Exhibit 10.1





Exhibit 10.1




SECURITIES PURCHASE AGREEMENT




THIS SECURITIES PURCHASE AGREEMENT (this “Agreement”) is made as of the 3rd
day of August, 2011 by and between AVALON PORTFOLIO, LLC, a Delaware limited liability company, and
any assignees or transferees thereof (the “Purchaser”) and PROSPECT GLOBAL RESOURCES INC.,
a Nevada corporation (the “Company”). Purchaser and the Company are sometimes each
referred to herein as a “Party” and collectively as the “Parties.”



ARTICLE I.

DEFINITIONS




1.1 Definitions. In addition to the terms defined elsewhere in this Agreement, for
all purposes of this Agreement, the following terms have the meanings set forth in this Section
1.1:




“Business Day” means any day except any Saturday, any Sunday, any day which is
a federal legal holiday in the United States or any day on which banking institutions in the
State of Colorado are authorized or required by law or other governmental action to close.




“Closing” means the closing of the purchase and sale of the Securities pursuant
to Section 2.1.




“Closing Date” means the Business Day on which this Agreement has been executed
and delivered by the applicable parties thereto, and all conditions precedent to (i) the
Purchaser’s obligations to pay the Purchase Price and (ii) the Company’s obligations to
deliver the Securities, in each case, have been satisfied or waived.




“Common Stock” means the common stock of the Company, par value $0.001 per
share, and any other class of securities into which such securities may hereafter be
reclassified or changed.




“Loan Documents” means this Agreement, the Note, the Warrants, the Registration
Rights Agreement and the Security Agreement.




“Note” means the Convertible Secured Promissory Note dated the date hereof in
the amount of $1,500,000 issued by the Company to the Purchaser.




“Person” means an individual, a partnership, a corporation, a limited liability
company, an association, a joint stock company, a trust, a joint venture, an unincorporated
organization and a governmental entity or any department, agency or political subdivision
thereof.




“Purchase Price” means $1,500,000 in cash.




“Registration Rights Agreement” means the Registration Rights Agreement dated
the date hereof between the Company and the Purchaser.




“Securities” means the Note and the Warrants.




“Securities Act” means the Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder.


 


 









 






“Security Agreement” means the Amended and Restated Security Agreement dated
the date hereof among the Company, the Purchaser, Richard Merkin, COR Capital LLC and
Hexagon Investments, LLC.




“Shares” means the shares of Common Stock issued or issuable to the Purchaser
upon conversion of the Note and exercise of the Warrants.




“Warrants” means the $5,700,000 Warrants dated the date hereof issued to
Purchaser to purchase Shares.



ARTICLE II.

PURCHASE AND SALE





2.1 Closing.



(a) On the Closing Date, upon the terms and subject to the conditions set forth herein,
substantially concurrent with the execution and delivery of this Agreement by the parties hereto,
the Company agrees to sell, and the Purchaser agrees to purchase, the Securities. The Purchaser
shall deliver to the Company, via wire transfer or a certified check of immediately available
funds, the Purchase Price and the Company shall deliver to the Purchaser the Securities. Upon
satisfaction of the covenants and conditions set forth herein, the Closing shall occur at the
offices of the Company or such other location as the parties shall mutually agree.




2.2 Deliveries.




(a) On or prior to the Closing Date, the Company shall deliver or cause to be delivered
to the Purchaser the following:




(i) this Agreement duly executed by the Company;




(ii) the Note duly executed by the Company;




(iii) the Warrants duly executed by the Company;




(iv) the Security Agreement duly executed by the Company; and




(v) the Registration Rights Agreement duly executed by the Company.




(vi) Fully executed copies of valid potash mineral leases and potash sharing
agreements with American General Life Insurance Company (as set forth on the Term
Sheet dated April 22, 2011); PAP & POP Family Ltd., 3MKJ, LP, (as set forth on the
Term Sheet dated April 20, 2011) and the members of the Spurlock and Wetzler
families (as set forth on the Term Sheet dated May 28, 2011).




(b) On or prior to the Closing Date, the Purchaser shall deliver or cause to be
delivered to the Company the following:




(i) this Agreement duly executed by the Purchaser;


 


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(ii) the Security Agreement duly executed by the Purchaser;




(iii) the Registration Rights Agreement duly executed by the Purchaser; and




(iv) the Purchase Price by wire transfer to the account as specified in writing
by the Company.




2.3 Closing Conditions. 




(a) The obligations of the Company hereunder in connection with the Closing are subject
to the following conditions being met:




(i) the accuracy in all material respects when made and on the Closing Date of
the representations and warranties of the Purchaser contained herein (unless as of a
specific date therein);




(ii) all obligations, covenants and agreements of the Purchaser required to be
performed at or prior to the Closing Date shall have been performed; and




(iii) the delivery by the Purchaser of the items set forth in Section 2.2(b) of
this Agreement.




(b) The respective obligations of the Purchaser hereunder in connection with the
Closing are subject to the following conditions being met:




(i) the accuracy in all material respects when made and on the Closing Date of
the representations and warranties of the Company contained herein (unless as of a
specific date therein);




(ii) all obligations, covenants and agreements of the Company required to be
performed at or prior to the Closing Date shall have been performed; and




(iii) the delivery by the Company of the items set forth in Section 2.2(a) of
this Agreement.



ARTICLE III.

REPRESENTATIONS AND WARRANTIES OF THE COMPANY




The Company hereby represents and warrants to the Purchaser as follows on the date hereof and
on the Closing Date:



3.1 Organization of the Company. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. The Company has full
corporate power and authority to own, use, lease and license its assets and its properties and to
carry on its business as it is now being conducted.


 


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3.2 Power and Authority. The Company has full power and authority to enter into the
Loan Documents and to consummate the transactions contemplated hereby and thereby. The
Company has duly and validly executed and delivered the Loan Documents. Each of the Loan
Documents constitute legal, valid and binding obligations of the Company, enforceable in accordance
with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency,
moratorium, reorganization, fraudulent conveyance or similar laws in effect which affect the
enforcement of creditors’ rights generally and by equitable limitations on the availability of
specific remedies.



3.3 No Conflict. The execution and delivery by the Company of the Loan Documents and
the consummation of the transactions contemplated hereby will not conflict with or result in any
violation of or default under (with or without notice or lapse of time, or both) or give rise to a
right of termination, cancellation, modification or acceleration of any obligation or loss of any
benefit under (i) any provision of the Certificate of Incorporation of the Company, as amended, or
Bylaws of the Company, (ii) any mortgage, indenture, lease, contract or other agreement or
instrument, permit, concession, franchise or license to which the Company or any of its properties
or assets is subject, or (iii) any judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to the Company or its properties or assets.



3.4 Government Approvals. Except as may be required by any state “blue sky” laws, no
authorization, consent, approval, license, qualification or formal exemption from, nor any filing,
declaration or registration with, any court, governmental agency, regulatory authority or political
subdivision thereof, any securities exchange or any other Person is required in connection with the
execution, delivery or performance by the Company of this Agreement or the business of the Company.



3.5 Liabilities. Other than the Note, the Company has no liabilities and, to the best
of its knowledge, no material contingent liabilities not disclosed in the financial statements
provided to the Purchaser.



3.6 Litigation. There is no action, suit, proceeding, or investigation pending or
currently threatened against the Company that questions the validity of this Agreement or any
related agreement or the right of the Company to enter into such agreements, or to consummate the
transactions contemplated hereby or thereby, or that might result, either individually or in the
aggregate, in any material adverse change in the assets, business plans for mining potash set forth
in the offering documents dated May 2011, properties, prospects, or financial condition of the
Company, or in any material change in the current equity ownership of the Company. The Company is
not a party to, or to the best of its knowledge, named in any order, writ, injunction, judgment, or
decree of any court, government agency, or instrumentality. There is no action, suit, or proceeding
by the Company currently pending or that the Company currently intends to initiate.



3.7 Permits and Leases. The Company has the necessary exploration permits on its
current acreage and will comply with applying for all future permits with any federal and state
governmental authority which are necessary for the performance of its business purpose as set forth
in the offering documents dated May 2011, specifically the mining of potash.



3.8 Limitation on Business. For so long as the Note is outstanding, the Company shall
limit its business to mining for and preparing for market, buying, selling, exchanging, producing
and otherwise dealing in potash and related natural resources and in the products and by-products
of those materials, of every type and description: to buy, sell, exchange, lease, acquire and deal
in lands, mines, and mineral rights and claims, and to conduct all business appertaining to those
properties, rights and interests.


 


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ARTICLE IV.

REPRESENTATIONS AND WARRANTIES OF THE PURCHASER




The Purchaser hereby represents and warrants to the Company as follows on the date hereof and
on the Closing Date:



4.1 Power and Authority. The Purchaser has full power and authority to enter into
this Agreement and to consummate the transactions contemplated hereby and thereby. The Purchaser
has duly and validly executed and delivered this Agreement. Each Loan Document to which the
Purchaser is a party constitutes legal, valid and binding obligations of the Purchaser, enforceable
in accordance with its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, moratorium, reorganization, fraudulent conveyance or similar laws in effect
which affect the enforcement of creditors’ rights generally and by equitable limitations on the
availability of specific remedies.



4.2 Risk. The Purchaser recognizes that the purchase of the Securities involves a
high degree of risk in that: (i) the Company is a development stage business with only limited
operating history and may require additional operating funds from time to time; (ii) an investment
in the Company is highly speculative and only investors who can afford the loss of their entire
investment should consider investing in the Company and the Securities; (iii) the Purchaser may not
be able to liquidate his, her or its investment; (iv) transferability of the Securities is
extremely limited; and (v) in the event of a disposition of the Securities or the Shares, the
Purchaser could sustain the loss of his, her or its entire investment.



4.3 Accredited Investor. The Purchaser is an “accredited investor” as such term is
defined in Rule 501 of Regulation D promulgated under the Securities Act, and the Purchaser is able
to bear the economic risk of a loss of its entire investment in the Securities and the Shares.



4.4 Investment Experience. The Purchaser has prior investment experience, including
investment in non-listed and unregistered securities.



4.5 Residency. The Purchaser’s principal residence address is in the jurisdiction set
forth on the signature page of this Agreement.



4.6 Information. The Purchaser acknowledges and agrees that the Purchaser has been
provided access to and has had the opportunity to discuss with the Company and review any
information the Purchaser desires in order to analyze the Company’s business, management, financial
affairs, prospects and the terms and conditions of this transaction with the Company. The
Purchaser has such knowledge and experience in financial and business matters that the Purchaser is
capable of evaluating the merits of this transaction. The Purchaser has had the opportunity to
seek independent advice in connection with such evaluation and analysis.



4.7 Protection of Interests; Exempt Offering. The Purchaser by reason of the
Purchaser’s business or financial experience has the capacity to protect the Purchaser’s own
interests in connection with the transaction contemplated hereby. The Purchaser agrees that the
Purchaser will not sell or otherwise transfer the Securities or the Shares unless they are
registered under the
Securities Act or unless an exemption from such registration is available.


 


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4.8 Investment Intent. The Purchaser understands that the Securities and the Shares
have not been registered under the Securities Act by reason of a claimed exemption under the
provisions of the Securities Act which depends, in part, upon the Purchaser’s investment intention.
In this connection, the Purchaser is acquiring the Securities as principal for its own account and
not with a view to or for distributing or reselling the Securities or the Shares or any part
thereof in violation of the Securities Act or any applicable state securities law, has no present
intention of distributing any of the Securities or the Shares in violation of the Securities Act or
any applicable state securities law and has no direct or indirect arrangement or understandings
with any other persons to distribute or regarding the distribution of the Securities or the Shares
in violation of the Securities Act or any applicable state securities law (this representation and
warranty not limiting the Purchaser’s right to sell the Securities or the Shares in compliance with
applicable federal and state securities laws).



4.9 Restricted Securities. The Purchaser understands that there currently is no
public market for the Securities or the Shares and that even if there were, Rule 144 promulgated
under the Securities Act requires, among other conditions, a one-year holding period prior to the
resale (in limited amounts) of securities acquired in a non-public offering without having to
satisfy the registration requirements under the Securities Act. The Purchaser understands and
hereby acknowledges that the Company is under no obligation to register the Securities under the
Securities Act or any state securities or “blue sky” laws (collectively, the “Securities
Laws”). The Purchaser consents that the Company may, if it desires, permit the transfer of the
Securities or the Shares out of the Purchaser’s name only when the Purchaser’s request for transfer
is accompanied by an opinion of counsel reasonably satisfactory to the Company that neither the
sale nor the proposed transfer results in a violation of Securities Laws. The Purchaser agrees to
hold the Company and its members, managers, officers, employees, controlling persons and agents and
their respective heirs, representatives, successors and assigns harmless and to indemnify them
against all liabilities, costs and expenses incurred by them as a result of any misrepresentation
made by the Purchaser contained in this Agreement or any sale or distribution by the Purchaser in
violation of the Securities Laws. The Purchaser understands and agrees that in addition to
restrictions on transfer imposed by applicable Securities Laws, the transfer of the Securities and
the Shares will be restricted by the terms of this Agreement.



4.10 Legends. The Purchaser consents to the placement of a legend on any certificate
or other document evidencing the Securities or the Shares that the Securities and the Shares have
not been registered under Securities Laws and setting forth or referring to the restrictions on
transferability and sale thereof contained in this Agreement. The Purchaser is aware that the
Company will make a notation in its appropriate records with respect to the restrictions on the
transferability of the Securities and the Shares and may place additional legends to such effect on
the Purchaser’s certificate(s) for the Shares.


 


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ARTICLE V.

COVENANTS




5.1 Information Rights. If and for so long as the Purchaser holds the Note or owns at
least 50,000 Shares, the Company shall deliver to the Purchaser:



(i) as soon as reasonably practicable, but in any event within 90 days
after the end of each fiscal year of the Company, an audited balance sheet for such fiscal
year, an audited income statement of the Company as of the end of such year, a statement of cash
flows for such year, such audited year-end financial reports to be prepared in accordance with
generally accepted accounting principles (“GAAP”);



(ii) as soon as reasonably practicable, but in any event within 45 days after the end of each
of the first three quarters of each fiscal year of the Company, an unaudited balance sheet as of
the end of such fiscal quarter and an unaudited income statement and statement of cash flows for
such fiscal quarter;



(iii) as soon as reasonably practicable, but in any event within 30 days prior to the end of
each fiscal year, a budget and business plan for the next fiscal year.



ARTICLE VI.

MISCELLANEOUS




6.1 Fees and Expenses. Each Party shall pay all costs and expenses that it incurs
with respect to the preparation, negotiation, execution and delivery of this Agreement and the
other documents and agreements entered into in connection herewith. The Company shall pay all
transfer agent fees, stamp taxes and other taxes and duties levied in connection with the delivery
of the Securities or the Shares to the Purchaser.



6.2 Entire Understanding. This Agreement, together with the schedules hereto, set
forth the entire agreement and understanding of the Parties and supersede any and all prior
agreements, arrangements and understandings among the Parties, and there are no other prior written
or oral agreements, undertakings, promises, warranties, or covenants respecting such subject matter
not expressly set forth herein and therein.



6.3 Further Assurances. Each of the Parties agrees to execute and deliver (or cause
to be executed and delivered) such additional documents and instruments and to perform such
additional acts as may be necessary and appropriate to effectuate, carry out, and perform all of
the terms, provisions, and conditions of this Agreement.



6.4 Notices. Any and all notices or other communications or deliveries required or
permitted to be provided hereunder shall be in writing and shall be deemed given and effective on
the earliest of: (a) the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile number set forth on the signature page of this Agreement prior to 5:30
p.m. (mountain time) on a Business Day, (b) the next Business Day after the date of transmission,
if such notice or communication is delivered via facsimile at the facsimile number set forth on the
signature page of this Agreement on a day that is not a Business Day or later than 5:30 p.m.
(mountain time) on any Business Day, (c) the second Business Day following the date of mailing, if
sent by U.S. nationally recognized overnight courier service or (d) upon actual receipt by the
party to whom such notice is required to be given. The address for such notices and communications
shall be as set forth on the signature page of this Agreement.



6.5 Governing Law. This Agreement shall be governed by and construed and enforced in
accordance with the internal laws of the State of Colorado without giving effect to the principles
of conflicts of law thereof.


 


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6.6 Replacement of the Securities or Shares. If any certificate or instrument
evidencing the Securities or the Shares is mutilated, lost, stolen or destroyed, the Company shall
issue or cause to be issued in exchange and substitution for and upon cancellation thereof (in the
case of mutilation), or in lieu of and substitution therefor, a new certificate or instrument, but
only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or
destruction. The applicant for a new certificate or instrument under such circumstances shall also
pay any reasonable third-party costs (including customary indemnity) associated with the issuance
of such replacement Security or Shares.



6.7 Counterparts. This Agreement may be executed in counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and the same instrument and
shall become effective when one or more counterparts have been signed by each of the Parties and
delivered (including by facsimile) to the other Parties.



6.8 Recitals. The recitals set forth above are hereby incorporated into this
Agreement and made a binding part hereof.



6.9 WAIVER OF JURY TRIAL. IN ANY ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION
BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE PARTIES EACH KNOWINGLY AND INTENTIONALLY, TO THE
GREATEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND
EXPRESSLY WAIVES FOREVER TRIAL BY JURY.


 


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



	 	 	 	 	 	 	 	 	 
	PROSPECT GLOBAL RESOURCES INC.,
	 	 	 	Address for Notice:	 	 
	a Delaware corporation	 	 	 	600 17th St. Suite 2800 South	 	 
	 

	 	 	 	 	 	Denver, CO 80202	 	 
	By:

	 	/s/ Jonathan Bloomfield
 

Name: Jonathan Bloomfield
	 	 	 	Attn:: Patrick Avery 

Fax: 720-294-0402	 	 
	 

	 	Title: Chief Financial Officer	 	 	 	email: pavery@prospectgri.com	 	 
	 
	 	 	 	 	 	 	 	 
	With a copy to (which shall not constitute notice):	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Brownstein Hyatt Farber Schreck, LLP	 	 	 	 	 	 
	410 Seventeenth Street, Suite 2200	 	 	 	 	 	 
	Denver, CO 80202-4437	 	 	 	 	 	 
	Attn: Jeff Knetsch	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	AVALON PORTFOLIO, LLC	 	 	 	Address for Notice:	 	 
	 

	 	 	 	 	 	PO Box 1397	 	 
	By its Manager Avalon Capital Group, Inc.	 	 	 	North Sioux City, SD 57049	 	 
	 

	 	 	 	 	 	Attention: Shane Hartnett	 	 
	By:

	 	/s/ Shane Hartnett
 

By: Shane Hartnett
	 	 	 	Fax: 605-232-8486

email: shartnett@avalon.com	 	 
	 

	 	Its Manager	 	 	 	 	 	 







 


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