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Item 1.01
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Entry Into Material Definitive Agreements
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On November 21, 2016, Golden
Queen Mining Co. Ltd. (“
Golden Queen
”), entered into a Second Amended and Restated Term Loan Agreement (the
“
Second Amended Loan Agreement
”) with THE LANDON T. CLAY 2009 IRREVOCABLE TRUST DATED MARCH 6, 2009 (“
LTC
Lender
”), EHT, LLC (“
EHT Lender
”), and THE CLAY FAMILY 2009 IRREVOCABLE TRUST DATED APRIL 14, 2009
(“
CFT Lender
” and, together with LTC Lender and EHT Lender , the “
Lenders
”) to secure a new
term loan facility (the “
Loan
”) in the amount of US$31,000,000. The Lenders are affiliated with the Clay family,
a shareholder group which collectively owns approximately 26.50% of the issued and outstanding shares of Golden Queen (the “
Clay
Family
”) before exercise of share purchase warrants held by them. Investment vehicles managed by Thomas M. Clay, Chief
Executive Officer and a director of the Company, funded US$23.25 million of the Loan, with the remainder being funded by the other
Lenders.
The Second Amended Loan
Agreement amends and restates that certain Amended and Restated Term Loan Agreement dated June 8, 2015 (the “
Loan Agreement
”)
among Golden Queen, LTC Lender, EHT Lender, Harris Clay, and CFT Lender, pursuant to which the original principal amount under
a certain Term Loan Agreement dated December 31, 2014 was increased to US$37,500,000 and the term of the loan was extended to December
8, 2016 (the “
June 2015 Loan
”). Harris Clay subsequently assigned his interest in the Loan Agreement and related
documents to EHT, LLC.
Pursuant to the Second
Amended Loan Agreement, Golden Queen will make a partial prepayment of the June 2015 Loan to reduce the outstanding principal balance
thereof to US$31,000,000. In consideration for the partial repayment of June 2015 Loan, the Lenders have agreed to waive the prepayment
fee pursuant to a Waiver of Prepayment Fee.
Golden Queen issued three
promissory notes in the principal amounts of US$18,497,700 (LTC Lender), US$7,750,000 (EHT Lender), US$4,752,300 (CFT Lender),
each due May 21, 2019, with an annual interest rate of 8%, payable quarterly on the first business day of each quarter and commencing
on January 1, 2017. For interest payments due in calendar year 2017, Golden Queen may elect, by notice to the Lenders prior to
the due date for payment of interest, to pay interest in kind by adding such interest payment to the unpaid principal balance outstanding
under the Loan, provided, that the total amount of interest so added to the principal balance of the Loan will be due and payable
in full on January 1, 2018. Golden Queen will use the net proceeds of the Loan to make a partial prepayment of the June 2015 Loan.
The balance of the prior loan will be repaid from available cash on hand.
Golden Queen paid the Lenders
a closing fee of US$930,000. The Second Amended Loan Agreement contains customary representations, warranties and covenants.
The Loan is guaranteed
by the subsidiaries of Golden Queen, under the terms of an amended and restated Guaranty dated June 8, 2015 (the “
Guaranty
”),
and secured by a pledge of Golden Queen’s interests in its subsidiaries and Golden Queen Mining Holdings, Inc.’s 50%
interest in Golden Queen Mining Company, LLC (“
GQ California
”), under the terms and conditions of an Amended
and Restated Pledge Agreement, dated June 8, 2015 (the “
Pledge Agreement
”). GQ California is a 50%/50% joint
venture formed with Gauss LLC to develop the Soledad Mountain Project. The Clay Family controls a 32.5% interest in Gauss LLC and
Leucadia National Corporation indirectly controls a 67.5% interest in Gauss LLC.
Under the terms of the
Second Amended Loan Agreement, Golden Queen was required, among other items, to provide a Reaffirmation of Guaranty and Pledge
Agreement (the “
Reaffirmation
”) pursuant to which all the terms and conditions of the Guaranty and Pledge Agreement
were reaffirmed, after giving effect to the Second Amended Loan Agreement.
Golden Queen also issued
warrants to the Lenders, exercisable to acquire 8,000,000 common shares of Golden Queen at an exercise price of US$0.85 per common
share, subject to certain adjustments (the “
Warrants
”). The common shares issuable upon exercise of the Warrants
have not been registered under the Securities Act of 1933, as amended (the “
Securities Act
”), and were issued
pursuant to exemptions from such registration requirements.
Under the terms of the
Second Amended Loan Agreement, Golden Queen entered into an amended and restated indemnity agreement with certain members of the
Clay Family (the “
Amended Indemnity Agreement
”), under which Golden Queen agreed to indemnify certain members
of the Clay Family for certain indemnifiable expenses arising out of proceedings related to (a) the making or failure to make a
filing under Section 16 of the Securities Exchange Act, as amended; (b) the beneficial ownership of Golden Queen securities or
(c) transactions with respect to Golden Queen securities occurring prior to May 21, 2019.
Copies of the Second Amended
Loan Agreement, form of Warrants, and Amended Indemnity Agreement are filed as exhibits to this Form 8-K and incorporated herein
by reference. The description of the Second Amended Loan Agreement, form of Warrants, and Amended Indemnity Agreement is a summary
of the terms of such agreements, and is qualified in its entirety by reference to the text of these agreements or instruments.