Exhibit 10.1

 

[*Some pricing information has been omitted from this agreement in connection
with a request for confidential treatment.  The omitted information has been
filed separately with the Securities and Exchange Commission as part of the
request for confidential treatment.  The omitted information is indicated by a
blank and marked with an asterisk.]

 

POTASH SUPPLY AGREEMENT

 

This POTASH SUPPLY AGREEMENT (“Supply Agreement”) is dated as of October 18,
2012.

 

BETWEEN:

 

PROSPECT GLOBAL RESOURCES INC. a corporation limited by shares incorporated
under the laws of Nevada, United States of America (“Prospect”), and AMERICAN
WEST POTASH LLC, a limited liability company under the laws of Delaware, United
States of America (“AWP”, Prospect and AWP are collectively referred to as
“Seller”);

 

AND:

 

SICHUAN CHEMICAL INDUSTRY HOLDING (GROUP) CO., LTD, a limited liability company
under the laws of Peoples Republic of China (“Buyer”).

 

Buyer and Seller are hereinafter referred to collectively as the “Parties” and
each a “Party”.

 

WHEREAS:

 

A.                                   Prospect is the owner and operator of a
developmental Potash project in the Holbrook Basin of eastern Arizona in the
United States and plans to design, construct and manage a world class Potash
facility (the “Project”) .

 

B.                                     AWP is a development stage company
engaged in the development of a potash mine and an indirectly 100% subsidiary of
Prospect.

 

C.                                     Seller wishes to sell to Buyer and its
nominee(s), and Buyer wishes to purchase from Seller, either directly or through
its nominee(s), Potash for a period of ten (10) years following the Initial
Production Date (as hereinafter defined) on the terms and conditions set forth
in this Supply Agreement; and

 

D.                                    This Supply Agreement has been approved by
the Board of the Seller and the board of directors of the Buyer.

 

1

--------------------------------------------------------------------------------

 

NOW, THEREFORE, for valuable consideration, the receipt and legal sufficiency of
which are hereby acknowledged, and intending to be legally bound, the Parties
hereto stipulate, covenant and agree as follows:

 

ARTICLE I.DEFINITIONS

 

1.1                                                         For purposes of this
Supply Agreement unless the context otherwise requires, the following
definitions apply:

 

“30 Day Average Comparable Price” has the meaning specified in
Section ARTICLE V(b);

 

“Affiliate” of any Person means any other Person directly or indirectly, through
one or more intermediaries, controlling, controlled by or under common control
with such Person.  A Person will be deemed to control another Person if the
controlling Person is the beneficial owner of greater than 20% or more of any
class of voting securities (or other voting or equity interests) of the
controlled person or possesses, directly or indirectly, the power to direct or
cause the direction of the management or policies of the controlled Person,
whether through ownership of capital stock, by contract or credit arrangement,
as trustee or executor, or otherwise;

 

“Annual Minimum Amount” has the meaning specified in Section 2.1;

 

“Arrival Inspection” has the meaning specified in Section ARTICLE XII(b);

 

“Asia ex PRC” means Asia except for the PRC;

 

“Benchmark Price” means the import price per tonne of Potash in the PRC derived
from the Negotiation;

 

“Board” has the meaning specified in Section 7.3:

 

“Breaching Party” has the meaning specified in Section 7.2(a)(i);

 

“Business Day” means any day other than a Saturday, Sunday or any day on which
banks are generally not open for business in Hong Kong, the PRC or New York
City, New York, USA;

 

“Buyer” has the meaning specified in the introduction of this Supply Agreement
and for the purpose of purchasing Potash under this Supply Agreement shall
include nominees of Sichuan Chemical Industry Holding (Group) Co Ltd.;

 

“Buying Period” means such period for which the most recently negotiated import
price per tonne of Potash purchased by Sinochem from Canpotex shall apply as set
forth in the publication of any press releases by Sinochem or as disclosed in
major fertilizer trade publications, such as, for the purpose of illustration
and not limitation, Fertecon, Green Markets, FMB and Sinofi;

 

2

--------------------------------------------------------------------------------

 

“Canpotex” means Canpotex Limited and/or its subsidiaries;

 

“Change Notice” has the meaning specified in Section 7.3;

 

“Change of Control” has the meaning specified in Section 7.3;

 

“Changing Party” has the meaning specified in Section 7.3;

 

“China Optimum Granular Price” means the Benchmark Price per tonne of granular
Potash imported into the PRC for a Buying Period, assuming delivery to a port in
the PRC on CFR terms (or other trade terms in the future jointly determined by
Sinochem and Canpotex) less (a) Costs of Shipping; and (b) any rebate, discount,
commission and dispatch money or any similar or related rebate or discount of
any nature in any form (as illustration,                                 *);

 

“China Optimum Standard Price” means the Benchmark Price per tonne of standard
potash imported into the PRC for a Buying Period, assuming delivery to a port in
the PRC upon CFR terms (or other trade and pricing terms in the future jointly
determined by Sinochem and Canpotex) less (a) Costs of Shipping; and (b) any
rebate, discount, commission and dispatch money or any similar or related rebate
or discount of any nature in any form (as illustration,
                                *);

 

“China Port Selling Price” means the lowest price at which potash is sold to
domestic distributors at a port in the PRC;

 

“CFR” has the meaning specified in INCOTERMS 2010;

 

“Comparable Price”  means the China Port Selling Price as adjusted so that such
price reflects a sale of Potash on FOB basis, by deducting (a) any cost and
expense incurred in the transport, shipment and import of the Potash, including
but not limited to import duty, insurance, average storage cost at port of
arrival, packing and unloading expenses, etc.;, (b) Costs f shipment and (c) any
rebate, discount, commission and dispatch money or any similar or related
rebated or discount of any nature in any form;

 

“Completion Date” has the meaning specified in Section 6.2(d);

 

“Confidential Information” has the meaning specified in Section 17.1;

 

“Consultant” has the meaning specified in Section 2.2(a);

 

“Costs of Shipment” means the costs of shipping for Potash from a Port of
Shipment to a port of arrival in the PRC. For the purposes of developing a more
precise procedure for calculating the Costs of Shipment as close to an actual
shipping date as practicable, the Parties hereby agree that they will negotiate
in good faith and execute a side letter no later

 

3

--------------------------------------------------------------------------------

 

than six (6) months before the Initial Production Date specifying the sources
and procedures to be used to calculate the Costs of Shipment;

 

“Defective Potash” has the meaning specified in Section 6.2(a);

 

“Delivered” has the meaning specified in Section ARTICLE V(g) and “Deliver” and
“Delivery” shall be interpreted accordingly;

 

“Event of Force Majeure” has the meaning specified in Section 10.1;

 

“Excess” has the meaning specified in Section 6.2(d);

 

“Exchange Act” has the meaning specified in Section 7.3:

 

“Expected Delivery Period” has the meaning specified in Section 2.3(b);

 

“FOB” has the meaning specified in INCOTERMS 2010;

 

“General Discount” means the sum of $        * per tonne of Potash;

 

“ICC” has the meaning specified in Section 12.1(f);

 

“Issuers” has the meaning specified in Section 12.1(d);

 

“Initial Production Date” means that date upon which Seller will have produced
and sold an aggregate amount of 100,000 tonnes of Potash in a 45 consecutive day
period, but in no event shall the Initial Production Date be later than the Long
Stop Date provided that such Initial Production Date shall only be effective if
the Seller shall have advised the Buyer of the Initial Production Date not less
than three (3) months in advance of such Initial Production Date;

 

“HKIAC’ has the meaning specified in Section 23.2;

 

“Hong Kong” means the Hong Kong Special Administrative Region of the PRC;

 

“LCs” has the meaning specified in Section 12.1;

 

“Long Stop Date” means 31 December 2015; provided, that if delays in completion
of the Project make it unlikely that the Project will begin production of Potash
by that date, the parties will negotiate in good faith to adjust the Long Stop
Date to a new date;

 

“Losses” has the meaning specified in Section 8.1;

 

“Lowest Actual Chinese Import Price” has the meaning specified in
Section 2.2(e);

 

“Lowest Actual Non-China Import Price” has the meaning specified in
Section 2.2(e);

 

4

--------------------------------------------------------------------------------

 

“Marketing Discount” means the sum of $        * per tonne for the first two
(2) Years of the Term, the sum of $        * per tonne for the remaining eight
(8) Years of the Term and the sum of $        * per tonne during any extensions
of the term of this Supply Agreement;

 

“Negotiation” means the negotiation conducted for a Buying Period between
Sinochem and Canpotex to determine the import price of Potash per tonne in the
PRC which is organized by China Chamber of Commerce of Metals Minerals &
Chemicals Importers & Exporters and implemented or conducted by Sinochem for the
PRC;

 

“Non-Breaching Party” has the meaning specified in Section 7.2(a);

 

“Non-changing Party” has the meaning specified in Section 7.3;

 

“Parties” and “Party” has the meaning specified in the introduction of this
Supply Agreement;

 

“Person” means an individual, limited or general partnership, corporation,
trust, limited liability company, unincorporated organization, association,
joint venture or a government or agency or political subdivision or
instrumentality thereof;

 

“Port of Shipment” means either the Port of Stockton, California or the Port of
Long Beach, California, as designated by the Buyer in a Sales Agreement;

 

“Potash” means granular potash and standard potash meeting the Specifications;

 

“PRC” means People’s Republic of China or China, and for the purpose of this
Supply Agreement and any Sales Agreements, shall be exclusive of Hong Kong the
Macao Special Administrative Region and Taiwan;

 

“Pre-loading Inspection” has the meaning specified in Section 6.1;

 

“Pre-Shipping Defective Potash” has the meaning specified in Section 6.2(a);

 

“Report” has the meaning specified in Section 2.2(a);

 

“Sales Agreement” has the meaning specified in Section 2.3(a);

 

“Shipping Advice” means the letter or form stating vessel name, voyage, loading
quantity, date of departure, date of arrival, port of departure, and port of
arrival, sent by the Seller to the Buyer informing that the shipment of the
Potash ordered in a Sales Agreement is on its way to which a copy of bill of
lading may, at the discretion of the Seller be attached;

 

“Shipment Schedule” has the meaning specified in Section 5.2;

 

5

--------------------------------------------------------------------------------

 

“Shortfall” has the meaning specified in Section 6.2(d);

 

“Sinochem” means Sinochem Group and/or its subsidiaries;

 

“Specifications” means, in respect of granular Potash, KCL (GB6549-2011) and in
respect of standard Potash, KCL (GB6549-2011) and those specifications set forth
in Schedule B;

 

“Term” has the meaning specified in Section 7.1;

 

“tonnes” means metric tonnes;

 

“USA” means the United States of America;

 

“Volume Inspection” has the meaning specified in Section 6.1;

 

“Year” means a 12 month period which commences on 1 July and ends on 30 June,
provided that; if the Initial Production Date is not 1 July, the first Year
shall be such period of time as shall elapse between the Initial Production Date
and first 30 June after the Initial Production Date even if such period is less
than 12 months.

 

1.2                                                         All references to
monetary amounts or “$” shall be a reference to United States Dollars.

 

ARTICLE II.SUPPLY AND PURCHASE OF THE PRODUCTS

 

2.1                                 Total Volume. Upon the terms and subject to
the conditions of this Supply Agreement, Seller agrees to supply and sell to
Buyer, and Buyer agrees to purchase from Seller not less than 500,000 tonnes
(“Annual Minimum Amount”) and up to 1,000,000 tonnes of Potash each Year during
the Term which Potash shall conform to the Specifications.

 

2.2                                 Prices.  The purchase price of all Potash
purchased under this Supply Agreement shall be determined at the signing of each
Sales Agreement and shall be calculated as follows:

 

(a)                                  The Parties shall engage a mutually
selected independent and disinterested third-party (the “Consultant”) on the
following basis:

 

ARTICLE III.it shall be an internationally recognized research or consulting
firm with its global headquarters located outside of the PRC and maintains a
permanent office in the PRC;

 

ARTICLE IV.it shall not have been a paid service provider to either Buyer or
Seller or their respective Affiliates prior to the date of this Supply Agreement
and,

 

6

--------------------------------------------------------------------------------

 

ARTICLE V.it shall not have any significant business arrangement with any Person
that sells more than 250,000 tonnes of Potash annually or purchases more than
250,000 tonnes of Potash annually.

 

The selection of the Consultant shall be made within 3 months prior to the
Initial Production Date. Following the Consultant’s engagement by the Buyer and
the Seller pursuant to the term of this Supply Agreement, the Buyer and Seller
covenant and undertake to each other that they shall not retain or attempt to
retain the Consultant to provide any other services to either of them or their
respective Affiliates.  The fees of the Consultant shall be paid 50% each by
Buyer and Seller.

 

For each Buying Period the Consultant shall determine and present to the Parties
in a report its professional understanding of the China Optimum Granular Price
and the China Optimum Standard Price (a “Report”).  The Parties agree to
instruct the Consultant to prepare and deliver its first Report within 60 days
after Initial Production Date and all subsequent Reports within 60 days after
the Negotiation for each Buying Period.  The Parties agree to accept the China
Optimum Granular Price and the China Optimum Standard Price as set forth in each
Report for the purposes of calculating prices in this Section 2.2.

 

(a)                                  The Potash sold and purchased under this
Supply Agreement and any Sales Agreement shall be at the China Optimum Granular
Price and the China Optimum Standard Price (as it may be adjusted from time to
time and in accordance with Sections 2.2(c) and (d)) less the General Discount
and the Marketing Discount.

 

(b)                                 If at any time within a period of 30 days
after the arrival of any vessel carrying a shipment of all or any portion of an
order of Potash at the port of arrival in the PRC, the Buyer believes that the
Comparable Price for granular Potash is lower than the China Optimum Granular
Price as determined by the Report for the relevant period or the Comparable
Price for standard Potash is lower than the China Optimum Standard Price as
determined by the Report for the relevant period, Buyer shall be entitled to
instruct the Consultant to assess whether the Comparable Price of Potash
averaged over a 30 day period commencing day on the date on which after the
relevant vessel arrives at the port of arrival (“30 Day Average Comparable
Price”)  is lower than the China Optimum Granular Price or the China Optimum
Standard Price (as the case may be).  The Parties shall procure that the
Consultant forms his assessment of the applicable 30 Day Average Comparable
Price and delivers his assessment within 60 days of the Buyer’s instructions. 
If the Consultant confirms that the 30 Day Average

 

7

--------------------------------------------------------------------------------

 

Comparable Price is lower than the China Optimum Granular Price or the China
Optimum Standard Price (as the case may be), the price to be paid by the Buyer
for the relevant shipment of Potash shall be based on the 30 Day Average
Comparable Price as determined by the Consultant and the Seller shall be deemed
to have sold such shipment of Potash to the Buyer at such 30 Day Average
Comparable Price as determined by the Consultant less the General Discount and
the Marketing Discount.  For the purpose of assessing whether the 30 Day Average
Comparable Price is lower than the China Optimum Granular Price or the China
Optimum Standard Price (as the case may be) where the China Port Selling Price
is designated in Renminbi, the same shall be converted to US dollars at the
middle rate of US dollars against Renminbi published by the People’s Bank of
China on the day that the relevant shipment of Potash arrives at the port of
arrival.  Where the Buyer has overpaid for any shipment due to an adjustment
made pursuant to this Section 2.2(c), the Seller and Buyer shall agree to
whether the overpaid amount shall be credited to the Buyer for a subsequent
order or refunded to the Buyer.

 

(c)                                  The China Optimum Granular Price and China
Optimum Standard Price determined in any Report (as may be adjusted in
accordance with Sections 2.2(c) and (d)) shall apply for the calculation of the
prices of Potash sold and purchased between Buyer and Seller until a new Report
is presented by the Consultant.  If as a result of the pricing mechanism for
fixing the Benchmark Price between Sinochem and Canpotex the China Optimum
Granular Price and China Optimum Standard Price determined in any Report are
retrospective or prospective for any Buying Period, then the Parties shall
adjust the prices at which Potash purchased and sold under this Supply Agreement
and any Sales Agreement when the actual China Optimum Granular Price and China
Optimum Standard Price for the relevant period is determined and credit or
additional payments shall be made by the Parties accordingly.

 

(d)                                 If the Benchmark Price cannot be determined
and presented in any Buying Period, the Parties shall jointly engage the
Consultant within 10 calendar days after the end of such Buying Period to
determine (i) the lowest actual import price of Potash paid by any entity in the
PRC market at a PRC port of arrival during such Buying Period and where such
import price was based on FOB (adjust the same to CFR basis) and deduct (x) any
rebate, discount, commission and dispatch money

 

8

--------------------------------------------------------------------------------

 

or any similar or related rebate or discount of any nature in any forms paid by
exporter; and (y) the Costs f shipment (the “Lowest Actual Chinese Import
Price”) and (ii) the lowest actual import price of Potash paid by an entity
globally, excluding the PRC market, at a port of arrival outside the PRC in such
Buying Period and where such import price was based FOB adjust the same to a CFR
basis)  and deduct (a)  any rebate, discount, commission and dispatch money or
any similar or related rebate or discount of any nature in any forms paid by an
exporter); and (b) the costs f shipment for the transport of the relevant
shipment from the Port of Shipment to the relevant port of arrival (the “Lowest
Actual Non-China Import Price”). The purchase price of Potash to be paid by
Buyer to Seller in such Buying Period shall be adjusted to the lower of the
Lowest Actual Chinese Import Price and the Lowest Actual Non-China Import Price,
less the General Discount and the Marketing Discount.

 

(e)                                  Where any Potash ordered by the Buyer is
intended for resell or distribution anywhere in Asia ex PRC, the Buyer shall
advise the Seller of the intended location of the resale or distribution and the
Parties shall negotiate in good faith and on sound commercial principles and use
their best endeavors to reach an agreement on a purchase price for such Potash
which price must not be higher than the price at which the Seller sells Potash
to any Person who intends to resell such Potash anywhere in Asia ex PRC).  The
Seller undertakes not to sell Potash to any direct customer in Asia ex PRC at a
price which is lower than the price at which the Buyer sells Potash in Asia ex
PRC. Seller shall not grant any Person an exclusive right to sell or distribute
Seller’s Potash in any jurisdiction in Asia ex PRC.

 

2.3                                 Orders and Delivery.

 

The Potash purchased by Buyer under this Supply Agreement will be sold and
Delivered in accordance with a sales contract to be signed by the Parties, the
agreed form of which is attached hereto as Schedule “A” (the “Sales Agreement”).

 

(f)                                    The Sales Agreement must be in the form
attached and may only be varied upon mutual agreement of the Parties.  Each
Sales Agreement shall state the date or range of dates on which the Buyer
expects such shipment of Potash to which the Sales Agreement relates, is
expected to be delivered (the “Expected Delivery

 

9

--------------------------------------------------------------------------------

 

Period”).  The Seller must sign the Sales Agreement within three (3) Business
Day of the receipt of a Sales Agreement signed by the Buyer.  The Seller
covenants and undertakes that it will not refuse to sign any Sales Agreement
delivered by the Buyer, provided that the quantity of Potash under the finalized
and signed Sales Agreement is plus or minus 20 percent of the quantity stated in
the Shipment Schedule under Section 5.2.

 

(g)                                 A shipment of Potash to Buyer will have been
deemed to have been Delivered to Buyer when Potash conforming to the
Specifications and the terms of the relevant Sales Agreement is loaded on board
the Buyer’s designated shipping vessel at the Port of Shipment designated in the
Sales Agreement for such shipment during the Expected Delivery Period
(“Delivered”). Buyer shall have the right to designate the shipper of its choice
and at its own arrangement and expenses.  The Seller shall advise the Buyer of
the exact date of delivery of the shipment to the Port of Shipment during the
Expected Delivery Period in writing within 3 Business Days before actual arrival
of the cargo at the Port of Shipment. The Seller shall also send to the Buyer
the Shipping Advice within three (3) days after the ship onto which the order is
loaded has departed from the Port of Shipment.

 

(h)                                 If Buyer has made orders during a Year for
the Annual Minimum Amount in full, but Seller fails to supply the Annual Minimum
Amount in full for any reason the Seller shall, in addition to any late loss,
costs, damages and other compensation that the Seller shall be obligated to pay
to the Buyer under this Supply Agreement or any Sales Agreement, indemnity and
pay to the Buyer all of the Buyer’s loss, costs, damages and expenses arising
and accruing from such failure, including but not limited to any costs, damages
and expenses incurred by the Buyer in defending or settling any claims, demands,
law suits or other proceedings on a full indemnity basis, within 30 days after
the end of the relevant Year.

 

2.4                                 Annual Minimum Amount Guarantee.

 

Subject to subsection 2.4(b), if the Buyer fails to purchase the Annual Minimum
Amount from Seller during a Year, Buyer shall, within 30 days after the end of
the relevant Year, purchase an amount of Potash which equals the difference
between the Annual Minimum Amount and the amount of Potash actually purchased
during the relevant Year, and the Seller shall sell and ship such amount to
Buyer in accordance with Buyer’s shipping instructions.

 

(i)                                     The Buyer’s obligation to purchase the
Annual Minimum Amount each year shall

 

10

--------------------------------------------------------------------------------

 

be subject to the following:

 

if any shipment of Potash delivered by the Seller is rejected by the Buyer in
accordance with Section 6, the quantity of such rejected shipment(s) will,
notwithstanding the rejection, be included in and counted towards the Annual
Minimum Amount;

 

ARTICLE VI.if the delivery of any shipment of Potash ordered by the Buyer is
delayed so as to the entitle the Buyer to terminate the Sales Agreement to which
such shipment relates, the quantity stated in such terminated Sales Agreement
shall be included in and counted towards the Annual Minimum Amount;

 

ARTICLE VII.if the Initial Production Date does not coincide with the
commencement of a Year, the Annual Minimum Amount for the first Year shall be
pro-rated for the period from the Initial Production Date to the commencement
date of the first Year.

 

ARTICLE VIII.RESALE RESTRICTION

 

ARTICLE IX.The Buyer may not resell Potash purchased under this Supply Agreement
or any Sales Agreement outside of Asia.  The Parties acknowledge and agree that
damages alone shall not be sufficient compensation for a breach of this
provision and the Seller, in addition to any claim for damages, shall be
entitled to injunctive or other equitable relief for breach by the Buyer of this
provision.

 

ARTICLE X.EXCLUSIVITY

 

4.1                                          During the Term, the Buyer shall
have the sole and exclusive right to sell or distribute Potash purchased from
the Seller in the PRC and Seller shall not sell, market or distribute or agree
to sell, market or distribute any Potash, either directly or indirectly, to any
Person located in the PRC, who, after due inquiry, the Seller knows or ought to
know would resell the Potash so purchased, whether directly or indirectly into
the PRC or elsewhere by transshipment through the PRC ports, without the prior
written consent of Buyer which consent may be given or withheld or subject to
terms and conditions as may be determined at the sole discretion of the Buyer.

 

4.2                                 The Parties acknowledge and agree that
damages alone shall not be sufficient compensation for a breach of this
provision and the Buyer, in addition to any claim for damages, shall be entitled
to injunctive or other equitable relief for breach by the Seller of this
provision.

 

11

--------------------------------------------------------------------------------

 

ARTICLE XI.SHIPMENT SCHEDULE

 

5.1                                                                          
The Parties will use all reasonable efforts to cooperate with each other in
connection with forecasting, ordering and delivery procedures for shipment of
Potash to be purchased by Buyer.

 

5.2                                                                          
Buyer will provide a rolling twelve (12) month forecast of demand for Potash to
be purchased by Buyer for the relevant Year every three months (the “Shipment
Schedule”). This initial forecast will be provided by Buyer within 30 days after
the Initial Production Date.  Seller shall notify Buyer in writing of the
Initial Production Date within five (5) Business Days of the Initial Production
Date. Failure by the Seller to issue such notice to the Buyer shall constitute a
breach of this Supply Agreement. The Parties agree and confirm that each Sales
Agreement will be signed according to the Shipment Schedule and Section 2.3(a).

 

ARTICLE XII.INSPECTION

 

6.1                                                                          
Seller shall at its own expense, arrange for inspection of any shipment of
Potash sold under this Supply Agreement at the port of shipment to verify the
quality of the Potash in the shipment prior to loading the same onto the vessel
(“Pre-loading Inspection”) and shall produce for the Buyer a report or
certificate from an independent internationally accepted third party laboratory
confirming that the Potash sold conforms in all respects to the Specifications. 
Seller shall at its own expense, arrange for inspection of any shipment of
Potash sold under this Supply Agreement at the port of shipment by draft survey
to verify the quantity of the Potash delivered conforms with the quantity
ordered in the relevant Sales Agreement, subject to a variation of plus or minus
10% (“Volume Inspection”).  The Buyer may, at its sole discretion and its own
cost, conduct its own Pre-loading Inspection and Volume Inspection.

 

6.2                                                                          
The Seller warrants and represents that all Potash sold by Seller under this
Supply Agreement shall meet the Specifications and all orders delivered by the
Seller shall conform to the quality and quantity (in terms of weight and volume)
stated in the Sales Agreement to which the delivery relates.

 

(a)                                  If, upon the Pre-loading Inspection, the
Potash fails to conform to Specifications (the “Pre-Shipping Defective Potash”),
Buyer shall be entitled to reject the Pre-Shipping Defective Potash by
delivering to the Seller a written notice of rejection within five (5) Business
Days after the inspection reports mentioned above have been completed and
received by the Buyer.

 

(b)                                 Any shipment of Potash which is not rejected
as a result of the Pre-loading Inspection shall be inspected again at Buyer’s
cost to confirm that it meets the state or national standards of Potash in the
PRC (GB6549-2011) (“Arrival Inspection”), by the PRC Exit-Entry Inspection and
Quarantine Bureau which has jurisdiction over the port of arrival, at the port
of arrival (the “Inspection Bureau”).  If the shipment of Potash fails to pass
the Arrival Inspection, the

 

12

--------------------------------------------------------------------------------

 

Buyer shall be entitled to reject the shipment of Potash by delivering to the
Seller a written notice of rejection within five (5) Business Days after the
Inspection Bureau has provided a report of the results of such Arrival
Inspection to the Buyer, provided that the Seller shall not be responsible for
any quality defects or deterioration which are proven to be caused by the
carrier in which case, the Buyer will not be responsible for the carrier.

 

(c)                                  If the Buyer rejects any shipment of Potash
as a result of the Pre-loading Inspection, a Shortfall (as hereinafter defined),
or the Arrival Inspection, risk of loss for the rejected shipment shall remain
with or revert to the Seller (as the case may be) upon the delivery of the
rejection notice.  Where the Buyer has rejected any shipment, the Seller shall
within 10 Business Days of the receipt of the rejection notice refund to the
Buyer the amount paid for the shipment in full and Seller shall further be
solely liable for the costs of the storage and return of the shipment and shall
hold the Buyer harmless against any costs and expenses of storage,
transportation, insurance taxes, duties and other charges and expenses relating
to the rejected shipment and its return to the Seller including but not limited
to any additional demurrage charges, import or freight and shipping expenses and
other related costs. Title to the rejected shipment shall revert to the Seller
only after a full refund of the price paid for such shipment by the Buyer and
full payment of all costs and expenses incurred by the Buyer in respect of the
rejected shipment has been received by the Buyer.  If the Buyer fails to deliver
the rejection notice as aforesaid, it shall be deemed to have accepted the
Potash so delivered and shall have no further claim to damages for failure to
conform to the Specifications or the quantity set forth in the Sales Agreement.

 

(d)                                 If Buyer rejects any shipment delivered and
issues the rejection notice as required under Section 6.2(a) for failure to pass
the Pre-loading Inspection or 6.2(b) for failure to pass the Arrival Inspection
or for a Shortfall and needs to acquire Potash on the spot market to cover its
obligations to its customers, then in addition to any other recovery the Buyer
may have against the Seller, the Buyer shall be entitled to recover from the
Seller all damages incurred by the Buyer, including (a) the amount by which the
price which Buyer had to pay on the spot mark for the replacement Potash exceeds
that price which the Buyer would have paid had the shipment been conforming; and
(b) the cost of shipping the replacement Potash from where the replacement
Potash was purchased to the port of arrival stated in

 

13

--------------------------------------------------------------------------------

 

the Sales Agreement for the rejected Potash including but not limited to
storage, transportation, insurance taxes, duties and other charges and expenses
relating to the rejected shipment and its return to the Seller including but not
limited to any additional demurrage charges, import or freight and shipping
expenses and other related costs.

 

(e)                                  If upon Volume Inspection, the Potash
delivered is found to be less than the amount ordered in the relevant Sales
Agreement by more than 10% (such difference being hereinafter referred to as the
“Shortfall”), the Buyer may, at its sole election accept or reject the
shipment.  If the Buyer elects to accept the shipment, it shall only be
responsible to pay for the amount of Potash actually Delivered and not for the
Shortfall and the Seller shall, as soon as practicable but no later than 30 days
from the completion of the Volume Inspection (the “Completion Date”), at its
sole cost and expense, ship to the Buyer at a port of arrival to be designated
by the Buyer an amount of Potash which is equals the Shortfall.  In addition
thereto, the Seller shall be liable to the Buyer for all loss, costs, damages
and expenses incurred by the Buyer as a result of such Shortall, including but
not limited to (a) the amount by which the price which Buyer had to pay for the
Shortfall on the spot mark exceeds that price which the Buyer would have paid
for the Shortfall under the terms of this Agreement; and (b) any costs and
expenses relating to the Buyer having to acquire the Shortfall on the spot
market after the Completion Date including but not limited to transportation,
insurance, taxes, duties and other charges and expenses relating to the
Shortfall, any additional demurrage charges, import or freight and shipping
expenses and other related costs.

 

(f)                                    If upon Volume Inspection, the Potash
delivered is found to exceed the amount order in the relevant Sales Agreement by
more than 10% (such difference being hereinafter referred to as the “Excess”),
the Buyer may, at its sole discretion, accept or reject the Excess.

 

14

--------------------------------------------------------------------------------

 

ARTICLE XIII.TERMINATION

 

7.1                      The initial term of this Supply Agreement will commence
on the date hereof and end on the last day of the 10th Year following the
Initial Production Date unless sooner terminated in accordance with this
Section 7 (the “Term”). The Term may be extended by written agreement of the
Parties at any time prior to the expiration of the Term or any renewal term. If
not extended, this Supply Agreement shall expire at the end of the Term.

 

7.2                      This Supply Agreement may be terminated:

 

(a)        by either Party (the “Non-Breaching Party”) at any time, by written
notice, in the event:

 

of a material breach by the other Party (“Breaching Party”) which breach, if
capable of being remedied, is not so remedied within 60 days after the
Non-Breaching  Party giving notice of such breach to the Breaching Party;

 

ARTICLE XIV.of insolvency of the other Party;

 

ARTICLE XV.of the filing of a voluntary petition in bankruptcy of the other
Party;

 

ARTICLE XVI.of the making of an assignment for the benefit of creditors by the
other Party, excluding assignments of accounts receivable;

 

ARTICLE XVII.of the inability of the other Party to pay its debts as they come
due;

 

ARTICLE XVIII.the other Party has a receiver or other custodian of any kind
appointed to administer any substantial amount of the other Party’s property;

 

ARTICLE XIX.of the filing of an involuntary petition in bankruptcy with respect
to the other Party that is not dismissed within 60 days of filing;

 

ARTICLE XX.the other Party makes a proposal in writing to its creditors
generally to compromise its debts or the institution of civil proceedings for
that purpose;

 

ARTICLE XXI.of the discontinuation by the other Party of its business; or

 

15

--------------------------------------------------------------------------------

 

(a)           by Buyer, by written notice, in the event that, the Seller closes
the Project or substantially discontinues mining and extraction operations at
the Project for a period of six (6) consecutive months, or

 

(b)           by Buyer, by written notice if the Initial Production Date does
not occur on or before the Long Stop Date.

 

7.3                         If at any time during the Term or any extended term,
there is:

 

any of the following with respect to the Buyer:

 

a change in the identity of the majority shareholder of the Buyer; or

 

ARTICLE XXII. a substantial change in the members of board of directors of the
Buyer; or

 

(a)           any of the following with respect to the Seller:

 

by a transaction or series of transactions, any “person” or “group” (within the
meaning of Section 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”)) becomes the “beneficial owner” (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of more than 35% of
the combined voting power of Seller’s then outstanding securities (provided such
person or group was not a beneficial owner of more than 35% of the combined
voting power of the Seller’s then outstanding securities as of the date hereof);

 

ARTICLE XXIII.as a result of any merger, consolidation, combination or sale or
issuance of securities of Seller, or as a result of or in connection with a
contested election of directors, the persons who were directors of Seller as of
the date hereof cease to constitute a majority of the Board of Directors of the
Seller (the “Board”); or

 

ARTICLE XXIV.by a transaction or series of transactions, the authority of the
Board over any activities of Seller becomes subject to the consent, agreement or
cooperation of a third party other than shareholders of Seller;

 

(each of (a) and (b), being a “Change of Control”),

 

ARTICLE XXV.the Party experiencing the Change of Control (“Changing Party”)
shall within 15 Business Days of the occurrence of such Change of Control,
notify the other Party (the “Non-changing Party”) of the Change of Control in
writing (“Change Notice”).  The Non-changing

 

16

--------------------------------------------------------------------------------

 

Party shall be entitled to terminate this Supply Agreement without having to
provide any reason therefore.

 

7.4                         Unless notified otherwise by Buyer, upon a
termination of this Supply Agreement, Seller will fulfill the outstanding orders
for Potash in all Sales Agreements which have been submitted by Buyer and signed
by the Seller. Buyer will accept and pay for all Potash Delivered pursuant to
such Sales Agreements. Termination will be without prejudice to the rights and
obligations of the Parties which have accrued prior to the effective date of
termination.  Sections 1, 6, 8, 12, 14, 15, 17, 24 and 25 hereof will survive
the expiration or termination of this Supply Agreement.

 

ARTICLE XXVI.INDEMNITY

 

8.1           Each Party will at all times defend, indemnify, protect and hold
harmless the other Party’s directors, officers, agents, employees, participants
and assigns, from and against any and all claims, losses, liabilities, damages,
demands, fines, penalties, administrative and judicial proceedings and orders,
judgments, remedial action, enforcement actions of any kind, and all reasonable
and documented costs and expenses incurred in connection therewith (including
without limitation reasonable attorneys’ fees) (collectively, the “Losses”),
arising in whole or in part out of the negligent performance of any obligations
of the indemnifying Party under this Supply Agreement; provided however, that a
Party will not be required to indemnify any indemnified Person for any Losses to
the extent resulting from the misconduct or gross negligence of such indemnified
Person.

 

ARTICLE XXVII.REPRESENTATIONS AND WARRANTIES

 

9.1                         Seller warrants, represents and covenants as
follows:

 

(a)           it is duly incorporated or formed, validly existing and in good
standing in its jurisdiction of incorporation or formation and holds all
material licenses and permits necessary to carry on business as presently
conducted;

 

(b)           it has full power and authority to enter into this Supply
Agreement and any Sales Agreement and to consummate the transactions
contemplated hereby and thereby;

 

(c)           its entry into this Supply Agreement, and its performance
hereunder and under the Sales Agreements, do not and with the passage of time
will not result in any breach of any contract, arrangement or obligation to
which it is a party;

 

(d)           it will perform its obligations hereunder, including without
limitation, the mining, extraction, processing and production of Potash, the
sale and delivery of Potash in material compliance with all applicable local,
state, federal and international standards, codes, laws, rules and regulations,
including without limitation, those

 

17

--------------------------------------------------------------------------------

 

related to safety, health, product and environment;

 

(e)           the Potash to be furnished hereunder and under any Sales Agreement
shall meet the Specifications in terms of quality, operating conditions and
performance requirements and the quantities set forth in each Sales Agreement;

 

(f)            the Potash furnished under all Sales Agreements shall be
merchantable, shall be free from defects, and shall be fit and sufficient for
the particular purpose of Buyer; and

 

(g)           it has good and marketable title to the Potash furnished under any
Sales Agreement and there are no liens, claims or encumbrances of any kind
whatsoever against the same other than any liens held by the Project’s project
finance lenders that will be released with respect to Potash ordered hereunder
upon delivery of such Potash to Buyer;

 

(h)           the Potash furnished hereunder will not violate, infringe or
misappropriate the rights of any third parties.

 

9.2                         Buyer warrants, represents and covenants as follows:

 

(i)            it is duly incorporated, validly existing and in good standing in
its jurisdiction of incorporation;

 

(j)            it has full power and authority to enter into this Supply
Agreement and any Sales Agreement and to consummate the transactions
contemplated hereby and thereby; and

 

(k)           its entry into this Supply Agreement, and its performance
hereunder and under the Sales Agreements, do not and with the passage of time
will not result in any breach of any contract, arrangement or obligation to
which it is a party.

 

9.3                         The warranties herein contained are not to be deemed
exclusive, and each of Buyer and Seller shall be entitled to all other
warranties and remedies available to it at law or in equity.

 

9.4                         Each Party shall defend, indemnify and hold the
other Party harmless from and against any costs or expenses of whatever nature,
including any fine or penalty, or punishment or any adverse or negative
treatments arising from a breach of warranties.

 

18

--------------------------------------------------------------------------------

 

ARTICLE XXVIII.FORCE MAJEURE

 

10.1                       No Party will be liable to the other for default or
delay in the performance of its obligations hereunder or under a Sales Agreement
when and to the extent that such default or delay is caused by order, injunction
or stay entered by any court with valid jurisdiction, war, order, moratorium or
edict imposed by a government authority, civil commotion, strike, labor dispute,
storm, earthquake, explosion, insurrection, epidemic or quarantine restriction,
fire, flood, act of God or any other similar contingency (a) beyond the
reasonable control of, (b) that are without the fault or negligence of, and
(c) that cannot be avoided, overcome or prevented by the reasonable foresight,
planning or implementation of a Party (the occurrence of any of the foregoing
will be an “Event of Force Majeure”).  The occurrence of an Event of Force
Majeure will not terminate this Supply Agreement, absent the written consent of
the Parties hereto otherwise; provided, however, that Buyer may, at its option,
terminate this Supply Agreement if an Event of Force Majeure prevents, or Buyer
reasonably anticipates that it will prevent, Seller from meeting its obligations
in whole or in substantial part under this Supply Agreement for more than 120
consecutive calendar days during the Term. The Party that encounters any Event
of Force Majeure shall notify the other Party of the conditions of such event
within 48 hours following the occurrence of such event and shall within 30
calendar days and provide to the other Party any and all details of such event
and valid certifying documents. Both Seller and Buyer will use their
commercially reasonable best efforts to avoid the occurrence and remove the
causes of an Event of Force Majeure and to continue performance of their
respective obligations hereunder promptly following the removal of such causes. 
In the event that an Event of Force Majeure prevents a Party from meeting its
obligations hereunder or under a Sales Agreement in part, but not in whole, the
Parties hereto will use their best efforts to equitably adjust the Parties’
respective obligations hereunder consistent with and in furtherance of the
purposes hereof.

 

ARTICLE XXIX.INSURANCE

 

11.1                       As of the Initial Production Date, Seller will, at
its sole cost and expense, obtain and maintain from a reputable insurance
company, adequate and suitable general and public liability insurance coverage
covering all claims (including without limitation, personal injury and products
liability claims) by third parties (including without limitation, governmental
and political bodies, agencies and other regulatory authorities) allegedly
caused by or resulting from the performance or breach of Seller’s obligations
hereunder, and such coverage will be reasonably satisfactory to Buyer.

 

19

--------------------------------------------------------------------------------

 

ARTICLE XXX.TERMS OF PAYMENT

 

12.1                       As security for the payment of Potash to be purchased
by the Buyer under this Supply Agreement and any Sales Agreement, the Buyer
shall arrange for irrevocable documentary letters of credit under the UCP 600
from one or more banks (“LC’s”) in the an aggregate amount equal to the price of
the Annual Minimum Amount for the relevant Year calculated in accordance with
China Optimum Granular Price and the China Optimum Standard Price (less the
General Discount and the General Discount) as set the then current and
applicable Report. The LCs shall be arranged during the months of May and
June each year for the upcoming Year except that the LCs for the first Year
shall be issued within 60 days after the Initial Production Date and shall be
for an Annual Minimum Amount which is prorated from the Initial Production Date
to the next 30th day of  June; provided that Seller shall not be obligated to
ship any Potash until the initial LC shall have been issued.  Such LCs will:

 

(a)           state Seller, as the beneficiary;

 

(b)           state its expiry date which shall not be prior to the end of the
applicable Year;

 

(c)           be sight payment against the documents specified in Section 12.2;

 

(d)           be issued by one or more Chinese banks acceptable to Seller in its
reasonable discretion (the “Issuers”);

 

(e)           be used, on a declining balance basis, to settle the value of each
and every shipment of Potash made by the Seller which conform to the
Specifications and which are not rejected by the Buyer during a one Year period
in accordance with the terms of the Supply Agreement and the Sales Agreements,
in United States dollars;

 

(f)            provide that it is subject to the International Chamber of
Commerce (“ICC”) Uniform Customs and Practice for Documentary Credits, 2007
Revision, ICC Publication No. 600; and

 

(g)           Seller shall accept any amendments to the LCs that are in
accordance with a Sales Agreement.

 

12.2                       The Parties agree that the documents to be presented
for sight payment of any LCs shall include only:

 

(h)           full set of clean on board ocean bill of lading;

 

(i)            tally sheet, the quantity stated in the tally sheet shall conform
to that in bill of lading;

 

20

--------------------------------------------------------------------------------

 

(j)            commercial invoice;

 

(k)           load sheet;

 

(l)            quality certificate issued by an independent surveyor retained by
the Seller which quality certificate shall confirm that quality of the shipment
inspected conforms to that in the bill of lading and the applicable Sales
Agreement;

 

(m)          quantity/weight certificate issued by an independent surveyor
retained by the Seller which quantity/weight certificate shall confirm that the
quantity/weight of the shipment inspected as determined by draft survey conforms
to that in the bill of lading and the applicable Sales Agreement;

 

(n)           documentary proof that the Seller has obtained the insurance
required under Section ARTICLE XXIX; and

 

(o)           certificate of origin for the shipment issued by the US Chamber of
Commerce; and

 

(p)           any other documents reasonably requested by Buyer or any Issuer
that are customary for transactions conducted upon INCOTERMS 2010 similar to
those contemplated by this Supply Agreement.

 

12.3                       If the Buyer purchases more than the Annual Minimum
Amount during any Year and has exhausted the LCs provided for the relevant Year,
the Buyer shall arrange for payment of all orders of Potash in excess of the
Annual Minimum Amount by way of documentary letters for credit for each Sales
Agreement.

 

21

--------------------------------------------------------------------------------

 

ARTICLE XXXI.CONFLICT BETWEEN SUPPLY AGREEMENT AND SALES AGREEMENT

 

13.1                       In the event of a conflict between this Supply
Agreement and the Sales Agreement executed in accordance with this Supply
Agreement, the provisions of this Supply Agreement shall prevail over the
conflicting terms of the Sales Agreement for all instances, provided that the
terms of a duly executed Sales Agreement shall prevail where there is a conflict
pertaining to the applicable names, specifications, quantity, quality, delivery
date, price, payment terms, transportation details (including any transportation
fee) and any applicable trade terms. It is expressly understood and agreed that
no provisions of any delivery tickets, invoices, confirmation of purchase order
or other instruments used and provided by Seller shall supersede the provisions
of this Supply Agreement or any Sales Agreement.

 

ARTICLE XXXII.WAIVER

 

14.1                       The failure of any Party hereto to enforce at any
time any of the provisions of this Supply Agreement will in no way be construed
to constitute a waiver of any such provision nor in any way to affect the
validity of this Supply Agreement or any part hereof, including the right of any
Party thereafter to enforce each and every provision.  The waiver by any Party
to this Supply Agreement of any breach or violation of any provision of this
Supply Agreement by the other Party hereto will not operate or be construed to
be a waiver of any subsequent breach or violation thereof.

 

ARTICLE XXXIII.NOTICES

 

15.1                       All notices and other communications hereunder will
be effective if in writing and delivered in person or by overnight courier, or
sent by facsimile transmission both in English and Chinese, as follows (or at
such other address for a party as will be specified by like notice):

 

If to Buyer:

Jiuhe Company Limited

NO. 279 Wuhou Avenue Shuangnan, Chengdu, Sichuan Province,

610043, PRC

Attention:           Chairman

Facsimile:           (86-28)85056000

 

If to Seller:

American West Potash LLC

c/o Prospect Global Resources Inc.

1621 18th Street, Suite 260

Denver CO 80202 USA

Attention:           Chief Financial Officer

Facsimile:           (303) 990-8440

 

With a copy to:                    Brownstein Hyatt Farber Schreck, LLP

410 17th Street, Suite 2200

Denver CO 80202 USA

Attention:           Jeffrey Knetsch

 

22

--------------------------------------------------------------------------------

 

Facsimile:           (303) 223-1111

 

15.2                       All such notices and other communications will be
effective when received. Any notice hereof shall be deemed as duly received at
the following time:

 

(a)           delivered by overnight courier, at the time delivered to the
receiving Party’s address under Section 15.1;

 

(b)           if delivered by facsimile transmission, at the time of
confirmation of transmission.

 

15.3                      Either of the Parties may change any of its
communication information in Section 15.1 by a written notice to the other
Party. The new communication information specified in the written notice shall
become effective on the follow date:

 

(c)           the effective date designated in the notice; or

 

(d)           the 10th day after the notice is sent, in the event that no
effective date is designated.

 

ARTICLE XXXIV.ASSIGNMENT

 

16.1         This Supply Agreement will be binding upon, enure to the benefit of
and be enforceable by the respective successors and permitted assigns of the
Parties hereto.  This Supply Agreement may not be assigned or otherwise
transferred by Buyer or Seller without the prior written consent of the other
Party; except that Buyer may, without the consent of Seller, assign its rights
and obligations under this Supply Agreement to an Affiliate of Buyer.   Any
assignment made by any Party will not relieve the assignor of any of its
obligations arising pursuant to this Supply Agreement without the prior written
consent of the other Party.

 

ARTICLE XXXV.CONFIDENTIALITY

 

17.1                        It is acknowledged and agreed that during the Term
each of Buyer and Seller will receive, or will be in a position to become
acquainted with, certain of each other’s confidential, privileged and
proprietary information, including without limitation, documents which are
marked confidential, proprietary or privileged or bear a similar mark of like
import; excluding, however, any information:

 

(a)           which is or becomes available to the public through no act,
omission or fault of, and absent any breach of a covenant or obligation
hereunder by, the party whose obligation it is to keep such information
confidential;

 

(b)           which the Party whose obligation it is to keep such information
confidential may have received lawfully from any third party without
restrictions as to disclosure

 

23

--------------------------------------------------------------------------------

 

thereof and without breach of this Supply Agreement; or

 

(c)           which was developed by the Party whose obligation it is to keep
such information confidential without (as established by documentation or by
other appropriate evidence) the use of the other Party’s Confidential
Information or any breach of this Supply Agreement or any other agreement,

 

(each Parties’ respective confidential, privileged and proprietary information
is referred to herein as such Party’s “Confidential Information”). Seller agrees
that the Confidential Information of Buyer, and Buyer agrees that the
Confidential Information of Seller, is an integral and key part of the assets of
each respective entity and that the unauthorized use or disclosure of the other
Party’s Confidential Information would seriously damage the owner thereof in its
business.  As a consequence of the above, Seller and Buyer hereby agree that,
during the Term and thereafter:

 

17.2                        Until the second anniversary of the expiration or
earlier termination of the Supply Agreement, Seller and Buyer will not, directly
or indirectly:

 

use any of the other Party’s Confidential Information, except as may be
necessary to perform its obligations hereunder; or

 

(d)           disclose, furnish or make accessible, or cause any Person to
disclose, furnish or make accessible, any aspect of the other Party’s
Confidential Information to any Person (other than the other Party),

 

except, in either case (a) or (b), as may be expressly authorized by the other
Party in writing or as required by law or regulatory authorities having
jurisdiction over a Party, or pursuant to a court order; provided, however, that
prior to any such compelled disclosure, the Party whose obligation it is to keep
such information confidential will have given the other Party notice of the
circumstances relating to such compelled disclosure and an opportunity to seek
an appropriate protective order with respect thereto.

 

17.3                        Except as required by law or regulatory authorities
having jurisdiction over a Party or pursuant to a court order:

 

Seller and Buyer will each use no less than the care a reasonably prudent Person
would use in safeguarding its own Confidential Information;

 

(e)           Seller and Buyer will each limit access to the other Party’s
Confidential Information to its employees who require access to such
Confidential Information for the purposes of performing its obligations
hereunder and who have agreed in writing to be bound by the terms of this
Section 17; and

 

24

--------------------------------------------------------------------------------

 

(f)            Seller and Buyer will each refrain from any action or conduct
which might reasonably or foreseeably be expected to compromise the
confidential, privileged or proprietary nature of the other Party’s Confidential
Information.

 

(g)           Seller and Buyer will each comply with reasonable requests made by
the other from time to time regarding the protection of the confidential,
privileged and proprietary nature of the other Party’s Confidential
Information.  Upon the written request of either Party, the other Party will
confirm to the requesting Party the destruction of all tangible forms of the
requesting Party’s Confidential Information, including any and all copies
thereof.

 

17.4                       For purposes of this Section 17 only, the term
“Seller” will include all Affiliates of Seller, and the term “Buyer” will
include all Affiliates of Buyer.  Nothing in this Section 17 will operate to
prevent a Party from disclosing such information as is required by securities
laws, rules or policies.

 

ARTICLE XXXVI.RELATIONSHIP OF THE PARTIES

 

18.1                     It is understood that each Party hereto is conducting
business as a separate and distinct legal entity.  Under no circumstances shall
either Party, its agents or employees be considered agents, partners,
representatives or employees of the other Party hereto.  Neither Party will have
the right to act as the legal representative of the other Party or to bind such
other Party in any respect whatsoever or to incur any debts or liability in the
name of or on behalf of such other Party.  This Supply Agreement creates no
relationships of joint venturers, partners, associates or principal and agent
between the Parties thereto.

 

ARTICLE XXXVII.SEVERABILITY

 

19.1                     The terms and conditions of this Supply Agreement are
hereby deemed by the Parties to be severable, and the invalidity or
unenforceability of any one or more of the provisions of this Supply Agreement
will not affect the validity and enforceability of the other provisions hereof.

 

ARTICLE XXXVIII.TAXES AND EXPENSES

 

20.1                     Except as expressly provided herein, each Party will be
responsible for payment of all taxes, if any, imposed upon it by applicable law
in connection with this Supply Agreement.  Each Party will pay all of its own
administrative expenses, including, without limitation, the fees and expenses of
its counsel and other agents, incident to the preparation and implementation of
this Supply Agreement.

 

25

--------------------------------------------------------------------------------

 

ARTICLE XXXIX.COUNTERPARTS; FACSIMILE

 

21.1                     This Supply Agreement may be executed in any number of
counterparts, and each such counterpart will be deemed to be an original
instrument, but all such counterparts together will constitute but one
agreement.  This Supply Agreement may be executed by facsimile.

 

ARTICLE XL.ENTIRE AGREEMENT; AMENDMENT

 

22.1                     This Supply Agreement, including the attached schedules
which are hereby incorporated herein by this reference, will supersede and
cancel all prior agreements and understandings between the Parties relating to
the subject matter hereof and, together with the Sales Agreements, will set
forth the Parties’ entire understanding with respect to the subject matter
hereof.  In that this Supply Agreement was prepared as a result of negotiation
and mutual agreement between the Parties hereto, neither this Supply Agreement
nor any provision hereof will be construed against either Party hereto as the
Party who prepared this Supply Agreement or any such provision.  No amendment,
modification or addition to this Supply Agreement will be effective unless in
writing and properly executed by both Parties.

 

22.2                     The parties acknowledge and agree that this Supply
Agreement was entered into on the basis of the negotiations and pricing
mechanisms which are determined by major international suppliers such as
Canpotex and major purchasers of Potash in the PRC. If, during the Term or any
extend Term of this Supply Agreement, there are material changes in the
procedures and mechanics for determining the pricing and other terms of the sale
and purchase of Potash by PRC purchasers, the Parties undertake and covenant to
use their respective commercially reasonable efforts to engage in good faith
discussions in order to determine if any material change in such terms should be
reflected in an amendment to this Supply Agreement.

 

ARTICLE XLI.CONSTRUCTION, GOVERNING LAW AND DISPUTE RESOLUTION

 

23.1         This Supply Agreement will be governed by and interpreted pursuant
to the laws of Hong Kong, without giving effect to any of the provisions thereof
that would require the application of the substantive laws of any other
jurisdiction.

 

23.2         In the event that any dispute in relation to the interpretation or
performance of this Supply Agreement arises, the Parties shall attempt in the
first instance to resolve such dispute through friendly consultations. If the
Parties are unable or fail to solve such dispute by friendly consultation within
30 days after the dispute arises, each Party has right to submit the dispute to
arbitration in Hong Kong, administered by the Hong Kong International
Arbitration Centre (“HKIAC”), in accordance with the arbitration rules of HKIAC
as then in effect. The arbitration tribunal shall consist of one arbitrator if
the Parties agree to the selection of a sole arbitrator within ten days after
the dispute is presented for arbitration. If the Parties do not so agree to the
selection of a sole arbitrator within that period, the arbitral tribunal shall
consist of three members, with the claimant and respondent each appointing one
arbitrator, and with the party-appointed arbitrators selecting the third
arbitrator within 15 days after their appointment, who will act as chairperson
of the arbitral tribunal. The arbitrators appointed or selected pursuant to this

 

26

--------------------------------------------------------------------------------

 

Section 23.2 shall be qualified by training, education, and experience to
rule on the issues presented. The language of the arbitration shall be English.
The award shall be in writing and shall state the reasoning on which the award
rests. The award shall be final, binding and enforceable in any court of
competent jurisdiction where either Party has assets or business. The cost and
expenses of the arbitration, shall be borne by the losing party to the
arbitration, provided that each Party shall bear its own solicitors/legal
counsel’s costs.

 

23.3                     The Parties will provide to the arbitrators all
information pertaining to the dispute that the arbitrators may request, provided
that all information supplied by a Party will be deemed to be confidential, and
the arbitrators and other participants in the dispute will protect such
information from disclosure to the same extent as provided in Section 17
hereof.  Judgment upon the award rendered may be entered in any court having
jurisdiction or application may be made to such court for a judicial acceptance
of the award and an order of enforcement, as the case may be.  The arbitrators
will not award any consequential, incidental, indirect, special, punitive or
exemplary damages hereunder or in connection herewith.

 

ARTICLE XLII.LIMITATION OF LIABILITY

 

24.1                     Under no circumstances will seller or buyer be liable
for consequential, incidental, indirect, special, punitive or exemplary damages
under this supply agreement or in connection herewith.

 

ARTICLE XLIII.THIRD PARTY BENEFICIARIES

 

25.1                     Nothing in this Supply Agreement, expressed or implied,
is intended or will be construed to confer upon or give to any other Person,
other than the Parties hereto and their successors and permitted assigns, any
rights, remedies or other benefits under or by reason of this Supply Agreement.

 

[Remainder of this page intentionally left blank]

 

27

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, Buyer and Seller have duly executed this Supply Agreement as
of the date first above written.

 

 

SELLER

 

 

 

Prospect Global Resources Inc.

 

 

 

 

 

By:

/s/ Devon D. Archer

 

 

Devon D. Archer

 

 

Director

 

 

 

 

American West Potash LLC

 

 

 

 

 

 

 

By:

/s/ Devon D. Archer

 

 

Devon D. Archer

 

 

Director

 

 

 

 

 

 

 

BUYER

 

 

 

 

Sichuan Chemical Industry Holding (Group) Co., Ltd

 

 

 

 

 

 

 

By:

/s/ Zhao, Yongqing

 

 

Zhao, Yongqing

 

 

Authorized Representative

 

 

28

--------------------------------------------------------------------------------

 

SCHEDULE “A”

 

Sample Sales Agreement

 

This Sales Agreement (this “Agreement”) is made on
                                  ,                            and is subject to
the terms of the Supply Agreement dated as of                             , 2012
between Seller and Buyer (the “Supply Agreement”).

 

Seller:

 

One of Prospect Global Resources Inc. and

American West Potash LLC or its nominee (collectively the “Seller”)

 

Buyer:

 

Sichuan Chemical Industry Holding (Group) Co., Ltd or its nominee (the “Buyer”)

 

THE PARTIES AGREE AS FOLLOWS:

 

(a)            Name of Commodity: Muriate of Potash in bulk

 

(b)           Quantity of Potash:                    tonnes. The Seller shall
provide 0.6% of the total quantity for free to The Buyer as a loading and
discharging tolerance. (the “Shipment”)

 

(c)           Type and grade of Potash (Granular or Standard): 
                                   (The “Potash”)

 

(d)           Unit Price: USD                       ( per tonne )

 

(e)            Total amount: USD                     (the “Purchase Price”)

 

(f)            Port of Shipment: 
                                                   (the “Port of Shipment”)

 

(g)           Expected delivery: from       (date)       (month)         (year)
to       (date)       (month)         (year). (the “Expected Delivery Period”)

 

All capitalized terms used in this Agreement shall have the same meaning they
are given in the Supply Agreement unless otherwise defined herein.

 

All terms and conditions in the Supply Agreement which are applicable to the
Sales Agreements and the delivery of any Shipment shall apply to this Agreement.

 

1

--------------------------------------------------------------------------------

 

1.                                      DELIVERY

 

1.1           Title and risk of loss of the Shipment shall pass from Seller to
Buyer when the Shipment is loaded onboard ship.

 

1.2           Seller shall deliver the Shipment during the Expected Delivery
Period.  In the event the Seller becomes aware that it will not be able to
deliver the Shipment to the Port of Shipment during the Expected Delivery
Period, Seller shall not less than five (5) Business Days prior to the earliest
day during the Expected Delivery Period, notify the Buyer in writing (“Delay
Notice”) of such delay and prose a revised delivery date which shall be no later
than 10 days after the latest date during Expected Delivery Period.  If the
Buyer accepts this revised delivery date, the same shall become the “Delayed
Expected Delivery Date”.  If the Buyer cannot accept the revised delivery date,
the Buyer shall have the right to fix a revised delivery date which shall become
the Delayed Expected Delivery Date; provided that the Seller pay to the Buyer
any and all costs, expenses, loss and damage arising and accruing to the Buyer
as a result of the delay

 

1.3           Delivery of the Shipment on the Delayed Expected Delivery Date
(pursuant to a Delay Notice and subject to the Shipment passing inspection),
shall constitute good Delivery under this the Supply Agreement and this
Agreement.

 

1.4.          If the Seller does not issue a Delay Notice and fails to deliver
the Shipment during the Expected Delivery Period or having issued the Delayed
notice, fail to deliver the Shipment on or before the Delayed Expected Delivery
Date, the Buyer shall be entitled to terminate this Agreement on the last day of
the Expected Delivery Period or on the Delayed Expected Delivery Date, as the
case may be, by forwarding a written notice of termination to the Seller and the
Seller shall (in addition to any loss, costs or damage recoverable by the Buyer
as a result of any delay) pay and indemnity the Buyer for all costs, expenses,
loss and damage arising and accruing to the Buyer as a result of the
termination.

 

Provided that, in either case, where this Agreement is terminated, the amount of
Potash in the Shipment shall be counted in determining whether the Buyer
achieved the Annual Minimum Amount.

 

If Buyer terminates this Agreement and needs to acquire Potash on the spot
market to cover its obligations to its customers, the Buyer shall be entitled to
recover from the Seller all damages incurred by the Buyer, including: (a) the
amount by which the price which Buyer had to pay on the spot mark for the
replacement Potash exceeds that price which the Buyer would have paid had the
shipment been conforming; and (b) the cost of shipping the replacement Potash
from where the replacement Potash was purchased to the port of arrival for the
rejected Potash including but not limited to storage, transportation, insurance
taxes, duties and other charges and expenses relating to the rejected shipment
and its return to the Seller including but not limited to any additional
demurrage charges, import or freight and shipping expenses and other related
costs.

 

2

--------------------------------------------------------------------------------

 

1.5           If delivery of the Shipment is made during the Expected Delivery
Date or on the Delayed Expected Delivery Date but the vessel designated by the
Buyer to transport the Potash has not arrived at the Port of Shipment, the
Shipment will be stored at the facilities available at the Port of Shipment at
the Buyer’s sole cost and expense.

 

2                                         GENERAL

 

2.1           This Agreement will remain valid and existing and will not be
annulled, amended or modified in any respect or terminated except by mutual
consent in writing of Seller and Buyer or as provided in this Agreement. A right
or obligation of either party under this Agreement may only be waived in writing
and signed by both parties.

 

2.2           If the day on which or by which a person must do something under
this Agreement is not a Business Day, the person must do it the next Business
Day.

 

2.3           Any right that Buyer or Seller may have under this Agreement is in
addition to, and does not replace or limit, any other right that Buyer or Seller
may have.

 

2.4           Any provision in this Agreement which is unenforceable or partly
unenforceable is, where possible, to be severed to the extent necessary to make
this Agreement enforceable, unless this would materially change the intended
effect of this Agreement.

 

2.5           Buyer assumes full liability and responsibility for the Potash
supplied by the Seller under this Agreement after Delivery of the same on board
the shipping vessel at the Port of Shipment and has full liability and
responsibility for compliance with PRC laws and regulations governing the
unloading, discharge, storage, and handling of Potash supplied by Seller under
this Agreement from the Delivery of such Potash on board the shipping vessel at
the Port of Shipping and agrees to hold Seller harmless against any claim,
demand or cause of action for personal injury or property damage arising from or
attributable to the shipping, unloading discharge, storage, and handling
thereof. Seller assumes no liability for failure of discharge or unloading
implements or materials used by Buyer, whether or not supplied by Seller.

 

2.6           Seller assumes full liability and responsibility for compliance
with US federal, state or local laws and regulations and PRC laws and
regulations governing Potash production, environmental protection, production
safety, product quality, intellectual property, or loading, shipment, delivery,
transport, storage, and handling of Potash supplied by Seller under this
Agreement on board the shipping vessel at the Port of Shipment and agrees to
hold Buyer harmless against any claim, demand or cause of action for personal
injury or property damage arising therefrom or attributable thereto.

 

2.7           As Seller shall have no control over Buyer’s (or others’) use
disposition, subsequent processing, admixture, or reaction of the Potash sold
hereunder with other products, chemicals or materials after Delivery of such
Potash on board the shipping vessel at the Port of Shipment, Buyer assumes the
entire responsibility therefore, and agrees to hold Seller harmless from any
claim, demand, or cause of action (by Buyer or others) arising therefrom.

 

3

--------------------------------------------------------------------------------

 

2.8           This Agreement will bind and inure to the benefit of the permitted
successors and assigns of the respective Parties here to.

 

IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the date
first above written.

 

 

BUYER

 

 

 

Sichuan Chemical Industry Holding (Group) Co., Ltd

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

 

 

 

SELLER

 

 

 

American West Potash LLC

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

 

Prospect Global Resources Inc.

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

4

--------------------------------------------------------------------------------

 

Schedule B

 

Specifications

 

 

 

Standard Potash

 

Granular Potash

 

 

 

 

 

K2O content

 

60 PCT minimum

 

60 PCT minimum

Moisture

 

0.5 PCT maximum

 

0.5 PCT maximum

Screen Size

 

More than 0.85 mm: 5% max, more than 0.3 mm: 50% max, more than 0.15 mm: 75%
max, more than 0.075 mm: 85%max, and less than 0.075mm: 15% max

 

More than 4 mm: 5% max, 1-4 mm: 90% min,and less than 1 mm: 5% max

Color

 

White

 

Pink

 

--------------------------------------------------------------------------------