THIRD AMENDED AND RESTATED PLEDGE AGREEMENT
EXHIBIT
10.72
THIRD AMENDED AND RESTATED
PLEDGE AGREEMENT
THIS
THIRD AMENDED AND RESTATED PLEDGE AGREEMENT (this “Agreement”), is entered into
as of December 17, 2009 by and between Wits Basin Precious Minerals Inc., a
Minnesota corporation (“Wits
Basin”), Xxxxxx Xxxxx Mining Corporation, a Minnesota corporation (“Xxxxxx Xxxxx”), Xxxxxxx Gold
Producers, Inc., a Colorado corporation (“Xxxxxxx Gold”; and
collectively with Wits Basin and Xxxxxxx Gold, the “Pledgors”), and China Gold,
LLC, a Kansas limited liability company, together with its successors and
assigns and all other holders of securities and equity interests pursuant to the
Purchase Agreement (hereinafter defined) (together with its respective
successors and assigns, “Purchaser”).
RECITALS
The
following recitals are a material part of this Agreement.
A.
Wits Basin and Purchaser
are parties to that certain Convertible Notes Purchase Agreement dated as of
April 10, 2007 as amended from time to time (as the same may hereafter be
further modified, amended, restated or supplemented from time to time, the
“Purchase Agreement”),
pursuant to which Purchaser loaned Wits Basin an aggregate principal amount of
$9.8 million in convertible secured promissory notes (the “Prior Notes”). On November 10,
2008, the parties converted the Prior Notes (including accrued and unpaid
interest thereon) into a Promissory Note dated November 10, 2008 in the
principal amount of $9,800,000 (the “First Amended Note”).
Capitalized terms used in this Agreement without definition have the definitions
given to them in the Purchase Agreement.
B.
Pursuant to the Purchase
Agreement, Wits Basin and Purchaser entered into that certain Pledge Agreement
dated as of April 10, 2007 (“Original Pledge Agreement”)
whereby Wits Basin agreed to provide Purchaser security documents, in form and
substance satisfactory to Purchaser, granting Purchaser a security interest in
all of the assets acquired from the use of proceeds for its purchase of the
Prior Notes. Accordingly, Wits Basin pledged certain shares of common
stock of Wits-China Acquisition Corp, a Minnesota corporation. On February
7, 2008, the parties amended the Original Pledge Agreement pursuant to an
Amended and Restated Pledge Agreement (the “Amended Pledge Agreement”) to
provide Purchaser a pledge of the equity interests in two additional wholly
owned subsidiaries of Wits Basin, namely China Global Mining Resources Limited,
a Hong Kong corporation (“CGMR
HK”), and Wits Basin (BVI) Ltd, a British Virgin Islands corporation with
registered number 1386052 (“Wits BVI”), which held assets
acquired with proceeds from the Prior Notes received from
Purchaser.
C.
On October 28, 2008,
Purchaser loaned Wits Basin an additional $441,000 pursuant to the terms of a
Promissory Note dated October 28, 2008 (the “Additional Note”), with Wits
Basin’s payment obligations under the Additional Note secured by the Amended
Pledge Agreement, amongst other forms of security.
D.
Pursuant to Amendment No.
2 to the Purchase Agreement, on November 10, 2008, the parties converted the
Prior Notes (including accrued and unpaid interest thereon) into a Promissory
Note dated November 10, 2008 in the principal amount of $9,800,000 (the “First Amended Note”), the
obligations under which remained secured by the Original Security Agreement and
Amended and Pledge Agreement.
E.
In March 2009, Wits Basin
entered into a joint venture transaction (the “JV Transaction”) with London
Mining Plc (“London
Mining”), whereby London Mining and Wits Basin formed a joint venture
entity in the British Virgin Islands entitled China Global Mining Resources
(BVI) Limited (registered number 1513743) (“CGMR BVI”) to acquire and
operate certain mining properties in the People’s Republic of China (the “PRC Properties”) pursuant to
certain rights to acquire the PRC Properties held by the Debtor and certain of
its subsidiaries (the “Rights”). Such Rights
were subject to the security interest of Secured Party under the terms of the
Original Security Agreement. For the avoidance of doubt, CGMR BVI is a
separate entity to the Debtor’s wholly owned subsidiary “China Global Mining
Resources Limited” (registered number 1386052) registered in the British Virgin
Islands and referred to in the Original Security Agreement (currently known as
Wits Basin (BVI) Ltd.).
F.
On December 22, 2009, Wits
Basin and Purchaser entered into that certain Amendment No. 3 to the Purchase
Agreement (“Amendment No.
3”), whereby the parties consolidated the First Amended Note and
Additional Note, and Wits Basin issued Purchaser in lieu thereof a promissory
note dated December19, 2008 in the aggregate principal amount of
$10,241,000. Additionally, pursuant to Amendment No. 3, the parties
modified certain terms of First Amended Note and Additional Note to, among other
modifications, amend certain terms of Purchaser’s security interest to release
from such security interest Wits Basin’s equity interest in CGMR HK and include
in such security interest Wits Basin’s equity interest in the CGMR BVI. As
a result of such modifications, on December 22, 2009, Debtor and Secured Party
amended and superseded the terms of the Amended and Restated Pledge Agreement
pursuant to a Second Amended and Restated Pledge Agreement (the “Second Amended Pledge
Agreement”).
G.
On April 20, 2009
Purchaser purchased from Platinum Long Term Growth V, LLC (“Platinum”) the rights of
Platinum under (i) that certain Note and Warrant Purchase Agreement dated on or
around February 11, 2008 (the “Platinum Purchase Agreement”),
pursuant to which Wits Basin issued Platinum that certain 10% Senior Secured
Convertible Promissory Note in the principal amount of $1,020,000 issued by Wits
Basin in favor of Platinum on or around February 11, 2008 and (ii) that certain
10% Senior Secured Convertible Promissory Note in the principal amount of
$110,000 issued by Wits Basin in favor of Platinum on or around July 10, 2008
(collectively, the notes issued to Platinum are referred to herein as the “Platinum Notes”). Wits
Basin’s obligations under the Platinum Notes are secured pursuant to the terms
of (i) that certain Security Agreement dated February 11, 2008 (the “Platinum Security Agreement”)
by and between Wits Basin and Purchaser (as a successor-in-interest to Platinum)
and (ii) that certain Amended and Restated Guaranty of Xxxxxxx Gold Producers,
Incorporated (“Xxxxxxx
Gold”) and Xxxxxx Xxxxx Mining Corporation (“Xxxxxx Xxxxx”), each of which
were wholly owned subsidiaries of Wits Basin at such time. Pursuant to the
Platinum Security Agreement, Purchaser holds a security interest in all of Wits
Basin’s assets with the exception of equity interests and assets held in CGMR
BVI, Wits Basin (BVI) Ltd., and Wits-China Acquisition, a wholly owned
subsidiary of Wits Basin, to the extent such entities or assets are located in
or relate to China and are subject to a lien in favor of Purchaser.
H.
On September 29, 2009,
Xxxxxx Xxxxx Mining Corporation, a Minnesota corporation and a majority-owned
subsidiary of Wits Basin (“Xxxxxx Xxxxx”), completed a
share exchange transaction with Princeton Acquisitions, Inc., a Colorado
corporation (“Princeton
Acquisitions”), whereby all of the holders of outstanding shares of
Xxxxxx Xxxxx were acquired by Princeton Acquisitions in consideration of, on a
share-for-share basis, shares of Princeton Acquisitions common stock. To
permit Wits Basin and Xxxxxx Xxxxx to (i) complete the share exchange
transaction and (ii) transfer the equity of Xxxxxxx Gold Producers, Inc., a
Colorado corporation and previously a wholly owned subsidiary of Wits Basin
(“Xxxxxxx Gold”),
Purchaser consented to the release of its pledge in Wits Basin’s shares of
Xxxxxx Xxxxx and Xxxxxxx Gold, and agreed to take in lieu thereof a pledge of
Wits Basin’s shares of Princeton Acquisitions.
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I.
On June 9, 2009,
Purchaser loaned Issuer an additional $100,000 pursuant to the terms of the
Second Amended Note. On September 1, 2009, Purchaser loaned Issuer an
additional $150,000 pursuant to terms of the Second Amended Note. On
November 10, 2009, Purchaser loaned Issuer an additional $150,000 pursuant to
the terms of the Second Amended Note (the “Additional Loans”). The
terms of the Additional Loans included, without limitation, that Debtor’s
payment obligations under the Additional Loans were to be secured by the Amended
Security Agreement, amongst other forms of security.
J.
On December 14,
2009, Issuer entered into a financing arrangement with Kenglo One, Ltd., a
company incorporated under the laws of Jersey (“Kenglo”), whereby Issuer
issued Kenglo a secured promissory note in the principal amount of
US$5,000,000. As a condition to the financing, Purchaser agreed to permit
Issuer to grant Kenglo a security interest in certain assets of Debtors on
a pari passu
basis with Purchaser.
K.
On or around the date
hereof, Debtor and Secured Party entered into that certain Amendment No. 4 to
the Purchase Agreement (“Amendment No. 4”) in an effort
to consolidate the Second Amended Note and the Additional Loans, and Debtor
issued Secured Party in lieu thereof a promissory note dated December 17,
2009 in the aggregate principal amount of $6,153,321.86 (the “Third Amended
Note”).
L.
Pursuant to the terms of
Amendment No. 4, Wits Basin and Purchaser wish to amend and restate the Second
Amended Pledge Agreement to consolidate the pledge of securities of Wits Basin
to Purchaser under the Second Amended Pledge Agreement and the Platinum Security
Agreement into a single agreement under the terms and conditions set forth
herein. This Agreement supersedes in its entirety the Second Amended
Pledge Agreement, which shall have no continuing effect from the date
hereof. Xxxxxx Xxxxx and Xxxxxxx Gold, each of which have provided
Purchaser a guaranty of the obligations of Wits Basin and have entered into that
certain Second Amended and Restated Security Agreement dated of even date
herewith, have further agreed to be bound by the terms hereof.
AGREEMENT
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 by the parties, Issuer and Purchaser agree as follows:
1.
Pledge.
As security for the prompt payment and performance of the Secured Obligations
(defined below) in full when due, whether at stated maturity, by acceleration or
otherwise (including amounts that would become due but for the operation of the
provisions of the United States Bankruptcy Code (11 U.S.C. Section 101, et
seq.),
as in effect from time to time, and any successor statute thereto (“Bankruptcy
Code”)), each Pledgor by this Agreement pledges, grants, transfers, and
assigns to Purchaser a security interest in all of such Pledgor’s right, title,
and interest in and to the Collateral (defined below).
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For the
purposes of this Agreement, with respect to each Pledgor, (a) “Collateral” means Pledgor’s
interest from time to time in the Pledged Interests, the Future Rights, and the
Proceeds, collectively; (b) “Pledged Interests” means (i)
all Equity Interests of Pledgor, and (ii) the certificates or instruments
representing such Equity Interests, if any; (c) “Equity Interests” means all
securities, shares, units, options, warrants, interests, participations, or
other equivalents (regardless of how designated) of, (I) with respect to Wits
Basin, Kwagga Gold (Barbados) Ltd., Standard Gold, Inc. (f/k/a Princeton
Acquisitions, Inc.) and CGMR BVI and (II) with respect to Hunter Xxxxx, Xxxxxxx
Gold; (d) “Future
Rights” means: (x) all Equity Interests of Pledgor, and all securities
convertible or exchangeable into, and all warrants, options, or other rights to
purchase, Equity Interests of Pledgor; and (y) the certificates or instruments
representing such Equity Interests, convertible or exchangeable securities,
warrants, and other rights and all dividends, cash, options, warrants, rights,
instruments, and other property or proceeds from time to time received,
receivable, or otherwise distributed in respect of or in exchange for any or all
of such Equity Interests; and (e) “Proceeds” means all proceeds
(including proceeds of proceeds) of the Pledged Interests and Future Rights
including all: (I) rights, benefits, distributions, premiums, profits,
dividends, interest, cash, instruments, documents of title, accounts, contract
rights, inventory, equipment, general intangibles, payment intangibles, deposit
accounts, chattel paper, and other property from time to time received,
receivable or otherwise distributed in respect of or in exchange for, or as a
replacement of or a substitution for, any of the Pledged Interests, Future
Rights, or proceeds thereof (including any cash, Equity Interests, or other
securities or instruments issued after any recapitalization, readjustment,
reclassification, merger or consolidation with respect to Pledgor and any
security entitlements, as defined in Section 8-102(a)(17) of the Uniform
Commercial Code, with respect thereto); (II) “proceeds,” as such term is defined
in Section 9-102(a)(64) of the Uniform Commercial Code; (III) proceeds of any
insurance, indemnity, warranty, or guaranty (including guaranties of delivery)
payable from time to time with respect to any of the Pledged Interests, Future
Rights, or proceeds thereof; (VI) payments (in any form whatsoever) made or due
and payable to Pledgor from time to time in connection with any requisition,
confiscation, condemnation, seizure or forfeiture of all or any part of the
Pledged Interests, Future Rights, or proceeds thereof; and (V) other amounts
from time to time paid or payable under or in connection with any of the Pledged
Interests, Future Rights, or proceeds thereof.
Notwithstanding
any other provision of this Agreement to the contrary, Purchaser acknowledges
and agrees that (A) (i) only Pledgor’s 50% interest in CGMR BVI shall constitute
an Equity Interest of Wits Basin hereunder, and (ii) that any actions taken by
Purchaser hereunder with respect to CGMR BVI or the related Equity Interest
shall be subject to the terms of that certain Shareholders’ Agreement entered
into on London Mining’s subscription into CGMR BVI (the “Shareholders’ Agreement”) and
(B) that 1,839,000 shares of common stock of Standard Gold, Inc. (f/k/a
Princeton Acquisitions, Inc.) held by Wits Basin shall be excluded from the
Collateral, Pledged Interests, Equity Interests and Future Rights as such terms
are defined hereunder.
2.
Secured Obligations. The
obligations secured by this Agreement (the “Secured Obligations”) are all
liabilities, obligations, or undertakings owing by each Pledgor to Purchaser of
any kind or description arising out of or outstanding under, advanced or issued
pursuant to, or evidenced by this Agreement, or the other Investment Documents,
as amended from time to time, irrespective of whether for the payment of money,
whether direct or indirect, absolute or contingent, due or to become due,
voluntary or involuntary, whether now existing or hereafter arising, and
including all interest (including interest that accrues after the filing of a
case under the Bankruptcy Code) and any and all costs, fees (including attorneys
fees), and expenses which such Pledgor is required to pay pursuant to any of the
foregoing, by law, or otherwise.
3.
Delivery and Registration of
Collateral. With respect to each Pledgor:
(a) All
certificates or instruments representing or evidencing the Collateral shall be
promptly delivered by Pledgor to Purchaser or Purchaser’s designees pursuant to
this Agreement at a location designated by Purchaser and shall be held by or on
behalf of Purchaser pursuant to this Agreement, and shall be in suitable form
for transfer by delivery, or shall be accompanied by a duly executed instrument
of transfer or assignment in blank, in form and substance satisfactory to
Purchaser.
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(b) Upon
the occurrence and during the continuance of an Event of Default, Purchaser
shall have the right, at any time in their discretion and without notice to
Pledgor, to transfer to or to register on the books of a subsidiary or company
of Pledgor of which Pledged Interests are held (or of any other Person
maintaining records with respect to the Collateral) in the name of Purchaser or
any of its nominees any or all of the Collateral. In addition, Purchaser
shall have the right at any time to exchange certificates or instruments
representing or evidencing Collateral for certificates or instruments of smaller
or larger denominations. Notwithstanding the foregoing, in the event this
Section 3(b) is applicable to Wits Basin’s equity interest in CGMR BVI,
Purchaser’s rights shall be subject to the execution and delivery to CGMR BVI of
a signed Deed of Adherence (as defined in the Shareholders’ Agreement), which
Purchaser undertakes to execute.
(c) If,
at any time and from time to time, any Collateral (including any certificate or
instrument representing or evidencing any Collateral) is in the possession of a
Person other than Purchaser, Kenglo (who has agreed or will agree to the terms
of an intercreditor agreement with Purchaser) or Pledgor (each, a “Holder”), then Pledgor shall
immediately, at Purchaser’s option, either cause such Collateral to be delivered
into Purchaser’s possession, or cause such Holder to enter into a control
agreement, in form and substance satisfactory to Purchaser, and take all other
steps deemed necessary by Purchaser to perfect the security interest of
Purchaser in such Collateral, all pursuant to Sections 9-106 and 9-313 of the
Uniform Commercial Code or other applicable law governing the perfection of
Purchaser’s security interest in the Collateral in the possession of such
Holder.
(d) Any
and all Collateral (including dividends, interest, and other cash distributions)
at any time received or held by Pledgor shall be so received or held in trust
for Purchaser, shall be segregated from other funds and property of Pledgor and
shall be forthwith delivered to Purchaser in the same form as so received or
held, with any necessary endorsements; provided that cash dividends or
distributions received by Pledgor may be retained by Pledgor in accordance with
Section
4.
(e) If
at any time, and from time to time, any Collateral consists of an uncertificated
security or a security in book entry form, then Pledgor shall immediately cause
such Collateral to be registered or entered, as the case may be, in the name of
Purchaser, or otherwise cause Purchaser’s security interest thereon to be
perfected in accordance with applicable law.
4.
Voting Rights and
Dividends.
(a) So
long as no Event of Default shall have occurred and be continuing, Pledgor shall
be entitled to exercise any and all voting and other consensual rights
pertaining to the Collateral or any part thereof for any purpose not
inconsistent with the terms of the Investment Documents and shall be entitled to
receive and retain any cash dividends or distributions paid or distributed in
respect of the Collateral;
(b) Upon
the occurrence and during the continuance of an Event of Default, all rights of
Pledgor to exercise the voting and other consensual rights or receive and retain
cash dividends or distributions that it would otherwise be entitled to exercise
or receive and retain, as applicable pursuant to Section 4(a), shall
cease, and all such rights shall thereupon become vested in Purchaser, who shall
thereupon have the sole right to exercise such voting or other consensual rights
and to receive and retain such cash dividends and distributions; provided that
with respect to Wits Basin and the exercise of any rights (including the right
to receive and retain dividends) relating to the its Equity Interest in CGMR
BVI, such rights shall be subject to the terms of the Shareholders'
Agreement. Wits Basin shall execute and deliver (or cause to be executed
and delivered) to Purchaser all such proxies and other instruments as Purchaser
may reasonably request for the purpose of enabling Purchaser to exercise the
voting and other rights which they are entitled to exercise and to receive the
dividends and distributions that they are entitled to receive and retain
pursuant to the preceding sentence; provided that with respect to exercise of
any rights (including the right to receive and retain dividends) relating to the
Equity Interest in CGMR BVI, such rights shall be subject to the terms of the
Shareholders' Agreement.
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5.
Release. On completion
of any acquisition of all or part of Pledgor's equity interest in CGMR BVI 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 undertaken in accordance with the terms of the
Shareholders' Agreement (an "Acquisition"), the Pledgor's
equity interest in CGMR BVI, or such part acquired, will automatically and
irrevocably be released and Purchaser agrees to take any further action
(including the execution, delivery and filing (as applicable) of any necessary
documents or agreements) necessary to effect such release, and shall, prior to
the completion of the Acquisition deliver to CGMR BVI all documents and items
held by Purchaser pursuant to Section 3 of this agreement.
6.
Representations and
Warranties. Each Pledgor represents, warrants, and covenants as
follows:
(a) Pledgor
has the authority to pledge the Pledged Interests to Purchaser under the terms
of this Agreement.
(b) Pledgor
has taken all steps it deems necessary or appropriate to be informed on a
continuing basis of changes or potential changes affecting the Collateral
(including rights of conversion and exchange, rights to subscribe, payment of
dividends, reorganizations or recapitalization, tender offers and voting and
registration rights), and Pledgor agrees that Purchaser shall have no
responsibility or liability for informing Pledgor of any such changes or
potential changes or for taking any action or omitting to take any action with
respect thereto.
(c) All
information in this Agreement or hereafter supplied to Purchaser by or on behalf
of Pledgor in writing with respect to the Collateral is, or in the case of
information hereafter supplied will be, accurate and complete in all material
respects.
(d) Pledgor
is and will be the sole legal and beneficial owner of the Collateral (including
the Pledged Interests and all other Collateral acquired by Pledgor after the
date hereof) free and clear of any adverse claim, Lien, or other right, title,
or interest of any party, other than the Liens in favor of Purchaser and
Kenglo.
(e) This
Agreement, and the filing of a UCC financing statement by Purchaser with the
Minnesota Secretary of State and Colorado Secretary of State (as appropriate)
describing the Collateral, creates a valid, perfected security interest in the
Pledged Interests in favor of Purchaser securing payment of the Secured
Obligations, and, except with respect to the filing of such UCC financing
statements, all actions of Pledgor necessary to achieve such perfection have
been duly taken.
(f)
Schedule
1 to this Agreement is true and correct and complete in all material
respects. Without limiting the generality of the foregoing: (i) except as set
forth on Schedule
1, all the Pledged Interests are in uncertificated form, and, except to
the extent registered in the name of Purchaser or its nominees pursuant to the
provisions of this Agreement and Kenglo pursuant to the terms of its security
agreement with Debtor, are registered in the name of Pledgor; and (ii) as of the
date of this Agreement, the Pledged Interests as to any subsidiary or company of
which Pledged Interests are held (and with respect to Wits Basin, as to CGMR
BVI) constitute at least the percentage of all the fully diluted issued and
outstanding Equity Interests of such subsidiary or company (and CGMR BVI) as set
forth in Schedule
1 to this Agreement.
(g) There
are no presently existing Future Rights or Proceeds owned by
Pledgor.
(h) The
Pledged Interests have been duly authorized and validly issued and are fully
paid and non-assessable.
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(i)
Neither the pledge
of the Collateral pursuant to this Agreement nor the extensions of credit
represented by the Secured Obligations violates Regulation T, U or X of the
Board of Governors of the Federal Reserve System.
7.
Further Assurances. With
respect to each Pledgor:
(a) Pledgor
agrees that from time to time, at the expense of Pledgor, Pledgor will promptly
execute and deliver all further instruments and documents, and take all further
action that may be necessary or reasonably desirable, or that Purchaser may
request, in order to perfect and protect any security interest granted or
purported to be granted by this Agreement or to enable Purchaser to exercise and
enforce their rights and remedies under this Agreement with respect to any
Collateral. Without limiting the generality of the foregoing, Pledgor will: (i)
at the request of Purchaser, xxxx conspicuously each of its records pertaining
to the Collateral with a legend, in form and substance reasonably satisfactory
to Purchaser, indicating that such Collateral is subject to the security
interest granted by this Agreement; (ii) execute such instruments or notices as
may be necessary or reasonably desirable, or as Purchaser may request, in order
to perfect and preserve the Liens granted or purported to be granted by this
Agreement; (iii) allow inspection of the Collateral by Purchaser or Persons
designated by Purchaser; and (iv) appear in and defend any action or proceeding
that may affect Pledgor’s title to or Purchaser’s security interest in the
Collateral.
(b) Pledgor
by this Agreement authorizes Purchaser to file one or more financing or
continuation statements, and amendments thereto, relative to all or any part of
the Collateral. A carbon, photographic, or other reproduction of this Agreement
or any financing statement covering the Collateral or any part thereof shall be
sufficient as a financing statement where permitted by law.
(c) Pledgor
will furnish to Purchaser, upon the request of Purchaser: (i) a certificate
executed by Pledgor, and dated as of the date of delivery to Purchaser,
itemizing in such detail as Purchaser may request, the Collateral which, as of
the date of such certificate, has been delivered to Purchaser by Pledgor
pursuant to the provisions of this Agreement; and (ii) such statements and
schedules further identifying and describing the Collateral and such other
reports in connection with the Collateral as Purchaser may request.
8.
Covenants of Pledgor.
Each Pledgor shall:
(a) To
the extent it may lawfully do so, use its best efforts to prevent a subsidiary
or company of which Pledged Interests are held from issuing Future Rights or
Proceeds; and
(b) Upon
receipt by Pledgor of any material notice, report, or other communication from a
subsidiary or company of which Pledged Interests are held or any Holder relating
to all or any part of the Collateral, deliver such notice, report or other
communication to Purchaser as soon as possible, but in no event later than five
(5) days following the receipt thereof by Pledgor.
9.
Purchaser as Pledgor’s
Attorneys-in-Fact.
(a) Each
Pledgor by this Agreement irrevocably appoints Purchaser as such Pledgor’s
attorneys-in-fact, with full authority in the place and stead of Pledgor and in
the name of Pledgor, Purchaser or otherwise, to enter into any control
agreements Purchaser deems necessary pursuant to Section 3 of this
Agreement, and from time to time at Purchaser’s discretion, upon the occurrence
and during the continuance of an Event of Default, to take any action and to
execute any instrument that Purchaser may reasonably deem necessary or advisable
to accomplish the purposes of this Agreement, including: (i) to receive,
indorse, and collect all instruments made payable to such Pledgor representing
any dividend, interest payment or other distribution in respect of the
Collateral or any part thereof to the extent permitted under this Agreement and
to give full discharge for the same and to execute and file governmental
notifications and reporting forms; or (ii) to arrange for the transfer of the
Collateral on the books of a subsidiary or company of which Pledged Interests
are held by such Pledgor or any other Person to the name of Purchaser or to the
names of Purchaser’s nominees.
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(b) In
addition to the designation of Purchaser as Pledgor’s attorneys-in-fact in
subsection (a), each Pledgor by this Agreement irrevocably appoints Purchaser as
such Pledgor’s agents and attorneys-in-fact to make, execute and deliver after
the occurrence and during the continuance of an Event of Default any and all
documents and writings which may be necessary or appropriate for approval of, or
be required by, any regulatory authority located in any city, county, state or
country where Pledgor or any subsidiary or company of which Pledged Interests
are held engage in business, in order to transfer or to more effectively
transfer any of the Pledged Interests or otherwise enforce Purchaser’s rights
under this Agreement.
10.
Remedies upon Default.
Upon the occurrence and during the continuance of an Event of
Default:
(a) Purchaser
may exercise in respect of the Collateral, in addition to other rights and
remedies provided for in this Agreement or otherwise available to it, all the
rights and remedies of a secured party on default under the Uniform Commercial
Code (irrespective of whether the Uniform Commercial Code applies to the
affected items of Collateral), and Purchaser may also without notice (except as
specified below) sell the Collateral or any part thereof in one or more parcels
at public or private sale, at any exchange, broker’s board or at any of
Purchaser’s office or elsewhere, for cash, on credit or for future delivery, at
such time or times and at such price or prices and upon such other terms as
Purchaser may deem commercially reasonable, irrespective of the impact of any
such sales on the market price of the Collateral. To the maximum extent
permitted by applicable law, Purchaser may be the purchaser of any or all of the
Collateral at any such sale and shall be entitled, for the purpose of bidding
and making settlement or payment of the purchase price for all or any portion of
the Collateral sold at any such public sale, to use and apply all or any part of
the Secured Obligations as a credit on account of the purchase price of any
Collateral payable at such sale. Each purchaser at any such sale shall hold the
property sold absolutely free from any claim or right on the part of any
Pledgor, and such Pledgor by this Agreement waives (to the extent permitted by
law) all rights of redemption, stay, or appraisal that it now has or may at any
time in the future have under any rule of law or statute now existing or
hereafter enacted. Each Pledgor agrees that, to the extent notice of sale shall
be required by law, at least ten (10) calendar days notice to such Pledgor of
the time and place of any public sale or the time after which a private sale is
to be made shall constitute reasonable notification. Purchaser shall not be
obligated to make any sale of Collateral regardless of notice of sale having
been given. Purchaser may adjourn any public or private sale from time to time
by announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so adjourned. To
the maximum extent permitted by law, each Pledgor by this Agreement waives any
claims against Purchaser arising because the price at which any Collateral may
have been sold at such a private sale was less than the price that might have
been obtained at a public sale, even if Purchaser accepts the first offer
received and do not offer such Collateral to more than one offeree.
(b) Each
Pledgor by this Agreement agrees that any sale or other disposition of the
Collateral conducted in conformity with reasonable commercial practices of
banks, insurance companies, or other financial institutions in the city and
state where Purchaser is located in disposing of property similar to the
Collateral shall be deemed to be commercially reasonable.
8
(c) Each
Pledgor by this Agreement acknowledges that the sale by Purchaser of any
Collateral pursuant to the terms hereof in compliance with the Securities Act of
1933 as now in effect or as hereafter amended, or any similar statute hereafter
adopted with similar purpose or effect (the “Securities Act”), as well as
applicable “Blue Sky” or other state securities laws may require strict
limitations as to the manner in which Purchaser or any subsequent transferee of
the Collateral may dispose thereof. Each Pledgor acknowledges and agrees that in
order to protect Purchaser’s interest it may be necessary to sell the Collateral
at a price less than the maximum price attainable if a sale were delayed or were
made in another manner, such as a public offering under the Securities Act. Each
Pledgor has no objection to sale in such a manner and agrees that Purchaser
shall have no obligation to obtain the maximum possible price for the
Collateral. Without limiting the generality of the foregoing, such Pledgor
agrees that upon the occurrence and during the continuation of an Event of
Default, Purchaser may, subject to applicable law, from time to time attempt to
sell all or any part of the Collateral by a private placement, restricting the
bidders and prospective Purchaser to those who will represent and agree that
they are purchasing for investment only and not for distribution. In so doing,
Purchaser may solicit offers to buy the Collateral or any part thereof for cash
from a limited number of investors reasonably believed by Purchaser to be
institutional investors or other accredited investors who might be interested in
purchasing the Collateral. If Purchaser shall solicit such offers, then the
acceptance by Purchaser of one of the offers shall be deemed to be a
commercially reasonable method of disposition of the Collateral.
Each
Pledgor acknowledges that there is no adequate remedy at law for failure by it
to comply with the provisions of this Section and that such failure would not be
adequately compensable in damages, and therefore agrees that its agreements
contained in this Section may be specifically enforced.
(d) EACH
PLEDGOR EXPRESSLY WAIVES TO THE MAXIMUM EXTENT PERMITTED BY LAW: (i) ANY
CONSTITUTIONAL OR OTHER RIGHT TO A JUDICIAL HEARING PRIOR TO THE TIME PURCHASER
DISPOSES OF ALL OR ANY PART OF THE COLLATERAL AS PROVIDED IN THIS SECTION; (ii)
ALL RIGHTS OF REDEMPTION, STAY, OR APPRAISAL THAT IT NOW HAS OR MAY AT ANY TIME
IN THE FUTURE HAVE UNDER ANY RULE OF LAW OR STATUTE NOW EXISTING OR HEREAFTER
ENACTED; AND (iii) EXCEPT AS SET FORTH IN SUBSECTION (a) OF THIS SECTION 10, ANY
REQUIREMENT OF NOTICE, DEMAND, OR ADVERTISEMENT FOR SALE.
(e) Notwithstanding
any term of this Agreement to the contrary, any rights or actions by Purchaser
under this Section 10 relating to the CGMR BVI shall be subject to the terms of
the Shareholders’ Agreement.
11.
Application of Proceeds.
Upon the occurrence and during the continuance of an Event of Default, any cash
held by Purchaser as Collateral and all cash Proceeds received by Purchaser in
respect of any sale of, collection from, or other realization upon all or any
part of the Collateral pursuant to the exercise by Purchaser of their remedies
as secured creditors as provided in Section 10 shall be applied from time to
time by Purchaser as provided in Section 9-615 of the Uniform Commercial
Code.
12.
Indemnity and Expenses.
Each Pledgor agrees:
(a) To
indemnify and hold harmless Purchaser and each of their directors, officers,
employees, agents and affiliates from and against any and all claims, damages,
demands, losses, obligations, judgments and liabilities (including, without
limitation, reasonable attorneys’ fees and expenses) in any way arising out of
or in connection with this Agreement or the Secured Obligations, except to the
extent the same shall arise as a result of the gross negligence or willful
misconduct of the party seeking to be indemnified; and
9
(b) To
pay and reimburse Purchaser upon demand for all reasonable costs and expenses
(including, without limitation, reasonable attorneys’ fees and expenses) that
Purchaser may incur in connection with (i) the custody, use or preservation of,
or the sale of, collection from or other realization upon, any of the
Collateral, including the reasonable expenses of re-taking, holding, preparing
for sale or lease, selling or otherwise disposing of or realizing on the
Collateral, (ii) the exercise or enforcement of any rights or remedies granted
under this Agreement or under any of the other Investment Documents or otherwise
available to them (whether at law, in equity or otherwise), or (iii) the failure
by Pledgor to perform or observe any of the provisions hereof. The provisions of
this Section shall survive the execution and delivery of this Agreement, the
repayment of any of the Secured Obligations, and the termination of this
Agreement or any other Investment Document.
13.
Duties of Purchaser. The
powers conferred on Purchaser under this Agreement are solely to protect their
interests in the Collateral and shall not impose on them any duty to exercise
such powers. Except as provided in Section 9-207 of the Uniform Commercial Code,
Purchaser shall have no duty with respect to the Collateral or any
responsibility for taking any necessary steps to preserve rights against any
Persons with respect to any Collateral.
14.
Amendments; etc. No
amendment or waiver of any provision of this Agreement nor consent to any
departure by any Pledgor from this Agreement shall in any event be effective
unless the same shall be in writing and signed by Purchaser and such Pledgor,
and then such waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given. No failure on the part of
Purchaser to exercise, and no delay in exercising any right under this
Agreement, any other Investment Document, or otherwise with respect to any of
the Secured Obligations, shall operate as a waiver thereof; nor shall any single
or partial exercise of any right under this Agreement, any other Investment
Document, or otherwise with respect to any of the Secured Obligations preclude
any other or further exercise thereof or the exercise of any other right. The
remedies provided for in this Agreement or otherwise with respect to any of the
Secured Obligations are cumulative and not exclusive of any remedies provided by
law.
15.
Notices. Unless
otherwise specifically provided in this Agreement, all notices shall be in
writing addressed to the respective party as set forth below, and may be
personally served, faxed, or sent by overnight courier service or United States
mail:
If
to Pledgors (respectively):
00 Xxxxx
Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxxx,
XX 00000-0000
Attn:
Xxxx Xxxxx, Chief Financial Officer
Facsimile:
(000) 000-0000
Xxxxxx
Xxxxx Mining Corporation
00 Xxxxx Xxxxxx Xxxxxx, Xxxxx
000
Xxxxxxxxxxx,
XX 00000-0000
Attn:
Xxxx Xxxxx, Chief Financial Officer
Facsimile:
(000) 000-0000
Xxxxxxx
Gold Producers, Inc.
00 Xxxxx Xxxxxx Xxxxxx, Xxxxx
000
Xxxxxxxxxxx,
XX 00000-0000
Attn:
Xxxx Xxxxx, Chief Financial Officer
Facsimile:
(000) 000-0000
10
with a
copy to:
Xxxxxx Xxxxxxx Xxxxxx & Brand,
LLP
3300 Xxxxx Fargo Center
00 Xxxxx
Xxxxxxx Xxxxxx
Xxxxxxxxxxx,
XX 00000-0000
Attn:
Xxxxx Xxxxxxx, Esq.
Facsimile:
(000) 000-0000
If
to Purchaser:
China
Gold, LLC
0000 Xxxx
Xxxxxx, Xxxxx 0000
Xxxxxx
Xxxx, XX 00000
Attn: C.
Xxxxxx Xxxxxx
Facsimile:
000-000-0000
with a
copy to:
Xxxxxxx
X. Xxxxxxx, Esq.
Xxxxxxxxxx
Xxxxxxx Xxxxxxxx Suelthaus PC
0000
Xxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxx
Xxxx, XX 00000
Facsimile:
000-000-0000
Any
notice given pursuant to this Section shall be deemed to have been given: (a) if
delivered in person, when delivered; (b) if delivered by fax, on the date of
transmission if transmitted on a Business Day before 5:00 p.m. at the place of
receipt or, if not, on the next succeeding Business Day; (c) if delivered by
overnight courier, two (2) days after delivery to such courier properly
addressed; or (d) if by United States mail, four (4) Business Days after
depositing in the United States mail, with postage prepaid and properly
addressed. Any party to this Agreement may change the address or fax number at
which it is to receive notices under this Agreement by notice to the other party
in writing in the foregoing manner.
16.
Continuing Security
Interest. This Agreement shall create a continuing security
interest in the Collateral and shall: (a) remain in full force and effect until
the indefeasible payment in full of the Secured Obligations; (b) be binding upon
each Pledgor and its successors and assigns; and (c) inure to the benefit of
Purchaser and their successors, transferees, and assigns. Upon the indefeasible
payment in full of the Secured Obligations, the security interests granted in
this Agreement shall automatically terminate and all rights to the Collateral
shall revert to Pledgors. Upon any such termination, Purchaser will, at each
Pledgor’s expense, execute and deliver to such Pledgor such documents as such
Pledgor shall reasonably request to evidence such termination. Such documents
shall be prepared by such Pledgor and shall be in form and substance reasonably
satisfactory to Purchaser.
17.
Security Interest
Absolute. To the maximum extent permitted by law, all rights of
Purchaser, all security interests under this Agreement, and all obligations of
Pledgors under this Agreement, other than under the terms of the Shareholders'
Agreement where applicable, shall be absolute and unconditional irrespective
of:
(a) any
lack of validity or enforceability of any of the Secured Obligations or any
other agreement or instrument relating thereto, including any of the Investment
Documents;
(b) any
change in the time, manner, or place of payment of, or in any other term of, all
or any of the Secured Obligations, or any other amendment or waiver of or any
consent to any departure from any of the Investment Documents, or any other
agreement or instrument relating thereto;
11
(c) any
exchange, release, or non-perfection of any other collateral, or any release or
amendment or waiver of or consent to departure from any guaranty for all or any
of the Secured Obligations; or
(d) any
other circumstances that might otherwise constitute a defense available to, or a
discharge of, any Pledgor.
18.
Construction. Section
and subsection headings in this Agreement are included in this Agreement for
convenience of reference only and shall not constitute a part of this Agreement
or be given any substantive effect. Unless the context of this Agreement
clearly requires otherwise, references to the plural include the singular and to
the singular include the plural, the part includes the whole, the term
“including” is not limiting, and the term “or” has, except where otherwise
indicated, the inclusive meaning represented by the phrase “and/or.” The words
“hereof,” “herein,” “hereby,” “hereunder,” and other similar terms in this
Agreement refer to this Agreement as a whole and not exclusively to any
particular provision of this Agreement. Article, section, subsection, exhibit,
and schedule references are to this Agreement unless otherwise specified. All of
the exhibits or schedules attached to this Agreement shall be deemed
incorporated in this Agreement by reference. Any reference to any of the
following documents includes any and all alterations, amendments, restatements,
extensions, modifications, renewals, or supplements thereto or thereof, as
applicable: this Agreement or any of the other Investment Documents. No
inference in favor of, or against, any party shall be drawn from the fact that
such party has drafted any portion of this Agreement, each party having been
represented by counsel of its choice in connection with the negotiation and
preparation of this Agreement and the other Investment Documents.
19.
Interpretation. Neither
this Agreement nor any uncertainty or ambiguity in this Agreement shall be
construed or resolved against Purchaser or any Pledgor, whether under any rule
of construction or otherwise. On the contrary, this Agreement has been reviewed
by both of the parties and their respective counsel and shall be construed and
interpreted according to the ordinary meaning of the words used so as to fairly
accomplish the purposes and intentions of the parties to this
Agreement.
20.
Severability. In case
any provision in or obligation under this Agreement shall be invalid, illegal or
unenforceable in any jurisdiction, the validity, legality and enforceability of
the remaining provisions or obligations, or of such provision or obligation in
any other jurisdiction, shall not in any way be affected or impaired
thereby.
21.
Counterparts; Facsimile
Execution. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same Agreement. Delivery of an executed
counterpart of this Agreement by facsimile shall be equally as effective as
delivery of an original executed counterpart of this Agreement. Any party
delivering an executed counterpart of this Agreement by facsimile also shall
deliver an original executed counterpart of this Agreement but the failure to
deliver an original executed counterpart shall not affect the validity,
enforceability, or binding effect of this Agreement.
22.
Waiver of Marshaling.
Each of the Pledgors and Purchaser acknowledge and agree that in exercising any
rights under or with respect to the Collateral: (a) Purchaser is under no
obligation to marshal any Collateral; (b) may, in their absolute discretion,
realize upon the Collateral in any order and in any manner they so elect; and
(c) may, in their absolute discretion, apply the proceeds of any or all of the
Collateral to the Secured Obligations in any order and in any manner they so
elect. Each Pledgor and Purchaser waive any right to require the marshaling of
any of the Xxxxxxxxxx.
00
00.
Conflict Among
Provisions. In the event of a conflict between the terms, covenants
and conditions of this Agreement and those of any other Investment Document
(unless otherwise specifically provided), the terms, covenants and conditions of
the document which shall enlarge the interest of Purchaser in the Collateral,
afford Purchaser greater financial benefits or financial security or better
assure payment of the Obligations in full, shall control; provided, however,
that in the event of a conflict between any provision of this Agreement and the
provisions of any other document, instrument or agreement which grants Purchaser
a security interest in all or any part of the Pledged Interest, the provisions
of this Agreement shall control.
24.
Sole and Absolute Discretion of
Purchaser. Whenever pursuant to this Agreement (a) Purchaser exercises
any right given to them to consent, approve or disapprove, (b) any arrangement,
document, item or term is to be satisfactory to Purchaser, or (c) any other
decision or determination is to be made by Purchaser, the decision of Purchaser
to consent, approve or disapprove, all decisions that arrangements, documents,
items, or terms are satisfactory or not satisfactory and all other decisions and
determinations made by Purchaser, shall be in the sole and absolute discretion
of Purchaser and shall be final and conclusive, except as may be otherwise
expressly and specifically provided in this Agreement.
25.
Consent to Forum. AS PART OF
THE CONSIDERATION FOR NEW VALUE THIS DAY RECEIVED, EACH PLEDGOR BY THIS
AGREEMENT CONSENTS TO THE JURISDICTION OF ANY STATE COURT LOCATED WITHIN XXXXXXX
COUNTY, KANSAS OR FEDERAL COURT IN THE DISTRICT COURT OF KANSAS, AND CONSENTS
THAT ALL SERVICE OF PROCESS BE MADE BY CERTIFIED OR REGISTERED MAIL DIRECTED TO
SUCH PLEDGOR AT THE ADDRESS STATED IN THE PURCHASE AGREEMENT AND SERVICE SO MADE
SHALL BE DEEMED TO BE COMPLETED UPON ACTUAL RECEIPT THEREOF. EACH PLEDGOR
WAIVES ANY OBJECTION TO JURISDICTION AND VENUE OF ANY ACTION INSTITUTED AGAINST
IT AS PROVIDED IN THIS AGREEMENT AND AGREES NOT TO ASSERT ANY DEFENSE BASED ON
LACK OF JURISDICTION OR VENUE. EACH PLEDGOR FURTHER AGREES NOT TO ASSERT
AGAINST PURCHASER (EXCEPT BY WAY OF A DEFENSE OR COUNTERCLAIM IN A PROCEEDING
INITIATED BY PURCHASER) ANY CLAIM OR OTHER ASSERTION OF LIABILITY WITH RESPECT
TO THE INVESTMENT DOCUMENTS, PURCHASER’S CONDUCT OR OTHERWISE IN ANY
JURISDICTION OTHER THAN THE FOREGOING JURISDICTIONS.
26.
Waiver of Jury Trial. TO THE FULLEST EXTENT PERMITTED BY
LAW, AND AS SEPARATELY BARGAINED-FOR CONSIDERATION TO PURCHASER, EACH PLEDGOR BY
THIS AGREEMENT WAIVES ANY RIGHT TO TRIAL BY JURY (WHICH PURCHASER ALSO WAIVES)
IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM OF ANY KIND ARISING OUT OF OR
OTHERWISE RELATING TO ANY OF THE INVESTMENT DOCUMENTS, THE OBLIGATIONS, THE
PLEDGED INTEREST, OR PURCHASER’S CONDUCT IN RESPECT OF ANY OF THE
FOREGOING.
27.
Entire Agreement. This
agreement, the Purchase Agreement, Amendment No. 4, the Third Amended Note and
the Second Amended and Restated Security Agreement between the parties thereto
dated on or around the date of the Agreement (i) constitute the final expression
of the agreement between Pledgors and Purchaser concerning the Pledge; and (ii)
may not be contradicted by evidence of any prior or contemporaneous oral
agreements or understandings between Pledgors and Purchaser. Neither
this agreement nor any of the terms hereof may be terminated, amended,
supplemented, waived or modified orally, but only by an instrument in writing
executed by the party against which enforcement of the termination, amendment,
supplement, waiver or modification is sought.
[Remainder
of page intentionally left blank; signature page follows]
13
IN WITNESS WHEREOF, Pledgor
and Purchaser have caused this Agreement to be duly executed and delivered by
their officers thereunto duly authorized as of the date first written
above.
|
PLEDGORS:
|
||
|
a
Minnesota corporation
|
||
|
By:
|
/s/ Xxxxxxx X. Xxxx
|
|
|
Xxxxxxx
X. Xxxx, Chief Executive
Officer
|
||
|
Xxxxxx
Xxxxx Mining Corporation,
|
||
|
a
Minnesota corporation
|
||
|
By:
|
/s/ Xxxxxxx X. Xxxx
|
|
|
Xxxxxxx
X. Xxxx, Chief Executive
Officer
|
||
|
Xxxxxxx
Gold Producers, Inc.,
|
||
|
a
Colorado corporation
|
||
|
By:
|
/s/ Xxxxxxx X. Xxxx
|
|
|
Xxxxxxx
X. Xxxx, President
|
||
|
PURCHASER:
|
China
Gold, LLC
|
||
|
a
Kansas limited liability company
|
|||
|
By:
|
Pioneer
Holdings, LLC
|
||
|
Its:
|
Manager
|
||
|
By:
|
/s/ C. Xxxxxx Xxxxxx
|
||
|
Name: C.
Xxxxxx Xxxxxx
|
|||
|
Title: Manager
|
|||
14
SCHEDULE
1
Pledged
Interests
|
Name of
Subsidiary/Entity
|
Jurisdiction
of
Organization
|
Type of
Interest
|
Number of
Shares/Units
(if applicable)
|
Certificate
Numbers
(if any)
|
Percentage of
Outstanding
Interests in
Subsidiary
|
||||||
|
WITS BASIN PRECIOUS
MINERALS
|
|||||||||||
|
Standard
Gold, Inc. (f/k/a Princeton Acquisitions, Inc.)1
|
Colorado
|
Common
Stock
|
18,584,544
|
various
|
85
|
% | |||||
|
Kwagga
Gold (Barbados) Limited
|
Barbados
|
Common Shares
|
1,884,615
|
2
|
35
|
% | |||||
|
China
Global Mining Resources (BVI) Limited (1513743)
|
British
Virgin Islands
|
Common
Stock
|
100 B Shares
|
1
|
50
|
% | |||||
|
XXXXXX XXXXX MINING
CORPORATION
|
|||||||||||
|
Xxxxxxx
Gold Producers, Inc.
|
Colorado
|
Common
Stock
|
100
|
1
|
100
|
% | |||||
1 Security interest excludes 1,839,000 shares of common stock of Standard Gold held by Wits Basin Precious Minerals Inc.
