Exhibit 10.1
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Agreement") is made effective October 28,
2005 by and between El Capitan Precious Metals, Inc., a Delaware corporation
("El Capitan - Delaware"), and Whitebox Intermarket Partners, L.P., a British
Virgin Islands limited partnership ("WIP").
RECITALS
A. El Capitan - Delaware is the wholly owned subsidiary of El Capitan
Precious Metals, Inc., a Nevada corporation ("El Capitan - Nevada").
B. El Capitan and WIP entered into a Purchase Agreement dated October 28,
2005 (the "Purchase Agreement"), pursuant to which WIP purchased a secured
convertible promissory note in the aggregate principal amount of $750,000 (the
"Note") and a warrant to purchase shares of El Capitan - Nevada's Common Stock
(the "Warrant") in consideration of a $750,000 loan (the "Loan"). WIP is
referred to herein as the "Secured Party."
C. As part of the Purchase Agreement, El Capitan - Nevada 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"). WIP exercised this option on January 11, 2006.
C. As a condition to making the Loan and the purchase of the Additional
Note and Additional Warrant, El Capitan - Delaware has agreed to pledge to
Secured Party all of its assets, subject to no other security interest.
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 Delaware (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 dated October 28, 2005 between El
Capitan - Nevada 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 - Delaware 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 - Delaware 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 - Delaware 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 - Delaware 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 be due in
connection with any such filing. El Capitan - Delaware 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 - Delaware 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.
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(a) Anything herein contained to the contrary notwithstanding, El
Capitan - Delaware 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 -
Delaware thereunder or to make any payment, or to make any inquiry as to the
nature or sufficiency of any payment received by them 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.
(b) If any default by El Capitan - Delaware 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 - Delaware and to the
parties to such contract, agreement or other document. Any cure by Secured Party
of El Capitan - Delaware'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 - Delaware contained in such
contract, agreement or other document, and Secured Party shall not incur any
liability to El Capitan - Delaware 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 - Delaware under any of such contracts, agreements
or other documents.
2.4 DELIVERY OF CERTIFICATES. All certificates and other instruments
representing or evidencing El Capitan - Delaware's ownership of shares of
capital stock of El Capitan, Ltd., an Arizona corporation or any other entity,
including any subsidiary of El Capitan - Delaware (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 INTENTIONALLY OMITTED.
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 - Delaware 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 - Delaware 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
(b) El Capitan - Delaware 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 - Delaware makes the following representations and warranties
to and in favor of Secured Party as of January 20, 2006. All of these
representations and warranties shall survive the execution and delivery of this
Agreement:
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3.1 ORGANIZATION. El Capitan - Delaware:
(a) is a corporation duly incorporated and validly existing and in
good standing under the laws of the State of Delaware;
(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 carry on its business as now
being conducted and as proposed to be conducted by it, (B) to execute, deliver
and perform this Agreement, (C) to take all action as may be necessary to
consummate the transactions contemplated hereunder, and (D) 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 - Delaware is located at 00000 Xxxxx 00xx
Xxxxxx, Xxxxxxxxxx, Xxxxxxx, 00000.
3.3 TITLE AND LIENS. El Capitan - Delaware 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.
3.4 AUTHORIZATION; NO CONFLICT. El Capitan - Delaware has duly authorized,
executed and delivered this Agreement, and El Capitan - Delaware'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 - Delaware which could reasonably be
expected to have a material adverse effect upon the Collateral or Secured
Party's rights therein;
(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 - Delaware's property, under any agreement or instrument to
which El Capitan - Delaware 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 - Delaware 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.
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3.6 UCC ARTICLE 8. All shares of common stock of El Capitan, Ltd., an
Arizona corporation, owned by the El Capitan-Delaware, and shares of capital
stock of any subsidiary of the El Capitan - Delaware or of any other entity in
which El Capitan - Delaware owns an interest, that are part of the Collateral,
are securities governed by Article 8 of the UCC.
ARTICLE 4.
COVENANTS OF DEBTOR
El Capitan - Delaware covenants to and in favor of Secured Party as follows:
4.1 COMPLIANCE WITH OBLIGATIONS. El Capitan - Delaware 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 - Delaware shall,
promptly upon request, provide to Secured Party all information and evidence
they it reasonably requests concerning the Collateral to enable Secured Party to
enforce the provisions of this Agreement.
4.3 DEFENSE OF COLLATERAL. El Capitan - Delaware 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 - Delaware 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 - Delaware 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 - Delaware shall give to Secured Party
prompt notice of any material default with respect to the Collateral of which El
Capitan - Delaware has knowledge or has received notice.
4.6 PRESERVATION OF VALUE; LIMITATION OF LIENS. El Capitan - Delaware
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 - Delaware, prior to the
exercise by Secured Party of any rights pursuant to the terms hereof, from
undertaking El Capitan - Delaware's operations in the ordinary course of
business. El Capitan - Delaware 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 -
Delaware shall at its own cost and expense promptly take such action as may be
necessary to discharge any such liens.
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4.7 NO OTHER FILINGS. El Capitan - Delaware 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 - Delaware shall, at all times,
keep accurate and complete records of the Collateral. El Capitan - Delaware
shall permit representatives of Secured Party, upon reasonable prior notice, at
any time during normal business hours of El Capitan - Delaware to inspect and
make abstracts from El Capitan - Delaware'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 - Delaware shall promptly
deliver copies of any and all such records to Secured Party.
4.9 PAYMENT OF TAXES. El Capitan - Delaware 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 - Delaware shall give
Secured Party at least 30 days prior written notice before El Capitan - Delaware
changes its name, jurisdiction of organization or entity type and shall at the
expense of El Capitan - Delaware 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 - Delaware 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 - Delaware 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 - Delaware 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.
4.12 DELIVERY OF PLEDGED EQUITY INTERESTS. 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 -
Delaware, 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 - Delaware all such Pledged Equity
Interests. In furtherance of the foregoing, El Capitan - Delaware shall further
execute and deliver to Secured Party stock powers in the form attached hereto as
Exhibit B.
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ARTICLE 5.
RIGHTS AND REMEDIES
5.1 EVENT OF DEFAULT DEFINED. Any failure of El Capitan - Delaware or El
Capitan - Nevada 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 an 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 - Delaware 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 -
Delaware are issued or secured;
(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 - Delaware'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
sells any of the Collateral upon credit, after reasonable inquiry as to the
credit worthiness of the purchaser, El Capitan - Delaware 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 - Delaware shall be credited with the proceeds of the sale;
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(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 - Delaware
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 - Delaware, El Capitan -
Delaware 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.
(c) Any action or proceeding to enforce this Agreement may be taken
by Secured Party either in El Capitan - Delaware's name or in Secured Party's
name, as Secured Party may deem necessary.
(d) All rights of marshalling of assets of El Capitan - Delaware,
including any such right with respect to the Collateral, are hereby waived by El
Capitan - Delaware.
(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 - Delaware 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 been 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.
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5.3 ATTORNEY-IN-FACT. Upon the occurrence and during the continuation of
an Event of Default, El Capitan - Delaware hereby irrevocably constitutes and
appoints Secured Party as its true and lawful attorney-in-fact to enforce all
rights of El Capitan - Delaware 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 - Delaware or, at the option of Secured Party,
in the name of Secured Party, with the same force and effect as El Capitan -
Delaware 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
- Delaware or any obligor of El Capitan - Delaware 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 - Delaware'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 - Delaware, to the date of
payment thereof, shall constitute part of the Obligations secured by this
Agreement and shall be paid by El Capitan - Delaware to Secured Party within 10
days after written demand.
5.5 NO IMPAIRMENT OF REMEDIES. If under applicable law, Secured Party
proceeds 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 its 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 - Delaware or any third party (whether because of any applicable law
pertaining to "election of remedies" or the like), El Capitan - Delaware
nevertheless hereby consents to such action by Secured Party. To the extent
permitted by applicable law, El Capitan - Delaware 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 - Delaware 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 - Delaware'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 - Delaware's liability
hereunder shall not be reduced, limited, impaired, discharged or terminated if
Secured Party at any time with El Capitan - Delaware s consent (or, to the
extent permissible by the terms of the Loan Documents and law, without notice to
or demand of El Capitan - Delaware):
(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 - Delaware'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
(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 - Delaware
hereunder, shall be absolute and unconditional irrespective of:
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(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 -
Delaware 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 - Delaware 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 - Delaware 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 -
Delaware 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 - Delaware subsequent to the date hereof.
6.3 CERTAIN WAIVERS. Except as provided in Section 7.16, El Capitan -
Delaware 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 - Delaware or any other third party or entity or any collateral securing
any of the Obligations, as the case may be.
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6.4 POSTPONEMENT OF SUBROGATION. El Capitan - Delaware 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
- Delaware 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 - Delaware 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 -
Delaware's request, Secured Party will execute and deliver to El Capitan -
Delaware appropriate documents (without recourse and without representation or
warranty) necessary to evidence the transfer by subrogation to El Capitan -
Delaware of an interest in the Obligations resulting from such payment by El
Capitan - Delaware .
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 - Delaware, 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
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.
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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 Delaware, exclusive of its conflict of
laws rules.
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.
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7.7 WAIVER OF JURY TRIAL. EL CAPITAN - DELAWARE 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.
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.
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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 - Delaware, Secured
Party shall execute and deliver to El Capitan - Delaware, at El Capitan -
Delaware '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 - Delaware or upon the dissolution of, or appointment of any intervenor
or conservator of, or trustee or similar official for, El Capitan - Delaware or
any substantial part of El Capitan - Delaware'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.
15
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 - Delaware: Secured Party:
El Capitan Precious Metals, Inc., Whitebox Intermarket Partners, L.P.,
a Delaware corporation a British Virgin Islands Limited Partnership
By /s/ Xxxxxxx X. Xxxxx By /s/ Xxxxxxxx Xxxx
---------------------------- ------------------------------------------
Its CFO/ Treasurer Its CFO/ Director
--------------------------- -----------------------------------------
16
EXHIBIT A
DESCRIPTION OF EL CAPITAN - DELAWARE COLLATERAL
All assets of El Capitan Precious Metals, Inc., a Delaware corporation
(the "Company"), including without limitation, the following:
Inventory: All inventory of the Company as that term is defined in the
Uniform Commercial Code, whether now owned or hereafter acquired or in which the
Company obtains rights, whether consisting of whole goods, spare parts or
components, supplies or materials whether acquired, held or furnished for sale,
for lease, for participation, revenue-sharing or other similar arrangements, or
under contracts or for manufacture or processing, and wherever located, to
include, without limitation, all gold, silver and other precious metals and
minerals, as extracted, now owned or hereafter acquired by the Company;
Equipment: All equipment of the Company, whether now owned or hereafter
acquired, including all present and future machinery, vehicles, furniture,
fixtures, office and recordkeeping equipment, parts, tools, supplies and all
other goods (except inventory) used or bought for use by the Company for any
business or enterprise and including specifically (without limitation) all
accessions thereto, all substitutions and replacements thereof, and all like or
similar property now owned or hereafter acquired by the Company, and all of
which is owned by the Company, and all deposits made on any such equipment;
Deposit Accounts and Other Cash: All deposits and deposit accounts with
any bank, savings and loan association, credit union or like organization, and
all funds and amounts therein, and whether or not held in trust, or in custody
or safekeeping, or otherwise restricted or designated for a particular purpose,
and all other cash or marketable securities on hand, whether held in-vault or
otherwise;
Receivables: Each and every right of the Company to the payment of money,
whether such right to payment now exists or hereafter arises, whether such right
to payment arises out of a sale, lease or other disposition of goods or other
property, out of a rendering of services, or of a loan, out of the overpayment
of taxes or other liabilities, or any other transaction or event, whether such
right to payment is created, generated or earned by the Company or by some other
person who subsequently transfers his, her or its interest to the Company,
whether such right to payment is or is not already earned by performance, and
howsoever such right to payment may be evidenced, together with all other rights
and interests (including all liens and other security interests) which the
Company may at any time have by law or agreement against any account debtor or
other person obligated to make such payment or against any property of such
account debtor or other persons including, but not limited to, all present and
future accounts, contract rights, chattel paper, bonds, notes and other debt
instruments, and rights to payment in the nature of general intangibles;
General Intangibles: All general intangibles of the Company whether now
owned or hereafter acquired, including (without limitation) all present and
future patents, patent applications, copyrights, trademarks, trade names, trade
secrets, customer or supplier lists and contracts, manuals, operating
instructions, permits, franchises, the right to use the Company's name, the
Company's internet domain names and address and the goodwill of the Company's
business; and
Securities: All securities, joint venture and other equity interests
(including mining claims and mineral exploration rights) now owned or hereafter
acquired by the Company, including (a) the Company's ownership interest, if any,
in the (i) El Capitan mine, located in Lincoln County, New Mexico (near Capitan,
New Mexico), (ii) COD mine located in Mohave County, Arizona, (iii) Xxxxxx mine
located in Maricopa County, Arizona (near Congress, Arizona) and (iv) Rainbow
Valley mine located in Maricopa County, Arizona (near Mobile, Arizona); (b) all
shares of common stock of El Capitan, Ltd., an Arizona corporation, owned by the
Company and (c) any shares of capital stock of any wholly-owned or
partially-owned subsidiary of the Company or any other entity in which the
Company owns an interest; all certificates, receipts and other instruments
evidencing any of interests or securities described in the foregoing clauses
(a), (b), and (c), and all dividends, cash, earnings, securities and other
property received or otherwise distributed in respect of or in exchange for any
or all of such interests or securities; and all additional interests or
securities described above in clauses (a), (b), and (c) from time to time
acquired by the Company in any manner, and all dividends, cash, earnings,
securities and other property received or otherwise distributed in respect of or
in exchange for any or all of such interests or securities.
The Collateral shall include (i) all substitutes and replacements for and
proceeds of any and all of the foregoing property, and in the case of all
tangible Collateral, all accessions, accessories, attachments, parts, equipment
and repairs now or hereafter attached or affixed to or use in connection with
any such goods and (ii) all warehouse receipts, bills of lading and other
documents of title now or hereafter covering such goods.
EXHIBIT B
STOCK POWER
For value received, the undersigned has bargained, sold, assigned, and
transferred, and by these presents does bargain, sell, assign and transfer unto
Whitebox Intermarket Partners, L.P., a British Virgin Islands limited
partnership, 4,000 shares of Common Stock of El Capitan, Ltd., an Arizona
corporation (the "Company"), standing in its name on the books of the Company,
represented by share Certificate No. 3 of the Company herewith and does
constitute and appoint the Company its true and lawful attorney-in-fact,
IRREVOCABLY, and in its name and stead, to sell, assign, transfer and set over,
all or any part of the said stock, and for that purpose to make and execute all
necessary acts of assignment and transfer, and one or more persons to substitute
with like full power, hereby ratifying and confirming all that any said attorney
or its substitute or substitutes shall lawfully do by virtue hereof.
Date: ___________________
El Capitan Precious Metals, Inc.,
a Delaware corporation
By: ___________________________________________
Its: _________________________________________
