UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) August 6,
2014
LITHIUM EXPLORATION GROUP,
INC.
(Exact name of registrant as specified in its
charter)
Nevada |
333-175883 |
06-1781911 |
(State or other jurisdiction of |
(Commission File Number) |
(IRS Employer |
incorporation) |
|
Identification No.) |
3200 N. Hayden Road, Suite 235, Scottsdale, Arizona
|
85251 |
(Address of principal executive offices) |
(Zip Code) |
Registrants telephone number, including area code (480) 641-4790
N/A
(Former name or former address, if
changed since last report.)
Check the appropriate box below if the Form 8-K filing is
intended to simultaneously satisfy the filing obligation of the registrant under
any of the following provisions:
[ ] Written communications pursuant to Rule
425 under the Securities Act (17 CFR 230.425)
[ ]
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement communications pursuant
to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[
] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
2
Item 1.01 Entry
into a Material Definitive Agreement
On August 6, 2014, we entered into a securities purchase
agreement with JDF Capital Inc. dated July 22, 2014 pursuant to which we issued
to JDF Capital a convertible promissory note in the aggregate principal amount
of $708,000, which amount includes the purchase price of $600,000 plus 18 months
prepaid interest at the rate of 12% per annum. The convertible note has a
maturity date of January 22, 2016 and is convertible in whole or in part into
shares of our common stock at price per share equal to 65% of the lowest
reported sale price of our common shares during the 20 trading days prior to
July 22, 2014 ($0.04) or prior to the applicable conversion date. Our company
will have the option to prepay the note within 60 days subject to a 10% penalty,
within the subsequent 60 days days subject to a 20% penalty, or anytime
thereafter prior to maturity subject to a 30% penalty. The purchase price of the
promissory note is payable in six installments beginning upon the effective date
of the agreement (which amount has been paid) and monthly thereafter beginning
on August 22, 2014. The promissory note is secured in first position against all
assets of our subsidiary, Alta Disposal Ltd., pursuant to a General Security
Agreement between Alta and JDF Capital.
As additional consideration for the proceeds of the convertible
note, we issued to JDF Capital warrants exercisable for 5 years to purchase up
to 17,700,000 shares of our common stock at an exercise price of $0.04 per
share, subject to cashless exercise provisions.
Item 9.01
Financial Statements and Exhibits
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
LITHIUM EXPLORATION GROUP, INC.
|
|
/s/ Alexander Walsh |
|
Alexander Walsh |
|
President and Director |
|
|
|
August 6, 2013 |
|
SECURITIES PURCHASE AGREEMENT
This
Securities Purchase Agreement (this Agreement) is dated as of July, 22
2014, between Lithium Exploration Group, Inc., a Nevada corporation (the
Company) and JDF Capital Inc., (the Purchaser) (referred to
collectively herein as the Parties).
WHEREAS,
the Company desires to sell and Purchaser desires to purchase a Secured
Convertible Promissory Note due, subject to the terms therein, eighteen months
from its effective date of issuance, issued by the Company to the Purchaser, in
the form of Exhibit A attached hereto (the Note) and a Warrant to
purchase 17,700,000 shares of the Companys common stock for a period of five
(5) years from the date hereof, issued by the Company to the Purchaser, in the
form of Exhibit B attached hereto (the Warrant, and together with the
Note, the Securities) as set forth below;
NOW,
THEREFORE, in consideration of the mutual covenants contained in this Agreement,
the Company and the Purchaser agree as follows:
ARTICLE I PURCHASE AND SALE
1.1
Purchase and Sale. Upon the terms and subject to the conditions set forth
herein, the Company agrees to sell, and the Purchaser agrees to purchase the
Note, in an aggregate principal amount of $708,000, and a Warrant to purchase
17,700,000 shares of Company common stock with an aggregate exercise price of
$708,000. The Note shall be funded by the Purchaser in the amount of $600,000
and shall include $108,000 in respect of prepaid interest calculated in advance
at the rate of 12% per annum for 18 months. On the Effective Date, the Purchaser
shall deliver to the Company, via wire transfer, immediately available funds in
the amount of US$100,000 (the Purchase Price) and the Company shall
deliver to the Purchaser the Note and the Warrant. The Warrant shall vest fully
on the Effective Date.
1.2
Effective Date. This Agreement will become effective on July 22,
2014,(the Effective Date) and only upon occurrence of the two following
events: execution of this Agreement, the Note, and the Warrant by both the
Company and the Purchaser, and delivery of the first payment of the Purchase
Price by the Purchaser to the Company.
1.3
Additional Payments. The Note requires the Purchaser to pay $500,000 of
additional consideration to the Company by providing $100,000 on or before the
22st day of each month beginning on August 22st, 2014 and
ending on December 22st, 2014 (the Additional Payments).
1.4
General Security Agreement. To secure the due payment of all principal
and interest payable pursuant to the Note, the Company shall cause to be
provided to the Purchaser contemporaneously with the advance of the Purchase
Price, the general security agreement annexed to the Note as Exhibit A granting
the Purchaser a security interest in all of the present and after acquired
personal property (the Security) of Alta Disposal Ltd.
ARTICLE II MISCELLANEOUS
2.1
Successors and Assigns. This Agreement may not be assigned by the
Company. The Purchaser may assign any or all of its rights under this Agreement
and agreements related to this transaction. The terms and conditions of this
Agreement shall inure to the benefit of, and be binding upon, the respective
successors and permitted assigns of the parties. Nothing in this Agreement,
express or implied, is intended to confer upon any party, other than the parties
hereto or their respective successors, any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
2.2
Reservation of Authorized Shares. As of the effective date of this
Agreement and for the remaining period during which the Note is outstanding and
the Warrant is exercisable for shares of the Company, the Company will reserve
from its authorized and unissued common stock a sufficient number of shares, and
not less than 30,000,000 common shares from time to time, to provide for the
issuance of common stock upon the full conversion of the Note and the full
exercise of the Warrant. The Company represents that upon issuance, such shares
will be duly and validly issued, fully paid and non-assessable. The Company
agrees that its issuance of the Note and the Warrant constitutes full authority to its
officers, agents and transfer agents who are charged with the duty of executing
and issuing shares to execute and issue the necessary shares of common stock
upon the conversion of the Note and the exercise of the Warrant. No further
approval or authority of the stockholders or the Board of Directors of the
Company will be required for the issuance and sale of the Securities to be sold
by the Company as contemplated by the Agreement or for the issuance of the
shares contemplated by the Note or the shares contemplated by the Warrant.
1
2.3
Rule 144 Tacking Back and Registration Rights. Whenever the Note or
Warrant or any other document related to this transaction provides that a
conversion amount, make-whole amount, penalty, fee, liquidated damage, or any
other amount or shares (a Tack Back Amount) tacks back to the original date of
the Note, Warrant, or document for purposes of Rule 144 or otherwise, in the
event that such Tack Back Amount was registered or carried registration rights,
then that Tack Back Amount shall have the same registration status or
registration rights as were in effect immediately prior to the event that gave
rise to such Tack Back Amount tacking back. For example, if the Purchaser
converts a portion of the Note and receives registered shares and the Purchaser
later rescinds that conversion, the conversion amount would be returned to the
principal balance of the Note and upon any future conversion of the Note the
amount converted would be convertible into shares registered on that
registration statement.
2.4
Governing Law. This Agreement shall be governed by, and construed and
enforced in accordance with, the laws of the State of Nevada, without regard to
the principles of conflict of laws thereof. The parties hereby consent to the
exclusive jurisdiction of the state and federal courts located in the State of
Nevada in respect of any action brought by either party against the other
concerning the transactions contemplated by this Agreement. Both parties and the
individuals signing this Agreement agree to submit to the jurisdiction of such
courts.
2.5
Delivery of Process by Purchaser to Company. In the event of any action
or proceeding by the Purchaser against the Company, and only by Purchaser
against the Company, service of copies of summons and/or complaint and/or any
other process which may be served in any such action or proceeding may be made
by Purchaser via overnight delivery service such as FedEx or UPS, process
server, or by personal delivery a copy of such process to the Company at its
last known address or to its last known attorney as set forth in its most recent
SEC filing.
2.6
Notices. Any notice required or permitted hereunder must be in writing
and either be personally served, sent by facsimile or email transmission, or
sent by overnight courier. Notices will be deemed effectively delivered at the
time of transmission if by facsimile or email, and if by overnight courier the
business day after such notice is deposited with the courier service for
delivery.
2.7
Counterparts. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument. Delivery of this Agreement may be
effected by email.
2.8
Expenses. The Company and the Purchaser shall pay all of their own costs
and expenses incurred with respect to the negotiation, execution, delivery and
performance of this Agreement. In the event any attorney is employed by either
party to this Agreement with respect to legal or equitable action, arbitration
or other proceeding brought by such party for the enforcement of this Agreement
or because of an alleged dispute, breach, default or misrepresentation in
connection with any of the provisions of this Agreement, the prevailing party in
such proceeding will be entitled to recover from the other party reasonable
attorneys fees and other costs and expenses incurred, in addition to any other
relief to which the prevailing party may be entitled.
2.9
No Public Announcement. Except as required by securities law, no public
announcement may be made regarding this Agreement, the Note, the Warrant, or the
Purchase Price without written permission by both the Company and the Purchaser.
2.10 Severability. If any term, provision,
covenant or restriction of this Agreement is held by a court of competent
jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions set forth herein shall remain in
full force and effect and shall in no way be affected, impaired or invalidated,
and the parties hereto shall use their commercially reasonable efforts to find
and employ an alternative means to achieve the same or substantially the same result as
that contemplated by such term, provision, covenant or restriction.
2
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of this
22 day of July, 2014.
LITHIUM EXPLORATION GROUP, INC.
|
By: |
/s/ Alexander Walsh |
|
|
Alexander Walsh |
|
|
President |
JDF CAPITAL INC.
|
By: |
/s/ John Fierro |
|
|
John Fierro |
|
|
President |
[Securities Purchase Agreement Signature Page]
3
SECURED CONVERTIBLE PROMISSORY NOTE
$708,000
ORIGINAL ISSUE DISCOUNT
THIS NOTE AND THE SHARES ISSUABLE UPON CONVERSION OF THIS NOTE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS NOTE
AND THE SHARES ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT BE SOLD, OFFERED
FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT OR APPLICABLE EXEMPTION OR SAFE HARBOR PROVISION.
Issue Date: July 22, 2014
FOR VALUE RECEIVED, Lithium Exploration Group, Inc. as
Obligor ("Borrower, or Obligor), hereby promises to pay to JDF Capital Inc.,
(the Lender or Holder), the Principal Sum, as defined below, along with the
Interest Rate, as defined below, according to the terms herein.
The "Lender" shall be: |
JDF Capital Inc. |
The "Principal Sum" shall be: |
$708,000 (six hundred seventy two thousand US Dollars)
which amount includes $600,000 paid by the Lender and $108,000 in respect
of prepaid interest at 8% per annum for 18 months. . |
The Consideration shall be: |
$600,000 (six hundred thousand US dollars) in the form of
cash payment by wire or check as set forth in the attached funding
schedule. |
The "Interest Rate" shall be: |
12% per annum, calculated monthly, in arrears. The
Principal Sum is inclusive of prepaid interest at the Interest Rate for 18
months. Interest shall continue to accrue on any portion of the Principal
Sum outstanding from time to time following the Maturity Date. |
The "Conversion Price" shall be the following price:
|
the lower of 65% of the lowest reported sale price of the
Borrowers common stock (the Common Stock) for the 20 trading days
immediately prior to (i) the closing date on July 22, 2014 (the Closing
Date), or (ii) 65% of the lowest reported sale price for the 20 days
prior the conversion date of the Note |
The "Maturity Date" is the date upon which the Principal
Sum of this Note, as well as any unpaid interest shall be due and payable,
and that date shall be: |
January 22, 2016. |
The Purchase Agreement, which is incorporated herein by
reference means the: |
Securities Purchase Agreement between the Borrower and
the Lender dated July 22, 2014 |
The General Security Agreement or GSA, which is
incorporated herein by reference means the: |
General Security Agreement between the Lender and Alta
Disposal Ltd. (the ``Guarantor``) dated July 22, 2014.
|
ARTICLE 1 PAYMENT-RELATED PROVISIONS
1.1 Principal Sum. The Principal Sum is $708,000 (six hundred seventy two
thousand) which includes$600,000 (six hundred thousand) payable to be advanced
by the Lender and $108,000 in prepaid interest at the Interest Rate for 18
months. The Lender shall pay $100,000 of Consideration upon closing of this Note
as the Purchase Price under the Purchase Agreement of even date herewith between
the Borrower and the Lender. As set forth in the attached Funding Schedule, the
Lender shall pay an additional $500,000 of Consideration to the Borrower in such
amounts and times as specified in the Funding Schedule.
_________
1.2 Events of Default. The occurrence of any of the following events
shall be an Event of Default or Default under this Note:
(a)
the Borrower shall fail to make the payment of any amount of principal
outstanding on the date such payment is due hereunder;
(b) the Borrower shall fail to make
any payment of interest in shares of Common Stock for a period of three (3) days
after the date such interest is due;
(c) the suspension from listing,
without subsequent listing on any one of, or the failure of the Common Stock to
be listed on at least one of the OTC Bulletin Board, Nasdaq SmallCap Market,
Nasdaq National Market, American Stock Exchange or The New York Stock Exchange,
Inc. for a period of five (5) consecutive Trading Days;
(d) the Borrowers notice to the
Lender, including by way of public announcement, at any time, of its inability
to comply or its intention not to comply with proper requests for conversion of
this Note into shares of Common Stock;
(e) the Borrower shall fail to (i)
timely deliver the shares of Common Stock upon conversion of the Note or any
accrued and unpaid interest, or (ii) make the payment of any fees and/or
liquidated damages under this Note or the Purchase Agreement, which failure in
the case of items (i) and (ii) of this Section 1.2 (e) is not remedied within
three (3) business days after the incurrence thereof;
(f) default shall be made in the
performance or observance of (i) any material covenant, condition or agreement
contained in this Note (other than as set forth in clause (e) of this Section
1.2) and such default is not fully cured within five (5) business days after the
occurrence thereof; (ii) any material covenant, condition or agreement contained
in the Purchase Agreement any other Transaction Document which is not covered by
any other provisions of this Section 1.2 and such default is not fully cured
within five (5) business days after the occurrence thereof; or (iii) any
covenant, condition or agreement contained in the GSA (without allowance for
cure of such default);
(g) any material representation or
warranty made by the Borrower herein or in the Purchase Agreement or any other
Transaction Document, or by the Guarantor in the GSA, shall prove to have been
false or incorrect or breached in a material respect on the date as of which
made;
(h) the Borrower shall (A) default in
any payment of any amount or amounts of principal of or interest on any
indebtedness (other than the indebtedness hereunder) the aggregate principal
amount of which indebtedness is in excess of $100,000 or (B) default in
the observance or performance of any other agreement or condition relating to
any indebtedness or contained in any instrument or agreement evidencing,
securing or relating thereto, or any other event shall occur or condition exist,
the effect of which default or other event or condition is to cause, or to
permit the holder or holders or beneficiary or beneficiaries of such indebtedness to cause with the giving of
notice if required, such indebtedness to become due prior to its stated
maturity;
(i) the Borrower shall (i) apply for
or consent to the appointment of, or the taking of possession by, a receiver,
custodian, trustee or liquidator of itself or of all or a substantial part of
its property or assets, (ii) make a general assignment for the benefit of its
creditors, (iii) commence a voluntary case under the United States Bankruptcy
Code (as now or hereafter in effect) or under the comparable laws of any
jurisdiction (foreign or domestic), (iv) file a petition seeking to take
advantage of any bankruptcy, insolvency, moratorium, reorganization or other
similar law affecting the enforcement of creditors rights generally, (v)
acquiesce in writing to any petition filed against it in an involuntary case
under United States Bankruptcy Code (as now or hereafter in effect) or under the
comparable laws of any jurisdiction (foreign or domestic), (vi) issue a notice
of bankruptcy or winding down of its operations or issue a press release
regarding same, or (vii) take any action under the laws of any jurisdiction
(foreign or domestic) analogous to any of the foregoing;
(j) a proceeding or case shall be
commenced in respect of the Borrower, without its application or consent, in any
court of competent jurisdiction, seeking (i) the liquidation, reorganization,
moratorium, dissolution, winding up, or composition or readjustment of its
debts, (ii) the appointment of a trustee, receiver, custodian, liquidator or the
like of it or of all or any substantial part of its assets in connection with
the liquidation or dissolution of the Borrower or (iii) similar relief in
respect of it under any law providing for the relief of debtors, and such
proceeding or case described in clause (i), (ii) or (iii) shall continue
undismissed, or unstayed and in effect, for a period of sixty (60) days or any
order for relief shall be entered in an involuntary case under United States
Bankruptcy Code (as now or hereafter in effect) or under the comparable laws of
any jurisdiction (foreign or domestic) against the Borrower or action under the
laws of any jurisdiction (foreign or domestic) analogous to any of the foregoing
shall be taken with respect to the Borrower and shall continue undismissed, or
unstayed and in effect for a period of sixty (60) days; or
(k) the failure of the Borrower to
instruct its transfer agent to remove any legends from shares of Common Stock
eligible to be sold under Rule 144 of the Securities Act and issue such
unlegended certificates to the Holder within five (5) business days of the
Holders request so long as the Holder has provided reasonable assurances and
opinions of counsel to the Borrower that such shares of Common Stock can be
resold pursuant to Rule 144; or
(l) the failure of the Borrower to pay
any amounts due to the Holder herein within three (3) business days of receipt
of notice to the Company.
1.3 Consequences of
Default/Remedies. In the event of any Event of Default, as defined in above
section 1.2, the outstanding principal amount of this Note, plus accrued but
unpaid interest, liquidated damages, fees and other amounts owing in respect
thereof through the date of acceleration, shall become, at the Holders
election, immediately due and payable in cash at the Mandatory Default Amount.
Commencing five (5) days after the occurrence of any Event of Default that
results in the eventual acceleration of this Note, the interest rate on this
Note shall accrue at an interest rate equal to the lesser of 18% per annum or
the maximum rate permitted under applicable law. In connection with such
acceleration described herein, the Holder need not provide, and the Borrower
hereby waives, any presentment, demand, protest or other notice of any kind, and
the Holder may immediately and without expiration of any grace period enforce
any and all of its rights and remedies hereunder and all other remedies
available to it under applicable law. Such acceleration may be rescinded and
annulled by Holder at any time prior to payment hereunder and the Holder shall
have all rights as a holder of the note until such time, if any, as the Holder
receives full payment pursuant to this Section 1.2. No such rescission or annulment shall affect any subsequent Event of Default or
impair any right consequent thereon. The Mandatory Default Amount means the
greater of (i) the outstanding principal amount of this Note, plus all accrued
and unpaid interest, liquidated damages, fees and other amounts hereon, divided
by the Conversion Price on the date the Mandatory Default Amount is either
demanded or paid in full, whichever has a lower Conversion Price, multiplied by
the VWAP on the date the Mandatory Default Amount is either demanded or paid in
full, whichever has a higher VWAP, or (ii) 130% of the outstanding principal
amount of this Note, plus 100% of accrued and unpaid interest, liquidated
damages, fees and other amounts hereon.
1.4 Redemption. During the first 18 months this Note is in effect, the Borrower
may redeem this Note by paying to the Holder an amount as follows: (i) if the
redemption is within the first 60 days after the Issue Date of this Note, then
for an amount equal to 110% of the unpaid Principal Sum of this Note, (ii) if
the redemption is on or after the 61st day after the Issue Date of this Note,
but prior to the 121st day after the Issue Date of this Note, then for an amount
equal to 120% of the unpaid Principal Sum of this Note, and (iii) if the
redemption is after the 121st day after the Issue Date of this Note, but prior
to the Maturity Date of this Note, then for an amount equal to 130% of the
unpaid Principal Sum. This Note may not be redeemed on or after the Maturity
Date. The redemption must be closed and paid for within 10 business days of the
Company sending the redemption demand or the redemption will be invalid.
1.5 Security. To secure the due payment of the Principal Sum and Interest
payable under this Note, the Borrower shall cause to be provided to the Holder
contemporaneously with the advance of the Principal Sum, the general security
agreement annexed hereto as Exhibit A granting the Holder a security interest in
all of the present and after acquired personal property (the Security)
of Alta Disposal Ltd. The Borrower further agrees that it will not transfer,
assign, pledge or provide a negative pledge to any third party with respect to
the Security while the Note is outstanding.
ARTICLE 2 CONVERSION RIGHTS
The Holder will have the right to convert the Principal Sum (including OID,
interest, and other fees) under this Note into Shares of the Borrower's Common
Stock as set forth below.
2.1 Conversion Rights and Cashless Exercise. The Holder will have the right at
its election from and after the Issue Date, and then at any time, to convert all
or part of the outstanding and unpaid Principal Sum and accrued interest into
shares of fully paid and nonassessable shares of common stock of Lithium
Exploration Group, Inc. (as such stock exists on the date of issuance of this
Note, or any shares of capital stock of Lithium Exploration Group, Inc. into
which such stock is hereafter changed or reclassified, the "Common Stock") as
per the Conversion Formula set forth in Section 2.2. Any such conversion shall
be cashless, and shall not require further payment from Holder. Unless otherwise
agreed in writing by both the Borrower and the Holder, at no time will the
Holder convert any amount of the Note into common stock that would result in the
Holder owning more than 4.99% of the common stock outstanding of Lithium
Exploration Group, Inc., as calculated in accordance with sections 13(d) and
13(g) of the Securities Exchange Act of 1934, as amended (the Exchange Act)
Shares from any such conversion will be delivered to Holder (in any name
directed by Holder) by 2:30pm EST within 3 (three) business days of conversion
notice delivery (see 3.1) by DWAC/FAST electronic transfer.
2.2. Conversion Formula. The number of shares issued through conversion is the
conversion amount divided by the conversion price, as illustrated below. The
Holder and the Borrower shall maintain records showing the principal amount(s)
converted and the date of such conversion(s). If no objection is delivered from
Borrower to Holder regarding any variable or calculation of the conversion
notice within 24 (twenty-four) hours of delivery of the conversion notice, the
Borrower shall have been thereafter deemed to have irrevocably confirmed and
irrevocably ratified such Notice of Conversion and waive any objection thereto.
The Company acknowledges and agrees that, absent a duly delivered objection
notice as required above, the Holder shall materially rely on the confirmation
and ratification of the conversion price and, notwithstanding subsequent
information to the contrary that such computation was made in error, such deemed
conversion price shall thereafter be the conversion price for purposes of such
conversion.
# Shares = Conversion
Amount
Conversion Price
2.5 Reservation of Shares. As of the issuance date of this Note and for the
remaining period during which the conversion right exists, the Borrower will
reserve from its authorized and unissued Common Stock a sufficient number of
shares to provide for the issuance of Common Stock upon the full conversion of
this Note. The Borrower represents that upon issuance, such shares will be duly
and validly issued, fully paid and non-assessable. The Borrower agrees that its
issuance of this Note constitutes full authority to its officers, agents and
transfer agents who are charged with the duty of executing and issuing shares to
execute and issue the necessary shares of Common Stock upon the conversion of
this Note.
2.6. Delivery of Conversion Shares. Shares from any such conversion will be
delivered to Holder by 2:30pm EST within 3 (three) business days of conversion
notice delivery (see 3.1) by DWAC/FAST electronic transfer (such date, the
Share Delivery Date). For example, if Holder delivers a conversion notice to
Borrower at 5:15 pm eastern time on Monday January 1st, Borrowers
transfer agent must deliver shares to Holders broker via DWAC/FAST electronic
transfer by no later than 2:30 pm eastern time on Thursday January 4th. If those
shares are not delivered in accordance with this timeframe stated in this
Section 2.6, Holder, at any time prior to selling those shares (in whole or in
part), may rescind that particular conversion (in whole or in part) and have the
conversion amount (in whole or in part) returned to the note balance with the
conversion shares (in whole or in part) returned to the Borrower (under Holder
and Borrowers expectation that any returned conversion amounts will tack back
to the original date of the note). The Company will make its best efforts
to deliver shares to Holder same day / next day.
2.6.1 Nothing herein shall limit a
Holders right to pursue any other remedies available to it hereunder (including
election to pursue its rights under this Section 2.6 and subsections), at law or
in equity including, without limitation, a decree of specific performance and/or
injunctive relief with respect to the Borrowers failure to timely deliver
shares of Common Stock upon conversion of the Note as required pursuant to the
terms hereof.
2.6.2 Conversion Delay Penalties.
Holder may assess, at its election, penalties or liquidated damages (both
referred to herein as penalties) as follows.
2.6.2. A. For each conversion,
Borrower agrees to deliver share issuance instructions to its transfer agent
same day or next day. In the event that the share issuance instructions are not
delivered to the Borrowers transfer agent by the next day, a penalty of $2,000
per day will be assessed for each day until share issuance instructions are
delivered to the transfer agent ($2,000 per day inclusive of the day of
conversion); and such penalty will be added to the principal balance of the Note
(under Holder and Borrowers expectation that any penalty amounts will tack back
to the original date of the note).
2.6.2. B. For each conversion, in the
event that shares are not delivered by the third business day (inclusive of the
day of conversion), a penalty of $2,000 per day will be assessed for each day
after the third business day (inclusive of the day of the conversion) until
share delivery is made; and such penalty will be added to the principal balance
of the Note (under Holder and Borrowers expectation that any penalty amounts
will tack back to the original date of the note). Borrower will not be
subjected to any penalties once its transfer agent processes the shares to the
DWAC system.
2.6.3 If failure to deliver Conversion
Shares occurs as follows, Holder may elect to enforce one or more of these
remedies at its sole election.
2.6.3. A. In addition to any other
rights available to the Holder, if the Borrower fails to cause its transfer
agent to transmit to the Holder the shares on or before the Share Delivery Date,
and if after such date the Holder is required by its broker to purchase (in an
open market transaction or otherwise) or if the Holders brokerage firm
otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale
by the Holder of the shares which the Holder anticipated receiving upon such
conversion (a Buy-In), then the Borrower shall (A) pay in cash to the
Holder the amount, if any, by which (x) the Holders total purchase price
(including brokerage commissions and other fees, if any) for the shares of
Common Stock so purchased exceeds (y) the amount obtained by multiplying (1) the
number of Shares that the Borrower was required to deliver to the Holder in
connection with the conversion at issue times (2) the price at which the sell
order giving rise to such purchase obligation was executed, and (B) at the
option of the Holder, either (x) reinstate the portion of the Note and
equivalent number of shares for which such conversion was not honored (in which
case such conversion shall be deemed rescinded), (y) deliver to the Holder the
number of shares of Common Stock that would have been issued had the Borrower
timely complied with its conversion and delivery obligations hereunder, or (z)
pay in cash to the Holder the amount obtained by multiplying (1) the number of
Shares that the Borrower was required to deliver to the Holder in connection
with the conversion at issue times (2) the price at which the sell order giving
rise to such purchase obligation was executed. The Holder shall provide the
Borrower written notice indicating the amounts payable to the Holder in respect
of the Buy-In and, upon request of the Borrower, evidence of the amount of such
loss.
2.6.3. B. If the Borrower fails for
any reason to deliver to the Holder the Shares by DWAC/FAST electronic transfer
(such as by delivering a physical stock certificate) and if the Holder incurs
a Market Price Loss, then at any time subsequent to incurring the loss the
Holder may provide the Borrower written notice indicating the amounts payable to
the Holder in respect of the Market Price Loss and the Borrower must make the
Holder whole by either of the following options at Holders election:
Market Price Loss = [(VWAP on the day
of conversion) x (Number of shares receivable from the conversion)] [(Sales
price realized by Holder) x (Number of shares receivable from the conversion)].
Option A Pay Market Price Loss in
Cash. The Borrower must pay the Market Price Loss by cash payment, and any such
cash payment must be made by the third business day from the time of the
Holders written notice to the Borrower.
Option B Add Market Price Loss to
Principal Sum. The Borrower must pay the Market Price Loss by adding the Market
Price Loss to the balance of the Principal Sum (under Holders and the
Borrowers expectation that any Market Price Loss amounts will tack back to the
original date of issue of this Note).
2.6.3. C. If the Borrower fails for
any reason to deliver to the Holder the Shares within 2 (two) business days of
the Share Delivery Date and if the Holder incurs a Failure to Deliver Loss, then
at any time subsequent to incurring the loss the Holder may provide the Borrower
written notice indicating the amounts payable to the Holder in respect of the
Failure to Deliver Loss and the Borrower must make the Holder whole as follows:
Failure to Deliver Loss = [(High trade
price at any time on or after the day of conversion) x (Number of shares
receivable from the conversion)].
The Borrower must pay the Failure to
Deliver Loss by cash payment, and any such cash payment must be made by the
third business day from the time of the Holders written notice to the Borrower.
2.7. This section 2.7 intentionally left blank.
ARTICLE 3 MISCELLANEOUS
3.1. Notices. Any notice required or permitted hereunder must be in writing and
either personally served, sent by facsimile or email transmission, or sent by
overnight courier. Notices will be deemed effectively delivered at the time of
transmission if by facsimile or email, and if by overnight courier the business
day after such notice is deposited with the courier service for delivery.
3.2 Subsequent Equity Sales or Agreements. The Borrower shall provide the
Holder, whenever the Holder requests at any time while this Note is outstanding,
a schedule of all issuances of Common Stock or any debt, preferred stock, right,
option, warrant or other instrument that is convertible into or exercisable or
exchangeable for, or otherwise entitles the holder thereof to receive, Common
Stock (a Common Stock Equivalent) since the date of issuance of this Note,
including the applicable issuance price, or applicable reset price, exchange price, conversion price, exercise price and other pricing
terms. The term issuances shall also include all agreements to issue, or
prospectively issue Common Stock or Common Stock Equivalents, regardless of
whether the issuance contemplated by such agreement is consummated. The Borrower
shall notify the Holder in writing of any issuances within twenty-four (24)
hours of such issuance.
3.3. Amendment Provision. The term "Note" and all reference thereto, as used
throughout this instrument, means this instrument as originally executed, or if
later amended or supplemented, then as so amended or supplemented.
3.4. Assignability. The Borrower may not assign this Note. This Note will be
binding upon the Borrower and its successors, and will inure to the benefit of
the Holder and its successors and assigns, and may be assigned by the Holder to
anyone of its choosing without Borrowers approval.
3.5.
Governing Law. This Note will be governed by, and construed and enforced in
accordance with, the laws of the State of Nevada, without regard to the conflict
of laws principles thereof. Each of the Borrower and the Holder (i) hereby
submits to the exclusive jurisdiction of the state and federal courts of Nevada
for the purposes of any suit, action or proceeding arising out of or relating to
this Note and (ii) hereby waives, and agrees not to assert in any such suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of such court, that the suit, action or proceeding is brought in an
inconvenient forum or that the venue of the suit, action or proceeding is
improper. Each of the Borrower and the Holder consents to process being served
in any such suit, action or proceeding by mailing a copy thereof to such party
at the address in effect for notices to it under the Purchase Agreement and
agrees that such service shall constitute good and sufficient service of process
and notice thereof. Nothing in this Section 3.5 shall affect or limit any right
to serve process in any other manner permitted by law.
3.6.
Delivery of Process by Holder To Borrower. In the event of any action or
proceeding by Holder against Borrower, and only by Holder against Borrower,
service of copies of summons and/or complaint and/or any other process which may
be served in any such action or proceeding may be made by Holder via overnight
delivery service such as FedEx or UPS, process server, or by personal delivery
of a copy of such process to the Borrower at its last known address or to its
last known attorney set forth in its most recent SEC filing.
3.7.
No Rights as Stockholder Until Conversion. This Note does not entitle the Holder
to any voting rights, dividends or other rights as a stockholder of the Company
prior to the conversion hereof as set forth in Section 2.1. So long as this Note
is unconverted, this Note carries no voting rights and does not convey to the
Holder any control over the Company, as such term may be interpreted by the
SEC under the Securities Act or the Exchange Act, regardless of whether this
Note is currently convertible.
3.8.
Maximum Payments. Nothing contained herein may be deemed to establish or require
the payment of a rate of interest or other charges in excess of the maximum
permitted by applicable law. In the event that the rate of interest required to
be paid or other charges hereunder exceed the maximum permitted by such law, any
payments in excess of such maximum will be credited against amounts owed by the
Borrower to the Holder and thus refunded to the Borrower.
3.9.
Attorney Fees. In the event any attorney is employed by either party to this
Note with regard to any legal or equitable action, arbitration or other
proceeding brought by such party for the enforcement of this Note or because of
an alleged dispute, breach, default or misrepresentation in connection with any
of the provisions of this Note, the prevailing party in such proceeding will be
entitled to recover from the other party reasonable attorneys' fees and other
costs and expenses incurred, in addition to any other relief to which the
prevailing party may be entitled.
3.10.
Nonwaiver. No course of dealing or any delay or failure to exercise any right
hereunder on the part of Holder shall operate as a waiver of such right or
otherwise prejudice the Holders rights, powers or remedies.
3.11.
No Public Announcement. Except as required by securities law, no public
announcement may be made regarding this Note, payments, or conversions without
written permission by both Borrower and Holder.
3.12.
Opinion of Counsel. In the event that an opinion of counsel is needed for any
matter related to this Note, Holder has the right to have any such opinion
provided by its counsel. Holder also has the right to have any such opinion
provided by Borrowers counsel.
3.13.
Directors Resolution. Once effective, Borrower will execute and deliver to
Holder a copy of a Board of Directors resolution resolving that this note is
validly issued, paid, and effective.
3.14. No Shorting. Holder agrees that so long as
any Note from Borrower to Holder remains outstanding, Holder will not enter into
or effect any short sales of the common stock or hedging transaction which
establishes a net short position with respect to the common stock of Lithium
Exploration Group, Inc. Borrower acknowledges and agrees that upon submission of
conversion notice as set forth in Section 3.1 (up to the amount of cash paid in
under the Note), Holder immediately owns the common shares described in the
conversion notice and any sale of those shares issuable under such conversion
notice would not be considered short sales.
BORROWER:
LITHIUM EXPLORATION GROUP, INC.
By: |
/s/ Alexander Walsh |
|
|
Alexander Walsh |
|
|
President |
|
LENDER/HOLDER:
JDF CAPITAL INC.
By: |
/s/ John Fierro |
|
|
John Fierro |
|
|
President |
|
[Secured Convertible Promissory Note Signature Page]
FUNDING SCHEDULE
- $100,000 paid to Borrower upon the Closing Date;
- $100,000 paid to Borrower on August 22, 2014;
- $100,000 paid to Borrower on September 22, 2014;
- $100,000 paid to Borrower on October 22, 2014;
- $100,000 paid to Borrower on November 22, 2014; and
- $100,000 paid to Borrower on December 22, 2014.
THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE
SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT OR APPLICABLE EXEMPTION OR SAFE HARBOR PROVISION.
COMMON STOCK PURCHASE WARRANT
LITHIUM EXPLORATION GROUP, INC.
Warrant Shares: 17,700,000 |
Initial Issue Date: July 22, 2014 |
Aggregate Exercise Amount: $708,000 |
|
THIS
COMMON STOCK PURCHASE WARRANT (the Warrant) certifies that, for value
received, JDF Capital Inc., or its assigns (the Holder) is entitled,
upon the terms and subject to the limitations on exercise and the conditions
hereinafter set forth, at any time on or after the date hereof (the Initial
Exercise Date) and on or prior to the close of business on the five (5)
year anniversary of the Initial Exercise Date (as subject to adjustment
hereunder, the Termination Date), to subscribe for and purchase from
Lithium Exploration Group, Inc., a Nevada corporation (the Company), up
to 17,700,000 shares (as subject to adjustment herein, the Warrant
Shares) of common stock of the Company (the Common Stock). The
purchase price of one share of Common Stock under this Warrant shall be equal to
the Exercise Price, as defined in Section 1.2.
ARTICLE 1 EXERCISE RIGHTS
The
Holder will have the right to exercise this Warrant to purchase shares of Common
Stock as set forth below. Capitalized terms used and not otherwise defined
herein shall have the meanings set forth in that certain Securities Purchase
Agreement Document dated July 22, 2014 between the Company and the Holder (the
Agreement).
1.1
Exercise of Warrant. Exercise of the purchase rights represented by this
Warrant may be made, in whole or in part, from and after the Initial Exercise
Date, and then at any time, by delivery to the Company (or such other office or
agency of the Company as it may designate by notice in writing to the registered
Holder at the address of the Holder appearing on the books of the Company) of a
duly executed facsimile or emailed copy of the Notice of Exercise form annexed
hereto. Within three (3) business days following the date of exercise as
aforesaid, the Holder shall deliver the aggregate Exercise Price for the shares
specified in the applicable Notice of Exercise by wire transfer or check drawn
on a United States bank unless the cashless exercise procedure specified in
Section 1.3 below is specified in the applicable Notice of Exercise. Partial
exercises of this Warrant resulting in purchases of a portion of the total
number of Warrant Shares available hereunder shall have the effect of lowering
the outstanding number of Warrant Shares purchasable hereunder in an amount
equal to the applicable number of Warrant Shares purchased. The Holder and the
Company shall maintain records showing the number of Warrant Shares purchased
and the date of such purchases. The Company shall deliver any objection to any
Notice of Exercise form within 24 hours of receipt of such notice. The Holder
and any assignee, by acceptance of this Warrant, acknowledge and agree that, by
reason of the provisions of this paragraph, following the purchase of a portion
of the Warrant Shares hereunder, the number of Warrant Shares available for
purchase hereunder at any given time may be less than the amount stated on the
face hereof.
1.2
Exercise Price. The exercise price per share of Common Stock under this
Warrant shall be $0.04 per share, subject to adjustment hereunder (the
Exercise Price). The aggregate exercise price is $708,000.
1
1.3 Cashless Exercise. If at any time after the earlier of (i) the six (6)
month anniversary of the date of the Agreement and (ii) the completion of the
then-applicable holding period required by Rule 144, or any successor provision
then in effect, there is no effective Registration Statement registering, or no
current prospectus available for, the resale of the Warrant Shares by the
Holder, then this Warrant may also be exercised, in whole or in part, at such time by means of a cashless exercise in which the Holder
shall be entitled to receive a number of Warrant Shares equal to the quotient
obtained by dividing [(A-B) (X)] by (A), where:
|
(A) = |
the VWAP on the trading day immediately preceding the
date on which Holder elects to exercise this Warrant by means of a
cashless exercise, as set forth in the applicable Notice of Exercise;
|
|
|
|
|
(B) = |
the Exercise Price of this Warrant, as adjusted
hereunder; and |
|
|
|
|
(X) = |
the number of Warrant Shares that would be issuable upon
exercise of this Warrant in accordance with the terms of this Warrant if
such exercise were by means of a cash exercise rather than a cashless
exercise. |
1.4
Delivery of Warrant Shares. Warrant Shares purchased hereunder will be
delivered to Holder by 2:30 pm EST within two (2) business days of Notice of
Exercise by DWAC/FAST electronic transfer (such date, the Warrant Share
Delivery Date). For example, if Holder delivers a Notice of Exercise to the
Company at 5:15 pm eastern time on Monday January 1st, the Companys
transfer agent must deliver shares to Holders broker via DWAC/FAST electronic
transfer by no later than 2:30 pm eastern time on Wednesday January
3rd. The Warrant Shares shall be deemed to have been issued, and
Holder or any other person so designated to be named therein shall be deemed to
have become a holder of record of such shares for all purposes, as of the date
of delivery of the Notice of Exercise. Holder may assess penalties or liquidated
damages (both referred to herein as penalties) as follows. For each exercise,
in the event that shares are not delivered by the third business day (inclusive
of the day of exercise), the Company shall pay the Holder in cash a penalty of
$2,000 per day for each day after the third business day (inclusive of the day
of exercise) until share delivery is made. The Company will not be subject to
any penalties once its transfer agent correctly processes the shares to the DWAC
system. The Company will make its best efforts to deliver the Warrant Shares
to the Holder the same day or next day.
1.5
Delivery of Warrant. The Holder shall not be required to physically
surrender this Warrant to the Company. If the Holder has purchased all of the
Warrant Shares available hereunder and the Warrant has been exercised in full,
this Warrant shall automatically be cancelled without the need to surrender the
Warrant to the Company for cancellation. If this Warrant shall have been
exercised in part, the Company shall, at the request of Holder and upon
surrender of this Warrant, at the time of delivery of the Warrant Shares,
deliver to the Holder a new Warrant evidencing the rights of the Holder to
purchase the unpurchased Warrant Shares called for by this Warrant, which new
Warrant shall in all other respects be identical with this Warrant and, for
purposes of Rule 144, shall tack back to the original date of this Warrant.
1.6
Warrant Exercise Rescission Rights. For any reason in Holders sole
discretion, including if the Warrant Shares are not delivered by DWAC/FAST
electronic transfer or in accordance with the timeframe stated in Section 1.4,
or for any other reason, Holder may, at any time prior to selling those Warrant
Shares rescind such exercise, in whole or in part, in which case the Company
must, within three (3) days of receipt of notice from the Holder, repay to the
Holder the portion of the exercise price so rescinded and reinstate the portion
of the Warrant and equivalent number of Warrant Shares for which the exercise
was rescinded and, for purposes of Rule 144, such reinstated portion of the
Warrant and the Warrant Shares shall tack back to the original date of this
Warrant. If Warrant Shares were issued to Holder prior to Holders rescission
notice, upon return of payment from the Company, Holder will, within three (3)
days of receipt of payment, commence procedures to return the Warrant Shares to
the Company.
1.7
Compensation for Buy-In on Failure to Timely Deliver Certificates Upon
Exercise. In addition to any other rights available to the Holder, if the
Company fails to cause its transfer agent to transmit to the Holder the Warrant
Shares on or before the Warrant Share Delivery Date, and if after such date the
Holder is required by its broker to purchase (in an open market transaction or
otherwise) or the Holders brokerage firm otherwise purchases, shares of Common
Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares
which the Holder anticipated receiving upon such exercise (a Buy-In),
then the Company shall (A) pay in cash to the Holder the amount, if any, by
which (x) the Holders total purchase price (including brokerage commissions and
other fees, if any) for the shares of Common Stock so purchased exceeds (y) the
amount obtained by multiplying (1) the number of Warrant Shares that the Company
was required to deliver to the Holder in connection with the exercise at issue
times (2) the price at which the sell order giving rise to such
purchase obligation was executed, and (B) at the option of the Holder, either
(x) reinstate the portion of the Warrant and equivalent number of Warrant Shares
for which such exercise was not honored (in which case such exercise shall be
deemed rescinded), (y) deliver to the Holder the number of shares of Common
Stock that would have been issued had the Company timely complied with its
exercise and delivery obligations hereunder, or (z) pay in cash to the Holder
the amount obtained by multiplying (1) the number of Warrant Shares that the
Company was required to deliver to the Holder in connection with the exercise at
issue times (2) the price at which the sell order giving rise to such purchase
obligation was executed. The Holder shall provide the Company written notice
indicating the amounts payable to the Holder in respect of the Buy-In and, upon
request of the Company, evidence of the amount of such loss.
2
1.8
Make-Whole for Market Loss after Exercise. At the Holders election, if
the Company fails for any reason to deliver to the Holder the Warrant Shares by
DWAC/FAST electronic transfer (such as by delivering a physical certificate) and
if the Holder incurs a Market Price Loss, then at any time subsequent to
incurring the loss the Holder may provide the Company written notice indicating
the amounts payable to the Holder in respect of the Market Price Loss and the
Company must make the Holder whole as follows:
Market Price Loss = [(High trade price
on the day of exercise) x (Number of Warrant Shares)] [(Sales price realized
by Holder) x (Number of Warrant Shares)]
The Company must pay the Market Price
Loss by cash payment, and any such cash payment must be made by the third
business day from the time of the Holders written notice to the Company.
1.9
Make-Whole for Failure to Deliver Loss. At the Holders election, if the
Company fails for any reason to deliver to the Holder the Warrant Shares by the
Warrant Share Delivery Date and if the Holder incurs a Failure to Deliver Loss,
then at any time the Holder may provide the Company written notice indicating
the amounts payable to the Holder in respect of the Failure to Deliver Loss and
the Company must make the Holder whole as follows:
Failure to Deliver Loss = [(High trade
price at any time on or after the day of exercise) x (Number of Warrant Shares)]
The Company must pay the Failure to
Deliver Loss by cash payment, and any such cash payment must be made by the
third business day from the time of the Holders written notice to the Company.
1.10
Choice of Remedies. Nothing herein, including, but not limited to,
Holders electing to pursue its rights under Sections 1.8 or 1.9 of this
Warrant, shall limit a Holders right to pursue any other remedies available to
it hereunder, at law or in equity including, without limitation, a decree of
specific performance and/or injunctive relief with respect to the Companys
failure to timely deliver shares of Common Stock upon exercise of the Warrant as
required pursuant to the terms hereof.
1.11
Charges, Taxes and Expenses. Issuance of Warrant Shares shall be made
without charge to the Holder for any issue or transfer tax or other incidental
expense in respect of the issuance of such shares, all of which taxes and
expenses shall be paid by the Company, and such Warrant Shares shall be issued
in the name of the Holder or in such name or names as may be directed by the
Holder. The Company shall pay all transfer agent fees required for same-day
processing of any Notice of Exercise.
1.12
Holders Exercise Limitations. Unless otherwise agreed in writing by both
the Company and the Holder, at no time will the Holder exercise any amount of
this Warrant to purchase Common Stock that would result in the Holder owning
more than 4.99% of the Common Stock outstanding of the Company (the
Beneficial Ownership Limitation). Upon the written or oral
request of Holder, the Company shall within twenty-four (24) hours confirm
orally and in writing to the Holder the number of shares of Common Stock then
outstanding.
3
ARTICLE 2 ADJUSTMENTS
2.1
Stock Dividends and Splits. If the Company, at any time while this
Warrant is outstanding: (i) pays a stock dividend or otherwise makes a
distribution or distributions on shares of its Common Stock or any other equity
or equity equivalent securities payable in shares of Common Stock (which, for
avoidance of doubt, shall not include any shares of Common Stock issued by the
Company upon exercise of this Warrant), (ii) subdivides outstanding shares of
Common Stock into a larger number of shares, (iii) combines (including by way of
reverse stock split) outstanding shares of Common Stock into a smaller number of
shares or (iv) issues by reclassification of shares of the Common Stock any
shares of capital stock of the Company, then in each case the Exercise 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
immediately before such event and of which the denominator shall be the number
of shares of Common Stock outstanding immediately after such event, and the
number of shares issuable upon exercise of this Warrant shall be proportionately
adjusted such that the aggregate Exercise Price of this Warrant shall remain
unchanged. Any adjustment made pursuant to this Section 2.1 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.
2.2
Subsequent Equity Sales. If the Company or any Subsidiary thereof, as
applicable, at any time while this Warrant is outstanding, shall sell or grant
any option to purchase, or sell or grant any right to reprice, or otherwise
dispose of or issue (or announce any offer, sale, grant or any option to
purchase or other disposition) any Common Stock or any security entitling the
holder thereof (including sales or grants to the Holder) to acquire Common
Stock, including, without limitation, any debt, preferred stock, right, option,
warrant or other instrument that is convertible into or exercisable or
exchangeable for, or otherwise entitles the holder thereof to receive, Common
Stock (a Common Stock Equivalent), at an effective price per share less
than the Exercise Price then in effect (such lower price, the Base Share
Price and such issuances collectively, a Dilutive Issuance) (it
being understood and agreed that if the holder of the Common Stock or Common
Stock Equivalents 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 are
issued in connection with such issuance, be entitled to receive shares of Common
Stock at an effective price per share that is less than the Exercise Price, such
issuance shall be deemed to have occurred for less than the Exercise Price on
such date of the Dilutive Issuance at such effective price regardless of whether
such holder has received or ever receives shares at such effective price), then
simultaneously with the consummation of each Dilutive Issuance the Exercise
Price shall be reduced and only reduced to equal the Base Share Price and
consequently the number of Warrant Shares issuable hereunder shall be increased
such that the Aggregate Exercise Amount hereunder, after taking into account the
decrease in the Exercise Price, shall be equal to the Aggregate Exercise Amount
prior to such adjustment. Such adjustment shall be made whenever such Common
Stock or Common Stock Equivalents are issued. The Company shall notify the
Holder, in writing, no later than the business day following the issuance or
deemed issuance of any Common Stock or Common Stock Equivalents subject to this
Section 2.2, indicating therein the applicable issuance price, or applicable
reset price, exchange price, conversion price and other pricing terms (such
notice, the Dilutive Issuance Notice). In addition, the Company
shall provide the Holder, whenever the Holder requests at any time while this
Warrant is outstanding, a schedule of all issuances of Common Stock or Common
Stock Equivalents since the date of the Agreement, including the applicable
issuance price, or applicable reset price, exchange price, conversion price,
exercise price and other pricing terms. The term issuances shall also include
all agreements to issue, or prospectively issue Common Stock or Common Stock
Equivalents, regardless of whether the issuance contemplated by such agreement
is consummated. The Company shall notify the Holder in writing of any issuances
within twenty-four (24) hours of such issuance. For purposes of clarification,
whether or not the Company provides a Dilutive Issuance Notice pursuant to this
Section 2.2, upon the occurrence of any Dilutive Issuance, the Holder is
entitled to receive a number of Warrant Shares based upon the Base Share Price
regardless of whether the Holder accurately refers to the Base Share Price in
the Notice of Exercise. If the Company enters into a Variable Rate Transaction,
the Company shall be deemed to have issued Common Stock or Common Stock
Equivalents at the lowest possible conversion or exercise price at which such
securities may be converted or exercised. Variable Rate
Transaction means a transaction in which the Company (i) issues or sells
any debt or equity securities that are convertible into, exchangeable or
exercisable for, or include the right to receive, additional shares of Common
Stock either (A) at a conversion price, exercise price or exchange rate or other
price that is based upon, and/or varies with, the trading prices of or
quotations for the shares of Common Stock at any time after the initial issuance
of such debt or equity securities or (B) with a conversion, exercise or
exchange price that is subject to being reset at some future date after the
initial issuance of such debt or equity security or upon the occurrence of
specified or contingent events directly or indirectly related to the business of
the Company or the market for the Common Stock or (ii) enters into any
agreement, including, but not limited to, an equity line of credit, whereby the
Company may sell securities at a future determined price.
4
2.3
Pro Rata Distributions. If the Company, at any time while this Warrant is
outstanding, shall distribute to all holders of Common Stock (and not to the
Holder) evidences of its indebtedness or assets (including cash and cash
dividends) or rights or warrants to subscribe for or purchase any security other
than the Common Stock, then in each such case the Exercise Price shall be
adjusted by multiplying the Exercise 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 VWAP determined
as of the record date mentioned above, and of which the numerator shall be such
VWAP on such record date less the then per share fair market value at such
record date of the portion of such assets or evidence of indebtedness or rights
or warrants 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.
2.4
Notice to Holder. Whenever the Exercise Price is adjusted pursuant to any
provision of this Article 2, the Company shall promptly notify the Holder (by
written notice) setting forth the Exercise Price after such adjustment and any
resulting adjustment to the number of Warrant Shares and setting forth a brief
statement of the facts requiring such adjustment.
ARTICLE 3 COMPANY COVENANTS
3.1
Reservation of Shares. As of the issuance date of this Warrant and for
the remaining period during which the Warrant is exercisable, the Company will
reserve from its authorized and unissued Common Stock a sufficient number of
shares to provide for the issuance of Warrant Shares upon the full exercise of
this Warrant. The Company represents that upon issuance, such Warrant Shares
will be duly and validly issued, fully paid and non-assessable. The Company
agrees that its issuance of this Warrant constitutes full authority to its
officers, agents and transfer agents who are charged with the duty of executing
and issuing shares to execute and issue the necessary Warrant Shares upon the
exercise of this Warrant. No further approval or authority of the stockholders
of the Board of Directors of the Company is required for the issuance of the
Warrant Shares.
3.2
No Adverse Actions. Except and to the extent as waived or consented to by
the Holder, the Company shall not by any action, including, without limitation,
amending its certificate of incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms of this Warrant, but will at all times in
good faith assist in the carrying out of all such terms and in the taking of all
such actions as may be necessary or appropriate to protect the rights of Holder
as set forth in this Warrant against impairment. Without limiting the generality
of the foregoing, the Company will (i) not increase the par value of any Warrant
Shares above the amount payable therefor upon such exercise immediately prior to
such increase in par value, (ii) take all such action as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid
and non-assessable Warrant Shares upon the exercise of this Warrant and (iii)
use commercially reasonable efforts to obtain all such authorizations,
exemptions or consents from any public regulatory body having jurisdiction
thereof, as may be, necessary to enable the Company to perform its obligations
under this Warrant.
ARTICLE 4 MISCELLANEOUS
4.1
Representation by the Holder. The Holder, by the acceptance hereof,
represents and warrants that it is acquiring this Warrant and, upon any exercise
hereof, will acquire the Warrant Shares issuable upon such exercise, for its own
account and not with a view to or for distributing or reselling such Warrant
Shares or any part thereof in violation of the Securities Act or any applicable
state securities law, except pursuant to sales registered or exempted under the
Securities Act.
5
4.2
Transferability. Subject to compliance with any applicable securities
laws, this Warrant and all rights hereunder (including, without limitation, any
registration rights) are transferable, in whole or in part, by a written
assignment of this Warrant duly executed by the Holder or its agent or attorney.
If necessary to obtain a new warrant for any assignee, the Company, upon
surrender of this Warrant, shall execute and deliver a new Warrant or Warrants
in the name of the assignee or assignees, as applicable, and in the denomination
or denominations specified in such instrument of assignment, and shall issue to
the assignor a new Warrant evidencing the portion of this Warrant not so
assigned, and such new Warrants, for purposes of Rule 144, shall tack back to
the original date of this Warrant. The Warrant, if properly assigned in
accordance herewith, may be exercised by a new holder for the purchase of
Warrant Shares without having a new Warrant issued.
4.3
Assignability. The Company may not assign this Warrant. This Warrant will
be binding upon the Company and its successors, and will inure to the benefit of
the Holder and its successors and assigns, and may be assigned by the Holder to
anyone of its choosing without the Companys approval.
4.4
Notices. Any notice required or permitted hereunder must be in writing
and either personally served, sent by facsimile or email transmission, or sent
by overnight courier. Notices will be deemed effectively delivered at the time
of transmission if by facsimile or email, and if by overnight courier the
business day after such notice is deposited with the courier service for
delivery.
4.5
Governing Law. This Warrant will be governed by, and construed and
enforced in accordance with, the laws of the State of Nevada, without regard to
the conflict of laws principles thereof. Any action brought by either party
against the other concerning the transactions contemplated by this Warrant shall
be brought only in the state courts of Nevada or in the federal courts located
in the State of Nevada. Both parties and the individuals signing this Agreement
agree to submit to the jurisdiction of such courts.
4.6
Delivery of Process by Holder to the Company. In the event of any action
or proceeding by Holder against the Company, and only by Holder against the
Company, service of copies of summons and/or complaint and/or any other process
which may be served in any such action or proceeding may be made by Holder via
overnight delivery service such as FedEx or UPS, process server, or by personal
delivery of a copy of such process to the Company at its last known address or
to its last known attorney set forth in its most recent SEC filing.
4.7
No Rights as Stockholder Until Exercise. This Warrant does not entitle
the Holder to any voting rights, dividends or other rights as a stockholder of
the Company prior to the exercise hereof as set forth in Section 1.1. So long as
this Warrant is unexercised, this Warrant carries no voting rights and does not
convey to the Holder any control over the Company, as such term may be
interpreted by the SEC under the Securities Act or the Exchange Act, regardless
of whether the price of the Companys Common Stock exceeds the Exercise Price.
4.8
Limitation of Liability. No provision hereof, in the absence of any
affirmative action by the Holder to exercise this Warrant to purchase Warrant
Shares, and no enumeration herein of the rights or privileges of the Holder,
shall give rise to any liability of the Holder for the purchase price of any
Common Stock or as a stockholder of the Company, whether such liability is
asserted by the Company or by creditors of the Company.
4.9
Attorney Fees. In the event any attorney is employed by either party to
this Warrant with regard to any legal or equitable action, arbitration or other
proceeding brought by such party for the enforcement of this Warrant or because
of an alleged dispute, breach, default or misrepresentation in connection with
any of the provisions of this Warrant, the prevailing party in such proceeding
will be entitled to recover from the other party reasonable attorneys fees and
other costs and expenses incurred, in addition to any other relief to which the
prevailing party may be entitled.
4.10
Opinion of Counsel. In the event that an opinion of counsel is needed for
any matter related to this Warrant, Holder has the right to have any such
opinion provided by its counsel. Holder also has the right to have any such
opinion provided by the Companys counsel.
4.11
Nonwaiver. No course of dealing or any delay or failure to exercise any
right hereunder on the part of Holder shall operate as a waiver of such right or
otherwise prejudice the Holders rights, powers or remedies.
6
4.12
Amendment Provision. The term Warrant and all references thereto, as
used throughout this instrument, means this instrument as originally executed,
or if later amended or supplemented, then as so amended or supplemented.
4.13
No Shorting. Holder agrees that so long as this Warrant remains
unexercised in whole or in part, Holder will not enter into or effect any short
sale of the common stock or hedging transaction which establishes a net short
position with respect to the common stock of the Company. The Company
acknowledges and agrees that as of the date of delivery to the Company of a
fully and accurately completed Notice of Exercise, Holder immediately owns the
common shares described in the Notice of Exercise and any sale of those shares
issuable under such Notice of Exercise would not be considered short sales.
* * *
IN
WITNESS WHEREOF, the Company has caused this Warrant to be executed by its
officer thereunto duly authorized as of the date first above indicated.
LITHIUM EXPLORATION GROUP, INC.
|
By: |
/s/ Alexander Walsh |
|
|
Alexander Walsh |
|
|
President |
|
HOLDER: |
|
JDF CAPITAL INC. |
|
|
|
/s/ John Fierro |
|
John Fierro, President |
8
NOTICE OF EXERCISE
TO: LITHIUM
EXPLORATION GROUP, INC.
(1)
The undersigned hereby elects to purchase ________ Warrant Shares of the Company
pursuant to the terms of the attached Warrant (only if exercised in full), and
tenders herewith payment of the exercise price in full, together with all
applicable transfer taxes, if any.
(2) Payment shall take the form of (check applicable box):
[ ] in lawful money of the
United States; or
[ ] the cancellation of
such number of Warrant Shares as is necessary, in accordance with the formula
set forth in Section 1.3, to exercise this Warrant with respect to the maximum
number of Warrant Shares purchasable pursuant to the cashless exercise procedure
set forth in Section 1.3.
(3)
Please issue a certificate or certificates representing said Warrant Shares in
the name of the undersigned or in such other name as is specified below:
_______________________________
The Warrant Shares shall be delivered to the following DWAC
Account Number:
_______________________________
_______________________________
_______________________________
(4) Accredited Investor. The undersigned is an accredited investor as
defined in Regulation D promulgated under the Securities Act of 1933, as
amended.
[SIGNATURE OF HOLDER]
Name: _______________________________________
Date:
________________________________________
EXHIBIT A TO SECURED CONVERTIBLE PROMISSORY NOTE G
ENERAL SECURITY AGREEMENT
THIS SECURITY AGREEMENT made as of the 22nd day of July, 2014.
AMONG:
ALTA DISPOSAL LTD.,
(the "Guarantor")
AND:
JDF Capital Inc.
(the "Secured Party")
WHEREAS:
(A) As evidenced by a Secured Promissory Note dated for
reference July 21, 2014, (as the same may be amended, supplemented, extended,
renewed, restated, replaced or superseded from time to time, the Promissory
Note) between Lithium Exploration Group Inc. (the Debtor), as
borrower, and the Secured Party, as lender, the Debtor has obtained a loan in
the aggregate principal amount of US $708,000;
(B) As a material inducement to the Secured Party to purchase
the Promissory Note, the Guarantor has agreed to provide a security agreement
securing the loan documented by the Promissory Note.
FOR VALUE RECEIVED, the Guarantor covenants, agrees, warrants,
represents, acknowledges, and confirms to and with the Secured Party and creates
and grants the mortgages, charges, transfers, assignments, and security
interests as follows:
1. Security Interest
As security for the payment and performance of the Obligations
(as defined in paragraph 3), the Guarantor, subject to the exceptions set out in
paragraph 2, does:
1.1 Grant to the Secured Party a security interest in, and
mortgages, charges, transfers and assigns absolutely, all of the Guarantor 's
present and after acquired personal property, and all personal property in which
the Guarantor has rights, of whatever nature or kind and wherever situate,
including, without limitations, all of the following now owned or in future
owned or acquired by or on behalf of the Guarantor;
- 2 -
|
(a) |
all goods, including: |
|
|
|
|
|
|
(i) |
all inventory of whatever kind and wherever situate,
including, without limitation, goods acquired or held for sale or lease or
furnished or to be furnished under contracts of rental or service, all raw
materials, work in progress, finished goods, returned goods, repossessed
goods and all packaging materials, supplies, and containers relating to or
used or consumed in connection with any of the foregoing (collectively the
"Inventory"); |
|
|
|
|
|
|
(ii) |
all equipment of whatever kind and wherever situate,
including, without limitation, all machinery, tools, apparatus, plant,
fixtures, furniture, furnishings, chattels, motor vehicles, vessels, and
other tangible personal property of whatever nature or kind (collectively
the "Equipment"); |
|
|
|
|
|
(b) |
all book accounts and book debts and generally all
accounts, debts, dues, claims, choses in action, and demands of every
nature and kind however arising or secured including letters of credit and
advices of credit, which are now due, owing, or accruing, or growing due
to, or owned by, or which may in future become due, owing, or accruing, or
growing due to, or owned by the Guarantor (the "Accounts"); |
|
|
|
|
|
(c) |
all contractual rights, insurance, claims, licences,
goodwill, patents, trademarks, trade names, copyrights, and other
industrial or intellectual property of the Guarantor or in which the
Guarantor has an interest, all other choses in action of the Guarantor of
every kind which now are, or which may in future be, due or owing to or
owned by the Guarantor, and all other intangible property of the Guarantor
which is not Accounts, Chattel Paper, Instruments, Documents of Title,
Securities, or Money; |
|
|
|
|
|
(d) |
all Money; |
|
|
|
|
|
(e) |
all property described in Schedule A to this Agreement,
or in any schedule now or at any time in future annexed to this Agreement
or agreed to form part of this Agreement; |
|
|
|
|
|
(f) |
the undertaking of the Guarantor; |
|
|
|
|
|
(g) |
all Chattel Paper, Documents of Title (whether negotiable
or not), Instruments, Intangibles, and Securities now owned or in future
owned or acquired by or on behalf of the Guarantor (including those
returned to or repossessed by the Guarantor) and all other goods of the
Guarantor that are not Equipment, Inventory, or Accounts; |
|
|
|
|
|
(h) |
all deeds, documents, writings, papers, books of account,
and other books and electronically recorded data relating too any of the
foregoing or by which any of the foregoing is or may in future be
secured, evidenced, acknowledged, or made payable; and |
- 3 -
|
(i) |
all renewals, accretions and substitutions of any of the
foregoing and all after acquired personal property and fixtures and crops
in any form derived directly or indirectly from any dealing with the
Collateral or Proceeds, including rights to insurance payments and any
other payments representing indemnity or compensation for loss or damage
to Collateral or Proceeds. |
1.2 The security interests created or granted under section 1.1
of this Agreement are collectively called the "Security Interest", and all
property, assets, interests, and undertakings (including Proceeds) subject to
the Security Interest or otherwise charged or secured by this Agreement or
expressed to be charged, assigned or transferred, or secured by any instruments
supplemental to this Agreement or in implementation of this Agreement are
collectively called the "Collateral".
2. Exceptions and Definitions
2.1 The Security Interest granted by this Agreement shall not
extend or apply to and the Collateral shall not extend to the last day of the
term of any lease or agreement to lease real property, but upon the enforcement
of the Security Interest the Guarantor shall stand possessed of such last day in
trust to assign and dispose thereof as the Secured Party shall direct.
2.2 The Security Interests shall not render the Secured Party
liable to observe or perform any term or covenant or condition of any agreement,
document or instrument to which the Guarantor is a party or by which it is
bound. In addition, the Security Interests do not and shall not extend to, and
the Collateral shall not include, any agreement, right, franchise, licence or
permit (the Contractual Rights) to which the Guarantor is a party or of
which the Guarantor has the benefit, to the extent that the creation of the
Security Interests herein would constitute a breach of the terms of or permit
any person to terminate the Contractual Rights, but the Guarantor shall hold its
interest therein in trust for the Secured Party and shall assign such
Contractual Rights to the Secured Party forthwith upon obtaining the consent of
all other parties thereto. The Guarantor agrees that it shall, if required by
the Secured Party, use commercially reasonable efforts to obtain any consent
required to permit any Contractual Rights to be subject to the Security
Interests herein.
2.3 All Consumer Goods are excepted from the Security Interest.
2.3 The terms "Chattel Paper", "Document of title",
"Equipment", "Consumer Goods", "Instrument", "Intangible", "Security",
"Proceeds", "Inventory", "Accessions", "Money", "financing statement",
"financing change statement" and "verification statement" shall, unless
otherwise defined in this Agreement or otherwise required by the context, be interpreted according to their
respective meanings as set out in the Province of Alberta Personal Property
Security Act, as amended.
- 4 -
2.4 Any reference in this Agreement to "Collateral" shall,
unless the context otherwise requires, be deemed a reference to "Collateral or
any part thereof". The Collateral shall not include consumer goods of the
Guarantor.
2.5 The term "Proceeds", whenever used and interpreted as
above, shall by way of example include trade-ins, equipment, cash, bank
accounts, notes, chattel paper, goods, contract rights, accounts, and any other
personal property or obligation received when such collateral or proceeds are
sold, exchanged, collected, or otherwise disposed of. The term "licence" means
any licence or similar right at any time owned or held by the Guarantor
including without limitation a "licence" as defined in the Act, and the meaning
of the term "crops" whenever used in this Agreement includes but is not limited
to "crops" as defined in the Act.
3. Obligations Secured
This Agreement and the Security Interest are in addition to and
not in substitution for any other security interest now or in future held by the
Secured Party from the Guarantor, or from any other person and shall be general
and continuing security for the payment of all indebtedness and liability of the
Guarantor to the Secured Party (including interest thereon), present or future,
absolute or contingent, joint or several, direct or indirect, matured or not,
extended or renewed, wherever and however incurred, and any ultimate balance
thereof, including all advances on current or running account and all future
advances and re-advances, and whether the same is from time to time reduced and
thereafter increased or entirely extinguished and thereafter incurred again, and
whether the Guarantor be bound alone or with another or others, and whether as
principal or surety, and for the performance and satisfaction of all obligations
of the Guarantor to the Secured Party, whether or not contained in this
Agreement or Promissory Note (all of which indebtedness, liability, and
obligations are collectively the "Obligations").
4. Covenants of Guarantor
|
|
The Guarantor covenants and agrees with the Secured
Party: |
|
|
|
|
(a) |
not to change its name, its principal place of business,
its chief executive office or the location of any of the Collateral
without giving 15 days prior written notice thereof to the Secured
Party; |
|
|
|
|
(b) |
not to sell, exchange, transfer, assign, lease or
otherwise dispose of or deal in any way with Collateral or release,
surrender or abandon possession of Collateral or move or transfer
Collateral, or enter into any agreement or undertaking to do any of the
foregoing; |
- 5 -
|
(c) |
not to create or permit to exist any encumbrance against
any of the Collateral except the Security Interests created by this
Agreement and other Permitted Encumbrances; |
|
|
|
|
(d) |
to defend the title to the Collateral for the benefit of
the Secured Party against all claims and demands; |
|
|
|
|
(e) |
to promptly pay when due all taxes, assessments, rates,
levies, payroll deductions, workers compensation assessments, and any
other charges which could result in the creation of a statutory lien or
deemed trust in respect of the Collateral; |
|
|
|
|
(f) |
to do, make, execute and deliver such further and other
assignments, transfers, deeds, security agreements and other documents as
may be required by the Secured Party to establish in favour of the Secured
Party and perfect the Security Interests intended to be created hereby and
to accomplish the intention of this Agreement and, if requested by the
Secured Party, to specifically assign to the Secured Party, the
Guarantors rights and interests (but not the Guarantors obligations)
under any contracts to which the Guarantor is a party; |
|
|
|
|
(g) |
to pay all expenses, including reasonable solicitors
fees and disbursements, receivers fees and disbursements, and accounting
fees and disbursements incurred by or on behalf of the Secured Party, its
secured parties, or any Receiver, as hereinafter defined, in connection
with inspecting the Collateral, investigating title to the Collateral, the
preparation, perfection, preservation, and enforcement of this Agreement,
including taking, recovering and keeping possession of the Collateral and
all expenses incurred by or on behalf of the Secured Party or such Secured
Partys or any Receiver in dealing with other creditors of the Guarantor
in connection with the establishment and confirmation of the priority of
the Security Interests, all of which expenses shall be payable forthwith
upon demand with interest at the rate specified in the Promissory Note and
shall form part of the Obligations; and |
|
|
|
|
(h) |
to observe and perform all of its obligations under or in
connection with any other security agreement creating a security interest
over the Collateral or any part thereof. |
5. Attachment
|
|
The Guarantor acknowledges and confirms that: |
|
|
|
|
(a) |
there is no intention to delay the time of attachment of
the Security Interest created by this Agreement, and the Security Interest
shall attach at the earliest time permissible under the laws governing
this Agreement; |
- 6 -
|
(b) |
that value has been given; and |
|
|
|
|
(c) |
that the Guarantor has (or in the case of any after
acquired property, will have at the time of acquisition) rights in the
Collateral. |
6. Use and Verification of Collateral
The Guarantor may, until default, possess, operate, collect,
use and enjoy, and deal with the Collateral in the ordinary course of the
Guarantor 's business in any manner not inconsistent with the provisions of this
Agreement; provided always that the Secured Party shall have the right at any
time and from time to time to verify the existence and state of the Collateral
in any manner the Secured Party may consider appropriate. The Guarantor agrees
to furnish all assistance and information and to perform all such acts as the
Secured Party may reasonably request in connection therewith, and for such
purposes to grant to the Secured Party or its agents access to all places where
the Collateral may be located and to all premises occupied by the Guarantor.
7. Income from and Interest on Collateral
7.1 Until an Event of Default, the Guarantor reserves the right
to receive any money constituting income from or interest on Collateral and if
the Secured Party receives any money before the occurrence of an Event of
Default, the Secured Party shall either credit that money against the
Obligations or pay it promptly to the Guarantor.
7.2 After the occurrence of an Event of Default, the Guarantor
shall not request or receive any money constituting income from or interest on
Collateral and if the Guarantor receives any such money in any event, the
Guarantor shall hold that money in trust for the Secured Party and shall pay it
promptly to the Secured Party.
8. Disposition of Monies
Subject to any applicable requirements of the Act, all monies
collected or received by the Secured Party under or in exercise of any right it
possesses with respect to Collateral shall be applied on account of the
Obligations in such manner as the Secured Party deems best or, at the option of
the Secured Party, may be held unappropriated in a collateral account or
released to the Guarantor, all without prejudice to the liability of the
Guarantor or the rights of the Secured Party under this Agreement, and any
surplus shall be accounted for as required by law.
9. Performance of Obligations
If the Guarantor fails to perform any of its obligations under
this Agreement, the Secured Party may, but shall not be obliged to, perform any
or all of those obligations without prejudice to any other rights and remedies
of the Secured Party under this Agreement.
- 7 -
10. Default
10.1 Unless waived by the Secured Party, it shall be an event
of default (an Event of Default) under this Agreement and the security
constituted by this Agreement shall become enforceable if:
|
(a) |
an Event of Default (as that term is defined in the
Promissory Note) occurs under the Promissory Note; |
|
|
|
|
(b) |
any term, covenant, or representation set out in this
Agreement breached or if an Event of Default occurs under this Agreement;
or |
|
|
|
|
(c) |
any amount owed to the Secured Party is not paid when
due; or |
|
|
|
|
(d) |
the Guarantor declares itself to be insolvent, makes an
assignment for the benefit of its creditors, is declared bankrupt,
declares bankruptcy, makes a proposal, or otherwise takes advantage of
provisions under the Bankruptcy and Insolvency Act, the Companies
Creditors' Arrangement Act, or similar legislation in any jurisdiction, or
fails to pay its debts generally as they become due; or |
|
|
|
|
(e) |
a receiver or receiver-manager is
appointed. |
11. Enforcement
11.1 Upon the occurrence and during the continuance of an Event
of Default under this Agreement, the Obligations shall, at the option of the
Secured Party, be immediately due and payable and the Security Interests granted
hereby shall, at the option of the Secured Party, become immediately
enforceable. To enforce and realize on the security constituted by this
Agreement, the Secured Party may take any action permitted by law or in equity,
as it may deem expedient, and in particular, but without limiting the generality
of the foregoing, the Secured Party may do any of the following:
|
(a) |
appoint by instrument a receiver, receiver and manager,
or receiver- manager (the person so appointed is called the "Receiver") of
the Collateral, with or without bond as the Secured Party may determine,
and from time to time in its absolute discretion remove such Receiver and
appoint another in its stead; |
|
|
|
|
(b) |
enter upon any premises of the Guarantor and take
possession of the Collateral with power to exclude the Guarantor, its
agents, and its servants from those premises, without becoming liable as a
mortgagee in possession; |
|
|
|
|
(c) |
preserve, protect, and maintain the Collateral and make
such replacements and repairs and additions as the Secured Party may deem
advisable; |
- 8 -
|
(d) |
sell, lease, or otherwise dispose of all or any part of
the Collateral, whether by public or private sale or lease or otherwise,
in such manner, at such price as can be reasonable obtained, and on such
terms as to credit and with such conditions of sale and stipulations as to
title or conveyance or evidence of title or otherwise as the Secured Party
may deem reasonable, provided that if any sale, lease or other disposition
is on credit, the Guarantor shall not be entitled to be credited with the
proceeds of any such sale, lease or other disposition until the monies
therefor are actually received; |
|
|
|
|
(i) |
exercise any of the powers set out in this Section 11.1,
without the appointment of a Receiver; |
|
|
|
|
(j) |
institute proceedings in any court of competent
jurisdiction for the appointment of a Receiver or for the sale of the
Collateral; |
|
|
|
|
(k) |
file proofs of claim and other documents in order to have
the claims of the Secured Party lodged in any bankruptcy, winding-up, or
other judicial proceeding relating to each Guarantor; |
|
|
|
|
(e) |
exercise all of the rights and remedies of a secured
party under the Act. |
11.2 Any Receiver appointed by the Secured Party may be any
person licensed as a trustee under the Bankruptcy and Insolvency Act
(Canada), and the Secured Party may remove any Receiver so appointed and appoint
another or others instead. Any Receiver appointed shall act as Secured Party for
the Guarantor for all purposes, including the occupation of any premises of the
Guarantor and in carrying on Guarantors business and the Secured Party shall
not be liable for any act or omission of any Receiver. Guarantor agrees to
ratify and confirm all actions of the Receiver and to release and indemnify the
Receiver and the Secured Party in respect of all such actions. Any Receiver so
appointed shall have the power:
|
(a) |
to enter upon, use, and occupy all premises owned or
occupied by the Guarantor; |
|
|
|
|
(b) |
to take possession of the Collateral; |
|
|
|
|
(c) |
to carry on the business of the Guarantor; |
|
|
|
|
(d) |
to borrow money required for the maintenance,
preservation or protection of the Collateral or for the carrying on of the
business of the Guarantor, and in the discretion of such Receiver, to
charge and grant further security interests in the Collateral in priority
to the Security Interests, as security for the money so
borrowed; |
|
|
|
|
(e) |
to sell, lease, or otherwise dispose of the Collateral in
whole or in part and for cash or credit, or part cash and part credit on
such terms and conditions and in such manner as the Receiver shall
determine in its discretion; |
- 9 -
|
(f) |
to demand, commence, continue or defend any judicial or
administrative proceedings for the purpose of protecting, seizing,
collecting, realizing or obtaining possession or payment of the
Collateral, and to give valid and effectual receipts and discharges
therefor and to compromise or give time for the payment or performance of
all or any part of the Accounts or any other obligation of any third party
to the Guarantor; and |
|
|
|
|
(g) |
to exercise any rights or remedies which could have been
exercised by the Secured Party against the Guarantor or the
Collateral. |
11.3 Subject to the claims, if any, of the creditors of the
Guarantor ranking in priority to this Agreement, all amounts realized from the
disposition of Collateral under this Agreement shall be applied as the Secured
Party, in its absolute discretion, may direct..
Subject to applicable law and the claims, if any, of other
creditors of the Guarantor, any surplus shall be paid to the Guarantor.
11.4 The Guarantor agrees that the Secured Party may exercise
its rights and remedies under this Agreement immediately upon default, except as
may be otherwise provided in the Act, and the Guarantor expressly confirms that,
except as may be otherwise provided in this Agreement or in the Act, the Secured
Party has not given any covenant, express or implied, and is under no obligation
to allow the Guarantor any period of time to remedy any Event of Default before
the Secured Party exercises its rights and remedies under this Agreement.
11.5 The Guarantor hereby irrevocably constitutes and appoints
any officer for the time being of the Secured Party to be, upon the occurrence
and during the continuance of an Event of Default, the true and lawful attorney
of the Guarantor, with full power of substitution, to do, make and execute all
such statements, assignments, documents, acts, matters of things with the right
to use the name of the Guarantor whenever and wherever the officer may deem
necessary or expedient and from time to time to exercise all rights and powers
and to perform all acts of ownership in respect to the Collateral in accordance
with this Agreement.
11.6 The Secured Party shall not be liable for any delay or
failure to enforce any remedies available to it or to institute any proceedings
for such purposes. The Secured Party may waive any Event of Default, provided
that no such waiver shall be binding upon the Secured Party unless in writing
nor shall it affect the rights of the Secured Party in connection with any other
or subsequent Event of Default.
12. Representations of Guarantor
2. The Guarantor represents and warrants that:
- 10 -
|
(a) |
this Agreement is granted in accordance with resolutions
of the directors (and of the shareholders as applicable) of the Guarantor,
and all other matters and things have been done and performed so as to
authorize and make the execution and delivery of this Agreement and the
performance of the obligations of the Guarantor hereunder legal, valid and
binding; |
|
|
|
|
(b) |
it lawfully owns and possesses all presently held
Collateral and has good title thereto, free from all security interests,
charges, encumbrances, liens and claims, save only the permitted
encumbrances set out in Schedule B attached hereto (the Permitted
Encumbrances), and has good right and lawful authority to grant the
Security Interests hereunder, free and clear of all encumbrances other
than the Permitted Encumbrances; and |
|
|
|
|
(c) |
the locations specified in the attached Schedule C with
respect to goods constituting the Collateral and of the business
operations and records of the Guarantor are accurate and
complete. |
13. Deficiency
If the amounts realized from the disposition of the Collateral
are not sufficient to pay the Obligations in full, the Guarantor shall pay to
the Secured Party the amount of such deficiency immediately upon demand for the
same.
14. Rights Cumulative
All rights and remedies of the Secured Party set out in this
Agreement are cumulative, and no right or remedy contained in this Agreement is
intended to be exclusive but each shall be in addition to every other right or
remedy contained in this Agreement or in any existing or future security
agreement or now or in future existing at law, in equity or by statute, or under
any other agreement between the Guarantor and the Secured Party that may be in
effect from time to time.
15. Liability of Secured Party
The Secured Party shall not be responsible or liable for any
debts contracted by it, for damages to persons or property or for salaries or
non-fulfilment of contracts during any period when the Secured Party shall
manage the Collateral upon entry, as provided in this Agreement, nor shall the
Secured Party be liable to account as mortgagee in possession or for anything
except actual receipts or be liable for any loss on realization or for any
default or omission for which a mortgagee in possession may be liable. The
Secured Party shall not be bound to do, observe or perform or to see to the
observance or performance by the Guarantor of any obligations or covenants
imposed upon the Guarantor, nor shall the Secured Party, in the case of
Securities, Instruments, or Chattel Paper, be obliged to preserve rights against
other persons, nor shall the Secured Party be obliged to keep any of the
Collateral identifiable. The Guarantor waives any applicable provision of law
permitted to be waived by it which imposes higher or greater obligations upon the Secured Party
than as contained in this paragraph.
- 11 -
16. Appropriation of Payments
Any and all payments made in respect of the Obligations from
time to time and monies realized from any security interests held therefor
(including monies collected in accordance with or realized on any enforcement of
this Agreement) may be applied to such part or parts of the Obligations as the
Secured Party may see fit, and the Secured Party may at all times and from time
to time change any appropriation as the Secured Party may see fit.
17. Waiver
The Secured Party may from time to time and at any time waive
in whole or in part any right, benefit or default under any paragraph of this
Agreement but any such waiver of any right, benefit, or default on any occasion
shall be deemed not to be a waiver of any such right, benefit, or default
thereafter, or of any other right, benefit or default, as the case may be, and
no delay or omission by the Secured Party in exercising any right or remedy
under this Agreement or with respect to any default shall operate as a waiver
thereof or of any other right or remedy.
18. Notice
Any notice, demand, or other communication required or
permitted to be given under this Agreement shall be effectually made or given if
delivered by prepaid private courier or by facsimile transmission to the address
of each party set out below:
To the Guarantor: |
Alta Disposal Ltd. |
|
200 N. Hayden Road, Suite 235, |
|
Scottsdale, Arizona 858251 |
|
Facsimile No.: 480-641-4794 |
|
Attention: Alex Walsh |
|
|
|
|
To the Secured Party: |
74 West George St |
|
Freehold, New Jersey 07728 |
|
Tel: 718-289-4058 |
|
Fax: 800-319-6863 |
|
Attention: John Fierro |
or to such other address or facsimile number as either party
may designate in the manner set out above. Any notice, demand, or other
communication shall be deemed to have been given and received on the day of
prepaid private courier delivery or facsimile transmission.
- 12 -
19. Extensions
The Secured Party may grant extensions of time and other
indulgences, take and give up security, accept compositions, compound,
compromise, settle, grant releases and discharges, refrain from perfecting or
maintaining perfection of the Security Interest, and otherwise deal with the
Guarantor, account debtors of the Guarantor, sureties, and others and with the
Collateral, the Security Interest, and other security interests as the Secured
Party sees fit without prejudice to the liability of the Guarantor or the
Secured Party's right to hold and realize on the security constituted by this
Agreement.
20. No Merger
This Agreement shall not operate to create any merger or
discharge of any of the Obligations, or of any assignment, transfer, guarantee,
lien, mortgage, contract, promissory note, bill of exchange, or security
interest of any form held or which may in future be held by the Secured Party
from the Guarantor or from any other person. The taking of a judgment with
respect to any of the Obligations shall not operate as a merger of any of the
covenants contained in this Agreement.
21. Satisfaction and Discharge
Any partial payment or satisfaction of the Obligations, or any
ceasing by the Borrower to be indebted to the Secured Party, shall be deemed not
to be a redemption or discharge of this Agreement. The Guarantor shall be
entitled to a release and discharge of this Agreement upon full payment and
satisfaction of all Obligations and upon written request by the Guarantor and
payment to the Secured Party of all costs, charges, expenses, and legal fees and
disbursements (on a solicitor and own client basis) incurred by the Secured
Party in connection with the Obligations and such release and discharge.
22. Enurement
This Agreement shall enure to the benefit of and be binding
upon the parties and their respective heirs, executors, personal
representatives, successors, and permitted assigns.
23. Interpretation
23.1 In this Agreement
|
(a) |
"Act" means the Personal Property Security Act (Alberta)
and all regulations thereunder as amended; |
|
|
|
|
(d) |
The word including, when following any word or
words is not to be construed as limiting the preceding word or words but
the preceding word or words are to be construed as referring to all items
or matters that could fall within the broadest possible interpretation of
the preceding word or words. |
- 13 -
23.2 Words and expressions used in this Agreement that have
been defined in the Act shall be interpreted in accordance with their respective
meanings given in the Act, whether expressed in this Agreement with or without
initial capital letters and whether in the singular or the plural, unless
otherwise defined in this Agreement or unless the context otherwise requires,
and, wherever the context so requires, in this Agreement the singular shall be
read as if the plural were expressed, and vice-versa, and the provisions of this
Agreement shall be read with all grammatical changes necessary dependent upon
the person referred to being a male, female, firm, or corporation.
23.3 Should any provision of this Agreement be declared or held
invalid or unenforceable in whole or in part or against or with respect to the
Guarantor by a court of competent jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of any or all
of the remaining provisions of this Agreement, which shall continue in full
force and effect and be construed as this Agreement had been executed without
the invalid or unenforceable provision.
23.4 The headings of the paragraphs of this Agreement have been
inserted for reference only and do not define, limit, alter, or enlarge the
meaning of any provision of this Agreement.
23.5 This Agreement shall be governed by the laws of the
Province of Alberta.
24. Miscellaneous
24.1 The Guarantor authorizes the Secured Party to file such
financing statements, financing change statements, and other documents, and do
such acts, matters, and things as the Secured Party may deem appropriate, to
perfect on an ongoing basis and continue the Security Interest, to protect and
preserve the Collateral, and to realize upon the Security Interest.
24.2 The Guarantor waives protest of any Instrument
constituting Collateral at any time held by the Secured Party on which the
Guarantor is any way liable and, subject to the provisions of the Act, notice of
any other action taken by the Secured Party.
24.3 The Guarantor covenants that it shall not amalgamate with
any other company or entity without first obtaining the written consent of the
Secured Party. The Guarantor acknowledges and agrees that if it amalgamates with
any other company or companies, then it is the intention of the parties that the
term " Guarantor " when used in this Agreement shall apply to each of the
amalgamating companies and to the amalgamated company, so that the Security
Interest granted by this Agreement:
- 14 -
|
(a) |
shall extend to the "Collateral" (as that term is defined
in this Agreement) owned by each of the amalgamating companies and the
amalgamated company at the time of amalgamation and to any "Collateral"
owned or acquired by the amalgamated company thereafter, and |
|
|
|
|
(b) |
shall secure the "Obligations" (as that term is defined
in this Agreement) of each of the amalgamating companies and the
amalgamated company to the Secured Party at the time of amalgamation and
any "Obligations" of the amalgamated company to the Secured Party arising
thereafter. The Security Interest shall attach to "Collateral" owned by
each company amalgamating with the Guarantor, and by the amalgamated
company, at the time of amalgamation, and shall attach to any "Collateral"
thereafter owned or acquired by the amalgamated company when that
Collateral becomes owned or is acquired. |
24.4 The Guarantor authorizes the Secured Party to provide a
copy of this Agreement and such other information and documents specified under
the Act to any person entitled under the Act to demand and receive them.
25. Copy of Agreement and Financing Statement
|
|
The Guarantor: |
|
|
|
|
(a) |
acknowledges receiving a copy of this Agreement,
and |
|
|
|
|
(b) |
waives all rights to receive from the Secured Party a
copy of any financing statement, financing change statement, or
verification statement filed, issued, or obtained at any time in respect
of this Agreement. |
[Balance of page intentionally left blank]
IN WITNESS WHEREOF the Guarantor has executed this Agreement on
the date indicated above.
ALTA DISPOSAL LTD., by its
authorized signatory:
- 15 -
By: |
/s/ Alexander Walsh |
|
Alexander Walsh |
Its: |
Chief Executive Officer |
|
|
|
|
|
|
|
|
JDF CAPITAL INC., by its |
authorized signatory: |
|
|
|
|
By: |
/s/ John Fierro |
|
John Fierro |
Its: |
President |
- 16 -
Schedule A
Description of Collateral
Alta Disposals Morrinville Disposal Facility Equipment and
Lease:
14-27-055-24- W4 Facility:
1) Well - Disposal Well - completed to Approx 1145M c/w tested
packers, tubing, wellhead and enclosure building , catadyne heater& Guard
fence.
2) Access road & well lease .
3) Containment System c/w liner capable of > 1500m3
4) 110 M3 (750 bbl) internally coated ,insulated tank c/w 250MM
BTU burner, Pollution Box for load line and sampling point.
5) Dual filter vessels, control valves, turbine metering
equipment in skid mounted building c/w catadyne heater.
6) Buried 3 inch steel flowline from Filter building to
wellhead.
7) Control and Monitor building and equipment c/w solar power.
8) Connecting piping, enclosures and heaters.
13-27-055- 24-W4 Facility:
1) Well suspended - Drilled and cased with basic wellhead and
guard fence.
2) Undeveloped lease and access road
16-27-055-24-W4 Facility
1) Well -gas producer suspended - wellhead; casing and tubing
2) Partially developed lease and access.
3) 400 bbl Insulated tank with heater
4) Skidded separator package
- 17 -
Schedule B
Permitted Encumbrances
Permitted Encumbrances means any of the following:
|
a) |
liens for taxes, assessments or governmental charges or
levies not at the time due and delinquent or the validity of which the
Guarantor is contesting in good faith and in respect of which such
Guarantor has set aside, on its books, reserves considered by the
Guarantor and the Secured Party as adequate therefor; |
|
|
|
|
b) |
undetermined or inchoate liens and charges incidental to
current operations which have not been filed against the Guarantor or
which relate to obligations not due or delinquent; |
|
|
|
|
c) |
the right reserved to or vested in any governmental or
public authority by any lease, licence, franchise, grant, permit or
statutory provision to terminate any lease, licence, franchise, grant or
permit, or to require annual or other period payments as a condition of
the continuance thereof; |
|
|
|
|
d) |
the encumbrance resulting from the deposit of cash or
obligations as security when a Guarantor is required to do so by
governmental or other public authority or by normal business practice in
connection with contracts, licences or tenders or similar matters in the
ordinary course of business and the purpose of carrying on the same or to
secure workers compensation, surety or appeal bonds or to secure costs of
litigation when required by law; and |
|
|
|
|
e) |
security given to any public utility or any governmental
or other public authority when required in connection with the operations
of a Guarantor. |
- 18 -
Schedule C
Location of Collateral
LOCATION OF GUARANTORS BUSINESS OPERATION
The Guarantors:
Chief Executive Office:
3800 North Central Avenue, Suite 820
Phoenix, AZ 85012
Operations Office:
Suite 300, 840 6th Ave SW
Calgary,
AB
T2P2ES
Other Location: Near Morinville,
Alberta
LOCATIONS OF RECORDS RELATING TO COLLATERAL
Operations Office:
Suite 300, 840 6th Ave SW
Calgary,
AB
T2P2ES
LOCATIONS OF COLLATERAL
Operations Office:
Suite 300, 840 6th Ave SW
Calgary,
AB
T2P2ES
Other Location Near Morinville,
Alberta