PURCHASE AND
SALE AGREEMENT
THIS
AGREEMENT (this “Agreement”) is made as of October 20,
2006, by and between STERLING MINING COMPANY, an Idaho corporation
(hereinafter referred to as “Purchaser”), and ESSENTIAL
METALS CORPORATION, an Idaho corporation (hereinafter referred to
as “Seller”).
W I T N E S
S E T H :
WHEREAS,
Seller is the owner of the Pond (as hereinafter defined);
and
WHEREAS,
Purchaser desires to purchase the Pond from Seller;
NOW,
THEREFORE, the parties have agreed and do hereby agree as
follows:
1.
Agreement of Purchase and Sale . Subject to the provisions
of this Agreement, and for the consideration herein stated, Seller
agrees to sell to Purchaser and Purchaser agrees to buy from Seller
all those certain tract(s) or parcel(s) of land located in Shoshone
County, State of Idaho and being described in Exhibit A
attached hereto, together with all structures and other
improvements, if any, located thereon, all tenements,
hereditaments, easements, appurtenances and privileges thereto
belonging, to the extent owned by Seller, any and all oil, gas and
mineral rights and interests with respect thereto, if any
(collectively, the “Pond”).
2.
Purchase Price, Including Stull Yard .
(a) The
purchase price (the “Purchase Price”) for the Pond
shall be the total sum of $4,500,000 plus the conveyance by
Purchaser to Seller of certain real property situated in Shoshone
County, Idaho being described in Exhibit B1 and Exhibit
B2 attached
hereto,
together with all structures and other improvements, if any,
located thereon, all tenements, hereditaments, easements,
appurtenances and privileges thereto belonging, to the extent owned
by Purchaser, and all oil, gas and mineral rights and interests
with respect thereto, if any (collectively, the “Stull
Yard”).
(b) The
$4,500,000 shall be paid as follows:
(1)
The sum of $100,000, which was paid by the
Purchaser to the Seller on October 3, 2006, and which is
nonrefundable;
(2)
The sum of $500,000, to be paid at the
First Closing, as defined below, and when paid is nonrefundable;
and
(3)
The sum of $3,900,000, to be paid at the
Second Closing, as defined below.
(c)
The Purchase Price will be paid at each
Closing by wire transfer of the full amount thereof in immediately
available funds to the Closing Agent, by the date and at the time
specified in this Agreement for each Closing.
(d)
The Stull Yard shall be conveyed to the
Seller at the Second Closing, or at such later date as provided
below.
3.
Closing .
(a)
There shall be two Closings. The First
Closing shall be on October 20, 2006. The Second Closing shall be
on January 22, 2007. Each Closing shall be at the offices of the
Closing and Escrow Agent hereby appointed by the parties, Alliance
Title And Escrow, 412 Cedar Street, Wallace, Idaho, phone
208-752-1167 (“Title Company”). Each Closing shall take
place at 2:00 PM local time, with time being of the essence. The
wire transfer instructions for the Title Company are:
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Wells Fargo
Bank
Wallace, Idaho 83873
Account No. xxxxxxxxxx
ABA No. 121000248
Attn: Kari Hill Re: xxxxxxxxxxxx-
From: Sterling Mining Company
(b) At the
First Closing Seller will execute and deliver , or
merely deliver as the context of this Agreement requires, to Title
Company:
(1)
a warranty deed in the form attached hereto
as Exhibit C (the “Pond Deed”), conveying the
Pond to Purchaser using the legal description attached hereto as
Exhibit A ;
(2)
an assignment to the Purchaser of the EPA
NPDES permit No. ID-000006-0 currently in the name of Seller along
with any associated letters or documents sufficient to allow the
Purchaser to effect the assignment to the end of EPA acceptance and
approval of said assignment in accordance with applicable EPA
regulations, such documents in the form attached hereto as
Exhibit D (“NPDES Permit
Assignment”);
(3)
an assignment to the Purchaser of any and
all tailings pond decant line easements which allow the tailings
pond decant line to run from the Pond to the South Fork of the
Coeur d’ Alene River, in the form attached hereto as
Exhibit E (“Decant Line Easement
Assignment”);
(4)
an easement over and across Seller’s
lands which allows the tailings and mine water line to run from
Purchaser’s mill to the Pond, in the form attached hereto as
Exhibit F (“Tailings Line Easement”);
(5)
an assignment to the Purchaser of the Mine
Tailings Impoundment Structure Certificate Of Approval issued by
the Idaho Department Of Water Resources, together with the tailings
pond abandonment security Certificate Of Deposit No. 1116236 in the
amount of $17,000, in the form attached hereto as Exhibit G
(“Dam Safety Certificate Assignment”), it being agreed
that at the Second
3
Closing
Purchaser will pay to Seller the sum of $17,000 plus any unpaid
accrued interest related to the Certificate Of Deposit to the date
of the Second Closing, in addition to all other sums due at said
Second Closing;
(6)
a conveyance of water right number 94-7290
for ground water in the amount of 0.03 cfs associated with the
tailings lift station, together with duly executed State Of Idaho
Department Of Water Resources Notice Of Change In Water Right
Ownership, in the form attached hereto as Exhibit H
(“Water Rights Deed”);
(7)
an assignment of that certain BLM easement
which allows easement rights upon BLM lands for the 14-inch
tailings line which runs from what is commonly known as the
Sunshine mill to what is commonly known as the Sunshine (now
Essential) tailings pond, attached hereto as Exhibit L
(“BLM Easement Assignment”);
(8)
written evidence that the real property
taxes for the year 2006 for the Pond have been paid in full;
and
(9)
a commitment for title insurance for
standard form of coverage for the Pond from Title Company with
Purchaser as the proposed insured, in the amount of $4,500,000,
with the effective date the date of the First Closing.
At the
First Closing Purchaser shall execute and deliver ,
or merely deliver as the context of this Agreement requires, to
Title Company:
(10)
the sum of $500,000;
(11)
a warranty deed in the form attached hereto
as Exhibit I (“Stull Yard Deed”), conveying the
Stull Yard to Seller using the legal descriptions attached hereto
as Exhibits B1 and B2 ;
(12)
an easement upon the Pond lands which
allows Seller access to a monitoring well situated thereon,
attached hereto as Exhibit M (“Monitoring Well
Easement”);
(13)
an easement over a strip of land running
east-west located near what is commonly known as the Sunshine
office complex, to allow a new pipeline and roadway to be
constructed by
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Seller
from the Stull Yard to its Big Creek processing facility and which
easement may also include easement rights in Purchaser for its
tailings line and an additional 8 inch line, it being understood
that Purchaser does not own said property but will deal with the
owner to attempt to acquire such easement; reasonable effort to be
made to do so by the First Closing but in any event such later date
that such can be accomplished (if it can be accomplished at all),
attached hereto as Exhibit N (“Office Complex
Easement”).
(14)
written evidence that the real property
taxes for the year 2006 for the Stull Yard have been paid in full;
and
(15)
a commitment for title insurance for
standard form of coverage for the Stull Yard from Title Company
with Seller as the proposed insured, in the amount of $830,000,
with the effective date the date of the First Closing.
(c)
At the Second Closing Seller
shall deliver to Title Company:
(1)
a title insurance policy in accordance with
the commitment referred to above which insures Purchaser for the
Pond, with effective date the date of the Second
Closing.
At the
Second Closing Purchaser shall deliver to Title
Company:
(1)
the sum of $3,900,000;
(2)
the sum of $17,000 plus unpaid accrued
interest in accordance with paragraph 3.(b)(5) above;
and
(3)
a title insurance policy in accordance with
the commitment referred to above which insures Seller for the Stull
Yard, with effective date the date of the Second
Closing.
(d)
The Second Closing date shall be extended
to February 22, 2007 if Purchaser pays to Title Company on January
22, 2007 the sum of $132,500; extended to March 22, 2007 if
Purchaser pays to Title Company on February 22, 2007 the additional
sum of $132,500; extended to April 23, 2007 if Purchaser pays to
Title Company on
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March 22,
2007 the additional sum of $132,500. There shall be no extensions
of the Second Closing date past April 23, 2007. The sums referred
to above shall be disbursed by the Title Company to Seller on the
date received, the parties being in agreement that said sums are
nonrefundable and are in addition to the cash portion of the
Purchase Price.
4.
Duties Of Title Company . The
parties agree that the duties of the Title Company shall be as
follows:
(a)
to issue the title insurance commitments
and the title insurance policies in accordance with paragraph 3.
above;
(b)
to disburse the sums paid by Purchaser to
Title Company, in accordance with paragraph 3. above, to Seller, on
the date of the First Closing and on the date of the Second
Closing, as a part of the First and Second Closings, and the
payments of extension of the Second Closing date (if any), it being
agreed by Seller and Purchaser that any sums so paid are
nonrefundable to Purchaser;
(c)
to hold in safekeeping the instruments
delivered to Title Company by the parties at the First Closing in
accordance with paragraphs 3. and 9. to the date of the Second
Closing, at which time they shall be delivered by Title Company to
the party intended to receive them if Closing occurs in accordance
with this Agreement, and payment is made by Purchaser to Title
Company in accordance with this Agreement (the foregoing being
subject to (e) below), with recording of such documents to be the
responsibility of Title Company;
(d)
to, in the alternative, in the event that
Title Company is paid the extension sums set forth in paragraph
3.(d), thereby extending the Second Closing date, continue to hold
the instruments without delivering them to a party, but deliver
said instruments when the Second Closing does occur(the foregoing
being subject to (e) below);
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(e)
to, in the event Title Company receives
written instructions from only Seller, at its option and in its
sole discretion, that the Stull Yard Deed, the Office Complex
Easement and the Stull Yard title insurance policy is to be
delivered to Seller at the date of the Second Closing, or they are
to be delivered at a subsequent date, or upon further written
instructions at a subsequent date, follow such instructions, the
parties hereto being in agreement that Title Company is authorized
to follow such instructions;
(f)
to deliver to the Seller the documents
executed by it and delivered to the Title Company for safekeeping
for delivery to the Purchaser at the Second Closing, if Purchaser
fails to pay the sum of $3,900,000 plus the sum of $17,000 and
accrued interest on the Second Closing date, or at an extended
Second Closing date pursuant to joint written instructions
specified in subparagraph (e) above;
(g)
prepare and furnish to the parties a
Closing Statement at the Second Closing, whereby the Seller is
charged:
(1)
one-half of the Title Company’s fee
for acting as Closing Agent and Escrow Agent;
(2)
the premium for the title insurance policy
for the Pond;
(3)
the portion of real property taxes for the
Pond for the year 2007 to the date of the Second
Closing;
(4)
the recording fees for the recording of the
documents delivered by the Seller; and whereby the Purchaser is
charged:
(5)
one-half of the Title Company’s fee
for acting as Closing Agent and Escrow Agent;
(6)
the premium for the title insurance policy
for the Stull Yard;
(7)
the portion of real property taxes for the
Stull Yard for the year 2007 to the date of the Second
Closing;
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(8)
the recording fees for the recording of the
documents delivered by the Purchaser. The parties intend that Title
Company may rely on the description of duties set forth above in
this paragraph 4., and said description is set forth for the
benefit of not only the parties hereto but also for the benefit of
Title Company, and the parties agree that Title Company should
perform its duties as set forth herein without the need of further
instructions from the parties. The parties agree to do such other
acts and execute and deliver such other documents and instruments
as are reasonably necessary for the consummation of the
transactions contemplated hereby, such as usual and customary
documents which may be required by the Title Company in the course
of the Title Company’s performance of its duties, or such as
letters or other documents which might be requested by regulatory
agencies.
5.
Condition Of Title .
(a)
Each party agrees to convey to the other
good and merchantable title to the Pond and Stull Yard, as the case
may be, free and clear of all liens and encumbrances, except for
easements of record, in view or to be created in accordance with
this Agreement and, with respect to the Pond, except claimed
contract rights of Sunshine Precious Metals, Inc. or any successor
in interest to that company, regarding the right to use the
Pond.
(b)
Each party acknowledges that it has had
ample opportunity to consider title insurance commitments caused to
be furnished by each to the other prior to the date of this
Agreement, and to otherwise examine the condition of title to the
extent which each party desires. Upon the execution of this
Agreement by the parties they each hereby waive any objection to
condition of title that either of them may have which is reflected
in the commitments for title insurance delivered at the First
Closing, or which are
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easements
of record or in view, or claimed contract rights as expressed in
subparagraph (a) above.
(c)
Prior to the date of the Second Closing the
parties agree that neither of them will take any action, or omit to
take action, which changes the condition of title as it existed on
the date of the First Closing with respect to the Pond and the
Stull Yard. It is further agreed that the parties contemplate that
on the Second Closing date the condition of title will not have
changed from that reflected in the title insurance commitment
delivered at the First Closing, and that title insurance policies
will be issued in accordance with said commitments. If such is not
the fact at the Second Closing due to acts by third parties, the
parties will cooperate to resolve any title issues prior to the
Second Closing, or either party affected may elect to waive such
changed condition and proceed to close.
6.
Inspection, Sale “AS IS”,
Waiver And Release .
(a)
Purchaser, Seller and their agents and
representatives have inspected the Pond and the Stull Yard and have
reviewed such documents pertaining to them which they desire to
review. Each party is aware that the properties are situated within
a super fund site, and that hazardous substances are situated upon
the properties. Each party has disclosed to the other, to the best
of the knowledge of each of them, material, relevant facts known by
either party which an owner of either the Pond or the Stull Yard
would want to know in the course of making a decision to acquire
either property.
(b)
Except for the warranties to be included in
the Stull Yard Deed and the Pond Deed, warranties, representations
and agreements contained in this Agreement, and warranties,
representations and agreements contained in the documents attached
to this Agreement, Purchaser and Seller each acknowledge and agree
that they are taking the Stull Yard and Pond “AS IS”,
“WHERE IS”
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and
“WITH ALL FAULTS”. Each of Seller and Purchaser have
not made, do not make and specifically disclaim any other
representations, warranties, guaranties, commitments, promises or
agreements of any kind, express or implied, with respect to the
Pond and the Stull Yard, including, without limitation,
governmental regulations, requirements or constraints, site or
physical conditions, condition of those properties, matters
affecting use, zoning or occupancy, profitability, availability,
quantity or quality of water, environmental compliance, prospects
for future improvements or future development, economic
feasibility, marketability or any other matter relating to the Pond
or Stull Yard.
(c)
Purchaser and Seller, and their successors
and assigns, each waives, and releases the other party from,
any
