Golden Queen Mining Company, Inc.: Exhibit 10.2 - Filed by newsfilecorp.com





EXECUTION VERSION 

SUBORDINATION AGREEMENT 

                          THIS
SUBORDINATION AGREEMENT (this “Agreement”), dated as of July 2, 2014, is
delivered by and among GOLDEN QUEEN MINING COMPANY, INC., a California
corporation (the “Borrower”), GOLDEN QUEEN MINING CO. LTD., a British
Columbia company (“Guarantor”), each entity listed on the signature page
hereof (each individually a “Subordinated Creditor”, and collectively,
the “Subordinated Creditors”), in favor of Leucadia National Corporation,
a New York corporation and Auvergne, LLC, a Delaware limited liability company
(each individually a “Senior Creditor”, and collectively, the “Senior
Creditors”), in light of the following: 

                         
WHEREAS, the Borrower, as a payor, the Guarantor, as a guarantor and the Senior
Creditors, as payees are parties to that certain Senior Secured Promissory Note,
dated the date hereof (the ”Note”);

                           WHEREAS,
Subordinated Creditors have made certain loans or advances to the Borrower or
the Borrower has issued a guarantee in favor of Subordinated Creditors, as
applicable, in each case, as set forth on Schedule I attached hereto (the
“Existing Debt”); and 

                         
WHEREAS, in order to comply with the condition precedent set forth in the Note,
each Subordinated Creditor has agreed to the subordination of all of its
Subordinated Debt, upon the terms and subject to the conditions set forth in
this Agreement. 

                          NOW,
THEREFORE, in consideration of the mutual promises, covenants, conditions,
representations, and warranties set forth herein and for other good and valuable
consideration, the parties hereto agree as follows: 

                         
SECTION 1 Definitions; Interpretation. 

                          (a)       
Terms Defined in Credit Agreement. All capitalized terms used in this
Agreement and not otherwise defined herein shall have the meanings assigned to
them in the Note. 

                          (b)       
Certain Defined Terms. As used in this Agreement, the following terms
shall have the following meanings: 

                         
“Insolvency Event” has the meaning set forth in Section 3. 

                          “Senior
Debt” means all Obligations of the Borrower under the Note and all other
indebtedness and obligations in connection with any renewal, refunding,
restructuring or refinancing thereof, including interest thereon accruing after
the commencement of any proceedings referred to in Section 3 below, whether or
not such interest is an allowed claim in such proceeding. 

                          “Subordinated
Debt” means, collectively, the Existing Debt and all other indebtedness and
obligations in connection with any renewal, refunding, restructuring or
refinancing thereof, including interest thereon accruing after the commencement
of any proceedings referred to in Section 3 below, whether or not such interest
is an allowed claim in such proceeding. 

                          “Subordinated
Debt Payment” means any payment or distribution by or on behalf of the
Borrower, directly or indirectly, of any kind or character, whether in cash,
property, or securities, including on account of the payment of interest,
repayment, purchase, redemption, or other acquisition of Subordinated Debt, as a
result of any collection, sale, or other disposition of collateral securing the
same, or by setoff, exchange, or in any other manner, for or on account of the
Subordinated Debt. 




                          SECTION
2 Subordination To Payment Of Senior Debt. Each Subordinated Creditor
hereby agrees that all Subordinated Debt now or hereafter owned or held by or
owing to it, and any interest therein, is and shall be subject, subordinate, and
junior, in right of payment and exercise of remedies, to the extent and in the
manner set forth herein, to the prior payment in full in cash of all Senior
Debt. 

                          SECTION
3 Subordination Upon Any Distribution Of Assets Of Borrower. Each
Subordinated Creditor agrees that in the event of any payment or distribution of
assets of the Borrower of any kind or character, whether in cash, property, or
securities, upon the dissolution, winding up, or total or partial liquidation or
reorganization, readjustment, arrangement, or similar proceeding relating to the
Borrower or its property, whether voluntary or involuntary, or in bankruptcy,
insolvency, receivership, arrangement, or similar proceedings or upon an
assignment for the benefit of creditors, or upon any other marshaling or
composition of the assets and liabilities of the Borrower, or otherwise (such
events, collectively, the “Insolvency Events”): (i) all amounts owing on
account of the Senior Debt shall first be paid in full in cash before any
Subordinated Debt Payment is made or before any Subordinated Creditor is
entitled to receive (directly or indirectly), or make any demands for, any
payment on account of any Subordinated Debt; and (ii) any Subordinated Debt
Payment to which such Subordinated Creditor would be entitled except for the
provisions hereof, shall be paid or delivered by the trustee in bankruptcy,
receiver, assignee for the benefit of creditors, or other liquidating lender
making such payment or distribution directly to the Senior Creditors (or their
representatives) for application to the payment of the Senior Debt ratably
according to the respective aggregate amounts remaining unpaid under the Note,
after giving effect to any concurrent payment or distribution or provision
therefor to the Senior Creditors in respect of such Senior Debt. 

                          SECTION
4 Unauthorized Payments. If any payment or distribution of any kind or
character, whether in cash, securities or other property in respect of any
Subordinated Debt shall (despite these subordination provisions) be received by
any Subordinated Creditor in violation of this Agreement before all Senior Debt
shall have been paid in full in cash, such payment or distribution shall be held
in trust for the benefit of, and shall be paid over or delivered to, the Senior
Creditors (or their representatives), ratably according to the respective
aggregate amounts remaining unpaid under the Note, to the extent necessary to
pay all Senior Debt in full in cash. 

                          SECTION
5 Subrogation. Until the payment and performance in full of all Senior
Debt, no Subordinated Creditor shall have or directly or indirectly exercise,
any rights that it may acquire by way of subrogation under this Agreement, by
any payment or distribution to the Senior Creditors hereunder or otherwise. Upon
the payment and performance in full in cash of all Senior Debt, each
Subordinated Creditor shall be subrogated to the rights of the Senior Creditor
to receive payments or distributions applicable to the Senior Debt until the
Subordinated Debt shall be paid in full. 

                         
SECTION 6 Continuing Agreement; Reinstatement. 

                          (a)       
Continuing Agreement. This Agreement is a continuing agreement of
subordination and shall continue in effect and be binding upon each Subordinated
Creditor until the payment and performance in full in cash of all Senior Debt.
The subordinations, agreements, and priorities set forth herein shall remain in
full force and effect regardless of whether any party hereto in the future seeks
to rescind, amend, terminate, or reform, by litigation or otherwise, its
respective agreements with the other party hereto. 

                          (b)       
Reinstatement. This Agreement shall continue to be effective or shall be
reinstated, as the case may be, if, for any reason, any payment of the Senior
Debt by or on behalf of the Borrower shall be rescinded or must otherwise be restored by
the Senior Creditors, whether as a result of an Insolvency Event or otherwise.

2 




                          SECTION
7 Obligations Of The Borrower Not Affected. The provisions of this
Agreement are intended solely for the purpose of defining the relative rights of
the Subordinated Creditors, on the one hand, and of the Senior Creditors, on the
other hand. Nothing contained in this Agreement shall (i) impair, as among the
Subordinated Creditors and the Borrower, the Borrower’s obligation to pay the
Subordinated Debt owing by it as and when the same shall become due and payable,
or (ii) otherwise affect the relative rights of each Subordinated Creditor
against the Borrower, on the one hand, and of the creditors (other than the
Senior Creditors) of the Borrower against the Borrower, on the other hand.

                          SECTION
8 Notices. Any notice, request or other communication required or
permitted to be given hereunder shall be given in writing by delivering it
against receipt for it, by depositing it with an overnight delivery service or
by depositing it in a receptacle maintained by the United States Postal Service,
postage prepaid, registered or certified mail, return receipt requested,
addressed to the respective parties as reflected in Schedule II attached hereto.
Any party’s address for notices may be changed at any time and from time to
time, but only after five (5) calendar days advance written notice to the other
parties hereto and shall be the most recent such address furnished in writing by
such party to the other parties hereto. Actual notice, however and from whomever
given or received, shall always be effective when received. 

                          SECTION
9 VENUE; CHOICE OF LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT
OF LAWS PRINCIPLES THEREOF. ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST THE
SUBORDINATED CREDITORS OR THE BORROWER ARISING OUT OF OR RELATING HERETO SHALL
BE BROUGHT IN EITHER (i) THE UNITED STATED BANKRUPTCY COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK, IF SUCH COURT HAS SUBJECT MATTER JURISDICTION, OR
OTHERWISE (ii) THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW
YORK, BOROUGH OF MANHATTAN OR, IF THAT COURT DOES NOT HAVE SUBJECT MATTER
JURISDICTION, IN ANY STATE COURT LOCATED IN THE CITY OF NEW YORK. BY EXECUTING
AND DELIVERING THIS AGREEMENT, EACH SUBORDINATED CREDITOR AND THE BORROWER, FOR
ITSELF AND IN CONNECTION WITH ITS PROPERTIES, IRREVOCABLY (A) ACCEPTS GENERALLY
AND UNCONDITIONALLY THE JURISDICTION AND VENUE OF SUCH COURTS; (B) WAIVES ANY
DEFENSE OF FORUM NON CONVENIENS; (C) AGREES THAT SERVICE OF ALL PROCESS IN ANY
SUCH PROCEEDING IN ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL,
RETURN RECEIPT REQUESTED, TO THE ADDRESS PROVIDED NEXT TO ITS NAME ON SCHEDULE
II ATTACHED HERETO; (D) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (C)
ABOVE IS SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER SUCH SUBORDINATED
CREDITOR OR THE BORROWER IN ANY SUCH PROCEEDING IN ANY SUCH COURT, AND OTHERWISE
CONSTITUTES EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT; AND (E) AGREES THAT
THE SENIOR CREDITORS RETAIN THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST ANY SUBORDINATED CREDITOR OR
THE BORROWER IN THE COURTS OF ANY OTHER JURISDICTION TO THE EXTENT THAT THE
COURTS SPECIFIED ABOVE DO NOT HAVE SUBJECT MATTER JURISDICTION.

3 




                          SECTION
10 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY AGREES TO
WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING HEREUNDER OR UNDER ANY OF THE OTHER LOAN DOCUMENTS OR ANY
DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT. THE
SCOPE OF THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY AND ALL DISPUTES
THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS
AGREEMENT, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS AND ALL
OTHER COMMON LAW AND STATUTORY CLAIMS. EACH PARTY HERETO ACKNOWLEDGES THAT THIS
WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH
HAS ALREADY RELIED ON THIS WAIVER IN ENTERING INTO THIS AGREEMENT, AND THAT EACH
WILL CONTINUE TO RELY ON THIS WAIVER IN ITS RELATED FUTURE DEALINGS. EACH PARTY
HERETO FURTHER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS
LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS
FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING
THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL
WRITTEN WAIVER SPECIFICALLY REFERRING TO THIS SECTION 10 AND EXECUTED BY EACH OF
THE PARTIES HERETO), AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS HERETO OR ANY OF THE OTHER LOAN DOCUMENTS
OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE ADVANCE MADE HEREUNDER.
IN THE EVENT OF LITIGATION, THIS NOTE MAY BE FILED AS A WRITTEN CONSENT TO A
TRIAL BY THE COURT. 

                         
SECTION 11 Entire Agreement; Amendments And Waivers. 

                          (a)       
Entire Agreement. This Agreement constitutes the entire agreement of each
party hereto with respect to the matters set forth herein and supersedes any
prior agreements, commitments, drafts, communications, discussions, and
understandings, oral or written, with respect thereto. The terms and conditions
of this Agreement shall not in any way limit or affect the obligations or
liabilities of the Borrower under the Note. 

                          (b)       
Amendments and Waivers. No amendment to any provision of this Agreement
shall in any event be effective unless the same shall be in writing and signed
by each party hereto; and no waiver of any provision of this Agreement, or
consent to any departure by any Subordinated Creditor or the Borrower therefrom,
shall in any event be effective unless the same shall be in writing and signed
by the Senior Creditors. Any such amendment, waiver, or consent shall be
effective only in the specific instance and for the specific purpose for which
given. 

                          SECTION
12 Counterparts; Telefacsimile Execution. This Agreement may be executed
in any number of counterparts and by different parties on separate counterparts,
each of which, when executed and delivered, shall be deemed to be an original,
and all of which, when taken together, shall constitute but one and the same
Agreement. Delivery of an executed counterpart of this Agreement by
telefacsimile or other electronic method of transmission shall be equally as
effective as delivery of an original executed counterpart of this Agreement. Any
party delivering an executed counterpart of this Agreement by telefacsimile or
other electronic method of transmission also shall deliver an original executed
counterpart of this Agreement but the failure to deliver an original executed
counterpart shall not affect the validity, enforceability, and binding effect of
this Agreement.

4 




                          SECTION
13 Termination Of Agreement. Upon payment and performance in full of the
Senior Debt, this Agreement shall terminate and the Senior Creditors shall
promptly execute and deliver, at the expense of the Borrower, to each
Subordinated Creditor such documents and instruments as shall be reasonably
necessary to evidence such termination. 

[Signature page follows.] 

5 




                          IN
WITNESS WHEREOF, the undersigned have executed and delivered this Agreement as
of the date first written above.

CLAY FAMILY 2009 IRREVOCABLE TRUST,
DATED APRIL 14, 2009, 
as Subordinated Creditor 

	 	By: 	 
    
	 	 	Name: Thomas M. Clay 
	 	 	Title:   Trustee 
	 	 	  
	 	 	 
	 	By: 	 
    
	 	 	Name: Harris Clay 
	 	 	Title:    Trustee



 

HARRIS CLAY, 
as
Subordinated Creditor 

	 	By: 	 
    
	 	 	Name: Harris Clay 


 

GOLDEN QUEEN MINING CO. LTD.,

as Subordinated Creditor 

	 	By: 	 
    
	 	 	Name: H. Lutz Klingmann 
	 	 	Title:   President and Chief
      Executive Officer 


 

 

[GQ CALIFORNIA SUBORDINATION AGREEMENT] 




GOLDEN QUEEN MINING COMPANY,
INC., 
as Borrower

	 	By:	 
	 	 	Name: H. Lutz Klingmann 
	 	 	Title:   President
  


 

GOLDEN QUEEN MINING CO. LTD.,

as Guarantor 

	 	By:	  
	 	 	Name: H. Lutz Klingmann 
	 	 	Title:   President and
      Chief Executive Officer 


 

 

 

 

[GQ CALIFORNIA SUBORDINATION AGREEMENT] 




LEUCADIA NATIONAL CORPORATION,

as Senior Creditor

	 	By:	 
	 	 	Name: Joseph A. Orlando 
	 	 	Title:   Chief
      Financial Officer 


 

AUVERGNE, LLC, 
as Senior
Creditor 

	 	By:	  
	 	 	Name: Thomas M. Clay 
	 	 	Title:   Manager
  


 

 

 

[GQ CALIFORNIA SUBORDINATION AGREEMENT]