Document:

Unassociated Document

 

EXECUTION COPY

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 Series E Convertible Preferred Stock, par value $0.0001 per share (the “Preferred Stock”) having the rights and benefits described in the Certificate of Designation, and thirty-six month warrants exercisable for the number of shares of Common Stock indicated on the signature page at $0.40 per share of Common Stock in an amount equal to 40% of the number of shares of Common Stock issuable upon conversion of the Preferred Stock subscribed under this Agreement (the “Warrant”), for an aggregate cash purchase price of $990 for each share of Preferred Stock and associated Warrants as indicated on the signature page 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:

 

“Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 405 under the Securities Act.

 

“Agreement” shall mean this Agreement and the schedules, exhibits and attachments hereto.

 

“Balance Sheet” shall have the meaning ascribed to such term in Section 3.5.

 

“Business Day” means any day other than a Saturday, Sunday or other day on which commercial banks in New York, New York are authorized or required by law or executive order to close.

 

“Certificate of Designation” means the Certificate of Designation to be filed prior to the Closing by the Company with the Secretary of State of Nevada, in the form of Exhibit A attached hereto.

 

“Closing” shall have the meaning ascribed to such term in Section 2.2.

 

“Closing Date” shall have the meaning ascribed to such term in Section 2.2.

 

  

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“Commission” means the U.S. Securities and Exchange Commission.

 

“Common Stock” means the Company’s common stock, par value $0.0001 per share.

 

“Common Stock Equivalents” means any securities of the Company or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, right, option, warrant or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.

 

“Company Counsel” means Davis Graham & Stubbs LLP, with offices located at 1550 17th Street, Suite 500, Denver, CO 80202, Attn: Deborah J. Friedman, Esq., Fax: (303) 893-1379.

 

“Company Group” means the Company and its Subsidiaries.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

 

“Financial Statements” shall have the meaning ascribed to such term in Section 3.5.

 

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

 

“G&M” shall mean Grushko & Mittman, P.C., with offices located at 515 Rockaway Avenue, Valley Stream, New York 11581, Fax: 212-697-3575.

 

“Interim Financial Statements” shall have the meaning ascribed to such term in Section 3.5.

 

“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.

 

“Legend Removal Date” shall have the meaning ascribed to such term in Section 4.4(c).

 

“Liens” means a lien, charge, pledge, security interest, encumbrance, right of first refusal, preemptive right or other restriction.

 

“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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“Maximum Rate” shall have the meaning ascribed to such term in Section 8.20.

 

“Offering” shall have the meaning ascribed to such term in the recital.

 

“Organizational Documents” shall have the meaning ascribed to such term in Section 3.1(b).

 

“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 or other entity of any kind.

 

“Preferred Stock” means up to 15,151 shares of the Company’s Series E Convertible Preferred Stock issued or issuable hereunder having the rights, preferences and privileges set forth in the Certificate of Designation, in the form of Exhibit A hereto.

 

“Proceeding” means an action, claim, suit, investigation or proceeding (including, without limitation, an informal investigation or partial proceeding, such as a deposition), whether commenced or threatened.

 

“Public Information Failure” shall have the meaning ascribed to such term in Section 5.3.

 

“Public Information Failure Payments” shall have the meaning ascribed to such term in Section 5.3.

 

“Purchaser Party” shall have the meaning ascribed to such term in Section 8.2.

 

“Purchase Price” means, as to each Subscriber, the aggregate amount to be paid for the Preferred Stock and Warrants purchased hereunder as specified below such Subscriber’s name on the signature page of this Agreement and next to the heading “Subscription Amount,” in United States dollars and in immediately available funds and, in the case of one Subscriber, by the cancellation of an obligation of the Company to pay such Subscriber the sum of $645,480.00 pursuant to a promissory note and the surrender of such note to the Company by such Subscriber, as described on the signature page.

 

“Registration Rights Agreement” means the Registration Rights Agreement between the Subscribers and the Company in the form attached hereto as Exhibit D.

 

“Regulation D” shall have the meaning ascribed to such term in Section 4.2.

 

“Required Approvals” shall have the meaning ascribed to such term in Section 3.3(c).

 

  

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“Required Minimum” means, as of any date, the maximum aggregate number of shares of Common Stock then issued or potentially issuable in the future pursuant to the Transaction Documents, including any Underlying Shares issuable upon exercise in full of all Warrants or conversion in full of all Shares of Preferred Stock, ignoring any conversion or exercise limits set forth therein.

 

“Restrictive Legend” shall have the meaning ascribed to such term in Section 4.4(c).

 

“Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.

 

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

 

“SEC Reports” shall have the meaning ascribed to such term in Section 3.7(a).

 

“Securities” means the Preferred Stock, the Warrants, and the Underlying Shares.

 

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

“Subsidiary” means, with respect to the Company, any entity at any date, any direct or indirect corporation, limited or general partnership, limited liability company, trust, estate, association, joint venture or other business entity (A) of which at least 50% of (i) the outstanding capital stock having (in the absence of contingencies) ordinary voting power to elect a majority of the board of directors or other managing body of such entity, (ii) in the case of a partnership or limited liability company, the interest in the capital or profits of such partnership or limited liability company or (iii) in the case of a trust, estate, association, joint venture or other entity, the beneficial interest in such trust, estate, association or other entity business is, at the time of determination, owned or controlled directly or indirectly through one or more intermediaries, by such entity, or (B) that is under the actual control of the Company.

 

“Transaction Documents” means this Agreement, the Certificate of Designation, the Warrants, the Registration Rights Agreement, all exhibits and schedules thereto and hereto and any other documents or agreements executed in connection with the transactions contemplated hereunder.

 

“Transfer Agent” means Action Stock Transfer Corp., 2469 E. Fort Union Blvd., Suite 214, Salt Lake City, Utah 84121, telephone (801) 274-1088, fax (801) 599-3678, and any successor transfer agent of the Company.

 

“Underlying Shares” means the shares of Common Stock issued and issuable upon conversion or redemption of the Preferred Stock and upon exercise of the Warrants.

 

“Warrant” means collectively, the Common Stock purchase warrants delivered to the Subscribers at the Closing in accordance with Section 2.2(b) hereof, which Warrants shall be exercisable immediately and have a term of exercise equal to 36 months, in the form of Exhibit C attached hereto.

 

  

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ARTICLE II

 

PURCHASE AND SALE

 

Section 2.1                      Purchase and Sale of the Securities.

 

(a)           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, the Preferred Stock and Warrants in the amounts set forth on the signature page hereto 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 2.2(b).  The minimum amount of cash Purchase Price for an initial Closing shall be $6,500,000.  The maximum cash Purchase Price for all Closings shall be $15,000,000.

 

(b)           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 but not in part, for any reason. Subscriptions need not be accepted in the order received, and the Preferred Stock may be allocated among Subscribers. Notwithstanding anything in this Agreement to the contrary, the Company shall have no obligation to issue any of the Preferred Stock and Warrants to any person who is a resident of a jurisdiction in which the issuance of the Preferred Stock and Warrants to such person would constitute a violation of the securities, “blue sky” or other similar laws of such jurisdiction.

 

(c)           The Purchase Price for the Preferred Stock and Warrants shall be received by the Company from the Subscriber as set forth in Section 2.2(b) or by such other means as are  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 Preferred Stock and Warrants to the Subscriber at the Closing bearing the Restrictive Legend.

 

Section 2.2                      Closing.

 

(a)            The sale and purchase of the Preferred Stock and Warrants shall take place at a closing (the “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, 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.”  The latest date upon which a Closing may occur is August 23, 2013.

 

(b)           At the Closing, (i) the Subscriber shall deliver to the Company, by wire transfer to a bank 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, in the case of one Subscriber, by cancellation of a $645,480.00 obligation owed by the Company to the Subscriber pursuant to a promissory note which such Subscriber shall surrender to the Company at the Closing, and (ii) the Company shall deliver to the Subscriber a certificate representing the Preferred Stock and Warrants issued in the name of the Subscriber as it is set forth on the signature page and such other documents as are set forth in Section 6.2 below.

 

  

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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 and each of the Subsidiaries is an entity duly incorporated or otherwise organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization, with the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted.  Neither the Company nor any Subsidiary is in violation nor default of any of the provisions of its respective certificate or articles of incorporation, bylaws or other organizational or charter documents, except such as would not result in a Material Adverse Effect.  Each of the Company and the Subsidiaries is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, has not and is not reasonably expected to result in a Material Adverse Effect, and no Proceeding has been instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification.

 

(b)           The Company has made available to the Subscriber 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 Subscriber pursuant to this Agreement, when issued and delivered in accordance with the terms of this Agreement (or in the case of the 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.

 

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).

 

  

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(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 the Required Approvals, (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) and (iii) through (vi), would not, individually or in the aggregate have a Material Adverse Effect.

 

(c)           The Company is not required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Company of the Transaction Documents, other than: (i) the filings required pursuant to Section 5.4 of this Agreement, (ii) the filing with the Commission pursuant to the Registration Rights Agreement, and (iii) the filing of Form D with the Commission and such filings as are required to be made under applicable state securities laws (collectively, the “Required Approvals”).

Section 3.4                      Capitalization; Subsidiaries.

 

(a)           The capitalization of the Company is as set forth on Exhibit F.  Except as set forth on Exhibit F, the Company has not issued any capital stock since the date of filing of its most recently filed periodic report under the Exchange Act, other than pursuant to the exercise of stock options under equity incentive plans or otherwise, and pursuant to the conversion and/or exercise of Common Stock Equivalents outstanding as of the date of filing of the most recently filed periodic report under the Exchange Act.  No Person has any right of first refusal, preemptive right, right of participation, or any similar right to participate in the transactions contemplated by the Transaction Documents.  Except as disclosed on Exhibit F, there are no outstanding options, warrants, scrip rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities, rights or obligations convertible into or exercisable or exchangeable for, or giving any Person any right to subscribe for or acquire any shares of Common Stock, or contracts, commitments, understandings or arrangements by which the Company or any Subsidiary is or may become bound to issue additional shares of Common Stock or Common Stock Equivalents.  The issuance and sale of the Securities will not obligate the Company to issue shares of Common Stock or other securities to any Person (other than the Subscribers) and will not result in a right of any holder of Company securities to adjust the exercise, conversion, exchange or reset price under any of such securities. All of the outstanding shares of capital stock of the Company are duly authorized, validly issued, fully paid and nonassessable, have been issued in material compliance with all federal and state securities laws, and none of such outstanding shares was issued in violation of any preemptive rights or similar rights to subscribe for or purchase securities.  No further approval or authorization of any stockholder, the board of directors of the Company or others is required for the issuance and sale of the Securities.  Except as disclosed in the SEC Reports, there are no stockholders agreements, voting agreements or other similar agreements with respect to the Company’s capital stock to which the Company is a party or, to the knowledge of the Company, between or among any of the Company’s stockholders.

 

  

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(b)           Except as set forth in the SEC Reports 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.

 

(c)           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, 2012 and 2011, and the related audited consolidated statements of operations, changes in stockholders’ equity and cash flows for the year ended December 31, 2012, 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 sheet of the Company and its Subsidiaries as of March 31, 2013 (the “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.

 

  

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(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.

 

Section 3.6                      Material Changes; Undisclosed Events, Liabilities or Developments/Litigation.

 

(a)           Since the date of the latest audited financial statements included within the SEC Reports, except as specifically disclosed in a subsequent SEC Report filed prior to the date hereof: (i) there has been no event, occurrence or development that has had or that would reasonably be expected to result in a Material Adverse Effect, (ii) the Company has not incurred any material liabilities (contingent or otherwise) other than (A) trade payables and accrued expenses incurred in the ordinary course of business consistent with past practice and (B) liabilities not required to be reflected in the Company’s financial statements pursuant to GAAP or disclosed in filings made with the Commission, (iii) the Company has not altered its method of accounting, (iv) the Company has not declared or made any dividend or distribution of cash or other property to its stockholders or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock and (v) the Company has not issued any equity securities to any officer, director or Affiliate except as disclosed pursuant to Section 16 of the Exchange Act. The Company does not have pending before the Commission any request for confidential treatment of information.  Except for the issuance of the Securities contemplated by this Agreement, no event, liability, fact, circumstance, occurrence or development has occurred or exists or is reasonably expected to occur or exist with respect to the Company or its Subsidiaries or their respective businesses, properties, operations, assets or financial condition, that would be required to be disclosed by the Company under applicable securities laws at the time this representation is made or deemed made that has not been publicly disclosed at least ten Business Days prior to the date that this representation is made.

 

(b)           Except as described in the SEC Reports, there is no action, suit, inquiry, notice of violation, proceeding or investigation pending or, to the knowledge of the Company, threatened against or affecting the Company, any Subsidiary or any of their respective properties before or by any court, arbitrator, governmental or administrative agency or regulatory authority (federal, state, county, local or foreign) (collectively, an “Action”) which (i) adversely affects or challenges the legality, validity or enforceability of any of the Transaction Documents or the Securities or (ii) would, if there were an unfavorable decision, have or reasonably be expected to result in a Material Adverse Effect.  Except as set forth in the SEC Reports, since March 31, 2013, neither the Company nor any Subsidiary, nor to the Company’s knowledge any director or officer thereof, is or has been the subject of any Action involving a claim of violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty.  There has not been, and to the knowledge of the Company, there is not pending or contemplated, any investigation by the Commission involving the Company or any current or former director or officer of the Company.  The Commission has not issued any stop order or other order suspending the effectiveness of any registration statement filed by the Company or any Subsidiary under the Exchange Act or the Securities Act.

 

  

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(c)           The information regarding the real property of the Company and the Subsidiaries as set forth in the SEC Reports is accurate in all material respects.

 

Section 3.7                      SEC Reports.

 

(a)           The Company has filed all reports required to be filed by it under the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the twelve 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 ten 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 Subscriber’s 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 Subscriber as contemplated hereby.  To the Company’s knowledge, the issuance and sale of the Securities hereunder does not contravene the rules and regulations of the OTCQB.

 

Section 3.9                      Investment Company.  The Company is not, and, to the Company’s knowledge, is not an Affiliate of, and immediately after receipt of payment for the Securities, will not be or, to the Company’s knowledge, be an Affiliate of, an “investment company” within the meaning of the Investment Company Act of 1940, as amended.

 

Section 3.10                      Use of Proceeds.   The Company intends to utilize the proceeds received from the Purchase Price for working capital and general corporate purposes.

 

Section 3.11                      Market Manipulation.   Neither the Company, nor to its knowledge 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 Underlying Shares or affect the price at which the Underlying Shares may be issued or resold.

 

Section 3.12                      Quotation.  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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Section 3.13                      Sarbanes-Oxley; Internal Accounting Controls.  Since December 31, 2012, the Company has maintained disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) sufficient to provide reasonable assurance that information required to be disclosed in the Company’s reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms.  The Company has disclosed, based on its most recent evaluation of the Company’s internal control over financial reporting prior to the date hereof, to the Company’s auditors any significant deficiencies and material weaknesses in the design or operation of the Company’s internal control over financial reporting.

 

Section 3.14                      Registration Rights.  Except as disclosed in the SEC Reports, no Person, other than the Subscribers, has any right to cause the Company or any Subsidiary to effect the registration under the Securities Act of any securities of the Company or any Subsidiary.

 

Section 3.15                      Reporting Company/Shell Company.  The Company is a publicly-held company subject to reporting obligations pursuant to Sections 12(g) and 13 of the Exchange Act.    As of the Closing Date, the Company is not a “shell company” as that term is employed in Rule 144 under the Securities Act.  The Company is, and has no reason to believe that it will not in the foreseeable future continue to be in compliance with all such listing and maintenance requirements.

 

Section 3.16                      Application of Takeover Protections.  There are no applicable control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under the Company’s certificate of incorporation (or similar charter documents) or the laws of its state of incorporation that is or could become applicable to the Subscribers as a result of the Subscribers and the Company fulfilling their obligations or exercising their rights under the Transaction Documents, including without limitation as a result of the Company’s issuance of the Securities and the Subscribers’ ownership of the Securities.

 

Section 3.17                      Solvency.  Based on the consolidated financial condition of the Company as of the Closing Date and the Company’s good faith estimate of the fair market value of its assets, and assuming that all of the authorized shares of Preferred Stock are sold and the Company receives full payment therefor, and after giving effect to the receipt by the Company of the proceeds from the sale of the Securities hereunder: (i) the fair saleable value of the Company’s assets exceeds the amount that will be required to be paid on or in respect of the Company’s existing debts and other liabilities (including known contingent liabilities) as they mature, and (ii) the current cash of the Company, together with the proceeds the Company would receive were it to liquidate all of its assets, after taking into account all anticipated uses of the cash, would be sufficient to pay all amounts on or in respect of its liabilities when such amounts are required to be paid.  The Company does not intend to incur debts beyond its ability to pay such debts as they mature (taking into account the timing and amounts of cash to be payable on or in respect of its debt).  The Company has no knowledge of any facts or circumstances which lead it to believe that it will file for reorganization or liquidation under the bankruptcy or reorganization laws of any jurisdiction within one year from the Closing Date.

 

  

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Section 3.18                      Tax Status. Except for matters that would not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect, the Company and its Subsidiaries each (i) has made or filed all United States federal, state and local income and all foreign income and franchise tax returns, reports and declarations required by any jurisdiction to which it is subject, (ii) has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations and (iii) has set aside on its books provision reasonably adequate for the payment of all material taxes as required by United States generally accepted accounting principles.  There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company or of any Subsidiary know of no basis for any such claim.

 

Section 3.19                      Acknowledgment Regarding Subscribers’ Purchase of Securities.  The Company acknowledges and agrees that each of the Subscribers is acting solely in the capacity of an arm’s length purchaser with respect to the Transaction Documents and the transactions contemplated thereby.  The Company further acknowledges that no Subscriber is acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to the Transaction Documents and the transactions contemplated thereby and any advice given by any Subscriber or any of their respective representatives or agents in connection with the Transaction Documents and the transactions contemplated thereby is merely incidental to the Subscribers’ purchase of the Securities.  The Company further represents to each Subscriber that the Company’s decision to enter into this Agreement and the other Transaction Documents has been based solely on the independent evaluation of the transactions contemplated hereby by the Company and its representatives.

 

Section 3.20                      No General Solicitation.  Neither the Company nor any person acting on behalf of the Company has offered or sold any of the Securities by any form of general solicitation or general advertising.  The Company has offered the Securities for sale only to the Purchasers and certain other “accredited investors” within the meaning of Rule 501 under the Securities Act.

 

Section 3.21                      Survival.  The Company acknowledges and agrees that the representations contained in Article IV shall not modify, amend or affect such Subscriber’s right to rely on the Company’s representations and warranties contained in this Agreement or any representations and warranties contained in any other Transaction Document or any other document or instrument executed and/or delivered in connection with this Agreement or the consummation of the transaction contemplated hereby.

 

ARTICLE IV

 

REPRESENTATIONS AND WARRANTIES OF THE SUBSCRIBER/LEGEND

 

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 jurisdiction set forth on the signature page hereto and is not acquiring the Securities as a nominee or agent or otherwise for any other person.

 

  

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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 and Warrants 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, Warrants or Underlying 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.

 

(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 Securities.

 

(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 Warrants 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.

 

  

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(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) 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 the Offering 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 Shares and Warrants, without interest thereon, to the Subscriber.

 

(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, 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, except as set forth herein and in the Registration Rights Agreement, 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, in the Warrant, and in the Registration Rights 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.

 

  

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Section 4.4                      Legends.

 

(a)           The Subscriber understands and agrees that the certificates for the Securities shall bear substantially the following legend (the “Restrictive Legend”) until such Securities shall have been disposed of in accordance with a registration statement under the Securities Act that has been declared effective or an exemption thereunder:

 

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.

 

And certificates representing the shares of Preferred Stock shall also bear substantially the following legend:

 

THE ACTUAL NUMBER OF SECURITIES HELD BY THE HOLDER HEREOF MAY BE LESS THAN THE NUMBER OF SHARES REPRESENTED BY THIS CERTIFICATE AS A RESULT OF THE PARTIAL CONVERSION OF THESE SECURITIES BY THE HOLDER.

 

(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 Securities set forth in Section 4 without the consent of the holder thereof.

 

(c)           Certificates evidencing the Underlying Shares shall not contain any legend (including the legend set forth in Section 4.1(a) above): (i) following the disposition of the Underlying Shares pursuant to a registration statement (including the Registration Statement) covering the resale of such security that is effective under the Securities Act, or (ii) following any sale of such Underlying Shares pursuant to Rule 144. The Company shall cause its counsel to issue a legal opinion to the Transfer Agent promptly after the sale of the Underlying Shares as set forth in the preceding sentence if required by the Transfer Agent to effect the removal of the legend hereunder.  The Company agrees that following such time as such legend is no longer required under this Section 4.1(c), it will, no later than five Business Days following the delivery by a Subscriber to the Company or the Transfer Agent of a certificate representing Underlying Shares, as applicable, issued with a restrictive legend (such fifth Business Day, the “Legend Removal Date”), deliver or cause to be delivered to such Subscriber a certificate representing such shares that is free from all restrictive and other legends (however, the Corporation shall use reasonable best efforts to deliver such shares within three (3) Trading Days).  Certificates for Underlying Shares subject to legend removal hereunder shall be transmitted by the Transfer Agent to the Subscriber by crediting the account of the Subscriber’s prime broker with the Depository Trust Company System as directed by such Subscriber, if applicable.

 

  

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(d)           In addition to such Subscriber’s other available remedies, if the Company fails to deliver to a Subscriber such certificate or certificates pursuant to Section 4.4(c) on the second Trading Day after the Legend Removal Date, the Company shall pay to a Subscriber, in cash, as partial liquidated damages and not as a penalty, for each $1,000 of Underlying Shares (based on the price paid for the Underlying Shares) delivered for removal of the restrictive legend, $10 per Business Day for each Business Day after the second Trading Day following the Legend Removal Date (increasing to $20 per Business Day after the tenth Business Day) until such certificate is delivered without a legend.  Nothing herein shall limit such Subscriber’s right to pursue actual damages for the Company’s failure to deliver certificates representing any Securities as required by the Transaction Documents, and such Subscriber shall have the right to pursue all remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief.

 

(e)           Restrictions on transfer applicable to the Warrants and shares of Common Stock issuable upon exercise of the Warrants are set forth in the Warrant Agreement.

 

ARTICLE V

 

OTHER AGREEMENTS AND COVENANTS OF THE PARTIES

 

Section 5.1                      Reservation and Listing of Securities.

 

(a)           The Company shall maintain a reserve from its duly authorized shares of Common Stock for issuance pursuant to the Transaction Documents in such amount as may then be required to fulfill its obligations in full under the Transaction Documents.

 

(b)           If, on any date, the number of authorized but unissued (and otherwise unreserved) shares of Common Stock is less than the Required Minimum on such date, then the board of directors of the Company shall amend the Company’s articles of incorporation to increase the number of authorized but unissued shares of Common Stock to at least the Required Minimum at such time, as soon as possible and in any event not later than the 90th day after such date.

 

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 to the extent required from time to time to enable such Subscriber to sell Underlying Shares without registration under the Securities Act within the limitation of the exemptions provided by Rule 144 under the Securities Act.

 

  

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Section 5.3                      Public Information Failure.  At any time commencing six months after the Closing Date and ending at such time that all of the Securities may be sold without the requirement for the Company to be in compliance with Rule 144(c)(1) and otherwise without restriction or limitation pursuant to Rule 144, if the Company shall fail for any reason to satisfy the current public information requirement under Rule 144(c) and the Underlying Shares are not then subject to unrestricted public resale pursuant to an effective Registration Statement (a “Public Information Failure”) then, in addition to such Subscriber’s other available remedies, the Company shall pay to a Subscriber, in cash, as partial liquidated damages and not as a penalty, by reason of any such delay in or reduction of its ability to sell the Securities, an amount in cash equal to one percent (1.0%) of the aggregate value of the Preferred Stock (based on the price per share paid by the Subscribers) held by such Subscriber on the day of a Public Information Failure and on every thirtieth (30th) day (pro-rated for periods totaling less than thirty days) thereafter until the earlier of (a) the date such Public Information Failure is cured and (b) such time that such public information is no longer required  for the Purchasers to transfer the Underlying Shares pursuant to Rule 144.  The payments to which a Subscriber shall be entitled pursuant to this Section 5.3 are referred to herein as “Public Information Failure Payments.”  Public Information Failure Payments shall be paid on the earlier of (i) the last day of the calendar month during which such Public Information Failure Payments are incurred and (ii) the third (3rd) Business Day after the event or failure giving rise to the Public Information Failure Payments is cured.  In the event the Company fails to make Public Information Failure Payments in a timely manner, such Public Information Failure Payments shall bear interest at the rate of 1.5% per month (prorated for partial months) until paid in full. Nothing herein shall limit such Purchaser’s right to pursue actual damages for the Public Information Failure, and such Subscriber shall have the right to pursue all remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief.

Section 5.4                      Securities Laws Disclosure; Publicity.  The Company shall, by 9:00 a.m. (Denver time) on the fourth (4th) Business Day immediately following the Closing Date file a current report on Form 8-K including the forms of the Transaction Documents as exhibits thereto.  From and after the filing of such Form 8-K, the Company represents to the Subscribers that it shall have publicly disclosed all material, non-public information delivered to any of the Subscribers by the Company or any of its Subsidiaries, or any of their respective officers, directors, employees or agents in connection with the transactions contemplated by the Transaction Documents. The Company and each Subscriber shall consult with each other in issuing any other press releases with respect to the transactions contemplated hereby, and neither the Company nor any Subscriber shall issue any such press release nor otherwise make any such public statement without the prior consent of the Company with respect to any press release of any Subscriber, or without the prior consent of each Subscriber with respect to any press release of the Company, which consent shall not unreasonably be withheld or delayed, provided that if such disclosure is required by law, the disclosing party shall promptly provide the other party with prior notice of such public statement or communication.  Notwithstanding the foregoing, and except for any Subscriber that is a director or Affiliate of the Company,  the Company shall not publicly disclose the name of any Subscriber, or include the name of any Subscriber in any filing with the Commission or any regulatory agency or Trading Market unless the name of such Subscriber is already included in the body of the Transaction Documents, without the prior written consent of such Subscriber, except: (a) as required by federal securities law in connection with the filing of final Transaction Documents with the SEC and (b) to the extent such disclosure is required by law or Trading Market regulations, in which case the Company shall provide the Subscribers with prior notice of such disclosure permitted under this clause (b).

 

  

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Section 5.5                      Non-Public Information.  Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents, the Company covenants and agrees that neither it, nor any other Person acting on its behalf, will provide any Subscriber or its agents or counsel, other than any Subscriber that is a director or Affiliate of the Company or such Subscriber’s agents or counsel, with any information that the Company believes constitutes material non-public information, unless prior thereto such Subscriber shall have entered into a written agreement with the Company regarding the confidentiality and use of such information.  The Company understands and confirms that each Subscriber, other than any Subscriber that is a director or Affiliate of the Company,  shall be relying on the foregoing covenant in effecting transactions in securities of the Company.

 

Section 5.6                      Form D; Blue Sky Filings.  The Company agrees to timely file a Form D with respect to the Securities as required under Regulation D and to provide a copy thereof, promptly upon request of any Subscriber. The Company shall take such action as the Company shall reasonably determine is necessary in order to obtain an exemption for, or to qualify the Securities for, sale to the Subscribers at the Closing under applicable securities or “Blue Sky” laws of the states of the United States, and shall provide evidence of such actions promptly upon request of any Subscriber.

 

Section 5.7                      Equal Treatment of Subscribers.  No consideration (including any modification of any Transaction Document) shall be offered or paid to any Person to amend or consent to a waiver or modification of any provision of any of this Agreement unless the same consideration is also offered on a ratable basis to all of the parties to this Agreement. For clarification purposes, this provision constitutes a separate right granted to each Subscriber by the Company and negotiated separately by each Subscriber, and is intended for the Company to treat the Subscribers as a class and shall not in any way be construed as the Subscribers acting in concert or as a group with respect to the purchase, disposition or voting of Securities or otherwise.

 

Section 5.8                      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, the Warrant Agreement, and the Registration Rights Agreement as promptly as practicable.

 

  

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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 Subscriber 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 Subscriber 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 Subscriber has delivered to the Company all required documentation including an executed Registration Rights Agreement.

 

Section 6.2                      Conditions to Obligations of the Subscriber.  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 Company Counsel to the effect set forth in Exhibit E hereto.

 

(d)           The Subscriber shall have received an Officer’s Certificate duly executed by an executive officer 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.

 

  

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(e)           The Subscriber 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 Group.

 

(g)           The Company shall have executed and delivered to each Subscriber an executed counterpart of the Registration Rights Agreement.

 

(h)           The Company shall have executed and delivered to each Subscriber a Warrant representing the right to purchase the number of shares of Common Stock set forth on the signature page hereto.

 

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 Subscriber;

 

(iv)           by the Company or the Subscriber if the Closing shall not have been consummated on or before August 15, 2013; 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;

 

(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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(vi)           by the Company or the Subscriber if, from the date hereof to the Closing Date, trading in the Common Stock shall not have been suspended by the SEC or the OTCQB, and, at any time prior to the Closing Date, trading in securities generally as reported by Bloomberg L.P. shall have been suspended or limited, or minimum prices shall have been established on securities whose trades are reported by such service, or a banking moratorium shall have been declared either by the United States or New York State authorities or shall there have occurred any material outbreak or escalation of hostilities or other national or international calamity of such magnitude in its effect on, or any material adverse change in, any financial market which, in each case, in the reasonable judgment of the Company or such Subscriber, makes it impracticable or inadvisable to purchase or sell the Securities; or

(vii)           by the Subscriber if, as of the Closing, Preferred Stock requiring cash payment of at least $6,500,000 has not been subscribed for.

 

(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.

 

  

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Section 8.2                      Indemnification.  Subject to the provisions of this Section 8.2, the Company will indemnify and hold each Subscriber and its directors, officers, shareholders, members, partners, employees and agents (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title), each Person who controls such Subscriber (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, shareholders, agents, members, partners or employees (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title) of such controlling persons (each, a “Purchaser Party”) harmless from any and all losses, liabilities, obligations, claims, contingencies, damages, costs and expenses, including all judgments, amounts paid in settlements, court costs and reasonable attorneys’ fees and costs of investigation that any such Purchaser Party may suffer or incur as a result of or relating to (a) any breach of any of the representations, warranties, covenants or agreements made by the Company in this Agreement or in the other Transaction Documents or (b) any action instituted against Purchaser Parties in any capacity, or any of them or their respective Affiliates, by any stockholder of the Company who is not an Affiliate of such Purchaser Party, with respect to any of the transactions contemplated by the Transaction Documents (unless such action is based upon a breach of such Purchaser Party’s representations, warranties or covenants under the Transaction Documents or any agreements or understandings such Purchaser Party may have with any such stockholder or any violations by such  Purchaser Party of state or federal securities laws or any conduct by such Purchaser Party which constitutes fraud, gross negligence, willful misconduct or malfeasance), provided that the Company shall not be liable to a Purchaser Party for any consequential or punitive damages.  If any action shall be brought against any Purchaser Party in respect of which indemnity may be sought pursuant to this Agreement, such Purchaser Party shall promptly notify the Company in writing, and the Company shall have the right to assume the defense thereof with counsel of its own choosing reasonably acceptable to the Purchaser Party.  Any Purchaser Party shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Purchaser Party except to the extent that (i) the employment thereof has been specifically authorized by the Company in writing, (ii) the Company has failed after a reasonable period of time to assume such defense and to employ counsel or (iii) in such action there is, in the reasonable opinion of counsel, a material conflict on any material issue between the position of the Company and the position of such Purchaser Party, in which case the Company shall be responsible for the reasonable fees and expenses of no more than one such separate counsel.  The Company will not be liable to any Purchaser Party under this Agreement (y) for any settlement by a Purchaser Party effected without the Company’s prior written consent, which shall not be unreasonably withheld or delayed; or (z) to the extent, but only to the extent that a loss, claim, damage or liability is attributable to any Purchaser Party’s breach of its representations, warranties or covenants under the Transaction Documents or any agreements or understandings such Purchaser Party may have with any such stockholder or any violations by such  Purchaser Party of state or federal securities laws or any conduct by such Purchaser Party which constitutes fraud, gross negligence, willful misconduct or malfeasance. The indemnification required by this Section 8.2 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or are incurred. The indemnity agreements contained herein shall be in addition to any cause of action or similar right of any Purchaser Party against the Company or others and any liabilities the Company may be subject to pursuant to law.

 

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; provided however that the Company shall pay at the initial Closing the reasonable documented legal fees of G&M, legal counsel for the lead investor, in an amount of $30,000.

 

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.

 

  

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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:

 

(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.  This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns.  The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of each Subscriber (other than by merger).  Following the Closing, any Subscriber may assign any or all of its rights under this Agreement to any Person to whom such Subscriber assigns or transfers any Securities, provided that such transferee agrees in writing to be bound, with respect to the transferred Securities, by the provisions of the Transaction Documents that apply to the “Subscribers.”

 

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 when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to each other party, it being understood that the parties need not sign the same counterpart.  In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page were an original thereof.

 

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, the Transaction Documents, together with any confidentiality or nondisclosure agreement between the Company and 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 purchase and sale of the Securities.

 

  

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Section 8.13                      Notification of Changes.  The parties hereto hereby covenant and agree to notify each other upon the occurrence of any event prior to the closing of the purchase of the Securities pursuant to this Agreement which would cause any representation, warranty, or covenant of such party contained in any Transaction Document to be false or incorrect.

 

Section 8.14                      Severability.  If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.

 

Section 8.15                      No Third-Party Beneficiaries.  This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by any other Person.

 

Section 8.16                      Rescission and Withdrawal Right.  Notwithstanding anything to the contrary contained in (and without limiting any similar provisions of) any of the other Transaction Documents, whenever any Subscriber exercises a right, election, demand or option under a Transaction Document and the Company does not timely perform its related obligations within the periods therein provided, then such Subscriber may, at any time prior to the Company’s performance of such obligations, rescind or withdraw, in its sole discretion from time to time upon written notice to the Company, any relevant notice, demand or election in whole or in part without prejudice to its future actions and rights; provided, however, that in the case of a rescission of a conversion of the Preferred Stock or exercise of a Warrant, the applicable Subscriber shall be required to return any shares of Common Stock subject to any such rescinded conversion or exercise notice concurrently with the return to such Subscriber of the aggregate exercise price paid to the Company for such shares and the restoration of such Subscriber’s right to acquire such shares pursuant to such Subscriber’s Warrant (including, issuance of a replacement warrant certificate evidencing such restored right).

 

Section 8.17                      Replacement of Securities.  If any certificate or instrument evidencing any Securities is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof (in the case of mutilation), or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction.  The applicant for a new certificate or instrument under such circumstances shall also pay any reasonable third-party costs (including customary indemnity) associated with the issuance of such replacement Securities.

 

  

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Section 8.18                      Remedies.  In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, each of the Subscribers and the Company will be entitled to specific performance under the Transaction Documents, provided that the Company shall not be liable to any Subscriber for any consequential or punitive damages.  The parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations contained in the Transaction Documents and hereby agree to waive and not to assert in any action for specific performance of any such obligation the defense that a remedy at law would be adequate.

 

Section 8.19                      Payment Set Aside. To the extent that the Company makes a payment or payments to any Subscriber pursuant to any Transaction Document or a Subscriber enforces or exercises its rights thereunder, and such payment or payments or the proceeds of such enforcement or exercise or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the Company, a trustee, receiver or any other Person under any law (including, without limitation, any bankruptcy law, state or federal law, common law or equitable cause of action), then to the extent of any such restoration the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred.

 

Section 8.20                      Usury.  To the extent it may lawfully do so, the Company hereby agrees not to insist upon or plead or in any manner whatsoever claim, and will resist any and all efforts to be compelled to take the benefit or advantage of, usury laws wherever enacted, now or at any time hereafter in force, in connection with any claim, action or proceeding that may be brought by any Subscriber in order to enforce any right or remedy under any Transaction Document.  Notwithstanding any provision to the contrary contained in any Transaction Document, it is expressly agreed and provided that the total liability of the Company under the Transaction Documents for payments in the nature of interest shall not exceed the maximum lawful rate authorized under applicable law (the “Maximum Rate”), and, without limiting the foregoing, in no event shall any rate of interest or default interest, or both of them, when aggregated with any other sums in the nature of interest that the Company may be obligated to pay under the Transaction Documents exceed such Maximum Rate.  It is agreed that if the maximum contract rate of interest allowed by law and applicable to the Transaction Documents is increased or decreased by statute or any official governmental action subsequent to the date hereof, the new maximum contract rate of interest allowed by law will be the Maximum Rate applicable to the Transaction Documents from the Closing Date thereof forward, unless such application is precluded by applicable law.  If under any circumstances whatsoever, interest in excess of the Maximum Rate is paid by the Company to any Subscriber with respect to indebtedness evidenced by the Transaction Documents, such excess shall be applied by such Subscriber to the unpaid principal balance of any such indebtedness or be refunded to the Company, the manner of handling such excess to be at such Subscriber’s election.

 

  

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Section 8.21                      Independent Nature of Subscribers’ Obligations and Rights.  The obligations of each Subscriber under any Transaction Document are several and not joint with the obligations of any other Subscriber and no Subscriber shall be responsible in any way for the performance or non-performance of the obligations of any other Purchaser under any Transaction Document.  Nothing contained herein or in any other Transaction Document, and no action taken by any Subscriber pursuant hereto or thereto, shall be deemed to constitute the Subscribers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Subscribers are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction Documents.  Each Subscriber shall be entitled to independently protect and enforce its rights, including, without limitation, the rights arising out of this Agreement or out of the other Transaction Documents, and it shall not be necessary for any other Subscriber to be joined as an additional party in any proceeding for such purpose.  Each Subscriber has been represented by its own separate legal counsel in its review and negotiation of the Transaction Documents.  For reasons of administrative convenience only, each Subscriber and its respective counsel have chosen to communicate with the Company through G&M.  The Company has elected to provide all Subscribers with the same terms and Transaction Documents for the convenience of the Company and not because it was required or requested to do so by any of the Subscribers.  It is expressly understood and agreed that each provision contained in this Agreement and in each other Transaction Document is between the Company and a Subscriber, solely, and not between the Company and the Subscribers collectively and not between and among the Subscribers.

 

Section 8.22                      Liquidated Damages.  The Company’s obligations to pay any partial liquidated damages or other amounts owing under the Transaction Documents is a continuing obligation of the Company and shall not terminate until all unpaid partial liquidated damages and other amounts have been paid notwithstanding the fact that the instrument or security pursuant to which such partial liquidated damages or other amounts are due and payable shall have been canceled.

 

Section 8.23                      Saturdays, Sundays, Holidays, etc.  If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then such action may be taken or such right may be exercised on the next succeeding Business Day.

 

Section 8.24                      Construction. The parties agree that each of them and/or their respective counsel have reviewed and had an opportunity to revise the Transaction Documents and, therefore, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of the Transaction Documents or any amendments thereto. In addition, each and every reference to share prices and shares of Common Stock in any Transaction Document shall be subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions of the Common Stock that occur after the date of this Agreement.

 

 

[The remainder of this page is intentionally left blank]

 

  

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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:

With a copy to:

Grushko & Mittman, P.C.

515 Rockaway Avenue

Valley Stream, New York 11581

Email: counslers@aol.com

 

PURCHASE PRICE

 

	
Number of shares of Preferred Stock Subscribed for: ­____________ x $990

	  
	 	 
	
Aggregate Purchase Price: _____________________

	  
	 	 
	
Warrant to purchase ________________ Underlying Shares

(Number of shares of Preferred Stock x 1200)

	  

 

IN WITNESS WHEREOF, the parties hereto have executed this Subscription Agreement as of the [____] day of [__________], 2013.

 

 

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]

 

[Signature Page to Subscription Agreement]

 

  

 

  

 

Exhibit A

 

Certificate of Designation

 

 

  

 

  

 

Exhibit B

Subsidiary Information

Subsidiaries.

	
Subsidiaries

	
Jurisdiction of Organization

	
Authorized Capital Stock

	
Outstanding Equity Interests

	
Record Ownership

	
Gold Acquisition Corp., a Nevada corporation

 

 

	
Nevada

	
100,000 authorized shares.

 

 

	
100,000 shares issued.

	
Pershing Gold Corp.

	
Pershing Royalty Company, a Delaware corporation

 

 

	
Delaware

	
1,000 authorized shares.

 

 

	
10 shares issued.

	
Pershing Gold Corp.

	
EXCX Funding Corp., a Nevada corporation

 

 

	
Nevada

	
3,000 authorized shares.

 

 

	
1,000 shares issued.

	
Pershing Gold Corp

 

  

 

  

 

Exhibit C

Warrant

 

  

 

  

 

Exhibit D

Registration Rights Agreement

 

  

 

  

 

Exhibit E

 

Form of Opinion of Davis, Graham & Stubbs LLP

 

1.           The Company is a validly existing corporation in good standing under the laws of the State of Nevada.

 

2.           Each Subsidiary is a validly existing corporation, limited liability company or limited partnership in good standing under the laws of its jurisdiction of formation.

 

3.           The Preferred Shares and Subscription Warrants have been duly authorized and, when issued and delivered to and paid for by the Subscriber in accordance with the terms of the Subscription Agreement, (a) the Preferred Shares will be validly issued, fully paid and nonassessable and (b) the Subscription Warrants will be validly issued.   The Conversion Shares have been duly authorized and, when issued and delivered upon conversion of the Preferred Shares in accordance with the terms of the Certificate of Designations, will be validly issued, fully paid and nonassessable.  The Warrant Shares have been duly authorized and, when issued and delivered to and paid for upon exercise of the Subscription Warrants in accordance with the Warrant Agreement, will be validly issued, fully paid and nonassessable.

 

4.           The Company has all requisite corporate power to execute and deliver the Subscription Agreement, Warrant Agreement and Registration Rights Agreement and to perform its obligations thereunder.  The execution and delivery by the Company of the Subscription Agreement, Warrant Agreement and Registration Rights Agreement and the performance of its obligations thereunder have been duly authorized by all necessary corporate action.  The Subscription Agreement, Warrant Agreement and Registration Rights Agreement have been duly executed and delivered by the Company and constitute the valid and binding obligation of the Company, enforceable against the Company in accordance with their terms.

 

5.           The execution and delivery by the Company of the Subscription Agreement, the performance of its obligations thereunder, and the issuance by the Company of the Preferred Shares and Subscription Warrants to the Subscriber, the issuance of the Conversion Shares upon conversion of the Preferred Shares in accordance with the Certificate of Designations and the issuance of the Warrant Shares upon exercise of the Subscription Warrants in accordance with the Warrant Agreement:

(i)           do not and will not violate the Organizational Documents;

 

(ii)           do not and will not result in a breach of or default under any agreement to which a member of the Company Group is a party that is material to the Company Group, taken as a whole, and has been filed by the Company as an exhibit to its Form 10-K for the year ended December 31, 2012 or any subsequent filing made by the Company under the Securities Exchange Act of 1934, as amended, through the date hereof (applying the laws of the State of Colorado in resolving questions of legality or legal construction, although such documents may be governed by other laws);

 

  

 

  

 

(iii)           do not and will not violate any order, judgment or decree of any court or other agency of government that is material to the Company Group, taken as a whole, and binding on a member of the Company Group; and

 

(iv)           do not and will not violate, or require any filing by the Company with or approval of any governmental authority or regulatory body under, any law or regulation currently in effect applicable to the Company (but we express no opinion relating to the United States federal securities laws or any state securities or blue sky laws except as set forth in paragraph 6 below), except for (A) such filings or approvals as already have been made or obtained under the Securities Act of 1933, as amended and (B) the filing of a Form D with the Securities and Exchange Commission in proper form within 15 days after the sale of Preferred Shares or Subscription Warrants.

 

6.           No registration of the Preferred Shares or Subscription Warrants under the U.S. Securities Act of 1933, as amended (the “Securities Act”), is required for the offer and sale of the Preferred Shares and Subscription Warrants by the Company to the Subscriber pursuant to and in the manner contemplated by the Subscription Agreement, or for the issuance to the Subscriber of the Conversion Shares upon conversion of the Preferred Shares in accordance with the Certificate of Designation and the issuance to the Subscriber of the Warrant Shares upon exercise of the Subscription Warrants in accordance with the Warrant Agreement.

 

7.           The authorized capital stock of the Company consists of an aggregate of Five Hundred Million (500,000,000) shares of Common Stock and Fifty Million (50,000,000) shares of Preferred Stock.

 

8.           Insofar as the statements in the paragraphs titled “Description of Securities” under the caption “Description of Securities” in the Company’s Form S-1 purport to summarize the Organizational Documents, such statements, to our knowledge, fairly present, in all material respects, an accurate summary of such Organizational Documents.

 

 

 

  

 

  

 

Exhibit F

 

Capitalization

The authorized capital stock of the Company consists of:

(i) 500,000,000 shares of Common Stock, of which 273,292,023 are issued and outstanding;

(ii) 2,250,000 shares of Series A Convertible Preferred Stock, par value $0.0001 per share, of which none are issued and outstanding;

(iii) 8,000,000 shares of Series B Convertible Preferred Stock, par value $0.0001 per share, of which none are issued and outstanding;

(iv) 3,284,396 shares of Series C Convertible Preferred Stock, par value $0.0001 per share, of which none are issued and outstanding;

(v) 7,500,000 shares of 9% Series D Cumulative Convertible Preferred Stock, par value $0.0001 per share, of which none are issued and outstanding;

(vi) 15,151 shares of Series E Convertible Preferred Stock, of which none are issued and outstanding; and

(vii) 28,950,453 undesignated shares of preferred stock, par value $0.0001 per share, of which none are issued and outstanding.

The Company also has issued and outstanding:

(a) warrants for the purchase of 12,809,031 shares of Common Stock at a weighted-average exercise price of $0.51 and

(b) outstanding equity-based compensation awards for the purchase of 33,200,000 shares of Common Stock at a weighted-average exercise price of $0.40.  All issued and outstanding shares of the Company’s capital stock are validly issued, fully paid and nonassessable.Unassociated Document

 

 EXECUTION COPY

REGISTRATION RIGHTS AGREEMENT

 

THIS REGISTRATION RIGHTS AGREEMENT (this “Agreement”) is made as of August 8, 2013 by and among Pershing Gold Corporation, a Nevada corporation (the “Company”), and each signatory hereto (each, a “Holder” and collectively, the “Holders”).

 

R E C I T A L S

 

WHEREAS, the Company and the Holders are parties to Subscription Agreements (the “Subscription Agreements”), dated as of the date hereof, as such may be amended and supplemented from time to time;

 

WHEREAS, the Holders’ obligations under the Subscription Agreements are conditioned upon certain registration rights under the Securities Act of 1933, as amended (the “Securities Act”); and

 

WHEREAS, the Holders and the Company desire to provide for the rights of registration under the Securities Act as are provided herein upon the execution and delivery of this Agreement by such Holders and the Company.

 

NOW, THEREFORE, in consideration of the promises, covenants and conditions set forth herein, the parties hereto hereby agree as follows:

 

1.           Registration Rights.

 

1.1           Definitions.  As used in this Agreement, the following terms shall have the meanings set forth below:

 

(a)           “Commission” means the United States Securities and Exchange Commission.

 

(b)           “Common Stock” means the Company’s common stock, par value $0.0001 per share.

 

(c)           “Demand Registration” has the meaning set forth in Section 1.2(a).

 

(d)           Delay Period” has the meaning set forth in Section 1.2(b).

 

(e)           “Effectiveness Period” means 180 days during which a registration statement has been effective or such shorter period until all Registrable Securities covered by the Resale Registration Statement have been sold, or may be sold without the requirement to be in compliance with Rule 144(c)(1) and otherwise without restriction or limitation pursuant to Rule 144, as determined by the counsel to the Company.

 

(f)           “End of Suspension Notice” has the meaning set forth in Section 1.2(c).

 

(g)           “Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

(h)           “Holder” means any person owning Registrable Securities who becomes party to this Agreement by executing a counterpart signature page hereto, which is accepted by the Company.

 

  

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(i)           “Majority Holders” has the meaning set forth in Section 3.3.

 

(j)           “Suspension Notice” has the meaning set forth in Section 1.2(c).

 

(k)           The terms “register,” “registered” and “registration” refer to a registration effected by preparing and filing a registration statement or similar document in compliance with the Securities Act, and the declaration or ordering of effectiveness of such registration statement or document.

 

(l)           “Registrable Securities” means the Shares; provided, however, that if as a result of any reclassification, stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization or other similar transaction or event, any capital stock, evidence of indebtedness, warrants, options, rights or other securities (collectively, “Other Securities”) are issued or transferred to an Holder in respect of Registrable Securities held by the Holder, references herein to Registrable Securities shall be deemed to include such Other Securities; provided, further, that Registrable Securities shall not include any securities of the Company which (i) have previously been registered and remain subject to a currently effective registration statement, (ii) have been sold to any Person to whom the rights under this Agreement are not assigned in accordance with this Agreement, (iii) have been sold to the public either pursuant to a registration statement (including the Resale Registration Statement) or Rule 144, (iv) may be sold immediately without registration under the Securities Act and without volume restrictions pursuant to Rule 144, or (iv) such securities have ceased to be outstanding.

 

(m)           “Rule 144” means Rule 144 as promulgated by the Commission under the Securities Act, as such Rule may be amended from time to time, or any similar successor rule that may be promulgated by the Commission.

 

(n)           “Rule 415” means Rule 415 as promulgated by the Commission under the Securities Act, as such Rule may be amended from time to time, or any similar successor rule that may be promulgated by the Commission.

 

(o)           “Series E Preferred Stock” means the Company’s Series E Convertible Preferred Stock, par value $0.0001 per share, issued pursuant to the Subscription Agreements.

 

(p)           “Shares” means the shares of Common Stock issuable upon conversion of the Series E Preferred Stock and the shares of Common Stock issuable upon exercise of the Warrants.

 

(q)           “Subscription Agreements” means the Subscription Agreements dated on or about the Issue Date pursuant to which the Series E Preferred Stock and Warrants are issued.

 

(r)           “Warrants” means the warrants to purchase Common Stock issued pursuant to the Subscription Agreements.

 

Other capitalized terms used but not defined herein shall have the meaning set forth in the Subscription Agreements.

 

  

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1.2           Company Registration.

 

(a)           At any time after the six-month anniversary of the date of this Agreement, any one or more Holders then holding at least 25% or more of the Registrable Securities shall have the right to require the Company to file a registration statement registering the resale of Registrable Securities (“Demand Registration”) from time to time by the Holders (a “Resale Registration Statement”). The registration statement shall be on Form S-1 or, if the Company is so eligible, on Form S-3 (except if the Company is not then eligible to register for resale the Registrable Securities on Form S-1 or Form S-3, as the case may be, in which case such registration shall be on another appropriate form in accordance herewith).  The Company, subject to Section 1.2(b), shall use its commercially reasonable efforts to effect such registration under the Securities Act of the Registrable Securities that the Company has been so requested to register for distribution in accordance with such intended method of distribution, and the Company shall keep such registration effect for the Effectiveness Period.  The Company shall be obligated to conduct only one Demand Registration, provided that the Demand Registration has completed pursuant to this Section 1.2.   The Company shall not be obligated to conduct an underwritten offering.

 

(b)           Notwithstanding anything to the contrary set forth herein, the Company shall have the right to delay the filing of the Resale Registration Statement for a period not in excess of 90 consecutive days and no more than 120 days in any consecutive 12-month period (a “Delay Period”), if (i) the Company is pursuing an acquisition, merger, reorganization, disposition or other similar transaction and the Company determines in good faith that the Company’s ability to pursue or consummate such a transaction would be materially adversely affected by any required disclosure of such transaction in any Registration Statement, (ii) the Company has experienced some other material non-public event the disclosure of which at such time, in the good faith judgment of the Company, would materially adversely affect the Company or (iii) the Company determines in good faith that the filing of the Registration Statement would otherwise be detrimental to the Company or its stockholders, or would substantially interfere with the Company’s ability to timely file a Form 10-Q or Form 10-K.

 

(c)           In the case of an event that causes the Company to suspend the use of a Registration Statement (a “Suspension Event”), the Company shall give written notice (a “Suspension Notice”) to the Holders to suspend sales of the Registrable Securities included in the Resale Registration Statement and such notice shall continue only for so long as the Suspension Event or its effect is continuing. No Holder shall effect any sales of the Registrable Securities pursuant to such Resale Registration Statement (or such filings) at any time after it has received a Suspension Notice from the Company and prior to receipt of an End of Suspension Notice (as defined below) with respect to such Registration Statement.  The Holders may recommence effecting sales of the Registrable Securities pursuant to such Registration Statement (or such filings) following further notice to such effect (an “End of Suspension Notice”) from the Company, which End of Suspension Notice shall be given by the Company to the Holders in the manner described above promptly following the conclusion of any Suspension Event and its effect.

 

1.3           Reserved.  

 

1.4           Holder Obligations.  

 

(a)           It shall be a condition precedent to the Company’s obligations to take any action pursuant to this Section 1 with respect to the Registrable Securities of any selling Holder that such Holder shall furnish to the Company the Questionnaire on Annex A and such information regarding such Holder, the Registrable Securities held by such Holder, or as otherwise reasonably required by the Company to effect the registration of such Holder’s Registrable Securities.

 

  

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(b)           Each Holder hereby agrees (i) to cooperate with the Company and to furnish to the Company Annex A and all such information regarding such Holder, its ownership of Registrable Securities and the disposition of such securities in connection with the preparation of the Registration Statement and any filings with any state securities commissions as the Company may reasonably request, (ii) to the extent required by the Securities Act, to deliver or cause delivery of the prospectus contained in the Resale Registration Statement, and any amendment or supplement thereto, to any purchaser of the Registrable Securities covered by the Resale Registration Statement from the Holder and (iii) to notify the Company of any sale of Registrable Securities by such Holder.

 

(c)           Each Holder agrees that, upon receipt of a Suspension Notice or the commencement of a Delay Period, such Holder will forthwith discontinue disposition of such Registrable Securities covered by such Registration Statement until such Holder’s receipt of an End of Suspension Notice.

 

(d)           Each Holder agrees that it will not sell, transfer or otherwise dispose of Registrable Securities in a manner contrary to applicable securities laws.  A period in which one or more Holders are prohibited from selling, transferring or disposing of Registrable Securities pursuant to such laws shall not be deemed a Delay Period for the purposes of this Agreement.

 

(e)           Each Holder represents that it shall dispose of its Shares in accordance with the Plan of Distribution section of the Resale Registration Statement.

 

1.5           Registration Procedures.  In connection with the Company’s registration obligations hereunder, the Company shall:

 

(a)           Not less than five (5) Trading Days prior to the filing of each Registration Statement and not less than one (1) Trading Day prior to the filing of any related Prospectus or any amendment or supplement thereto (including any document that would be incorporated or deemed to be incorporated therein by reference), the Company shall (i) furnish to each Holder copies of all such documents proposed to be filed, which documents (other than those incorporated or deemed to be incorporated by reference) will be subject to the review of such Holders, and (ii) cause its officers and directors, counsel and independent registered public accountants to respond to such inquiries as shall be necessary, in the reasonable opinion of respective counsel to each Holder, to conduct a reasonable investigation within the meaning of the Securities Act. Notwithstanding the above, the Company shall not be obligated to provide the Holders advance copies of any universal shelf registration statement registering securities in addition to those required hereunder, or any Prospectus prepared thereto.  The Company shall not file a Registration Statement or any such Prospectus or any amendments or supplements thereto to which the Holders of a majority of the Registrable Securities shall reasonably object in good faith, provided that, the Company is notified of such objection in writing no later than five (5) Trading Days after the Holders have been so furnished copies of a Registration Statement or one (1) Trading Day after the Holders have been so furnished copies of any related Prospectus or amendments or supplements thereto. Each Holder agrees to furnish to the Company a completed questionnaire in the form attached to this Agreement as Annex A (a “Selling Stockholder Questionnaire”) on a date that is not less than two (2) Trading Days prior to the Filing Date or by the end of the fourth (4th) Trading Day following the date on which such Holder receives draft materials in accordance with this Section.

(b)           (i) Prepare and file with the Commission such amendments, including post-effective amendments, to a Registration Statement and the Prospectus used in connection therewith as may be necessary to keep a Registration Statement continuously effective as to the applicable Registrable Securities for the Effectiveness Period and prepare and file with the Commission such additional Registration Statements in order to register for resale under the Securities Act all of the Registrable Securities, (ii) cause the related Prospectus to be amended or supplemented by any required Prospectus supplement (subject to the terms of this Agreement), and, as so supplemented or amended, to be filed pursuant to Rule 424, (iii) respond as promptly as reasonably possible to any comments received from the Commission with respect to a Registration Statement or any amendment thereto and provide as promptly as reasonably possible to the Holders true and complete copies of all correspondence from and to the Commission relating to a Registration Statement (provided that, the Company shall excise any information contained therein which would constitute material non-public information regarding the Company or any of its Subsidiaries), and (iv) comply in all material respects with the applicable provisions of the Securities Act and the Exchange Act with respect to the disposition of all Registrable Securities covered by a Registration Statement during the applicable period in accordance (subject to the terms of this Agreement) with the intended methods of disposition by the Holders thereof set forth in such Registration Statement as so amended or in such Prospectus as so supplemented.

 

  

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(c)           If during the Effectiveness Period, the number of Registrable Securities at any time exceeds 100% of the number of shares of Common Stock then registered in a Registration Statement, then the Company shall file as soon as reasonably practicable, but in any case prior to the applicable Filing Date, an additional Registration Statement covering the resale by the Holders of not less than the number of such Registrable Securities.

(d)           Notify the Holders of Registrable Securities to be sold (which notice shall, pursuant to clauses (iii) through (vi) hereof, be accompanied by an instruction to suspend the use of the Prospectus until the requisite changes have been made) as promptly as reasonably possible (and, in the case of (i)(A) below, not less than one (1) Trading Day prior to such filing) and (if requested by any such Person) confirm such notice in writing no later than one (1) Trading Day following the day (i)(A) when a Prospectus or any Prospectus supplement or post-effective amendment to a Registration Statement is proposed to be filed, (B) when the Commission notifies the Company whether there will be a “review” of such Registration Statement and whenever the Commission comments in writing on such Registration Statement, and (C) with respect to a Registration Statement or any post-effective amendment, when the same has become effective, (ii) of any request by the Commission or any other federal or state governmental authority for amendments or supplements to a Registration Statement or Prospectus or for additional information, (iii) of the issuance by the Commission or any other federal or state governmental authority of any stop order suspending the effectiveness of a Registration Statement covering any or all of the Registrable Securities or the initiation of any Proceedings for that purpose, (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction, or the initiation or threatening of any Proceeding for such purpose, (v) of the occurrence of any event or passage of time that makes the financial statements included in a Registration Statement ineligible for inclusion therein or any statement made in a Registration Statement or Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires any revisions to a Registration Statement, Prospectus or other documents so that, in the case of a Registration Statement or the Prospectus, as the case may be, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, and (vi) of the occurrence or existence of any pending corporate development with respect to the Company that the Company believes may be material and that, in the determination of the Company, makes it not in the best interest of the Company to allow continued availability of a Registration Statement or Prospectus, provided, however, in no event shall any such notice contain any information which would constitute material, non-public information regarding the Company or any of its Subsidiaries.

(e)           Use its best efforts to avoid the issuance of, or, if issued, obtain the withdrawal of (i) any order stopping or suspending the effectiveness of a Registration Statement, or (ii) any suspension of the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction, at the earliest practicable moment.

 

  

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(f)           Furnish to each Holder, without charge, at least one conformed copy of each such Registration Statement and each amendment thereto, including financial statements and schedules, all documents incorporated or deemed to be incorporated therein by reference to the extent requested by such Person, and all exhibits to the extent requested by such Person (including those previously furnished or incorporated by reference) promptly after the filing of such documents with the Commission; provided, that any such item which is available on the EDGAR system (or successor thereto) need not be furnished in physical form.

(g)           Subject to the terms of this Agreement, the Company hereby consents to the use of such Prospectus and each amendment or supplement thereto by each of the selling Holders in connection with the offering and sale of the Registrable Securities covered by such Prospectus and any amendment or supplement thereto, except after the giving of any notice pursuant to Section 1.5(d).

(h)            The Company shall cooperate with any broker-dealer through which a Holder proposes to resell its Registrable Securities in effecting a filing with the FINRA Corporate Financing Department pursuant to FINRA Rule 5110, as requested by any such Holder, and the Company shall pay the filing fee required by such filing within two (2) Business Days of request therefor.

(i)           Prior to any resale of Registrable Securities by a Holder, use its commercially reasonable efforts to register or qualify or cooperate with the selling Holders in connection with the registration or qualification (or exemption from the Registration or qualification) of such Registrable Securities for the resale by the Holder under the securities or Blue Sky laws of such jurisdictions within the United States as any Holder reasonably requests in writing, to keep each registration or qualification (or exemption therefrom) effective during the Effectiveness Period and to do any and all other acts or things reasonably necessary to enable the disposition in such jurisdictions of the Registrable Securities covered by each Registration Statement; provided, that, the Company shall not be required to qualify generally to do business in any jurisdiction where it is not then so qualified, subject the Company to any material tax in any such jurisdiction where it is not then so subject or file a general consent to service of process in any such jurisdiction.

(j)           If requested by a Holder, cooperate with such Holder to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be delivered to a transferee pursuant to a Registration Statement, which certificates shall be free, to the extent permitted by the Subscription Agreement, of all restrictive legends, and to enable such Registrable Securities to be in such denominations and registered in such names as any such Holder may request.

(k)           Upon the occurrence of any event contemplated by Section 1.5(d), as promptly as reasonably possible under the circumstances taking into account the Company’s good faith assessment of any adverse consequences to the Company and its stockholders of the premature disclosure of such event, prepare a supplement or amendment, including a post-effective amendment, to a Registration Statement or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, and file any other required document so that, as thereafter delivered, neither a Registration Statement nor such Prospectus will contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. If the Company notifies the Holders in accordance with clauses (iii) through (vi) of Section 1.5(d) above to suspend the use of any Prospectus until the requisite changes to such Prospectus have been made, then the Holders shall suspend use of such Prospectus.  The Company will use its best efforts to ensure that the use of the Prospectus may be resumed as promptly as is practicable.  The Company shall be entitled to exercise its right under this Section 1.5(d) to suspend the availability of a Registration Statement and Prospectus for a period not to exceed 60 calendar days (which need not be consecutive days) in any 12-month period.

 

 

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(l)           Comply with all applicable rules and regulations of the Commission.

(m)           The Company may require each selling Holder to furnish to the Company a certified statement as to the number of shares of Common Stock beneficially owned by such Holder and, if required by the Commission, the natural persons thereof that have voting and dispositive control over the shares.

(n)           All fees and expenses incident to the performance of or compliance with, this Agreement by the Company shall be borne by the Company whether or not any Registrable Securities are sold pursuant to a Registration Statement. The fees and expenses referred to in the foregoing sentence shall include, without limitation, (i) all registration and filing fees (including, without limitation, fees and expenses of the Company’s counsel and independent registered public accountants) (A) with respect to filings made with the Commission, (B) with respect to filings required to be made with any Trading Market on which the Common Stock is then listed for trading, (C) in compliance with applicable state securities or Blue Sky laws reasonably agreed to by the Company in writing (including, without limitation, fees and disbursements of counsel for the Company in connection with Blue Sky qualifications or exemptions of the Registrable Securities) and (D) if not previously paid by the Company, with respect to any filing that may be required to be made by any broker through which a Holder intends to make sales of Registrable Securities with FINRA pursuant to FINRA Rule 5110, so long as the broker is receiving no more than a customary brokerage commission in connection with such sale, (ii) printing expenses (including, without limitation, expenses of printing certificates for Registrable Securities), (iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of counsel for the Company, (v) Securities Act liability insurance, if the Company so desires such insurance, and (vi) fees and expenses of all other Persons retained by the Company in connection with the consummation of the transactions contemplated by this Agreement.  In addition, the Company shall be responsible for all of its internal expenses incurred in connection with the consummation of the transactions contemplated by this Agreement (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit.  In no event shall the Company be responsible for any broker or similar commissions of any Holder or, except to the extent provided for in the Transaction Documents, any legal fees or other costs of the Holders.

1.6           Indemnification.

 

(a)           To the extent permitted by law, the Company will indemnify and hold harmless each Holder and each person, if any, who controls such Holder within the meaning of the Securities Act or the Exchange Act, against any losses, claims, damages or liabilities (joint or several) to which any of the foregoing persons may become subject under the Securities Act, the Exchange Act or other federal or state securities law, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (collectively, a “Violation”): (i) any untrue statement or alleged untrue statement of a material fact contained in the Resale Registration Statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, (ii) the omission or alleged omission to state in such filings a material fact required to be stated therein, or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any state securities law or any rule or regulation promulgated under the Securities Act, the Exchange Act or any state securities law; and the Company will pay any legal or other expenses reasonably incurred by any person to be indemnified pursuant to this Section 1.6(a) in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the indemnity agreement contained in this Section 1.6(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld), nor shall the Company be liable in any such case for any such loss, claim, damage, liability or action to the extent that it arises out of or is based upon a Violation that occurs in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by any such Holder or controlling person, nor shall the Company be liable for a Holder’s failure to deliver or cause to be delivered (to the extent such delivery is required under the Securities Act) the prospectus contained in the Resale Registration Statement, furnished to it by the Company on a timely basis at or prior to the time such action is required by the Securities Act to the person alleging a misstatement or omission if such misstatement or omission was corrected in such prospectus.

 

  

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(b)           To the extent permitted by law, each Holder will indemnify and hold harmless the Company, each of its directors, each of its officers who has signed the registration statement, each person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act, any underwriter, any other Holder selling securities in such registration statement and any controlling person of any such underwriter or other Holder, against any losses, claims, damages or liabilities (joint or several) to which any of the foregoing persons may become subject under the Securities Act, the Exchange Act or other federal or state securities law, insofar as such losses, claims, damages or liabilities (or actions in respect thereto) arise out of or are based upon any Violation, in each case to the extent (and only to the extent) that (i) such Violation occurs in reliance upon and in conformity with written information furnished by such Holder expressly for use in connection with such registration; or (ii) the failure by such Holder to deliver or cause to be delivered (to the extent such delivery is required under the Securities Act) the prospectus contained in the Resale Registration Statement furnished to it by the Company on a timely basis at or prior to the time such action is required by the Securities Act to the person asserting a misstatement or omission if such misstatement or omission was corrected in such Prospectus.  Each such Holder will pay any legal or other expenses reasonably incurred by any person to be indemnified pursuant to this Section 1.6(b) in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the indemnity agreement contained in this Section 1.6(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Holder (which consent shall not be unreasonably withheld).  In no event shall any indemnity under this subsection 1.6(b) exceed the net proceeds received by such Holder upon the sale of the Registrable Securities giving rise to such indemnification obligation.

 

(c)           Promptly after receipt by an indemnified party under this Section 1.6 of notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 1.6, deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party (together with all other indemnified parties that may be represented without conflict by one counsel) shall have the right to retain one separate counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action, if materially prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this Section 1.6, but the omission so to deliver written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 1.6.

 

  

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(d)           If the indemnification provided for in Sections 1.6(a) and (b) is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, claim, damage or expense referred to herein, then the indemnifying party, in lieu of indemnifying such indemnified party hereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such loss, claim, damage or expense in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the statements or omissions or alleged statements or omissions that resulted in such loss, liability, claim or expense as well as any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.  In no event shall any Holder be required to contribute an amount in excess of the net proceeds received by such Holder upon the sale of the Registrable Securities giving rise to such indemnification obligation.

 

(e)           The obligations of the Company and Holders under this Section 1.6 shall survive the completion of any offering of Registrable Securities in the Resale Registration Statement under this Section 1, and otherwise.

 

1.7           Reports Under Securities Exchange Act.  With a view to making available the benefits of certain rules and regulations of the Commission, including Rule 144, that may at any time permit an Holder to sell securities of the Company to the public without registration or pursuant to a registration on Form S-1 or Form S-3, the Company agrees to:

 

(a)           file or furnish information as set forth in Section 5.2 of the Subscription Agreement;

 

(b)           take such action, including the voluntary registration of its Common Stock under Section 12 of the Exchange Act, as is necessary to enable the Holders to utilize Form S-1 for the sale of their Registrable Securities, such action to be taken as soon as practicable after the end of the fiscal year in which the registration statement is declared effective;

 

(c)           file with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act; and

 

(d)           furnish to any Holder, so long as the Holder owns any Registrable Securities, forthwith upon request (i) a written statement by the Company that it has complied with the reporting requirements of Rule 144, the Securities Act and the Exchange Act, or that it qualifies as a registrant whose securities may be resold pursuant to Form S-1 or Form S-3 (at any time after it so qualifies), (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company, and (iii) such other information as may be reasonably requested in availing any Holder of any rule or regulation of the Commission that permits the selling of any such securities without registration or pursuant to such form.

 

1.8           Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of each of the parties and shall inure to the benefit of each Holder. The Company may not assign (except by merger) its rights or obligations hereunder without the prior written consent of all of the Holders of the then outstanding Registrable Securities.  Each Holder may assign their respective rights hereunder in the manner and to the Persons as permitted under the Subscription Agreement.

 

  

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2.           Legend.

 

Each certificate representing Shares of Common Stock held by the Holders shall be endorsed with a restrictive legend as set forth in the Subscription Agreement, and shall be removed in accordance with under the conditions and as set forth in the Subscription Agreement.

 

3.           Miscellaneous.

 

3.1           Governing Law.  All questions concerning the governing law, construction, validity, enforcement and interpretation of this Agreement shall be determined in accordance with the provisions of the Subscription Agreement.

 

3.2           WAIVER OF JURY TRIAL.  IN ANY ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE PARTIES EACH KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY WAIVES FOREVER TRIAL BY JURY

 

3.3           Waivers and Amendments.  This Agreement may be terminated and any term of this Agreement may be amended or waived (either generally or in a particular instance and either retroactively or prospectively) with the written consent of the Company and Holders holding at least 75% of the Registrable Securities then outstanding (the “Majority Holders”).  Notwithstanding the foregoing, additional parties may be added as Holders under this Agreement, and the definition of Registrable Securities expanded, with the written consent of the Company and the Majority Holders.  No such amendment or waiver shall reduce the aforesaid percentage of the Registrable Securities, the holders of which are required to consent to any termination, amendment or waiver without the consent of the record holders of all of the Registrable Securities. Any termination, amendment or waiver effected in accordance with this Section 3.3 shall be binding upon each holder of Registrable Securities then outstanding, each future holder of all such Registrable Securities and the Company.

 

3.4           Termination of Registration Rights.  The rights of any Holder to cause the Company to register Registrable Securities under this Agreement shall not apply with respect to such Holder during such periods when such Holder is legally able to dispose of all of its Registrable Securities immediately without registration under the Securities Act and without volume restrictions pursuant to Rule 144, or two years after the date of this Agreement, whichever comes first.  Upon the consummation of a transaction that constitutes a Change in Control (as defined in the Certificate of Designation) and an Organic Change (as defined in the Warrant), all rights and obligations of the Company and the Holder pursuant to this Agreement shall terminate.

 

3.5           Successors and Assigns.  Except as otherwise expressly provided herein, the provisions of this Agreement shall inure to the benefit of, and be binding upon, the successors, assigns, heirs, executors and administrators of the parties hereto.

 

3.6           Entire Agreement.  This Agreement constitutes the full and entire understanding and agreement among the parties with regard to the subject matter hereof, and no party shall be liable or bound to any other party in any manner by any warranties, representations or covenants except as specifically set forth herein.  The remedies provided herein are cumulative and not exclusive of any other remedies provided by law.

 

  

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3.7           Notices.  All notices and other communications required or permitted under this Agreement shall be in writing and shall be delivered personally by hand or by overnight courier, mailed by United States first-class mail, postage prepaid, sent by facsimile or sent by electronic mail directed (a) if to an Holder, at such Holder’s address, facsimile number or electronic mail address set forth in the Company’s records, or at such other address, facsimile number or electronic mail address as such Holder may designate by ten days’ advance written notice to the other parties hereto or (b) if to the Company, to its address, facsimile number or electronic mail address set forth on its signature page to this Agreement and directed to the attention of Stephen Alfers, CEO and President, or at such other address, facsimile number or electronic mail address as the Company may designate by ten days’ advance written notice to the other parties hereto. All such notices and other communications shall be effective or deemed given upon delivery, on the date that is three days following the date of mailing, upon confirmation of facsimile transfer or upon confirmation of electronic mail delivery.

 

3.8           Interpretation.  The words “include,” “includes” and “including” when used herein shall be deemed in each case to be followed by the words “without limitation.”  The titles and subtitles used in this Agreement are used for convenience only and are not considered in construing or interpreting this Agreement.

 

3.9           Severability.  If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.

 

3.10           Independent Nature of Holders’ Obligations and Rights.  The obligations of each Holder hereunder are several and not joint with the obligations of any other Holder hereunder, and no Holder shall be responsible in any way for the performance of the obligations of any other Holder hereunder. Nothing contained herein or in any other agreement or document delivered at any closing, and no action taken by any Holder pursuant hereto or thereto, shall be deemed to constitute the Holders as a partnership, an association, a joint venture or any other kind of group or entity, or create a presumption that the Holders are in any way acting in concert or as a group or entity with respect to such obligations or the transactions contemplated by this Agreement or any other matters, and the Company acknowledges that the Holders are not acting in concert or as a group, and the Company shall not asset any such claim, with respect to such obligations or transactions. Each Holder shall be entitled to protect and enforce its rights, including without limitation the rights arising out of this Agreement, and it shall not be necessary for any other Holder to be joined as an additional party in any proceeding for such purpose. The use of a single agreement with respect to the obligations of the Company contained was solely in the control of the Company, not the action or decision of any Holder, and was done solely for the convenience of the Company and not because it was required or requested to do so by any Holder.  It is expressly understood and agreed that each provision contained in this Agreement is between the Company and a Holder, solely, and not between the Company and the Holders collectively and not between and among Holders.

 

3.11           Execution and Counterparts. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart.  In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page were an original thereof.

 

  

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3.12           No Inconsistent Agreements. Neither the Company nor any of its Subsidiaries has entered, as of the date hereof, nor shall the Company or any of its Subsidiaries, on or after the date of this Agreement, enter into any agreement with respect to its securities, that would have the effect of impairing the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof.

 

3.13           Piggy-Back Registrations. If, at any time during the Effectiveness Period, there is not an effective Registration Statement covering all of the Registrable Securities and the Company shall determine to prepare and file with the Commission a registration statement relating to an offering for its own account or the account of others under the Securities Act of any of its equity securities, other than on Form S-4 or Form S-8 (each as promulgated under the Securities Act) or their then equivalents relating to equity securities to be issued solely in connection with any acquisition of any entity or business or equity securities issuable in connection with the Company’s stock option or other employee benefit plans, then the Company shall deliver to each Holder a written notice of such determination and, if within fifteen days after the date of the delivery of such notice, any such Holder shall so request in writing, the Company shall include in such registration statement all or any part of such Registrable Securities such Holder requests to be registered (a “Piggyback Registration”); provided, however, that the Company shall not be required to register any Registrable Securities pursuant to this Section 3.13 that are eligible for resale pursuant to Rule 144 (without the requirement for the Company to be in compliance with current public information under Rule 144 and without volume restrictions or current public information requirements) promulgated by the Commission pursuant to the Securities Act (assuming that such securities and any securities issuable upon exercise, conversion or exchange of which, or as a dividend upon which, such securities were issued or are issuable, were at no time held by any Affiliate of the Company.  If a Piggyback Registration is initiated as a primary underwritten offering on behalf of the Company and the managing underwriter advises the Company and the holders of Registrable Securities (if any holders of Registrable Securities have elected to include Registrable Securities in such Piggyback Registration) in writing that in its opinion the number of shares of Common Stock proposed to be included in such registration, including all Registrable Securities and all other shares of Common Stock proposed to be included in such underwritten offering, exceeds the number of shares of Common Stock reasonably expected to be sold in such offering and/or that the number of shares of Common Stock proposed to be included in any such registration would adversely affect the price per share of the Common Stock to be sold in such offering, the Company shall include in such registration (i) first, the number of shares of Common Stock that the Company proposes to sell, and (ii) second, to the extent applicable, the number of shares of Common Stock requested to be included therein by holders of Registrable Securities, allocated pro rata among all such holders on the basis of the number of Registrable Securities owned by each such holder or in such manner as they may otherwise agree.  A Registration Statement filed on behalf of the Holders pursuant to Section 1.2 shall not be subject to the limitations applicable to an underwritten offering.

3.14           Amendments and Waivers.  If a Registration Statement does not register all of the Registrable Securities pursuant to a waiver or amendment done in compliance with Section 3,3, then the number of Registrable Securities to be registered for each Holder shall be reduced pro rata among all Holders and each Holder shall have the right to designate which of its Registrable Securities shall be omitted from such Registration Statement. Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of a Holder or some Holders and that does not directly or indirectly affect the rights of other Holders may be given only by such Holder or Holders of all of the Registrable Securities to which such waiver or consent relates; provided, however, that the provisions of this sentence may not be amended, modified, or supplemented except in accordance with the provisions of Section 3.3.  No consideration shall be offered or paid to any Person to amend or consent to a waiver or modification of any provision of this Agreement unless the same consideration also is offered to all of the parties to this Agreement.

[SIGNATURE PAGES FOLLOW]

 

  

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IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officer, as of the date first set forth above.

 

PERSHING GOLD CORPORATION

By:                                                                                

Name:  Eric Alexander

Title:    Vice President of Finance and Controller

Address for notice:

1658 Cole Boulevard

Building 6, Suite 210

Lakewood, CO 80401

[COMPANY SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]

 

 

  

 

 

IN WITNESS WHEREOF, the undersigned Holder has executed this Agreement as of the date first written above.

 

	  	
“Holder”

 

 

 

	  
	  	
 ______________________________________

	  
	  	  	  
	  	  	  
	  	  	  	  
	  	
By: 

	  	  
	  	  	
Name:

	  
	  	  	
Title:

	  
	  	  	  	  
	  	
 

Address:

	  
	  	
___________________________________

	  
	  	
___________________________________

	  
	  	
___________________________________

	  
	  	
Telephone:__________________________

	  
	  	
Facsimile:___________________________

	  
	  	
Email:______________________________

	  
	  	  	  	  

 

 

[HOLDER SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]

 

  

 

  

 

Annex A

PERSHING GOLD CORPORATION

Selling Securityholder Notice and Questionnaire

The undersigned beneficial owner of common stock (the “Registrable Securities”) of Pershing Gold Corporation, a Nevada corporation (the “Company”), understands that the Company has filed or intends to file with the Securities and Exchange Commission (the “Commission”) a registration statement (the “Registration Statement”) for the registration and resale under Rule 415 of the Securities Act of 1933, as amended (the “Securities Act”), of the Registrable Securities, in accordance with the terms of the Registration Rights Agreement (the “Registration Rights Agreement”) to which this document is annexed. A copy of the Registration Rights Agreement is available from the Company upon request at the address set forth below.  All capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Registration Rights Agreement.

 

Certain legal consequences arise from being named as a selling securityholder in the Registration Statement and the related prospectus.  Accordingly, holders and beneficial owners of Registrable Securities are advised to consult their own securities law counsel regarding the consequences of being named or not being named as a selling securityholder in the Registration Statement and the related prospectus.

 

NOTICE

 

The undersigned beneficial owner (the “Selling Securityholder”) of Registrable Securities hereby elects to include the Registrable Securities owned by it in the Registration Statement.

 

The undersigned hereby provides the following information to the Company and represents and warrants that such information is accurate:

 

QUESTIONNAIRE

 

1.           Name.

 

(a)           Full Legal Name of Selling Securityholder

 

 

(b)           Full Legal Name of Registered Holder (if not the same as (a) above) through which Registrable Securities are held:

 

 

(c)           Full Legal Name of Natural Control Person (which means a natural person who directly or indirectly alone or with others has power to vote or dispose of the securities covered by this Questionnaire):

 

2.           Address for Notices to Selling Securityholder:

 

 

 

A-1

 

 

	
Telephone:

	
Fax:

	
Contact Person:

3.           Broker-Dealer Status:

 

(a)           Are you a broker-dealer?

 

Yes                                No

 

(b)           If “yes” to Section 3(a), did you receive your Registrable Securities as compensation for investment banking services to the Company?

 

Yes                                No

 

Note:           If “no” to Section 3(b), the Commission’s staff has indicated that you should be identified as an underwriter in the Registration Statement.

 

(c)           Are you an affiliate of a broker-dealer?

 

Yes                                No

 

An “affiliate” of a registered broker-dealer shall include any company that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such broker-dealer, and does not include any individuals employed by such broker-dealer or its affiliates.

 

(d)           If you are an affiliate of a broker-dealer, do you certify that you purchased the Registrable Securities in the ordinary course of business, and at the time of the purchase of the Registrable Securities to be resold, you had no agreements or understandings, directly or indirectly, with any person to distribute the Registrable Securities?

 

Yes                                No

 

Note:           If “no” to Section 3(d), the Commission’s staff has indicated that you should be identified as an underwriter in the Registration Statement.

 

4.           Beneficial Ownership of Securities of the Company Owned by the Selling Securityholder.

 

Except as set forth below in this Item 4, the undersigned is not the beneficial or registered owner of any securities of the Company other than the securities issuable pursuant to the Subscription Agreement.

 

(a)           Type and Amount of other securities beneficially owned by the Selling Securityholder:

 

  

  

5.           Relationships with the Company:

 

Except as set forth below, neither the undersigned nor any of its affiliates, officers, directors or principal equity holders (owners of 5% of more of the equity securities of the undersigned) has held any position or office or has had any other material relationship with the Company (or its predecessors or affiliates) during the past three years.

 

  

A-2

  

 

State any exceptions here:

 

  

  

The undersigned agrees to promptly notify the Company of any inaccuracies or changes in the information provided herein that may occur subsequent to the date hereof at any time while the Registration Statement remains effective.

 

By signing below, the undersigned consents to the disclosure of the information contained herein in its answers to Items 1 through 5 and the inclusion of such information in the Registration Statement and the related prospectus and any amendments or supplements thereto.  The undersigned understands that such information will be relied upon by the Company in connection with the preparation or amendment of the Registration Statement and the related prospectus.

 

The undersigned also represents that it (including its donees or pledgees) shall distribute the Registrable Securities listed pursuant to the Resale Registration Statement and as set forth in the Plan of Distribution section of the Resale Registration Statement.

 

  

A-3

  

 

IN WITNESS WHEREOF the undersigned, by authority duly given, has caused this Notice and Questionnaire to be executed and delivered either in person or by its duly authorized agent.

 

Date:

	  	
Beneficial Owner:

	  
	  	  	  	  
	  	  	  	  
	  	
By: 

	  	  
	  	  	
Name:

Title:

	  

 

PLEASE EMAIL A COPY OF THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE, AND RETURN THE ORIGINAL BY OVERNIGHT MAIL, TO:

 

Mindyjo Germann, Corporate Secretary: MGermann@pershinggold.com

 

Pershing Gold Corporation

1658 Cole Boulevard

Building 6, Suite 210

Lakewood, CO 80401

 

 

A-4

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