Environmental Indemnity Agreement

Exhibit 10.4

ENVIRONMENTAL INDEMNITY AGREEMENT

THIS ENVIRONMENTAL INDEMNITY AGREEMENT (this " Agreement" ), dated as of June 17, 2008 is made by STERLING MINING COMPANY , an Idaho corporation (" Borrower" ) to and for the benefit of those individuals/entities listed on the attached Exhibit " A," and their successors and assigns (" Lender" ).

R E C I T A L S:

A. WHEREAS , Lender has extended to Borrower a loan in the principal amount of Two MILLION FOUR HUNDRED THOUSAND DOLLARS AND No/100 ($2,400,000.00) (" Loan" ). B. WHEREAS , The Loan is evidenced by a Promissory Note of even date herewith (as amended from time to time, " Note" ), executed by Borrower and payable to the order of Lender, and is secured by a Mortgage, Assignment of Leases and Rents, Security Agreement, and Fixture Filing of even date herewith (as amended from time to time, " Mortgage" ), from Borrower in favor of Lender encumbering real property located in Shoshone County, Idaho, as described on Exhibit " B" attached hereto, together with the other collateral as described in the Mortgage (the real property and other collateral being collectively referred to as " Property" ) (capitalized terms used and not specifically defined herein shall bear the same meaning as in the Mortgage). C. WHEREAS , As a condition precedent to making the Loan, Lender has required that Indemnitors (as defined below) indemnify Lender with respect to environmental conditions and operations at the Property as set forth below.

NOW, THEREFORE, to induce Lender to extend the Loan to Borrower and in consideration of the foregoing premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged. Indemnitors hereby covenant and agree for the benefit of Lender and the other Indemnified Parties (as defined below), as follows:

1. Environmental Matters.

(a) Definitions. For purposes of this Agreement the following terms have the following meanings:

" Environmental Laws" means any and all federal, state and local laws (whether under common law, statute, rule, regulation or otherwise), requirements under permits or other authorizations issued with respect thereto, and other orders, decrees, judgments, directives or other requirements of any governmental authority relating to or imposing liability or standards of conduct (including disclosure or notification) concerning protection of human health or the environment or Hazardous Substances or any activity involving Hazardous Substances, all as previously and in the future to be amended.

" Hazardous Substance" means, but is not limited to any and all substances (whether solid, liquid or gas) defined, listed, or otherwise classified as pollutants, hazardous wastes, hazardous substances, hazardous materials, extremely hazardous wastes, or words of similar meaning or regulatory effect under any present or future


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Environmental Laws or that may have a negative impact on human health or the environment, including but not limited to petroleum and petroleum products, asbestos and asbestos-containing materials, polychlorinated biphenyls, lead, radon, radioactive materials, flammables and explosives, but excluding substances of kinds and in amounts ordinarily and customarily present used or stored in similar properties, and otherwise in compliance with all Environmental Laws.

" Indemnified Parties" means and includes Lender, their parent, subsidiaries, and affiliated companies, assignees of any of Lender' s interest in the Loan or the Loan Documents, any servicer or originator of the Loan, and the officers, directors, employees, agents and contractors of any of the foregoing parties.

" Indemnitors" means Borrower, its parent, subsidiaries, and affiliated companies.

" Loan Documents" means the Note, the Mortgage, this Agreement and any other document given by any Indemnitor to evidence or secure the Loan, as amended from time to time.

" Release" means any release, deposit discharge, emission, leaking, leaching, spilling, seeping, migrating, injecting, pumping, pouring, emptying, escaping, dumping, disposing or other movement of Hazardous Substances. (b) Environmental Representations and Warranties . Indemnitors hereby represent and warrant to Indemnified Parties that, as of the date hereof:

(i) neither the Property nor any operations of Borrower are in violation of any Environmental Laws or any permit or other authorization issued pursuant thereto;

(ii) no Hazardous Substances are, or to Indemnitors' knowledge and belief, have been handled, generated, stored, processed or otherwise managed on or at the Property except for those substances used by Borrower at the Property in the ordinary course of their businesses and in compliance with all Environmental Laws;

(iii) there are not, to Indemnitors' knowledge, any past or present Releases of Hazardous Substances in, on, under or from the Property;

(iv) the Property is not subject to any private or governmental lien or judicial or administrative notice or action relating to Hazardous Substances;

(v) there are no existing or closed underground storage tanks or other underground storage receptacles for Hazardous Substances on the Property;

(vi) Borrower has received no notice of, and to Borrower' s knowledge, there exists no current investigation, action, proceeding or claim by any agency, authority or unit of government or by any third party which could result in any liability, penalty, sanction or judgment under any Environmental Laws with respect to any condition, use or operation of the Property or any of Borrower' s operations, nor does Borrower know of any basis for such a claim;

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(vii) there has been no claim by any party that any use, operation or condition of the Property or any of Borrower' s operations has caused any nuisance or any other liability or adverse condition on any other property nor does Borrower know of any basis for such a claim: and (viii) there are no agreements, consent orders, decrees, judgments, license or permit conditions or other orders or directives of any federal, state or local court, governmental agency or authority or agreements, whether settlement agreements or otherwise, with any third parties relating to the ownership, use, operation, sale, transfer or conveyance of the Property that require any change in the present condition of the Property or any work, repairs, construction, containment, clean up, investigations, studies, removal or other remedial action or capital expenditures with respect to the Property. (ix) the Property is subject to regulation by federal and state authorities as part of an ongoing mining and milling operation (the " Operations" ). The Operations are conducted pursuant to federal and state Environmental Laws. Borrower holds all necessary and required permits as required by applicable Environmental Laws. (c) Environmental Covenants . Borrower covenants and agrees that Borrower: (i) shall keep or cause the Property to be kept free from Hazardous Substances (except those substances used by Borrower at the Property in the ordinary course of its businesses and in compliance with all Environmental Laws); (ii) shall not install or use any underground storage tanks, shall not itself engage in the use, generation, handling, storage, production, processing or management of Hazardous Substances, except in the ordinary course of their businesses and in compliance with all Environmental Laws; (iii) shall not itself cause or allow and shall expressly prohibit the Release of Hazardous Substances at, on, under, or from the Property; shall itself comply and shall expressly require any other persons who may come upon the Property to comply with all Environmental Laws; (iv) shall keep the Property free and clear of all liens and other encumbrances imposed pursuant to any Environmental Law, whether due to any act or omission of Borrower or any other person or entity (" Environmental Liens" ); (v) shall comply and cause all occupants of the Property to comply with the reasonable recommendations of any qualified environmental engineer or other expert that apply or pertain to the environmental condition of the Property; and, (vi) without limiting the generality of the foregoing, during the term of this Agreement, shall not use any construction materials which contain asbestos nor install in the Improvements on the Property or permit to be installed in the Improvements on the Property, any materials which contain asbestos.

(d) Notice and Access . Indemnitors shall promptly notify Indemnified Parties in writing if Indemnitors knows, suspects or believes there is or are (i) any Hazardous Substances, other than those used by Borrower at the Property in the ordinary course of their businesses and in compliance with all Environmental Laws, present on the Property; (ii) any Release of Hazardous Substances in, on, under, from or migrating towards the Property; (iii) any non-compliance with Environmental Laws related in any way to the Property; (iv) any actual or potential Environmental Liens; (v) any


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investigation or action or claim, whether threatened or pending, by any governmental agency or third party pertaining to the Release of Hazardous Substances in, on, under, from, or migrating towards the Property; and (vi) any installation of wells, piping, or other equipment at the Property to investigate, remediate or otherwise address any Release of Hazardous Substances at, on, in or in the vicinity of the Property. Indemnitors shall promptly, at Indemnitors' sole cost and expense, take all reasonable actions with respect to any Hazardous Substances or other environmental condition at, on or under the Property or other affected property, including all investigative, monitoring, removal, containment and remedial actions in accordance with all applicable Environmental Laws, including the payment, at no expense to Indemnified Parties, of all clean-up, administrative and enforcement costs of applicable governmental agencies which may be asserted against the Property in all instances as necessary to (A) comply with all applicable Environmental Laws; (B) protect human health or the environment; (C) allow continued use, occupation, or operation of the Property; and (D) maintain fair market value of the Property (collectively, " Completion of the Clean-up" ). In the event Indemnitors fail to do so, Indemnified Parties may, but shall not be obligated or have any duty to, cause the Completion of the Clean-up of the Property. Indemnitors hereby grant to Indemnified Parties and their agents and employees access to the Property as provided in Section l(f) below, and a license to remove any items reasonably deemed by Indemnified Parties to be Hazardous Substances and to take all reasonable steps Indemnified Parties shall deem necessary to cause the Completion of the Clean-up of the Property. (e) Indemnification . Indemnitors covenant and agree, at Indemnitors' sole cost and expense, to indemnify, defend (at trial and appellate levels, and with attorneys, consultants and experts acceptable to Indemnified Parties), and hold Indemnified Parties harmless from and against any and all liens, damages (including, without limitation, consequential damages), losses, liabilities, obligations, settlement payments, penalties, claims, judgments, suits, proceedings, costs, disbursements or expenses of any kind or of any nature whatsoever (including reasonable attorneys' , consultants' and experts' fees ...