Exhibit 10.1

 

EXECUTION COPY

 

ADDITIONAL CONSIDERATION AGREEMENT

 

THIS ADDITIONAL CONSIDERATION AGREEMENT (this “Agreement”), dated as of
August 1, 2012 (the “Effective Date”), is by and between American West Potash
LLC, a Delaware limited liability company (the “Company”), and The Karlsson
Group, Inc., an Arizona corporation, (“Karlsson”). The Company and Karlsson are
sometimes referred to in this Agreement, collectively, as the “Parties,” and
individually, as a “Party.”

 

R E C I T A L S

 

WHEREAS, the Company will be a wholly-owned subsidiary of Prospect Global
Resources, Inc., a Delaware corporation (“Prospect”);

 

WHEREAS, Prospect and Karlsson entered into that certain Membership Interest
Purchase Agreement dated as of May 30, 2012 (the “Purchase Agreement”), whereby
Prospect purchased, and Karlsson sold, all of Karlsson’s limited liability
company membership interests (the “Membership Interests”), representing fifty
percent (50%) of the total limited liability company membership interests, in
the Company;

 

WHEREAS, as partial consideration for the Membership Interests, Prospect agrees
to cause the Company to grant to Karlsson additional consideration measured by
the Gross Sales (as defined below) of potash from the Company’s current
landholdings, as set forth in this Agreement.

 

NOW, THEREFORE, in consideration of the foregoing premises and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties hereto hereby agree as follows:

 

AGREEMENT

 

1.                                      Recitals Incorporated. The foregoing
Recitals are incorporated herein by reference.

 

2.                                      Definitions.  The following terms shall
have the following respective meanings:

 

a.              “Authorized Minerals” shall mean all potash which is known to
exist or which is discovered to exist after the Effective Date in and under the
AWP Area , extracted, mined or processed by underground mining, solution mining
or other mining methods now existing or developed or invented after the
Effective Date.

 

b.              “AWP Area” means the real property legally described on
Exhibit “A” attached hereto, where the Company has certain leases, licenses, and
permits for mining purposes as such AWP Area may be modified pursuant to the
provisions of Sections 3(d) below.

 

c.               “Gross Sales” shall mean a sum calculated based on tons of
Authorized Minerals actually sold during a calendar quarter at the actual
average quarterly per ton sales price

 

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received by the Company during such calendar quarter on a weighted basis,
whether such sales are made pursuant to purchase orders, off-take agreements or
otherwise.  In the case of sales of Authorized Minerals sold under non-arms
length contracts, “Gross Sales” shall mean the fair market value of such
Authorized Minerals without deduction for any costs, expenses, liabilities or
obligations paid or incurred by the Company other than transportation from the
point of shipment to market at the mine (but not intra-mine transportation
costs). In the event of a sale made pursuant to a long-term contract where a
deposit is made, such deposit shall be treated as a Gross Sale.

 

d.              “Potash Sharing Agreement” means that certain Potash Sharing
Agreement dated as of July 27, 2011, among the Company, James Marlin Gale,
Evelyn W. Lucking, David Glen Spurlock, Ransom Theodore Spurlock, Robert H.W.W.
Spurlock, Vincent Pride Spurlock, Nancy Elizabeth Winn, American General Life
Insurance Company, a Texas corporation, Pap and Pop Family Ltd., a Texas limited
partnership, and 3MKJ LP, a Texas limited partnership.

 

3.                                      Additional Consideration.

 

a.              In accordance with the terms and conditions of this Agreement,
the Company hereby grants to Karlsson as additional consideration an amount
equal to one percent (1%) of one hundred percent (100%) of the Gross Sales of
all Authorized Minerals extracted and sold by the Company from the AWP Area (the
“Additional Consideration”); provided that the total amount of payments that
Karlsson shall be entitled to receive hereunder shall not exceed seventy-five
million dollars ($75,000,000). An example of the calculation of the Additional
Consideration is attached hereto as Exhibit “B”.

 

b.              The definition of “Additional Consideration” shall also be
deemed to include an amount equal to twenty-five percent (25%) of all amounts
received by the Company from Hunt NZ, LLC (“HNZ”) in connection with the
transaction described in that certain letter from the Company to Michael Stone
and Anders Karlsson dated April 5, 2012 (the “HNZ Consideration”), attached
hereto as Exhibit “C”. In the event that the HNZ Consideration is memorialized
in a long-form agreement between the Company and HNZ, then such agreement will
also be included as Exhibit “C”, and a copy of same shall be provided to
Karlsson.

 

c.               Additional Consideration shall be calculated quarterly as of
the last day of March, June, September and December; provided, however, that
Additional Consideration paid upon written off receivables shall be credited to
the next calendar quarter. Additional Consideration payments for each preceding
calendar quarter shall be paid in arrears within forty-five (45) days of the end
of each of June, September, and December and within ninety (90) days of the end
of each March, by the Company to Karlsson.

 

d.              This Agreement and the Additional Consideration described herein
shall immediately terminate when the cumulative total of the Additional
Consideration payments made to Karlsson equal seventy-five million dollars
($75,000,000).

 

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e.               The Company may, in the good faith exercise of its reasonable
discretion, modify and amend its existing leases applicable to the AWP Area to
release portions of the AWP Area (the “Released Areas”) from such leases and/or
replace such Released Areas with other real property owned by the applicable
lessors (the “Replacement Areas”) on which the Company will in the immediate
future conduct mining of Authorized Minerals and in connection therewith shall
add any such Replacement Areas to the AWP Area and remove any such Released
Areas from the AWP Area.

 

f.                Nothing herein shall be deemed to create any ownership
interests of Karlsson in the Minerals or the AWP Area or in any other real
property owned, leased, or otherwise subject to a license, permit or other
agreement benefitting the Company or to grant Karlsson any interest in proceeds
from mining activities of the Company related to real property other than the
AWP Area. It is the intent of the Company to provide Additional Consideration
for the benefit of Karlsson related to mining of the Minerals on the AWP Area as
described in this Agreement.

 

4.                                      Company Representations. The Company
hereby represents and warrants to Karlsson the following:

 

a.              The Company is a limited liability company, duly formed, validly
existing and in good standing under the laws of the State of Delaware and the
Company is qualified to do business in the State of Arizona.

 

b.              The Company has all requisite power and authority to enter into
this Agreement, and perform its obligations under this Agreement. The
consummation of the transactions contemplated by this Agreement will not violate
nor be in conflict with any provision of the Company’s certificate of formation,
limited liability company agreement, or any agreement or instrument, to which
the Company is a party or is bound, or any judgment, decree, order, writ,
injunction, statute, rule or regulation applicable to the Company. The
execution, delivery and performance of this Agreement, and the transactions
contemplated hereby, have been duly and validly authorized by all requisite
action on the part of the Company.

 

5.                                      Karlsson Representations. Karlsson
hereby represents and warrants to the Company the following:

 

a.              Karlsson is a corporation, duly organized, validly existing and
in good standing under the laws of the State of Arizona.

 

b.              Karlsson has all requisite power to enter into this Agreement,
and perform its obligations under this Agreement. The consummation of the
transactions contemplated by this Agreement will not violate nor be in conflict
with any provision of Karlsson’s articles of organization or organizational
documents, or any agreement or instrument to which it is a party or is bound, or
any judgment, decree, order, writ, injunction, statute, rule or regulation
applicable to Karlsson. The execution, delivery and performance of this
Agreement, and the transactions contemplated hereby, have been duly and validly
authorized by all requisite action on the part of Karlsson.

 

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6.                                      Inspection. During business hours and
upon reasonable written notice to the Company, Karlsson and its duly authorized
representatives shall, at its own cost and expense, have the right to
periodically, but not more than once per calendar quarter, inspect and audit the
books and records of the Company with respect to the subject matter of this
Agreement.

 

7.                                      Miscellaneous.

 

a.              Expenses. Except as otherwise expressly provided herein, all
costs and expenses, including, without limitation, fees and disbursements of
counsel, financial advisors and accountants, incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the Party
incurring such costs and expenses.

 

b.              Notices. All notices, requests, consents, claims, demands,
waivers and other communications hereunder shall be in writing and shall be
deemed to have been given (a) when delivered by hand (with written confirmation
of receipt); (b) when received by the addressee if sent by a nationally
recognized overnight courier (receipt requested); (c) on the date sent by
facsimile or e-mail of a PDF document (with confirmation of transmission) if
sent during normal business hours of the recipient, and on the next business day
if sent after normal business hours of the recipient or (d) on the third day
after the date mailed, by certified or registered mail, return receipt
requested, postage prepaid. Such communications must be sent to the respective
Parties at the following addresses (or at such other address for a Party as
shall be specified in a notice given in accordance with this Section 7(b)):

 

If to Karlsson:

The Karlsson Group, Inc.
18 Ozone Avenue
Venice, CA 90291
Facsimile: 310-933-0262
E-mail: sevenciel@ca.rr.com
Attention: Michael Stone

 

 

with a copy, which shall not constitute notice, to:

Law Offices of Richard C. Weisberg
33 Derwen Road
Bala Cynwyd, PA 19004
Facsimile 215-689-1504
Email: weisberg@weisberg-law.com
Attention: Mr. Richard Weisberg

 

 

If to Prospect:

Prospect Global Resources, Inc.
1621 18th Street, Suite 260
Denver, CO 80202
Facsimile: 720-294-0402
E-Mail: PAvery@prospectGRI.com

 

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Attention: Mr. Pat Avery

 

 

with a copy, which shall not constitute notice, to:

Eisner, Kahan & Gorry, P.C.
9601 Wilshire Boulevard, Suite 700
Beverly Hills, CA 90210
Facsimile: 310-855-3201
E-mail: meisner@eisnerlaw.com
Attention: Mr. Michael Eisner

 

c.               Construction; Representation by Counsel. The Parties
acknowledge and agree that they have been represented and advised by counsel in
connection with the negotiation and preparation of this Agreement, and this
Agreement shall be deemed to have been drafted jointly by the Parties,
notwithstanding that one Party or the other may have performed the actual
drafting hereof.  This Agreement shall be construed and interpreted in
accordance with the plain meaning of its language, and not for or against any
Party, and as a whole, giving effect to all the terms, conditions and provisions
hereof.  Whenever the context may require, any provisions used in this Agreement
shall include the corresponding masculine, feminine, or neuter forms.

 

d.              Headings. The headings in this Agreement are for reference only
and shall not affect the interpretation of this Agreement.

 

e.               Severability.  If any provision of this Agreement is held
invalid or unenforceable, such decision shall not affect the validity or
enforceability of any other provision of this Agreement, all of which other
provisions shall remain in full force and effect.

 

f.                Entire Agreement. This Agreement contains the entire agreement
between the Parties with respect to the transactions contemplated hereby, and
supersedes all negotiations, agreements, representations, warranties,
commitments, whether in writing or oral, prior to the Effective Date.

 

g.               Successors and Assigns. This Agreement shall be binding upon
and shall inure to the benefit of the Parties and their respective successors
and permitted assigns. Neither Party may assign its rights and obligations
hereunder without the prior written consent of the other Party, which consent
shall not be unreasonably withheld or delayed; provided that no consent shall be
required for an assignment by Karlsson to a liquidating trust for the benefit of
the current equity interest holders of Karlsson.

 

h.              No Third-Party Beneficiaries. This Agreement is for the sole
benefit of the Parties and their respective successors and permitted assigns and
nothing herein, express or implied, is intended to or shall confer upon any
other person or entity any legal or equitable right, benefit or remedy of any
nature whatsoever under or by reason of this Agreement.

 

i.                  Amendment and Modification; Waiver. This Agreement may only
be amended, modified or supplemented by an agreement in writing signed by each
Party hereto. No waiver by any Party of any of the provisions hereof shall be
effective unless explicitly set forth in writing and signed by the Party so
waiving. No waiver by any Party shall operate or be

 

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construed as a waiver in respect of any failure, breach or default not expressly
identified by such written waiver, whether of a similar or different character,
and whether occurring before or after that waiver. No failure to exercise, or
delay in exercising, any right, remedy, power or privilege arising from this
Agreement shall operate or be construed as a waiver thereof; nor shall any
single or partial exercise of any right, remedy, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other
right, remedy, power or privilege.

 

j.                 Governing Law; Submission to Jurisdiction.

 

i.                  This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Arizona without giving effect
to any choice or conflict of law provision or rule (whether of the State of
Arizona or any other jurisdiction) that would cause the application of laws of
any jurisdiction other than those of the State of Arizona.

 

ii.               The Parties consent to the sole and exclusive jurisdiction and
venue in the Federal or State courts in Arizona, and agree that all disputes
based on or arising out of this Agreement shall only be submitted to and
determined by said courts, which shall have sole and exclusive jurisdiction.

 

k.              Acknowledgment. Karlsson acknowledges and agrees to be bound by
the terms and conditions of the Potash Sharing Agreement.

 

l.                  Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall be deemed to be one and the same agreement. A signed copy of this
Agreement delivered by facsimile, e-mail or other means of electronic
transmission shall be deemed to have the same legal effect as delivery of an
original signed copy of this Agreement.

 

[SIGNATURE PAGE FOLLOWS]

 

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IN WITNESS WHEREOF, the Parties hereto have executed and delivered this
Agreement as of the Effective Date.

 

 

THE COMPANY:

 

 

 

AMERICAN WEST POTASH LLC,

 

a Delaware limited liability company

 

 

 

 

 

By:

/s/ Wayne Rich

 

Name:

Wayne Rich

 

Title:

Manager

 

 

STATE OF CALIFORNIA

COUNTY OF
                                                                            }
SS.

On                                                                                                  
before me,
                                                                                                                      ,
personally appeared

 

 

personally known to me (or proved to me on the basis of satisfactory evidence)
to the person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which the
person(s) acted, executed the instrument.

 

WITNESS my hand and official seal.

 

 

Signature

 

 

 

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KARLSSON:

 

 

 

THE KARLSSON GROUP, INC.,

 

an Arizona corporation

 

 

 

 

 

 

By:

/s/ Anders Karlsson

 

Name:

Anders Karlsson

 

Title:

President

 

STATE OF CALIFORNIA

COUNTY OF
                                                                            }
SS.

On                                                                                                  
before me,
                                                                                                                      ,
personally appeared

 

 

personally known to me (or proved to me on the basis of satisfactory evidence)
to the person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which the
person(s) acted, executed the instrument.

 

WITNESS my hand and official seal.

 

 

Signature

 

 

 

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EXHIBIT A

 

AWP AREA

 

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EXHIBIT B

 

Royalty Example Calculation

 

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EXHIBIT C

 

HNZ Letter

 

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