmental order or regulation.

     

    6.8 Investor Relations.
The Company shall have retained an investor relations firm to perform investor
relations services, reasonably acceptable to the Company.

     

    6.9 DWAC. The Company
shall take all action to add its shares of common stock to the list of DWAC
eligible issues.

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

     

    7. CONDITIONS
TO THE COMPANY’S OBLIGATIONS AT CLOSING.

     

    The
obligations of the Company under Section 1 of this Agreement are subject to the
fulfillment on or before the Closing of each of the following
conditions:

     

    7.1 Representations and
Warranties.  The representations and warranties of each
Investor contained in Section 3 shall be true in all respects on and as of the
Closing Date with the same effect as though such representations and warranties
had been made on and as of the Closing Date, except that any representations and
warranties stated as being true and correct as of a date other than the date
hereof shall be true and correct as of such other date.

     

    7.2 Performance.  Each
Investor shall have performed and complied with all agreements, obligations and
conditions contained in this Agreement that are required to be performed or
complied with by it on or before the Closing.

     

    7.3 Qualifications.  All
authorizations, approvals, or permits, if any, of any governmental authority or
regulatory body of the United States or of any state of the United States that
are required in connection with the lawful issuance and sale of the Shares to
the Investors pursuant to this Agreement shall have been duly obtained and shall
be effective on and as of the Closing.

     

    7.4 Proceedings and
Documents.  All corporate and other proceedings undertaken in
connection with the transactions contemplated by this Agreement and all
documents incident thereto shall be reasonably satisfactory in form and
substance to the Company and its counsel, and they shall have received all such
counterpart original and certified or other copies of such documents as they may
reasonably request.

     

    8. MISCELLANEOUS.

     

    8.1 Survival of
Warranties.  The warranties, representations, agreements,
covenants and undertakings of the Company or the Investor contained in or made
pursuant to this Agreement shall survive the execution and delivery of this
Agreement and the Closing and shall in no way be affected by any investigation
of the subject matter thereof made by or on behalf of the Investors or the
Company.

     

    8.2 Incorporation by
Reference.  All Exhibits and Schedules appended to this
Agreement are herein incorporated by reference and made a part
hereof.

     

    8.3 Successor and
Assignees.  All terms, covenants, agreements, representations,
warranties and undertakings in this Agreement made by and on behalf of any of
the parties hereto shall bind and inure to the benefit of the respective
successors and assigns of the parties hereto (including transferees of any
Shares) whether so expressed or not, subject to Section 5.7.

     

    8.4 Amendments and
Waivers.  Neither this Agreement nor any provision hereof shall
be waived, modified, changed, discharged, terminated, revoked or canceled except
by an instrument in writing signed by the party against whom any change,
discharge or termination is sought.  Failure of either party to
exercise any right or remedy under this Agreement or any other agreement between
the Company and the Investors, or otherwise, or delay by the Company or the
Investors in exercising such right or remedy, will not operate as a waiver
thereof, nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power or
privilege.  The rights and remedies herein provided shall be
cumulative and not exclusive of any rights or remedies provided by
law.

     

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

     

    8.5 Governing
Law.  This Agreement shall be deemed a contract made under the
laws of the State of New York, without giving effect to the conflicts of law
principles thereof.

     

    8.6 Notices.  All
notices, requests, consents, demands, notice or other communication required or
permitted under this Agreement shall be in writing and shall be deemed duly
given and received when delivered personally or transmitted by facsimile, or one
business day after being deposited for next-day delivery with a nationally
recognized overnight delivery service, or three days after being deposited as
first class mail with the United States Postal Services, all charges or postage
prepaid, and properly addressed:

     

    to the
Company at:

     

    Tao
Minerals, Ltd.

    Officina
624, Empresarial Mall Ventura, Cra.32#1B

    Sur 51,
Medellin, Columbia

    Tel:  (___)
_____________

    Fax:  (___)
______________

    Attention:  Chief
Executive Officer

     

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

     

    Sichenzia
Ross Friedman Ference LLP

    61
Broadway, 32nd
Floor

    New York,
New York 10006

    Fax:
(212) 930-9725

    Attention:
Michael Ference

     

    or to the
Investors at the address set forth opposite the Investor’s name on Exhibit A
hereto

     

    or such
other address as may be furnished in writing by a party hereto.

     

    8.7 Counterparts. This
Agreement may be executed in counterparts, all of which together shall
constitute one and the same instrument.

     

    8.8 Effect of
Headings.  The section and paragraph headings herein are
included for convenience only and shall not affect the construction
hereof.

     

    8.9 Entire
Agreement.  This Agreement and the Exhibits and Schedules
hereto and thereto constitute the entire agreement among the Company and the
Investors with respect to the subject matter hereof.  There are no
representations, warranties, covenants or undertakings with respect to the
subject matter hereof other than those expressly set forth
herein.  This Agreement supersedes all prior agreements between the
parties with respect to the Shares purchased hereunder and the subject matter
hereof.

     

    8.10 Severability.  If
any provision of this Agreement is held by a court of competent jurisdiction to
be unenforceable under applicable law, such provision shall be replaced with a
provision that accomplishes, to the extent possible, the original business
purpose of such provision in a valid and enforceable manner, and the balance of
the Agreement shall be interpreted as if such provision were so modified and
shall be enforceable in accordance with its terms.

     

    8.11 Interpretation.  This
Agreement shall be construed according to its fair language.  The rule
of construction to the effect that any ambiguities are to be resolved against
the drafting party shall not be employed in the interpretation of this
Agreement.

     

    8.12 No Strict Construction.  The
language used in this Agreement will be deemed to be the language chosen by the
parties to express their mutual intent, and no rules of strict construction will
be applied against any party.

     

    [Signature
page follows]

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

    

    IN
WITNESS WHEREOF, this Agreement has been executed as of the date first above
written, by the duly authorized representatives of the parties
hereto.

     

     

    
      
        	 	TAO MINERALS,
    LTD.	 
	 	 	 	 
	
                 

              	
                By:
      

              	/s/ James Sikora	 
	 	 	Name:
      James Sikora	 
	 	 	Title:
      President	 
	 	 	 	 

      

    

    
      
        	 	OUTBOARD INVESTMENTS
      LTD.	 
	 	 	 	 
	
                 

              	
                By:
      

              	/s/ Hugh
      G. O’Neil 	 
	 	 	Name:
      Hugh G. O’Neill	 
	 	 	Title:
      Director        	 
	 	 	 	 

      

    

     

     

                                            

    
      
         

      

      
        16

        
          

        

      

      
         

      

    

    Schedule
A

    

    COMPANY
SCHEDULE OF EXCEPTIONS

    

    None

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    
      
         

      

      
        17

        
          

        

      

      
         

    

     

    Exhibit
A

    

    

    
      	
               

              Investor
      Name and

               Notice Address

            	
              Cash
      Investment Amount

            
	
              Outboard
      Investments, Ltd.

              BCM
      Cape Building

              Leeward
      Highway Providenciales

              Turks
      and Caicos, BWI

               

               

               

            	
              $1,000,000

            

    

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    18Unassociated Document

    Dated:  April
4, 2008

     

    NEITHER
THIS NOTE NOR THE SECURITIES INTO WHICH THIS NOTE IS CONVERTIBLE HAVE BEEN
REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”),
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS.

    
    

     

    
      	 No.
    0001	
                $125,000

            

    

     

     

     

    TAO
MINERALS, LTD.

     

    Convertible
Note

     

    Due
Date: as set forth herein

     

    This Convertible Note (the “Note”) is issued by
Tao Minerals, Ltd.., a Nevada corporation
(the “Obligor”), to
Outboard Investments Ltd. (the “Holder”), pursuant to
that certain Securities Purchase Agreement (the “Securities Purchase
Agreement”) dated April 4, 2008.  Capitalized terms not
otherwise defined herein shall have the meaning ascribed thereto in the
Securities Purchase Agreement.

     

    FOR VALUE RECEIVED, the
Obligor hereby promises to pay to the Holder or its successors and assigns the
principal sum of One Hundred and Twenty Five Thousand  ($125,000)
together with accrued but unpaid interest on April 4, 2011 (the “Maturity Date”), in
accordance with the following terms:

     

    Interest.  Interest
shall accrue on the outstanding principal balance hereof at an annual rate equal
to ten percent (10%).  Interest shall be calculated on the basis of a
360-day year and the actual number of days elapsed, to the extent permitted by
applicable law.  Interest hereunder will be paid quarterly in arrears
to the Holder or its assignee (as defined in Section 5) in whose name this
Note is registered on the records of the Obligor regarding registration and
transfers of Notes (the “Note
Register”).

     

    Right of
Redemption.  The Obligor at its option shall have the right,
with three (3) business days advance written notice (the “Redemption Notice”),
to redeem a portion or all amounts outstanding under this Note prior to the
Maturity Date.  The Obligor shall deliver to the Holder the Redemption
Amount on the third (3rd)
business day after the Redemption Notice.

     

    Notwithstanding
the foregoing in the event that the Obligor has elected to redeem a portion of
the outstanding principal amount and accrued interest under this Note the Holder
shall be permitted to convert all or any portion of this Note during such three
business day period.

     

     

    
      
         

      

      
        1

        
          

        

      

      
         

      

    

     

    This Note is subject to the following
additional provisions:

     

    Section
1.                                This
Note is exchangeable for an equal aggregate principal amount of Notes of
different authorized denominations, as requested by the Holder surrendering the
same. No service charge will be made for such registration of transfer or
exchange.

     

    Section
2.                                Events of
Default.

     

    (a)           An
“Event of
Default”, wherever used herein, means any one of the following events
(whatever the reason and whether it shall be voluntary or involuntary or
effected by operation of law or pursuant to any judgment, decree or order of any
court, or any order, rule or regulation of any administrative or governmental
body):

     

    (i)           Any
default in the payment of the principal of, interest on or other charges in
respect of this Note, free of any claim of subordination, as and when the same
shall become due and payable (whether on a Conversion Date or the Maturity Date
or by acceleration or otherwise);

     

    (ii)           The
Obligor shall fail to observe or perform any other covenant, agreement or
warranty contained in, or otherwise commit any breach or default of any
provision of this Note (except as may be covered by Section 2(a)(i) hereof) or
any Transaction Document (as defined in Section 5) which is not cured
with in the time prescribed, including without limitation Obligor’s obligation
to timely deliver shares of Common Stock upon conversion of this Note and
exercise of the Warrant;

     

    (iii)           The
Obligor or any subsidiary of the Obligor shall commence, or there shall be
commenced against the Obligor or any subsidiary of the Obligor under any
applicable bankruptcy or insolvency laws as now or hereafter in effect or any
successor thereto, or the Obligor or any subsidiary of the Obligor commences any
other proceeding under any reorganization, arrangement, adjustment of debt,
relief of debtors, dissolution, insolvency or liquidation or similar law of any
jurisdiction whether now or hereafter in effect relating to the Obligor or any
subsidiary of the Obligor or there is commenced against the Obligor or any
subsidiary of the Obligor any such bankruptcy, insolvency or other proceeding
which remains undismissed for a period of 61 days; or the Obligor or any
subsidiary of the Obligor is adjudicated insolvent or bankrupt; or any order of
relief or other order approving any such case or proceeding is entered; or the
Obligor or any subsidiary of the Obligor suffers any appointment of any
custodian, private or court appointed receiver or the like for it or any
substantial part of its property which continues undischarged or unstayed for a
period of sixty one (61) days; or the Obligor or any subsidiary of the Obligor
makes a general assignment for the benefit of creditors; or the Obligor or any
subsidiary of the Obligor shall fail to pay, or shall state that it is unable to
pay, or shall be unable to pay, its debts generally as they become due; or the
Obligor or any subsidiary of the Obligor shall call a meeting of its creditors
with a view to arranging a composition, adjustment or restructuring of its
debts; or the Obligor or any subsidiary of the Obligor shall by any act or
failure to act expressly indicate its consent to, approval of or acquiescence in
any of the foregoing; or any corporate or other action is taken by the Obligor
or any subsidiary of the Obligor for the purpose of effecting any of the
foregoing;

     

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

     

    (iv)           The
Obligor or any subsidiary of the Obligor shall default in any of its obligations
under any other Note or any mortgage, credit agreement or other facility,
indenture agreement, factoring agreement or other instrument under which there
may be issued, or by which there may be secured or evidenced any indebtedness
for borrowed money or money due under any long term leasing or factoring
arrangement of the Obligor or any subsidiary of the Obligor in an amount
exceeding $100,000, whether such indebtedness now exists or shall hereafter be
created and such default shall result in such indebtedness becoming or being
declared due and payable prior to the date on which it would otherwise become
due and payable;

     

    (v)           The
Obligor or any subsidiary of the Obligor shall be a party to any Change of
Control Transaction (as defined in Section 5);

     

    (vi)           The
Obligor shall fail for any reason to deliver Common Stock certificates to a
Holder prior to the fifth (5th)
Trading Day after a Conversion Date or the Obligor shall provide notice to the
Holder, including by way of public announcement, at any time, of its intention
not to comply with requests for conversions of this Note in accordance with the
terms hereof; and

     

    (b)           During
the time that any portion of this Note is outstanding, if any Event of Default
has occurred and shall continue for a period of ten (10) days after a notice of
such default has been delivered by the Holder to the Obligor (the “Notice Period”), the
full principal amount of this Note, together with interest and other amounts
owing in respect thereof, to the date of acceleration shall become at the
Holder's election, immediately due and payable in cash, provided however, the Holder
may request (but shall have no obligation to request) payment of such amounts in
Common Stock of the Obligor.  In addition to any other remedies, the
Holder shall have the right (but not the obligation) to convert this Note at any
time after (x) an Event of Default or (y) the Maturity Date at the Conversion
Price then in-effect.  The Holder need not provide and the Obligor
hereby waives any presentment, demand, protest or other notice of any kind, and
the Holder may immediately and without expiration of any grace period (other
than the Notice Period) enforce any and all of its rights and remedies hereunder
and all other remedies available to it under applicable law. Such declaration
may be rescinded and annulled by Holder at any time prior to payment hereunder.
No such rescission or annulment shall affect any subsequent Event of Default or
impair any right consequent thereon

     

    Section
3.                                Conversion.

     

    (a)           Conversion at Option of
Holder.

     

    (i)           This
Note shall be convertible into shares of Common Stock at the option of the
Holder, in whole or in part at any time and from time to time, after the
Original Issue Date (as defined in Section 5) (subject to the
limitations on conversion set forth in Section 3(b) hereof). The
number of shares of Common Stock issuable upon a conversion hereunder equals the
quotient obtained by dividing (x) the outstanding amount of this Note to be
converted by (y) the Conversion Price (as defined in Section
3(b)(i)).  The Obligor shall deliver Common Stock certificates
to the Holder prior to the Fifth (5th)
Trading Day after a Conversion Date.

     

    (ii)           Notwithstanding
anything to the contrary contained herein, if on any Conversion
Date:  (1) the number of shares of Common Stock at the time
authorized, unissued and unreserved for all purposes, or held as treasury stock,
is insufficient to pay principal and interest hereunder in shares of Common
Stock; (2) the Common Stock is not listed or quoted for trading on the OTC or on
a Subsequent Market; or (3) the Obligor has failed to timely satisfy its
conversion, and the Obligor is unable to remedy any of the foregoing within 20
business days,  then, at the option of the Holder, the Obligor, in
lieu of delivering shares of Common Stock pursuant to Section 3(a)(i), shall
deliver, within three (3) Trading Days of each applicable Conversion Date, an
amount in cash equal to the product of the outstanding principal amount to be
converted plus any interest due therein divided by the Conversion Price, chosen
by the Holder, and multiplied by the  average closing price of the
stock from date of the conversion notice till the date that such cash payment is
made.

     

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

     

    Further,
if the Obligor shall not have delivered any cash due in respect of conversion of
this Note or as payment of interest thereon by the fifth (5th)
Trading Day after the Conversion Date, the Holder may, by notice to the Obligor,
require the Obligor to issue shares of Common Stock pursuant to Section 3(c), except that for
such purpose the Conversion Price applicable thereto shall be the lesser of the
Conversion Price on the Conversion Date and the Conversion Price on the date of
such Holder demand. Any such shares will be subject to the provisions of this
Section.

     

    (iii)           The
Holder shall effect conversions by delivering to the Obligor a completed notice
in the form attached hereto as Exhibit A (a “Conversion
Notice”).  The date on which a Conversion Notice is delivered
is the “Conversion
Date.” Unless the Holder is converting the entire principal amount
outstanding under this Note, the Holder is not required to physically surrender
this Note to the Obligor in order to effect conversions.  Conversions
hereunder shall have the effect of lowering the outstanding principal amount of
this Note plus all accrued and unpaid interest thereon in an amount equal to the
applicable conversion. The Holder and the Obligor shall maintain records showing
the principal amount converted and the date of such conversions. In the event of
any dispute or discrepancy, the records of the Holder shall be controlling and
determinative in the absence of manifest error.

     

    (b)           Certain Conversion
Restrictions.

     

    (i)           The
Holder may not convert this Note or receive shares of Common Stock as payment of
interest hereunder to the extent such conversion or receipt of such interest
payment would result in the Holder, together with any affiliate thereof,
beneficially owning (as determined in accordance with Section 13(d) of the
Exchange Act and the rules promulgated thereunder) in excess of 4.9% of the then
issued and outstanding shares of Common Stock, including shares issuable upon
conversion of, and payment of interest on, this Debenture held by such Holder
after application of this Section.  Since the Holder will not be
obligated to report to the Obligor the number of shares of Common Stock it may
hold at the time of a conversion hereunder, unless the conversion at issue would
result in the issuance of shares of Common Stock in excess of 4.9% of the then
outstanding shares of Common Stock without regard to any other shares which may
be beneficially owned by the Holder or an affiliate thereof, the Holder shall
have the authority and obligation to determine whether the restriction contained
in this Section will limit any particular conversion hereunder and to the extent
that the Holder determines that the limitation contained in this Section
applies, the determination of which portion of the principal amount of this
Debenture is convertible shall be the responsibility and obligation of the
Holder.  If the Holder has delivered a Conversion Notice for a
principal amount of this Debenture that, without regard to any other shares that
the Holder or its affiliates may beneficially own, would result in the issuance
in excess of the permitted amount hereunder, the Obligor shall notify the Holder
of this fact and shall honor the conversion for the maximum principal amount
permitted to be converted on such Conversion Date in accordance with the periods
described in Section
3(a)(i) and, at the option of the Holder, either retain any principal
amount tendered for conversion in excess of the permitted amount hereunder for
future conversions or return such excess principal amount to the Holder by
issuing to the Holder a new debenture representing such excess principal
amount.  The provisions of this Section may be waived by a Holder (but
only as to itself and not to any other Holder) upon not less than 65 days prior
notice to the Obligor. Other Holders shall be unaffected by any such
waiver.

     

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

     

    (c)           Conversion Price and
Adjustments to Conversion Price.

     

    (i)           The
Holder shall be entitled to convert, at its sole option, at any time a portion
or all amounts of principal and interest due and outstanding under this Note
into shares of the Obligor’s Common Stock at a price equal to fifty (50%)
percent of the of the average of the volume weighted average price of the shares
of the Obligor’s common Stock during the five trading days immediately preceding
the Conversion Date as quoted by Bloomberg, LP (the “Conversion
Price”).  The Conversion Price may be adjusted pursuant to the
other terms of this Note.

     

     (ii)           If
the Obligor, at any time while this Note is outstanding, shall (a) pay a
stock dividend or otherwise make a distribution or distributions on shares of
its Common Stock or any other equity or equity equivalent securities payable in
shares of Common Stock, (b) subdivide outstanding shares of Common Stock into a
larger number of shares, (c) combine (including by way of reverse stock split)
outstanding shares of Common Stock into a smaller number of shares, or (d) issue
by reclassification of shares of the Common Stock any shares of capital stock of
the Obligor, then the Conversion Price shall be multiplied by a fraction of
which the numerator shall be the number of shares of Common Stock (excluding
treasury shares, if any) outstanding before such event and of which the
denominator shall be the number of shares of Common Stock outstanding after such
event. Any adjustment made pursuant to this Section shall become effective
immediately after the record date for the determination of stockholders entitled
to receive such dividend or distribution and shall become effective immediately
after the effective date in the case of a subdivision, combination or
re-classification.

     

    (iii)           If
the Obligor, at any time while this Note is outstanding, shall issue rights,
options or warrants to all holders of Common Stock (and not to the Holder)
entitling them to subscribe for or purchase shares of Common Stock at a price
per share less than the Conversion Price, then the Conversion Price shall be
multiplied by a fraction, of which the denominator shall be the number of shares
of the Common Stock (excluding treasury shares, if any) outstanding on the date
of issuance of such rights or warrants (plus the number of additional shares of
Common Stock offered for subscription or purchase), and of which the numerator
shall be the number of shares of the Common Stock (excluding treasury shares, if
any) outstanding on the date of issuance of such rights or warrants, plus the
number of shares which the aggregate offering price of the total number of
shares so offered would purchase at the Conversion Price. Such adjustment shall
be made whenever such rights or warrants are issued, and shall become effective
immediately after the record date for the determination of stockholders entitled
to receive such rights, options or warrants. However, upon the expiration of any
such right, option or warrant to purchase shares of the Common Stock the
issuance of which resulted in an adjustment in the Conversion Price pursuant to
this Section, if any such right, option or warrant shall expire and shall not
have been exercised, the Conversion Price shall immediately upon such expiration
be recomputed and effective immediately upon such expiration be increased to the
price which it would have been (but reflecting any other adjustments in the
Conversion Price made pursuant to the provisions of this Section after the
issuance of such rights or warrants) had the adjustment of the Conversion Price
made upon the issuance of such rights, options or warrants been made on the
basis of offering for subscription or purchase only that number of shares of the
Common Stock actually purchased upon the exercise of such rights, options or
warrants actually exercised.

     

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

     

    (iv)           Except
in the case of an Exempt Issuance (as such term is defined in the Securities
Purchase Agreement), if the Obligor or any subsidiary thereof, as applicable, at
any time while this Note is outstanding, shall issue shares of Common Stock or
rights, warrants, options or other securities or debt that are convertible into
or exchangeable for shares of Common Stock (“Common Stock
Equivalents”) entitling any Person to acquire shares of Common Stock, at
a price per share less than the Conversion Price (if the holder of the Common
Stock or Common Stock Equivalent so issued shall at any time, whether by
operation of purchase price adjustments, reset provisions, floating conversion,
exercise or exchange prices or otherwise, or due to warrants, options or rights
per share which is issued in connection with such issuance, be entitled to
receive shares of Common Stock at a price per share which is less than the
Conversion Price, such issuance shall be deemed to have occurred for less than
the Conversion Price), then, at the sole option of the Holder, the Conversion
Price shall be reduced to the price (calculated to the nearest one hundredth of
a cent) determined by multiplying the Conversion Price in effect immediately
prior thereto by a fraction, the numerator of which shall be the sum of (i) the
number of shares of Common Stock outstanding immediately prior to such issuance,
and (ii) the number of shares of Common Stock which the aggregate consideration
received (or to be received, assuming exercise or conversion in full of such
rights, warrants and convertible securities) for the issuance of such additional
shares of Common Stock would purchase at the Conversion Price, and the
denominator of which shall be the sum of the number of shares of Common Stock
outstanding immediately after the issuance of such additional
shares.  Such adjustment shall be made successively whenever such an
issuance is made.  The Obligor shall notify the Holder in writing, no
later than three (3) business days following the issuance of any Common Stock or
Common Stock Equivalent subject to this Section, indicating therein the
applicable issuance price, or of applicable reset price, exchange price,
conversion price and other pricing terms. No adjustment under this Section shall
be made as a result of issuances and exercises of options to purchase shares of
Common Stock issued for compensatory purposes pursuant to any of the Obligor's
stock option or stock purchase plans.

     

    (v)           If
the Obligor, at any time while this Note is outstanding, shall distribute to all
holders of Common Stock (and not to the Holder) evidences of its indebtedness or
assets or rights or warrants to subscribe for or purchase any security, then in
each such case the Conversion Price at which this Note shall thereafter be
convertible shall be determined by multiplying the Conversion Price in effect
immediately prior to the record date fixed for determination of stockholders
entitled to receive such distribution by a fraction of which the denominator
shall be the Closing Bid Price determined as of the record date mentioned above,
and of which the numerator shall be such Closing Bid Price on such record date
less the then fair market value at such record date of the portion of such
assets or evidence of indebtedness so distributed applicable to one outstanding
share of the Common Stock as determined by the Board of Directors in good faith.
In either case the adjustments shall be described in a statement provided to the
Holder of the portion of assets or evidences of indebtedness so distributed or
such subscription rights applicable to one share of Common Stock. Such
adjustment shall be made whenever any such distribution is made and shall become
effective immediately after the record date mentioned above.

     

     

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

     

    (vi)           In
case of any reclassification of the Common Stock or any compulsory share
exchange pursuant to which the Common Stock is converted into other securities
of the Company, cash or property, the Holder shall have the right thereafter to,
at its option,  (A) convert the then outstanding principal amount,
together with all accrued but unpaid interest and any other amounts then owing
hereunder in respect of this Note into the shares of stock and other securities,
cash and property receivable upon or deemed to be held by holders of the Common
Stock following such reclassification or share exchange, and the Holder of this
Note shall be entitled upon such event to receive such amount of securities,
cash or property as the shares of the Common Stock of the Obligor into which the
then outstanding principal amount, together with all accrued but unpaid interest
and any other amounts then owing hereunder in respect of this Note could have
been converted immediately prior to such reclassification or share exchange
would have been entitled, or (B) require the Obligor to prepay the outstanding
principal amount of this Note, plus all interest and other amounts due and
payable thereon. The entire prepayment price shall be paid in
cash.  This provision shall similarly apply to successive
reclassifications or share exchanges.

     

    (vii)           The
Obligor shall at all times reserve and keep available out of its authorized
Common Stock the full number of shares of Common Stock issuable upon conversion
of all outstanding amounts under this Note; and within three (3) Business Days
following the receipt by the Obligor of a Holder's notice that such minimum
number of Underlying Shares is not so reserved, the Obligor shall promptly
reserve a sufficient number of shares of Common Stock to comply with such
requirement.

     

    (viii)                      All
calculations under this Section 3 shall be rounded up
to the nearest $0.001 or whole share.

     

    (ix)           Whenever
the Conversion Price is adjusted pursuant to Section 3 hereof, the Obligor
shall promptly mail to the Holder a notice setting forth the Conversion Price
after such adjustment and setting forth a brief statement of the facts requiring
such adjustment.

     

    (x)           If
(A) the Obligor shall declare a dividend (or any other distribution) on the
Common Stock; (B) the Obligor shall declare a special nonrecurring cash dividend
on or a redemption of the Common Stock; (C) the Obligor shall authorize the
granting to all holders of the Common Stock rights or warrants to subscribe for
or purchase any shares of capital stock of any class or of any rights; (D) the
approval of any stockholders of the Obligor shall be required in connection with
any reclassification of the Common Stock, any consolidation or merger to which
the Obligor is a party, any sale or transfer of all or substantially all of the
assets of the Obligor, of any compulsory share exchange whereby the Common Stock
is converted into other securities, cash or property; or (E) the Obligor shall
authorize the voluntary or involuntary dissolution, liquidation or winding up of
the affairs of the Obligor; then, in each case, the Obligor shall cause to be
filed at each office or agency maintained for the purpose of conversion of this
Note, and shall cause to be mailed to the Holder at its last address as it shall
appear upon the stock books of the Obligor, at least twenty (20) calendar days
prior to the applicable record or effective date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the purpose of such
dividend, distribution, redemption, rights or warrants, or if a record is not to
be taken, the date as of which the holders of the Common Stock of record to be
entitled to such dividend, distributions, redemption, rights or warrants are to
be determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of the Common Stock
of record shall be entitled to exchange their shares of the Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer or share exchange, provided, that the
failure to mail such notice or any defect therein or in the mailing thereof
shall not affect the validity of the corporate action required to be specified
in such notice.  The Holder is entitled to convert this Note during
the 20-day calendar period commencing the date of such notice to the effective
date of the event triggering such notice.

     

     

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

     

    (xi)           In
case of any (1) merger or consolidation of the Obligor or any subsidiary of the
Obligor with or into another Person, or (2) sale by the Obligor or any
subsidiary of the Obligor of more than one-half of the assets of the Obligor in
one or a series of related transactions, a Holder shall have the right to
exercise any rights under Section 2(b), if Obligor
fails, at the option of the Holder, (A) to permit the Holder to convert the
aggregate amount of this Note then outstanding into the shares of stock and
other securities, cash and property receivable upon or deemed to be held by
holders of Common Stock following such merger, consolidation or sale, and such
Holder shall not be entitled upon such event or series of related events to
receive such amount of securities, cash and property as the shares of Common
Stock into which such aggregate principal amount of this Note could have been
converted immediately prior to such merger, consolidation or sales would have
been entitled, or (B) in the case of a merger or consolidation, to require the
surviving entity to issue to the Holder a convertible Note with a principal
amount equal to the aggregate principal amount of this Note then held by such
Holder, plus all accrued and unpaid interest and other amounts owing thereon,
which such newly issued convertible Note shall have terms identical (including
with respect to conversion) to the terms of this Note, and shall be entitled to
all of the rights and privileges of the Holder of this Note set forth herein and
the agreements pursuant to which this Notes were issued.  In the case
of clause (C), the conversion price applicable for the newly issued shares of
convertible preferred stock or convertible Notes shall be based upon the amount
of securities, cash and property that each share of Common Stock would receive
in such transaction and the Conversion Price in effect immediately prior to the
effectiveness or closing date for such transaction. The terms of any such
merger, sale or consolidation shall include such terms so as to continue to give
the Holder the right to receive the securities, cash and property set forth in
this Section upon any conversion or redemption following such event. This
provision shall similarly apply to successive such events.

     

    (xii)           Notwithstanding
anything to the contrary herein, no adjustment shall be made hereunder in
connection with an Exempt Adjustment.

     

    (d)           Other
Provisions.

     

    (i)           The
Obligor covenants that it will at all times reserve and keep available out of
its authorized and unissued shares of Common Stock solely for the purpose of
issuance upon conversion of this Note and payment of interest on this Note, each
as herein provided, free from preemptive rights or any other actual contingent
purchase rights of persons other than the Holder, not less than such number of
shares of the Common Stock as shall (subject to any additional requirements of
the Obligor as to reservation of such shares set forth in this Note) be issuable
(taking into account the adjustments and restrictions of Sections 2(b) and 3(c)) upon
the conversion of the outstanding principal amount of this Note and payment of
interest hereunder. The Obligor covenants that all shares of Common Stock that
shall be so issuable shall, upon issue, be duly and validly authorized, issued
and fully paid.

     

     

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

     

    (ii)           The
issuance of certificates for shares of the Common Stock on conversion of this
Note shall be made without charge to the Holder thereof for any documentary
stamp or similar taxes that may be payable in respect of the issue or delivery
of such certificate, provided that the Obligor shall not be required to pay any
tax that may be payable in respect of any transfer involved in the issuance and
delivery of any such certificate upon conversion in a name other than that of
the Holder of such Note so converted and the Obligor shall not be required to
issue or deliver such certificates unless or until the person or persons
requesting the issuance thereof shall have paid to the Obligor the amount of
such tax or shall have established to the satisfaction of the Obligor that such
tax has been paid.

     

    (iii)           Nothing
herein shall limit a Holder's right to pursue actual damages or declare an Event
of Default pursuant to Section
2 herein for the Obligor 's failure to deliver certificates representing
shares of Common Stock upon conversion within the period specified herein and
such Holder shall have the right to pursue all remedies available to it at law
or in equity including, without limitation, a decree of specific performance
and/or injunctive relief, in each case without the need to post a bond or
provide other security. The exercise of any such rights shall not prohibit the
Holder from seeking to enforce damages pursuant to any other Section hereof or
under applicable law.

     

    Section
4.                                Notices.                      Any
notices, consents, waivers or other communications required or permitted to be
given under the terms hereof must be in writing and will be deemed to have been
delivered:  (i) upon receipt, when delivered personally; (ii) upon
receipt, when sent by facsimile (provided confirmation of transmission is
mechanically or electronically generated and kept on file by the sending party);
or (iii) one (1) trading day after deposit with a nationally recognized
overnight delivery service, in each case properly addressed to the party to
receive the same.  The addresses and facsimile numbers for such
communications shall be:

    

    

    
      	
              If
      to the Company, to:

            	
              Tao
      Minerals, Ltd.

            
	 
      	
              Officina
      624, Empresarial Mall Ventura, Cra.32#1B

            
	 
      	
              Sur
      51, Medellin, Columbia

            
	 
      	
              Attention:      James
      A. Sikora,  Chief Executive Officer

            
	 
      	
              Telephone:                                ____________________

            
	 
      	
              Facsimile:                                ____________________

            
	 
      	 
      
	 
      	 
      
	
              If
      to the Holder:

            	
              Hugh
      G. O’Neill

            
	 
      	
              Outboard
      Investments Ltd.

            
	 
      	
              BCM
      Cape Building

              Leeward
      Highway Providenciales

              Turks
      and Caicos, BWI

              Telephone:
      __________________

              Facsimile:
      ___________________

               

            

    

     

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

     

    
 

    or at
such other address and/or facsimile number and/or to the attention of such other
person as the recipient party has specified by written notice given to each
other party three (3) business days prior to the effectiveness of such
change.  Written confirmation of receipt (i) given by the recipient of
such notice, consent, waiver or other communication, (ii) mechanically or
electronically generated by the sender's facsimile machine containing the time,
date, recipient facsimile number and an image of the first page of such
transmission or (iii) provided by a nationally recognized overnight delivery
service, shall be rebuttable evidence of personal service, receipt by facsimile
or receipt from a nationally recognized overnight delivery service in accordance
with clause (i), (ii) or (iii) above, respectively.

     

    Section
5.                                Definitions.  For
the purposes hereof, the following terms shall have the following
meanings:

     

    “Business Day” means
any day except Saturday, Sunday and any day which shall be a federal legal
holiday in the United States or a day on which banking institutions are
authorized or required by law or other government action to close.

     

    “Change of Control
Transaction” means the occurrence of (a) an acquisition after the date
hereof by an individual or legal entity or “group” (as described in Rule
13d-5(b)(1) promulgated under the Exchange Act) of effective control (whether
through legal or beneficial ownership of capital stock of the Obligor, by
contract or otherwise) of in excess of fifty percent (50%) of the voting
securities of the Obligor (except that the acquisition of voting securities by
the Holder shall not constitute a Change of Control Transaction for purposes
hereof), (b) a replacement at one time or over time of more than one-half of the
members of the board of directors of the Obligor which is not approved by a
majority of those individuals who are members of the board of directors on the
date hereof (or by those individuals who are serving as members of the board of
directors on any date whose nomination to the board of directors was approved by
a majority of the members of the board of directors who are members on the date
hereof), (c) the merger, consolidation or sale of fifty percent (50%) or more of
the assets of the Obligor or any subsidiary of the Obligor in one or a series of
related transactions with or into another entity, or (d) the execution by the
Obligor of an agreement to which the Obligor is a party or by which it is bound,
providing for any of the events set forth above in (a), (b) or (c).

     

    “Closing Bid Price”
means the price per share in the last reported trade of the Common Stock on the
OTC or on the exchange which the Common Stock is then listed as quoted by
Bloomberg, LP.

     

    “Common Stock” means
the common stock, par value $0.001, of the Obligor and stock of any other class
into which such shares may hereafter be changed or reclassified.

     

    “Conversion Date”
shall mean the date upon which the Holder gives the Obligor notice of their
intention to effectuate a conversion of this Note into shares of the Company’s
Common Stock as outlined herein.

     

    “Exchange Act” means
the Securities Exchange Act of 1934, as amended.

     

    “Original Issue Date”
shall mean the date of the first issuance of this Note regardless of the number
of transfers and regardless of the number of instruments, which may be issued to
evidence such Note.

     

    “Person” means a
corporation, an association, a partnership, organization, a business, an
individual, a government or political subdivision thereof or a governmental
agency.

     

     “Securities Act” means
the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.

     

    “Trading Day” means a
day on which the shares of Common Stock are quoted on the OTC or quoted or
traded on such Subsequent Market on which the shares of Common Stock are then
quoted or listed; provided, that in the event that the shares of Common Stock
are not listed or quoted, then Trading Day shall mean a Business
Day.

     

    “Transaction
Documents” means the Securities Purchase Agreement or any other agreement
delivered in connection with the Securities Purchase Agreement, including,
without limitation, the Registration Rights Agreement and Warrants of even date
herewith.

     

     

     

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

     

    “Underlying Shares”
means the shares of Common Stock issuable upon conversion of this Note or as
payment of interest in accordance with the terms hereof.

     

    Section
6.                                Except
as expressly provided herein, no provision of this Note shall alter or impair
the obligations of the Obligor, which are absolute and unconditional, to pay the
principal of, interest and other charges (if any) on, this Note at the time,
place, and rate, and in the coin or currency, herein prescribed.  This
Note is a direct obligation of the Obligor. This Note ranks pari passu with all
other Notes  now or hereafter issued under the terms set forth herein.
As long as this Note is outstanding, the Obligor shall not and shall cause their
subsidiaries not to, without the consent of the Holder (which shall not be
unreasonably withheld), (i) amend its certificate of incorporation, bylaws or
other charter documents so as to adversely affect any rights of the Holder; (ii)
repay, repurchase or offer to repay, repurchase or otherwise acquire shares of
its Common Stock or other equity securities other than as to the Underlying
Shares to the extent permitted or required under the Securities Purchase
Agreement; or (iii) enter into any agreement with respect to any of the
foregoing.

     

    Section
7.                                This
Note shall not entitle the Holder to any of the rights of a stockholder of the
Obligor, including without limitation, the right to vote, to receive dividends
and other distributions, or to receive any notice of, or to attend, meetings of
stockholders or any other proceedings of the Obligor, unless and to the extent
converted into shares of Common Stock in accordance with the terms
hereof.

     

    Section
8.                                If
this Note is mutilated, lost, stolen or destroyed, the Obligor shall execute and
deliver, in exchange and substitution for and upon cancellation of the mutilated
Note, or in lieu of or in substitution for a lost, stolen or destroyed Note, a
new Note for the principal amount of this Note so mutilated, lost, stolen or
destroyed but only upon receipt of evidence of such loss, theft or destruction
of such Note, and of the ownership hereof, and indemnity, if requested, all
reasonably satisfactory to the Obligor.

     

    Section
9.                                No
indebtedness of the Obligor is senior to this Note in right of payment, whether
with respect to interest, damages or upon liquidation or dissolution or
otherwise.  Without the Holder’s consent, the Obligor will not and
will not permit any of their subsidiaries to, directly or indirectly, enter
into, create, incur, assume or suffer to exist any indebtedness of any kind, on
or with respect to any of its property or assets now owned or hereafter acquired
or any interest therein or any income or profits there from that is senior in
any respect to the obligations of the Obligor under this Note.

     

    Section
10.                                This
Note shall be governed by and construed in accordance with the laws of the State
of New York, without giving effect to conflicts of laws thereof.  Each
of the parties consents to the jurisdiction of the Courts of the State of New
York sitting in New York County, New York and the U.S. District Court for
the Southern District of New York in connection with any dispute arising under
this Note and hereby waives, to the maximum extent permitted by law, any
objection, including any objection based on forum non conveniens to the
bringing of any such proceeding in such jurisdictions.

     

    Section
11.                                If
the Obligor fails to comply with the terms of this Note, then the Obligor shall
reimburse the Holder promptly for all fees, costs and expenses, including,
without limitation, attorneys’ fees and expenses incurred by the Holder in any
action in connection with this Note, including, without limitation, those
incurred: (i) during any workout, attempted workout, and/or in connection with
the rendering of legal advice as to the Holder’s rights, remedies and
obligations, (ii) collecting any sums which become due to the Holder, (iii)
defending or prosecuting any proceeding or any counterclaim to any proceeding or
appeal; or (iv) the protection, preservation or enforcement of any rights or
remedies of the Holder.

     

    Section
12.                                Any
waiver by the Holder of a breach of any provision of this Note shall not operate
as or be construed to be a waiver of any other breach of such provision or of
any breach of any other provision of this Note. The failure of the Holder to
insist upon strict adherence to any term of this Note on one or more occasions
shall not be considered a waiver or deprive that party of the right thereafter
to insist upon strict adherence to that term or any other term of this Note. Any
waiver must be in writing.

     

     

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

     

     

    Section
13.                                If
any provision of this Note is invalid, illegal or unenforceable, the balance of
this Note shall remain in effect, and if any provision is inapplicable to any
person or circumstance, it shall nevertheless remain applicable to all other
persons and circumstances. If it shall be found that any interest or other
amount deemed interest due hereunder shall violate applicable laws governing
usury, the applicable rate of interest due hereunder shall automatically be
lowered to equal the maximum permitted rate of interest. The Obligor covenants
(to the extent that it may lawfully do so) that it shall not at any time insist
upon, plead, or in any manner whatsoever claim or take the benefit or advantage
of, any stay, extension or usury law or other law which would prohibit or
forgive the Obligor from paying all or any portion of the principal of or
interest on this Note as contemplated herein, wherever enacted, now or at any
time hereafter in force, or which may affect the covenants or the performance of
this indenture, and the Obligor (to the extent it may lawfully do so) hereby
expressly waives all benefits or advantage of any such law, and covenants that
it will not, by resort to any such law, hinder, delay or impeded the execution
of any power herein granted to the Holder, but will suffer and permit the
execution of every such as though no such law has been enacted.

     

    Section
14.                                Whenever
any payment or other obligation hereunder shall be due on a day other than a
Business Day, such payment shall be made on the next succeeding Business
Day.

     

    Section
15.                                THE
PARTIES HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT ANY OF
THEM MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON OR
ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY TRANSACTION
DOCUMENT OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL
OR WRITTEN) OR ACTIONS OF ANY PARTY.  THIS PROVISION IS A MATERIAL
INDUCEMENT FOR THE PARTIES’ ACCEPTANCE OF THIS AGREEMENT.

     

    [REMAINDER
OF PAGE INTENTIONLLY LEFT BLANK]

     

    

     

    IN WITNESS WHEREOF, the
Obligor has caused this Convertible Note to be duly executed by a duly
authorized officer as of the date set forth above.

    

    
      	 
      	
              TAO
      MINERALS LTD.

            
	 
      	 
      
	 
      	
              By:/s/ James A
      Sikora                                                                           

            
	 
      	
              Name:  James
      A. Sikora

            
	 
      	
              Title:
      President

            

    

    

     

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

     

     

    EXHIBIT
“A”

     

     

    NOTICE OF
CONVERSION

     

     

    (To
be executed by the Holder in order to convert the Note)

     

    

    
      	
              TO:

            	 
      

    

    

    The
undersigned hereby irrevocably elects to convert $ of the principal amount of
the above Note into Shares of Common Stock of Sub-Urban Industries, Inc.,
according to the conditions stated therein, as of the Conversion Date written
below.

     

    
      	
              Conversion
      Date:

            	 
      	 
	
              Applicable
      Conversion Price:

            	 
      	 
	
              Signature:

            	 
      	 
	
              Name:

            	 
      	 
	
              Address:

            	 
      	 
	
              Amount
      to be converted:

            	
              $                                                                                      

            	 
	
              Amount
      of Note unconverted:

            	
              $                                                                                      

            	 
	
              Conversion
      Price per share:

            	
              $                                                                                      

            	 
	
              Number
      of shares of Common Stock to be issued:

            	 
      	 
	
              Please
      issue the shares of Common Stock in the following name and to the
      following address:

            	 
      	 
	
              Issue
      to:

            	 
      	 
	
              Authorized
      Signature:

            	 
      	 
	
              Name:

            	 
      	 
	
              Title:

            	 
      	 
	
              Phone
      Number:

            	 
      	 
	
              Broker
      DTC Participant Code:

            	 
      	 
	
              Account
      Number:

            	 
      	 

    

    

    
 

     

    13

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