Document:

Unassociated Document

 

Exhibit 10.1

FORM OF

SUBSCRIPTION AGREEMENT

 

This Subscription Agreement (this “Agreement”), dated as of the date indicated on the signature page, is by and among the subscriber or subscribers set forth on the signature page (collectively, the “Subscriber”) and Pershing Gold Corporation, a Nevada corporation (the “Company”).

 

WHEREAS, the Company desires to issue and sell to the Subscriber, and the Subscriber desires to purchase from the Company, the number of shares indicated on the signature page (the “Shares”) of the Company’s common stock, par value $0.0001 per share (the “Common Stock”) and three-year warrants exercisable for Common Stock at $0.50 per share of Common Stock in an amount equal to 40% of the number of Shares subscribed under this Agreement (the “Subscription Warrants”) (together with the Shares, the “Securities”), for an aggregate cash purchase price of $0.33 for each Share and Subscription Warrant as indicated on the signature page (the “Purchase Price”) subject to the terms and conditions described herein (the “Offering”).

 

NOW THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein contained, and intending to be legally bound hereby, the parties agree as follows:

 

ARTICLE I

DEFINITIONS

 

Section 1.1                      Certain Defined Terms.  For purposes of this Agreement:

 

“Account Agreement” means the Account agreement between the Company and the Subscriber.

 

 “Business Day” means any day that is not a Saturday, a Sunday or other day on which banks are required or authorized by Law to be closed in Denver, Colorado.

 

“Company Group” means the Company and its Subsidiaries.

 

 “GAAP” means generally accepted accounting principles, as in effect in the United States of America from time to time.

 

“Law” means any statute, law, ordinance, regulation, rule, code, injunction, judgment, decree or order of any United States federal, state or local governmental, regulatory or administrative authority, agency or commission or any judicial or arbitral body.

 

“Material Adverse Effect” means (i) with respect to the Company, any event, change, occurrence or effect that (A) would have a material adverse effect on the business, financial condition, prospects or results of operations of the Company Group, taken as a whole or (B) would prevent, materially delay or materially impede the performance by the Company of its obligations under this Agreement or the consummation of the transactions contemplated hereby, and (ii) with respect to a Subscriber, any event, change, occurrence or effect that would prevent, materially delay or materially impede the performance by such Subscriber of its obligations under this Agreement or the consummation of the transactions contemplated hereby.

 

  

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“OTCQB” means the OTC Markets’ OTCQB quotation service.

 

“Person” means any individual, corporation, limited liability company, limited or general partnership, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof.

 

“SEC” means the United States Securities and Exchange Commission.

 

“Securities Act” means the Securities Act of 1933, as amended.

 

“Subsidiary” means, with respect to the Company, any other Person of which at least 50% of the outstanding voting securities or other voting equity interests are owned, directly or indirectly, by the Company.

 

“Warrant Agreement” means the Warrant Agreement between the Subscribers and the Company in the form attached hereto as Exhibit C.

 

ARTICLE II

PURCHASE AND SALE

 

Section 2.1                      Purchase and Sale of the Securities.

 

(a)           The closing date of the transaction contemplated hereby shall be November 30, 2012, or as promptly thereafter as practicable after completion of due diligence and negotiation of the definitive documentation (the “Closing”).

 

(b)           Upon the terms and subject to the conditions of this Agreement, at the Closing the Company agrees to issue and sell to the Subscriber, and the Subscriber agrees to purchase from the Company, Securities for an aggregate cash Purchase Price equal to the purchase price set forth on the signature page hereto, which Purchase Price is payable as described in Section 2.1(c).

 

(c)           It is understood and agreed that the Company shall have the sole right, at its complete discretion, to accept or reject this subscription, in whole or in part, for any reason. Subscriptions need not be accepted in the order received, and the Securities may be allocated among subscribers. Notwithstanding anything in this Agreement to the contrary, the Company shall have no obligation to issue any of the Securities to any person who is a resident of a jurisdiction in which the issuance of Securities to such person would constitute a violation of the securities, “blue sky” or other similar laws of such jurisdiction.

 

(d)           Payment for the Securities shall be received by the Company from the Subscriber by means approved by the Company at or prior to the Closing, in the amount as set forth on the signature page hereto. The Company shall deliver certificates representing the Securities to the Subscriber at the Closing bearing an appropriate legend referring to the fact that the Securities were sold in reliance upon an exemption from registration under the Securities Act.

 

  

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Section 2.2                      Closing.

 

(a)           The sale and purchase of the Shares shall take place at a closing to be held at the offices of Davis Graham & Stubbs LLP, 1550 Seventeenth St., Suite 500, Denver, Colorado, at 10:00 a.m., Mountain Time, on the closing date specified on the signature page, or at such other place or at such other time or on such other date as the Company and the Subscriber mutually may agree in writing.  The day on which the Closing takes place is referred to as the “Closing Date.”

 

(b)           At the Closing, (i) the Subscriber shall deliver to the Company, by wire transfer to a bank account or other account designated in writing by the Company to the Subscriber at least one Business Day prior to the Closing Date, the applicable Purchase Price in immediately available funds and (ii) the Company shall deliver to the Subscriber a certificate representing the Securities issued in the name of the applicable Subscriber as it is set forth on the signature page and such other documents as are set forth in Section 6.2 below.

 

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

The Company hereby represents and warrants to the Subscriber as follows, as of the date of this Agreement and as of the Closing Date that:

 

Section 3.1                      Organization and Qualification.

 

(a)           The Company is a corporation duly organized, validly existing and in good standing under the laws of the state of Nevada.  The Company is duly qualified to do business and is in good standing in the states required due to (a) the ownership or lease of real or personal property for use in the operation of the Company’s business or (b) the nature of the business conducted by the Company.  The Company has all requisite power, right and authority to own, operate and lease its properties and assets, to carry on its business as now conducted, to execute, deliver and perform its obligations under this Agreement, and to carry out the transactions contemplated hereby and thereby.

 

(b)           The Company has heretofore made available to the Subscribers a complete and correct copy of its articles of incorporation, together with all certificates of designations thereto (the “Articles of Incorporation”), and bylaws (the “Bylaws,” and together with the Articles of Incorporation, the “Organizational Documents”), each as amended to the date hereof.  Such Organizational Documents are in full force and effect.

 

Section 3.2                      Share Issuance.  The Shares to be issued to the Subscribers pursuant to this Agreement, when issued and delivered in accordance with the terms of this Agreement (or in the case of Subscription Warrants, when issued and delivered in accordance with the terms of the Warrant Agreement), will be free and clear of all liens and other encumbrances, duly and validly issued and will be fully paid and non-assessable and free from preemptive rights.

 

  

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Section 3.3                      Authority; No Conflict; Required Consents and Filings.

 

(a)           The Company has the corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby.  All actions on the part of the Company and its officers and directors necessary for the authorization, execution, delivery and performance of this Agreement, the consummation of the transactions contemplated hereby, and the performance of all of the Company’s obligations under this Agreement have been taken or will be taken prior to the Closing.  This Agreement has been duly executed and delivered by the Company, and this Agreement is a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except (i) as may be limited by bankruptcy, reorganization, insolvency, moratorium and similar laws of general application relating to or affecting the enforcement of rights of creditors and (ii) as enforceability of the obligations hereunder are subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or law).

 

(b)           The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby will not (i) constitute a violation (with or without the giving of notice or lapse of time, or both) in any material respect of any provision of any Law applicable to the Company Group, (ii) require any consent, approval or authorization of, or declaration, filing or registration with, any Person, other than any filings required to be made with the SEC or the OTCQB, (iii) result in a default (with or without the giving of notice or lapse of time, or both) under, acceleration or termination of, or the creation in any party of the right to accelerate, terminate, modify or cancel, any material agreement, lease, note or other restriction, encumbrance, obligation or liability to which the Company Group is a party or by which it is bound or to which any assets of the Company Group are subject, (iv) result in the creation of any lien or encumbrance upon the assets of the Company Group, or upon any Shares or other securities of the Company Group, (v) conflict with or result in a breach of or constitute a default under any provision of the Organizational Documents, or (vi) invalidate or adversely affect any permit, license or authorization used in the conduct of the business of the Company Group, except which in any case of (i) through (vi), would not, individually or in the aggregate have a Material Adverse Effect.

 

Section 3.4                      Capitalization; Subsidiaries.

 

(a)           The capitalization of the Company as of September 30, 2012  is set forth on Exhibit A to this Agreement.  All issued and outstanding shares of the Company’s capital stock are validly issued, fully paid and nonassessable and free of preemptive rights.

 

(b)           Except as set forth on Exhibit A, (i) there are not outstanding, authorized or designated any (A) shares of capital stock or other voting securities of the Company, (B) securities of the Company convertible into or exchangeable for shares of capital stock or voting securities of the Company or (C) options or other rights to acquire from the Company, and no obligation of the Company to issue, any capital stock, voting securities or securities convertible into or exchangeable for capital stock or voting securities of the Company, (ii) there are no outstanding obligations of the Company to repurchase, redeem or otherwise acquire any capital stock, voting securities or securities convertible into or exchangeable for capital stock or voting securities of the Company and (iii) there are no other options, calls, warrants or other rights, agreements, arrangements or commitments of any character relating to the issued or unissued capital stock of the Company or any of its Subsidiaries to which the Company or any of its Subsidiaries is a party.

 

  

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(c)           Except as set forth in the SEC Reports (as defined in Section 3.7 below) and as otherwise required by Law, there are no restrictions upon the voting or transfer of any of the shares of capital stock of the Company pursuant to the Articles of Incorporation, Bylaws or other governing documents or any agreement or other instruments to which the Company is a party or by which the Company is bound.

 

(d)           Exhibit B sets forth a complete list of all of the Subsidiaries, together with their respective jurisdictions of organization, authorized capital stock (to the extent applicable), outstanding equity interests and record ownership thereof.  Except for its Subsidiaries and as otherwise set forth in Exhibit B, the Company does not own or hold, beneficially or of record, any equity or other security of any other Person.

 

Section 3.5                      Financial Statements; No Undisclosed Liabilities.

 

(a)           The audited consolidated balance sheet of the Company and its Subsidiaries as of December 31, 2011 and 2010, and the related audited consolidated statements of operations, changes in stockholders’ deficit and cash flows for the year ended December 31, 2011, together with all related notes and schedules thereto, accompanied by the reports thereon of the Company’s independent auditors (collectively referred to as the “Financial Statements”) and the unaudited condensed consolidated balance sheets of the Company and its Subsidiaries as at March 31, June 30 and September 30, 2012 (each, a “Balance Sheet”), and the related condensed consolidated statements of operations and cash flows of the Company and its Subsidiaries, together with all related notes and schedules thereto (collectively referred to as the “Interim Financial Statements”), have been filed on the SEC’s EDGAR system.  Each of the Financial Statements and the Interim Financial Statements (i) has been prepared based on the books and records of the Company and its Subsidiaries (except as may be indicated in the notes thereto), (ii) has been prepared in accordance with GAAP applied on a consistent basis throughout the periods indicated (except as may be indicated in the notes thereto) and (iii) fairly presents, in all material respects, the consolidated financial position, results of operations and cash flows of the Company and its Subsidiaries as at the respective dates thereof and for the respective periods indicated therein, except as otherwise noted therein and subject, in the case of the Interim Financial Statements, to normal and recurring year-end adjustments and the absence of notes that will not, individually or in the aggregate, be material.

 

(b)           There are no debts, liabilities or obligations, whether accrued or fixed, absolute or contingent, matured or unmatured or determined or determinable, of the Company or any of its Subsidiaries of a nature required to be reflected on a balance sheet prepared in accordance with GAAP, other than any such debts, liabilities or obligations (i) reflected or reserved against on the Interim Financial Statements, the Financial Statements or the notes thereto, (ii) incurred since the date of the Balance Sheet in the ordinary course of business of the Company and its Subsidiaries, or (iii) that are not, individually or in the aggregate, material to the Company.

 

  

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Section 3.6                      Absence of Certain Changes or Events.  Since the date of the September 30, 2012 Balance Sheet, there has not occurred any Material Adverse Effect with respect to the Company.

 

Section 3.7                      SEC Reports.

 

(a)           The Company has filed all reports required to be filed by it under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), including pursuant to Section 13(a) or 15(d) thereof, for the 12 months preceding the date hereof (the foregoing materials (together with any materials filed by the Company under the Exchange Act, whether or not required), collectively referred to herein as the “SEC Reports”).  No event or circumstance has occurred within the four Business Days prior to the date of this Agreement that requires the filing of a Form 8-K, except such as have already been reported pursuant to Form 8-K.

 

(b)           As of their respective dates, the SEC Reports complied in all material respects with the requirements of the Securities Act and the Exchange Act and the rules and regulations of the Commission promulgated thereunder, and none of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.

 

Section 3.8                      Private Placement.  Assuming the accuracy of the Subscribers’ representations and warranties set forth in Section 4, no registration under the Securities Act is required for the offer and sale of the Securities by the Company to the Subscribers as contemplated hereby.

 

Section 3.9                      Investment Company.  Based solely on review of the Company’s balance sheet for the year ended December 31, 2011, as set forth in the Company’s Annual Report on Form 10-K, the Company is not and immediately after receipt of payment for the Shares will not be an “investment company” within the meaning of the Investment Company Act of 1940, as amended.  The Company shall conduct its business in a manner so that it will not become subject to the Investment Company Act.

 

Section 3.10                      Projections.  Any estimates or forward-looking statements or projections furnished by the Company to the Subscribers were prepared by the management of the Company in good faith.

 

Section 3.11                      Use of Proceeds.   The Company intends to use the net proceeds from the Offering for general corporate purposes.

 

Section 3.12                      Market Manipulation.   Neither the Company nor its affiliates have taken, or will take, directly or indirectly, any action designed to, or that might reasonably be expected to, cause or result in stabilization or manipulation of the price of the Common Stock to facilitate the sale or resale of the Shares or affect the price at which the Shares may be issued or resold.

 

Section 3.13                      Listing.  The Common Stock is quoted on the OTC Markets’ OTCQB under the symbol “PGLC” and satisfies all the requirements for the continued quotation of its Common Stock on the OTCQB.  The Company has not received any oral or written notice that its Common Stock is ineligible or will become ineligible for quotation on the OTCQB or that its Common Stock does not meet all requirements for the continuation of such quotation.

 

  

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ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE SUBSCRIBER

 

Each Subscriber, severally as to itself only and not jointly as to or with anyone else, hereby represents and warrants to the Company as follows:

 

Section 4.1                      Authority and Enforceability.  The Subscriber has full power and authority to enter into this Agreement, the execution and delivery of which has been duly authorized and this Agreement constitutes a valid and legally binding obligation of the Subscriber, except as may be limited by bankruptcy, reorganization, insolvency, moratorium and similar laws of general application relating to or affecting the enforcement of rights of creditors, and except as enforceability of the obligations hereunder are subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or law).  The Subscriber is a resident of the state set forth on the signature page hereto and is not acquiring the Securities as a nominee or agent or otherwise for any other person.

 

Section 4.2                      Private Placement.  The Subscriber acknowledges its understanding that the Offering and sale of the Securities is intended to be exempt from registration under the Securities Act, by virtue of Section 4(2) of the Securities Act and the applicable provisions of Regulation D promulgated thereunder (“Regulation D”) and that the Company is relying on the Subscriber’s representations and warranties in connection with the Regulation D exemption.  In furtherance thereof, the Subscriber represents and warrants to the Company and its affiliates as follows:

 

(a)           The Subscriber is an “accredited investor” as defined in Rule 501(a) of Regulation D promulgated under the Securities Act.

 

(b)           The Subscriber realizes that the basis for exemption would not be available if the Offering was part of a plan or scheme to evade registration provisions of the Securities Act or any applicable state or federal securities laws.

 

(c)           The Subscriber is acquiring the Shares solely for the Subscriber’s own beneficial account, for investment purposes, and not with a view towards, or resale in connection with, any distribution of the Shares.

 

(d)           The Subscriber has the financial ability to bear the economic risk of the Subscriber’s investment, has adequate means for providing for its current needs and contingencies, and has no need for liquidity with respect to an investment in the Company.

 

(e)           The Subscriber understands and accepts that the purchase of the Securities is highly risky. The Subscriber represents that it is able to bear any loss associated with an investment in the Securities.

 

  

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(f)           The Subscriber has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of an investment in the Shares.

 

(g)           The Subscriber has had a reasonable opportunity to ask questions of and receive answers from a person or persons acting on behalf of the Company concerning the Offering and the business, financial condition, results of operations and prospects of the Company.  The Subscriber has had access to such information concerning the Company and the Shares as it deems necessary to make an informed investment decision concerning the purchase of the Shares.

 

(h)           The Subscriber is unaware of, and is in no way relying on, any form of general solicitation or general advertising, including, without limitation, any article, notice, advertisement or other communication published in any newspaper, magazine or similar media or broadcast over television or radio, or electronic mail over the internet, in connection with the Offering and is not subscribing for Shares and did not become aware of the Offering through or as a result of any seminar or meeting to which the Subscriber was invited by, or any solicitation of a subscription by, a person not previously known to the Subscriber in connection with investments in securities generally.

 

(i)           The Subscriber represents that it is not relying on (and will not at any time rely on) any communication (written or oral) of the Company, as investment advice or as a recommendation to purchase the Securities, it being understood that information and explanations related to the terms and conditions of the Securities shall not be considered investment advice or a recommendation to purchase the Securities.

 

(j)           The Subscriber confirms that the Company has not (A) given any guarantee or representation as to the potential success, return, effect or benefit (either legal, regulatory, tax, financial, accounting or otherwise) an of investment in the Securities or (B) made any representation to the Subscriber regarding the legality of an investment in the Securities under applicable legal investment or similar laws or regulations. In deciding to purchase the Securities, the Subscriber is not relying on the advice or recommendations of the Company and the Subscriber has made its own independent decision that the investment in the Securities is suitable and appropriate for the Subscriber.

 

(k)           The Subscriber understands that, unless the Subscriber notifies the Company in writing to the contrary at or before the Closing, each of the Subscriber’s representations and warranties contained in this Agreement will be deemed to have been reaffirmed and confirmed as of the Closing, taking into account all information received by the Subscriber.

 

(l)           The Subscriber acknowledges that the Company has the right in its sole and absolute discretion to abandon this private placement at any time prior to the completion of the Offering. This Agreement shall thereafter have no force or effect and the Company shall return the previously paid subscription price of the Securities, without interest thereon, to the Subscriber.

 

  

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(m)           The Subscriber understands that no federal or state agency has passed upon the merits or risks of an investment in the Securities or made any finding or determination concerning the fairness or advisability of this investment.

 

Section 4.3                      Transfer Restrictions.  The Subscriber will not sell or otherwise transfer any Securities without registration under the Securities Act or an exemption therefrom, and fully understands and agrees that the Subscriber must bear the economic risk of its purchase because, among other reasons, the Securities have not been registered under the Securities Act or under the securities laws of any state and, therefore, cannot be resold, pledged, assigned or otherwise disposed of unless they are subsequently registered under the Securities Act and under the applicable securities laws of such states, or an exemption from such registration is available.  In particular, the Subscriber is aware that the Securities are “restricted securities,” as such term is defined in Rule 144 promulgated under the Securities Act (“Rule 144”), and they may not be sold pursuant to Rule 144 unless all of the conditions of Rule 144 are met.  The Subscriber also understands that the Company is under no obligation to register the Securities on behalf of the Subscriber or to assist the Subscriber in complying with any exemption from registration under the Securities Act or applicable state securities laws.  The Subscriber understands that any sales or transfers of the Securities are further restricted by state securities laws and the provisions of this Agreement.  The Subscriber understands that, subject to the Subscriber’s rights set forth herein and the Warrant Agreement, the Company may establish procedures for approval of transfers, including transfers sought to be permitted under Rule 144, which may result in delays in desired sales or transfers by Subscriber.

 

Section 4.4                      Legends.

 

(a)           The Subscriber understands and agrees that the certificates for the Shares shall bear substantially the following legend (the “Restrictive Legend”) until the Restrictive Legend may be removed pursuant to Section 4.4(c):

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY APPLICABLE STATE SECURITIES LAWS.  SUCH SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT PURPOSES AND MAY NOT BE OFFERED FOR SALE, SOLD, DELIVERED AFTER SALE, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FILED BY THE ISSUER WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION COVERING SUCH SECURITIES UNDER THE SECURITIES ACT OR AN EXEMPTION FROM REGISTRATION.

 

(b)           The Company may not make any notation on its records or give instructions to the transfer agent that enlarge the restrictions on transfer of the Shares set forth in Section 4.4(a) without the consent of the holder thereof.

 

  

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(c)           The Company will remove the Restrictive Legend and issue a certificate representing the Shares without such Restrictive Legend if (i) such Shares are registered for resale under the Securities Act, (ii) such Shares are re-sold or transferred pursuant to Rule 144 (assuming the transferor or transferee is not an affiliate (as defined in Rule 144) of the Company), (iii) such Shares are eligible for resale under Rule 144 without regard to the volume, notice, manner of sale or current public information requirements of Rule 144, or (iv) such Shares may be re-sold pursuant to Regulation S.

 

(d)           In furtherance of the obligations set forth in Section 4.4(c), at any time as the Restrictive Legend is no longer required for Shares, the holder of Shares bearing the Restrictive Legend may request that the Restrictive Legend be removed.  After such request has been made, the Company will, within five Business Days following delivery of the certificate representing such Shares (endorsed or with stock powers attached, signatures guaranteed, and otherwise in form necessary to effect the reissuance and/or transfer), deliver or cause to be delivered to the requesting holder a certificate representing such Shares that is free from all restrictive and other legends.

(e)           Legend and transfer restrictions on the Subscription Warrants and shares of Common Stock issuable upon exercise of the Subscription Warrants are set forth in Section 2 of the Warrant Agreement.

 

ARTICLE V

COVENANTS

 

Section 5.1                      Standstill.  For a period of two years after the Closing Date, without prior consent of the Board of Directors of the Company, the Subscriber shall not, directly or indirectly through any affiliate, acquire or offer to acquire or agree to acquire from any Person, directly or directly, by purchase or merger, through the acquisition of control of another Person or by joining a partnership, limited partnership or other group (within the meaning of Section 13(d)(3) of the Exchange Act), shares of Common Stock that would cause the Subscriber’s aggregate beneficial ownership of Common Stock to exceed 5% of the issued and outstanding Common Stock of the Company.

 

Section 5.2                      Furnishing Information.  As long as a Subscriber owns Shares, the Company covenants to timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the Closing Date pursuant to the Exchange Act.  As long as a Subscriber owns Shares, if the Company is not required to file reports pursuant to the Exchange Act, it will prepare and furnish to such Subscriber and make publicly available in accordance with Rule 144(c) under the Securities Act such information as is or would be required for such Subscriber to sell the Shares under Rule 144.  The Company further covenants that it will take such further action as such Subscriber may reasonably request, all to the extent required from time to time to enable such person to sell such Shares without registration under the Securities Act within the limitation of the exemptions proved by Rule 144 under the Securities Act.

 

Section 5.3                      Disclosure and Publicity.  The Subscriber shall consult with the Company before issuing any press releases with respect to the transactions contemplated hereby.  The Company shall have the right to approve (such approval to be timely and not unreasonably withheld) any press releases, SEC filings or other regulatory filings to the extent they refer to the Company or the transactions contemplated hereby.

 

  

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Section 5.4                      Further Assurances.  Each of the parties shall use all commercially reasonable efforts to take, or cause to be taken, all appropriate action to do, or cause to be done, all things necessary, proper or advisable to consummate and make effective the transactions contemplated by this Agreement and the Warrant Agreement as promptly as practicable.

 

ARTICLE VI

CONDITIONS TO CLOSING

 

Section 6.1                      Conditions to Obligations of the Company.  The obligations of the Company to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment, at or prior to the Closing, of each of the following conditions, any of which may be waived in writing by the Company in its sole discretion:

 

(a)           As of the Closing, no legal action, suit or proceeding shall be pending that seeks to restrain or prohibit the transactions contemplated by this Agreement.

 

(b)           The representations and warranties of the Subscribers contained in this Agreement shall be true and correct in all material respects both when made and as of the Closing Date, or in the case of representations and warranties that are made as of a specified date, such representations and warranties shall be true and correct to the extent set forth above, as of such specified date.  The Subscribers shall have performed in all material respects all obligations and agreements and complied in all material respects with all covenants and conditions required by this Agreement to be performed or complied with by them prior to or at the Closing.

 

(c)           The Subscribers have delivered to the Company all required documentation including an executed Warrant Agreement and Account Agreement.

 

Section 6.2                      Conditions to Obligations of the Subscribers.  Each Subscriber’s obligations to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment, at or prior to the Closing, of each of the following conditions, any of which may be waived in writing by the applicable Subscriber in its sole discretion:

 

(a)           As of the Closing, no legal action, suit or proceeding shall be pending that seeks to restrain or prohibit the transactions contemplated by this Agreement.

 

(b)           The representations and warranties of the Company contained in this Agreement or any certificate delivered pursuant hereto shall be true and correct in all material respects both when made and as of the Closing Date or, in the case of representations and warranties that are made as of a specified date, such representations and warranties shall be true and correct to the extent set forth above, as of such specified date.  The Company shall have performed in all material respects all obligations and agreements and complied in all material respects with all covenants and conditions required by this Agreement to be performed or complied with by it prior to or at the Closing.

 

(c)           The Subscriber shall have received a legal opinion from Davis, Graham & Stubbs LLP to the effect set forth in Exhibit D hereto.

 

  

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(d)           The Subscribers shall have received a secretary’s certificate duly executed by the corporate secretary of the Company attaching copies of the Organizational Documents and the resolutions of the Board of Directors of the Company approving this Agreement and the transactions contemplated hereby.

 

(e)           The Subscribers shall have received a certificate of good standing regarding the Company from the Secretary of State of the State of Nevada, dated within seven Business Days of the Closing Date.

 

(f)           Since the date of this Agreement, there shall not have occurred any Material Adverse Effect with respect to the Company.

 

(g)           The Company shall have executed and delivered to the Subscribers an executed counterpart of the Warrant Agreement and Account Agreement.

 

ARTICLE VII

TERMINATION

 

Section 7.1                      Termination.

 

(a)           This Agreement may be terminated at any time prior to the Closing:

 

(i)           by mutual written consent of the Subscriber and the Company;

 

(ii)           by the Company, if a Subscriber breaches or fails to perform in any respect any of its representations, warranties or covenants contained in this Agreement and such breach or failure to perform (i) would give rise to the failure of a condition set forth in Section 6.1, (ii) cannot be or has not been cured within 15 days following delivery of written notice of such breach or failure to perform and (iii) has not been waived by the Company;

 

(iii)           by the Subscriber, if the Company breaches or fails to perform in any respect any of its representations, warranties or covenants contained in this Agreement and such breach or failure to perform (i) would give rise to the failure of a condition set forth in Section 6.2, (ii) cannot be or has not been cured within 15 days following delivery of written notice of such breach or failure to perform and (iii) has not been waived by the Subscribers;

 

(iv)           by the Company or the Subscriber if the Closing shall not have been consummated on or before December 7, 2012; provided, that the right to terminate this Agreement under this Section 7.1(a)(iv) shall not be available if the failure of the party so requesting termination to fulfill any obligation under this Agreement shall have been the cause of the failure of the Closing to be consummated on or prior to such date; or

 

(v)           by the Company or the Subscriber if, as of the Closing, any legal action, suit or proceeding shall be pending that seeks to restrain or prohibit the transactions contemplated by this Agreement.

 

  

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(b)           The party seeking to terminate this Agreement pursuant to this Section 7.1 shall give prompt written notice of such termination to the other party.

 

Section 7.2                      Effect of Termination.  In the event of termination of this Agreement as provided in Section 7.1, this Agreement shall forthwith become void and there shall be no liability on the part of any party except that (a) the provisions of Article VIII (other than Sections 8.1 and 8.2) and this Section 7.2 shall remain in effect and (b) nothing herein shall relieve any party from liability for any breach of this Agreement prior to such termination.

 

ARTICLE VIII

INDEMNITY; GENERAL PROVISIONS

 

Section 8.1                      Survival.  The representations, warranties and agreement of the Subscriber and the Company made in this Agreement shall survive the execution and delivery of this Agreement and the delivery of the Shares.

 

Section 8.2                      Indemnification.  The Company will indemnify and hold harmless the Subscriber and, where applicable, its directors, officers, employees, agents, advisors, affiliates and shareholders, and each other person, if any, who controls any of the foregoing from and against any and all loss, liability, claim, damage and expense whatsoever (including, but not limited to, reasonable fees of legal counsel and any and all fees, costs and expenses whatsoever reasonably incurred in investigating, preparing or defending against any claim, lawsuit, administrative proceeding or investigation whether commenced or threatened) arising out of or based upon any representation or warranty of the Company contained herein or in any document furnished by the Company to a Subscriber in connection herewith being untrue in any material respect or any breach or failure by the Company to comply with any covenant or agreement made by the Company to a Subscriber in connection therewith; provided, however, that the Company’s liability shall not exceed the Purchase Price tendered hereunder; provided further, that the Company shall not be liable to a Subscriber for any consequential, punitive or similar damages.

 

Section 8.3                      Fees and Expenses.  Each of the parties hereto shall be responsible to pay the costs and expenses of its own legal counsel in connection with the preparation and review of this Agreement and related documentation.

 

Section 8.4                      Amendment and Modification.  Neither this Agreement, nor any provisions hereof, shall be waived, amended, modified, discharged or terminated except by an instrument in writing signed by the party against whom any waiver, amendment, modification, discharge or termination is sought.

 

Section 8.5                      Notices.  All notices and other communications hereunder shall be in writing and shall be deemed duly given (a) on the date of delivery if delivered personally, or if by facsimile or email, upon written confirmation of receipt by facsimile, e-mail or otherwise, (b) on the first Business Day following the date of dispatch if delivered utilizing a next-day service by a recognized next-day courier or (c) on the earlier of confirmed receipt or the fifth Business Day following the date of mailing if delivered by registered or certified mail, return receipt requested, postage prepaid.  All notices hereunder shall be delivered to the addresses set forth below, or pursuant to such other instructions as may be designated in writing by the party to receive such notice:

 

  

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(i)           if to the Company, to:

 

Pershing Gold Corporation

1658 Cole Boulevard

Building 6, Suite 210

Lakewood, CO  80401

Attention:  Stephen Alfers

Email:  SAlfers@pershinggold.com

Facsimile:  720-974-7249

 

with a copy (which shall not constitute notice) to:

 

Davis Graham & Stubbs LLP

1550 17th Street, Suite 500

Denver, Colorado 80202

Attention:  Deborah J. Friedman

Email:  Deborah.friedman@dgslaw.com

Facsimile:  303-893-1379

 

(ii)           if to Subscriber to the address, email and facsimile number(s), and with such copies as, indicated on the signature page.

 

Section 8.6                      Assignment; Successors.  Neither this Agreement nor any of the rights, interests or obligations under this Agreement may be assigned or delegated, in whole or in part, by operation of law or otherwise, by any party without the prior written consent of the other parties, and any such assignment without such prior written consent shall be null and void.  Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of, and be enforceable by, the parties and their respective successors and assigns.

 

Section 8.7                      Governing Law.  This Agreement and all disputes or controversies arising out of or relating to this Agreement or the transactions contemplated hereby shall be governed by, and construed in accordance with, the internal laws of the State of New York, without regard to the laws of any other jurisdiction that might be applied because of the conflicts of laws principles of the State of New York.

 

  

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Section 8.8                      Submission to Jurisdiction.  Each of the parties irrevocably agrees that any legal action or proceeding arising out of or relating to this Agreement brought by the other party or its successors or assigns shall be brought and determined in any New York State or federal court sitting in The City of New York (or, if such court lacks subject matter jurisdiction, in any appropriate New York State or federal court), and each of the parties hereby irrevocably submits to the exclusive jurisdiction of the aforesaid courts for itself and with respect to its property, generally and unconditionally, with regard to any such action or proceeding arising out of or relating to this Agreement and the transactions contemplated hereby.  Each of the parties agrees not to commence any action, suit or proceeding relating thereto except in the courts described above in New York, other than actions in any court of competent jurisdiction to enforce any judgment, decree or award rendered by any such court in New York as described herein.  Each of the parties further agrees that notice as provided herein shall constitute sufficient service of process and the parties further waive any argument that such service is insufficient.  Each of the parties hereby irrevocably and unconditionally waives, and agrees not to assert, by way of motion or as a defense, counterclaim or otherwise, in any action or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby, (a) any claim that it is not personally subject to the jurisdiction of the courts in New York as described herein for any reason, (b) that it or its property is exempt or immune from jurisdiction of any such court or from any legal process commenced in such courts (whether through service of notice, attachment prior to judgment, attachment in aid of execution of judgment, execution of judgment or otherwise) and (c) that (i) the suit, action or proceeding in any such court is brought in an inconvenient forum, (ii) the venue of such suit, action or proceeding is improper or (iii) this Agreement, or the subject matter hereof, may not be enforced in or by such courts.

 

Section 8.9                      Waiver of Jury Trial.  EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

 

Section 8.10                      Counterparts.  This Agreement may be executed in two or more counterparts, all of which shall be considered one and the same instrument and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties.

 

Section 8.11                      Interpretation.  The headings contained in this Agreement are for convenience of reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.  The word “including” and words of similar import when used in this Agreement will mean “including, without limitation,” unless otherwise specified.

 

Section 8.12                      Entire Agreement.  As between the Company and the Subscriber, this Agreement, the Warrant Agreement, the Account Agreement, and the nondisclosure agreement executed by the Subscriber, constitute the entire agreement, and supersede all prior written agreements, arrangements, communications and understandings and all prior and contemporaneous oral agreements, arrangements, communications and understandings among the parties with respect to the subject matter hereof and thereof.

 

 

[signature page follows]

 

  

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NOTICES

Notices to the Subscriber(s) pursuant to Section 8.5 shall be delivered to:

[Name of Subscriber]

[Address of Subscriber]

Email:

Facsimilie:

With a copy to:

[Name]

[Address]

Email:

Facsimile:

 

PURCHASE PRICE

 

	
Securities to Be Acquired

	
Aggregate Cash Purchase Price to be Paid

	
 

_________ shares of common stock

 

_________ warrants

	
 

US$ ___________

___________________

 

IN WITNESS WHEREOF, the parties hereto have executed this Subscription Agreement as of the _____ day of __________, 2012.

 

 

PERSHING GOLD CORPORATION

 

By:                                                                 

Name: Stephen Alfers

Title: Chief Executive Officer, President and       Chairman

[NAME OF SUBSCRIBER],

[a [State] [corporation/limited liability company]]

[an individual]

 

By:                                                                 

Name: [Name]

Title: [Title]exh10_1.htm

LIMITED GUARANTY

WHEREAS, KEWALO DEVELOPMENT LLC, a Hawaii limited liability company (the “Borrower”), has applied to FIRST HAWAIIAN BANK, WELLS FARGO BANK, N.A., BANK OF HAWAII and CENTRAL PACIFIC BANK (collectively, the “Lender”) for a loan (the “Loan”) in the principal sum of up to ONE HUNDRED TWENTY MILLION AND NO/100 DOLLARS ($120,000,000.00), the proceeds from which will be used to finance the costs of acquiring, developing, designing, constructing, furnishing, marketing and selling a high-rise condominium project to be known as “Waihonua” (the “Project”), all upon the terms and conditions set forth in that certain Loan Agreement to be executed by the Borrower and the Lender in connection with the Loan (the “Loan Agreement”); and

WHEREAS, A & B PROPERTIES, INC., a Hawaii corporation (hereinafter called the “Guarantor”) is the manager of the Borrower, and the  sole member of Waimanu Development LLC, the owner of a 50% membership interest in the Borrower, and deems it to be to its own financial benefit that the Lender make the Loan to the Borrower; and

WHEREAS, the Lender is willing to make the Loan to the Borrower, subject to the condition, among others, that the Guarantor execute and deliver this Limited Guaranty to the Lender; and

WHEREAS, the Guarantor has received, reviewed and approved the Loan Agreement and all of the other “Loan Documents”, as defined in the Loan Agreement;

NOW, THEREFORE, as an essential inducement to the Lender to make the Loan to the Borrower, and as a consideration for its so doing, the Guarantor hereby unconditionally, irrevocably, and absolutely, warrants, represents, covenants and agrees, with the Lender, as follows:

1.           Definitions.  As used herein, the following terms shall have the following meanings:

(a)           “Indebtedness” shall mean (i) all sums due and payable under the Loan, principal, interest, fees and charges; and (ii) any and all other indebtedness or liability of the Borrower, its successors and assigns, to the Lender, under or arising out of the Loan or the Loan Documents, including, as to (i) and (ii) above, any extension, renewal, reduction, compromise, indulgence, variation or modification thereof.

(b)           “Obligations” shall mean each and every agreement, covenant and condition to be observed or performed by the Borrower, its successors and assigns, under the Loan Documents (i) which the Guarantor can cause the Borrower to observe and perform, or (ii) which can be satisfied by the payment of money.

(c)           “Expenses” shall mean all costs and expenses, including, but not limited to, reasonable attorneys’ fees, incurred in connection with the enforcement by the Lender of the rights of the Lender against the Guarantor, or the enforcement by the Lender of the rights of the Lender against the Borrower and the Guarantor jointly, following any default in the due and punctual performance of the Guarantor’s obligations hereunder.

 

(d)           Other Capitalized Terms.  Unless otherwise defined herein, all other capitalized terms used herein shall have the same meanings such terms have in the Loan Agreement.

2.           Indebtedness and Obligations Guaranteed; Payment of Expenses; Lender’s Right to Enforce Limited Guaranty.

(a)           The Guarantor hereby absolutely, irrevocably and unconditionally guarantees the payment of the Indebtedness and the performance of the Obligations; PROVIDED, HOWEVER, that, subject to the provisions of Section 2(c) below, the obligations of the Guarantor hereunder shall not exceed the lesser of (a) $20,000,000.00, or (b) the outstanding Indebtedness.

(b)           In addition to the foregoing, and without reducing the Guarantor’s obligations under Section 2(a) above, the Guarantor will also pay to the Lender, on demand, all of the Expenses.

(c)           Notwithstanding the limitation set forth in Section 2(a) above, the Guarantor will be fully liable for any and all direct loss, liability, cost and reasonable expense incurred by the Lender due to or arising out of (i) misapplication of insurance proceeds, condemnation proceeds, and any tenant security deposits; (ii) any willful act of material waste of the Project or the Reserved Housing Project, and any damage to the Project or the Reserved Housing Project arising from the intentional misconduct or gross negligence of the Borrower or the Guarantor, or any of the Borrower’s or the Guarantor’s principals, officers, directors, agents or employees, and any removal of property in violation of the Loan Documents; (iii) so long as the Borrower (or any affiliate of the Guarantor) has possession and control of the Project or the Reserved Housing Project, failure to pay (or deposit into reserves held by the Lender funds sufficient to pay) taxes or other liens with priority over the Loan Documents; (iv) damages arising from any fraud or material misrepresentation of the Borrower or the Guarantor, or any of the Borrower’s or the Guarantor’s principals, officers, directors, agents or employees; and (v) all obligations and indemnities of the Borrower under the Loan Documents relating to forfeiture laws and hazardous or toxic substances or the failure of Project or the Reserved Housing Project to comply with environmental laws.  For the avoidance of doubt, the phrase “any and all direct loss, liability, cost and reasonable expense incurred by the Lender” as used in the foregoing sentence shall not include the unpaid balance of the Loan.

The Guarantor shall also be fully liable to the Lender for the full amount of the Loan in the event that (i) the Borrower fails to maintain its status as a single purpose entity in accordance with terms of the Loan Agreement; (ii) the Borrower fails to obtain the Lender’s consent to any subordinate financing or other voluntary lien encumbering the Project or the Reserved Housing Project; (iii) the Borrower fails to obtain the Lender’s consent to any assignment, transfer or conveyance of the Project or the Reserved Housing Project (except as provided in the Loan Agreement); or (iv) there is a voluntary bankruptcy of the Borrower, or an involuntary bankruptcy of the Borrower in which the Borrower has colluded with its creditors.

(d)           The Lender shall not have the right to enforce this Limited Guaranty or require the Guarantor to perform its obligations under this Limited Guaranty, unless and until an “Event of Default” under the Loan Agreement has occurred and any applicable grace period therefor has expired, and the Lender has given notice of its intention to accelerate the Loan because of such Event of Default.

 

3.           Unconditional and Absolute Payment Guaranty.  This is an unconditional and absolute guaranty of payment and not merely a guaranty of collection, and if for any reason, any Indebtedness shall not be paid when and as due and payable, or any Obligation shall not be observed or performed when the same is required to be observed or performed. the Guarantor undertakes promptly to pay all such Indebtedness on demand, and to observe and perform, or to cause the appropriate party to observe and perform, each of such Obligations, subject, however, to the limitation contained in Section 2(a) above, and the provisions of Section 2(c) above, regardless of any defense or setoff or counterclaim which the Borrower may have or assert, and regardless of whether or not the Lender, or anyone on behalf of the Lender, shall have instituted any suit, action or proceeding or exhausted its remedies or taken any steps to enforce any rights against the Borrower, any other guarantor, or any other person to collect all or part of any such amounts, or to compel any such performance, either pursuant to the Loan Documents, or at law or in equity, and regardless of any other condition or contingency.  However, nothing contained herein shall prevent the Lender from pursuing any right or remedy it may now have or hereafter acquire against the Borrower or any other party, notwithstanding that the same may in fact destroy any rights that the Guarantor may have against or with respect to, the Borrower or any third party, and the Guarantor agrees that the exercise of any such right or remedy by the Lender shall not constitute a discharge of any of the obligations of the Guarantor under this Limited Guaranty.

4.           Waiver.  Subject to the limitations set forth in Section 2(a) above, and the provisions of Section 2(c) above, the Guarantor hereby unconditionally waives any and all statutory and common law suretyship defenses that now or hereafter may be available to the Guarantor, including, without limitation (a) any requirement that the Lender in the event of any default by the Borrower first make demand upon, or seek to enforce remedies against, the Borrower or any other guarantor or any security or collateral held by the Lender at any time, or to pursue any other remedy in its power, before being entitled to payment from the Guarantor of the amounts payable by the Guarantor hereunder, or before proceeding against the Guarantor; (b) the defense of the statute of limitations in any action hereunder or for the collection of any of the Indebtedness or the performance of any Obligation; (c) any defense that may arise by reason of (i) the incapacity, lack of authority, death or disability of the Borrower, the Guarantor or any other person or entity, (ii) the revocation or repudiation of this Limited Guaranty  by the Guarantor, or the revocation or repudiation of any of the Loan Documents by the Borrower or any other person or entity, (iii) the failure of the Lender to file or enforce a claim against the estate (either in administration, bankruptcy or any other proceeding) of the Borrower or any other person or entity, (iv) the unenforceability in whole or in part of the Loan Documents or any other document, instrument, or agreement referred to therein, or any limitation on the liability of the Borrower thereunder, or any limitation on the method or terms of payment thereunder, which may now or hereafter be caused or imposed in any manner whatsoever, (v) the election by the Lender, in any proceeding instituted under the federal Bankruptcy Code, of the application of Section 1111(b)(2) of the federal Bankruptcy Code, or (vi) any borrowing or grant of a security interest under Section 364 of the federal Bankruptcy Code; (d) diligence, presentment, demand for payment, protest, notice of discharge, notice of acceptance of this Limited Guaranty, and indulgences and notices of any other kind whatsoever; (e) any defense based upon an election of remedies (including, if available, an election to proceed by non-judicial foreclosure) by the Lender which destroys or otherwise impairs any subrogation rights of the Guarantor or the right of the Guarantor to proceed against the Borrower for reimbursement, or both; (f) any defense based upon any taking, modification or release of any collateral or guaranties for the Indebtedness of the Borrower to the Lender, or any failure to perfect any security interest in, or the taking of any other action or the failure to take any other action with respect to any collateral securing payment of the Indebtedness or performance of the Obligations; (g) any rights or defenses based upon an offset by the Guarantor against any obligation now or hereafter owed to the Guarantor by the Borrower; or (h) any right of appraisement with regard to the value of any collateral which the Lender may apply as a credit to the obligations of the Borrower, through foreclosure or otherwise, and agrees that the determination by an independent appraiser appointed by the Lender of the value of such collateral shall be binding upon the Guarantor for all purposes; it being the intention hereof that the Guarantor shall remain fully liable, as principal, until the full payment of the Indebtedness, full performance of the Obligations and termination of the obligations of the Lender under the Loan Documents, notwithstanding any act, omission or thing which might otherwise operate as a legal or equitable discharge of the Guarantor.

5.           No Release of Guaranty.  The obligations, covenants, agreements and duties of the Guarantor under this Limited Guaranty shall not be released, affected, stayed or impaired, except upon the express written consent of the Lender, by (a) any assignment, indorsement or transfer, in whole or in part, of any of the Loan Documents, although made without notice to or the consent of the Guarantor; or (b) any alteration, compromise, modification, acceleration, extension or change to or of the time or manner of payment of any of the Indebtedness, or the performance or observance of any of Obligations; or (c) any increase or reduction in the rate of interest on, or amount of principal payable under, the Loan; or (d) the voluntary or involuntary liquidation, sale or other disposition of all or substantially all of the assets of the Borrower or the Guarantor; or (e) any receivership, insolvency, bankruptcy, reorganization, dissolution or other similar proceedings, affecting the Borrower or the Guarantor or any of their assets; or (f) any release of any property from the lien and security interest created by any of the Loan Documents, the subordination of any such lien or security interest, or the acceptance of additional or substitute property as security under the Loan Documents; or (g) the release or discharge of the Borrower from, or any waiver by the Lender of, the observance or performance of any agreement, covenant, term or condition contained in the Loan Documents, or any failure by the Lender to insist upon the Borrower’s compliance with any such agreement, covenant, term or condition; or (h) the foreclosure of any lien or security interest on any property securing repayment of the Indebtedness, or the acceptance of a deed or assignment of any such property in lieu of foreclosure; or (i) any action which the Lender may take or omit to take by virtue of the Loan Documents or through any course of dealing with the Borrower; or (j) the release of any existing guarantor or the addition of a new guarantor; or (k) any change in the status or structure of the Borrower, including any change by incorporation, merger or consolidation; (l) any change in the composition of the Borrower, including, without limitation, any addition of, removal of, replacement for or substitution of any member of the Borrower; or (m) the operation of law or any other cause, whether similar or dissimilar to the foregoing.

6.           Waiver of Subrogation.  The Guarantor hereby waives, releases, and discharges any claim or right the Guarantor may have to be subrogated to the rights of the Lender following payment of the Indebtedness and performance of the Obligations.  This waiver, release and discharge shall continue even after the Indebtedness has been paid in full, the Obligations have been performed, and the obligations of the Lender under the Loan Documents have terminated.

7.           Subordination of Indebtedness.  Any indebtedness of the Borrower now or hereafter held by the Guarantor is hereby subordinated to the Indebtedness of the Borrower to the Lender; and, upon the request of the Lender,  such indebtedness of the Borrower to the Guarantor shall be collected, enforced and received by the Guarantor as trustee for the Lender and shall be paid over to the Lender on account of the Indebtedness of the Borrower to the Lender subject to the limitations set forth in Section 2(a) above, and the provisions of Section 2(c) above, without reducing or affecting in any manner the liability of the Guarantor under the other provisions of this Limited Guaranty.

8.           Claims in Bankruptcy.  The Guarantor will file all claims against the Borrower in any bankruptcy or other proceeding in which the filing of claims is required or permitted by law upon any indebtedness of the Borrower to the Guarantor or claim against the Borrower by the Guarantor, and the Guarantor hereby assigns to the Lender all rights of the Guarantor thereunder.  If the Guarantor does not file any such claim, the Lender, as attorney-in-fact for the Guarantor, is hereby authorized to do so in the name of the Guarantor or, in the Lender’s discretion, to assign the claim and to cause proof of claim to be filed in the name of the Lender’s nominee.  The Lender or its nominee shall have the sole right to accept or reject any plan proposed in such proceeding and to take any other action which a party filing a claim is entitled to take.  In all such cases, whether in administration, bankruptcy or otherwise, the person or persons authorized to pay such claim shall pay to the Lender the full amount payable on such claim up to the amounts due under this Limited Guaranty, and, to the full extent necessary for that purpose, the Guarantor hereby assigns to the Lender all of the Guarantor’s rights to any such payments or distributions to which the Guarantor would otherwise be entitled; provided, however, that the Guarantor’s obligations hereunder shall not be satisfied except to the extent that the Lender receives cash by reason of any such payment or distribution.  If the Lender receives anything hereunder other than cash, the same shall be held as collateral for the payment of all amounts due under this Limited Guaranty.

9.           Financial Reporting and Financial Covenants.

(a)           The Guarantor hereby agrees, as a material inducement to the Lender to make the Loan to the Borrower, to furnish to the Lender, within ninety (90) days after the close of each fiscal year, its annual (unaudited) financial statement, in form satisfactory to the Lender.  The Lender agrees to observe the confidentiality provisions of Section 11.23 of the Loan Agreement with respect to all of the financial and other information which it receives in connection herewith.

(b)           The Guarantor also agrees to maintain at all times an aggregate “Net Worth”, as defined below, of not less than $500,000,000.00.  As used herein, the term “Net Worth” shall mean the excess of “total assets” over “total liabilities”, as determined in accordance with generally accepted accounting principles.  The Guarantor acknowledges that its agreement to maintain an aggregate Net Worth of not less than $500,000,000.00 is a material consideration for the Lender to make the Loan to the Borrower, and that if the Guarantor fails to maintain an aggregate Net Worth of not less than $500,000,000.00 at any time during the term of the Loan, and fails to correct the deficiency within thirty (30) days after notification thereof from the Lender, then, in such event, the Guarantor will, upon request of the Lender, promptly furnish or make available to the Lender such satisfactory additional security in such manner as the Lender may reasonably request to compensate for such failure.

(c)           The Guarantor will give the Lender prompt notice of any litigation or claim of any kind against the Guarantor which the Guarantor reasonably believes might subject the Guarantor to any liability, claim, or judgment in an amount in excess of $1,000,000.00, whether covered by insurance or not.

10.           Condition of Borrower.  The Guarantor is fully aware of the financial condition of the Borrower and is executing and delivering this Limited Guaranty based solely upon the Guarantor’s own independent investigation of all matters pertinent hereto, and is not relying in any manner upon any representation or statement of the Lender.  The Guarantor represents and warrants that the Guarantor is in a position to obtain and the Guarantor hereby assumes full responsibility for obtaining, any additional information concerning the Borrower’s financial condition and any other matter pertinent hereto as the Guarantor may desire, and the Guarantor is not relying upon or expecting the Lender to furnish to the Guarantor any information now or hereafter in the Lender’s possession concerning the same or any other matter.  By executing this Limited Guaranty, the Guarantor knowingly acknowledges and accepts the full range of risks encompassed within a contract of this type.  The Guarantor shall have no right to require the Lender to obtain or disclose any information with respect to the Loan, the Indebtedness, the Obligations, the financial condition or character of the Borrower, the Borrower’s ability to pay the Indebtedness or perform the Obligations, the Borrower’s ability to develop and market the Project, the existence of any collateral or security for any or all of the Indebtedness or the Obligations, the existence or non-existence of any other guaranties of all or any part of the Indebtedness or the Obligations, or any action or non-action on the part of the Lender, the Borrower, or any other person, or any other matter, fact or occurrence whatsoever.

11.           Representations and Warranties.  The Guarantor makes the following representations and warranties which shall be deemed to be continuing representations and warranties until the full payment of the Indebtedness, the full performance of the Obligations, and the termination of the Lender’s obligations under the Loan Documents:

(a)           Tax Returns and Payments.  All tax returns and reports of the Guarantor required by law to be filed have been duly filed, and all taxes, assessments, contributions, fees and other governmental charges (other than those currently payable without penalty or interest and those currently being contested in good faith) upon the Guarantor or upon the Guarantor’s properties, assets or income which are due and payable have been paid.

(b)           Litigation.  There are no actions, suits or proceedings pending or, to the knowledge of the Guarantor, threatened against or affecting the Guarantor or any of the Guarantor’s properties or assets in any court at law or in equity, or before or by any governmental department, commission, board, bureau, agency or instrumentality, an adverse decision in which might materially affect the Guarantor’s ability to observe and perform the Guarantor’s obligations under this Limited Guaranty.

(c)           Compliance with Other Instruments; None Burdensome.  There is no provision of any mortgage, indenture, contract, agreement or instrument applicable to the Guarantor or by which the Guarantor is bound which materially adversely affects, or in the future (so far as the Guarantor can now reasonably foresee) will materially adversely affect, the Guarantor’s ability to observe and perform the Guarantor’s obligations under this Limited Guaranty, and the Guarantor is not in violation of or in default with respect to any material provision of any such mortgage, indenture, contract, agreement or instrument which violation or default gives rise to a remedy that, if exercised, would materially adversely affect the Guarantor’s ability to observe and perform the Guarantor’s obligations under this Limited Guaranty.

(d)           Financial Statements.  Any financial statements heretofore delivered to the Lender by the Guarantor are true and correct in all material respects, and fairly represent the respective financial conditions of the subjects thereof as of the respective dates thereof; no materially adverse change has occurred in the financial conditions reflected therein since the respective dates thereof.

(e)           Due Execution of Loan Documents.  The execution and delivery of the Loan Documents by the Borrower, and the observance and performance by the Borrower of all of the provisions and conditions thereof, have been duly authorized by the Board of Directors of A & B Properties, Inc., and no other corporate action of A & B Properties, Inc., is required therefor.  In addition, the execution and delivery of this Limited Guaranty by A & B Properties, Inc., have been duly authorized by the Board of Directors of A & B Properties, Inc., and no other corporate action of A & B Properties, Inc. is required therefor.

12.           Bankruptcy.  Until all Indebtedness has been paid to the Lender, all Obligations have been performed, and the obligations of the Lender under the Loan Documents have been terminated, the Guarantor shall not, without the prior written consent of the Lender, commence or join with any other person in commencing any bankruptcy, reorganization or insolvency proceedings of or against the Borrower.  The obligations of the Guarantor under this Limited Guaranty shall not be altered, limited or affected by any proceeding, voluntary or involuntary, involving the bankruptcy, insolvency, receivership, reorganization, liquidation or arrangement of the Borrower or by any defense which the Borrower may have by reason of the order, decree or decision of any court or administrative body resulting from any such proceeding.  The Guarantor acknowledges and agrees that any interest on the Indebtedness which accrues after the commencement of any such proceeding (or, if interest on any portion of the Indebtedness ceases to accrue by operation of law by reason of the commencement of said proceeding, such interest as would have accrued on any such portion of the Indebtedness if said proceeding had not been commenced) shall be included in the Indebtedness, since it is the intention of the parties that the amount of the Indebtedness which is guaranteed by the Guarantor pursuant to this Limited Guaranty  should be determined without regard to any rule of law or order which may relieve the Borrower of any portion of such Indebtedness.  The Guarantor will permit any trustee in bankruptcy, receiver, debtor in possession, assignee for the benefit of creditors or similar person to pay the Lender, or allow the claim of the Lender in respect of, any such interest accruing after the date on which such proceeding is commenced.  If all or any portion of the Indebtedness is paid or all or any part of the Obligations are performed by the Borrower, the obligations of the Guarantor hereunder shall continue and remain in full force and effect in the event that all or any part of such payment or performance is avoided or recovered directly or indirectly from the  Lender as a preference, fraudulent transfer or otherwise in such proceeding.

13.            Remedies Cumulative.  The liability of the Guarantor, and all rights, powers and remedies of the Lender hereunder and under any other agreement now or at any time hereafter in force between the Lender and the Guarantor, relating to the Loan, shall be cumulative and not exclusive or alternative, and such rights, powers and remedies shall be in addition to all other rights, powers and remedies given to the Lender by law.

14.            Amendments; Continuing Liability.  The terms of this Limited Guaranty may not be modified or amended except by a written agreement executed by the Guarantor with the consent in writing of the Lender.  The obligations of the Guarantor under this Limited Guaranty shall be continuing obligations and a separate cause of action shall be deemed to arise in respect of each default hereunder.  The Guarantor will from time to time deliver, upon written request of the Lender, satisfactory acknowledgments of the Guarantor’s continued liability hereunder.

15.           Continued Ownership.  The Guarantor shall at all times retain ownership of one hundred percent (100%) of the membership interests in Waimanu Development LLC, and shall not sell, pledge or otherwise transfer any portion of such interest without the written consent of the Lender. Waimanu Development LLC shall at all times retain ownership of at least fifty percent (50%) of the membership interests in the Borrower, and shall not sell, pledge or otherwise transfer any portion of such interest without the written consent of the Lender.  No transfer or pledge of any such membership interest in Waimanu Development LLC, or the Borrower, with or without the consent of the Lender, shall release, affect or impair the continuing liability and obligation of the Guarantor under this Limited Guaranty.

16.           Notices.  Any notice or demand to be given or served hereunder shall be in writing and personally delivered, or sent by registered or certified mail addressed as follows:

To Lender at:                         999 Bishop Street

Honolulu, Hawaii  96813

Attention:  Commercial Real Estate Division

	
  

	
To Guarantor at:

	
822 Bishop Street

Honolulu, Hawaii  96813

Attention:  Michael G. Wright

Any such address may be changed from time to time by the addressee by serving notice to the other party as above provided.  Service of such notice or demand shall be deemed complete on the date of actual delivery or at the expiration of the second day after the date of mailing if mailed in Hawaii, whichever is earlier.

17.           Parties in Interest.  All covenants, agreements, terms and conditions contained in this Limited Guaranty  shall be binding on the Guarantor and the Guarantor’s successors and assigns, and shall bind, inure to the benefit of and be enforceable by the Lender from time to time.  This Limited Guaranty is assignable by the Lender with respect to all or any portion of the Indebtedness or the Obligations without notice to or consent of the Guarantor, and when so assigned, the Guarantor shall be liable to the assignee as to any such portion, without in any manner affecting the liability of the Guarantor with respect to any of the Indebtedness or Obligations retained by the Lender.

 

18.           Governing Law; Choice of Forum; Service of Process.  This Limited Guaranty shall be construed and interpreted in accordance with and shall be governed by the laws of the State of Hawaii.  The Lender may bring any action or proceeding to enforce this Limited Guaranty, or any action or proceeding arising out of this Limited Guaranty, in the Circuit Court of the First Circuit of the State of Hawaii or the United States District Court for the District of Hawaii.  If the Lender commences such an action in the Circuit Court of the First Circuit of the State of Hawaii, or the United States District Court for the District of Hawaii, the Guarantor hereby agrees that the Guarantor will submit and does hereby irrevocably submit to the personal jurisdiction of such courts; if served by certified mail, postage prepaid, return receipt requested, will acknowledge receipt of a copy of the summons and complaint within the statutory time limit and in the manner set forth on the notice and summons; and will not attempt to have such action dismissed, abated, or transferred on the ground of forum non conveniens or similar grounds; provided, however, that nothing contained herein shall prohibit the Guarantor from seeking, by appropriate motion, to remove an action brought in the Circuit Court of the First Circuit of the State of Hawaii to the United States District Court for the District of Hawaii.  If such action is so removed, however, the Guarantor shall not seek to transfer such action to any other district nor shall the Guarantor seek to transfer to any other district any action which the Lender originally commenced in the United States District Court for the District of Hawaii.  Any action or proceeding brought by the Guarantor arising out of this Limited Guaranty shall be brought solely in the Circuit Court of the First Circuit of the State of Hawaii or in the United States District Court for the District of Hawaii.

19.           Waiver of Jury Trial.  The Guarantor hereby knowingly, voluntarily and intentionally waives any right it may have to a jury trial in any legal proceeding which may be hereinafter instituted by the Lender or the Guarantor to assert any of their respective claims arising out of or relating to this Guaranty or any of the other Loan Documents or any other agreement, instrument or document contemplated thereby.  In such event, the Guarantor, at the request of the Lender, shall cause its attorney of record to effectuate such waiver in compliance with the Hawaii Rules of Civil Procedure, as the same may be amended from time to time.

 

 

20           Compliance with OFAC Restrictions.  The Lender, the Borrower and the Guarantor are obligated to comply with the laws and regulations administered by the United States Office of Foreign Asset Control (“OFAC Restrictions”).  In order to comply with OFAC Restrictions, the Lender may be required to temporarily suspend processing or funding of the Loan, which may result in delayed availability of funds, or may be prohibited from closing the Loan altogether.  The Guarantor agrees to the foregoing, and further agrees that if the Lender is required by applicable OFAC Restrictions to suspend processing or funding of the Loan, or is prohibited by applicable OFAC Restrictions from closing the Loan, the Guarantor will nevertheless continue to perform and will not be relieved from its obligations under this Guaranty, and the Lender will not be liable for any damages of any kind or nature (including, without limitation, actual, consequential, special, incidental, punitive, or indirect damages, whether arising out of claims for “lender liability” or any other cause), which the Borrower or the Guarantor may suffer or incur in connection with any such suspension of, or failure to close, the Loan.

21.           Paragraph Headings.  The headings of paragraphs herein are inserted only for convenience and shall in no way define, describe or limit the scope or intent of any provision of this Limited Guaranty.

 

IN WITNESS WHEREOF, the Guarantor has executed this instrument as of November 30, 2012.

A & B PROPERTIES, INC.

By          /s/ Michael G. Wright

Its  Executive Vice President

By         /s/ Charles W. Loomis

Its  Assistant Secretary

  

  

  

STATE OF HAWAI' I                                                         )

)           SS:

CITY AND COUNTY OF HONOLULU                            )

On November 28, 2012, in the First Circuit, State of Hawai'i, before me personally appeared Michael G. Wright, and Charles W. Loomis, to me personally known, who, being by me duly sworn or affirmed, did say that they are the Executive Vice President and Assistant Secretary respectively, of A & B Properties, Inc., a Hawaii corporation, that said persons executed the foregoing instrument identified or described as Limited Guaranty on behalf of said A & B Properties, Inc., by authority of its board of directors and said Michael G. Wright and Charles W. Loomis acknowledged the instrument to be the free act and deed of said corporation.

The foregoing instrument is undated and contained 11 pages at the time of this acknowledgment/certification.

/s/ Dayle S. Sasaki-Hamamoto             

Print Name: Dayle S. Sasaki-Hamamoto       

Notary Public, State of Hawai'i

My commission expires: August 3, 2015

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