Exhibit 10.1
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this “Agreement”) is made as of the 3rd day
of August, 2011 by and between AVALON PORTFOLIO, LLC, a Delaware limited
liability company, and any assignees or transferees thereof (the “Purchaser”)
and PROSPECT GLOBAL RESOURCES INC., a Nevada corporation (the “Company”).
Purchaser and the Company are sometimes each referred to herein as a “Party” and
collectively as the “Parties.”
ARTICLE I.
DEFINITIONS
1.1 Definitions. In addition to the terms defined elsewhere in this Agreement,
for all purposes of this Agreement, the following terms have the meanings set
forth in this Section 1.1:
“Business Day” means any day except any Saturday, any Sunday, any day which is a
federal legal holiday in the United States or any day on which banking
institutions in the State of Colorado are authorized or required by law or other
governmental action to close.
“Closing” means the closing of the purchase and sale of the Securities pursuant
to Section 2.1.
“Closing Date” means the Business Day on which this Agreement has been executed
and delivered by the applicable parties thereto, and all conditions precedent to
(i) the Purchaser’s obligations to pay the Purchase Price and (ii) the Company’s
obligations to deliver the Securities, in each case, have been satisfied or
waived.
“Common Stock” means the common stock of the Company, par value $0.001 per
share, and any other class of securities into which such securities may
hereafter be reclassified or changed.
“Loan Documents” means this Agreement, the Note, the Warrants, the Registration
Rights Agreement and the Security Agreement.
“Note” means the Convertible Secured Promissory Note dated the date hereof in
the amount of $1,500,000 issued by the Company to the Purchaser.
“Person” means an individual, a partnership, a corporation, a limited liability
company, an association, a joint stock company, a trust, a joint venture, an
unincorporated organization and a governmental entity or any department, agency
or political subdivision thereof.
“Purchase Price” means $1,500,000 in cash.
“Registration Rights Agreement” means the Registration Rights Agreement dated
the date hereof between the Company and the Purchaser.
“Securities” means the Note and the Warrants.
“Securities Act” means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.

 

 

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“Security Agreement” means the Amended and Restated Security Agreement dated the
date hereof among the Company, the Purchaser, Richard Merkin, COR Capital LLC
and Hexagon Investments, LLC.
“Shares” means the shares of Common Stock issued or issuable to the Purchaser
upon conversion of the Note and exercise of the Warrants.
“Warrants” means the $5,700,000 Warrants dated the date hereof issued to
Purchaser to purchase Shares.
ARTICLE II.
PURCHASE AND SALE
2.1 Closing.
(a) On the Closing Date, upon the terms and subject to the conditions set forth
herein, substantially concurrent with the execution and delivery of this
Agreement by the parties hereto, the Company agrees to sell, and the Purchaser
agrees to purchase, the Securities. The Purchaser shall deliver to the Company,
via wire transfer or a certified check of immediately available funds, the
Purchase Price and the Company shall deliver to the Purchaser the Securities.
Upon satisfaction of the covenants and conditions set forth herein, the Closing
shall occur at the offices of the Company or such other location as the parties
shall mutually agree.
2.2 Deliveries.
(a) On or prior to the Closing Date, the Company shall deliver or cause to be
delivered to the Purchaser the following:
(i) this Agreement duly executed by the Company;
(ii) the Note duly executed by the Company;
(iii) the Warrants duly executed by the Company;
(iv) the Security Agreement duly executed by the Company; and
(v) the Registration Rights Agreement duly executed by the Company.
(vi) Fully executed copies of valid potash mineral leases and potash sharing
agreements with American General Life Insurance Company (as set forth on the
Term Sheet dated April 22, 2011); PAP & POP Family Ltd., 3MKJ, LP, (as set forth
on the Term Sheet dated April 20, 2011) and the members of the Spurlock and
Wetzler families (as set forth on the Term Sheet dated May 28, 2011).
(b) On or prior to the Closing Date, the Purchaser shall deliver or cause to be
delivered to the Company the following:
(i) this Agreement duly executed by the Purchaser;

 

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(ii) the Security Agreement duly executed by the Purchaser;
(iii) the Registration Rights Agreement duly executed by the Purchaser; and
(iv) the Purchase Price by wire transfer to the account as specified in writing
by the Company.
2.3 Closing Conditions.
(a) The obligations of the Company hereunder in connection with the Closing are
subject to the following conditions being met:
(i) the accuracy in all material respects when made and on the Closing Date of
the representations and warranties of the Purchaser contained herein (unless as
of a specific date therein);
(ii) all obligations, covenants and agreements of the Purchaser required to be
performed at or prior to the Closing Date shall have been performed; and
(iii) the delivery by the Purchaser of the items set forth in Section 2.2(b) of
this Agreement.
(b) The respective obligations of the Purchaser hereunder in connection with the
Closing are subject to the following conditions being met:
(i) the accuracy in all material respects when made and on the Closing Date of
the representations and warranties of the Company contained herein (unless as of
a specific date therein);
(ii) all obligations, covenants and agreements of the Company required to be
performed at or prior to the Closing Date shall have been performed; and
(iii) the delivery by the Company of the items set forth in Section 2.2(a) of
this Agreement.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Purchaser as follows on the
date hereof and on the Closing Date:
3.1 Organization of the Company. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
The Company has full corporate power and authority to own, use, lease and
license its assets and its properties and to carry on its business as it is now
being conducted.

 

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3.2 Power and Authority. The Company has full power and authority to enter into
the Loan Documents and to consummate the transactions contemplated hereby and
thereby. The Company has duly and validly executed and delivered the Loan
Documents. Each of the Loan Documents constitute legal, valid and binding
obligations of the Company, enforceable in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy, insolvency,
moratorium, reorganization, fraudulent conveyance or similar laws in effect
which affect the enforcement of creditors’ rights generally and by equitable
limitations on the availability of specific remedies.
3.3 No Conflict. The execution and delivery by the Company of the Loan Documents
and the consummation of the transactions contemplated hereby will not conflict
with or result in any violation of or default under (with or without notice or
lapse of time, or both) or give rise to a right of termination, cancellation,
modification or acceleration of any obligation or loss of any benefit under
(i) any provision of the Certificate of Incorporation of the Company, as
amended, or Bylaws of the Company, (ii) any mortgage, indenture, lease, contract
or other agreement or instrument, permit, concession, franchise or license to
which the Company or any of its properties or assets is subject, or (iii) any
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to the Company or its properties or assets.
3.4 Government Approvals. Except as may be required by any state “blue sky”
laws, no authorization, consent, approval, license, qualification or formal
exemption from, nor any filing, declaration or registration with, any court,
governmental agency, regulatory authority or political subdivision thereof, any
securities exchange or any other Person is required in connection with the
execution, delivery or performance by the Company of this Agreement or the
business of the Company.
3.5 Liabilities. Other than the Note, the Company has no liabilities and, to the
best of its knowledge, no material contingent liabilities not disclosed in the
financial statements provided to the Purchaser.
3.6 Litigation. There is no action, suit, proceeding, or investigation pending
or currently threatened against the Company that questions the validity of this
Agreement or any related agreement or the right of the Company to enter into
such agreements, or to consummate the transactions contemplated hereby or
thereby, or that might result, either individually or in the aggregate, in any
material adverse change in the assets, business plans for mining potash set
forth in the offering documents dated May 2011, properties, prospects, or
financial condition of the Company, or in any material change in the current
equity ownership of the Company. The Company is not a party to, or to the best
of its knowledge, named in any order, writ, injunction, judgment, or decree of
any court, government agency, or instrumentality. There is no action, suit, or
proceeding by the Company currently pending or that the Company currently
intends to initiate.
3.7 Permits and Leases. The Company has the necessary exploration permits on its
current acreage and will comply with applying for all future permits with any
federal and state governmental authority which are necessary for the performance
of its business purpose as set forth in the offering documents dated May 2011,
specifically the mining of potash.
3.8 Limitation on Business. For so long as the Note is outstanding, the Company
shall limit its business to mining for and preparing for market, buying,
selling, exchanging, producing and otherwise dealing in potash and related
natural resources and in the products and by-products of those materials, of
every type and description: to buy, sell, exchange, lease, acquire and deal in
lands, mines, and mineral rights and claims, and to conduct all business
appertaining to those properties, rights and interests.

 

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ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby represents and warrants to the Company as follows on the
date hereof and on the Closing Date:
4.1 Power and Authority. The Purchaser has full power and authority to enter
into this Agreement and to consummate the transactions contemplated hereby and
thereby. The Purchaser has duly and validly executed and delivered this
Agreement. Each Loan Document to which the Purchaser is a party constitutes
legal, valid and binding obligations of the Purchaser, enforceable in accordance
with its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, moratorium, reorganization, fraudulent conveyance or
similar laws in effect which affect the enforcement of creditors’ rights
generally and by equitable limitations on the availability of specific remedies.
4.2 Risk. The Purchaser recognizes that the purchase of the Securities involves
a high degree of risk in that: (i) the Company is a development stage business
with only limited operating history and may require additional operating funds
from time to time; (ii) an investment in the Company is highly speculative and
only investors who can afford the loss of their entire investment should
consider investing in the Company and the Securities; (iii) the Purchaser may
not be able to liquidate his, her or its investment; (iv) transferability of the
Securities is extremely limited; and (v) in the event of a disposition of the
Securities or the Shares, the Purchaser could sustain the loss of his, her or
its entire investment.
4.3 Accredited Investor. The Purchaser is an “accredited investor” as such term
is defined in Rule 501 of Regulation D promulgated under the Securities Act, and
the Purchaser is able to bear the economic risk of a loss of its entire
investment in the Securities and the Shares.
4.4 Investment Experience. The Purchaser has prior investment experience,
including investment in non-listed and unregistered securities.
4.5 Residency. The Purchaser’s principal residence address is in the
jurisdiction set forth on the signature page of this Agreement.
4.6 Information. The Purchaser acknowledges and agrees that the Purchaser has
been provided access to and has had the opportunity to discuss with the Company
and review any information the Purchaser desires in order to analyze the
Company’s business, management, financial affairs, prospects and the terms and
conditions of this transaction with the Company. The Purchaser has such
knowledge and experience in financial and business matters that the Purchaser is
capable of evaluating the merits of this transaction. The Purchaser has had the
opportunity to seek independent advice in connection with such evaluation and
analysis.
4.7 Protection of Interests; Exempt Offering. The Purchaser by reason of the
Purchaser’s business or financial experience has the capacity to protect the
Purchaser’s own interests in connection with the transaction contemplated
hereby. The Purchaser agrees that the Purchaser will not sell or otherwise
transfer the Securities or the Shares unless they are registered under the
Securities Act or unless an exemption from such registration is available.

 

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4.8 Investment Intent. The Purchaser understands that the Securities and the
Shares have not been registered under the Securities Act by reason of a claimed
exemption under the provisions of the Securities Act which depends, in part,
upon the Purchaser’s investment intention. In this connection, the Purchaser is
acquiring the Securities as principal for its own account and not with a view to
or for distributing or reselling the Securities or the Shares or any part
thereof in violation of the Securities Act or any applicable state securities
law, has no present intention of distributing any of the Securities or the
Shares in violation of the Securities Act or any applicable state securities law
and has no direct or indirect arrangement or understandings with any other
persons to distribute or regarding the distribution of the Securities or the
Shares in violation of the Securities Act or any applicable state securities law
(this representation and warranty not limiting the Purchaser’s right to sell the
Securities or the Shares in compliance with applicable federal and state
securities laws).
4.9 Restricted Securities. The Purchaser understands that there currently is no
public market for the Securities or the Shares and that even if there were,
Rule 144 promulgated under the Securities Act requires, among other conditions,
a one-year holding period prior to the resale (in limited amounts) of securities
acquired in a non-public offering without having to satisfy the registration
requirements under the Securities Act. The Purchaser understands and hereby
acknowledges that the Company is under no obligation to register the Securities
under the Securities Act or any state securities or “blue sky” laws
(collectively, the “Securities Laws”). The Purchaser consents that the Company
may, if it desires, permit the transfer of the Securities or the Shares out of
the Purchaser’s name only when the Purchaser’s request for transfer is
accompanied by an opinion of counsel reasonably satisfactory to the Company that
neither the sale nor the proposed transfer results in a violation of Securities
Laws. The Purchaser agrees to hold the Company and its members, managers,
officers, employees, controlling persons and agents and their respective heirs,
representatives, successors and assigns harmless and to indemnify them against
all liabilities, costs and expenses incurred by them as a result of any
misrepresentation made by the Purchaser contained in this Agreement or any sale
or distribution by the Purchaser in violation of the Securities Laws. The
Purchaser understands and agrees that in addition to restrictions on transfer
imposed by applicable Securities Laws, the transfer of the Securities and the
Shares will be restricted by the terms of this Agreement.
4.10 Legends. The Purchaser consents to the placement of a legend on any
certificate or other document evidencing the Securities or the Shares that the
Securities and the Shares have not been registered under Securities Laws and
setting forth or referring to the restrictions on transferability and sale
thereof contained in this Agreement. The Purchaser is aware that the Company
will make a notation in its appropriate records with respect to the restrictions
on the transferability of the Securities and the Shares and may place additional
legends to such effect on the Purchaser’s certificate(s) for the Shares.

 

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ARTICLE V.
COVENANTS
5.1 Information Rights. If and for so long as the Purchaser holds the Note or
owns at least 50,000 Shares, the Company shall deliver to the Purchaser:
(i) as soon as reasonably practicable, but in any event within 90 days after the
end of each fiscal year of the Company, an audited balance sheet for such fiscal
year, an audited income statement of the Company as of the end of such year, a
statement of cash flows for such year, such audited year-end financial reports
to be prepared in accordance with generally accepted accounting principles
(“GAAP”);
(ii) as soon as reasonably practicable, but in any event within 45 days after
the end of each of the first three quarters of each fiscal year of the Company,
an unaudited balance sheet as of the end of such fiscal quarter and an unaudited
income statement and statement of cash flows for such fiscal quarter;
(iii) as soon as reasonably practicable, but in any event within 30 days prior
to the end of each fiscal year, a budget and business plan for the next fiscal
year.
ARTICLE VI.
MISCELLANEOUS
6.1 Fees and Expenses. Each Party shall pay all costs and expenses that it
incurs with respect to the preparation, negotiation, execution and delivery of
this Agreement and the other documents and agreements entered into in connection
herewith. The Company shall pay all transfer agent fees, stamp taxes and other
taxes and duties levied in connection with the delivery of the Securities or the
Shares to the Purchaser.
6.2 Entire Understanding. This Agreement, together with the schedules hereto,
set forth the entire agreement and understanding of the Parties and supersede
any and all prior agreements, arrangements and understandings among the Parties,
and there are no other prior written or oral agreements, undertakings, promises,
warranties, or covenants respecting such subject matter not expressly set forth
herein and therein.
6.3 Further Assurances. Each of the Parties agrees to execute and deliver (or
cause to be executed and delivered) such additional documents and instruments
and to perform such additional acts as may be necessary and appropriate to
effectuate, carry out, and perform all of the terms, provisions, and conditions
of this Agreement.
6.4 Notices. Any and all notices or other communications or deliveries required
or permitted to be provided hereunder shall be in writing and shall be deemed
given and effective on the earliest of: (a) the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile number set
forth on the signature page of this Agreement prior to 5:30 p.m. (mountain time)
on a Business Day, (b) the next Business Day after the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number
set forth on the signature page of this Agreement on a day that is not a
Business Day or later than 5:30 p.m. (mountain time) on any Business Day,
(c) the second Business Day following the date of mailing, if sent by U.S.
nationally recognized overnight courier service or (d) upon actual receipt by
the party to whom such notice is required to be given. The address for such
notices and communications shall be as set forth on the signature page of this
Agreement.
6.5 Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the internal laws of the State of Colorado without
giving effect to the principles of conflicts of law thereof.

 

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6.6 Replacement of the Securities or Shares. If any certificate or instrument
evidencing the Securities or the Shares is mutilated, lost, stolen or destroyed,
the Company shall issue or cause to be issued in exchange and substitution for
and upon cancellation thereof (in the case of mutilation), or in lieu of and
substitution therefor, a new certificate or instrument, but only upon receipt of
evidence reasonably satisfactory to the Company of such loss, theft or
destruction. The applicant for a new certificate or instrument under such
circumstances shall also pay any reasonable third-party costs (including
customary indemnity) associated with the issuance of such replacement Security
or Shares.
6.7 Counterparts. This Agreement may be executed in counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument and shall become effective when one or more counterparts
have been signed by each of the Parties and delivered (including by facsimile)
to the other Parties.
6.8 Recitals. The recitals set forth above are hereby incorporated into this
Agreement and made a binding part hereof.
6.9 WAIVER OF JURY TRIAL. IN ANY ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION
BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE PARTIES EACH KNOWINGLY AND
INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY
ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY WAIVES FOREVER TRIAL BY
JURY.

 

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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed and
delivered as of the date first above written.

                  PROSPECT GLOBAL RESOURCES INC.,
      Address for Notice:     a Delaware corporation       600 17th St.
Suite 2800 South    
 
          Denver, CO 80202    
By:
  /s/ Jonathan Bloomfield
 
Name: Jonathan Bloomfield       Attn:: Patrick Avery
Fax: 720-294-0402    
 
  Title: Chief Financial Officer       email: pavery@prospectgri.com    
 
                With a copy to (which shall not constitute notice):            
 
                Brownstein Hyatt Farber Schreck, LLP             410 Seventeenth
Street, Suite 2200             Denver, CO 80202-4437             Attn: Jeff
Knetsch            
 
                AVALON PORTFOLIO, LLC       Address for Notice:    
 
          PO Box 1397     By its Manager Avalon Capital Group, Inc.       North
Sioux City, SD 57049    
 
          Attention: Shane Hartnett    
By:
  /s/ Shane Hartnett
 
By: Shane Hartnett       Fax: 605-232-8486
email: shartnett@avalon.com    
 
  Its Manager            

 

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