Exhibit 10.2

 

SUBORDINATION AND INTERCREDITOR AGREEMENT

 

THIS SUBORDINATION AND INTERCREDITOR AGREEMENT (this “Agreement”), dated as of
May 2, 2013 (as the same may be amended, restated, supplemented or otherwise
modified from time to time, this “Agreement”), is made by and among Very Hungry
LLC, a Colorado limited liability company (“Very Hungry”), Scott Reiman 1991
Trust (together with Very Hungry, “Subordinated Creditor”), Prospect Global
Resources Inc., a Nevada corporation (the “Company”), and The Karlsson
Group, Inc., an Arizona corporation (“Senior Lender”).

 

R E C I T A L S

 

A.    On or about April 15, 2013, the Company and Senior Lender entered into an
Unconditional Guaranty (as the same may be amended, restated, supplemented or
otherwise modified from time to time, the “Guaranty”) whereby the Company
unconditionally guaranteed and promised to pay any and all obligations of
Company’s wholly-owned subsidiary Prospect Global Resources, Inc., a Delaware
corporation (“Maker”), to Senior Creditor pursuant to a Secured First Priority
Promissory Note in the original principal sum of $125 million (as the same may
be amended, supplemented or otherwise modified, from time to time, including
without limitation by that certain First Amendment to Secured First Priority
Promissory Note (the “First Note Amendment”) (as amended thereby, the “Note”)). 
Pursuant to the documents and agreements executed in connection with the
Guaranty, Senior Lender has agreed to make certain financial accommodations to
the Company and to Maker.  All of the Company’s obligations to Senior Lender
under the Guaranty and the other Senior Debt Documents (as hereinafter defined)
are secured by, among other things, liens on and security interests in all of
the shares of Maker owned by the Company (the “Collateral”).

 

B.    The Company has issued two Subordinated Promissory Notes of even date
herewith pursuant to which Subordinated Creditor is extending credit to the
Company as evidenced by two Subordinated Promissory Notes of even date herewith
in the aggregate principal amount of $5,500,000 (as the same may be amended,
supplemented or otherwise modified from time to time as permitted hereunder, the
“Subordinated Note”);

 

C.    As an inducement to and as one of the conditions precedent to the
agreement of Senior Lender to enter into the First Note Amendment, Senior Lender
has required the Company to covenant to procure the execution and delivery of
this Agreement by Subordinated Creditor and the Company in order to set forth
the relative rights and priorities of Senior Lender and Subordinated Creditor
under the Senior Debt Documents and the Subordinated Debt Documents (as
hereinafter defined).

 

NOW, THEREFORE, in accordance with the Company’s agreement (entered into in
order to induce Senior Lender to enter into the First Note Amendment) to procure
the execution

 

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and delivery of this Agreement, and for other good and valuable consideration,
the receipt and sufficiency of which hereby are acknowledged, the parties hereto
hereby agree as follows:

 

ARTICLE I
DEFINITIONS

 

The following terms shall have the following meanings in this Agreement:

 

1.1          “Bankruptcy Code” means Chapter 11 of Title 11 of the United States
Code, as amended from time to time and any successor statute and all rules and
regulations promulgated thereunder.

 

1.2          “Business Day” means any day that is not a Saturday, a Sunday or a
day on which banks are required or permitted to be closed in the State of New
York.

 

1.3          “Debt Default Notice” means a written notice from Subordinated
Creditor to Senior Lender or from Senior Lender to Subordinated Creditor
pursuant to which Senior Lender or Subordinated Creditor, as applicable, is
notified of the occurrence of a Subordinated Debt Default or Senior Default, as
applicable, which notice incorporates a reasonably detailed description of such
default.

 

1.4          “Distribution” means, with respect to any indebtedness, obligation
or security,  (a) any payment or distribution by any Person of cash, securities
or other property other than Plan Securities (as defined below), by set-off or
otherwise, on account of such indebtedness, obligation or security, (b) any
redemption, purchase or other acquisition of such indebtedness, obligation or
security by any Person or (c) the granting of any lien or security interest to
or for the benefit of the holders of such indebtedness, obligation or security
in or upon any property of any Person; provided, however, that notwithstanding
any other provisions in this Agreement, the Company shall have the right to
issue any equity securities in connection with the satisfaction of indebtedness.

 

1.5          “Enforcement Action” means (a) to take from or for the account of
the Company or any guarantor of the Subordinated Debt, by set-off or in any
other manner, the whole or any part of any moneys which may now or hereafter be
owing by the Company or any such guarantor with respect to the Subordinated
Debt, (b) to sue for payment of, or to initiate or participate with others in
any suit, action or proceeding against the Company or any such guarantor to
(i) enforce payment of or to collect the whole or any part of the Subordinated
Debt or (ii) commence judicial enforcement of any of the rights and remedies
under the Subordinated Debt Documents or applicable law with respect to the
Subordinated Debt, (c) to accelerate the Subordinated Debt, (d) to exercise any
put option or to cause the Company or any such guarantor to honor any redemption
or mandatory prepayment obligation under any Subordinated Debt Document or
(e) to take any action under the provisions of any state or federal law,
including, without limitation, the Uniform Commercial Code, or under any
contract or agreement, to enforce, foreclose upon, take possession of or sell
any property or assets of the Company or any such guarantor.

 

1.6          “Person” means any natural person, corporation, general or limited
partnership, limited liability company, firm, trust, association, government,
governmental agency or other entity, whether acting in an individual, fiduciary
or other capacity.

 

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1.7          “Proceeding” means any voluntary or involuntary insolvency,
bankruptcy, receivership, custodianship, liquidation, dissolution,
reorganization, assignment for the benefit of creditors, appointment of a
custodian, receiver, trustee or other officer with similar powers or any other
proceeding for the liquidation, dissolution or other winding up of a Person.

 

1.8          “Senior Covenant Default” means any “Event of Default” under any
Senior Debt Document (other than a Senior Payment Default).

 

1.9          “Senior Debt” means all obligations, liabilities and indebtedness
of every nature of the Maker that are guaranteed by the Company (and all
obligations of the Company with respect thereto) from time to time and owed to
Senior Lender under the Senior Debt Documents, including, without limitation,
the principal amount of all debts, claims and indebtedness, accrued and unpaid
interest and all fees, costs and expenses, whether primary, secondary, direct,
contingent, fixed or otherwise, heretofore, now and from time to time hereafter
owing, due or payable, whether before or after the filing of a Proceeding under
the Bankruptcy Code together with (a) any amendments, modifications, renewals or
extensions thereof and (b) any interest accruing thereon after the commencement
of a Proceeding, without regard to whether or not such interest is an allowed
claim.  Senior Debt shall be considered to be outstanding whenever any amount
under any Senior Debt Document is outstanding.

 

1.10        “Senior Debt Documents” means the Senior Loan Documents and shall
include but not be limited to all documents by which any Senior Debt is
refinanced or replaced or by which any Senior Debt Document is superseded,
amended, or replaced as part of any Senior Refinancing.

 

1.11        “Senior Default” means any Senior Payment Default or Senior Covenant
Default.

 

1.12        “Senior Loan Documents” means the Note, the Guaranty, and all other
agreements, documents and instruments executed from time to time in connection
therewith or pursuant thereto, as the same may be amended, supplemented or
otherwise modified from time to time.

 

1.13        “Senior Payment Default” means any “Event of Default” under any
Senior Debt Document resulting from the failure of the obligor to pay, on a
timely basis, any principal, interest, fees or other obligations under such
Senior Debt Document (whether to Senior Lender or into any escrow account
pursuant to the terms of any Senior Debt Document) including, without
limitation, any default in payment of Senior Debt after acceleration thereof.

 

1.14        “Senior Refinancing” means any refinancing of all or any portion of
the Senior Debt under the Senior Loan Documents.

 

1.15        “Subordinated Debt” means all of the obligations of the Company or
any guarantor to Subordinated Creditor evidenced by or incurred pursuant to the
Subordinated Debt Documents.

 

1.16        “Subordinated Debt Documents” means the Subordinated Note, any
guaranty with respect to the Subordinated Debt, and all other documents,
agreements and instruments now

 

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existing or hereinafter entered into evidencing or pertaining to all or any
portion of the Subordinated Debt.

 

1.17        “Subordinated Debt Default” means a default in the payment of the
Subordinated Debt or in the performance of any term, covenant or condition
contained in the Subordinated Debt Documents or any other occurrence permitting
Subordinated Creditor to accelerate the payment of, put or cause the redemption
of all or any portion of the Subordinated Debt or any Subordinated Debt
Document.

 

1.18        “Uniform Commercial Code” means the Uniform Commercial Code (or any
similar or equivalent legislation) as in effect from time to time in any
applicable jurisdiction.

 

ARTICLE II
SUBORDINATION

 

2.1          Subordination of Subordinated Debt to Senior Debt.  The Company
covenants and agrees, and Subordinated Creditor by its acceptance of the
Subordinated Debt Documents (whether upon original issue or upon transfer or
assignment) likewise covenants and agrees, notwithstanding anything to the
contrary contained in any of the Subordinated Debt Documents, that the payment
of any and all of the Subordinated Debt shall be subordinate and subject in
right and time of payment, to the extent and in the manner hereinafter set
forth, to the prior indefeasible payment in full in cash of all Senior Debt.
Each holder of Senior Debt, whether such Senior Debt is now outstanding or
hereafter created, incurred, assumed or guaranteed, shall be deemed to have
acquired Senior Debt in reliance upon the provisions contained in this
Agreement.

 

2.2          Liquidation, Dissolution, Bankruptcy.  In the event of any
Proceeding involving the Company or any subsidiary of the Company:

 

(a)           All Senior Debt shall first be indefeasibly paid in full in cash
and all commitments to lend under the Senior Debt Documents shall be terminated
before any Distribution shall be made to Subordinated Creditor on account of any
Subordinated Debt; provided that Subordinated Creditor may receive securities of
the Company or any Person provided for by a bankruptcy court approved plan of
reorganization or readjustment, the payment of which is subordinate on terms
substantially similar hereto with respect to the Senior Debt Documents (“Plan
Securities”).

 

(b)           Except as set forth in Section 2.2(a), any Distribution which
would otherwise, but for the terms hereof, be payable or deliverable in respect
of the Subordinated Debt, shall be paid or delivered directly to Senior Lender
(to be held and/or applied by Senior Lender in accordance with the terms of the
Senior Debt Documents) until all Senior Debt is indefeasibly paid in full in
cash and any commitments to lend under the Senior Debt Documents shall have been
terminated. Subordinated Creditor irrevocably authorizes, empowers and directs
any debtor, debtor in possession, receiver, trustee, liquidator, custodian,
conservator or other Person having authority, to pay or otherwise deliver all
such Distributions to Senior Lender. Subordinated Creditor also irrevocably
authorizes and empowers Senior Lender, in the name of Subordinated Creditor, to
demand, sue for, collect and receive any and all such Distributions.

 

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(c)           Subordinated Creditor agrees not to initiate, prosecute or
participate in any claim, action or other proceeding challenging the
enforceability, validity, perfection or priority of the Senior Debt or any liens
and security interests securing the Senior Debt.

 

(d)           Subordinated Creditor agrees to execute, verify, deliver and file
any proofs of claim in respect of the Subordinated Debt requested by Senior
Lender in connection with any such Proceeding and hereby irrevocably authorizes,
empowers and appoints Senior Lender its agent and attorney-in-fact to
(i) execute, verify, deliver and file such proofs of claim upon the failure of
Subordinated Creditor promptly to do so prior to 30 days before the expiration
of the time to file any such proof of claim and (ii) vote such claim in any such
Proceeding; provided Senior Lender shall have no obligation to execute, verify,
deliver, file and/or vote any such proof of claim. In the event that Senior
Lender votes any claim in accordance with the authority granted hereby,
Subordinated Creditor shall not be entitled to change or withdraw such vote.

 

(e)           The Senior Debt shall continue to be treated as Senior Debt and
the provisions of this Agreement shall continue to govern the relative rights
and priorities of Senior Lender and Subordinated Creditor even if all or part of
the Senior Debt or the security interests securing the Senior Debt are
subordinated, set aside, avoided, invalidated or disallowed in connection with
any such Proceeding, and this Agreement shall be reinstated if at any time any
payment of any of the Senior Debt is rescinded or must otherwise be returned by
any holder of Senior Debt or any representative of such holder.

 

2.3          Subordinated Debt Payment Restrictions.

 

Notwithstanding the terms of the Subordinated Debt Documents, the Company hereby
agrees that it may not make, directly or indirectly, and Subordinated Creditor
hereby agrees that it will not accept, any Distribution with respect to the
Subordinated Debt until the Senior Debt is indefeasibly paid in full in cash and
any commitments to lend under the Senior Debt Documents have terminated.

 

2.4          Subordinated Debt Standstill Provisions.

 

(a)           Until the Senior Debt is indefeasibly paid in full in cash and all
commitments to lend under the Senior Debt Documents shall be terminated,
Subordinated Creditor shall not, without the prior written consent of Senior
Lender, take any Enforcement Action with respect to the Subordinated Debt, until
acceleration of the Senior Debt and in any event no earlier than ten (10) days
after Senior Lender’s receipt of written notice of Subordinated Creditor’s
intention to take any such Enforcement Action.

 

Notwithstanding the foregoing, Subordinated Creditor may file proofs of claim
against the Company in any Proceeding involving the Company.  Any Distributions
or other proceeds of any Enforcement Action obtained by Subordinated Creditor
(including but not limited to Distributions of money or property with respect to
any Plan Securities) shall in any event be held in trust by it for the benefit
of Senior Lender and promptly be paid or delivered to Senior Lender in the form
received until all Senior Debt is indefeasibly paid in full in cash and any
commitment to lend under the Senior Debt Documents shall have been terminated.

 

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(b)           Notwithstanding anything contained herein to the contrary, if
following the acceleration of the Senior Debt by Senior Lender such acceleration
is rescinded (whether or not any existing Senior Default has been cured or
waived), then all Enforcement Actions taken by the Subordinated Creditor shall
likewise be rescinded.

 

2.5          Incorrect Payments.  If any Distribution on account of the
Subordinated Debt not permitted to be made by the Company or accepted by
Subordinated Creditor under this Agreement is made and received by Subordinated
Creditor, such Distribution shall not be commingled with any of the assets of
Subordinated Creditor, shall be held in trust by Subordinated Creditor for the
benefit of Senior Lender and shall be promptly paid over to Senior Lender for
application (in accordance with the Senior Debt Documents ) to the payment of
the Senior Debt then remaining unpaid, until all of the Senior Debt is paid in
full.

 

2.6          Subordination of Liens and Security Interests; Agreement Not to
Contest; Agreement to Release Liens.  Until the Senior Debt has been
indefeasibly paid in full in cash and any lending commitments under the Senior
Debt Documents have terminated, any liens and security interests of Subordinated
Creditor in the Collateral which may exist in breach of Subordinated Creditor’s
agreement pursuant to Section 3.2(b) or Section 4.1 of this Agreement shall be
and hereby are subordinated for all purposes and in all respects to the liens
and security interests of Senior Lender in the Collateral, regardless of the
time, manner or order of perfection of any such liens and security interests.
Subordinated Creditor agrees that it will not at any time contest the validity,
perfection, priority or enforceability of the Senior Debt, the Senior Loan
Documents, the Senior Debt Documents, or the liens and security interests of
Senior Lender in the Collateral securing the Senior Debt. In the event that
Subordinated Creditor obtains any liens or security interests in the Collateral,
Subordinated Creditor shall (or shall cause its agent to) promptly execute and
deliver to Senior Lender such termination statements and releases as Senior
Lender shall request to effect the release of the liens and security interests
of Subordinated Creditor in such Collateral. In furtherance of the foregoing,
Subordinated Creditor hereby irrevocably appoints Senior Lender its
attorney-in-fact, with full authority in the place and stead of Subordinated
Creditor and in the name of Subordinated Creditor or otherwise, to execute and
deliver any document or instrument which Subordinated Creditor may be required
to deliver pursuant to this Section 2.6.

 

2.7          Sale, Transfer or other Disposition of Subordinated Debt.

 

(a)           Subordinated Creditor shall not sell, assign, pledge, dispose of
or otherwise transfer all or any portion of the Subordinated Debt or any
Subordinated Debt Document: (i) without giving prior written notice of such
action to Senior Lender, (ii) unless, prior to the consummation of any such
action, the transferee thereof shall execute and deliver to Senior Lender an
agreement substantially identical to this Agreement, providing for the continued
subordination of the Subordinated Debt to the Senior Debt as provided herein and
for the continued effectiveness of all of the rights of Senior Lender arising
under this Agreement.

 

(b)           Notwithstanding the failure of any transferee to execute or
deliver an agreement substantially identical to this Agreement, the
subordination effected hereby shall survive any sale, assignment, pledge,
disposition or other transfer of all or any portion of the

 

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Subordinated Debt, and the terms of this Agreement shall be binding upon the
successors and assigns of Subordinated Creditor, as provided in Section 6.4
hereof.

 

2.8          Legends.  Until the termination of this Agreement in accordance
with Section 6.10 hereof, Subordinated Creditor will cause to be clearly,
conspicuously and prominently inserted on the face of the Subordinated Note, and
any other Subordinated Debt Document, as well as any renewals or replacements
thereof, the following legend:

 

“This instrument and the rights and obligations evidenced hereby are subordinate
in the manner and to the extent set forth in that certain Subordination and
Intercreditor Agreement (the “Subordination Agreement”) dated as of May 2, 2013,
among Very Hungry LLC, a Colorado limited liability company, Scott Reiman 1991
Trust, Prospect Global Resources Inc., a Nevada corporation (the “Company”) and
The Karlsson Group, Inc., an Arizona corporation (“Senior Lender”), to the
indebtedness (including interest) owed by the Company to Senior Lender pursuant
to the Company’s Guaranty, and to indebtedness refinancing such indebtedness as
contemplated by the Subordination Agreement; and each holder of this instrument,
by its acceptance hereof, irrevocably agrees to be bound by the provisions of
the Subordination Agreement.”

 

2.9          Default Notice.  Promptly following a Subordinated Debt Default or
Senior Default, Subordinated Creditor or Senior Lender, as applicable, shall
deliver to the other a Debt Default Notice.

 

ARTICLE III
MODIFICATIONS

 

3.1          Modifications to Senior Debt Documents.  Senior Lender may at any
time and from time to time without the consent of or notice to Subordinated
Creditor, without incurring liability to Subordinated Creditor and without
impairing or releasing the obligations of Subordinated Creditor under this
Agreement, change the manner or place of payment or extend the time of payment
of or increase the obligations of Maker or the Company or renew or alter any of
the terms of the Senior Debt, or amend or modify in any manner the Senior Debt
Documents.

 

3.2          Modifications to Subordinated Debt Documents.  Until the Senior
Debt has been indefeasibly paid in full in cash and any lending commitments
under the Senior Debt Documents have terminated, and notwithstanding anything to
the contrary contained in the Subordinated Debt Documents, Subordinated Creditor
shall not, without the prior written consent of Senior Lender, agree to any
amendment, modification or supplement to the Subordinated Debt Documents the
effect of which is to (a) alter the subordination provisions with respect to the
Subordinated Debt, including, without limitation, subordinating the Subordinated
Debt to any other indebtedness, (b) take any liens or security interests in any
assets of Maker, the Company or any other guarantor of the Subordinated Debt or
(c) change or amend any other term of the Subordinated Debt Documents if such
change or amendment would result in a Senior Default, increase the obligations
of the Company or any guarantor of the Subordinated Debt or confer additional
material rights on Subordinated Creditor or any other holder of the Subordinated
Debt in a manner adverse to Senior Lender.

 

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ARTICLE IV
REPRESENTATIONS AND WARRANTIES

 

4.1          Representations and Warranties of Subordinated Creditor. 
Subordinated Creditor hereby represents and warrants to Senior Lender that as of
the date hereof: (a) Very Hungry Very Hungry is a limited liability company duly
formed and validly existing under the laws of the State of Colorado and Scott
Reiman 1991 Trust is a trust duly formed and validly existing under the laws of
the State of Colorado; (b)  Subordinated Creditor has the power and authority to
enter into, execute, deliver and carry out the terms of this Agreement, all of
which have been duly authorized by all proper and necessary action; (c) the
execution of this Agreement by Subordinated Creditor will not violate or
conflict with the organizational documents of Subordinated Creditor, any
material agreement binding upon Subordinated Creditor or any law, regulation or
order or require any consent or approval which has not been obtained; (d) this
Agreement is the legal, valid and binding obligation of Subordinated Creditor,
enforceable against Subordinated Creditor in accordance with its terms, except
as such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors’ rights generally and by equitable principles; (e) Subordinated
Creditor is the sole owner, beneficially and of record, of the Subordinated Debt
Documents and the Subordinated Debt; and (f) the Subordinated Debt is, and at
all times prior to the termination of this Agreement shall remain, an unsecured
obligation of the Company.

 

4.2          Representations and Warranties of Senior Lender.  Senior Lender
hereby represents and warrants to Subordinated Creditor that as of the date
hereof: (a) Senior Lender is a corporation duly formed and validly existing
under the laws of the State of Arizona; (b) Senior Lender has the power and
authority to enter into, execute, deliver and carry out the terms of this
Agreement, all of which have been duly authorized by all proper and necessary
action; (c) the execution of this Agreement by Senior Lender will not violate or
conflict with the organizational documents of Senior Lender, any material
agreement binding upon Senior Lender or any law, regulation or order or require
any consent or approval which has not been obtained; and (d) this Agreement is
the legal, valid and binding obligation of Senior Lender, enforceable against
Senior Lender in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors’ rights generally or by
equitable principles.

 

ARTICLE V
SUBROGATION

 

Subject to the indefeasible payment in full in cash of all Senior Debt and the
termination of any lending commitments under the Senior Debt Documents,
Subordinated Creditor shall be subrogated to the right of Senior Lender to
receive Distributions with respect to the Senior Debt. Subordinated Creditor
agrees that in the event that all or any part of a payment made with respect to
the Senior Debt is recovered from the holders of the Senior Debt in a Proceeding
or otherwise, any Distribution received by Subordinated Creditor with respect to
the Subordinated Debt at any time after the date of the payment that is so
recovered, whether pursuant to the right of subrogation provided for in this
Agreement or otherwise, shall be deemed to have been received by Subordinated
Creditor in trust as property of the holders of the Senior Debt and Subordinated
Creditor shall forthwith deliver the same to Senior Lender for application to
the Senior Debt until

 

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the Senior Debt is paid in full. A Distribution made pursuant to this Agreement
to Senior Lender which otherwise would have been made to Subordinated Creditor
is not, as between the Company and Subordinated Creditor, a payment by the
Company to or on account of the Senior Debt.

 

ARTICLE VI
MISCELLANEOUS

 

6.1          Complete Agreement; Modification of Agreement.  This Agreement
constitutes the complete agreement between the parties with respect to the
subject matter hereof and supersedes all prior agreements, commitments,
understandings or inducements (oral or written, expressed or implied).  Any
modification or waiver of any provision of this Agreement, or any consent to any
departure by any party from the terms hereof, shall not be effective in any
event unless the same is in writing and signed by Senior Lender and Subordinated
Creditor, and then such modification, waiver or consent shall be effective only
in the specific instance and for the specific purpose given. Any notice to or
demand on any party hereto in any event not specifically required hereunder
shall not entitle the party receiving such notice or demand to any other or
further notice or demand in the same, similar or other circumstances unless
specifically required hereunder.

 

6.2          Further Assurances.  Each party to this Agreement promptly will
execute and deliver such further instruments and agreements and do such further
acts and things as may be reasonably requested in writing by any other party
hereto that may be necessary or desirable in order to effect fully the purposes
of this Agreement.

 

6.3          Notices.  Except as otherwise provided herein, whenever any notice,
demand, request or other communication shall or may be given to or served upon
any party by any other party, or whenever any party desires to give or serve
upon any other party any communication with respect to this Agreement, each such
notice, demand, request or other communication shall be in writing and shall be
deemed to have been validly served, given or delivered (a) upon the earlier of
actual receipt and three (3) days after deposit in the United States mail,
registered or certified mail, return receipt requested, with proper postage
prepaid, (b) upon transmission, when sent by telecopy or other similar facsimile
transmission (with such telecopy or facsimile promptly confirmed by delivery of
a copy by personal delivery or United States mail as otherwise provided in this
Section 6.3), (c) one (1) Business Day after deposit with a reputable overnight
courier with all charges prepaid or (d) when hand-delivered, all of which shall
be addressed to the party to be notified and sent to the address or facsimile
number indicated below or to such other address (or facsimile number) as may be
substituted by notice given as herein provided.  The giving of any notice
required hereunder may be waived in writing by the party entitled to receive
such notice. Failure or delay in delivering copies of any notice, demand,
request or other communication to any Person (other than Subordinated Creditor,
the Company or Senior Lender) designated below to receive copies shall in no way
adversely affect the effectiveness of such notice, demand, request or other
communication.

 

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Notices shall be addressed as follows:

 

If to Subordinated Creditor:

 

Very Hungry LLC

Scott Reiman 1991 Trust

730 17th Street, Suite 800

Denver, CO 80202
Attention:                                         Conway Schatz
Telephone:                                   303-571-1010
Facsimile:                                         303-571-1221

 

With a copy to:

Bryan Cave

1700 Lincoln Street, Suite 4100

Denver CO 80203
Attention:                                         W. Dean Salter
Telephone:                                   303-866-0245
Facsimile:                                         303-335-3745

 

If to the Company:

 

Prospect Global Resources Inc.
1401 17th Street, Suite 1550
Denver, CO 80202
Attention:                                         Chief Executive Officer
Telephone:                                   303-990-8415
Facsimile:                                         303-990-8440

 

With a copy to:

 

Eisner Kahan Gorry Chapman Ross & Jaffe PC
9601 Wilshire Blvd., Suite 700
Beverly Hills, CA 90210
Attention:                                         Mr. Michael Eisner
Telephone:                                   310-855-3200
Facsimile:                                         310-855-3201

 

If to Senior Lender:

The Karlsson Group, Inc.

18 Ozone Avenue

Venice, California  90291

Attention:                                         Michael Stone
Facsimile:                                         310-933-0262

 

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With copies to:

 

Loeb & Loeb LLP

10100 Santa Monica Boulevard, Suite 2200

Los Angeles, California 90067

Attention:                                         Lance N. Jurich, Esq.
Facsimile:                                         310-282-2211

 

and

 

Law Offices of Richard C. Weisberg

33 Derwen Road

Bala Cynwyd, Pennsylvania 19005

Attention:                                         Dick Weisberg

Facsimile:                                         215-689-1504

 

or in any case, to such other address as the party addressed shall have
previously designated by written notice to the serving party, given in
accordance with this Section 6.3.

 

6.4          Successors and Assigns.  This Agreement shall inure to the benefit
of, and shall be binding upon, the respective successors and assigns of Senior
Lender, Subordinated Creditor and the Company. To the extent permitted under the
Senior Debt Documents, Senior Lender may, from time to time, without notice to
Subordinated Creditor, assign or transfer any or all of the Senior Debt or any
interest therein to any Person and, notwithstanding any such assignment or
transfer, or any subsequent assignment or transfer, the Senior Debt shall,
subject to the terms hereof, be and remain Senior Debt for purposes of this
Agreement, and every permitted assignee or transferee of any of the Senior Debt
or of any interest therein shall, to the extent of the interest of such
permitted assignee or transferee in the Senior Debt, be entitled to rely upon
and be the third party beneficiary of the subordination provided under this
Agreement and shall be entitled to enforce the terms and provisions hereof to
the same extent as if such assignee or transferee were initially a party hereto.

 

6.5          Relative Rights.  This Agreement shall define the relative rights
of Senior Lender and Subordinated Creditor. Nothing in this Agreement shall
(a) impair, as between the Company and Senior Lender and as between the Company
and Subordinated Creditor, the obligation of the Company with respect to the
payment of the Senior Debt and the Subordinated Debt in accordance with their
respective terms or (b) affect the relative rights of Senior Lender or
Subordinated Creditor with respect to any other creditors of the Company.

 

6.6          Conflict.  In the event of any conflict between any term, covenant
or condition of this Agreement and any term, covenant or condition of any of the
Subordinated Debt Documents, the provisions of this Agreement shall control and
govern.

 

6.7          Counterparts.  This Agreement may be authenticated in any number of
separate counterparts by any one or more of the parties hereto, and all of said
counterparts taken together

 

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shall constitute one and the same instrument.  This Agreement may be
authenticated by manual signature, facsimile or, if approved in writing by
Senior Lender, electronic means, all of which shall be equally valid.

 

6.8          Severability; Section Titles.  Wherever possible, each provision of
this Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be prohibited
by or invalid under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.  The
Section titles contained in this Agreement are and shall be without substantive
meaning or content of any kind whatsoever and are not a part of the agreement
between the parties hereto.

 

6.9          Rules of Construction.  The meanings given to terms defined herein
shall be equally applicable to both the singular and plural forms of such
terms.  The terms “herein”, “hereof” and similar terms refer to this Agreement
as a whole and not to any particular Article, Section or clause in this
Agreement.  References herein to an Exhibit, Schedule, Article, Section or
clause refer to the appropriate Exhibit or Schedule to, or Article, Section or
clause in this Agreement.

 

6.10        Continuation of Subordination; Termination of Agreement.  This
Agreement shall remain in full force and effect until the indefeasible payment
in full in cash of the Senior Debt and the termination of all lending
commitments under the Senior Debt Documents after which this Agreement shall
terminate without further action on the part of the parties hereto.

 

6.11        GOVERNING LAW.  THIS AGREEMENT AND THE OBLIGATIONS ARISING HEREUNDER
SHALL BE GOVERNED BY AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF ARIZONA APPLICABLE TO CONTRACTS MADE AND PERFORMED
IN SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES THEREOF REGARDING CONFLICTS OF
LAWS, AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.

 

6.12        SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL.

 

(a)           EACH PARTY HERETO HEREBY CONSENTS AND AGREES THAT THE STATE OR
FEDERAL COURTS LOCATED IN ARIZONA SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND
DETERMINE ANY CLAIMS OR DISPUTES BETWEEN OR AMONG SENIOR LENDER, THE
SUBORDINATED LENDER AND THE COMPANY PERTAINING TO THIS AGREEMENT OR TO ANY
MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT; PROVIDED, THAT EACH OF THE
SUBORDINATED CREDITOR AND THE COMPANY HERETO ACKNOWLEDGES THAT ANY APPEALS FROM
THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF ARIZONA;
AND FURTHER PROVIDED, THAT NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE
TO PRECLUDE SENIOR LENDER FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY
OTHER JURISDICTION TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF SENIOR
LENDER.  EACH OF THE SUBORDINATED CREDITOR AND THE COMPANY EXPRESSLY SUBMITS AND
CONSENTS IN ADVANCE TO SUCH JURISDICTION IN

 

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ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND EACH OF THE SUBORDINATED
CREDITOR AND THE COMPANY HEREBY WAIVES ANY OBJECTION THAT IT MAY HAVE BASED UPON
LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS.  EACH OF
THE SUBORDINATED CREDITOR AND THE COMPANY HEREBY WAIVE PERSONAL SERVICE OF THE
SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREE
THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY
REGISTERED OR CERTIFIED MAIL ADDRESSED TO SUCH PARTY AT THE ADDRESS SET FORTH IN
SECTION 6.3 HEREOF AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE
EARLIER OF SUCH PARTY’S ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT
IN THE U.S. MAILS, PROPER POSTAGE PREPAID.

 

(b)           THE PARTIES HERETO DESIRE THAT THEIR DISPUTES BE RESOLVED BY A
JUDGE APPLYING SUCH APPLICABLE LAWS.  THEREFORE, TO ACHIEVE THE BEST COMBINATION
OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO
WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO
RESOLVE ANY DISPUTE, WHETHER ARISING IN CONTRACT, TORT, OR OTHERWISE BETWEEN OR
AMONG ANY OF SENIOR LENDER, THE SUBORDINATED CREDITOR AND THE COMPANY ARISING
OUT OF, CONNECTED WITH, RELATED OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED
BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS RELATED
HERETO.

 

(Signature page follows)

 

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IN WITNESS WHEREOF, Subordinated Creditor, the Company and Senior Lender have
caused this Agreement to be executed as of the date first above written.

 

 

 

“Senior Lender”

 

 

 

THE KARLSSON GROUP, INC., an Arizona corporation

 

 

 

 

 

By:

s/s Michael Stone

 

 

Name: Michael Stone

 

 

Title: CFO

 

 

 

 

 

 

 

“Subordinated Creditor”

 

 

 

 

 

 

 

VERY HUNGRY LLC, a Colorado limited liability company

 

 

 

 

 

 

By:

By:

/s/ Brian Fleishmann

 

 

Name: Brian Fleishmann

 

 

Title: Manager

 

 

 

 

 

 

 

SCOTT REIMAN 1991 TRUST

 

 

 

 

 

 

 

By:

/s/ Scott Reiman

 

 

Name: Scott Reiman

 

 

Title: Trustee

 

 

 

 

 

 

 

“Company”

 

 

 

 

PROSPECT GLOBAL RESOURCES INC., a Nevada corporation

 

 

 

 

By:

/s/ Damon G. Barber

 

 

Name: Damon G. Barber

 

 

Title: President and Chief Executive Officer

 

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