AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
EXHIBIT
10.1
AMENDED
AND RESTATED
This
Amended and Restated Loan and Security Agreement (the
“Amended Agreement”) is entered into as of the 1st
day of
November, 2005, by and among Wits Basin Precious Minerals Inc., a Minnesota
corporation (the “Company”), and Pacific Xxxx Capital, LLC, a California limited
liability company (the “Lender”).
INTRODUCTION
A. On
September 30, 2005, the Company and the Lender entered into that certain
Loan
and Security Agreement (the “Loan Agreement”), pursuant to which the Lender
provided bridge financing to the Company in the amount of up to $600,000
against
a secured convertible promissory note accruing interest at a rate of 6% per
annum.
B. On
the
date hereof, the Company entered into a similar loan and security agreement
(the
“Green Loan”) with Xxxxxx Xxxxx (“Green”), pursuant to which Green provided
bridge financing to the Company in the amount of up to $600,000 against a
secured convertible promissory note accruing interest at a rate of
12%.
C. As
a
condition to the Green Loan, the Company is required to xxxxx Xxxxx a secondary
security interest in all of its assets, such interest to be pari
passu
with the
Lender’s security interest.
D. In
consideration of the Lender’s agreement to amend the terms of the Loan Agreement
to (i) consent to the Green Loan, (ii) allow the Company to grant to Green
a
security interest in the assets of the Company pari
passu
with
Lender’s security interest and (iii) to provide for a balloon payment of
principal and interest at the Maturity Date (as defined herein), and certain
other amendments, the Company has agreed to increase the applicable interest
rate under the Note (as defined herein) to 12% per annum.
E. Accordingly,
the Company and the Lender desire to amend and restate the terms of the Loan
Agreement as set forth in this Amended Agreement.
AGREEMENT
Now,
Therefore,
in
consideration of the foregoing facts and premises hereby made a part of this
Amended 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:
Article
1
Loan
1.1 The
Loan.
On the
terms and conditions hereof, the Lender hereby agrees to loan the Company
up to
$600,000 (the “Loan”) pursuant to mutually acceptable monthly draws by the
Company of up to $100,000 (each a “Monthly Draw”). The parties hereby
acknowledge the acceptance of the first Monthly Draw, and that such Monthly
Draw
occurred on October 1, 2005 via a wire transfer of immediately available
funds
by Lender to the Company (the “Initial Monthly Draw”). Thereafter, the parties
may mutually agree to additional Monthly Draws during each successive month
commencing November 2005 and ending March 2006 (each such month shall be
hereinafter referred to as a “Month” and each additional Monthly Draw an
“Additional Monthly Draw”).
1.2 Mechanics
of Additional Monthly Draws. If the Company intends to exercise an
Additional Monthly Draw for any Month, it shall deliver to the Lender a written
notice of its intent (each, a “Notice”), such Notice to include the amount of
such draw (not to exceed $100,000) and current assay reports relating to
the
Company’s exploration operations (“Assays”), on or prior to the 25th
day of
the calendar month prior to the such Month. If the Lender intends to reject
such
Additional Monthly Draw, it shall, within three (3) Business Days of its
receipt
of Notice, deliver to the Company written notice of such rejection. If the
Lender accepts the Additional Monthly Draw, it shall deliver to the Company,
via
wire transfer of immediately available funds, the amount of such draw specified
in the Notice on or before the fifth (5) day of such Month (the “Wire Date”).
For purpose of this Amended Agreement, “Business Day” means any day other than a
Saturday, Sunday or legal holiday in the State of Minnesota. In the event
any
day upon which notice is required to be delivered falls on Non-Business Day,
a
weekend or holiday, the party shall have until the end of next Business Day
to
deliver such notice to the other party.
Notwithstanding
the foregoing, in the event the Company does not exercise its Monthly Draw
during any Month, the Company waives its right to exercise the funds
representing the Monthly Draw for that Month. The aggregate amount of the
Monthly Draws shall be referred to herein as the “Loan Amount.”
1.3 Consideration.
(a) Initial
Monthly Draw.
In
consideration of the Initial Monthly Draw, the Company shall, within two
(2)
Business Days of the Company’s receipt of such Initial Monthly
Draw:
(i) Issue
and
deliver to the Lender a convertible secured promissory note in a principal
amount equal to the Loan Amount, in the form attached hereto as Exhibit
A
(the
“Note”);
(ii) Issue
and
deliver to the Lender 500,000 shares of its restricted common stock, par
value
$.01 per share (the “Common Stock”); and
(iii) Issue
and
deliver to the Lender warrants to purchase 1,000,000 shares of Common Stock
at
an exercise price of $0.12 per share (the “Warrants”), a form of which is
attached hereto as Exhibit
B.
(b) Additional
Monthly Draws.
For
each additional Monthly Draw, the Company shall:
(i) Issue
to
the Lender, within two (2) Business Days of the Wire Date associated with
such
Monthly Draw, Warrants to purchase an additional 1,000,000 shares of Common
Stock at an exercise price of $0.12 per share; and
(ii) Reflect
in the Company’s records the increase to the Principal balance of the Note (as
such term is defined in the Note).
(c) Non-Usage
of Draws.
In the
event the Company does not exercise any Additional Monthly Draws, the Company
shall issue to the Lender 500,000 shares of Common Stock; provided that,
the
Company shall not be required to issue Common Stock pursuant to this Section
1.3(c) if the Company provides one or more Notices to exercise an Additional
Monthly Draw and each such Notice is rejected by the Lender.
Article
2
Company
Representations and Warranties
The
Company hereby makes the following representations and warranties to the
Lender
as of the Closing Date.
2.1 Organization,
Good Standing and Qualification.
The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Minnesota. The Company has all requisite
corporate power and authority to own and operate its properties and assets,
to
execute and deliver this Amended Agreement, the Note and the Warrants (together,
the “Transaction Documents”), to issue and sell the shares of Common Stock
issuable hereunder and upon exercise of the Warrants (the “Warrant
Shares”), to carry out the provisions of the Transaction Documents, and to carry
on its business as presently conducted and as presently proposed to be
conducted. The Company is duly qualified and is authorized to do business
and is
in good standing in each jurisdiction in which the nature of its activities
makes such qualification necessary, except for those jurisdictions in which
failure to be so qualified would not have a materially adverse effect on
the
Company or its business, taken as a whole.
2.2 Authorization;
Binding Obligations.
All
corporate action on the part of the Company, its officers, directors and
shareholders necessary for the authorization of the Transaction Documents,
the
performance of all obligations of the Company hereunder, including the
authorization, sale, issuance and delivery of the Common Stock, including
the
Warrant Shares, has been taken. The Transaction Documents, when executed
and
delivered, will be valid and binding obligations of the Company enforceable
in
accordance with their respective terms, except as limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws of general
application affecting enforcement of creditors’ rights and according to general
principles of equity that restrict the availability of equitable
remedies.
2.3 Issuance
of Common Stock.
The
shares of Common Stock issuable hereunder, including upon exercise of the
Warrants, when issued, shall be validly issued, fully paid and
nonassessable.
2.4 Collateral.
The
Company is the legal and beneficial owner of the Collateral, as defined in
Article 4 hereof. The Collateral is subject to a priority security interest
held
by Pandora Select Partners, L.P. (the “Priority Security Interest”) and a
secondary security interest held by Xxxxxx Xxxxx (the “Secondary Security
Interest”). Except
for the Priority Security Interest and the Secondary Security Interest, the
Collateral is free and clear of all mortgages, security interests, liens,
encumbrances and claims of every kind (the “Encumbrances”). The Collateral is
and will remain free and clear of all Encumbrances of any nature whatsoever,
except for the Priority Security Interest, the Secondary Security Interest
and
those contemplated herein.
2.5 Offering.
Assuming the accuracy of the representations and warranties of the Lender
contained in Article 3 hereof, the offer, issue and sale of the Note, Warrants,
the Common Stock and the Warrant Shares (collectively, the “Securities”) is and
will be exempt from registration and prospectus delivery requirements of
the
Securities Act of 1933, as amended, and are exempt from registration and
qualification under the requirements of all applicable state securities
laws.
Article
3
Lender’s
Representations and Warranties
The
Lender hereby represents and warrants to the Company, as of the Closing Date,
as
follows:
3.1 Investment
Representations.
The
Lender understands that neither the offer or the sale of the Securities have
been registered under the Securities Act. The Lender also understands that
the
Securities are being offered and sold pursuant to an exemption from registration
contained in the Securities Act based in material part upon the Lender’s
representations contained in the Amended Agreement. In this regard, the Lender
additionally represents and warrants as follows:
(a) The
Lender has substantial experience in evaluating and investing in private
placement transactions of securities in companies similar to the Company
so that
it is capable of evaluating the merits and risks of its investment in the
Company. The Lender must bear the economic risk of this investment indefinitely
unless the Shares are registered for resale pursuant to the Securities Act,
or
an exemption from registration is available. The Lender has no present intention
of selling or otherwise transferring the Securities, or any interest therein.
The Lender also understands that there is no assurance that any exemption
from
registration under the Securities Act will be available and that, even if
available, such exemption may not allow the Lender to transfer all or any
portion of the Securities under the circumstances, in the amounts or at the
times the Lender might wish. Lender
represents and agrees that if, contrary to the foregoing representations
and
warranties, Lender should later desire to dispose of or transfer all or any
portion of the Shares or Securities in any manner, Lender shall not do so
without complying with applicable securities laws.
(b) The
Lender is acquiring the Securities for the Lender’s own account, for investment
only, and not with a view towards their public distribution. Lender is not
aware
of any occurrence, event or circumstance upon the happening of which Lender
intends to transfer or sell the Securities. Lender has been informed that,
in
the view of the certain state securities commissions, a purchase of Securities
with a current intent to resell, by reason of any foreseeable specific
contingency or anticipated change in market values, any change in the condition
of the Company or the investment market as a whole, or in connection with
a
contemplated liquidation or settlement of any loan obtained for the acquisition
of the Securities, would represent a purchase with an intent inconsistent
with
the representations set forth above, and that certain state securities
commissions might regard such sale or disposition as a deferred sale with
regard
to which an exemption from registration is not available.
(c) The
Lender represents that, by reason of the business or financial experience
of
Lender’s management , the Lender has the capacity to protect his own interests
in connection with the transactions contemplated in this Amended Agreement
and
the Securities. Further, the Lender is aware of no publication of any
advertisement in connection with the transactions contemplated in the Amended
Agreement.
(d) The
Lender represents that the Lender is an accredited investor within the meaning
of Regulation D under the Securities Act.
(e) Lender
represents and warrants that this Amended Agreement and the obligations of
Lender hereunder have been fully authorized by Lender, and are legal, valid
and
binding upon Lender, enforceable in accordance with their terms and that
Lender
is limited liability company duly organized in the State of
California.
3.2 High
Risk.
The
Securities offered hereby are highly speculative in nature and an investment
therein involves a high degree of risk, including but not limited to the
risk of
losing the entire investment in such Securities.
3.3 No
Governmental Approval.
No
federal or state agency, including the Commission or the securities commission
or authority of any state, has approved or disapproved the Securities, passed
upon or endorsed the merits of the issuance of Securities or the accuracy
or
adequacy of any information provided by the Company, or made any finding
or
determination as to the fairness or fitness of the Securities for
sale.
3.4 No
Reliance.
Lender
has been encouraged to rely upon the advice of its legal counsel, accountants
or
other financial advisors with respect to tax and other considerations relating
to the purchase of the Securities pursuant hereto. Lender is not relying
upon
the Company with respect to the economic considerations involved in determining
to make an investment in the Securities.
3.5 Access
to Information.
Lender
has been given access to full and complete information regarding the Company
and
has utilized such access to Lender’s satisfaction for the purpose of obtaining
information respecting the Company. Particularly, Lender has been given
reasonable opportunity to meet with and/or contact Company representatives
for
the purpose of asking questions of, and receiving answers from, such
representatives concerning the terms and conditions of the issuance of the
Securities and to obtain any additional information, to the extent reasonably
available, necessary to verify the accuracy of information about the Company
already obtained.
Article
4
Other
Agreements
4.1 Security
Agreement.
To
secure the full and timely payment and performance of the Company’s obligations
under this Amended Agreement and the Note, the Company hereby grants to Lender
a
security interest (the “Security Interest”) in the property of the Company
identified on Exhibit C hereto, whether now owned or later acquired or created,
and including all proceeds therefrom, whether cash or non-cash (collectively,
the “Collateral”). The Security Interest is secondary in interest to the
Priority Security Interest held by Pandora Select Partners, L.P., and, pursuant
to [that certain Intercreditor Agreement entered into effective November
1, 2005
by and between Lender and Xxxxxx Xxxxx], pari
passu
with the
Secondary Security Interest held by Xxxxxx Xxxxx.
4.2 “Piggyback”
Registration. Except in the event of a public offering of securities by the
Company, at any such time the Company proposes to file a registration statement
with the SEC under the Securities Act registering equity securities or debt
with
equity features for public sale or resale (except by a Form S-4 or Form S-8
Registration Statement or any successor forms thereto), it will give Lender
at
least ten (10) days’ advance written notice of its intention to file such
registration statement and Lender shall have the right to have included in
such
registration statement the number of shares of Common Stock issued to Lender
hereunder, including shares issued upon conversion of the Note or exercise
of
the Warrants, as Lender shall designate to the Company within ten (10) days
after the date the Company provides such notice. The Company will use
commercially reasonable efforts to cause all of such shares to be included
in
such registration statement proposed to be filed by the Company; provided,
however,
that
nothing herein shall prevent Company from, at any time, abandoning or delaying
any registration. If any registration pursuant to this Section is underwritten
in whole or in part, the Company may require that the shares be included
in the
underwriting on the same terms and conditions as the securities otherwise
being
sold through the underwriters and that the Purchaser execute any underwriting
agreement, “lock-up” letters or other customary agreements or documents executed
by all of the other selling securityholders in connection with that underwritten
offering. If, in the reasonable opinion of the managing underwriter of the
proposed offering, the number of shares offered for participation in the
proposed offering cannot be accommodated without adversely affecting the
proposed offering, then the amount of such shares proposed to be offered,
as
well as the number of securities of any other selling stockholders participating
in the registration, shall be proportionately reduced to a number deemed
satisfactory by the managing underwriter.
4.3 Preemptive
Rights. Except for Excluded Shares (as defined below), the Company shall
not,
for cash, issue, sell or exchange, agree to issue, sell or exchange, or reserve
or set aside for issuance, sale or exchange, (i) any shares of its Common
Stock,
(ii) any other equity securities of the Company, including, without limitation,
shares of Preferred Stock, (iii) any option, warrant or other right to subscribe
for, purchase or otherwise acquire any equity securities of the Company,
or (iv)
any debt securities convertible into capital stock of the Company (collectively,
the “Offered Securities”), unless in each such case the Company first delivers
to the Lender a written notice of any proposed or intended issuance, sale
or
exchange of Offered Securities (the “Offer”), which Offer shall
(i) identify and describe the Offered Securities, (ii) describe
the
price and other terms upon which they are to be issued, sold or exchanged,
and
the number or amount of the Offered Securities to be issued, sold or exchanged,
(iii) identify the persons or entities to which or with which the
Offered
Securities are to be offered, issued, sold or exchanged and (iv) offer
to
issue and sell to or exchange with the Lender such portion of the Offered
Securities as the aggregate number of shares of Common Stock then held by
the
Lender pursuant to this Amended Agreement (on an as-converted basis assuming
the
conversion of the Loan Amount on the Note and the exercise of outstanding
Warrants) bears to the total number of shares of Common Stock outstanding
on an
as-converted basis. The Lender shall have the right, for a period of 20 days
following delivery of the Offer, to purchase or acquire, at a price and upon
the
other terms specified in the Offer, the number or amount of Offered Securities
described above. The Offer by its term shall remain open for such 20-day
period.
For purposes of this Amended Agreement, “Excluded Shares” shall include
securities of the Company issued pursuant to (A) a stock option plan (or
similar
equity incentive plan) to employees, consultants or directors for the primary
purposes of soliciting or retaining services, (B) a conversion or exercise
of
derivative securities, (C) a bona fide business acquisition of or by the
Company, whether by merger, consolidation, sale of all or substantially all
of
the assets of the Company or a third party, (D) a financing of the Company
whereby the Company receives gross proceeds of $2,000,000 or more, (E) a
public
offering of securities of the Company, and (F) the Green Loan.
Notwithstanding
the foregoing, in the event the Board of Directors of the Company determines,
in
its good faith and reasonable discretion, that the Company is unable to obtain
available financing necessary to the Company due to its obligation to provide
the Lender the rights referenced in this Section 4.3, the Company is entitled
to
obtain such financing and shall use its best efforts to offer the Lender
the
opportunity to purchase like-securities of the Company at terms similar to
those
provided to third-party investors in such financing arrangement.
4.4 Future
Issuance of Warrants.
On each
date which the Company prepays outstanding Principal (as defined in the Note)
under the Note (each, a “Payment Date”), the Company shall issue to the Lender a
warrant to purchase the number of shares of Common Stock into which such
Principal would be convertible on such Payment Date (each, a “Payment Warrant”)
at an exercise price equal to the Conversion Price applicable on the Payment
Date (subject to adjustment), in a form substantially similar to that provided
herein as Exhibit B relating to the Warrants. Each Payment Warrant shall
be
exercisable from the date of its issuance through and including the Maturity
Date (as defined in the Note).
Article
5
General
Provisions
5.1 Entire
Agreement.
The
Transaction Documents and the other documents delivered pursuant hereto
constitute the full and entire understanding and agreement between the parties
with regard to the subjects hereof and no party shall be liable or bound
to any
other in any manner by any representations, warranties, covenants and agreements
except as specifically set forth herein and therein. This Amended Agreement
amends, restates and supercedes the terms of the Loan Agreement.
5.2 Governing
Law; Venue.
This
Amended Agreement shall be governed by the laws of the State of California
without regard to its conflicts-of-law principles. The parties expressly
acknowledge and agree that any judicial action to enforce any right of any
party
under this Amended Agreement, the Note or the Warrant may be brought and
maintained in California state or federal courts. Accordingly, the parties
hereby submit to the process, jurisdiction and venue of any such court. Each
party hereby waives, and agrees not to assert, any claim that it is not
personally subject to the jurisdiction of the foregoing courts in the State
of
California or that any action or other proceeding brought in compliance with
this Section is brought in an inconvenient forum.
5.3 Survival.
The
representations, warranties, covenants and agreements made herein shall survive
the Closing.
5.4 Successors
and Assigns.
Except
as otherwise expressly provided herein, the provisions hereof shall inure
to the
benefit of, and be binding upon, the successors, assigns, heirs, executors
and
administrators of the parties hereto and shall inure to the benefit of and
be
enforceable by each person who shall be a holder of the Securities from time
to
time.
5.5 Severability.
In case
any provision of the Amended Agreement shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
5.6 Amendment
and Waiver.
This
Amended Agreement may be amended or modified, and any provision hereunder
may be
waived, only upon the written consent of the Company and the
Lender.
5.7 Notices.
All
notices, requests, consents, and other communications hereunder shall be
in
writing and shall be deemed effectively given and received when delivered
in
person or by national overnight courier service or by certified or registered
mail, return-receipt requested, or by telecopier, addressed as
follows:
(a) if
to the
Company:
00
Xxxxx
Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxxx,
Xxxxxxxxx 00000
Attention:
Xxxx X. Xxxxx, Chief Financial Officer
Facsimile:
(000) 000-0000
(b) if
to the
Lender:
Pacific
Xxxx Capital, LLC
0000
X.
Xxxxxxxx Xxxxx
Xxxxxxx,
XX 00000
Attention:
Xxxxxx X. Xxxxxx
Facsimile:
(____) _____________
5.8 Counterparts.
This
Amended Agreement may be executed in any number of counterparts, all of which
taken together shall constitute one agreement binding on the parties. Facsimile
and electronically transmitted signatures shall be valid and binding to the
same
extent as original signatures. Each party shall become bound by this Amended
Agreement immediately upon signing and delivering any counterpart, independently
of the signature of any other party. Nevertheless, in making proof of this
Amended Agreement, it will be necessary to produce only one copy signed by
the
party to be charged.
5.9 Further
Assurances.
Each
party hereby agrees to execute and deliver such additional documents and
instruments and to perform such additional acts as may be necessary or
appropriate to effectuate, carry out and perform all of the terms, provisions
and conditions of this Amended Agreement and the transactions contemplated
hereby.
Signature
Page Follows
In
Witness Whereof,
the
parties hereto have set their hands to this Amended Agreement to be effective
as
of the date first set forth above.
| COMPANY: | LENDER: | ||
| WITS BASIN PRECIOUS MINERALS INC. | PACIFIC XXXX CAPITAL, LLC | ||
| By:/s/ Xxxx X. Xxxxx | By: /s/Xxxxxx Xxxxxx | ||
|
Its: CFO |
Its: Manager |
||
