UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
8-K
CURRENT
REPORT
PURSUANT
TO SECTION 13 OR 15(d) OF
THE
SECURITIES EXCHANGE ACT OF 1934
Date of
report (date of earliest event reported): December 14,
2009
WITS
BASIN PRECIOUS MINERALS INC.
(Exact
name of registrant as specified in its charter)
Minnesota
(State or
other jurisdiction of incorporation)
1-12401
|
84-1236619
|
(Commission
File Number)
|
(IRS
Employer Identification No.)
|
80
South Eighth Street, Suite 900
Minneapolis,
MN 55402
(Address
of principal executive offices) (Zip Code)
(612)
349-5277
(Registrant’s
telephone number, including area code)
N/A
(Former
name or former address, if changed since last report)
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
o Written communications
pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material
pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
o Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
1
Item
1.01 Entry
into a Material Definitive Agreement.
(a) Kenglo One, Ltd.
Financing
On
December 14, 2009, Wits Basin Precious Minerals Inc. (the “Registrant”) entered into a
Loan Agreement (the “Loan
Agreement”) with Kenglo One, Ltd. (“Kenglo”), pursuant to which
the Registrant issued to Kenglo a secured promissory note in the face amount of
$5,000,000 (the “Kenglo
Note”) in consideration of a loan to the Registrant of
$4,000,000. The Kenglo Note was issued with an original issue
discount of $1,000,000, and otherwise bears no interest. The maturity
date of the Kenglo Note is February 14, 2011.
As
additional consideration for the loan, the Registrant issued Kenglo (i) a
five-year warrant to purchase 16,000,000 shares of Registrant’s common stock at
an exercise price of $0.10 per share (the “Kenglo Warrant”) and (ii) a
third-party option to purchase from the Registrant 1,299,000 shares of common
stock of Standard Gold, Inc. (f/k/a Princeton Acquisitions, Inc.) held by the
Registrant at a price per share of $1.00 (the “Option”). Standard
Gold, Inc. is a majority-owned subsidiary of the Registrant. The Kenglo Warrant
contains standard anti-dilution rights, and includes a net exercise right on
behalf of Kenglo.
As a
condition to the financing, Kenglo required that the Registrant grant Kenglo a
security interest that was pari passu to that granted to
China Gold, LLC (“China
Gold”), a significant lender to the Registrant, such security interest to
include a pledge of certain equity interests held by the Registrant and a
security interest in Hunter Bates Mining Corporation (“Hunter Bates”) and Gregory
Gold Producers, Inc. (“Gregory
Gold”), each of which were previously wholly owned subsidiaries of the
Registrant and are parties to certain security instruments with China
Gold. Hunter Bates and Gregory Gold are currently majority-owned,
indirect subsidiaries of Registrant. With the consent of China Gold
to grant a pari passu
security interest to Kenglo, the Registrant, Hunter Bates and Gregory Gold
entered into a Security Agreement dated December 14, 2009 (the “Kenglo Security Agreement”)
with Kenglo, granting Kenglo a security interest in all of such parties
assets. Pursuant to the Kenglo Security Agreement, the Registrant
pledged its equity interest in 18,584,544 shares of Standard Gold (constituting
approximately 85% of the equity interest in Standard Gold), its 35% equity
interest in Kwagga Gold (Barbados) Ltd., and its 50% equity interest in China
Global Mining Resources (BVI) Limited (“CGMR BVI”) (subject to the
consent of London Mining Plc, the other 50% holder of CGMR BVI), and Hunter
Bates pledged its 100% equity interest in Gregory Gold.
The
Registrant offered and sold the securities referenced above in reliance on the
statutory exemption from registration in Section 4(2) of the Securities
Act, and on Rule 506 promulgated thereunder. The Registrant relied on
this exemption and/or the safe harbor rule thereunder based on the fact that (i)
the purchaser had knowledge and experience in financial and business matters
such that it was capable of evaluating the risks of the investment, and (ii) the
Registrant has obtained representations from the purchaser indicating that it
was an accredited investor and purchasing for investment only.
(b) Modifications to
China Gold Financing Agreements
On
December 17, 2009, the Registrant entered into Amendment No. 4 (“Amendment No. 4”) to that
certain Notes Purchase Agreement dated April 10, 2007 with China Gold (as
amended, the “Purchase
Agreement”), pursuant to which the parties (i) consolidated certain loan
obligations of the Registrant to China Gold into a Third Amended and Restated
Promissory Note dated December 17, 2009 in the principal amount of $6,153,321.86
(the “Third Amended
Note”), which reflected the outstanding principal and interest under such
consolidated loan obligations, (ii) amended and modified certain security
agreements between the parties to consolidate the security interests of China
Gold, (iii) extend and make certain other modifications to that certain 10%
Senior Secured Convertible Promissory Note dated on or around February 11, 2008
issued in favor of China Gold in the principal amount of $1,020,000 (the “February Note”) and that
certain 10% Senior Secured Promissory Note dated on or around July 10, 2008
issued in favor of China Gold in the principal amount of $110,000 (the “July Note”), each of which was
issued by the Registrant to a third party lender and acquired by China Gold from
such lender in April 2009, and (iv) reflect certain other agreements between the
parties in consideration of certain accommodations to the Registrant made by
China Gold, from time to time, including without limitation China Gold’s consent
to the Registrant’s grant to Kenglo of a security interest that was pari passu to that of China
Gold.
2
Pursuant
to Amendment No. 4, the parties consolidated the Registrant’s payment
obligations under that certain Second Amended and Restated Promissory Note dated
December 22, 2008 in the principal amount of $10,421,107.18 (the “Prior Note”) and certain other
loans made by China Gold to the Registrant in the aggregate principal amount of
$400,000 into the Third Amended Note. The Third Amended Note accrues
interest at a rate equal to 12.25% per annum with the principal and interest due
on demand at any time on or after February 15, 2010. The Prior Note
and the other loan obligations were cancelled as of the issuance of the Third
Amended Note.
China
Gold’s security interest under the Purchase Agreement was principally
governed by the terms of that certain Amended and Restated Security Agreement
dated December 22, 2008 (the “Prior Security Agreement”) and
that certain Second Amended and Restated Pledge Agreement dated December 22,
2008 (the “Prior Pledge
Agreement”). With the acquisition of the February Note and
July Note from a third-party lender in April 2009, China Gold also acquired a
security interest in certain other assets of the Registrant, Hunter Bates and
Gregory Gold, principally pursuant to the terms of that certain Security
Agreement dated February 11, 2008 by and between China Gold (as a
successor-in-interest), the Registrant, Hunter Bates and Gregory Gold (the
“Platinum Security
Agreement”). Pursuant to Amendment No. 4, the parties
consolidated the security interests held by China Gold under the Prior Security
Agreement and Prior Pledge Agreement with those held pursuant to the Platinum
Security Agreement into that certain Second Amended and Restated Security
Agreement (the “Amended
Security Agreement”) and Third Amended and Restated Pledge Agreement (the
“Amended Pledge
Agreement”), each dated December 17, 2009 and entered into by and between
China Gold, the Registrant, Hunter Bates and Gregory Gold, resulting in a
security interest in all assets of the Registrant, Hunter Bates and Gregory
Gold, subject to certain priority liens and matters of
record. Pursuant to the Amended Pledge Agreement, the Registrant
pledged its equity interest in 18,584,544 shares of Standard Gold (constituting
approximately 85% of the equity interest in Standard Gold), its 35% equity
interest in Kwagga Gold (Barbados) Ltd., and its 50% equity interest in CGMR
BVI, and Hunter Bates pledged its 100% equity interest in Gregory
Gold. Pursuant to the terms of a consent to the Kenglo financing as
referenced above under Item 1.01(a), China Gold agreed to permit the Registrant
to grant a similar security interest to Kenglo that is pari passu to the security
interests set forth in the Amended Security Agreement and Amended Pledge
Agreement.
Pursuant
to Amendment No. 4, China Gold also agreed to extend the February Note and July
Note maturity dates to February 15, 2010, which coincides with the maturity of
the Third Amended Note. Accordingly, the parties entered into (i)
that certain Amended and Restated 10% Senior Secured Convertible Promissory Note
dated December 17, 2009 (the “Amended February Note”) in the
principal amount of $227,391.25, which amount reflects the outstanding principal
and interest due under the February Note as of the date of issuance of the
Amended February Note, and (ii) that certain Amended and Restated 10% Senior
Secured Promissory Note dated December 17, 2009 (the “Amended July Note”) in the
principal amount of $110,000, which also requires the Registrant to pay an
additional $7,474.91 in interest accrued as of the date of
issuance. The Registrant’s obligations under the Amended February
Note and Amended July Note are secured pursuant to the terms of the Amended
Security Agreement and Amended Pledge Agreement, as well as existing guaranties
of Hunter Bates and Gregory Gold.
3
As
consideration for entering into Amendment No. 4 and certain other accommodations
of China Gold made to the Registrant from time to time, including without
limitation China Gold’s consent to the Registrant’s grant to Kenglo of a
security interest that is pari
passu to the security interest held by China Gold to secure China Gold’s
right to repayment of approximately $6,500,000 in obligations of the Registrant,
the Registrant issued China Gold a five-year warrant to purchase 1,600,000
shares of the Registrant’s common stock at an exercise price of $0.01, and
agreed to modify the terms of that certain warrant to purchase 38,200,000 shares
of the Registrant’s common stock issued on November 10, 2008 (the “November Warrant”) and that
certain warrant to purchase 882,000 shares of the Registrant’s common stock
issued on October 28, 2008 (the “October Warrant”) to reduce
the exercise price of such Warrants from $0.075 per share to $0.01 per
share. The October Warrant was further modified to extend the
expiration date from October 28, 2010 to October 28, 2013 as originally intended
by the parties.
In
consideration of certain loan accommodations made to Registrant by Pioneer
Holdings, LLC, an affiliate of China Gold (“Pioneer”), from time to time,
including without limitation loans made to the Registrant and its affiliates in
excess of $350,000 in the aggregate, on December 17, 2009 the Registrant has
issued to Pioneer five-year warrants to purchase an aggregate of 7,000,000
shares of the Registrant’s common stock at an exercise price of $0.01 per
share. The warrants include a cashless exercise
provision.
The
warrants issued to Pioneer were issued in reliance on the statutory exemption
from registration in Section 4(2) of the Securities Act, and on Rule 506
promulgated thereunder. The Registrant relied on this exemption
and/or the safe harbor rule thereunder based on the fact that (i) the purchaser
had knowledge and experience in financial and business matters such that it was
capable of evaluating the risks of the investment, and (ii) the Registrant has
previously obtained representations from the purchaser indicating that it was an
accredited investor and purchasing for investment only.
SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Company has duly
caused this report to be signed on its behalf by the undersigned hereunto duly
authorized.
WITS BASIN PRECIOUS MINERALS INC. | |||
Date: December
18, 2009
|
By:
|
/s/ Mark D. Dacko | |
Mark D. Dacko | |||
Chief Financial Officer | |||
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