AMENDMENT NO. 3 TO CONVERTIBLE NOTES PURCHASE AGREEMENT
EXHIBIT
10.1
AMENDMENT
NO. 3 TO
This
Amendment No. 3 to Convertible Notes Purchase Agreement (this “Amendment”) is entered into on
this 22nd day of December, 2008, by and between Wits Basin Precious Minerals
Inc., a Minnesota corporation (the “Issuer”), and China Gold, LLC,
a Kansas limited liability company, its successors and assigns (together with
its successors and assigns “Purchaser”), to amend, as
hereinafter set forth, the terms of that certain Convertible Notes Purchase
Agreement dated April 10, 2007 by and between Issuer and Purchaser, as
previously amended on June 19, 2007 and November 10, 2008 (as amended, the
“Purchase
Agreement”). Capitalized terms used in this Amendment and not
otherwise defined herein shall have the same meanings as defined in the Purchase
Agreement.
A. Issuer
and Purchaser entered into the Purchase Agreement on April 10, 2007, which
contemplated the initial sale by Issuer, and purchase by Purchaser, of an
aggregate minimum of $12,000,000 and an aggregate maximum of $25,000,000 in
convertible notes of Issuer within 12 months of the Initial Closing
Date.
B. Pursuant
to the Purchase Agreement, on April 10, 2007, Issuer sold, and Purchaser
purchased, that certain Convertible Note in the amount of $3,000,000 (“Note 1”). On
May 7, 2007, Issuer sold, and Purchaser purchased, that certain Convertible Note
in the amount of $2,000,000 (“Note 2”). On
June 19, 2007, Issuer sold and Purchaser purchased that certain Convertible
Note in the aggregate amount of $4,000,000 (“Note 3”). On
July 9, 2007, Issuer sold, and Purchaser purchased, that certain Convertible
Note in the amount of $800,000 (“Note 4”; collectively
with Note 1, Note 2 and Note 3, the “Prior Notes”).
C. To
secure its obligations under the Prior Notes, Issuer entered into a Security
Agreement with Purchaser dated June 19, 2007 (the “Security Agreement”), whereby
Issuer granted Purchaser a security interest in all of the assets acquired by
Issuer from the use of the proceeds from the sale of the Prior
Notes. Pursuant to the Purchase Agreement and Security Agreement,
Issuer and certain of its subsidiaries further entered into the following
agreements with Purchaser relating to such security: (i) that certain
Pledge Agreement dated as of April 10, 2007 by and between Purchaser and Issuer,
as amended pursuant to that certain Amended and Restated Pledge Agreement dated
February 7, 2008 by and between Purchaser and Issuer (as amended, the “Pledge Agreement”);
(ii) that certain Guaranty dated April 10, 2007 (the “Wits-China Guaranty”) of
Wits-China Acquisition Corporation, a Minnesota corporation and wholly owned
subsidiary of Issuer (“Wits-China”); (iii) that
certain Guaranty dated February 7, 2008 (the “BVI Guaranty”) of China Global
Mining Resources Limited, a British Virgin Islands corporation (registered
number 1386052) and wholly owned subsidiary of Issuer (“Original BVI Co”); (iv) that certain
Guaranty dated February 7, 2008 (the “HK Guaranty”) of China Global
Mining Resources Limited, a Hong Kong corporation and wholly owned subsidiary of
Issuer (“CGMR HK”); (v)
that certain Subsidiary Security Agreement dated February 7, 2008 by and between
Wits-China and Purchaser (the “Wits-China Subsidiary Security
Agreement”); (vi) that certain Subsidiary Security Agreement dated
February 7, 2008 by and between Original BVI Co and Purchaser (the “BVI Subsidiary Security
Agreement”); and (vii) that certain Subsidiary Security Agreement dated
February 7, 2008 by and between CGMR HK and Purchaser (the “HK Subsidiary Security
Agreement”). Collectively, the Security Agreement, Pledge
Agreement, Wits-China Guaranty, BVI Guaranty, HK Guaranty, Wits-China Subsidiary
Security Agreement, BVI Subsidiary Security Agreement and HK Subsidiary Security
Agreement are referred to herein as the “Security
Documents.”
D. On
November 10, 2008, Issuer and Purchaser cancelled the Prior Notes and Issuer
issued Purchaser an Amended and Restated Promissory Note in the aggregate
principal amount of $9,800,000 (the “Amended and Restated Note”),
which, amongst other amendments to the terms of the Prior Notes, terminated the
conversion feature of the Prior Notes and terminated certain Purchase Rights (as
defined in the Purchase Agreement) provided to Purchaser. In
consideration thereof, Issuer issued Purchaser a five-year warrant to purchase
up to 39,200,000 shares of the Issuer’s common stock, par value $0.01 per share,
at an exercise price of $0.15 per share (the “First Warrant”). As
of the date hereof, the accrued and unpaid interest on the Amended and Restated
Note is $171,930.86.
E. On
October 28, 2008, Purchaser loaned Issuer an additional $441,000 pursuant to the
terms of that certain Promissory Note dated October 28, 2008 of Issuer in favor
of Purchaser (the “Additional
Note”), the payment obligations of which are secured by the Security
Documents. In consideration of the Additional Note, Issuer issued
Purchaser a five-year warrant to purchase up to 882,000 shares of Issuer’s
common stock at an exercise price of $0.11 per share (the “Second Warrant”; and
collectively with the First Warrant, the “Warrants”). As of
the date hereof, the accrued and unpaid interest on the Additional Note is
$7,762.59.
F. Pursuant
to the terms of that certain Subscription Agreement dated November 17, 2008 by
and between London Mining Plc (“London Mining”) and Issuer
(the “Subscription
Agreement”), Issuer and London Mining have formed a joint venture entity
incorporated in the British Virgin Islands under the name China Global Mining
Resources (BVI) Limited (with registered number 1513743) (“CGMR BVI”), to acquire and
operate certain mining properties in the People’s Republic of China operated
through Maanshan Xiaonanshan Mining Co Limited, Nanjing Sudan Mining Co Ltd and
Maanshan Zhaoyuan Mining Co Limited (collectively, the “PRC
Properties”). Issuer, through certain of its subsidiaries,
currently holds the rights to acquire the PRC Properties (the “Rights”), and such Rights are
subject to the security interest of Purchaser pursuant to the terms of the
Security Agreement. The transactions contemplated by Issuer and
London Mining are hereinafter referred to as the “JV Transaction.”
G. As
a condition to the JV Transaction, Issuer is required to (i) consolidate the
Rights in CGMR HK and transfer its equity interests in CGMR HK to CGMR BVI and
(ii) restructure the terms of the Amended and Restated Note and the Additional
Note provided by Purchaser to Issuer (collectively, the “Loans”), including without
limitation (a) extending the Maturity Date (as defined in the Amended and
Restated Note and Additional Note, respectively), (b) amending certain of the
Security Documents to release Purchaser’s security interest in the Rights, the
PRC Properties and Issuer’s equity interest in CGMR HK, and (c) release and
terminate the HK Guaranty and the HK Subsidiary Security Agreement and (d) to
permit the transfer to CGMR BVI of the equity interests in CGMR HK.
H. Issuer
and Purchaser wish to consolidate the Amended and Restated and Additional Note
into a Second Amended and Restated Note (as defined below) in the aggregate
principal amount of $10,241,000, with accrued and unpaid interest of $179,693.45
thereon as of the date hereof. Contemporaneously with the closing of
the JV Transaction, Issuer intends to make a prepayment of the Amended and
Restated Note in the aggregate amount of $5,600,000.
I. Issuer
and Purchaser wish to amend the Purchase Agreement in the respects set forth
herein to restructure the terms of the related agreements in a manner permitting
Issuer to complete the JV Transaction.
Now,
Therefore, in consideration of the foregoing facts and premises hereby made a
part of this Agreement, the mutual promises hereinafter set forth and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, hereby agree as
follows:
2
Section
1. PREPAYMENT AND AMENDMENT OF
NOTE
1.1 Amendment to
Notes. On the date of this Agreement, Issuer and Purchaser
hereby cancel the Amended and Restated Note and Additional Note, and Issuer
shall issue Purchaser a promissory note in the aggregate principal amount of
$10,421,107.18 having a maturity date of February 15, 2010, in the form attached
as Exhibit A
(the “Second Amended and
Restated Note”). Together with the execution and delivery of
this Amendment, Purchaser has delivered to Issuer the original Amended and
Restated Note and Additional Note, each marked “Cancelled.”
1.2 Prepayment. On
the Effective Date (as defined below), Issuer, or another party at the direction
of and on behalf of Issuer, shall make a prepayment of the Amended and Restated
Note in the aggregate amount of $5,600,000 (the “Prepayment”), payable in cash
or other immediately available funds.
1.3 Modification of
Warrants. In consideration of the terms hereof, on the
Effective Date, Purchaser and Issuer shall modify the terms of the Warrants to
reduce the Exercise Price (as defined in each of the Warrants) to $0.075 per
share. Upon the request of Purchaser, together with delivery of the
Warrants, Issuer shall reissue to Purchaser modified warrant certificates
reflecting the modified Exercise Price as set forth herein.
1.4 Effective
Date. Except with respect to the transactions contemplated in
Sections 1.1 and 2.2, the Prepayment and the other transactions contemplated
pursuant to this Amendment shall take place contemporaneously with the closing
of the JV Transaction pursuant to the terms of the Subscription Agreement (as
defined in the Subscription Agreement as the Completion Date) (the “Effective Date”).
Section
2. MODIFICATION AND/OR TERMINATION OF
SECURITY INTERESTS
2.1 Amendment to Security
Agreement. Purchaser and Issuer amend and restate as of the
Effective Date the terms of the Security Agreement, in the form attached hereto
as Exhibit B
(the “Amended and Restated
Security Agreement”), to reflect the changes to the collateral subject to
the Purchaser’s security interest from the date hereof.
2.2 Amendment to Pledge
Agreement. Purchaser and Issuer amend and restate as of the
date of this Agreement the terms of the Pledge Agreement, in the form attached
hereto as Exhibit
C (the “Second Amended
and Restated Pledge Agreement”), to reflect the release from Purchaser’s
security interest of Issuer’s equity interest in CGMR HK and any other
Collateral under the Pledge Agreement not forming Collateral under the Second
Amended and Restated Pledge Agreement.
2.3 Release of
Security.
1. Effects of Amendments to Security
Agreement and Pledge Agreement. Purchaser hereby completely,
fully and irrevocably releases, discharges and acquits, as of the Effective
Date, Issuer from (i) the Pledge Agreement and (ii) subject to receipt of the
Prepayment, the Security Agreement, in each case only to the extent not restated
in the Second Amended and Restated Pledge Agreement and the Amended and Restated
Security Agreement, respectively.
3
2. Release of CGMR HK Security
Interests. Subject to receipt of the Prepayment, Purchaser
hereby completely, fully and irrevocably releases, discharges and acquits, as of
the Effective Date, CGMR HK from (i) the HK Guaranty and (ii) the HK Subsidiary
Security Agreement, and terminates the obligations of CGMR HK under the HK
Guaranty and HK Subsidiary Security Agreement. With the exception of
the release of CGMR HK, nothing in this Section 2.3(2) shall operate to release
Issuer or any other third party from Issuer’s continuing indebtedness under the
Note or the remaining Security Documents.
3. Release of
Claims.
a. CGMR
HK hereby absolutely and unconditionally releases and forever discharges
Purchaser and its officers, directors, agents, employees and other affiliates
thereof, from any and all claims, demands or causes of action of any kind,
nature or description, whether arising in law or equity or upon contract or tort
or under any state or federal law or otherwise, which CGMR HK has had, now has
or has made claim to have against any such person for or by reason of any act,
omission, matter, cause or thing whatsoever arising from the beginning of time
to and including the date of this release, whether such claims, demands and
causes of action are matured or unmatured or known or unknown.
b. Purchaser
hereby absolutely and unconditionally releases and forever discharges CGMR HK
and its officers, directors, agents and employees, from any and all claims,
demands or causes of action of any kind, nature or description, whether arising
in law or equity or upon contract or tort or under any state or federal law or
otherwise, which Purchaser has had, now has or has made claim to have against
any such person for or by reason of any act, omission, matter, cause or thing
whatsoever arising from the beginning of time to and including the date of this
release, whether such claims, demands and causes of action are matured or
unmatured or known or unknown.
4. Releases
Irrevocable. Upon execution of this Agreement, and subject to
receipt of the Prepayment from or on behalf of the Issuer, Purchaser’s release
of security interests as set forth in this Section 2.3 are irrevocable by
Purchaser unless with the written consent of London Mining. Purchaser
acknowledges and agrees that the Prepayment may be made by the Issuer or London
Mining (or such other person as London Mining directs) on behalf of the
Issuer.
5. Effect of
Release. Purchaser acknowledges, without limiting this Section
2.3, that the effect of this Section 2.3 includes the complete, full and
irrevocable release from its security interest of the Issuer’s equity interests
in CGMR HK, the Rights and any other interests in the PRC Properties such that
on and from the Effective Date, Purchaser has no other security over any equity
interests in (except with respect to the pledge of Issuer’s equity interest
pursuant to the Second Amended and Restated Pledge Agreement) or the assets of,
or otherwise in relation to, CGMR BVI and any of its subsidiary undertakings,
from time to time other than that specified in Section 1 of the Amended and
Restated Security Agreement.
6. Further Actions;
Authorization. Purchaser agrees that it shall, from time to
time, promptly execute and deliver all further instruments and documents, and
take all further action, that may be necessary or desirable, or that Issuer or
CGMR HK may reasonably request, in order to terminate or amend any security
interest released or amended (as applicable) pursuant to the terms of this
Section 2. Purchaser by this Agreement authorizes Issuer and CGMR HK
to file one or more financing, continuation or termination statements, and
amendments thereto, relative to the related collateral and security
interests.
4
Section
3. CONSENTS AND
WAIVERS
3.1 Access to
Information. Purchaser acknowledges that it (i) has been
provided a copy of the Subscription Agreement dated November 17, 2008 by and
between Issuer and London Mining setting forth the terms of London Mining’s
investment in CGMR BVI, (ii) has been provided a form of the Shareholders’
Agreement to be entered into by and among Issuer, London Mining and CGMR BVI
relating to certain governance and other terms and conditions applicable to CGMR
BVI (the “Shareholders’
Agreement” and forms of the documents referenced in the Shareholders’
Agreement are collectively referred to herein as the “Provided JV Documents”) and
(iii) has been afforded the opportunity to access full and complete information
regarding the JV Transaction, including the opportunity to contact Issuer
representatives concerning the JV Transaction, and has utilized such access to
Purchaser’s satisfaction.
3.2 Consent, Waiver and
Undertaking. Purchaser hereby provides its consents under, and
any required waivers and undertakings in respect of, pursuant to, the terms of
the Purchase Agreement and the agreements referenced therein, including without
limitation the Security Documents, the Pledge Agreement to the consummation by
Issuer and the subsidiaries (as appropriate) of the JV Transaction on terms
substantially similar to those set forth in the Provided JV
Documents. Without limitation, the consent, waiver and undertaking
provided for herein shall include in particular the following:
1. consent
to the JV Transaction (provided there have been no amendments to the Provided JV
Documents which materially effect the security to which the Purchaser has been
granted under the Amended and Restated Security Agreement and the Second Amended
and Restated Pledge Agreement) with respect to the negative covenants set forth
in Section 4.4 of the Purchase Agreement;
2. an
acknowledgment and agreement that the JV Transaction (provided there have been
no amendments to the Provided JV Documents which materially effect the security
to which the Purchaser has been granted under the Amended and Restated Security
Agreement and the Second Amended and Restated Pledge Agreement) does not
constitute an Event of Default pursuant to Section 7.1 of the Purchase
Agreement;
3. an
acknowledgment that any enforcement of its rights under the Second Amended and
Restated Pledge Agreement pertaining to CGMR BVI will be subject to the terms of
the Shareholders' Agreement between London Mining and the Issuer to be entered
into on the date of London Mining's subscription into CGMR BVI;
4. consent
to the transfer by Issuer of its equity interest in CGMR HK to CGMR BVI pursuant
to the terms of the JV Transaction;
5. consent
to the transfer by Original BVI Co of the Rights to Maanshan Global Mining
Resources Limited, a corporation organized under the laws of the People’s
Republic of China and a wholly owned subsidiary of Original BVI Co (“MGMR”), and the transfer by
MGMR of the Rights to CGMR HK;
6. consent
to the change of the name of Original BVI Co.;
7. consent
to the acquisition of Issuer’s equity interest in CGMR BVI pursuant to the terms
of the Shareholders’ Agreement by London Mining or a member of its Group (as
defined in the Shareholders’ Agreement) or a third party under the “Come Along”
provisions of the Shareholders’ Agreement with respect to the negative covenants
set forth in Section 4.4 of the Purchase Agreement and an acknowledgment and
agreement that any such sale would not constitute an Event of Default pursuant
to Section 7.1 of the Purchase Agreement; and
5
8. an
undertaking that if Purchaser elects to enforce any of its rights under the
Amended and Restated Pledge Agreement it will enter into a Deed of Adherence in
accordance with the terms of the Shareholders’ Agreement prior to the transfer
of any equity interests in CGMR BVI from Issuer to Purchaser.
Section
4. MISCELLANEOUS
4.1 This
Amendment shall be construed in connection with and as part of the Purchase
Agreement, and, except as modified and expressly amended by this Amendment, all
terms, conditions and covenants contained in the Purchase Agreement, are hereby
ratified and shall be and remain in full force and effect.
4.2 Any
and all notices, requests, certificates and other instruments executed and
delivered after the execution and delivery of this Amendment may refer to the
Purchase Agreement without making specific reference to this Amendment, but
nevertheless all such references shall include this Amendment, unless the
context otherwise requires.
4.3 Purchaser
and Issuer acknowledge and agree that CGMR BVI and its successors and assigns
(collectively, the “Beneficiaries”) are expressly intended to be third-party
beneficiaries to this Agreement, and that all provisions of this Agreement
relating to each such Beneficiary are intended to inure to the benefit of such
Beneficiary. Each such party is entitled to any rights, interest or
claims arising hereunder.
4.4 The
description headings of the various sections or parts of this Amendment are for
convenience only and shall not affect the meaning or construction of any of the
provisions hereof.
4.5 This
Amendment shall be governed by and construed in accordance with Kansas
law.
4.6 This
Amendment may be executed in any number of counterparts, each executed
counterpart constituting an original, but all together only one
agreement. Signature to this Amendment may be given by facsimile or
other electronic transmission and such signatures shall be fully binding on the
party sending the same.
[The
remainder of this page is intentionally blank. Signature page
follows.]
6
IN WITNESS WHEREOF, the
parties hereto have executed this Agreement on the date first written
above.
|
a
Minnesota corporation
|
||
|
By:
|
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇
|
|
|
Name:
|
▇▇▇▇
▇. ▇▇▇▇▇
|
|
|
Title:
|
Chief
Financial Officer
|
|
|
PURCHASER:
|
CHINA
GOLD, LLC,
|
|
|
a
Kansas limited liability company
|
||
|
By:
|
Pioneer
Holdings, LLC
|
|
|
Its:
|
Manager
|
|
|
By:
|
/s/ C. ▇▇▇▇▇▇ ▇▇▇▇▇▇
|
|
Name:
C. ▇▇▇▇▇▇ ▇▇▇▇▇▇
|
|
|
Title: Manager
|
|
|
CGMR
HK:
|
CHINA
GLOBAL MINING RESOURCES LTD
|
|
|
a
company registered under the laws of Hong Kong
|
||
|
(with
respect to Section 2.3 only)
|
||
|
By:
|
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇
|
|
|
Name:
|
▇▇▇▇
▇. ▇▇▇▇▇
|
|
|
Title:
|
Director
|
|