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Exhibit
10.3
ALL ASSETS SECURITY
AGREEMENT
This ALL ASSETS SECURITY
AGREEMENT (“Agreement”) is entered into as of this
17 th day
of June, 2008, by and between S TERLING M
INING C OMPANY , an Idaho corporation
(“Sterling”) and those individuals/entities listed on
the attached Exhibit “A”, by and through their
servicing agent P RIVATE C APITAL G
ROUP , I NC ., a Utah corporation
(collectively the “Secured Party”) on the
other.
AGREEMENT:
As security for all their
obligations as described under the Environmental Indemnity
Agreement and the Promissory Note, all dated on or about
June 17, 2008, Obligors have agreed, among other things, to
grant Secured Party a security interest in the Collateral (as
defined below) on the terms set forth in this Agreement.
NOW, THEREFORE, in
consideration of the foregoing recitals, and for other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto hereby agree as
follows:
A. SCHEDULE OF
OBLIGORS.
1. Sterling Mining
Company.
(a) Sterling’s chief
executive office and principal place of business is located at 2201
Government Way, Suite E, Coeur d ’ Alene, Idaho 83814.
(b) Sterling’s state of
organization is the State of Idaho.
2. Sterling’s exact
legal name is “ Sterling Mining Company
”
(a) Sterling does not conduct
business under any other name, fictitious, trade or
otherwise.
(b) The Collateral
attributable to Sterling, to the extent locatable, is located in
Idaho.
(c) Sterling’s books
and records relating to the Collateral are located at its principal
place of business in Idaho.
B. DEFINITIONS.
In this Agreement, the
following terms shall have the following meanings, and all
capitalized terms used in this Agreement, which are not defined
herein, shall have their respective meanings as defined in either
the (i) Promissory Note, (ii) Mortgage or (iii) as
presently or hereafter defined in the Uniform Commercial
Code:
1. “Agreement”
means this All Assets Security Agreement as it may be amended,
modified, extended, renewed, restated, or supplemented from time to
time.
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2. “Approvals and
Permits” means each and all of the material approvals,
authorizations, bonds, consents, certificates, franchises,
licenses, permits, registrations, qualifications, and other actions
and rights granted by and filings with any Governmental Authority
necessary for the Property, mining operation of the mine or mines
by Obligors’ ownership, lease, or use by Obligors of the
Collateral, Property, mine or mines.
3. “Secured
Party” means Private Capital Group, a Utah corporation, as
servicing agent for the individuals/entities listed on the attached
Exhibit “A.”
4. “Change in
Control” means (a) any sale, transfer, merger,
transaction or other event or occurrence whereby after the date
hereof a person or affiliated groups of persons acquires the
smaller of: (i) greater than 50% of the issued and outstanding
voting interests of membership interests or (ii) such voting
interests or membership interests sufficient to control Sterling;
or (b) the sale of all or substantially all of the assets of
either Obligor.
5. “Collateral”
means all present and future right, title, and interest of Obligors
in and to and under whether now existing or hereafter acquired in
all of Obligors’ assets including but not limited to the
following property and regardless of whether such property,
interests, and rights are in the possession of Obligors, a bailee,
a common carrier, a warehouseman, or any other Person:
(a) Accounts, including
Receivables;
(b) Chattel Paper, whether
tangible or electronic;
(c) Inventory;
(d) Equipment;
(e) Furnishings:
(f) Fixtures;
(g) Instruments, including
promissory notes;
(h) Investment
Property;
(i) Documents;
(j) Deposit
Accounts;
(k) Letter-of-Credit
Rights;
(1) General Intangibles,
including payment intangibles, patents, patent applications,
trademarks, trademark applications, tradenames, copyrights,
copyright applications, software, engineering drawings, service
marks, customer lists, goodwill and all licenses, permits,
agreements of any kind or nature pursuant to which Obligors possess
or use or have authority to possess or use property (whether
tangible or intangible) of others or others possess, use or
have
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authority to possess or use property
(whether tangible or intangible) of the Obligors, and all recorded
data of any kind or nature, regardless of the medium of recording
including, all software, writings, plans, specifications, and
schematics;
(m) Leasehold rights,
excepting the Sunshine Precious Metals Lease dated June 6,
2003, which Lease requires consent of Lessor prior to assignment of
Lease. Such consent shall not be required of Borrower to obtain
unless and until an Event of Default occurs. Should an Event of
Default occur, Borrower covenants that it shall us its best efforts
to obtain Lessor’s consent to an assignment of the Lease and
upon receiving consent, Borrower shall execute a Borrower’s
Assignment Of Lease To Lender and said Assignment shall then be
recorded in the official records of Shoshone County,
Idaho;
(n) Any other contract rights
or rights to the payment of money, insurance claims and proceeds,
and tort claims;
(o) Rights of way, easements
and governmental leases; and
(p) To the extent not listed
above, products and proceeds of any of the foregoing.
This Security Agreement is intended to
cover “all assets” of the Obligors.
6. “Common
Collateral” shall mean all of the assets of the Obligors
whether real, personal, or mixed, which is part of the
Collateral.
7. “Customer”
means a customer of an Obligor.
8. “Default Rate”
means thirty-six percent (36%).
9. “Event of
Default” shall have the meaning specified in Section
F.
10. “Governmental
Authority” means any government, any court, and any agency,
authority, body, bureau, department, or instrumentality of the
federal government or any state or local government.
11. “Lien or
Encumbrance” and “Liens and Encumbrances” mean,
respectively, each and all of the following: (i) any
assignment as security, conditional sale, grant in trust, lien,
mortgage, pledge, security interest, title retention arrangement,
other encumbrance, or other interest or right securing the payment
of money or the performance of any other liability or obligation,
whether voluntarily or involuntarily created and whether arising by
agreement, document, or instrument, under any law, ordinance,
regulation, or rule (federal, state, or local), or otherwise; and
(ii) any purchase option, right of first refusal or other
right to acquire, which, in either case could reasonably be
expected to have a Material Adverse Effect, after exhausting all
appeals and protests.
12. “Material Adverse
Effect” means an effect that results in or causes, or could
reasonably be expected to result in or cause, a material adverse
change in the fair market value of Obligors’ businesses,
taken as a whole, from the fair market value of Obligors’
businesses, taken as a whole, as of the date hereof.
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13. “Obligations”
mean the following:
(a) Payment of principal,
interest, costs, expenses, fees, and other amounts under the
Promissory Note, Mortgage, and Indemnity Agreement payable by
Obligors to or for the benefit of Secured Party;
(b) Payment and performance
of each other obligation of, and compliance with each term and
condition applicable to, Obligors under this Agreement, the
Promissory Note, or Indemnity Agreement;
14. “Obligor” or
“Obligors” shall mean Sterling Mining Company, an Idaho
corporation.
15.
“Participants” means the means the individuals/entities
listed on the attached Exhibit “A” which are using
Private Capital Group, Inc. as their servicing agent and have
advanced money to Sterling.
16. “Permitted
Discretion” means a determination made in good faith and in
the exercise of reasonable business judgment.
17. “Permitted
Dispositions” means the dispositions of ownership and
possession of Collateral as permitted and described in the section
below entitled “Permitted Dispositions.”
18. “Permitted
Distributions” means so long as no Event of Default for
nonpayment under the Promissory Note, Mortgage or this Agreement
has occurred and is continuing, the payment of any dividend or
other distribution on account of the members’ or
shareholders’ interests of the Obligors now or hereafter
outstanding, payable as permitted by the provisions of the
respective organizational documents of the Obligors and as limited,
in Obligors’ Permitted Discretion, to keep sufficient capital
for each Obligor to maintain continuing business operations to
operate the mine or mines for their Intended Use.
19. “Permitted
Exceptions” means Liens and Encumbrances that are permitted
as described in the section entitled “Permitted
Exceptions.”
20. “Person”
means a natural person, a partnership, a joint venture, an
unincorporated association, a corporation, a limited liability
company, a trust, any other legal entity, or any Governmental
Authority.
21. “Receivable
Debtor” means a Customer obligated on a
Receivable.
22. “Receivables”
means any and all rights of Obligors to payment (i) for
services rendered, (ii) for Goods or other tangible personal
property leased, sold, furnished under contracts for service, or
otherwise disposed of, or (iii) otherwise arising out of the
business or operations of Obligors (including, without limitation,
Accounts, Chattel Paper, Instruments, Insurance Claims and General
Intangibles evidencing such rights to payment), whether
existing
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now or in the future, whether now due or
to become due, and whether earned or not yet earned by performance,
together with ail guaranties of such rights to payment and all
rights and interests of Obligors in and to property, rights to
property, and interests in property that are security for such
rights to payment.
23.
“Requirements” means any and all material obligations,
terms and conditions, requirements, and restrictions in effect now
or in the future relating to any or all Collateral which are used
for the provision of dialysis services (including, without
limitation, such obligations, other terms and conditions,
restrictions, and requirements imposed by: (i) any applicable
law, ordinance, regulation, or rule (federal, state, or local);
(ii) any Approvals and Permits; (iii) any Permitted
Exceptions; (iv) any insurance policies; (v) any other
agreement, document, or instrument; or (vi) any judgment,
order, or decree of any arbitrator, other private adjudicator, or
Governmental Authority).
24. “Security
Interest” means the Security Interest created
hereunder.
25. “Secured
Party” means Private Capital Group, a Utah corporation, as
servicing agent for Participants.
26. “Transfer”
means the occurrence of any of the following:
(a) Any or all Collateral, or
any interest or right of any Obligor in or to any or all
Collateral, taken as a whole, which is material to the business of
Obligors, is conveyed to, or becomes vested in, any Person, other
than an Obligor or the Secured Party, voluntarily or involuntarily,
other than in a Permitted Disposition or in the ordinary course of
business;
(b) The occurrence of any
event that results in any option, right of first refusal or other
right to acquire, to, or against, any or all Collateral being held
by a Person other than an Obligor or the Secured Party, whether
occurring voluntarily or involuntarily and whether arising by
agreement, under any law, ordinance, regulation, or rule (federal,
state, or local), or otherwise; or
(c) Any Obligor enters into
any agreement the performance of which would result in a Transfer
under clause (a) or (b) above, and the consummation of
such agreement is not expressly conditional upon the prior written
consent of Secured Party in its Permitted Discretion or as
otherwise permitted hereunder.
27. “Uniform Commercial
Code” means the Uniform Commercial Code as in effect from
time to time in the State of Utah.
C. GRANT OF SECURITY
INTEREST.
Obligors grant to Secured
Party a security interest in and pledges and assigns to the Secured
Party all right, title and interest of the Obligors in and to the
Collateral to secure payment and performance of the
Obligations.
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D. OBLIGORS’
REPRESENTATIONS AND WARRANTIES.
Each Obligor represents and
warrants to Secured Party as of the date of this Agreement and as
to Collateral in which such Obligor acquires an interest or rights
after the date of this Agreement, as of the date such Obligor
acquires such interest or rights:
1. Ownership and
Possession of Collateral . Such Obligor has rights in or the
power to transfer the Collateral and is the legal and beneficial
owner of its Collateral, subject only to the Permitted Exceptions.
There are no Liens and Encumbrances on the Collateral or claims
thereof, except the Permitted Exceptions, which taken as a whole,
would not reasonably be expected to have a Material Adverse Effect.
There is no financing statement now filed or recorded covering any
of the Collateral, except financing statements related to the
Permitted Exceptions.
2. Validity, Perfection,
and Priority of Security Interest . The security interest
granted by such Obligor in this Agreement (i) is legal, valid,
binding, and enforceable against such Obligor, (ii) is a
perfected security interest in all the Collateral owned by such
Obligor, and (iii) other than Permitted Exceptions, is a first
priority security interest in all the Collateral.
3. Names; Location(s) of
Collateral; State of Incorporation; Principal Place of Business;
and Books and Records . The items set forth in Section A
regarding each Obligor are true, correct and accurate.
4. Enforceability, Amount,
and Other Matters Concerning Collateral . To such
Obligor’s knowledge, the Receivables of such Obligor and the
agreements, documents, and instruments evidencing and securing such
Receivables are (i) genuine, (ii) the legal, valid, and
binding obligations of the parties thereto, and
(iii) enforceable against the parties thereto in accordance
with their terms. Any copies of such agreements, documents, and
instruments delivered to Secured Party are accurate and complete
and, except for the items delivered to Secured Party, there are no
material amendments, modifications, extensions, renewals,
restatements, or supplements thereof.
E. OBLIGORS’
COVENANTS.
Until all of the Obligations
are paid in full, Obligors agree that, unless Secured Party
otherwise agrees in writing in Secured Party’s Permitted
Discretion:
1. Obligations;
Requirements; Approvals and Permits . Obligors shall pay and
perform the Obligations. Obligors shall comply with and perform the
Requirements and maintain the Approvals and Permits, except to the
extent non-compliance or non-performance would not have a Material
Adverse Effect on the Obligors.
2. Transfer; Liens and
Encumbrances; Defense of Obligors’ Title and of Security
Interest; Possession and Use of Collateral .
(a) Restrictions on
Transfers and Liens and Encumbrances . Except for Permitted
Dispositions, Obligors shall not suffer to occur any Transfer.
Except for Permitted Exceptions, Obligors shall not suffer to exist
any Lien or Encumbrance on any or all Collateral except for those
that would not reasonably be expected to have a Material Adverse
Effect,
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regardless of whether junior or senior
to the Security Interest granted herein, Except for Permitted
Exceptions, Obligors shall notify Secured Party within ten
(10) Business Days after any Obligor obtains knowledge of any
filing of a claim by any Person of any Lien or Encumbrance on any
or all Collateral except for those that would not reasonably be
expected to have a Material Adverse Effect. Except for financing
statements relating to Permitted Exceptions, Obligors shall not
execute or suffer to exist or to be filed or recorded any financing
statement that covers any or all Collateral.
(b) Defense of
Obligors’ Title and of Security Interest . Obligors shall
defend the Collateral, the title and interest therein of Obligors
represented and warranted in this Agreement, and the legality,
validity, binding nature, and enforceability of the security
interest granted herein, the perfection thereof, and the priority
thereof against all matters, including, without limitation,
(i) any attachment, levy, or other seizure by legal process or
otherwise of any or all Collateral, (ii) except for Permitted
Exceptions, any Lien or Encumbrance or claim thereof on any or all
Collateral that is claimed to have priority over the Security
Interest, (iii) any attempt to realize upon any or all
Collateral under any Lien or Encumbrance, regardless of whether a
Permitted Exception and regardless of whether junior or senior to
the security interest herein, and (iv) any claim questioning
the legality, validity, binding nature, enforceability, perfection,
or priority of the security interest herein, except where the
failure to do so with respect to any of the foregoing items
(i)-(iv) would not result in a Material Adverse Effect.
Obligors shall notify Secured Party immediately in writing of any
of the foregoing.
(c) Possession and Use of
Collateral . Except as may be limited or provided otherwise for
in Section “G”, Obligors may possess, process, and use
the Collateral in the ordinary course of Obligors’ business,
may consume the Collateral in the manufacture and processing of
finished goods, and may make Permitted Dispositions. Except for
Permitted Dispositions, Obligors shall have exclusive possession of
the Collateral.
(d) Allowances, Discounts,
and Other Adjustments . Obligors shall grant to its customers
only such allowances, discounts, and other adjustments relating to
the Collateral as Obligors may reasonably determine to be in
accordance with sound business practice.
3. Books and Records;
Names; Location of Collateral; Principal Place of Business .
Obligors shall maintain complete and accurate books and records
relating to the Collateral. Unless Obligors obtain the prior
written consent of Secured Party, which shall not be unreasonably
withheld, and take in advance all actions and makes all filings and
recordings necessary to assure the perfection and priority of the
Security Interest granted herein. Obligors shall not alter their
legal existence, change the state of their organizations or change
their names and shall conduct their businesses and other activities
solely in the name(s), trade name(s), and fictitious name(s) in
Section A. Further, Obligors shall keep all Collateral at and not
move any Collateral or its books and records relating to the
Collateral from the respective location(s) in Section A, except in
the normal course of Obligors’ business. Anything in this
Section E.3 to the contrary notwithstanding, Obligors may move the
Collateral between any of such locations and between and among
(i) such locations, (ii) any warehouse in which
Collateral is stored, and (iii) any location at which services
are rendered to Customers or where the Collateral is delivered to
Customers.
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4. Inspection and
Verification . In the event of an Event of Default for
non-payment under Section F.1 hereof, and the expiration of any
applicable cure periods, the Secured Party shall have the power and
authority, after execution of a written confidentiality agreement
preventing disclosure of any confidential or proprietary
information relating to Obligors’ business to any other
Person (including Secured Party), and upon at least three
(3) business days prior written notice, (i) to enter upon
the premises of any Obligor at which any of the Collateral or any
of the books and records included in the Collateral are located,
(ii) to inspect the Collateral and such books and records for
the purpose of verifying Obligors’ compliance with this
Agreement and to carry out its duties as set forth herein,
(iii) to make copies of and extracts from such books and
records of such information, and (iv) to determine the amount,
condition, quality, quantity, status, validity, and value of, or
any other matter relating to, the Collateral and report to Secured
Party. To the extent the Collateral is with a third party, Obligors
shall use their best efforts to provide the Secured Party access to
the information. Notwithstanding the foregoing, such access shall
not unreasonably interfere with Obligors’
business.
5. Further Assurances
. Obligors shall promptly execute, acknowledge, deliver, and cause
to be duly filed and recorded all such additional agreements,
documents, and instruments (including, without limitation,
financing statements) and take all such other actions as Secured
Party may reasonably request from time to time to better assure,
perfect, preserve, and protect the Security Interest, the priority
thereof, and the rights and remedies of Secured Party hereunder.
Obligors authorize Secured Party to file financing statements
describing the Collateral as deemed necessary by Secured Party. If
from time to time any Collateral is evidenced by a Document or an
Instrument, and to the extent such Document or Instrument does not
constitute a part of the Common Collateral, Obligors shall
immediately deliver such Document or Instrument to Secured Party,
duly assigned or endorsed in a manner satisfactory to the Secured
Party. If from time to time any Inventory or other Goods that are
Collateral are in the possession of a bailee or other Person that
has not issued a Document covering them, Obligors hereby direct
such bailee or other Person to hold such Inventory or other Goods
for the benefit of Secured Party and Secured Party shall have the
right to notify such bailee or other Person of the Security
Interest herein and such direction. Additionally, Obligors shall
use their best efforts to obtain an acknowledgement from such
bailee or other Person that the Collateral is being held for the
benefit of Secured Party.
6. Maintenance of
Collateral and Other Matters . Obligors shall keep all tangible
Collateral in good condition and shall maintain, repair, and
service the tangible Collateral to keep the tangible Collateral in
as good operating condition, state of repair, and appearance as
when acquired by Obligors, ordinary wear and tear excepted.
Obligors shall comply in all material respects with all applicable
maintenance, overhaul, repair, and service manuals and service
bulletins published by the manufacturer of the tangible Collateral
or any component parts. Obligor shall maintain all cost effective
manufacturer’s warranties for the Collateral. Obligors shall
maintain all logs, records, and other items required under any
Requirements. Obligors shall house or store all tangible Collateral
properly to protect it from damage, destruction, and deterioration.
Obligors shall not conceal, damage, destroy, misuse, or waste any
tangible Collateral. Obligors shall promptly repair the Collateral
whenever needed. Except to the extent Secured Party applies
proceeds of insurance on the Collateral to payment of the
Obligations, if any of the Collateral is damaged or destroyed,
Obligors will promptly replace or restore such Collateral, provided
such Collateral was not obsolete at the time of damage or
destruction. Obligors shall not take any action or fail to take any
action with respect to the Collateral that
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might affect any insurance coverage in
any adverse manner. Obligors shall perform all obligations of and
comply with all terms and conditions applicable to Obligors in each
agreement, document, and instrument relating to any Collateral
(including, without limitation, all agreements, documents, and
instruments under which Inventory is acquired, leased, sold, or
otherwise disposed of by Obligors or out of which Receivables
arise), except to the extent non-performance or non-compliance
would not have a Material Adverse Effect. Except for normal cash
discounts, bad debts, or other allowances taken in the ordinary
course of business as deemed re
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