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 $10,421,107.18 (the “ Second
Amended Note ”). Additionally, pursuant to
Amendment No. 3, the parties modified certain terms of the First
Amended Note and Additional Note to, among other modifications,
amend certain terms of Purchaser’s security interest to
release from such security interest the Rights, the PRC Properties
and Issuer’s equity interest in China Global Mining Resources
Limited, a Hong Kong corporation (“ CGMR HK
”).
G. Pursuant
to the terms of Amendment No. 3, Issuer and Purchaser wish to amend
and restate the Original Security Agreement on the terms and
conditions set forth herein to permit Issuer to complete the JV
Transaction, including, without limitation, to release the security
interests referenced above.
H. This
Agreement supersedes in its entirety the Original Security
Agreement, which shall have no continuing effect from the date
hereof.
AGREEMENT
NOW, THEREFORE, in consideration of the
foregoing facts and premises hereby made a part of this Agreement,
the mutual promises hereinafter set forth and for other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged by the parties, Issuer and Purchaser agree as
follows:
1.
Grant of Security Interest . Issuer grants to
Purchaser a present and continuing security interest in all of
Issuer’s right, title and interest in and to all the
following property of Issuer (collectively, the “
Collateral ”):
(a) That certain unsecured promissory note
of CGMR BVI, issued in favor of Issuer in the amount of
US$[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
”).
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 t
