Document:

Exhibit 10.5

 

EXECUTION COPY

 

REGISTRATION RIGHTS AGREEMENT

 

THIS REGISTRATION RIGHTS AGREEMENT (the “Agreement”) is made as of this 1st day of August, 2012 by and between Prospect Global Resources Inc., a Nevada corporation (the “Company”), and The Karlsson Group, Inc., an Arizona corporation, and any assignees or transferees thereof (the “Investor”).

 

1.                                      Certain Definitions. As used in this Agreement, the following terms shall have the following respective meanings:

 

(a)                                 An “Affiliate” of any Person (as defined herein) means a Person that, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, the first mentioned Person.  A Person shall be deemed to control another Person if such first Person possesses, directly or indirectly, the power to direct, or cause the direction of, the management and policies of the second Person, whether through the ownership of voting securities, by contract or otherwise.

 

(b)                                 “Board of Directors” means the Board of Directors of the Company.

 

(c)                                  “Commission” shall mean the United States Securities and Exchange Commission, or any other federal agency at the time administering the Securities Act and the Exchange Act.

 

(d)                                 “Common  Stock” shall mean 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.

 

(e)                                  “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, or any similar successor federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time.

 

(f)                                   “Holders” shall mean the holders of Registrable Securities.

 

(g)                                  “Majority Interest” means Holders holding not less than a majority in interest of the Registrable Securities held by all Holders.

 

(h)                                 “Person” shall mean an individual, a corporation, an association, a joint venture, a partnership, a limited liability company, an estate, a trust, an unincorporated organization, and any other entity or organization, governmental or otherwise.

 

(i)                                     “Registrable Securities” shall mean 5,605,834 shares of Common Stock initially issuable upon exercise of the Warrant and any additional securities issued pursuant to the terms of the Warrant.

 

(j)                                    “Registration Expenses” shall mean the expenses so described in Section.

 

(k)                                 “Securities Act” shall mean the Securities Act of 1933, as amended, or any similar successor federal statute, and the rules and regulations of the Commission thereunder, all as

 

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the same shall be in effect at the time.

 

(l)                                     “Warrant” shall mean the Warrant dated the date hereof issued to Investor to purchase 5,605,834 shares of Common Stock.

 

2.                                      Demand Registration.  At any time beginning as of the date hereof, Holders of a majority of the Registrable Securities may require registration (a “Demand Registration”) under the Securities Act of all or any part of their Registrable Securities; provided that each such Demand Registration must be in respect of at least 100,000 shares of Common Stock.  Holders may exercise this demand registration right under this Section 2 by giving a written request to the Company specifying the intended method of disposition of Holders’ Registrable Securities.  Within five (5) business days of receipt of such request, the Company shall promptly notify all other Holders of the request.  The Holders shall have thirty (30) days after receipt by such Holder of such notice from the Company to request that their Registrable Securities be included in the registration with the shares of the Holders initially requiring registration pursuant to this Section 2.  Holder will be entitled to require up to two (2) Demand Registrations on Form S-1 and unlimited Demand Registration on Form S-3 (or any respective successor forms).  A Demand Registration under this Section 2 shall not be deemed to have been effected or requested (a) unless a Registration Statement with respect thereto has become effective and Holder is legally permitted to sell the Registrable Securities included therein and the Registration Statement remains effective for at least one hundred eighty (180) consecutive days (unless the Registrable Securities are sold within a shorter period, then the Registration Statement shall have remained effective for such shorter period); (b) if after the Registration Statement has become effective, a stop-order, injunction or order suspending the effectiveness of the Registration Statement is issued or any other limitation, restriction or suspension of the offer or sale of any Registrable Securities has been imposed and the Registrable Securities covered thereby have not been sold; or (c) if the conditions to be fulfilled by the Company for completion of the transactions contemplated by the selling agreement or underwriting agreement related to the registration are not satisfied by the Company or waived by the underwriters.

 

(a) If Holders of a majority of the Registrable Securities being registered so elect, a Demand Registration may be in the form of an underwritten offering.  If the Demand Registration is an underwritten offering, Holders of a majority of the Registrable Securities being registered will have the right to select the investment bankers and managers for the offering, subject to the Company’s approval, which approval shall not be unreasonably withheld.  In a Demand Registration that is an underwritten offering, as many securities of the Company that the Company elects may be included in such registration on the same terms and conditions as the Registrable Securities to be included in such registration; however, if the managing underwriters advise the Company in writing that in their opinion the number of Registrable Securities and other securities to be included in the registration exceeds the number that can be sold in such offering at a price satisfactory to Holders, the Company will give priority for inclusion in such registration:  (a) first, to the Registrable Securities requested to be included in such registration by Holders and (b) second, to the securities the Company elects to be included in such registration.

 

(b) The Company may delay a Demand Registration for up to ninety (90) days if a majority of the Company’s Board of Directors determines that it would be significantly detrimental to the Company to proceed with the registration.  Notwithstanding anything in this Section 2 to the

 

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contrary, the Company will not be obligated to effect a Demand Registration within six months after the effective date of a previous Demand Registration.

 

3.                                      Piggyback Registration.  If the Company at any time proposes to register any of its Common Stock under the Securities Act for sale to the public either for its own account or for the account of another Person other than Holder, other than on Form S-4 or Form S-8 (each as promulgated under the Securities Act) or their then equivalents relating to equity securities to be issued solely in connection with any acquisition of any entity or business or equity securities issuable in connection with stock option or other employee benefit plans, each such time it will promptly give written notice to the Holders of its intention to effect such registration. Upon the written request of any such Holder given within 30 days after receipt by such Holder of such notice, the Company will, subject to the limits contained in this Section 3, use its reasonable best efforts to cause all Registrable Securities of such Holder that such Holder so requests to be registered under the Securities Act and qualified for sale under any state blue sky law, all to the extent required to permit such sale or other disposition of said Registrable Securities; provided, however, that if the Company is advised in writing in good faith by the managing underwriter of the Company’s securities being offered in an underwritten public offering pursuant to such registration statement that the amount to be sold by persons other than the Company (collectively, “Selling Stockholders”) is greater than the amount which can be offered without adversely affecting the marketability of the offering, the Company may reduce the amount offered for the accounts of Selling Stockholders (including any Holders) to a number reasonably deemed satisfactory by such managing underwriter; and provided, further, that the securities to be excluded shall be determined in the following sequence: (i) first, securities held by any Persons not having any contractual incidental or “piggy back” registration rights, and (ii) second, Registrable Securities and securities held by any Persons having contractual incidental or “piggy back” registration rights pursuant to an agreement which is not this Agreement. If there is a reduction in the number of shares of Common Stock or Registrable Securities to be registered pursuant to clauses (i) and (ii) above, such reduction shall be made within each tranche on a pro rata basis (based upon the aggregate number of shares of Registrable Securities held by the holders in each such tranche).

 

4.                                      Registration Procedures. If and whenever the Company is required by the provisions of this Agreement to effect the registration of any of its securities under the Securities Act, the Company will, as expeditiously as possible:

 

(a)                                 use its reasonable best efforts diligently to prepare and file with the Commission a registration statement on the appropriate form under the Securities Act with respect to such securities, which form shall comply as to form in all material respects with the requirements of the applicable form and include all financial statements required by the Commission to be filed therewith, and use its reasonable best efforts to cause such registration statement to become and remain effective until completion of the proposed offering (but not for more than 180 days);

 

(b)                                 use its reasonable best efforts to prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective until the completion of the offering (but not for more than 180 days) and to comply with the provisions of the Securities Act with respect to the sale or other disposition of all securities covered by such registration statement whenever the seller or sellers of such securities shall desire to sell or otherwise dispose of

 

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the same, but only to the extent provided in this Agreement;

 

(c)                                  furnish to each selling Holder and the underwriters, if any, such number of copies of such registration statement, any amendments thereto, any documents incorporated by reference therein, the prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act, and such other documents as such selling holder may reasonably request in order to facilitate the public sale or other disposition of the securities owned by such selling holder;

 

(d)                                 use its reasonable best efforts to register or qualify the securities covered by such registration statement under and to the extent required by such other securities or state blue sky laws of such jurisdictions as each selling holder shall reasonably request, and do any and all other acts and things which may be necessary under such securities or blue sky laws to enable such selling holder to consummate the public sale or other disposition in such jurisdictions of the securities owned by such selling holder, except that the Company shall not for any such purpose be required to qualify to do business as a foreign corporation in any jurisdiction wherein it is not so qualified;

 

(e)                                  within a reasonable time before each filing of the registration statement or prospectus or amendments or supplements thereto with the Commission, furnish to counsel selected by a Majority Interest (“Holders’ Counsel”) copies of such documents proposed to be filed, which documents shall be subject to the reasonable approval of such counsel;

 

(f)                                   promptly notify each selling holder of Registrable Securities, Holders’ Counsel and any underwriter and (if requested by any such Person) confirm such notice in writing, of the happening of any event which makes any statement made in the registration statement or related prospectus untrue or which requires the making of any changes in such registration statement or prospectus so that they will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein in the light of the circumstances under which they were made not misleading; and, as promptly as practicable thereafter, prepare and file with the Commission and furnish a supplement or amendment to such prospectus so that, as thereafter deliverable to the purchasers of such Registrable Securities, such prospectus will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading;

 

(g)                                  use its best efforts to prevent the issuance of any order suspending the effectiveness of a registration statement, and if one is issued use its reasonable best efforts to obtain the withdrawal of any order suspending the effectiveness of a registration statement at the earliest possible moment;

 

(h)                                 if requested by the managing underwriter or underwriters (if any), any selling holder, or Holders’ Counsel, promptly incorporate in a prospectus supplement or post-effective amendment such information as such Person requests to be included therein with respect to the selling holder or the securities being sold, including, without limitation, with respect to the securities being sold by such selling holder to such underwriter or underwriters, the purchase price being paid therefor by such underwriter or underwriters and with respect to any other terms of an underwritten offering of the securities to be sold in such offering, and promptly make all required filings of such prospectus supplement or post-effective amendment;

 

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(i)                                     make available to each selling Holder, any underwriter participating in any disposition pursuant to a registration statement, Holders’ Counsel and any accountant or other agent or representative retained by a Majority Interest (collectively, the “Inspectors”), all financial and other records, pertinent corporate documents and properties of the Company (collectively, the “Records”), as shall be reasonably necessary to enable them to exercise their due diligence responsibility, and cause the Company’s officers, directors and employees to supply all information requested by any such Inspector in connection with such registration statement subject, in each case, to such confidentiality agreements as the Company shall reasonably request;

 

(j)                                    enter into any reasonable underwriting agreement required by the proposed underwriter(s) for the selling holders, if any, and use its reasonable best efforts to facilitate the public offering of the securities;

 

(k)                                 use its reasonable best efforts to cause the securities covered by such registration statement to be listed on the securities exchange or quoted on the quotation system on which the Common Stock is then listed or quoted (including the Over-the-Counter Bulletin Board);

 

(l)                                     otherwise use its reasonable best efforts to comply with all applicable rules and regulations of the Commission and make generally available to its security holders, in each case as soon as practicable, but not later than 90 days after the close of the period covered thereby, all earnings statement of the Company which will satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder (or any comparable successor provisions); and

 

(m)                             otherwise cooperate with the underwriter(s), the Commission and other regulatory agencies and take all reasonable actions and execute and deliver or cause to be executed and delivered all documents reasonably necessary to effect the registration of any securities under this Agreement.

 

5.                                      Expenses.  All reasonable expenses incurred by the Company, the Investor and any other Holders in effecting the registrations provided for in Sections 2 and 3, including, without limitation, all registration and filing fees, printing expenses, fees and disbursements of counsel for the Company, reasonable fees and disbursements of Holders’ Counsel, underwriting expenses (other than fees, commissions or discounts), expenses of any audits incident to or required by any such registration and expenses of complying with the securities or blue sky laws of any jurisdiction pursuant to Section 4(d) hereof (all of such expenses referred to as “Registration Expenses”), shall be paid by the Company.

 

6.                                      Indemnification.

 

(a)                                 The Company shall indemnify and hold harmless each selling Holder of Registrable Securities, each underwriter (as defined in the Securities Act), and each other Person who participates in the offering of such securities and each other Person, if ally, who controls (within the meaning of the Securities Act) such seller, underwriter or participating Person (individually and collectively, the “Indemnified Person”) against any losses, claims, damages or liabilities (collectively, the “liability”), joint or several, to which such Indemnified Person may become subject under the Securities Act or any other statute or at common law, insofar as such liability (or action in respect thereof) arises out of or is based upon (i) any untrue statement or alleged untrue statement of any material fact contained, on the effective date thereof, in any registration statement under which such securities were registered under the Securities Act, any preliminary prospectus or final

 

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prospectus contained therein, or any amendment or supplement thereto, (ii) any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, or (iii) any violation by the Company of the Securities Act, any state securities or “blue sky” laws or any rule or regulation thereunder in connection with such registration. Notwithstanding anything to the contrary contained herein, the indemnification agreement contained in this Section 6(a) as it pertains to any preliminary prospectus, shall not inure to the benefit of any Indemnified Person if the untrue statement or omission of material fact contained in the preliminary prospectus was corrected on a timely basis in the prospectus, as then amended or supplemented, if such corrected prospectus was timely made available by the Company pursuant to Section 4(f), and the Indemnified Person was promptly advised in writing not to use the incorrect prospectus prior to the use giving rise to a violation and such Indemnified Person, notwithstanding such advice, used such incorrect prospectus. Except as otherwise provided in Section 6(d), the Company shall reimburse each such Indemnified Person in connection with investigating or defending any such liability as expenses in connection with the same are incurred; provided, however, that the Company shall not be liable to any Indemnified Person in any such case to the extent that any such liability arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission made in such registration statement, preliminary or final prospectus, or amendment or supplement thereto in reliance upon and in conformity with information furnished in writing to the Company by such Indemnified Person specifically for use therein.

 

(b)                                 Each selling Holder of any securities included in such registration being effected shall indemnify and hold harmless each other selling holder of any securities, the Company, its directors and officers, each underwriter and each other Person, if any, who controls the Company or such underwriter (individually and collectively also the “Indemnified Person”), against any liability, joint or several, to which any such Indemnified Person may become subject under the Securities Act or any other statute or at common law, insofar as such liability (or actions in respect thereof) arises out of or is based upon (i) any untrue statement or alleged untrue statement of any material fact contained, on the effective date thereof, in any registration statement under which securities were registered under the Securities Act at the request of such selling holder, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereto, or (ii) any omission or alleged omission by such selling holder to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in the case of (i) and (ii) to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in such registration statement, preliminary or final prospectus, amendment or supplement thereto in reliance upon and in conformity with information furnished in writing to the Company by such selling holder specifically for use therein.  Such selling Holder’s obligations hereunder shall be limited to an amount equal to the proceeds to such selling Holder of the securities sold in any such registration.

 

(c)                                  Indemnification similar to that specified in Section 6(a) and Section 6(b) shall be given by the Company and each selling Holder (with such modifications as may be appropriate) with respect to any required registration or other qualification of their securities under any federal or state law or regulation of governmental authority other than the Securities Act.

 

(d)                                 If the indemnification provided for in this Section 6 for any reason is held by a court of competent jurisdiction to be unavailable to an Indemnified Person in respect of any losses,

 

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claims, damages, expenses or liabilities referred to therein, then each Indemnifying Party under this Section 6, in lieu of indemnifying such Indemnified Person thereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, expenses or liabilities (1) in such proportion as is appropriate to reflect the relative benefits received by the Company, the selling Holders and the underwriters from the offering of the Registrable Securities or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above, but also the relative fault of the Company, the other selling Holders and the underwriters in connection with the statements or omissions which resulted in such losses, claims, damages, expenses or liabilities, as well as any other relevant equitable considerations. The relative benefits received by the Company, the selling Holders and the underwriters shall be deemed to be in the same respective proportions that the net proceeds from the offering (before deducting expenses) received by the Company and the selling Holders and the underwriting discount received by the underwriters, in each case as set forth in the table on the cover page of the applicable prospectus, bear to the aggregate public offering price of the Registrable Securities. The relative fault of the Company, the selling Holders and the underwriters shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company, the selling Holders or the underwriters and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.

 

The Company, the selling Holders and the underwriters agree that it would not be just and equitable if contribution pursuant to this Section 6 were determined by pro rata or per capita allocation or by any other method of allocation which does not take into account the equitable considerations referred to in the immediately preceding paragraph. In no event, however, shall a selling Holder be required to contribute any amount under this Section 6(d) in excess of the lesser of (i) that proportion of the total of such losses, claims, damages or liabilities indemnified against equal to the proportion of the total Registrable Securities sold under such registration statement which are being sold by such selling Holder or (ii) the net proceeds received by such selling holder from its sale of Registrable Securities under such registration statement. No person found guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not found guilty of such fraudulent misrepresentation.

 

7.                                      Compliance with Rule 144.  The Company will use its reasonable best efforts to file with the Commission such information as is required under the Exchange Act for so long as there are holders of Registrable Securities; and in such event, the Company shall use its reasonable best efforts to take all action as may be required as a condition to the availability of Rule 144 under the Securities Act (or any comparable successor rules). The Company shall furnish to any holder of Registrable Securities upon request a written statement executed by the Company as to the steps it has taken to comply with the current public information requirement of Rule 144 (or such comparable successor rules). Subject to the limitations on transfers imposed by this Agreement, or any other agreement to which the Holders and the Company are a party, the Company shall use its reasonable best efforts to facilitate and expedite transfers of Registrable Securities pursuant to Rule 144 under the Securities Act, which efforts shall include timely notice to its transfer agent to expedite such transfers of Registrable Securities.

 

8.                                      Amendments. The provisions of this Agreement may be amended, and the

 

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Company may take any action herein prohibited or omit to perform any act herein required to be performed by it, only with the written consent of the Company and a Majority Interest.

 

9.                                      Transferability of Registration Rights. The registration rights set forth in this Agreement are transferable by the Investor to each transferee of Registrable Securities. Each subsequent holder of Registrable Securities must consent in writing to be bound by the terms and conditions of this Agreement in order to acquire the rights granted pursuant to this Agreement.

 

10.                               Rights Which May Be Granted to Subsequent Parties. Other than transferees of Registrable Securities under Section 9 hereof, the Company shall not, without the prior written consent of a Majority Interest, allow purchasers of the Company’s securities to become a party to this Agreement.

 

11.                               Damages. The Company recognizes and agrees that each Holder of Registrable Securities will not have an adequate remedy if the Company fails to comply with the terms and provisions of this Agreement and that damages will not be readily ascertainable, and the Company expressly agrees that, in the event of such failure, it shall not oppose an application by any holder of Registrable Securities or any other Person entitled to the benefits of this Agreement requiring specific performance of any and all provisions hereof or enjoining the Company from continuing to commit any such breach of this Agreement.  The Company agrees to pay all reasonable costs, legal expenses and attorneys’ and paralegals’ fees actually incurred by the Holder in endeavoring to enforce its rights hereunder.

 

12.                               Governing Law; Jurisdiction; Venue.

 

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

 

(b)                                 The parties consent to the sole and exclusive jurisdiction and venue in the Federal or State courts in the County of Los Angeles, California, and agree that all disputes based on or arising out of this Agreement shall only be submitted to and determined by said courts, which shall have sole and exclusive jurisdiction.

 

13.                               Miscellaneous.

 

(a)                                 All notices, requests, consents, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been given (a) when delivered by hand (with written confirmation of receipt); (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (c) on the date sent by facsimile or e-mail of a PDF document (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next business day if sent after normal business hours of the recipient or (d) on the third day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications must be sent to the respective parties at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 13(a)):

 

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If to the Investor:
    	
 
    	
The Karlsson Group, Inc.
   18 Ozone Avenue
   Venice, CA 90291
   Facsimile: 310-933-0262
   E-mail: sevenciel@ca.rr.com
   Attention: Michael Stone
    
	
 
    	
 
    	
 
    
	
with a copy, which shall not constitute notice, to:
    	
 
    	
Law Offices of Richard C. Weisberg
   33 Derwen Road
   Bala Cynwyd, PA 19004
   Facsimile 215-689-1504
   Email: weisberg@weisberg-law.com
   Attention: Mr. Richard Weisberg
    
	
 
    	
 
    	
 
    
	
If to the Company:
    	
 
    	
Prospect Global Resources, Inc.
   1621 18th Street, Suite 260
   Denver, CO 80202
   Facsimile: 720-294-0402
   E-Mail: PAvery@prospectGRI.com
   Attention: Mr. Pat Avery
    
	
 
    	
 
    	
 
    
	
with a copy, which shall not constitute notice, to:
    	
 
    	
Eisner, Kahan & Gorry, P.C.
   9601 Wilshire Boulevard, Suite 700
   Beverly Hills, CA 90210
   Facsimile: 310-855-3201
   E-mail: meisner@eisnerlaw.com
   Attention: Mr. Michael Eisner
    
	
 
    	
 
    	
 
    
	
If to any other holder of Registrable Securities:
    	
 
    	
At such Person’s address for notice as set forth in the books and   records of the Company.
    

 

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

 

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

 

[SIGNATURE PAGE FOLLOWS]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Registration Rights Agreement to be duly executed as of the date first set forth above.

 

 

	
 
    	
COMPANY:
    
	
 
    	
 
    
	
 
    	
PROSPECT GLOBAL RESOURCES, INC.,
    
	
 
    	
a Nevada corporation
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Wayne Rich
    
	
 
    	
Name:
    	
Wayne Rich
    
	
 
    	
Title:
    	
Chief Financial Officer and Vice President of Finance
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
INVESTOR:
    
	
 
    	
 
    
	
 
    	
THE KARLSSON GROUP, INC.,
    
	
 
    	
an Arizona corporation
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Anders Karlsson
    
	
 
    	
Name:
    	
Anders Karlsson
    
	
 
    	
Title:
    	
PresidentExhibit 10.6

 

EXECUTION COPY

 

SECURITY AGREEMENT

 

THIS SECURITY AGREEMENT, dated as of August 1, 2012 (this “Agreement”), is made by Prospect Global Resources, Inc., a Delaware corporation (“Debtor”), American West Potash LLC, a Delaware limited liability company (“Guarantor,” and collectively with Debtor, “Prospect Parties”), in favor of The Karlsson Group, Inc., an Arizona corporation (“Secured Party”).  Debtor, Guarantor and Secured Party are sometimes referred to in this Agreement, collectively, as the “Parties,” and individually, as a “Party.”

 

RECITALS

 

WHEREAS, Debtor and Secured Party entered into that certain Membership Interest Purchase Agreement dated as of May 30, 2012 (the “Purchase Agreement”), whereby Debtor agreed to purchase and accept, and Secured Party agreed to sell and assign, all of Secured Party’s limited liability company membership interests in Guarantor, then representing fifty percent (50%) of the total limited liability company membership interests in Guarantor;

 

WHEREAS, part of the purchase price payable by Debtor pursuant to the Purchase Agreement is in the form of a promissory note in the original principal amount of One Hundred Twenty-Five Million Dollars ($125,000,000) from Debtor, a copy of which is attached as Exhibit A to this Agreement (the “Note”), which Note is unconditionally guaranteed by Guarantor pursuant to a Guaranty a copy of which is attached hereto as Exhibit B;

 

WHEREAS, contemporaneously herewith, Guarantor and Secured Party are entering into a Deed of Trust, Security Agreement, Assignment of Production and Proceeds, Fixture Filing and Financing Statement of even date herewith (“Deed of Trust”), a copy of which is attached hereto as Exhibit C; and

 

WHEREAS, the Prospect Parties and Secured Party agreed that the Prospect Parties’ obligations under the Purchase Agreement, the Note and the Guaranty shall be secured by, among other things, all of the assets of the Prospect Parties on the terms described herein and the Secured Party’s willingness to enter into the Purchase Agreement and accept the Note as consideration only on the condition, among others, that the Prospect Parties shall have executed and delivered to the Secured Party this Agreement, and that Guarantor shall have executed and delivered to Secured Party the Deed of Trust and the Collateral Assignments (the Note, the Guaranty, the Collateral Assignments, the Deed of Trust, and this Agreement are defined herein as the “Loan Documents”).

 

NOW, THEREFORE, in order to induce the Secured Party to enter into the Purchase Agreement and accept the Note and in consideration of the foregoing premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:

 

AGREEMENT

 

1.                                      Definitions and Interpretation.  When used in this Agreement, the following terms shall have the following respective meanings:

 

 

“Account” means any “account,” as such term is defined in Section 9-102(a)(2) of the UCC.

 

“Affiliate” means, with respect to Debtor, any other entity directly or indirectly controlling, (including, but not limited to, all directors and officers of such entity) controlled by, or under common control with, Debtor.

 

“Chattel Paper” means any “chattel paper,” as such term is defined in Section 9-102(a)(11) of the UCC.

 

“Collateral” shall have the meaning assigned to such term in Section 2 below.

 

“Collateral Assignments” means (i) Collateral Assignment of Royalty Agreement between Guarantor and Secured Party, dated of even date herewith, (ii) Collateral Assignment of Mineral Leases between Guarantor and Secured Party, dated of even date herewith, and (iii) Collateral Assignment of State Mineral Permits between Guarantor and Secured Party, dated of even date herewith.

 

“Commercial Tort Claim” means any “commercial tort claim,” as such term is defined in Section 9-102(a)(13) of the UCC.

 

“Contracts” means all contracts, undertakings, royalty agreements, mineral lease agreements, license agreements or other agreements (but excluding rights evidenced by Chattel Paper, Documents or Instruments) in or under which Debtor has any right, title or interest.

 

“Deposit Account” means any “deposit account” as such term is defined in Section 9-102(a)(29) of the UCC.

 

“Documents” means any “documents,” as such term is defined in Section 9-102(a)(30) of the UCC.

 

“Equipment” means any “equipment,” as such term is defined in Section 9-102(a)(33) of the UCC.

 

“Event of Default” shall have the meaning assigned thereto in the Note.

 

“General Intangible” means any “general intangible,” as such term is defined in Section 9-102(a)(42) of the UCC.

 

“Goods” means any “goods,” as such term is defined in Section 9-102(a)(44) of the UCC.

 

“Instruments” means any “instrument,” as such term is defined in Section 9-102(a)(47) of the UCC.

 

“Inventory” means any “inventory,” as such term is defined in Section 9-102(a)(48) of the UCC.

 

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“Investment Property” means any “investment property,” as such term is defined in Section 9-102(a)(49) of the UCC.

 

“Letter-of-Credit Right” means “letter-of-credit right,” as such term is defined in Section 9-102(a)(51) of the UCC.

 

“Lien” means any mortgage, pledge, deed of trust, hypothecation, assignment, deposit, arrangement, encumbrance, lien, or preference, priority or other security agreement of any kind or nature whatsoever.

 

“Note” has the meaning ascribed thereto in the Recitals.

 

“Permitted Liens” has the meaning set forth in the Deed of Trust.

 

“Proceeds” means “proceeds,” as such term is defined in Section 9-102(a)(64) of the UCC.

 

“Records, Samples and Data” any and all title instruments, title opinions, land status reports, title abstracts, title materials and information, files, records, writings, data bases, information, systems, maps, plats, surveys, geological and geophysical (including, without limitation, electrical, electromagnetic, gravity, and seismic), geochemical, geotechnical and radiometric data and information, drilling data, test data, mineral samples (including, without limitation, drill cores), mineral assay reports, interpretative and analytical reports of any kind or nature (including, without limitation, reserve or deposit studies or evaluations), information concerning exploration and development of deposits of Minerals (as defined in the Deed of Trust) (including information concerning mine operation, shutdown, and closure and concerning reclamation of lands and other resources affected by mining), environmental data and related information and reports and studies, computer hardware and software and all documentation therefor or relating thereto (including, without limitation, all licenses relating to or covering such computer hardware, software or documentation), trade secrets, business names, trade marks, service marks and the goodwill of the business relating thereto, patented and unpatented inventions, copyrights, lease records (including rental and royalty payment records), permits and records and information concerning compliance with the permits, mine development programs and budgets, financial statements and audits, reclamation plans and related data and reports, information, data and reports relating to or associated with all aspects of all or any portion of the Lands and all of each of Debtor’s and Guarantor’s rights and interests therein, whether owned, licensed or otherwise, any and all contracts and agreements between or among Debtor or Guarantor and any contractor, architect or engineer in connection with the design, construction or operation of any of the Lands, including, without limitation, any contract or agreement executed by Debtor or Guarantor and any landscape architect, civil engineer, electrical engineer, soils engineer, mining engineer, mechanical engineer or other engineer, together with all plans and specifications prepared by any design architect for the construction of any improvements comprising any part of the Lands, and all geological, geophysical, geochemical and geotechnical data, samples and records and other information or data related to any lands in the Holbrook Basin, Arizona, whether in the form of a writing, photograph, microfilm or electronic media, including, but not limited to, any computer-readable memory and any computer hardware of software necessary to process such memory.

 

3

 

“Secured Obligations” means the Obligations as such capitalized term is defined in the Note.

 

“Supporting Obligation” means “supporting obligation,” as such term is defined in Section 9-102(a)(77) of the UCC.

 

“UCC” means the Uniform Commercial Code as the same may, from time to time, be in effect in the State of Arizona; provided, however, in the event that, by reason of mandatory provisions of law, any or all of the creation or attachment, perfection or priority of Secured Party’s security interest in any collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of Arizona, the term “UCC” shall mean the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions hereof relating to such creation or attachment, perfection of priority and for purposes of definitions related to such provisions.

 

2.                                      Grant of Security Interest.  As security for the prompt and complete payment in full when due (whether at stated maturity, acceleration or otherwise) of all the Secured Obligations and the performance of all obligations of the Prospect Parties in the instruments creating the same and in order to induce the Secured Party to enter into the Purchase Agreement, each of Debtor and Guarantor, pursuant to this Agreement and any additional documents, instruments or agreements reasonably requested by Secured Party, hereby grants to Secured Party a security interest in and to and a Lien upon:

 

(a)                                 all of Debtor’s right, title and interest in, to and under each of the following, whether now owned or hereafter acquired by Debtor or any of its controlled Affiliates (“Debtor’s Collateral”):

 

(i)                                     All Accounts;

 

(ii)                                  All Chattel Paper;

 

(iii)                               All Commercial Tort Claims;

 

(iv)                              All Contracts;

 

(v)                                 All Deposit Accounts;

 

(vi)                              All Documents;

 

(vii)                           All Equipment;

 

(viii)                        All General Intangibles;

 

(ix)                              All Instruments;

 

(x)                                 All Inventory;

 

(xi)                              All Investment Property;

 

4

 

(xii)                           All Letter-of-Credit Rights;

 

(xiii)                        All Supporting Obligations; and

 

(xiv)                       To the extent not otherwise included, all Proceeds and products, including, without limitation, condemnation awards and the proceeds of any and all insurance policies of each of the foregoing.

 

(b)                                 With respect to the Trust Property (as such term is defined in the Deed of Trust), all of Guarantor’s right, title and interest in, to and under each of the following, whether now owned or hereafter acquired by Guarantor (“Guarantor’s Collateral”):

 

(i)                                     All Accounts;

 

(ii)                                  All Chattel Paper;

 

(iii)                               All Commercial Tort Claims;

 

(iv)                              All Contracts;

 

(v)                                 All Deposit Accounts;

 

(vi)                              All Documents;

 

(vii)                           All Equipment;

 

(viii)                        All General Intangibles;

 

(ix)                              All Instruments;

 

(x)                                 All Inventory;

 

(xi)                              All Investment Property;

 

(xii)                           All Letter-of-Credit Rights;

 

(xiii)                        All Supporting Obligations;

 

(xiv)                       All Collateral Assignments; and

 

(xv)                          To the extent not otherwise included, all Proceeds and products, including, without limitation, condemnation awards and the proceeds of any and all insurance policies of each of the foregoing.

 

In the case of each of the foregoing, whether (i) owned by Debtor or Guarantor or (ii) used in or useful to the business conducted by the Guarantor.

 

5

 

Debtor’s Collateral and Guarantor’s Collateral are collectively referred to as “Collateral” and, for the avoidance of doubt, shall include, without limitation, Records, Samples and Data.

 

3.                                      Representations, Warranties and Covenants of Prospect Parties.  Each Prospect Party hereby represents, warrants and covenants to Secured Party that from and after the date of this Agreement and until the Secured Obligations have been completely and finally paid in full:

 

(a)                                 Each Prospect Party is the sole legal and equitable owner of each item of the Collateral in which it purports to grant a security interest hereunder, having good and merchantable title or rights thereto free and clear of any and all Liens, except for Permitted Liens.

 

(b)                                 The security interest in the Collateral granted to Secured Party hereunder constitutes a valid and enforceable security interest in the Collateral to the extent that a security interest can be created under Article 9 of the UCC, except as the enforcement thereof may be limited by applicable bankruptcy, insolvency or similar laws affecting the enforcement of rights of creditors generally and except to the extent that enforcement of rights and remedies set forth herein may be limited by equitable principles (regardless of whether enforcement is considered in a court of law or a proceeding in equity).

 

(c)                                  Secured Party at all times shall have a perfected security interest in the Collateral that shall be prior to any other interest therein except for Permitted Liens.  Each Prospect Party will do all acts and things, and will execute and file all instruments (including, without limitation, any and all security agreements, mortgages, deeds of trusts, assignments of rents, assignments of proceeds, attornment documents, financing statements, and continuation statements) required by Secured Party to establish, maintain and continue the perfected security interest of Secured Party in the Collateral, and will promptly on demand, pay all costs and expenses of filing and recording, including the cost of any searches reasonably deemed necessary by Secured Party from time to time to establish and determine the validity and the continuing priority of the security interest of Secured Party granted hereby, and also pay all other claims and charges that in the reasonable opinion of Secured Party might prejudice, imperil or otherwise affect the Collateral or its security interest therein.

 

(d)                                 Each Prospect Party, at its expense, will, to the extent commercially feasible, insure the Collateral, with Secured Party as loss payee, against such hazards and in such form and in such amounts and with such companies as Secured Party may from time to time require, and will deliver the policies or appropriate certificates to Secured Party.  Any such insurance policies shall provide for at least thirty (30) days’ written notice to Secured Party of cancellation, reduction in amount or material change in coverage of the insurance.  In the event that any Prospect Party fails to obtain or renew any insurance required hereunder within fifteen (15) days prior to its expiration, Secured Party may do so and charge the cost thereof to Debtor, pursuant to Section 3(i)herein.

 

6

 

Secured Party is hereby irrevocably appointed the attorney-in-fact of each Prospect Party. As such entity’s attorney-in-fact, Secured Party, without any obligation to do so, may make, adjust or settle any claims under such insurance or pursuant to cancellation of such insurance and endorse any check or draft that may be payable to such Prospect Party, alone or jointly with other payees, so that Secured Party may collect the proceeds for any loss under such insurance.  Subject to the right to restore as set forth in the Deed of Trust, the proceeds of such insurance, less any costs and expenses incurred or paid by Secured Party in the collection thereof, shall be applied to repayment of the Secured Obligations, whether or not due and in any order of priority, and any balance shall be refunded to the applicable Prospect Party.  Any such application of insurance proceeds shall not cure or waive any default hereunder.

 

(e)                                  Each Prospect Party at its cost and expense shall protect and defend the security interest of Secured Party and all of the rights of Secured Party hereunder against the claims and demands of all other parties.

 

(f)                                   To the extent applicable, each Prospect Party shall at all times keep and maintain the Collateral in good working order, repair and condition and permit no waste thereof, and shall from time to time make all necessary and proper repairs, replacements and additions thereto, so that the efficiency thereof shall be fully preserved and maintained, all as satisfactory to Secured Party.  All such replacements shall be free of any other lien, security interest or encumbrance of any nature. Each Prospect Party shall maintain in full force and effect all leases, contracts, servitudes and other agreements forming a part of any of the Collateral and shall perform all of its obligations thereunder, including, but not limited to, the timely payment of all rents, royalties and other payments due and payable thereunder or otherwise attendant to such Prospect Party’s ownership or operation of the Collateral. No Prospect Party shall amend, modify or otherwise revise any such lease, contract, servitude or other agreement if such amendment, modification or revision would have a material and adverse effect on the value of Collateral.

 

(g)                                  Each Prospect Party shall pay when due all taxes, assessments, charges, liens or encumbrances now or hereafter affecting the Collateral, subject to each Prospect Party’s right to contest in good faith.

 

(h)                                 Each Prospect Party shall comply in all material respects with all environmental laws now or hereafter applicable such Prospect Party or the Collateral as well as all contractual obligations and agreements with respect to environmental remediation or other environmental matters and shall obtain, at or prior to the time required by applicable environmental laws, all environmental, health and safety permits, licenses and other authorizations necessary for the its operations and will maintain such authorizations in full force and effect.

 

(i)                                     With at least ten (10) days’ prior written notice to the Prospect Parties (provided, however, that if failure to pay such obligation within ten (10)

 

7

 

days shall result in an impairment of the Collateral or the Secured Party’s secured interest and Lien therein, no such notice shall be required), Secured Party may, at its option, and without any obligation to do so, pay, perform and discharge any and all amounts, costs, expenses and liabilities herein agreed to be paid or performed by the Prospect Parties, and all amounts expended by Secured Party in so doing shall become part of the Secured Obligations secured hereby, and shall be immediately due and payable by Debtor to Secured Party upon demand therefor, and shall bear interest at the rate of nine percent (9%) per year from the date of such expenditure until paid.

 

(j)                                    On the date hereof, the chief executive office of Debtor is located at c/o Prospect Global Resources, Inc., 1621 18th Street, Suite 260 South, Denver, Colorado 80202.

 

(k)                                 At any time and from time to time, upon the reasonable written request of Secured Party, the Prospect Parties will promptly and duly execute and deliver any and all such further instruments, endorsements, powers of attorney and other documents, make such filings, give such notices and take such further action as Secured Party may reasonably deem necessary to obtain the full benefits of this Agreement and of the rights, remedies and powers granted herein.

 

(l)                                     The Prospect Parties shall keep and maintain accurate and complete records of the Collateral, including, without limitation, a record of all payments received and all credits granted with respect to the Collateral and all other dealings with the Collateral.

 

(m)                             Each of the Prospect Parties hereby authorizes Secured Party at any time and from time to time to file in any filing office in any UCC jurisdiction any initial financing statements and amendments thereto that (i) indicate the Collateral (A) as “all assets” of such Prospect Party or words of similar effect, regardless of whether any particular asset comprised in the Collateral falls within the scope of Article 9 of the UCC of such jurisdiction, or (B) as being of an equal or lesser scope or with greater detail, and (ii) contain any other information required by part 5 of Article 9 of the UCC for the sufficiency or filing office acceptance of any financing statement or amendment, including, without limitation, (A) whether such Prospect Party is an organization, the type of organization and any organization identification number issued to such entity, and (B) in the case of a financing statement filed as a fixture filing or indicating any timber to be cut, a sufficient description of the real property to which such Collateral relates.

 

4.                                      Representations, Warranties and Covenants of Guarantor under the Deed of Trust.

 

4.1                               This Agreement incorporates by reference all representations, warranties and covenants of Guarantor with respect to the Trust Property as contained in the Deed of Trust.

 

8

 

5.                                      Rights and Remedies Upon Default.

 

5.1                               If an Event of Default shall have occurred and be continuing, then Secured Party shall have all the rights of a secured party under the UCC (including, without limitation, the right to dispose of the Collateral in any manner permitted under the UCC), shall have all rights now or hereafter existing under all other applicable laws or in equity, and, subject to any requirements of applicable law then in effect, shall have all the rights set forth in this Agreement.

 

5.2                               The obligations of each of the Prospect Parties under this Agreement shall be absolute and unconditional and shall remain in full force and effect without regard to, and shall not be released, suspended, discharged, terminated or otherwise affected by, any circumstances or occurrence except as specifically provided in this Agreement.  The rights, powers and remedies of Secured Party under this Agreement shall be cumulative and not exclusive of any other right, power or remedy which Secured Party may have against any Prospect Party.

 

6.                                      Miscellaneous.

 

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

 

6.2                               Notices. All notices, requests, consents, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been given (i) when delivered by hand (with written confirmation of receipt); (ii) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (iii) on the date sent by facsimile or e-mail of a PDF document (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next business day if sent after normal business hours of the recipient; or (iv) on the third day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications must be sent to the respective Parties at the following addresses (or at such other address for a Party as shall be specified in a notice given in accordance with this Section 6.2):

 

	
If   to Secured Party:
    	
The   Karlsson Group, Inc. 
   18 Ozone Avenue 
   Venice, CA 90291 
   Facsimile: 310-993-0262 
   E-mail: sevenciel@ca.rr.com 
   Attention: Anders Karlsson
    

 

9

 

	
with   a copy, which shall not constitute notice, to:
    	
Law   Offices of Richard C. Weisberg 
   33 Derwen Road 
   Bala Cynwyd, PA 19004 
   Facsimile 215-689-1504 
   Email: weisberg@weisberg-law.com 
   Attention: Mr. Richard Weisberg
    
	
 
    	
 
    
	
If   to Debtor and Guarantor:
    	
c/o   Prospect Global Resources, Inc. 
   1621 18th Street, Suite 260 
   Denver, CO 80202 
   Facsimile: 720-294-0402 
   E-Mail: PAvery@prospectGRI.com 
   Attention: Mr. Pat Avery
    
	
 
    	
 
    
	
with   a copy, which shall not constitute notice, to:
    	
Eisner,   Kahan & Gorry, a professional corporation 
   9601 Wilshire Boulevard, Suite 700 
   Beverly Hills, CA 90210 
   Facsimile: 310-855-3201 
   E-mail: meisner@eisnerlaw.com 
   Attention: Mr. Michael Eisner
    

 

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

 

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

 

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

 

6.6                               Entire Agreement. This Agreement contains the entire agreement between the Parties with respect to the transactions contemplated hereby, and supersedes all negotiations, agreements, representations, warranties, commitments, whether in writing or oral, prior to the effective date of this Agreement.

 

6.7                               Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the Parties and their respective successors and permitted assigns. 

 

10

 

Neither Party may assign its rights or obligations hereunder without the prior written consent of the other Party, which consent shall not be unreasonably withheld or delayed.

 

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

 

6.9                               Amendment and Modification; Waiver. This Agreement may only be amended, modified or supplemented by an agreement in writing signed by each Party hereto. No waiver by any Party of any of the provisions hereof shall be effective unless explicitly set forth in writing and signed by the Party so waiving. No waiver by any Party shall operate or be construed as a waiver in respect of any failure, breach or default not expressly identified by such written waiver, whether of a similar or different character, and whether occurring before or after that waiver. No failure to exercise, or delay in exercising, any right, remedy, power or privilege arising from this Agreement shall operate or be construed as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.

 

6.10                        Governing Law; Submission to Jurisdiction.

 

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

 

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

 

6.11                        Further Assurances.  In the event Secured Party has exercised its rights and remedies under this Agreement and has acquired the Collateral for its own continued use and operation, then as soon as practicable, upon Secured Party’s request, the Prospect Parties and Prospect Global Resources, Inc., a Nevada corporation (“PGRX”) agree to cooperate with Secured Party in accordance with this paragraph.  Specifically, the Prospect Parties and PGRX agree to provide to Secured Party such access, water rights and permits as are under the Prospect Parties’ or PGRX’s then current control or ownership and that are necessary for the Secured Party to mine and produce Authorized Minerals (as defined in the Additional Consideration Agreement) from the AWP Area (as defined in the Additional Consideration Agreement) as contemplated by the Parties in the business plans and projections of AWP as of the date hereof.  The Prospect Parties’ and PGRX’s obligations under this paragraph are subject to (i) the Secured Party’s agreement 

 

11

 

to compensate the Prospect Parties or PGRX, as applicable, for the use of such access, water rights and permits on the lower of the acquisition cost or a fair market basis, and (ii) that the Prospect Parties or PGRX shall not be required to provide any such resources to Secured Party in material violation of any environmental laws, permits, licenses or agreements relating to such resources, and (iii) that Prospect Parties and PGRX shall not be required to provide such resources to Secured Party to the extent the same would materially and adversely affect either the Prospect Parties’ or PGRX’s ability to continue to operate its own operations on non-AWP Area in a commercially reasonable manner.  This Agreement shall be binding on the successors and assigns of PGRX.  PGRX represents and warrants to Secured Party that PGRX has full right and authority to join in, and agree to the terms and conditions of this Section 6.11, and that its joinder and agreement is the legal and binding obligation of PGRX, and does not conflict with any other agreement of PGRX.

 

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

 

6.13                        Termination; Release.  This Agreement shall automatically terminate upon the full, complete and final payment of the Secured Obligations and all rights to the Collateral shall revert to the respective Prospect Party.  Upon termination of this Agreement, Secured Party, at the request of Debtor, will promptly execute and deliver to Debtor and Guarantor the proper instruments (including UCC termination statements) acknowledging the termination of this Agreement and all Liens on the Collateral.

 

[SIGNATURE PAGE FOLLOWS]

 

12

 

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

 

	
 
    	
DEBTOR:
    
	
 
    	
 
    
	
 
    	
PROSPECT   GLOBAL RESOURCES, INC.,
    
	
 
    	
a   Delaware corporation
    
	
 
    	
 
    	
 
    
	
 
    	
By:   
    	
/s/   Wayne Rich
    
	
 
    	
Name:   Wayne Rich
    
	
 
    	
Title:   Chief Financial Officer
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
GUARANTOR:
    
	
 
    	
 
    
	
 
    	
AMERICAN   WEST POTASH LLC,
    
	
 
    	
a   Delaware limited liability company
    
	
 
    	
 
    	
 
    
	
 
    	
By:   
    	
/s/   Wayne Rich
    
	
 
    	
Name:   Wayne Rich
    
	
 
    	
Title:   Manager
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
SECURED   PARTY:
    
	
 
    	
 
    
	
 
    	
THE   KARLSSON GROUP, INC.,
    
	
 
    	
an   Arizona corporation
    
	
 
    	
 
    	
 
    
	
 
    	
By:   
    	
/s/   Anders Karlsson
    
	
 
    	
Name:   Anders Karlsson
    
	
 
    	
Title:   President
    

 

 

JOINDER

 

The undersigned hereby joins into this Agreement and agrees to be bound as to Section 6.11 of this Agreement.

 

	
 
    	
PROSPECT   GLOBAL RESOURCES, INC.,
    
	
 
    	
a   Nevada corporation
    
	
 
    	
 
    	
 
    
	
 
    	
By:   
    	
/s/   Wayne Rich
    
	
 
    	
Name:   Wayne Rich
    
	
 
    	
Title:   Chief Financial Officer and Vice President of Finance

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