Exhibit 10.8

 

EXECUTION COPY

 

[*The information in Schedule 2 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.]

 

ESCROW AGREEMENT

 

This ESCROW AGREEMENT (this “Agreement”), dated as of April 15, 2013, by and
among The Karlsson Group , Inc., an Arizona corporation (“Lender”), Prospect
Global Resources, Inc., a Nevada corporation (“Obligor”) and JPMorgan Chase
Bank, N.A., a national banking association, as escrow agent (together with any
successor in such capacity, the “Escrow Agent”). Lender and Obligor are referred
to collectively herein as the “Parties”, and individually, a “Party.”

 

WHEREAS, simultaneous with the execution of this Agreement, (a) Lender and
Obligor and certain of Obligor’s affiliates have entered into that certain
Extension Agreement, dated as of the date hereof (the “Extension Agreement”),
and (b) Lender and Prospect Global Resources, Inc., a Delaware corporation, have
entered into an Amendment to Senior First Priority Secured Promissory Note,
dated as of the date hereof (the “Amendment”); and

 

WHEREAS, in accordance with the Extension Agreement, Obligor is to deposit into
escrow certain amounts which are to be held in escrow pursuant to the terms of
this Agreement (the “Escrow Deposits”). The Escrow Deposits plus any income
earned thereon pursuant to this Agreement are referred to collectively as the
“Escrow Amount”.

 

NOW, THEREFORE, in consideration of the foregoing and the mutual promises and
undertakings set forth herein, the Parties and the Escrow Agent agree as
follows:

 

1. Defined Terms. Certain capitalized terms used herein shall have the
respective meanings set forth on Exhibit A attached hereto. Other capitalized
terms used but not otherwise defined herein shall have the respective meanings
assigned to such terms in the Extension Agreement or the Amendment. The Escrow
Agent shall not be responsible to determine or to make inquiry into any term,
capitalized, or otherwise, not defined herein. The Escrow Agent shall neither be
responsible for, nor chargeable with, knowledge of, nor have any requirements to
comply with, the terms and conditions of any other agreement, instrument or
document between the parties, in connection herewith, if any, including without
limitation the Stock Purchase Agreement, nor shall the Escrow Agent be required
to determine if any Person has complied with any such agreements, nor shall any
additional obligations of the Escrow Agent be inferred from the terms of such
agreements, even though reference thereto may be made in this Agreement. In the
event of any conflict between the terms and provisions of this Agreement, those
of the Extension Agreement, any schedule or exhibit attached to this Agreement,
or any other agreement among the Parties, the terms and conditions of this
Agreement shall control.

 

2. Appointment of Escrow Agent. Lender and Obligor hereby appoint the Escrow
Agent as escrow agent hereunder, and the Escrow Agent hereby accepts such
appointment, subject to the terms and conditions contained herein.

 

3. Deposit of Funds into Escrow Account.

 

(a) Escrow Agent shall hold as the Escrow Amount up to a total of $9,213,000
which will be deposited

 

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with the Escrow Agent from time to time and in the amounts and on the dates set
forth in Schedule I attached hereto.  Schedule I and the dates and funding
amounts set forth therein are expressly made part of this Agreement.  The Escrow
Agent shall invest and reinvest the Escrow Amount and the proceeds thereof as
directed in Section 5.

 

(b) Receipt, investment and reinvestment of the Escrow Amount shall be confirmed
by the Escrow Agent as soon as practicable by account statement sent to the
Parties, or online statements, if available from Escrow Agent and the Escrow
Agent shall be notified by the Parties, as soon as reasonably practicable after
becoming aware of any discrepancies in any such account statement.

 

4. Holding of Escrow Amount. The Escrow Agent shall hold the Escrow Amount in
accordance with the terms of this Agreement.

 

5. Investment of Escrow Amount. During the term of this Agreement, the Escrow
Amount shall be in one or more demand deposit account and invested and
reinvested by the Escrow Agent in (i) the JPMorgan Chase Bank, N.A. Money Market
Deposit Account (“MMDA”) or a successor investment offered by the Escrow Agent,
in each case, in cash or cash equivalents. MMDAs have rates of compensation that
may vary from time to time as determined by the Escrow Agent. Periodic
statements shall be provided to Lender and Obligor reflecting transactions of
the Escrow Account. Lender and Obligor, upon written request to the Escrow
Agent, shall receive a statement of transaction details upon completion of any
securities transaction in the Escrow Account without any additional cost. The
Escrow Agent shall have the right to liquidate any investments held in order to
provide funds necessary to make required payments under this Agreement. The
Escrow Agent will not provide supervision, recommendations or advice relating to
either investment of the moneys held in the Escrow Account or the purchase,
sale, retention or other disposition of any investment described herein. The
Escrow Agent shall have no liability for any loss sustained as a result of:
(i) any investment in a MMDA, (ii) as a result of any liquidation of any
investment prior to its maturity or (iii) for the failure of Lender and Obligor
to give the Escrow Agent instructions to invest or reinvest the Escrow Amount
(in each case, other than as a result of the Escrow Agent’s gross negligence or
willful misconduct). In the absence of written instructions, the Escrow Agent
shall invest in a JPMorgan Chase Bank, N.A. Money Market Deposit Account in cash
or cash equivalents.

 

6. Procedures for Disbursement of Escrow Amount. The Escrow Agent shall be
authorized to make disbursements from the Escrow Account in accordance with the
following provisions, but not otherwise:

 

(a) Instructions.  From time to time, the Parties may agree on an approved
schedule, pursuant to which the Obligor may provide unilateral payment
instructions (each, an “Approved Schedule”), and in such event, the Parties
shall jointly sign and deliver such Approved Schedule to the Escrow Agent. If
the Parties wish to amend an Approved Schedule, then the Parties shall jointly
sign and deliver an amended Approved Schedule to the Escrow Agent (each, an
“Amended Approved Schedule”). If Obligor delivers a certificate or written
instruction (the “Obligor’s Certificate” which is attached as a template as
Schedule 4 to this Agreement) to the Escrow Agent instructing the Escrow Agent
to distribute all or any portion of the Escrow Amount in accordance with an
Approved Schedule or an Amended Approved Schedule (with

 

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a copy to Lender), such amount shall be so distributed by the Escrow Agent out
of the Escrow Account to the respective vendors and payees listed thereon. The
delivery of an Obligor’s Certificate is a representation by the Obligor to the
Lender and Escrow Agent that (i) the amounts set forth in such Obligor’s
Certificate are valid, due and owing to the payee listed therein and (ii) the
amounts requested to be disbursed pursuant to such Obligor’s Certificate comply
in all respects with the Approved Schedule or Amended Approved Schedule, as
applicable, and Section 3(a) hereof. The Parties hereby acknowledge and agree
that (i) the Escrow Agent shall be entitled to rely solely on an Approved
Schedule and/or an Amended Approved Schedule and shall disburse the Escrow
Amount upon receipt of the Obligor’s Certificate in accordance with such
Approved Schedule or Amended Approved Schedule, as applicable, (ii) Schedule 2
attached hereto is an Approved Schedule, (iii) the Escrow Agent shall have no
responsibility of ensuring that each Obligor Certificate provided by the Obligor
is within the capped amount in the Approved Schedule or any Amended Approved
Schedule, (iv) the Escrow Agent shall have no liability for acting on an Obligor
Certificate provided by Obligor which amounts may be over the amounts listed on
the Approved Schedule or any Amended Approved Schedule, and (v) the Escrow Agent
shall have no responsibility to determine if sufficient amounts have been
deposited by Obligor for payment to the respective payees on an Approved
Schedule or Amended Approved Schedule.  Upon the occurrence of the DFS
Completion Date (as defined in the Amendment) and payment in full of all amounts
set forth on the Approved Schedule or Amended Approved Schedule, as applicable,
and Section 3(a) hereof, which shall be certified to the Escrow Agent and Lender
pursuant to a certificate of the Obligor executed by an Authorized
Representative and the delivery of which certificate shall be a representation
by Obligor as to the occurrence of such events, Escrow Agent shall promptly
remit all remaining Escrow Amounts to Obligor.

 

(b) Disbursement Totals; Notices and Information.  The Escrow Agent shall
provide the Parties with monthly statements detailing the total amount deposited
in the Escrow Account as of such date, and the total amount distributed from the
Escrow Account as of such date.  Either Party may contact the Escrow Agent and
request additional information related to deposits and disbursements into and
out of the Escrow Account, which the Escrow Agent will promptly provide to the
extent such additional information is available.  Each Party shall have the
right to any and all information pertaining to the Escrow Account.

 

(c) Compliance with Orders. Notwithstanding anything to the contrary within this
Section 6, in the event that any claim is finally determined by a final
resolution binding on the parties, whether by consent order, judgment, decree,
settlement, arbitration award or otherwise, (a “Final Resolution”) (i) with
respect to the release of all or any portion of the Escrow Amount and
(ii) presented to the Escrow Agent by Lender or Obligor, the Escrow Agent shall
comply therewith. It is hereby understood that any Final Resolution that is
received by the Escrow Agent from Lender or Obligor pursuant to this
Section 6(c) shall be accompanied by a written letter of an Authorized
Representative of the instructing Party, specifying the amounts, time(s) and
complete wire transfer information for the payee(s) given to effectuate such
Final Resolution. The Escrow Agent shall be entitled to conclusively rely upon
any such letter and shall have no responsibility to review the Final Resolution
to which such letter refers or to many any determination as to whether such
Final Resolution is final. The Party submitting the Final

 

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Resolution to the Escrow Agent shall provide written notice to the other Party
of such submission of such Final Resolution to the other Party at the same time
submission is made to the Escrow Agent. The Parties acknowledge and agree that
the Escrow Agent shall be entitled absolutely to rely and act upon any such
Final Resolution received, even if such Final Resolution is not final and is
subject to further appeal and potential reversal.

 

(d) Method of Payments. All payments and releases hereunder shall be made as
promptly as practicable following receipt of an Obligor’s Certificate executed
by Obligor or a Final Resolution (as provided in accordance with Section 6(c))
and delivered as provided herein and shall be made by wire transfer of
immediately available funds to such bank account or accounts designated in
writing to the Escrow Agent.

 

7. Escrow Agent’s Duties and Fees.

 

(a) Duties Limited. The Escrow Agent undertakes to perform only such duties as
are expressly set forth herein and in any joint written instructions from the
Lender and the Obligor in accordance with this Agreement and no other duties,
including but not limited to any fiduciary duty, shall be implied. Except as
provided herein, the Escrow Agent shall not be subject to, or have any liability
or responsibility under, nor be obliged to recognize, any other agreements,
directions or instructions of any of the Parties or any other Person in carrying
out its duties hereunder. The Escrow Agent shall not be liable for any action
taken, suffered or omitted to be taken by it except to the extent caused by or
arising out of the Escrow Agent’s gross negligence or willful misconduct.

 

(b) Reliance. The Escrow Agent may rely upon, and shall be protected in acting
or refraining from acting upon, any written notices, instructions or requests
furnished to it pursuant to the terms and provisions of this Agreement and
believed by it to be genuine and to have been signed or presented by the proper
party or parties in a timely fashion without inquiry and without requiring
substantiating evidence of any kind. The Escrow Agent shall also be protected in
refraining from acting upon any such notices, instructions or requests furnished
to it and believed by it not to be genuine or timely furnished. The Escrow
Agreement shall not be liable to Lender, Obligor, any beneficiary or other
person for refraining from acting upon any instruction setting forth, claiming,
containing, objecting to, or relating to the transfer or distribution of the
Escrow Amount, or any portion thereof, unless such instruction shall have been
delivered to the Escrow Agent in accordance with Section 12 below and the Escrow
Agent has been able to satisfy any applicable security procedures as may be
required thereunder. The Escrow Agent may execute any of its powers and perform
any of its duties hereunder directly or through agents or attorneys, and shall
be liable only for its gross negligence or willful misconduct (as finally
adjudicated in a court of competent jurisdiction) in the selection of any such
agent or attorney. The Escrow Agent may consult with counsel, accountants and
other skilled persons to be selected and retained by it. In the event that the
Escrow Agent shall be uncertain, or believes there is some ambiguity, as to its
duties or rights hereunder or receives instructions, claims or demands from any
Party hereto which, in the Escrow Agent’s judgment, conflict with any of the
provisions of this Agreement, or if the Escrow Agent receives conflicting
instructions, it shall be entitled to refrain from taking any action and its
sole obligation shall be to keep safely all property held in escrow until it
shall be directed otherwise in writing by a joint

 

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letter executed by Authorized Representative (as defined in Section 12(b) below)
of the Parties or by a court order issued by a court of competent
jurisdiction(it being understood that the Escrow Agent shall be entitled
conclusively to rely and act upon any such order and shall have no obligation to
determine whether any such court order is final). Anything in this Agreement to
the contrary notwithstanding, in no event shall the Escrow Agent be liable for
special, incidental, punitive, indirect or consequential loss or damage of any
kind whatsoever (including but not limited to lost profits), even if the Escrow
Agent has been advised of the likelihood of such loss or damage and regardless
of the form of action. The Escrow Agent shall have no duty to solicit any
payments which may be due to it or due in respect of the Escrow Account,
including, without limitation, the Escrow Amount, nor shall the Escrow Agent
have any duty or obligation to confirm or verify the accuracy or correctness of
any amounts deposited hereunder. The Escrow Agent shall have no duty or
obligation to make any calculations of any kind hereunder.

 

(c) Indemnification. Lender and Obligor jointly and severally hereby agree to
indemnify the Escrow Agent and its officers, directors, employees, successors,
assigns, managers, attorneys, accountants, experts, and agents (the “Agent
Indemnitees”) for, and hold such indemnities harmless against any and all
losses, damages, claims, liabilities, penalties, judgments, settlements,
actions, suits, proceedings, litigation, investigations, costs or expenses
(including, without limitation, the reasonable, out-of-pocket fees and expenses
of one outside counsel and all expense of document location, duplication and
shipment) (collectively “Losses”) arising out of or in connection with (a) the
Escrow Agent’s execution and performance of this Agreement, the enforcement of
any rights or remedies under or in connection with this Agreement, or as may
arise by reason of any act, omission or error of the Agent Indemnitees, except
in the case of any Agent Indemnitee to the extent that such Losses are finally
adjudicated by a court of competent jurisdiction to have been primarily caused
by the gross negligence or willful misconduct of such Agent Indemnitee, or
(b) its following any instructions or other directions, whether joint or
singular, from Lender or Obligor, except to the extent that its following any
such instruction or direction is expressly forbidden by the terms hereof. The
Parties hereby grant the Escrow Agent a lien on, right of set-off against and
security interest in the Escrow Amount for the payment of any claim for
indemnification, compensation, expenses and amounts due the Escrow Agent
hereunder. The obligations contained in this Section 7(c) shall survive the
termination of this Agreement and the resignation, replacement or removal of the
Escrow Agent.  For the avoidance of doubt, indemnification with respect to
taxes, additions for late payment, interest, penalties and other expenses shall
be governed by Section 7(h) hereof.

 

(d) Successor Escrow Agents. The Escrow Agent may resign and be discharged from
its duties or obligations hereunder by giving notice in writing of such
resignation to Lender and Obligor not less than thirty (30) days prior to the
effective date thereof, specifying the date upon which such resignation shall
take effect. In addition, Lender and Obligor acting jointly, shall have the
right to terminate the appointment of the Escrow Agent by giving it thirty (30)
days’ notice in writing of such termination, specifying the date upon which such
termination shall take effect. In the event of the resignation or termination of
the Escrow Agent, the Parties shall appoint a successor before the effective
date thereof and shall give written notice to the Escrow Agent then serving of
such appointment. Upon demand of the successor escrow agent, and payment of the
Escrow Agent’s fees and expenses pursuant to Section

 

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7 ( e), all funds and property in the Escrow Account shall be turned over
promptly to such successor escrow agent, who shall thereupon be bound by all of
the provisions hereof. If the Parties shall fail to name a successor escrow
agent prior to the effective date of the Escrow Agent’s resignation or
termination hereunder, the Escrow Agent may petition any court of competent
jurisdiction for the appointment of a successor escrow agent or for other
appropriate relief, and any such resulting appointment shall be binding upon all
of the Parties. The Escrow Agent’s sole responsibility shall be to hold the
Escrow Amount (without any obligation to reinvest the same) and to deliver the
same to a designated substitute escrow agent, if any, or in accordance with the
directions of an order or judgment of a court of competent jurisdiction, at
which time the Escrow Agent’s obligations hereunder shall cease and terminate.

 

(e) Fees. Simultaneously with the execution of this Agreement, the Escrow Agent
shall be paid a fee for the services to be rendered hereunder, along with any
fees or charges for accounts hereunder, including those levied by any
governmental authority which the Escrow Agent may impose, charge or
pass-through, in accordance with the schedule set forth on Schedule 2 attached
hereto, and from time to time thereafter, and shall be reimbursed for any
out-of-pocket expenses reasonably incurred by it in carrying out its duties
hereunder. All of such fees and expenses incurred on and after the date hereof
shall be paid by Obligor. Each of the Parties further agrees to the disclosures
set forth on Schedule 2.

 

(f) Additional Documents. Lender and Obligor agree to execute and deliver to the
Escrow Agent such additional documents as it may reasonably request to evidence
termination of this Agreement and to evidence their consent to the distribution
and/or release of the Escrow Amount from the Escrow Account.

 

(g) No Liability. Neither the Escrow Agent nor any of its officers, directors or
employees shall be liable to any Person or party for any action taken or omitted
to be taken by it or any of its officers, directors or employees under this
Agreement, except in the case of the Escrow Agent’s gross negligence or willful
misconduct.

 

(h) Taxes. Each of Lender and Obligor shall severally indemnify and hold the
Escrow Agent harmless from and against any taxes, additions for late payment,
interest, penalties and other expenses that may be assessed against the Escrow
Agent on any payment or activities in respect of taxes that relate solely to the
payment of the Escrow Amount (or any portion thereof) to Lender or Obligor, as
applicable, under this Agreement. Notwithstanding the foregoing, neither the
Escrow Agent nor any Agent Indemnitee shall be entitled to indemnity in the
event of its own gross negligence or willful misconduct.

 

8. Taxes.

 

(a) The Parties have provided the Escrow Agent with their respective fully
executed Internal Revenue Service (“IRS”) Form W-8, or W-9. All interest or
other income earned under this Agreement shall be allocated to the Obligor and
reported, as and to the extent required by law, by the Escrow Agent to the IRS,
or any other taxing authority, on IRS Form 1099 or 1042S (or other appropriate
form) as income earned from the Escrow Deposit by the Obligor whether or not
said income has been distributed during such year. The Parties hereby represent
to the Escrow Agent that no other tax reporting of any kind is

 

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required given the underlying transaction giving rise to this Agreement.

 

(b) Any other tax returns required to be filed shall be prepared and filed by
Lender and Obligor, as applicable, with the IRS and any other taxing authority
as required by law, including but not limited to any applicable reporting or
withholding pursuant to the Foreign Investment in Real Property Tax Act
(“FIRPTA”). Lender and Obligor acknowledge and agree that the Escrow Agent shall
have no responsibility for the preparation and/or filing of any income tax
return or any applicable FIRPTA reporting or withholding with respect to the
Escrow Amount or any income earned by the Escrow Amount. Lender and Obligor
further acknowledge and agree that any taxes payable from the income earned on
the investment of any sums held in the Escrow Account shall be paid by Obligor.
In the absence of a joint written direction from Lender and Obligor, all
proceeds of the Escrow Amount shall be retained in the Escrow Account and
reinvested from time to time by the Escrow Agent as provided in this Agreement.

 

9. Dispute Resolution. In the event that any dispute arises with respect to this
Agreement or in the event that any claim with respect to the Escrow Account is
disputed, or the Escrow Agent is faced with inconsistent claims or demands by
the Parties, then the Escrow Agent is authorized and directed to retain in its
possession without liability to any Person all of the Escrow Amount until such
dispute shall have been settled either by the mutual agreement of the parties
involved or by a Final Resolution. It is hereby understood that any Final
Resolution that is received by the Escrow Agent pursuant to this Section 9
directing the release of all or any portion of the Escrow Amount shall be
accompanied by a written letter of an Authorized Representative of the
Instructing Party, specifying the amounts, time(s) and complete wire transfer
information for the payees given to effectuate such Final Resolution. The Escrow
Agent shall be entitled to conclusively rely upon any such certification and
letter and shall have no responsibility to review the Final Resolution to which
such letter refers or to make any determination as to whether such Final
Resolution is final. The Parties acknowledge and agree that the Escrow Agent
shall be entitled absolutely to rely and act upon any such order received, even
if such order is not final and is subject to further appeal and potential
reversal. The Escrow Agent may, but shall be under no duty to, institute or
defend any legal proceeding which relates to this Agreement. The Parties agree
to pursue any redress or recourse in connection with any dispute between Lender
and Obligor without making the Escrow Agent a party to the same. The parties to
this Agreement hereby waive any right to a trial by jury with respect to any
lawsuit or judicial proceeding arising or relating to this Agreement.

 

10. Consent to Jurisdiction and Service. The Parties to this Agreement consent
and submit to the jurisdiction of the courts of the State of California and of
any federal court located in the State of California in connection with any
actions or proceeding brought against the Parties by the Escrow Agent arising
out of or in relation to this Agreement and each Party irrevocably waives any
objection on the grounds of venue, forum non-conveniens or any similar grounds
to the jurisdiction of such courts. In any such action or proceeding the Parties
hereby absolutely and irrevocably waive personal service of any summons,
complaint, declaration or other process and agrees that service thereof may be
made by certified or registered first class mail directed to the Parties at the
addresses set forth in Section 11.

 

11. Notices and Funds Transfer Information. All communications hereunder shall
be in writing and,

 

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except for communications from Lender or Obligors setting forth, claiming,
objecting to, or in any way relating to the transfer of distribution of funds,
including but not limited to funds transfer instructions (all of which shall be
specifically governed by Section 12 below), shall be deemed to be duly given
after is has been received if it is sent or served to the appropriate notice
address set forth below or at such other address as any Party or the Escrow
Agent may have furnished to the other parties hereto in writing. Notwithstanding
the above, in the case of communications delivered to the Escrow Agent such
communications shall be deemed to have been given on the date received by an
officer of the Escrow Agent or any employee of the Escrow Agent who reports
directly to such officer at the below referenced office. Any communications
received after 5:00 pm PST shall be deemed to have been received on the next
Business Day. In the event that the Escrow Agent, in its sole discretion, shall
determine that an emergency exists, the Escrow Agent may use such other means of
communication as the Escrow Agent deems appropriate. All communications
hereunder shall be in writing, and all instructions shall be executed by an
Authorized Representative, and shall be executed and delivered with the terms of
this Agreement by facsimile or overnight courier only to the appropriate fax
number or notice address set forth for each party as follows:

 

(i) If to Lender, to: Michael Stone, 18 Ozone Ave., Venice, CA 90291, Telefax:
310 933 0262

 

(ii) If to Obligor to:

 

Prospect Global Resources, Inc.

1401 17th Street

Suite 1550

Denver, Colorado 80202

Facsimile: 303-990-8440

 

(iii) If to the Escrow Agent, to:

 

JPMorgan Chase Bank, N.A. Escrow Services

300 South Grand Avenue

Mail Code CA2-0310

Los Angeles, California 90071

Attn: Nelia Lopez

Facsimile: 213-621-8072

 

12. Security Procedures.

 

(a) Notwithstanding the foregoing, any instructions setting forth, claiming,
containing, objecting to, or in any way relating to the transfer or distribution
of funds, including, but not limited to, any such funds transfer instructions
that may otherwise be set forth in a written instruction pursuant to Section 6
of this Agreement shall be executed by an Authorized Representative of the
appropriate Party or Parties, and delivered to the Escrow Agent only by
confirmed facsimile on a Business Day only at the fax number set forth in
Section 11 above. No instruction for or related to the transfer or distribution
of the Escrow Amount, or any portion thereof, shall be deemed delivered and
effective unless the Escrow Agent actually shall have received such instruction
on a Business Day by facsimile at the number provided to

 

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Lender and Obligor by the Escrow Agent in accordance with Section 11 and as
further evidenced by a confirmed transmittal to that the Party’s or Parties
transmitting fax number and the Escrow Agent has been able to satisfy any
applicable security procedures as may be required hereunder. The Escrow Agent
shall not be liable to any Party or other person for refraining from acting upon
any instruction for or related to the transfer or distribution of the Escrow
Amount if delivered to any other fax number.

 

(b) In the event Escrow Amount funds transfer instructions are received by the
Escrow Agent by facsimile, the Escrow Agent is authorized to seek confirmation
of such instructions by a single telephone call-back to the Person or Persons
designated on Schedule 3 hereto (each an “Authorized Representative”), and the
Escrow Agent may rely upon the confirmation of anyone purporting to be that
Authorized Representative.  The persons and telephone numbers designated for
call-backs may be changed only in a writing executed by Authorized
Representatives of the applicable Party and actually received by Escrow Agent
via facsimile. No funds will be disbursed until an Authorized Representative is
able to confirm such instructions by telephone callback. The Escrow Agent, any
intermediary bank, and the beneficiary’s bank in any funds transfer may rely
upon the identifying number of the beneficiary’s bank or any intermediary bank
included in a funds transfer instruction provided by Lender or Obligor and
confirmed by an Authorized Representative to identify (i) the beneficiary,
(ii) the beneficiary’s bank or (iii) an intermediary bank. Further, the
beneficiary’s bank in the funds transfer instructions may make payment on the
basis of the account number provided in such Party’s or the Parties’ instruction
and confirmed by an Authorized Representative even though it identifies a person
different from the named beneficiary.

 

(c) The Parties acknowledge that the Escrow Agent is authorized to use the
following funds transfer instructions to disburse any funds due to Obligor,
without a verifying call-back as set forth in Section 12(b) above:

 

Bank Name:      KeyBank NA

 

Bank Address:    1675 Broadway
                                                                                               
Denver, Colorado 80202

 

ABA Number:                307-070-267

 

Account Name:   Prospect Global Resources Inc.

 

Account Number:  765071001158

 

The parties to this Agreement acknowledge that these security procedures are
commercially reasonable. All funds transfer instructions shall be executed by an
Authorized Representative as set forth on Schedule 3 hereto.

 

14. Termination. This Agreement may be terminated at any time by and upon the
receipt by the Escrow Agent of a joint written notice of termination executed by
each of Lender and Obligor directing the distribution of all property then held
by the Escrow Agent under and pursuant to this Agreement. This

 

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Agreement shall automatically terminate if and when all of the Escrow Amount
(which includes all the securities in which any of the Escrow Amount shall have
been invested) shall have been distributed by the Escrow Agent in accordance
with the terms of this Agreement.

 

15. Miscellaneous.

 

(a) Benefit of Parties. This Agreement and the various rights and obligations
arising hereunder shall inure to the benefit of and be binding upon the Parties
and their respective successors and permitted assigns. Any corporation or
association into which the Escrow Agent may be converted or merged, or with
which it may be consolidated, or to which it may sell or transfer its escrow
services business and assets as a whole or substantially as a whole, or any
corporation or association resulting from any such conversion, sale, merger,
consolidation or transfer to which it is a party, shall be and become successor
escrow agent hereunder and vested with all the trusts, powers, discretions,
immunities, privileges and all other matters as was its predecessor, without the
execution or filing of any instrument or any further act, deed or conveyance on
the part of any of the Parties, anything herein to the contrary notwithstanding.
Except as otherwise provided herein, no assignment or attempted assignment of
this Agreement or any interest hereunder shall be effective without the written
consent of Parties and the Escrow Agent; provided, however, that Subject to
Section 15(f) Lender may (i) assign any or all of its rights and interests to
payment hereunder to one or more of its Affiliates, (ii) designate one or more
of its Affiliates to perform its obligations hereunder provided that Lender
supplies the Escrow Agent with an updated Schedule 3 (in any or all of which
cases Lender nonetheless shall remain responsible for the performance of all of
its obligations hereunder), and (iii) assign any or all of its rights, interests
and obligations under this Agreement to any lender as collateral security or to
any subsequent purchaser of the Company (whether by merger, stock purchase,
asset purchase or otherwise), subject to the consent of the Escrow Agent, which
consent shall not be unreasonably withheld, conditional or delayed. Any transfer
or assignment of any of the rights, interests or obligations hereunder in
violation of the terms hereof shall be void and of no force or effect.

 

(b) Governing Law. THIS AGREEMENT SHALL BE DEEMED TO BE MADE IN AND IN ALL
RESPECTS SHALL BE INTERPRETED, CONSTRUED AND GOVERNED BY AND IN ACCORDANCE WITH
THE LAW OF THE STATE OF CALIFORNIA WITHOUT REGARD TO THE CONFLICT OF LAW
PRINCIPLES. To the extent that in any jurisdiction either Party may now or
hereafter be entitled to claim for itself or its assets, immunity from suit,
execution, attachment (before or after judgment) or other legal process, such
Party shall not claim, and hereby irrevocably waives, such immunity.

 

(c) Force Majeure. Notwithstanding any other provision of this Agreement, the
Escrow Agent shall not be obligated to perform any obligation hereunder and
shall not incur any liability for the nonperformance or breach of any obligation
hereunder to the extent that the Escrow Agent is delayed in performing, unable
to perform or breaches such obligation because of acts of God, fire, floods,
war, terrorism, electrical outages, strikes, equipment or transmission failure,
or other causes reasonably beyond its control.

 

(d) Counterparts. This Agreement and any joint instructions from the Parties,
may be executed in one or

 

10

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more counterparts, each of which shall be deemed an original, but all of which
taken together shall constitute one and the same instrument or instruction, as
applicable. All signatures of the parties to this Agreement may be transmitted
by facsimile.

 

(e) Amendments: Waivers. This Agreement may not be changed, amended, terminated,
augmented, rescinded or discharged (other than by performance), in whole or in
part, except by a writing executed by the Parties and the Escrow Agent, and no
waiver of any of the provisions or conditions of this Agreement or any of the
rights of a party hereto shall be effective or binding unless such waiver shall
be in writing and signed by the party claimed to have given or consented
thereto. Except to the extent that a party hereto may have otherwise agreed in
writing, no waiver by that party of any condition of this Agreement or breach by
the other party of any of its obligations or representations hereunder or
thereunder shall be deemed to be a waiver of any other condition or subsequent
or prior breach of the same or any other obligation or representation by the
other party, nor shall any forbearance by the first party to seek a remedy for
any noncompliance or breach by the other party be deemed to be a waiver by the
first party of its rights and remedies with respect to such noncompliance or
breach.

 

(f) Patriot Act Disclosure. Section 326 of the Uniting and Strengthening America
by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act
of 2001 (“USA PATRIOT Act”) requires the Escrow Agent to implement reasonable
procedures to verify the identity of any Person that opens a new account with
it. Accordingly, the parties acknowledge that Section 326 of the USA PATRIOT Act
and the Escrow Agent’s identity verification procedures require the Escrow Agent
to obtain information which may be used to confirm the parties identity
including without limitation name, address and organizational documents
(“identifying information”). The parties agree to provide the Escrow Agent with
and consent to the Escrow Agent obtaining from third parties any such
identifying information required as a condition of opening an account with or
using any service provided by the Escrow Agent.

 

(g) Entire Agreement. This Agreement contains all of the terms agreed upon
between the parties with respect to the subject matter hereof.

 

(h) Miscellaneous. If any provision of this Agreement is determined to be
prohibited or unenforceable by reason of any applicable law of a jurisdiction,
then such provision shall, as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions thereof, and any such prohibition or unenforceability in such
jurisdiction shall not invalidate or render unenforceable such provisions in any
other jurisdiction. The Parties represent, warrant and covenant that each
document, notice, instruction or request provided by such Party to the Escrow
Agent shall comply with applicable laws and regulations. Where, however, the
conflicting provisions of any such applicable law may be waived, they are hereby
irrevocably waived by the parties hereto to the fullest extent permitted by law,
to the end that this Agreement shall be enforced as written. Except as expressly
provided in Section 7(e) above, nothing in this Agreement, whether express or
implied, shall be construed to give to any person or entity other than Escrow
Agent and the Parties any legal or equitable right, remedy, interest or claim
under or in respect of the Escrow Amount or this Agreement.

 

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(i) Compliance with Court Orders. In the event that any property in the Escrow
Account shall be attached, garnished or levied upon by any court order, or the
delivery thereof shall be stayed or enjoined by an order of a court, or any
order, judgment or decree shall be made or entered by any court order affecting
the property deposited under this Agreement, the Escrow Agent is hereby
expressly authorized, in its sole discretion, to obey and comply with all writs,
orders or decrees so entered or issued, which it is advised by legal counsel of
its own choosing is binding upon it, whether with or without jurisdiction, and
in the event that the Escrow Agent obeys or complies with any such writ, order
or decree it shall not be liable to any of the Parties or to any other person,
entity, firm or corporation, by reason of such compliance notwithstanding such
writ, order or decree be subsequently reversed, modified, annulled, set aside or
vacated.

 

[The remainder of this page is intentionally left blank.]

 

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IN WITNESS WHEREOF, each of Lender, Sellers’ Representative and the Escrow Agent
has signed or caused this Agreement to be signed by its duly authorized
representative as of the date first above written.

 

Lender:

 

THE KARLSSON GROUP, INC.

 

 

 

 

 

By:

/s/ Anders Karlsson

 

Name:

Anders Karlsson

 

Title:

President

 

 

 

 

 

Obligor:

 

 

 

PROSPECT GLOBAL RESOURCES, INC.

 

 

 

 

 

By:

/s/ Damon Barber

 

Name:

Damon G. Barber

 

Title:

President and CEO

 

 

 

 

 

JPMORGAN CHASE BANK, N.A.

 

 

 

 

 

By:

/s/ Sonny Lui

 

 

 

 

Name:

Sonny Lui

 

Title:

Vice President

 

 

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SCHEDULE 1

 

Amount

 

Escrow Deposit Date

$

313,000

 

Within one (1) Business Day of funding the First Funding Raise

$

250,000

 

Within one (1) Business Day of funding the First Funding Raise

$

500,000

 

Within one (1) Business Day of funding the First Funding Raise

$

500,000

 

Within one (1) Business Day of funding the First Funding Raise

$

500,000

 

Within one (1) Business Day of funding the First Funding Raise

$

2,850,000

 

Within one (1) Business Day of funding the Second Funding Raise

$

4,050,000

 

Within one (1) Business Day of funding the Third Funding Raise

$

250,000

 

Within one (1) Business Day of funding the Third Funding Raise

 

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SCHEDULE 2

APPROVED SCHEDULE

 

Category

 

Amount

 

Approved Vendors/Payees

 

 

 

 

 

*

 

 

 

 

 

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SCHEDULE 2

 

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Schedule of Fees and Disclosures for Escrow Agent Services

 

Based upon our current understanding of your proposed transaction, our fee
proposal is as follows:

 

Account Acceptance Fee

 

$6,000

 

 

Encompassing review, negotiation and execution of governing documentation,
opening of the account, and completion of all due diligence documentation. 
Payable upon closing.

 

Annual Administration Fee

 

$Waived

 

 

The Administration Fee covers our usual and customary ministerial duties,
including record keeping, distributions, document compliance and such other
duties and responsibilities expressly set forth in the governing documents for
each transaction.  Payable upon closing and annually in advance thereafter,
without pro-ration for partial years.

 

Extraordinary Services and Out-of Pocket Expenses

 

Any additional services beyond our standard services as specified above, and all
reasonable out-of-pocket expenses including attorney’s or accountant’s fees and
expenses will be considered extraordinary services for which related costs,
transaction charges, and additional fees will be billed at the Escrow Agent’s
then standard rate.  Disbursements, receipts, investments or tax reporting
exceeding 25 items per year may be treated as extraordinary services thereby
incurring additional charges. The Escrow Agent may impose, charge, pass-through
and modify fees and/or charges for any account established and services provided
by the Escrow Agent, including but not limited to, transaction, maintenance,
balance-deficiency, and service fees, agency or trade execution fees, and other
charges, including those levied by any governmental authority.

 

Fee Disclosure & Assumptions: Please note that the fees quoted are based on a
review of the transaction documents provided and an internal due diligence
review. The Escrow Agent reserves the right to revise, modify, change and
supplement the fees quoted herein if the assumptions underlying the activity in
the account, level of balances, market volatility or conditions or other factors
change from those used to set our fees.  Payment of the invoice is due upon
receipt

 

The Escrow Amount shall be continuously invested in a JPMorgan Chase Bank MMDA.
MMDA’s have rates of interest or compensation that may vary from time to time as
determined by the Escrow Agent.

 

Disclosures and Agreements

 

Patriot Act Disclosure.  Section 326 of the Uniting and Strengthening America by
Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of
2001 (“USA PATRIOT Act”) requires the Escrow Agent to implement reasonable
procedures to verify the identity of any person that opens a new account with
it.  Accordingly, you acknowledge that Section 326 of the USA PATRIOT Act and
the Escrow Agent’s identity verification procedures require the Escrow Agent to
obtain information which may be used to confirm your identity including without
limitation name, address and organizational documents (“identifying
information”). You agree to provide the Escrow Agent with and consent to the
Escrow Agent obtaining from third parties any such identifying information
required as a condition of opening an account with or using any service provided
by the Escrow Agent.

 

OFAC Disclosure.  The Escrow Agent is required to act in accordance with the
laws and regulations of various jurisdictions relating to the prevention of
money laundering and the implementation of sanctions, including but not limited
to regulations issued by the U.S. Office of Foreign Assets Control.  The Escrow
Agent is not obligated to execute payment orders or effect any

 

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other transaction where the beneficiary or other payee is a person or entity
with whom the Escrow Agent is prohibited from doing business by any law or
regulation applicable to Escrow Agent, or in any case where compliance would, in
the Escrow Agent’s opinion, conflict with applicable law or banking practice or
its own policies and procedures.  Where the Escrow Agent does not execute a
payment order or effect a transaction for such reasons, the Escrow Agent may
take any action required by any law or regulation applicable to the Escrow Agent
including, without limitation, freezing or blocking funds.

 

Abandoned Property.  The Escrow Agent is required to act in accordance with the
laws and regulations of various states relating to abandoned property and,
accordingly, shall be entitled to remit dormant funds to any state as abandoned
property in accordance with such laws and regulations.

 

THE FOLLOWING DISCLOSURES ARE REQUIRED TO BE PROVIDED UNDER APPLICABLE U.S.
REGULATIONS, INCLUDING, BUT NOT LIMITED TO, FEDERAL RESERVE REGULATION D.  WHERE
SPECIFIC INVESTMENTS ARE NOTED BELOW, THE DISCLOSURES APPLY ONLY TO THOSE
INVESTMENTS AND NOT TO ANY OTHER INVESTMENT.

 

Demand Deposit Account Disclosure.  The Escrow Agent is authorized, for
regulatory reporting and internal accounting purposes, to divide an escrow
demand deposit account maintained in the U.S. in which the Escrow Amount is held
into a non-interest bearing demand deposit internal account and a non-interest
bearing savings internal account, and to transfer funds on a daily basis between
these internal accounts on the Escrow Agent’s general ledger in accordance with
U.S. law at no cost to the Parties.  The Escrow Agent will record the internal
accounts and any transfers between them on the Escrow Agent’s books and records
only.  The internal accounts and any transfers between them will not affect the
Escrow Amount, any investment or disposition of the Escrow Amount, use of the
escrow demand deposit account or any other activities under this Agreement,
except as described herein. The Escrow Agent will establish a target balance for
the demand deposit internal account, which may change at any time.  To the
extent funds in the demand deposit internal account exceed the target balance,
the excess will be transferred to the savings internal account, unless the
maximum number of transfers from the savings internal account for that calendar
month or statement cycle have already occurred.  If withdrawals from the demand
deposit internal account exceeds the available balance in the demand deposit
internal account, funds from the savings internal account will be transferred to
the demand deposit internal account up to the entire balance of available funds
in the savings internal account to cover the shortfall and to replenish any
target balance that the Escrow Agent has established for the demand deposit
internal account.  If a sixth transfer is needed during a calendar month or
statement cycle, it will be for the entire balance in the savings internal
account, and such funds will remain in the demand deposit internal account for
the remainder of the calendar month or statement cycle.

 

MMDA Disclosure and Agreement.  If MMDA is the investment for the escrow deposit
as set forth above or anytime in the future, you acknowledge and agree that U.S.
law limits the number of pre-authorized or automatic transfers or withdrawals or
telephonic/electronic instructions that can be made from an MMDA to a total of
six (6) per calendar month or statement cycle or similar period.  The Escrow
Agent is required by U.S. law to reserve the right to require at least seven
(7) days notice prior to a withdrawal from a money market deposit account.

 

Unlawful Internet Gambling.  The use of any account to conduct transactions
(including, without limitation, the acceptance or receipt of funds through an
electronic funds transfer, or by check, draft or similar instrument, or the
proceeds of any of the foregoing) that are related, directly or indirectly, to
unlawful Internet gambling is strictly prohibited.

 

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Schedule 3

 

Telephone Number(s) and Signature(s) for Person(s) Designated to Give & Confirm
Funds Transfer Instructions

 

If to Lender:

 

Name

Telephone Number

Specimen Signature

 

 

 

1. Michael Stone

 

 

 

 

 

 

 

 

If to Obligor:

 

 

 

 

 

Name

Telephone Number

Specimen Signature

 

 

 

1. Greg Dangler

303-990-8405

 

 

Periodically, Lender or Obligor may issue payment orders to the Escrow Agent to
transfer funds by federal funds wire. All orders, including but not limited to
funds transfer instructions, transmitted by facsimile, must include the
signature of an Authorized Representatives authorizing said funds transfer on
behalf of such Party. The Escrow Agent reviews the orders to determine
compliance with the governing documentation and to confirm signature by the
appropriate party, in accordance with this Schedule 3. The Escrow Agent’s policy
requires that, whenever practicable, it undertake callbacks to a party other
than the individual who signed the payment order to verify the authenticity of
the payment order.

 

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Schedule 4

 

Obligor Certificate

 

[INSERT DATE]

 

Via Facsimile

 

JPMorgan Chase Bank, N.A.

Escrow Services

300 South Grand Avenue, Mail Code CA2-0310

Los Angeles, CA 90071-3109

Facsimile: 213-621-8072

 

Escrow Agreement dated April [  ], 2013 by and among The Karlsson Group, Inc.
(“Lender”), Prospect Global Resources, Inc. (“Obligor”), and JPMorgan Chase
Bank, N.A. (the “Escrow Agent”)

 

Ladies and Gentlemen:

 

This Obligor Certificate is being delivered pursuant to Section 6(a) of the
Agreement referenced above. The Obligor hereby instructs the Escrow Agent to
distribute the following amount [$     ] from Category [     ] for
[VENDOR/PAYEE]and with the following wiring instructions:

 

Bank Name:

 

Bank Address:

 

ABA Number:

 

Account Name:

 

Account Number:

 

All capitalized terms used in this letter and not otherwise defined shall have
the respective meanings ascribed thereto in the Agreement.

 

 

 

Authorized Representative of Obligor

 

 

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Exhibit A

 

(Definitions)

 

“Affiliate” means, with respect to any Person, any other Person directly or
indirectly controlling, controlled by or under common control with such Person.
For purposes of the immediately preceding sentence, the term “control”
(including, with correlative meanings, the terms “controlling”, “controlled by”
and “under common control with”), as used with respect to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through
ownership of voting securities, by contract or otherwise.

 

“Business Day” means a day on which banks are open to the public for conducting
business and not authorized or required to close in the State of California.

 

“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 or a governmental entity or any department, agency
or political subdivision thereof.

 

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