AMENDED AND RESTATED SECURITY AGREEMENT
EXHIBIT
10.3
AMENDED AND RESTATED
SECURITY AGREEMENT
THIS
AMENDED AND RESTATED SECURITY AGREEMENT (this “Agreement”) is dated as of
December 22, 2008, and is by and between Wits Basin Precious Minerals Inc., a
Minnesota corporation (“Issuer”), and China Gold, LLC,
a Kansas limited liability company, its successors and assigns (together with
its successors and assigns, “Purchaser”).
RECITALS
The
following recitals are a material part of this Agreement.
A. Issuer
and Purchaser are parties to that certain Convertible Notes Purchase Agreement
dated as of April 10, 2007, as amended on June 19, 2007 and November 10, 2008
(as amended, the “Purchase
Agreement”), pursuant to which, among other things, Issuer has issued
Purchaser Secured Convertible Notes in an aggregate principal amount of
$9,800,000 (the “Prior
Notes”). All capitalized terms used in this Agreement without
definition have the definitions given to them in the Purchase
Agreement.
B. As
partial security for Issuer’s obligations under the Prior Notes, Issuer entered
into a Security Agreement with Purchaser dated June 19, 2007 (the “Original 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.
C. On
October 28, 2008, Purchaser loaned Issuer an additional $441,000 pursuant to the
terms of a Promissory Note dated October 28, 2008 (the “Additional Note”), with
Issuer’s payment obligations under the Additional Note secured by the Original
Security 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 remain secured by the Original
Security Agreement.
E. Issuer
has entered into an agreement (the “JV Transaction”) with London
Mining Plc (“London
Mining”), whereby London Mining and Issuer have formed a joint venture
entity in the British Virgin Islands entitled China Global Mining Resources
(BVI) Limited (registered number 1513743) (“CGMR BVI”), which will acquire
and operate certain mining properties in the People’s Republic of China (the
“PRC
Properties”). Issuer and certain of its subsidiaries currently
hold the rights to acquire the PRC Properties (the “Rights”), and such Rights are
subject to the security interest of Purchaser under the terms of the Original
Security Agreement and the Subsidiary Security Agreement. For the
avoidance of doubt, CGMR BVI is a separate entity to the Issuer’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 and the Subsidiary Security Agreement.
F. On
even date herewith, Issuer 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 Issuer
issued Purchaser in lieu thereof a promissory note dated December 22, 2008
in the aggregate principal amount of $10,421,107.18 (the “Second Amended
Note”). Additionally, pursuant to Amendment No. 3, the parties
modified certain terms of the First Amended Note and Additional Note to, among
other modifications, amend certain terms of Purchaser’s security interest to
release from such security interest the Rights, the PRC Properties and Issuer’s
equity interest in China Global Mining Resources Limited, a Hong Kong
corporation (“CGMR
HK”).
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G. Pursuant
to the terms of Amendment No. 3, Issuer and Purchaser wish to amend and restate
the Original Security Agreement on the terms and conditions set forth herein to
permit Issuer to complete the JV Transaction, including, without limitation, to
release the security interests referenced above.
H. This
Agreement supersedes in its entirety the Original Security Agreement, which
shall have no continuing effect from the date hereof.
AGREEMENT
NOW,
THEREFORE, in consideration of the foregoing facts and premises hereby made a
part of this Agreement, the mutual promises hereinafter set forth and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by the parties, Issuer and Purchaser agree as follows:
1. Grant of Security
Interest. Issuer grants to Purchaser a present and continuing
security interest in all of Issuer’s right, title and interest in and to all the
following property of Issuer (collectively, the “Collateral”):
(a) That certain unsecured
promissory note of CGMR BVI, issued in favor of Issuer in the amount of
US$[4,800,000] and dated as of December __, 2008;
(b) The proceeds of the
sale of any part of Issuer’s equity interest in CGMR BVI made in accordance with
the terms of the Shareholders’ Agreement entered into by Issuer and London
Mining on or around December ____, 2008;
(c) All financing
statements and other writings which now or hereafter evidence a security
interest for the benefit of Issuer in the items specified in subsection (a) and
(b) above;
(d) All additions and
accessions to, replacements and substitutions for, proceeds of, and the use or
operation of the property described in subsections (a), (b) and (c) above,
whether tangible or intangible, and, to the extent not otherwise included, all
payments under any insurance policy (whether or not Purchaser is the loss payee
thereof) and under any indemnity, warranty or guaranty, payable by reason of
loss or damage to or otherwise with respect to any of the foregoing
Collateral.
To the
extent that the Uniform Commercial Code does not apply to any item of the
Collateral, it is the intention of the parties and this Agreement that Purchaser
have a common law pledge or collateral assignment of such item of
Collateral.
2. Security for
Obligations. This Agreement secures the payment and
performance of all obligations of Issuer under the Purchase Agreement, the Note,
and the Investment Documents (as defined in the Purchase Agreement) (the “Obligations”).
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3. Acknowledgments of
Holder. Holder acknowledges that Issuer intends to transfer
the Rights (pursuant to and along with the equity interest in CGMR HK) to CGMR
BVI. Holder further acknowledges and agrees that, pursuant to the
terms of Amendment No. 3, it has completely and fully released from its security
interest the Rights and any other interests in the PRC Properties and that upon
effectiveness of the releases, it has no other security over the equity
interests in (except with respect to the pledge of Issuer’s equity interest
pursuant to that certain Second Amended and Restated Pledge Agreement dated of
even date herewith by and between Issuer and Holder) 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 this
Agreement.
4. Further
Assurances.
(a) Issuer agrees that it
shall, from time to time and at its sole expense, promptly execute and deliver
all further instruments and documents, and take all further action, that may be
necessary or desirable, or that Purchaser may reasonably request, in order to
perfect and protect any security interest granted or purported to be granted
hereby or to enable Purchaser to exercise and enforce its rights and remedies
under this Agreement with respect to any Collateral. Without limiting
the generality of the foregoing, Issuer shall: (i) if any Collateral is or shall
become evidenced by any promissory note or other instrument or any certificate
or document of title or the like, deliver and pledge to Purchaser such note,
instrument, certificate or document duly endorsed with recourse by Issuer, and
accompanied by duly executed instruments of transfer or assignment, all in form
and content satisfactory to Purchaser; and (ii) execute and file such financing
or continuation statements, or amendments thereto, and such other instruments or
notices, as may be necessary or desirable, or as Purchaser may request, in order
to perfect and preserve the security interests granted or purported to be
granted hereby.
(b) Issuer hereby
authorizes Purchaser to file one or more financing or continuation statements,
and amendments thereto, relating to all or any part of the Collateral, without
the signature of Issuer to the extent permitted by law. A copy of
this Agreement shall be sufficient as a financing statement to the extent
permitted by law.
(c) Issuer will furnish to
Purchaser from time to time statements and schedules further identifying and
describing the Collateral and such other reports in connection with the
Collateral as Purchaser may reasonably request from time to time, all in
reasonable detail.
5. Purchaser’s
Duties. The powers conferred on Purchaser under this Agreement
are solely to protect its interest in the Collateral and shall not impose any
duty upon it to exercise any such powers. Except for the safe custody
of any Collateral in its possession and the accounting for monies actually
received by it under this Agreement, Purchaser shall have no duty as to any
Collateral or as to the taking of any necessary steps to preserve rights against
other parties or any other rights pertaining to any Collateral. Upon
full and complete payment and performance of all of the Obligations under the
Investment Documents, Purchaser shall release the Collateral of the Liens
created and granted under this Agreement and, at Issuer’s expense, execute and
deliver to Issuer such documents as Issuer shall reasonably request to evidence
such release.
6. Issuer Remains
Liable. Notwithstanding anything in this Agreement to the
contrary, (a) Issuer shall remain liable under the contracts and agreements
included in the Collateral to the extent set forth therein to perform all of its
duties and obligations thereunder to the same extent as if this Agreement had
not been executed, (b) the exercise by Purchaser of any of its rights under this
Agreement shall not release Issuer from any of its duties or obligations under
the contracts and agreements included in the Collateral, and (c) Purchaser shall
not have any obligation or liability under the contracts and agreements included
in the Collateral by reason of this Agreement, nor shall Purchaser be obligated
to perform any of the obligations or duties of Issuer thereunder or to take any
action to collect or enforce any claim for payment assigned under this
Agreement.
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7. Remedies. If
any Event of Default shall have occurred and be continuing:
(a) Purchaser shall have
the right pursuant to the applicable Uniform Commercial Code (or pursuant to
applicable law for any Collateral not subject to the Uniform Commercial Code) to
take immediate possession of the Collateral, and (i) to require Issuer to
assemble the Collateral, at Issuer’s expense, and make it available to Purchaser
at a place designated by Purchaser which is reasonably convenient to both
parties, and (ii) to enter any of the premises of Issuer or wherever any of the
Collateral shall be located, and to keep and store the same on such premises
until sold or otherwise realized upon (and if such premises are the property of
Issuer, Issuer agrees not to charge Purchaser for storage thereof).
(b) Purchaser shall have
the right to sell or otherwise dispose of all or any Collateral at public or
private sale or sales, with such notice as may be required by law, all as
Purchaser, in its sole discretion, may deem advisable. Issuer agrees
that ten (10) days written notice to Issuer of any public or private sale or
other disposition of such Collateral shall be reasonable notice thereof, and
such sale shall be at such locations as Purchaser may designate in such
notice. Purchaser shall have the right to conduct such sales on
Issuer’s premises, without charge therefor. All public or private
sales may be adjourned from time to time in accordance with applicable
law. Purchaser shall have the right to sell, lease or otherwise
dispose of such Collateral, or any part thereof, for cash, credit or any
combination thereof, and Purchaser may purchase all or any part of such
Collateral at public or, if permitted by law, private sale and, in lieu of
actual payment of such purchase price, may set off the amount of such price
against the Obligations.
(c) Purchaser may exercise
with respect to the Collateral all of the rights and remedies (i) provided for
in this Agreement, (ii) provided under the Purchase Agreement or under the other
Investment Documents, (iii) afforded to a secured party upon a default under the
Uniform Commercial Code, or (iv) otherwise available at law or in
equity.
8. Indemnity and
Expenses.
(a) Issuer agrees to
indemnify Purchaser from and against any and all claims, losses and liabilities
arising out of or relating to this Agreement or any of the Obligations
(including enforcement of this Agreement and Purchaser’s exercise of its rights
and remedies under this Agreement), unless such claims, losses and liabilities
are caused solely by Purchaser’s gross negligence or willful
misconduct.
(b) Issuer shall upon
demand pay to Purchaser the amount of any and all charges, costs, fees and
expenses, including the reasonable fees and disbursements of its counsel and of
any experts and agents, that Purchaser may incur following Issuer’s default in
connection with (i) the custody, preservation, use of, or the sale of,
collection from, or other realization upon, any of the Collateral, (ii) the
exercise or enforcement of any of the rights of Purchaser under this Agreement,
or (iii) the failure by Issuer to perform or observe any of the provisions of
this Agreement. All such fees, expenses and disbursements shall be
deemed Obligations secured by this Agreement.
9. Governing
Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Kansas without regard to any choice of
law rule thereof giving effect to the laws of any other jurisdiction; provided, however, that if any
of the Collateral is located in any jurisdiction other than Kansas, then the
laws of such jurisdiction shall govern the method, manner and procedure for
foreclosure of Purchaser’s security interest in such Collateral and the
enforcement of Purchaser’s other remedies in respect of such Collateral to the
extent that the laws of such jurisdiction are different from or inconsistent
with the laws of Missouri.
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10. Organizational
Representations; UCC Filing Offices. Issuer represents and
warrants to Purchaser that (a) Issuer is a corporation incorporated under the
laws of Minnesota and (b) Issuer’s chief executive office is located at 00 Xxxxx
Xxxxxx Xxxxxx, Xxxxx 000, Xxxxxxxxxxx, Xxxxxxxxx 00000-0000. If
Issuer changes the address of its chief executive office, or if Issuer changes
its name, identity, corporate structure or state of incorporation (without
implying any right of Issuer to make any such change without the prior consent
of Purchaser), then, in each case, Issuer shall give Purchaser not less than ten
(10) Business Days prior written notice thereof.
11. Miscellaneous.
(a) No amendment or waiver
of any provision of this Agreement nor consent to any departure by Issuer from
the terms or provisions of this Agreement, shall in any event be effective
unless it shall be in writing and signed by the party against whom enforcement
of such amendment, waiver or consent is sought, and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given.
(b) The paragraph and
section headings in this Agreement are solely for convenience and shall not be
deemed to limit or otherwise affect the meaning or construction of any part of
this Agreement. This document shall be construed without regard to
any presumption or rule requiring construction against the party causing such
document or any portion thereof to be drafted. The section and other
headings in this Agreement are for convenience of reference only and shall not
limit or otherwise affect any of the terms of this Agreement. Any
pronoun used in this Agreement shall be deemed to cover all
genders. The terms “include”, “including” and similar terms shall be
construed as if followed by the phrase “without being limited
to.” The term “or” has, except where otherwise indicated, the
inclusive meaning represented by the phrase “and/or.” The words
“hereof,” “herein,” “hereby,” “hereunder,” and similar terms in this Agreement
refer to this Agreement as a whole and not to any particular provision or
section of this Agreement. An Event of Default shall “continue” or be
“continuing” until such Event of Default has been waived in writing by
Purchaser.
(c) If any provision or
provisions of this Agreement shall be unlawful, then such provision or
provisions shall be null and void, but the remainder of the Agreement shall
remain in full force and effect and be binding on the parties.
(d) This Agreement may be
validly executed and delivered by fax or other electronic transmission and in
one or more counterpart signature pages by different signatories
thereto.
(e) Any notice or demand
that Purchaser may wish to give to Issuer shall be served upon it in the fashion
prescribed for notices in the Purchase Agreement at the address and facsimile
number for Issuer set forth in the Purchase Agreement, and any notice or demand
so sent shall be deemed to be served as set forth in the Purchase
Agreement.
12. Waiver of Jury
Trial. TO THE FULLEST EXTENT PERMITTED BY LAW, AND AS
SEPARATELY BARGAINED-FOR CONSIDERATION TO PURCHASER, ISSUER HEREBY 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
THIS AGREEMENT OR ANY OF THE OTHER INVESTMENT DOCUMENTS, THE OBLIGATIONS, THE
COLLATERAL, PURCHASER’S CONDUCT IN RESPECT OF ANY OF THE FOREGOING, ANY OTHER
INVESTMENT DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY,
REGARDLIESS OF WHICH PARTY INITATES SUCH ACTION, SUIT, PROCEEDING OR
COUNTERCLAIM. TO EFFECTUATE THE FOREGOING, PURCHASER IS HEREBY
GRANTED AN IRREVOCABLE POWER OF ATTORNEY TO FILE, AS ATTORNEY-IN-FACT FOR
ISSUER, A COPY OF THIS AGREEMENT IN ANY COURT, AND THE COPY OF THIS AGREEMENT SO
FILED SHALL CONCLUSIVELY BE DEEMED TO CONSTITUTE ISSUER’S WAIVER OF TRIAL BY
JURY IN ANY PROCEEDING ARISING OUT OF OR OTHERWISE RELATING TO THIS AGREEMENT OR
ANY OF THE OTHER INVESTOR DOCUMENTS, THE OBLIGATIONS, THE COLLATERAL OR
PURCHASER’S CONDUCT IN RESPECT OF ANY OF THE FOREGOING.
[Remainder
of page intentionally left blank; signature page follows.]
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IN WITNESS WHEREOF, the
parties hereto have executed this Agreement on the date first written
above.
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a Minnesota corporation
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By:
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/s/ Xxxx X. Xxxxx
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CFO, Xxxx X. Xxxxx
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PURCHASER:
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China Gold, LLC
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a Kansas limited liability company
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By:
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China
Gold, LLC
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Its:
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General
Partner
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By: /s/ C. Xxxxxx Xxxxxx
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SIGNATURE
PAGE TO AMENDED AND RESTATED
SECURITY
AGREEMENT
6
