AMENDMENT TO CONVERTIBLE NOTES PURCHASE AGREEMENT
EXHIBIT
10.1
AMENDMENT
TO
This
Amendment to Convertible Notes Purchase Agreement
(this
“Amendment”)
is
entered into on this 19th day of June, 2007, by and between Wits Basin Precious
Minerals Inc., a Minnesota corporation (the “Issuer”),
and
China Gold, LLC, a Kansas limited liability company, its successors and assigns
(together with its successors and assigns “Purchaser”),
to
amend, as hereinafter set forth, the terms of that certain Convertible Notes
Purchase Agreement dated April 10, 2007 by and between Issuer and Purchaser
(the
“Purchase
Agreement”).
Capitalized terms used in this Amendment and not otherwise defined herein
shall
have the same meanings as defined in the Purchase Agreement.
A. Issuer
and Purchaser entered into the Purchase Agreement on April 10, 2007, which
contemplated the initial sale by Issuer, and purchase by Purchaser, of an
aggregate minimum of $12,000,000 and an aggregate maximum of $25,000,000
in
convertible notes of Issuer within 12 months of the Initial Closing
Date.
B. Pursuant
to the Purchase Agreement, on April 10, 2007, Issuer sold, and Purchaser
purchased, the Initial Note in the amount of $3,000,000. On May 7, 2007,
Issuer
sold, and Purchaser purchased, an Additional Note in the amount of $2,000,000.
C. Issuer
and Purchaser wish to amend the Purchase Agreement, in the respects, but
only in
the respects, as set forth herein. Issuer and Purchaser intend for this
amendment to (a) clarify that the obligations of Issuer and Purchaser under
the
Purchase Agreement to sell and purchase, respectively, convertible notes
under
the Purchase Agreement shall terminate at the earlier of (i) 12 months from
the
Initial Closing Date and (ii) the date of effectiveness of Issuer’s proposed
merger with Easyknit Enterprises Holdings Limited (defined herein and in
the
Purchase Agreement as the “Permitted
Business Combination”);
(b)
to provide for anti-dilution protections for the Purchase Rights (defined
herein) provided by this amendment; and (c) extend certain registration rights
to the common stock underlying the Registration Rights.
D. On
the
date hereof, and in the form attached hereto as Exhibit A, Issuer is selling,
and Purchaser is purchasing, an Additional Note in the aggregate amount of
$4,000,000.
Now,
Therefore,
the
parties hereto hereby agree as follows:
Section
1. AMENDMENTS
1.1 Section
2.1 of the Purchase Agreement is hereby deleted in its entirety and replaced
with the following:
2.1 Authorization
of the Notes. Issuer
shall authorize the issuance and sale to the Purchaser of an initial 8.25%
Secured Convertible Note in the principal amount of $3,000,000.00 (the
“Initial
Note”)
and,
prior to the earlier of (i) 12 months from the Initial Closing Date and (ii)
the
effectiveness of the Permitted Business Combination, may authorize the issuance
and sale to the Purchaser of one or more additional 8.25% Secured Convertible
Notes in a minimum aggregate principal amount of $9,000,000 and a maximum
aggregate principal amount of $22,000,000.00, with each such 8.25% Secured
Convertible Note containing the terms and conditions and in the form set
forth
in Exhibit
A
attached
hereto and with all such 8.25% Secured Convertible Notes, including the Initial
Note, not to exceed a total aggregate principal amount of $25,000,000.00
(each a
“Note”
and
collectively, together with any notes issued by any Person with respect to
the
purchase of Securities, the “Notes”).
The
Notes authorized for sale to Purchaser other than the Initial Note are
collectively the “Additional
Notes”.
The
Notes are sometimes referred to herein as the “Securities.”
1.2 Section
2.3 of the Purchase Agreement is hereby deleted in its entirety and replaced
with the following:
2.3 Purchase
and Sales of the Additional Notes.
Prior
to the earlier of (i) 12 months from the Initial Closing Date and (ii)
effectiveness of the Permitted Business Combination, Issuer shall direct,
by
written notice, that Purchaser purchase one or more Additional Notes in an
aggregate principal amount not to exceed $9,000,000 authorized in accordance
with Section 2.1. Within 5 days of its receipt of such notice, and, subject
to
the terms and conditions set forth in this Agreement, Purchaser shall purchase
from the Issuer one or more Additional Notes in an aggregate principal amount
not to exceed $9,000,000 at a purchase price equal to the principal amount
of
the Additional Note or Additional Notes being purchased by wire transfer
of
immediately available funds against delivery of the Additional Notes or
Additional Notes. From time to time, but prior to the earlier of (i) 12 months
from the Initial Closing Date and (ii) effectiveness of the Permitted Business
Combination, at Issuer’s request by written notice to Purchaser that Purchaser
purchase one or more Additional Notes in an aggregate amount of up to an
additional $13,000,000, Purchaser may purchase, at its discretion, Additional
Notes in an aggregate amount of up to an additional $13,000,000.
1.3 The
following shall be incorporated as Section 2.5 of the Purchase
Agreement:
2.5 Prepayment
of Notes in Event of Substantial Financing.
Notwithstanding the specific terms and conditions of any Additional Notes,
in
the event Issuer and/or any of Issuer’s majority-owned subsidiaries receive, at
a time when any Notes remain outstanding, cumulative financing in the form
of
cash or immediately available funds from one or more third parties in the
aggregate amount of at least $50,000,000 from and after June 19, 2007] (a
“Substantial
Financing”),
the
outstanding Notes issued under the Purchase Agreement
shall
be
due and payable out
of
the proceeds from such Substantial Financing.
In the
event such prepayment of any or all outstanding Notes, the respective Holder
of
each such prepaid Note shall be entitled to receive from Issuer, from the
date
of such prepayment until the earlier of (i) immediately prior to the Permitted
Business Combination or (ii) five (5) years from the date of such prepayment,
at
a purchase price of $1.00 per share, the right to purchase the number of
shares
of Issuer’s common stock equal to the amount prepaid on such Note divided by
$1.00 (the “Purchase
Right”).
In
the event the issuance of a Purchase Right is required pursuant to the terms
of
this Section 2.5, Issuer shall deliver to Holder an option agreement, with
standard terms and conditions as agreed upon by Issuer and Holder, evidencing
Holder’s Purchase Rights as set forth herein. Issuer shall provide, as
reasonably practicable, Holder notice of the proposed time of effectiveness
of a
Substantial Financing or Permitted Business Combination within a reasonable
time
prior to any such proposed effectiveness. The number of shares that may be
purchased under any Purchase Right shall be entitled to anti-dilution protection
substantially similar to the anti-dilution protections provided in Section
7 of
the Initial Note. As such, the provisions of Section 7 of the Initial Note
shall
apply as practicable to any such Purchase Right arising from this Section
2.5 to
avoid any inequity to Issuer and Holder.
1.4 The
following shall be incorporated as Section 8.25 of the Purchase
Agreement:
8.25 Limitation
of Conversion of
Notes or Exercise of Purchase Right.
Despite
anything to the contrary in the respective Notes, except pursuant to an
Automatic Conversion (as defined in the Notes), Purchaser may not convert
any or
all of the Notes or exercise its Purchase Right pursuant to Section 2.5 hereof
during the time period and to the extent that the shares of Common Stock
that
Purchaser could acquire upon such conversion or exercise would cause the
Beneficial Ownership (as defined below) of Common Stock held by Purchaser
and
its Affiliates to exceed 4.99%. The parties shall compute “Beneficial Ownership"
of Common Stock in accordance with Rule 13d-3 under the Securities Exchange
Act
of 1934, as amended. Purchaser will, at the request of Issuer, from time
to
time, notify Issuer of Purchaser’s computation of Purchaser’s Beneficial
Ownership. By written notice to Issuer, Purchaser may waive the provisions
of
this Section 8.25, but any such waiver will not be effective until the
61st
day
after delivery thereof. Nothing herein shall preclude Purchaser or its
Affiliates from disposing of a sufficient number of other shares of Common
Stock
beneficially owned by Purchaser or its Affiliates so as to thereafter permit
the
conversion of the respective Notes or exercise of any Purchase
Right.
1.5 The
definition of the terms “Purchase Agreement” and Registrable Securities” in
Section 2 of Appendix 1 to the Purchase Agreement are hereby deleted and
the
following definitions are substituted in place thereof:
“Purchase
Agreement” means that certain Convertible Notes Purchase Agreement by and
between Issuer and China Gold, LLC, of even date herewith as may be amended
or
restated from time to time.
“Registrable
Securities” means (i) any shares of Common Stock issuable upon conversion
of the Notes or the exercise of any Purchase Right, and (ii) any additional
shares of Common Stock issued pursuant stock splits, in-kind dividends and
similar distributions with respect to the stock described in the foregoing
clause, but does not include any such shares, which, at the time the identity
of
the Registrable Securities is to be determined, previously have been sold
pursuant to a registration or Rule 144, including Rule 144(k) or
Rule 144A.
1.6 The
following shall be added as a new definition in alphabetical order to Section
2
of Appending 1 to the Purchase Agreement:
“Purchase
Right” means any Purchase Right arising under Section 2.5 of the Purchase
Agreement or under Section 2 of any of the Notes.
Section
2. SUPPLEMENTAL
REPRESENTATION
2.1 On
June
19, 2007, Issuer makes to Purchaser the supplemental representation and warranty
identified in Exhibit B hereto (the “Supplemental Representation”). The
Supplemental Representation is accurate as of June 19, 2007, and Issuer does
not
undertake any obligation to update the applicability, veracity or accuracy
of
such representation on any other date except as otherwise required under
the
Purchase Agreement.
Section
3. MISCELLANEOUS
3.1 This
Amendment shall be construed in connection with and as part of the Purchase
Agreement, and, except as modified and expressly amended by this Amendment,
all
terms, conditions and covenants contained in the Purchase Agreement, are
hereby
ratified and shall be and remain in full force and effect.
3.2 Any
and
all notices, requests, certificates and other instruments executed and delivered
after the execution and delivery of this Amendment may refer to the Purchase
Agreement without making specific reference to this Amendment, but nevertheless
all such references shall include this Amendment, unless the context otherwise
requires.
3.3 The
description headings of the various sections or parts of this Amendment are
for
convenience only and shall not affect the meaning or construction of any
of the
provisions hereof.
3.4 This
Amendment shall be governed by and construed in accordance with Kansas
law.
3.5 This
Amendment may be executed in any number of counterparts, each executed
counterpart constituting an original, but all together only one agreement.
Signature to this Amendment may be given by facsimile or other electronic
transmission and such signatures shall be fully binding on the party sending
the
same.
[Signature
page follows]
IN
WITNESS WHEREOF,
the
parties hereto have executed this Agreement on the date first written
above.
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ISSUER:
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a
Minnesota corporation
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By:
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Name:
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▇▇▇▇
▇. ▇▇▇▇▇
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Title:
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Chief
Financial Officer
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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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Pioneer
Holdings, LLC
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Its:
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Manager
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By:
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Name:
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Title:
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Exhibit
B
SUPPLEMENTAL
REPRESENTATION
With
respect to Section 6.22 of the Convertible Notes Purchase Agreement, please
note
that Section 7.01(k) of the Merger Agreement with Easyknit Enterprises provides
that it is a condition to the obligations of the parties under the Merger
Agreement that the Hong Kong Securities and Futures Commission (the "SFC")
issue a ruling that the merger and related transactions do not require the
holders of record of Wits Basin shares to make a mandatory general offer
for all
shares of Easyknit as a result of, or in connection with, the merger under
the
Hong Kong Code on Takeovers. Easyknit has a made a request to the SFC
for the ruling. The sole issue for the ruling is whether there will
be an acquisition of "control" of Easyknit upon the merger, which under
the Hong Kong Code on Takeovers means an aggregate of 30% or more of
the voting rights of Easyknit. To further satisfy the SFC with respect to
establishing that a block of Wits Basin shareholders that would hold an
aggregate of 30% of the post-merger shares of Easyknit are not acting in
concert, Wits Basin has submitted questionnaires from its officers,
directors and 5% holders certifying that they are not so acting in
concert. The SFC has not yet made its final decision on the ruling, but
has indicated that it needs evidence that a larger number of Wits
Basin shares are not held by shareholders acting in concert. Accordingly,
Wits Basin is currently preparing a questionnaire to be sent to a larger
group
of its shareholders (possibly all other shareholders) to obtain similar
certifications that they are not acting in concert, respectively.
In
the
event Wits Basin cannot affirmatively establish that its shareholders are
not
acting in concert to acquire control of Easyknit in a manner
acceptable to the SFC, it is likely the SFC will not provide the necessary
ruling. Absent a waiver of the aforementioned condition in the Merger
Agreement by Easyknit and Wits Basin, the parties would not be able to complete
the merger as currently intended without the
SFC ruling. Easyknit has informally indicated that it might not
provide such waiver should it become necessary.