Exhibit 10.1
 
THIS NOTE AND THE COMMON STOCK INTO WHICH IT MAY BE CONVERTED HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR
APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT OR SUCH LAWS COVERING THE TRANSFER OR AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
 

PROSPECT GLOBAL RESOURCES INC.

CONVERTIBLE SECURED PROMISSORY NOTE

 

$500,000   March 11, 2011

 

 
Section 1.  Principal.  PROSPECT GLOBAL RESOURCES INC., a Delaware corporation
(the “Company”), for value received, hereby promises to pay to the order of COR
Capital LLC, as investment advisor on behalf of the COR US Equity Income Fund,
and any assignees or transferees thereof (the “Holder”), in lawful money of the
United States at the address of Holder set forth below, the principal amount of
$500,000, together with interest as provided in Section 2 below.
 
Section 2.  Interest.  Except as otherwise provided herein, interest
(“Interest”) shall accrue on the outstanding Principal Amount of the Note at the
rate of 10% per annum (the “Interest Rate”).
 
Section 3.  Definitions.  For purposes of this Note, the following terms have
the meanings set forth below:
 
“Business Day” means any day other than Saturday, Sunday or a day on which banks
are required to be closed in the State of Colorado.

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

“Note” means this Convertible Secured Promissory Note.

"Note Purchase Agreement" means the Note Purchase Agreement, dated as of the
date hereof, between the Company and the Holder, pursuant to which this Note was
issued.

“Obligations” means any and all amounts owing to the Holder under the Note,
including Principal and Interest provided for herein and the conversion rights
of the Holder.
 
 
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“Person” means an individual, a partnership, a corpora­tion, a limited liability
company, an association, a joint stock company, a trust, a joint venture, an
unincorporated organization and a governmental entity or any department, agency
or political subdivision thereof.

“Principal Amount” means, as to this Note, the principal amount set forth on the
first page of this Note, or such lesser principal amount of this Note
(“Principal”) as may be outstanding hereunder at any time and from time to time.

“Qualified Financing” means the Company’s next sale of its Common Stock in one
transaction or series of related transactions occurring on or before the
Maturity Date for an aggregate purchase price paid to the Company of no less
than $10,000,000.
 
Section 4.  Payments of Principal and Interest.
 
4.1 The “Maturity Date” of the Note shall be January 24, 2012.
 
4.2 Except as otherwise provided herein, the aggregate unpaid Principal Amount
of the Note together with all accrued and unpaid Interest thereon shall be due
and payable in full on the Maturity Date.
 
4.3 The aggregate unpaid Principal Amount of the Note together with all accrued
and unpaid Interest thereon shall be due and payable in full upon an Event of
Default in the event that the Holder accelerates and demands payment pursuant to
the terms herein. Upon any conversion into Common Stock, as provided for herein,
then the Company's only obligation shall be to issue the Common Stock to the
Holder in accordance with the terms hereof.
 
4.4 Whenever any payment of any Obligation under the Note shall become due, or
otherwise would occur, on a day that is not a Business Day, such payment shall
be made on the next succeeding Business Day, and such extension of time shall in
such case be included in the computation of such Interest payable.
 
4.5 If at any time any payment of any Obligations under this Note is rescinded
or must otherwise be restored or returned upon the insolvency, bankruptcy or
reorganization of the Company or otherwise, such Obligations, but only to the
extent so rescinded, restored or returned, shall be reinstated as though such
payment had been due but not made when due.
 
Section 5.  Conversion.
 
5.1 Optional Conversion.  On or prior to the Maturity Date, the Holder may
elect, by providing written notice to the Company, to convert the aggregate
Principal Amount plus all accrued Interest into shares of Common Stock at a
conversion price per share equal to $3.00 (subject to adjustment for stock
splits, recapitalizations or similar events).
 
5.2 Upon conversion of this Note pursuant to Section 5.1, the Holder shall
surrender the Note in exchange for shares representing the Common Stock.
 
 
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Section 6.  Other Holder Rights.
 
6.1 Share Adjustment.  To the extent that a conversion occurs pursuant to
Paragraph 5.1 above concurrent with or within 30 days after a Qualified
Financing and the Qualified Financing is for a per share purchase price of less
than $3.60, then Holder shall receive additional consideration in the form of
Common Stock such that the total shares received by Holder (including those in
Section 5.1 above) equals the aggregate Principal Amount (X) plus all accrued
Interest (Y) divided by 0.8 times the per share purchase price of the Qualified
Financing (Z).  If the Qualified Financing occurs in a series of transactions,
then (Z) shall be on the most favorable terms offered to any other investor in
that series of transactions.  For clarity, the total shares received by Holder
shall be equal to (X + Y)÷(0.8 * Z).
 
6.2 Participation Rights.  Subject to regulatory limitations, Holder, or its
assigns, shall have the right to participate in any subsequent securities
offering (including the issuance of convertible debt, preferred stock, or other
debt with a contractual rate of interest over 8%) for a period of two years from
date hereof for an amount of up to $5 million per offering. Holder’s
participation shall be on the most favorable terms offered to any other investor
in the transaction.
 
Section 7.  Covenants.
 
7.1 Affirmative Covenants of the Company.  The Company covenants and agrees
that, between the date hereof and the earlier of (i) conversion of the Note
pursuant to Section 5, or (ii) the date of repayment of the Principal Amount
plus all accrued Interest, the Company shall:
 
(a) Corporate Existence.  At all times cause to be done all things reasonably
necessary to maintain, preserve and renew its corporate existence and all
material licenses, authorizations and permits necessary to the conduct of its
businesses.
 
(b) Compliance with Laws.  Comply with all applicable laws, rules and
regulations of all governmental authorities, the violation of which could
reasonably be expected to have a Material Adverse Effect on its business or
properties.
 
(c) Books and Records.  Maintain proper books of record and account which
present fairly in all material respects its financial condition and results of
operations and make provisions on its financial statements for all such proper
reserves as in each case are required in accordance with generally accepted
accounting principles, consistently applied.
 
7.2 Negative Covenants of the Company.  The Company covenants and agrees that,
between the date hereof and the earlier of (i) conversion of the Note pursuant
to Section 5 or (ii) the repayment of the Principal Amount plus all accrued
Interest, the Company shall not:
 
(a) Equity Plans.  Adopt or otherwise implement any new stock option, stock
grant or other equity compensation plan for the Company's employees, directors
or consultants.
 
(b) Liquidation.  Take any action to liquidate, dissolve or otherwise wind-up
the Company.
 
 
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(c) Redemptions.  Redeem or repurchase any outstanding Common Stock.
 
(d) No Impairment.  Through any reorganization, recapitalization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms to be observed or performed hereunder by the Company, but will
at all times in good faith assist in the carrying out of all the provisions of
the Note and in the taking of all such action as may be necessary or appropriate
in order to protect the respective conversion rights of Holder against
impairment.
 
7.3 Other Rights. The Company shall treat the Note and the Holder pari passu in
all respects with the Company's $2,000,000 Convertible Secured Promissory Note
dated January 24, 2011 payable to Richard Merkin (the “Merkin Note”).  The
Company will make no payments to the holders of the Merkin Note in order to
induce the waiver of any negative covenant in the Merkin Note or to make any
other amendment to the Merkin Note without making a pro rata payment to Holder
based on the relative outstanding principal balances of this Note and the Merkin
Note.  The Company also agrees to notify Holder of any communications with the
holders of the Merkin Note which may impact Holder pursuant to this provision,
this Note, the related Registration Rights Agreement between Holder and Company
and/or the Security Agreement among Richard Merkin, Holder and the Company.
 
Section 8.  Events of Default.  In case of the happening of any of the following
events (each, an “Event of Default”):
 
(a) the Company shall materially fail to observe or perform any material
covenant or agreement contained in this Note and such failure shall continue
unremedied for a period of 15 days following written notice thereof  to the
Company from any Holder;
 
(b) any breach of any representation, warranty or covenant made by the Company
contained in this Note or the Note Purchase Agreement;
 
(c) the Company shall (i) voluntarily commence any proceeding or file any
petition or any notice of its intent to commence or file any such proceeding,
petition or proposal seeking relief under Title 11 of the United States Code or
any other federal or state bankruptcy, insolvency or similar law, (ii) apply for
or consent to the appointment of a receiver, trustee, custodian, sequestrator or
similar official for any such Person or for any substantial part of its property
or assets, (iii) make a general assignment for the benefit of creditors, or (iv)
take any corporate or stockholder action in furtherance of any of the foregoing;
 
(d) an involuntary proceeding shall be commenced or an involuntary petition
shall be filed in a court of competent jurisdiction seeking (i) relief in
respect of the Company or of any substantial part of the property or assets
thereof, under Title 11 of the United States Code or any other federal or state
bankruptcy, insolvency or similar law, (ii) the appointment of a receiver,
trustee, custodian, sequestrator or similar official for the Company or any
substantial part of its property or (iii) the winding-up or liquidation of the
Company, and such proceeding, petition or order shall continue unstayed and in
effect for a period of 90 consecutive days; or
 
 
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(e) the Note shall cease to be in full force and effect and enforceable against
the Company in accordance with its terms (other than by reason of any action
taken (or the failure to take any action) by the Holder);
 
then, upon the occurrence of any such Event of Default (other than an Event of
Default described in Section 7(c) or (d) above, in which case all Principal and
Interest shall automatically become immediately due and payable in full), at any
time thereafter during the continuation of such Event of Default, the Holder may
elect, by written notice delivered to the Company (a “Remedies Election”), to
take any or all of the following actions: (i) declare the Note to be forthwith
due and payable, whereupon the entire unpaid Principal Amount, together with
accrued and unpaid Interest thereon, and all other cash Obligations thereunder,
shall become forthwith due and payable, without presentment, demand, protest or
any other notice of any kind, all of which are hereby expressly waived by the
Company, anything contained herein or in the Note to the contrary
notwithstanding; and (ii) exercise any and all other remedies provided in the
Note or available at law or in equity upon the occurrence and continuation of an
Event of Default.

Section 9. Miscellaneous.
 
9.1 Successors and Assigns.  Subject to the exceptions specifically set forth in
this Note, the terms and conditions of this Note shall inure to the benefit of
and be binding upon the respective executors, administrators, heirs, successors
and assigns of the parties.

9.2 Survival.  The warranties, representations and covenants of the Company and
the Holder contained in or made pursuant to this Note shall survive the
execution and delivery of this Note.

9.3 Loss or Mutilation of Note.  Upon receipt by the Company of evidence
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Note, together with indemnity reasonably satisfactory to the Company, in
the case of loss, theft or destruction, or the surrender and cancellation of the
Note, in the case of mutilation, the Company shall execute and deliver to Holder
a new Note of like tenor and denomination as this Note.  Principal is payable
only to the registered Holder of the Note.

9.4 Legend.  Any certificate representing shares of the Company's capital stock
issued upon conversion of this Note or otherwise issued hereunder shall be
stamped or otherwise imprinted with a legend substantially in the following
form:

THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “ACT”), OR APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR SUCH LAWS COVERING THE
TRANSFER OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED.
 
 
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9.5 Notices.  Any notice, request or other communication required or permitted
hereunder shall be in writing and shall be delivered personally or by facsimile
or email  (facsimile or email receipt confirmed electronically) or shall be sent
by a reputable express delivery service addressed as follows:

 
If to the Company to:

 
Prospect Global Resources Inc.
600 17th Street, Suite 2800 South

 
Denver, CO 80202

 
Attn:  Patrick L. Avery

 
Fax No.:  720-294-0402

 
email:  *********

 
If to the Holder to:

 
COR Capital LLC

 
233 Wilshire Boulevard, suite 830

 
Santa Monica, CA 90401

 
Attn:  Steven Sugarman

 
Fax:     *********

 
email:  *********

Either party hereto may change the above specified recipient or mailing address
by notice to the other party given in the manner herein prescribed.  All notices
shall be deemed given on the day when actually delivered as provided above (if
delivered personally or by facsimile, provided that any such facsimile is
received during regular business hours at the recipient's location) or on the
day shown on the return receipt (if delivered by mail or delivery service).

9.6 Law. This Note shall be governed by and construed in accordance with the
domestic laws of the Colorado, without giving effect to any choice of law or
conflict of law provision or rule that would cause the application of the laws
of any jurisdiction other than the State of Colorado.  The Holder and the
Company each accepts and consents to the exclusive jurisdiction of the state or
federal courts located in the City of Denver and State of Colorado, for itself
and in respect of its property, and waives in respect of both itself and its
property any defense it may have as to or based on sovereign immunity,
jurisdiction, improper venue or inconvenient forum.  Each of the parties hereto
irrevocably consents to the service of any process or other papers by the use of
any of the methods and to the addresses set for the giving of notices pursuant
to this Agreement.

9.7 Waiver and Amendment.  Any term of this Note may be amended and the
observance of any term of this Note may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
prior written consent of the Company and the Holder.
 
 
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IN WITNESS WHEREOF, the Company has caused this Note to be signed in its name.

THE COMPANY:

PROSPECT GLOBAL RESOURCES INC.

By:       /s/ Patrick L. Avery        
            Patrick L. Avery
Chief Executive Officer

 
 

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