EXHIBIT 10.3
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Agreement") is made as of October 28, 2005
by and between El Capitan Precious Metals, Inc., a Nevada corporation ("El
Capitan"), and Whitebox Intermarket Partners, L.P., a British Virgin Islands
limited partnership ("WIP").
RECITALS
A. El Capitan and WIP have entered into a Purchase Agreement dated as of
this date (the "Purchase Agreement"), pursuant to which WIP is purchasing a
secured convertible promissory note in the aggregate principal amount of
$750,000 (the "Note") and a warrant to purchase shares of El Capitan's Common
Stock (the "Warrant") in consideration of a $750,000 loan (the "Loan"). WIP is
referred to herein as the "Secured Party."
B. As part of the Purchase Agreement, El Capitan has granted to WIP and
its affiliates an option to purchase an additional secured convertible
promissory note in the aggregate principal amount of $550,000 (the "Additional
Note") and an additional warrant to purchase Common Stock (the "Additional
Warrant").
C. As a condition to making the Loan, El Capitan has agreed to pledge to
Secured Party all of its assets, subject to no other security interest except as
noted herein.
NOW, THEREFORE, in consideration of the agreements herein and in reliance
upon the representations and warranties set forth herein and therein, the
parties agree as follows:
ARTICLE 1.
DEFINED TERMS
1.1 DEFINITIONS. Unless otherwise defined herein or unless the context
otherwise requires, terms used in this Agreement, including its preamble and
recitals, have the meanings provided in the Uniform Commercial Code in effect in
the State of Nevada (the "UCC"). In addition, the following terms when used in
this Agreement, including its preamble and recitals, shall have the following
meanings:
"Loan Documents" means (a) this Agreement, (b) the Notes, (c) the
Warrants, (d) a Registration Rights Agreement of this date between El Capitan
and WIP (the "Registration Rights Agreement"), and (e) the Purchase Agreement.
"Notes" means each of the Note and the Additional Note.
"Obligations" means the payment and other performance obligations under
the Loan Documents.
"Warrants" means each of the Warrant and the Additional Warrant.
ARTICLE 2.
SECURITY INTEREST
2.1 GRANT OF SECURITY INTEREST. To secure the timely payment and
performance in full of the Obligations, El Capitan does hereby assign, grant and
pledge to Secured Party, subject to no other secured rights, all of the estate,
right, title and interest of El Capitan in and to the Collateral as more fully
described on Exhibit A hereto, whether now owned or later acquired or created,
and including all proceeds of the Collateral, whether cash or non-cash (the
"Collateral").
2.2 FINANCING STATEMENTS.
(a) El Capitan hereby authorizes Secured Party to file all financing
statements, continuation statements, assignments, certificates, and other
documents and instruments with respect to the Collateral pursuant to the UCC and
otherwise as may be necessary or reasonably requested by Secured Party to
perfect or from time to time to publish notice of, or continue or renew the
security interests granted hereby (including, such financing statements,
continuation statements, certificates, and other documents as may be necessary
or reasonably requested to perfect a security interest in any additional
property rights hereafter acquired by El Capitan or in any replacements,
products or proceeds thereof), in each case in form and substance satisfactory
to Secured Party.
(b) Secured Party will pay the cost of filing the same in all public
offices where filing is necessary or reasonably requested by Secured Party and
will pay any and all recording, transfer or filing taxes that may due in
connection with any such filing. El Capitan grants Secured Party the right, at
any time and at Secured Party's option, to file any or all such financing
statements, continuation statements, and other documents pursuant to the UCC and
otherwise as Secured Party reasonably may deem necessary or desirable.
(c) El Capitan hereby authorizes the filing of any financing
statements or continuation statements, and amendments to financing statements,
or any similar document in any jurisdictions and with any filing offices as
Secured Party may reasonably determine are necessary or advisable to perfect the
security interests granted to Secured Party. Such financing statements may
describe the Collateral in the same manner as described herein or may contain an
indication or description of collateral that describes such property in any
other manner as Secured Party may reasonably determine is necessary, advisable
or prudent to ensure the perfection of the security interest in the Collateral
granted to Secured Party herein.
2.3 DEBTOR REMAINS LIABLE.
(a) Anything herein contained to the contrary notwithstanding, El
Capitan shall remain liable under any contracts, agreements and other documents
included in the Collateral, to perform all of the obligations undertaken by it
thereunder, all in accordance with and pursuant to the terms and provisions
thereof, and Secured Party shall have no obligations or liabilities under any
such contracts, agreements or other documents by reason of or arising out of
this Agreement, nor shall Secured Party be required or obligated in any manner
to perform or fulfill any obligations of El Capitan thereunder or to make any
payment, or to make any inquiry as to the nature or sufficiency of any payment
received by their or present or file any claim, or take any action to collect or
enforce the payment of any amounts which may have been assigned to them or to
which they may be entitled at any time or times.
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(b) If any default by El Capitan under any of the contracts,
agreements or other documents shall occur, Secured Party shall, at its option,
be permitted (but shall not be obligated) to remedy any such default by giving
written notice of such intent to El Capitan and to the parties to such contract,
agreement or other document. Any cure by Secured Party of El Capitan's default
under any such contract, agreement or other document shall not be construed as
an assumption by Secured Party of any obligations, covenants or agreements of El
Capitan contained in such contract, agreement or other document, and Secured
Party shall not incur any liability to El Capitan or any other person as a
result of any actions undertaken by Secured Party in curing or attempting to
cure any such default. This Agreement shall not be deemed to release or to
affect in any way the obligations of El Capitan under any of such contracts,
agreements or other documents.
2.4 DELIVERY OF CERTIFICATES. Secured Party acknowledges that El Capitan
has granted a security interest in 1,000,000 shares of common stock of U.S.
Canadian Minerals, Inc., a Nevada corporation ("UCAD"), owned by El Capitan to a
third party ("UCAD Security Interest") and that such shares are in the
possession of such third party. Other than certificates or other instruments
evidencing shares securing the UCAD Security Interest, all certificates and
other instruments representing or evidencing El Capitan's ownership of shares of
capital stock of UCAD and El Capitan, Ltd., an Arizona corporation
(collectively, the "Pledged Equity Interests") shall be delivered to and held by
or on behalf of Secured Party, or its designee in the manner set forth in
Section 4.12 below.
2.5 SALE OF UCAD COMMON STOCK. Notwithstanding any other term of this
Agreement, El Capitan shall be entitled to sell any and all shares of UCAD
common stock to a third party in an arms-length transaction; provided that, in
the event of such sale of UCAD common stock, El Capitan shall, at the option of
Secured Party, use no less than 35% of the net proceeds from the sale of the
UCAD common stock constituting a portion of the Pledged Equity Interests to
satisfy all or a portion of its obligations to Secured Party under the Notes. In
the event of such sale, Secured Party shall promptly deliver to El Capitan, upon
the request of El Capitan, any certificates or other instruments representing or
evidencing such ownership in such number of shares of UCAD common stock to be
sold by El Capitan, and shall further provide written consent for such sale by
El Capitan in such form as reasonably requested by El Capitan or the purchaser
of such UCAD common stock. In such written request to Secured party, El Capitan
shall set forth the terms of the proposed sale and the anticipated closing date.
2.6 VOTING RIGHTS; DIVIDENDS. As long as no Event of Default, or event
which with the giving of notice or lapse of time would constitute an Event of
Default shall have occurred and be continuing:
(a) El Capitan shall be entitled to exercise any and all voting or
consensual rights relating to the Pledged Equity Interests for any purpose not
inconsistent with the terms of this Agreement; provided, however, that El
Capitan shall not exercise or refrain from exercising any such right if such
action would have a material adverse effect on the value of the Collateral; and
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(b) El Capitan shall be entitled to receive and retain any and all
ordinary cash dividends payable in respect of the Pledged Equity Interests.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF DEBTOR
El Capitan makes the following representations and warranties to and in
favor of Secured Party as of the date hereof. All of these representations and
warranties shall survive the execution and delivery of this Agreement:
3.1 ORGANIZATION. El Capitan:
(a) is a corporation duly incorporated and validly existing and in
good standing under the laws of the State of Nevada;
(b) is duly qualified, authorized to do business as a foreign
corporation in each U.S. and foreign jurisdiction where the character of its
properties or the nature of its activities makes such qualification necessary;
and
(c) has the corporate power (A) to enter into the Loan Documents and
to perform its obligations thereunder and to consummate the transactions
contemplated thereby, (B) to carry on its business as now being conducted and as
proposed to be conducted by it, (C) to execute, deliver and perform this
Agreement, (D) to take all action as may be necessary to consummate the
transactions contemplated hereunder, and (E) to grant the liens and security
interests provided for in this Agreement.
3.2 OFFICES, LOCATION OF COLLATERAL. The chief executive office or chief
place of business of El Capitan is located at 00000 Xxxxx 00xx Xxxxxx,
Xxxxxxxxxx, Xxxxxxx, 00000.
3.3 TITLE AND LIENS. Except for the UCAD Security Interest, El Capitan has
good, valid, and marketable title to the Collateral, free from all liens and
encumbrances of any kind. As a result of this Agreement, Secured Party will have
a first priority security interest in the Collateral, subordinate to no other
security interest other than the UCAD Security Interest, in which the Secured
Party shall have a secondary security interest.
3.4 AUTHORIZATION; NO CONFLICT. El Capitan has duly authorized, executed
and delivered this Agreement, and El Capitan's execution and delivery hereof and
its consummation of the transactions contemplated hereby and the compliance with
the terms thereof:
(a) does not or will not contravene any legal requirements
applicable to or binding on El Capitan which could reasonably be expected to
have a material adverse effect upon the Collateral or Secured Party's rights
therein;
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(b) does not or will not contravene or result in any breach of or
constitute any default, or result in or require the creation of any lien upon
any of El Capitan's property, under any agreement or instrument to which El
Capitan is a party or by which it or any of its properties may be bound or
affected; and
(c) does not or will not require the consent or approval of any
third party which has not already been obtained.
3.5 ENFORCEABILITY. This Agreement is a legal, valid and binding
obligation of Secured Party, enforceable against El Capitan in accordance with
its terms, except to the extent that enforceability may be limited by applicable
bankruptcy, insolvency, moratorium, reorganization or other similar laws
affecting the enforcement of creditors' rights or by the effect of general
equitable principles.
3.6 UCC ARTICLE 8. All shares of common stock of UCAD and El Capitan,
Ltd., an Arizona corporation, owned by the Company, and shares of capital stock
of any subsidiary of the Company that are part of the Collateral are securities
governed by Article 8 of the UCC.
ARTICLE 4.
COVENANTS OF DEBTOR
El Capitan covenants to and in favor of Secured Party as follows:
4.1 COMPLIANCE WITH OBLIGATIONS. El Capitan shall perform and comply in
all material respects with all obligations and conditions on its part to be
performed with respect to the Collateral.
4.2 INFORMATION CONCERNING COLLATERAL. El Capitan shall, promptly upon
request, provide to Secured Party all information and evidence they it
reasonably request concerning the Collateral to enable Secured Party to enforce
the provisions of this Agreement.
4.3 DEFENSE OF COLLATERAL. El Capitan shall defend its title to the
Collateral and the interests of Secured Party in the Collateral pledged
hereunder against the claims and demands of all third parties whomsoever.
4.4 MAINTENANCE OF COLLATERAL. El Capitan shall not (i) fail to deliver to
Secured Party a copy of each demand or notice received or given by it relating
to any contract or agreement of El Capitan or to any other Collateral which
could reasonably be expected to have a material adverse effect upon the
Collateral or Secured Party's rights therein, or (ii) except as otherwise
permitted herein, sell, contract to sell, assign, transfer or dispose of any of
the Collateral, except in the ordinary course of business, or with the consent
of Secured Party, which consent will not be unreasonably withheld.
4.5 EVENTS OF DEFAULT. El Capitan shall give to Secured Party prompt
notice of any material default with respect to the Collateral of which El
Capitan has knowledge or has received notice.
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4.6 PRESERVATION OF VALUE; LIMITATION OF LIENS. El Capitan shall not take
any action in connection with the Collateral which would impair in any material
respect the interests or rights of Secured Party therein or with respect
thereto, except as expressly permitted hereby; provided, however, that nothing
in this Agreement shall prevent El Capitan, prior to the exercise by Secured
Party of any rights pursuant to the terms hereof, from undertaking El Capitan's
operations in the ordinary course of business. El Capitan shall not directly or
indirectly create, incur, assume or suffer to exist any liens on or with respect
to all or any part of the Collateral (other than the lien created by this
Agreement). El Capitan shall at its own cost and expense promptly take such
action as may be necessary to discharge any such liens.
4.7 NO OTHER FILINGS. El Capitan shall not file or authorize to be filed
in any jurisdiction any financing statements under the UCC or any like statement
relating to the Collateral.
4.8 MAINTENANCE OF RECORDS. El Capitan shall, at all times, keep accurate
and complete records of the Collateral. El Capitan shall permit representatives
of Secured Party, upon reasonable prior notice, at any time during normal
business hours of El Capitan to inspect and make abstracts from El Capitan's
books and records pertaining to the Collateral. Upon the occurrence and during
the continuation of any Event of Default, at Secured Party's request, El Capitan
shall promptly deliver copies of any and all such records to Secured Party.
4.9 PAYMENT OF TAXES. El Capitan shall pay or cause to be paid, before any
fine, penalty, interest or cost attaches thereto, all taxes, assessments and
other governmental or non-governmental charges or levies (other than those taxes
that it is contesting in good faith and by appropriate proceedings, and in
respect of which it has established adequate reserves for such taxes) now or
hereafter assessed or levied against the Collateral pledged by them hereunder
and shall retain copies of, and, upon request, permit Secured Party to examine
receipts showing payment of any of the foregoing.
4.10 NAME; JURISDICTION OF ORGANIZATION. El Capitan shall give Secured
Party at least 30 days prior written notice before El Capitan changes its name,
jurisdiction of organization or entity type and shall at the expense of El
Capitan execute and deliver such instruments and documents as may be required by
Secured Party or applicable legal requirements to maintain a first perfected
security interest in the Collateral.
4.11 PROCEEDS OF COLLATERAL. Except as otherwise specified herein, El
Capitan shall, at all times, keep pledged to Secured Party pursuant hereto all
Collateral and all dividends, distributions, interest, principal and other
proceeds received by El Capitan with respect thereto, and all other Collateral
and other securities, instruments, proceeds and rights from time to time
received by or distributable to El Capitan in respect of any Collateral, and
shall not permit any issuer of such Collateral to issue any shares of stock or
other equity interests which shall not have been immediately duly pledged to
Secured Party hereunder.
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4.12 DELIVERY OF PLEDGED EQUITY INTERESTS. Except for certificates or
instruments representing or evidencing shares securing the UCAD Security
Interest, certificates or instruments representing or evidencing the Pledged
Equity Interests shall be delivered to and held by or on behalf of Secured Party
pursuant hereto. All such certificates or instruments shall be in suitable form
for transfer by delivery, or shall be accompanied by duly executed instruments
of transfer or assignment in blank, all in form and substance acceptable to
Secured Party. Secured Party shall have the right, at any time in its discretion
and without prior notice to El Capitan, following the occurrence and during the
continuation of an Event of Default, to transfer to or to register in the name
of Secured Party or any of its nominees any or all of the Pledged Equity
Interests and to exchange certificates or instruments representing or evidencing
Pledged Equity Interests for certificates or instruments of smaller or larger
denominations; provided, however, that once such Event of Default has been
cured, Secured Party will promptly transfer to or register in the name or cause
its nominees to transfer to or to register in the name of El Capitan all such
Pledged Equity Interests. In furtherance of the foregoing, El Capitan shall
further execute and deliver to Secured Party stock powers in the form attached
hereto as Exhibit B.
ARTICLE 5.
RIGHTS AND REMEDIES
5.1 EVENT OF DEFAULT DEFINED. Any failure to materially comply with any
covenant, agreement, term or provision contained in this Agreement, the Purchase
Agreement or the Registration Rights Agreement or any event of default under any
of the Notes (incorporating any applicable cure periods) (including events of
non-compliance with this Agreement as described in the Notes) shall constitute
an "Event of Default" hereunder. Without limiting the foregoing, it is intended
that any event of default under the Additional Note will constitute an event of
default under the Note.
5.2 REMEDIES UPON EVENT OF DEFAULT.
(a) During any period during which an Event of Default shall have
occurred and be continuing, Secured Party may (but shall be under no obligation
to), directly or by using agent or broker:
(i) proceed to protect and enforce the rights vested in it by
this Agreement and under the UCC;
(ii) cause all moneys and other property pledged as security
to be paid and/or delivered directly to it, and demand, xxx for, collect and
receive any such moneys and property;
(iii) cause any action at law or suit in equity or other
proceeding to be instituted and prosecuted to collect or enforce any Obligations
of El Capitan or rights included in the Collateral, or for specific enforcement
of any covenant or agreement contained herein, or in aid of the exercise of any
power therein or herein granted, or for any foreclosure hereunder and sale under
a judgment or decree in any judicial proceeding, or to enforce any other legal
or equitable right vested in it by this Agreement or by law;
(iv) foreclose or enforce any other agreement or other
instrument by or under or pursuant to which the Obligations of El Capitan are
issued or secured;
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(v) subject to Section 5.2(b), sell, lease or otherwise
dispose of any or all of the Collateral, in one or more transactions, at such
prices as Secured Party may deem best, and for cash or on credit or for future
delivery, without assumption of any credit risk, at any broker's board or at
public or private sale, without demand of performance or notice of intention to
sell, lease or otherwise dispose of, or of time or place of disposition (except
such notice as is required by applicable statute and cannot be waived), it being
agreed that Secured Party may be purchasers or lessees on their own behalf at
any such sale and that Secured Party or anyone else who may be the purchaser,
lessee or recipient for value of any or all of the Collateral so disposed of
shall, upon such disposition, acquire all of El Capitan's rights therein.
Secured Party may adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and place fixed for the
same, and such sale may, without further notice or publication, be made at any
time or place to which the same may be so adjourned. If Secured Party sell any
of the Collateral upon credit, after reasonable inquiry as to the credit
worthiness of the purchaser, El Capitan will be credited only with payments
actually made by the purchaser, received by Secured Party and applied to the
indebtedness of the purchaser. In the event the purchaser fails to pay for the
Collateral, Secured Party may resell the Collateral and El Capitan shall be
credited with the proceeds of the sale;
(vi) incur expenses, including reasonable attorneys' fees,
consultants' fees, and other costs appropriate to the exercise of any right or
power under this Agreement;
(vii) perform any obligation of El Capitan hereunder and make
payments, purchase, contest or compromise any encumbrance, charge, or lien, and
pay taxes and expenses;
(viii) make any reasonable compromise or settlement deemed
desirable with respect to any or all of the Collateral and extend the time of
payment, arrange for payment installments, or otherwise modify the terms of, any
or all of the Collateral;
(ix) secure the appointment of a receiver of any or all of the
Collateral;
(x) exercise any other or additional rights or remedies
granted to Secured Party under any other provision of this Agreement or
exercisable by a secured party under the UCC, whether or not the UCC applies to
the affected Collateral, or under any other applicable law and take any other
action which Secured Party deem necessary or desirable to protect or realize
upon their security interests in the Collateral or any part thereof; and/or
(xi) appoint a third party (who may be an employee, officer or
other representative of Secured Party) to do any of the foregoing, or take any
other action permitted hereunder, on behalf of Secured Party.
(b) If, pursuant to any law, prior notice of any action described in
Section 5.2(a) is required to be given to El Capitan, El Capitan hereby
acknowledges that the minimum time required by such law, or if no minimum is
specified, ten days, shall be deemed a reasonable notice period.
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(c) Any action or proceeding to enforce this Agreement may be taken
by Secured Party either in El Capitan's name or in Secured Party's name, as
Secured Party may deem necessary.
(d) All rights of marshalling of assets of El Capitan, including any
such right with respect to the Collateral, are hereby waived by El Capitan.
(e) Secured Party shall incur no liability as a result of the sale
of any or all of the Collateral at any private sale pursuant to Section 5.2(a)
conducted in a commercially reasonable manner. El Capitan hereby waives any
claims against Secured Party arising by reason of the fact that the price at
which any or all of the Collateral may have been sold at such a private sale was
less than the price that might have obtained at a public sale or was less than
the aggregate amount of the Obligations, even if Secured Party accepts the first
offer received and does not offer the Collateral to more than one offeree.
5.3 ATTORNEY-IN-FACT. Upon the occurrence and during the continuation of
an Event of Default, El Capitan hereby irrevocably constitutes and appoints
Secured Party as its true and lawful attorney-in-fact to enforce all rights of
El Capitan with respect to the Collateral, including the right to give
appropriate receipts, releases and satisfactions for and on behalf of and in the
name of El Capitan or, at the option of Secured Party, in the name of Secured
Party, with the same force and effect as El Capitan could do if this Agreement
had not been made. If Secured Party shall so elect after the occurrence and
during the continuation of an Event of Default hereunder, Secured Party shall
have the right at all times to settle, compromise, adjust, or liquidate all
claims or disputes directly with El Capitan or any obligor of El Capitan upon
such terms and conditions as Secured Party may determine in its sole discretion,
and to charge all costs and expenses thereof (including reasonable attorneys'
fees and charges) to El Capitan's account and to add them to the Obligations
whereupon such costs and expenses shall be and become part of the Obligations.
This power of attorney is a power coupled with an interest and shall be
irrevocable.
5.4 EXPENSES; INTEREST. All costs and expenses (including reasonable
attorneys' fees and expenses) incurred by Secured Party in connection with
exercising any actions taken under Article 5, together with interest thereon (to
the extent permitted by law) computed at a rate of 10% per annum (or if less,
the maximum rate permitted by law) from the date on which such costs or expenses
are invoiced to and become payable by El Capitan, to the date of payment
thereof, shall constitute part of the Obligations secured by this Agreement and
shall be paid by El Capitan to Secured Party within 10 days after written
demand.
5.5 NO IMPAIRMENT OF REMEDIES. If under applicable law, Secured Party
proceed by either judicial foreclosure or by non-judicial sale or enforcement,
Secured Party may, at its sole option, determine which of its remedies or rights
to pursue without affecting any of their rights and remedies under this
Agreement. If, by exercising any right and remedy, Secured Party forfeits any of
its other rights or remedies, including any right to enter a deficiency judgment
against El Capitan or any third party (whether because of any applicable law
pertaining to "election of remedies" or the like), El Capitan nevertheless
hereby consents to such action by Secured Party. To the extent permitted by
applicable law, El Capitan also waives any claim based upon such action, even if
such action by Secured Party results in a full or partial loss of any rights of
subrogation, indemnification or reimbursement which El Capitan might otherwise
have had but for such action by Secured Party or the terms herein. Any election
of remedies which results in the denial or impairment of the right of Secured
Party to seek a deficiency judgment against any third party shall not, to the
extent permitted by applicable law, impair El Capitan's obligations hereunder.
If Secured Party bids at any foreclosure or trustee's sale or at any private
sale permitted by law or this Agreement, Secured Party may bid all or less than
the amount of the Obligations. To the extent permitted by applicable law, the
amount of the successful bid at any such sale, whether Secured Party or any
other party is the successful bidder, shall be conclusively deemed to be the
fair market value of the Collateral and the difference between such bid amount
and the remaining balance of the Obligations shall be conclusively deemed to be
the amount of the Obligations.
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ARTICLE 6.
CERTAIN WAIVERS
6.1 MODIFICATION OF OBLIGATIONS. El Capitan's liability hereunder shall
not be reduced, limited, impaired, discharged or terminated if Secured Party at
any time with El Capitan's consent (or, to the extent permissible by the terms
of the Loan Documents and law, without notice to or demand of El Capitan):
(a) renews, extends, accelerates, increases the rate of interest on,
or otherwise changes the time, place, manner or terms, or otherwise modifies any
of the Obligations (including any payment terms);
(b) extends or waives the time for El Capitan's performance of, or
compliance with, any term, covenant or agreement on its part to be performed or
observed under the Loan Documents, or waives such performance or compliance or
consents to a failure of, or departure from, such performance or compliance;
(c) settles, compromises, releases or discharges, or accepts or
refuses any offer of performance with respect to, or substitutions for, any of
the Obligations or any agreement relating thereto and/or subordinates the
payment of the same to the payment of any other obligations;
(d) requests and accepts other guaranties of any of the Obligations
and takes and holds security for the payment hereof or any of the Obligations;
(e) releases, surrenders, exchanges, substitutes, compromises,
settles, rescinds, waives, alters, subordinates or modifies, with or without
consideration, any security for payment of any of the Obligations, any other
guaranties of any of the Obligations, or any other obligation of any third party
with respect to any of the Obligations;
(f) to the extent permitted by law, enforces and applies any
security, if any, now or hereafter held by or for the benefit of Secured Party
in respect hereof or any of the Obligations and directs the order or manner of
sale thereof, or exercises any other right or remedy that Secured Party may have
against any such security, in each case as Secured Party in its discretion may
determine, including foreclosure on any collateral pursuant to one or more
judicial or nonjudicial sales, whether or not every aspect of any such sale is
commercially reasonable; or
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(g) exercises any other rights available to it under any of the Loan
Documents, at law or in equity.
6.2 SECURITY INTERESTS ABSOLUTE. All rights of Secured Party and the
security interests hereunder, and all obligations of El Capitan hereunder, shall
be absolute and unconditional irrespective of:
(a) any failure or omission to assert or enforce or agreement or
election not to assert or enforce, or the stay or enjoining, by order of court,
by operation of law or otherwise, of the exercise or enforcement of, any claim
or demand or any right, power or remedy (whether arising under any Loan
Document, at law, in equity or otherwise) with respect to any of the Obligations
or any agreement relating thereto, or with respect to any other guaranty of or
security for the payment of any of the Obligations;
(b) any rescission, waiver, amendment or modification of, or any
consent to departure from, any of the terms or provisions (including provisions
relating to events of default) hereof, in any other Loan Document or any
agreement or instrument executed pursuant thereto, or of any other guaranty or
security for any of the Obligations, in each case, whether or not in accordance
with the terms hereof or any other Loan Document or any agreement relating to
such other guaranty or security;
(c) the application of payments received from any source (other than
payments received from the proceeds of any security for any of the Obligations,
except to the extent such security also serves as collateral for indebtedness
other than the Obligations) to the payment of indebtedness of El Capitan to
Secured Party other than the Obligations, even though Secured Party might have
elected to apply such payment to any part or all of the Obligations;
(d) Secured Party's consent to the change, reorganization or
termination of the corporate structure or existence of El Capitan and to any
corresponding restructuring of any of the Obligations;
(e) any other act or thing or omission, or delay to do any other act
or thing, which may or might in any manner or to any extent vary the risk of El
Capitan as an obligor in respect of any of the Obligations;
(f) any Obligations or any agreement relating thereto, at any time
being found to be illegal, invalid or unenforceable in any respect
(g) any defenses, set-offs or counterclaims which El Capitan may
allege or assert against Secured Party in respect of the Obligations; and
(h) whether Secured Party makes, or does not or fails to make, any
additional loan to El Capitan subsequent to the date hereof.
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6.3 CERTAIN WAIVERS. Except as provided in Section 7.16, El Capitan hereby
waives any and all defenses afforded to a surety, including promptness,
diligence, notice of acceptance and any other notice with respect to any of the
Obligations and this Agreement and any requirement that Secured Party protect,
secure, perfect or insure any security interest or lien, or any property subject
thereto, or exhaust any right or take any action against El Capitan or any other
third party or entity or any collateral securing any of the Obligations, as the
case may be.
6.4 POSTPONEMENT OF SUBROGATION. El Capitan agrees that it will not
exercise any rights which it may acquire by way of rights of subrogation under
this Agreement, by any payment made hereunder or otherwise, while this Agreement
is in effect, unless such action is required to stay or prevent the running of
any applicable statute of limitations. Any amount paid to El Capitan on account
of any such subrogation rights prior to such time shall be held in trust for
Secured Party and shall immediately be paid to Secured Party and credited and
applied against the Obligations. Any time after this Agreement has terminated
and if El Capitan has made payment to Secured Party of all of the Obligations,
or if an action is required to stay or prevent the running of any applicable
statute of limitations, then, at El Capitan's request, Secured Party will
execute and deliver to El Capitan appropriate documents (without recourse and
without representation or warranty) necessary to evidence the transfer by
subrogation to El Capitan of an interest in the Obligations resulting from such
payment by El Capitan.
ARTICLE 7.
MISCELLANEOUS
7.1 NOTICES. Any communications, including notices and instructions,
between the parties hereto or notices provided herein to be given may be given
to the following addresses:
(a) if to El Capitan, at:
El Capitan Precious Metals, Inc.
00000 Xxxxx 00xx Xxxxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx, President and Chief Executive Officer
Facsimile: (000) 000-0000
with a copy to:
Xxxxxx Xxxxxxx Xxxxxx & Brand, LLP
00 Xxxxx Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxx, Esq.
Facsimile: (000) 000-0000
(b) if to the Secured Party, in care of:
Whitebox Advisors, LLC
0000 Xxxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxxxxxx Xxxx, Chief Financial Officer
Facsimile: (000) 000-0000
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with a copy to:
Xxxxxxxx & Xxxxxx P.A.
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
Facsimile: (000) 000-0000.
All notices or other communications required or permitted to be given
hereunder shall be made in writing and shall be considered given (a) when made
if made by hand delivery, (b) one business day after being deposited with an
overnight courier if made by a courier guaranteeing overnight delivery, (c) on
the date indicated on the notice of receipt if made by first-class United States
mail, with return receipt requested, and (d) upon confirmation if made by
telecopier. Any party shall have the right to change its address for notice
hereunder to any other location within the continental United States by giving
of notice to the other parties in the manner set forth hereinabove.
7.2 DELAY AND WAIVER; REMEDIES CUMULATIVE. No failure or delay by Secured
Party in exercising any right or power hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or power, or
any abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. Any waiver, permit, consent or approval of any kind or character
on the part of Secured Party of any breach or default under the Agreement or any
waiver on the part of Secured Party of any provision or condition of this
Agreement must be in writing and shall be effective only to the extent in such
writing specifically set forth. No right, power or remedy herein conferred upon
or reserved to Secured Party hereunder is intended to be exclusive of any other
right, power or remedy, and every such right, power and remedy shall, to the
extent permitted by law, be cumulative and in addition to every other right,
power and remedy given hereunder or now or hereafter existing at law or in
equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy. Resort to any or all
security now or hereafter held by Secured Party may be taken concurrently or
successively and in one or several consolidated or independent judicial actions
or lawfully taken nonjudicial proceedings, or both.
7.3 ENTIRE AGREEMENT. This Agreement and any agreement, document or
instrument referred to herein integrate all the terms and conditions mentioned
herein or incidental hereto and supersede all oral negotiations and prior
writings in respect of the subject matter hereof.
7.4 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Nevada, exclusive of its conflict of
laws rules.
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7.5 SEVERABILITY. In case any one or more of the provisions contained in
this Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
7.6 HEADINGS. Paragraph headings have been inserted in this Agreement as a
matter of convenience for reference only and it is agreed that such paragraph
headings are not a part of this Agreement and shall not be used in the
interpretation of any provision of this Agreement.
7.7 WAIVER OF JURY TRIAL. EL CAPITAN HEREBY KNOWINGLY, VOLUNTARILY, AND
INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS
AGREEMENT OR ANY COURSE OR CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER
VERBAL OR WRITTEN), OR ACTIONS OF SECURED PARTY. THIS PROVISION IS A MATERIAL
INDUCEMENT FOR SECURED PARTY TO MAKE THE LOAN.
7.8 CONSENT TO JURISDICTION. Each party hereto agrees that any legal
action or proceeding with respect to or arising out of this Agreement may be
brought in or removed to the federal or state courts located in Hennepin County,
Minnesota, as Secured Party may elect. By execution and delivery of this
Agreement, each party hereto accepts, for themselves and in respect of their
property, generally and unconditionally, the jurisdiction of the aforesaid
courts. Each of the parties hereto irrevocably consents to the service of
process out of any of the aforementioned courts in any manner permitted by law.
Nothing herein shall affect the right of Secured Party to bring legal action or
proceedings in any other competent jurisdiction. Each party hereto hereby waives
any right to stay or dismiss any action or proceeding under or in connection
with this Agreement brought before the foregoing courts on the basis of forum
non-conveniens.
7.9 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
permitted assigns.
7.10 COUNTERPARTS. This Agreement may be executed in one or more duplicate
counterparts and when signed by all of the parties listed below, shall
constitute a single binding agreement. Delivery of an executed signature page of
this Agreement by facsimile transmission shall be as effective as delivery of a
manually executed counterpart thereof.
7.11 BENEFIT OF AGREEMENT. Nothing in this Agreement, express or implied,
shall give or be construed to give, any person other than the parties hereto and
their respective permitted successors, transferees and assigns any legal or
equitable right, remedy or claim under this Agreement, or under any covenants
and provisions of this Agreement, each such covenant and provision being for the
sole benefit of the parties hereto and their respective permitted successors,
transferees and assigns.
7.12 AMENDMENTS AND WAIVERS. No amendment, modification, termination or
waiver of any provision of this Agreement or consent to any departure therefrom
shall be effective unless the same shall be in writing and signed by each of the
parties hereto. Each amendment, modification, termination or waiver shall be
effective only in the specific instance and for the specific purpose for which
it was given.
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7.13 SURVIVAL OF AGREEMENTS. The provisions regarding the payment of
expenses and indemnification obligations shall survive and remain in full force
and effect regardless of the termination of this Agreement pursuant to Section
7.14.
7.14 RELEASE AND SATISFACTION. Upon the indefeasible payment (whether in
cash and/or other consideration which is satisfactory to Secured Party in their
sole discretion) and performance in full of the Obligations, (i) this Agreement
and the security interests created hereby shall terminate and Secured Party will
return the Collateral, including all documentation evidencing or affecting the
Collateral, and (ii) upon written request of El Capitan, Secured Party shall
execute and deliver to El Capitan, at El Capitan's expense and without
representation or warranty by or recourse to Secured Party, releases and
satisfactions of all financing statements, mortgages, notices of assignment and
other registrations of security.
7.15 REINSTATEMENT. This Agreement shall continue to be effective or be
automatically reinstated, as the case may be, if at any time any payment
pursuant to this Agreement is rescinded or must otherwise be restored or
returned upon the insolvency, bankruptcy, reorganization, liquidation of El
Capitan or upon the dissolution of, or appointment of any intervenor or
conservator of, or trustee or similar official for, El Capitan or any
substantial part of El Capitan's assets, or otherwise, all as though such
payments had not been made.
7.16 LIMITATION ON DUTY OF SECURED PARTY WITH RESPECT TO THE COLLATERAL.
The powers conferred on Secured Party hereunder are solely to protect its
interest in the Collateral and shall not impose any duty on Secured Party or any
of its designated agents to exercise any such powers. Except for the safe
custody of any Collateral in its possession and the accounting for monies
actually received by it hereunder, Secured Party shall have no duty with respect
to any Collateral and no implied duties or obligations shall be read into this
Agreement against Secured Party. Secured Party shall be deemed to have exercised
reasonable care in the custody and preservation of the Collateral in its
possession if the Collateral is accorded treatment that is substantially
equivalent to that which Secured Party accords its own property, it being
expressly agreed, to the maximum extent permitted by applicable law, that
Secured Party shall have no responsibility for (a) taking any necessary steps to
preserve rights against any parties with respect to any Collateral or (b) taking
any action to protect against any diminution in value of the Collateral, but, in
each case, Secured Party may do so and all expenses reasonably incurred in
connection therewith shall be part of the Obligations.
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IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement
to be executed and delivered as of the date first written above.
El Capitan: Secured Party:
El Capitan Precious Metals, Inc. Whitebox Intermarket Partners, L.P.
By /s/ Xxxxxxx X. Xxxxxxx By /s/ Xxxxxxxx Xxxx
---------------------------------- --------------------------------
Xxxxxxx X. Xxxxxxx, President and
Chief Executive Officer Its CFO/Director
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