Document:

Exhibit 4.1

 

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT THERETO UNDER SUCH ACT AND APPLICABLE LAWS OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND APPLICABLE LAWS OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.

 

Dated: May 30, 2012 (“Effective Date”)

 

WARRANT TO PURCHASE COMMON STOCK

of

PROSPECT GLOBAL RESOURCES INC.

 

PROSPECT GLOBAL RESOURCES INC., a Nevada corporation (the “Company”), HEREBY CERTIFIES THAT, for value received, THE KARLSSON GROUP, INC., an Arizona corporation, or registered assigns (each a “Holder”), is entitled to purchase up to 5,605,834 shares of Common Stock at a purchase price of $4.25 per share (the “Exercise Price”). As used herein, the term “Common Stock” means the Company’s Common Stock, par value $0.001 per share, as constituted on the date of original issue of this Warrant. The number and character of such shares of Common Stock is subject to adjustment as provided below. The term “Warrant” as used herein shall include this Warrant, and any warrants delivered in substitution or exchange therefor as provided herein.

 

1.     Term of Warrant.  Capitalized terms used in this Section 1 but not defined in this Warrant shall have the meanings ascribed to them in that certain Membership Interest Purchase Agreement by and among The Karlsson Group, Inc., an Arizona corporation, Prospect Global Resources, Inc., a Delaware corporation and American West Potash, LLC, a Delaware corporation dated as of the date hereof (the “Purchase Agreement”).  Subject to the terms and conditions set forth herein, this Warrant shall be exercisable, in whole or in part, during the term commencing on the earlier of (i) the Closing Date, and (ii) the Expiration Date, and ending at 5:00 p.m., Mountain Time, on the seven year anniversary of the Effective Date hereof, and shall be void thereafter.

 

2.              Exercise of Warrant.

 

(a)        Method of Exercise.  The purchase rights represented by this Warrant are exercisable by the Holder in whole or in part, at any time, or from time to time during the term hereof as described in Section 1 above, by the surrender of this Warrant and the Notice of Exercise annexed hereto duly completed and executed on behalf of the Holder, at the principal office of the Company (or such other office or agency of the Company as it may designate by notice in writing to the Holder at the address of the Holder appearing on the books of the Company), upon payment in cash or by check acceptable to the Company. Notwithstanding any provisions herein to the contrary, if the fair market value of one share of Common Stock is

 

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greater than the Warrant Price for one share of Common Stock (at the date of calculation, as set forth below), in lieu of exercising this Warrant for cash, the holder may elect to receive shares of Common Stock equal to the value (as determined below) of this Warrant (or the portion thereof being canceled), computed using the following formula (the “Cashless Exercise”); provided that the Cashless Exercise shall apply to no more than 1,121,167 Warrants.

 

CS = WCS (FMV-WP)
 FMV

WHERE

 

CS                      equals the number of Shares of Common Stock to be issued to the Holder

 

WCS          equals the number of shares of Common Stock purchasable under the Warrant or, if only a portion of the Warrant is being exercised, the portion of the Warrant being canceled (at the date of such calculation)

 

FMV          equals the Fair Market Value (as defined below) of one share of Common Stock (at the date of such calculation

 

WP                   equals the per share Warrant Price (as adjusted to the date of such calculation) of the Warrant

 

As used in this Section 2(a), the term “Fair Market Value”  of each Warrant Share as of any date shall be (i) if the Common Stock is not then listed on a national securities exchange the volume weighted average price per share of Common Stock (as reported on the exchange, market or quotation system on which shares of Common Stock are admitted to trading or listed) for the five consecutive trading days ending on the business day prior to such exercise, (ii) if the Common Stock is then listed on a national securities exchange, the last sale price in respect of the Common Stock on the Nasdaq Global Market or any national securities exchange on which the Common Stock is then listed at the close of trading on the business day prior to such exercise or (iii) if not so available, Fair Market Value shall be determined as follows: (A) if the parties hereto can agree on the Fair Market Value, such agreed upon value shall constitute the Fair Market Value; (B) if the parties cannot reach an agreement as to the Fair Market Value within five (5) business days from the onset of negotiations, then the Appraised Value (as defined below) shall constitute the Fair Market Value. “Appraised Value”  per Warrant Share as of a date specified herein shall mean the value of such a share as of such date as determined by a nationally recognized valuation or appraisal firm (an “Appraiser”) selected jointly by the holder of this Warrant and the Company. If the Company and the holder of this Warrant cannot agree on a mutually acceptable Appraiser, then the Company and the holder of this Warrant shall each choose one such Appraiser and the respective chosen firms shall jointly select a third Appraiser, which shall make the determination. The Company and the Warrant Holders shall each pay half of the costs and fees of each such Appraiser, and the decision of the Appraiser making such determination of Appraised Value shall be final and binding on the Company and all affected holders of Warrants. No discount shall be applied on account of any lack of liquidity of the

 

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Common Stock, the Warrant or the Warrant Shares, including the fact that the Warrants or Warrant Shares may constitute “restricted securities” for securities law purposes.

 

(b)        Issuance of Shares.  This Warrant shall be deemed to have been exercised immediately prior to the close of business on the date of its surrender for exercise as provided above, and the person entitled to receive the shares of Common Stock issuable upon such exercise shall be treated for all purposes as the holder of record of such shares as of the close of business on such date. As promptly as practicable on or after such date and in any event within ten (10) days thereafter, the Company at its expense shall issue and deliver to the person or persons entitled to receive the same a certificate or certificates for the number of shares issuable upon such exercise. In the event that this Warrant is exercised in part, the Company at its expense will execute and deliver a new Warrant of like tenor exercisable for the number of shares for which this Warrant may then be exercised.

 

3.     No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. In lieu of any fractional share to which the Holder would otherwise be entitled (after aggregating all shares that are being issued upon such exercise), the Company shall make a cash payment equal to the Exercise Price multiplied by such fraction or, at the Company’s option, round the number of shares to be issued up to the next whole number.

 

4.     Replacement of Warrant. On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of loss, theft or destruction, on delivery of an indemnity agreement reasonably satisfactory in form and substance to the Company or, in the case of mutilation, on surrender and cancellation of this Warrant, the Company at its expense shall execute and deliver, in lieu of this Warrant, a new warrant of like tenor and amount.

 

5.     Rights of Stockholders. Subject to Section 11 and 13 of this Warrant, the Holder shall not be entitled to vote or receive dividends or be deemed the holder of Common Stock or any other securities of the Company that may at any time be issuable on the exercise hereof for any purpose, nor shall anything contained herein be construed to confer upon the Holder, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof or to give or withhold consent to any corporate action (whether upon any recapitalization, issuance of stock, reclassification of stock, change of par value, or change of stock to no par value, consolidation, merger, conveyance, or otherwise) or to receive notice of meetings, or to receive dividends or subscription rights or otherwise until this Warrant shall have been exercised as provided herein.

 

6.     Transfer of Warrant.

 

(a)           Warrant Register. The Company will maintain a register (the “Warrant Register”) containing the names and addresses of the Holder or Holders.  Any Holder of this Warrant or any portion thereof may change its address as shown on the Warrant Register by written notice to the Company requesting such change.  Any notice or written communication required or permitted to be given to the Holder may be delivered or given by mail to such Holder as shown on the Warrant Register and at the address shown on the Warrant Register.  Until this Warrant is

 

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transferred on the Warrant Register of the Company, the Company may treat the Holder as shown on the Warrant Register as the absolute owner of this Warrant for all purposes, notwithstanding any notice to the contrary.

 

(b)           Warrant Agent.  The Company may, by written notice to the Holder, appoint an agent for the purpose of maintaining the Warrant Register referred to in Section 6(a) above, issuing the Common Stock or other securities then issuable upon the exercise of this Warrant, exchanging this Warrant, replacing this Warrant, or any or all of the foregoing (the “Warrant Agent”).  Thereafter, any such registration, issuance, exchange or replacement, as the case may be, shall be made at the office of the Warrant Agent.

 

(c)           Transferability and Negotiability of Warrant.  This Warrant may not be transferred or assigned in whole or in part without compliance with all applicable federal and state securities laws by the transferor and the transferee (including the delivery of investment representation letters and legal opinions reasonably satisfactory to the Company, if such are requested by the Company).  Subject to the provisions of this Warrant with respect to compliance with the Securities Act of 1933, as amended (the “Act”), title to this Warrant may be transferred by endorsement (by the Holder executing the Assignment Form annexed hereto) and delivery in the same manner as a negotiable instrument transferable by endorsement and delivery.

 

(d)           Exchange of Warrant Upon a Transfer.  On surrender of this Warrant for exchange, properly endorsed on the Assignment Form and subject to the provisions of this Warrant with respect to compliance with the Act and with the limitations on assignments and transfers contained in this Section 6, the Company at its expense shall issue to or on the order of the Holder a new warrant or warrants of like tenor, in the name of the Holder or as the Holder (on payment by the Holder of any applicable transfer taxes) may direct, for the number of shares issuable upon exercise hereof.

 

7.     Capital Structure of PGRX. As of May 30, 2012, (i) 39,489,173 shares of common stock, par value $0.001 per share, of PGRX (“Common Stock”) were issued and outstanding, (ii) 3,965,000 options to purchase shares of Common Stock were issued and outstanding, (iii) 4,085,000 shares of Common Stock were reserved for issuance pursuant to options, and (iv) 12,097,363 warrants to purchase shares of common stock were issued and outstanding. As of May 30, 2012, the total number of shares outstanding on a fully diluted basis is 59,636,536.

 

8.     SEC Reports. PGRX has filed all forms, reports, statements, certifications and other documents (including all exhibits, amendments and supplements thereto) required to be filed by it with the SEC pursuant to the Exchange Act or other applicable United States federal securities Laws (“SEC Reports”).  As of their respective filing dates, the SEC Reports complied as to form in all material respects with the applicable requirements of the Securities Act and Exchange Act.  None of the SEC Reports when filed with the SEC and, if amended, as of the date of such amendment contained any untrue statement of a material fact or omitted to state a material fact required to be stated or incorporated by reference therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.

 

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9.     Compliance with Securities Laws.

 

(i)          The Holder of this Warrant, by acceptance hereof, acknowledges that this Warrant and the shares of Common Stock to be issued upon exercise hereof are being acquired for investment, and that the Holder will not offer, sell or otherwise dispose of this Warrant or any shares of Common Stock to be issued upon exercise hereof except under circumstances that will not result in a violation of the Act or any state securities laws.

 

(ii)         This Warrant and all shares of Common Stock issued upon exercise hereof or conversion thereof shall be stamped or imprinted with a legend in substantially the following form (in addition to any legend required by state securities laws):

 

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT THERETO UNDER SUCH ACT AND APPLICABLE LAWS OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND APPLICABLE LAWS OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.

 

10.  Reservation of Stock.  The Company covenants that during the term this Warrant is exercisable, the Company will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of Common Stock upon the exercise of this Warrant and, from time to time, will take all steps necessary to amend its Certificate of Incorporation (the “Certificate”) to provide sufficient reserves of shares of Common Stock issuable upon exercise of this Warrant.  The Company further covenants that all shares of Common Stock that may be issued upon the exercise of rights represented by this Warrant and payment of the Exercise Price, all as set forth herein will be duly and validly authorized and issued, fully paid and nonassessable and free from all taxes, liens and charges in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously therewith).  The Company agrees that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for shares of Common Stock upon the exercise of this Warrant.

 

11.  Notices.

 

(a)        Whenever the Exercise Price or the shares purchasable hereunder shall be adjusted pursuant to Section 13 hereof, the Company shall issue a certificate signed by its Chief Financial Officer setting forth, in reasonable detail, the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated, and the Exercise Price and the shares purchasable hereunder after giving effect to such adjustment, and shall cause a copy of such certificate to be delivered to the Holder of this Warrant by overnight courier service.

 

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(b)        In case:

 

(i)        the Company shall take a record of the holders of its Common Stock (or other stock or securities at the time receivable upon the exercise of this Warrant) for the purpose of entitling them to receive any dividend or other distribution, or any right to subscribe for or purchase any shares of stock of any class or any other securities, or to receive any other right, or

 

(ii)       of any capital reorganization of the Company, any reclassification of the capital stock of the Company, any consolidation or merger of the Company with or into another corporation or entity, or any conveyance of all or substantially all of the assets of the Company to another corporation or entity, or

 

(iii)      of any voluntary or involuntary dissolution, liquidation or winding-up of the Company, then, and in each such case, the Company will deliver to the Holder by overnight courier a notice specifying, as the case may be, (A) the date on which a record is to be taken for the purpose of such dividend, distribution or right, and stating the amount and character of such dividend, distribution or right, or (B) the date on which such reorganization, reclassification, consolidation, merger, conveyance, dissolution, liquidation or winding-up is to take place, and the time, if any is to be fixed, as of which the holders of record of Common Stock (or such stock or securities at the time receivable upon the exercise of this Warrant) shall be entitled to exchange their shares of Common Stock (or such other stock or securities) for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, conveyance, dissolution, liquidation or winding-up. Such notice shall be delivered at least ten days prior to the record date specified in (A) above or twenty (20) days prior to the date specified in (B) above, in each case by overnight courier.

 

(c)        All Notices under this Warrant shall be sent if to the Company at:

 

	
If   to holder of Warrant:
    	
 
    	
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 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
    

 

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with   a copy, which shall not constitute notice, to:
    	
 
    	
Brownstein   Hyatt Farber Schreck, LLP
   410 Seventeenth Street, Suite 2200
   Denver, CO 80202
   Facsimile: 303-223-1111
   E-Mail: jknetsch@bhfs.com
   Attention: Jeffrey M. Knetsch
    

 

Any party may by notice given in accordance with this Section 11(c) to the other party designate another address or person for receipt of notices hereunder.

 

12.                   Amendments and Waivers.

 

(a)       Except as provided in Section 12(b) below, this Warrant, or any provision hereof, may be amended, waived, discharged or terminated only by a statement in writing signed by the party against which enforcement of the change, waiver, discharge or termination is sought.

 

(b)       Any term or condition of this Warrant may be amended or waived with the written consent of the Company and holders of Warrants representing more than two-thirds of the shares of Common Stock issuable upon the exercise of all then outstanding Warrants (the “Majority Holders”), even without the consent of the Holder.  Any amendment effected in accordance with this Section 12(b) shall be binding upon each holder of any of the Warrants, each future holder of any of the Warrants, and the Company; provided, however, that no special consideration or inducement may be given to any such holder in connection with such consent that is not given ratably to all such holders, and that such amendment must apply to all such holders equally and ratably.  The Company shall promptly give notice to all holders of Warrants of any amendment effected in accordance with this Section 12(b).

 

(c)       No waivers of, or exceptions to, any term, condition or provision of this Warrant, in any one or more instances, shall be deemed to be, or construed as, a further or continuing waiver of any such term, condition or provision.

 

13.      Adjustments. The Exercise Price and the shares purchasable hereunder are subject to adjustment from time to time as follows:

 

(a)       Merger, Reorganization, Sale of Company, etc.  If at any time while this Warrant is outstanding and unexpired there shall be (i) a reorganization (other than a combination, reclassification, exchange or subdivision of shares otherwise provided for herein), (ii) a merger or consolidation of the Company with or into another corporation in which the Company is not the surviving entity, or a reverse merger in which the Company is the surviving entity but the shares of the Company’s capital stock outstanding immediately prior to the merger are converted or exchanged by virtue of the merger into other property, whether in the form of securities, cash or otherwise, or (iii) a sale or transfer of the Company’s properties and assets as, or substantially as, an entirety to any other corporation or other entity, then, as a part of such reorganization, merger, consolidation, sale or transfer, lawful provision shall be made so that the holder of this

 

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Warrant shall thereafter be entitled to receive upon exercise of this Warrant, during the period specified herein and upon payment of the Exercise Price then in effect, the number of shares of stock or other securities or property of the successor corporation or other entity resulting from such reorganization, merger, consolidation, merger, sale or transfer that a holder of the shares deliverable upon exercise of this Warrant would have been entitled to receive in such reorganization, consolidation, merger, sale or transfer if this Warrant had been exercised immediately before such reorganization, merger, consolidation, sale or transfer, all subject to further adjustment as provided in this Section 13.  The foregoing provision of this Section 13(a) shall similarly apply to successive reorganizations, consolidations, mergers, sales and transfers and to the stock or securities of any other corporation or other entity that are at the time receivable upon the exercise of this Warrant.  If the per-share consideration payable to the Holder for shares in connection with any such transaction is in a form other than cash or marketable securities, then the value of such consideration shall be determined by the Company’s Board of Directors in good faith.  In all events, appropriate adjustment (as determined in good faith by the Company’s Board of Directors) shall be made in the application of the provisions of this Warrant with respect to the rights and interests of the Holder after the transaction, to the end that the provisions of this Warrant shall be applicable after that event, as near as reasonably may be, in relation to any shares or other property deliverable after that event upon exercise of this Warrant.

 

(b)       Reclassification, etc.  If the Company, at any time while this Warrant remains outstanding and unexpired, by reclassification of securities or otherwise, shall change any of the securities as to which purchase rights under this Warrant exist into the same or a different number of securities of any other class or classes, this Warrant shall thereafter represent the right to acquire such number and kind of securities as would have been issuable as the result of such change with respect to the securities that were subject to the purchase rights under this Warrant immediately prior to such reclassification or other change and the Exercise Price therefor shall be appropriately adjusted, all subject to further adjustment as provided in this Section 13.

 

(c)       Split, Subdivision or Combination of Shares.  If the Company at any time while this Warrant remains outstanding and unexpired shall split, subdivide or combine the securities as to which purchase rights under this Warrant exist, into a different number of securities of the same class, the Exercise Price for such securities shall be proportionately decreased in the case of a split or subdivision or proportionately increased in the case of a combination and the number of such securities shall be proportionately increased in the case of a split or subdivision or proportionately decreased in the case of a combination.

 

(d)       Adjustments for Dividends in Stock or other Securities or Property.  If while this Warrant remains outstanding and unexpired, the holders of the securities as to which purchase rights under this Warrant exist (including without limitation securities into which such securities may be converted) at the time shall have received, or, on or after the record date fixed for the determination of eligible stockholders, shall have become entitled to receive, without payment therefor, other or additional stock or other securities or property (other than cash) of the Company by way of dividend, then and in each case, this Warrant shall represent the right to acquire, in addition to the number of shares of the security receivable upon exercise of this Warrant, and without payment of any additional consideration therefor, the amount of such other

 

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or additional stock or other securities or property (other than cash) of the Company that such holder would hold on the date of such exercise had it been the holder of record of the security receivable upon exercise of this Warrant (or upon such conversion) on the date hereof and had thereafter, during the period from the date hereof to and including the date of such exercise, retained such shares and/or all other additional stock available by it as aforesaid during such period, giving effect to all adjustments called for during such period by the provisions of this Section 10.

 

(e)       Other Adjustments.  In case any event shall occur as to which the other provisions of this Section 13 are not strictly applicable but as to which failure to make any adjustment would not fairly protect the exercise rights represented by this Section 13 in accordance with the essential intent and principles hereof then, in each such case, the Majority Holders may appoint a firm of independent public accountants of recognized national standing reasonably acceptable to the Company, which shall give their opinion as to the adjustment, if any, on a basis consistent with the essential intent and principles established herein, necessary to preserve the exercise rights represented herein.  Upon receipt of such opinion, the Company will promptly mail a copy thereof to all holders of Common Warrants and shall make the adjustments described therein.  The fees and expenses of such independent public accountants shall be borne by the Company.

 

(f)        Calculations.  All calculations under this Section 13 shall be made to the nearest four decimal points.

 

(g)       No Impairment.  The Company shall not, by amendment of its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company but will at all times in good faith assist in the carrying out of all the provisions of this Section 13 and in the taking of all such action as may be necessary or appropriate in order to protect the exercise rights of the Holder against dilution or other impairment.

 

14.         Miscellaneous Provisions.

 

(a)       Saturdays, Sundays and Holidays.  If the last or appointed day for the taking of any action or the expiration of any right granted herein shall be a Saturday, Sunday or legal holiday, then (notwithstanding anything herein to the contrary) such action may be taken or such right may be exercised on the next succeeding day that is not a Saturday, Sunday or legal holiday.

 

(b)       Successors and Assigns. This Warrant shall be binding upon and shall inure to the benefit of the parties and their respective successors and permitted assigns. Neither party may assign its rights or obligations hereunder without the prior written consent of the other party; provided, however, that no consent shall be required for an assignment to the current equity interest holders of warrant holder or a liquidating trust for the benefit of the same.

 

(c)       Payment of Taxes. The Company shall pay all documentary stamp taxes, if any, attributable to the initial issuance of the shares of Common Stock upon exercise of this Warrant,

 

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provided that the Company shall not be required to pay any tax or taxes which may be payable with respect to any secondary transfer of a Warrant or the shares of Common Stock issued upon exercise of this Warrant, and in such case the Company shall not be required to issue or deliver any certificates for shares of Common Stock, until the person requesting the same has paid to the Company the amount of such tax or has established to the Company’s reasonable satisfaction that such tax has been paid or that no such tax is due.

 

(d)       Governing Law.  This Warrant shall be governed by and construed in accordance with the laws of the State of Delaware applicable to agreements made and to be performed entirely within such State, without regard to the conflicts of law principles of such State.

 

(e)       Binding Effect.  The terms of this Warrant shall be binding upon and inure to the benefit of the Company and the Holder and their respective successors and assigns.

 

* * * * *

 

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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officers thereunto duly authorized.

 

	
 
    	
PROSPECT   GLOBAL RESOURCES, INC.,
    
	
 
    	
a   Nevada corporation
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Pat Avery
    
	
 
    	
Name:
    	
Pat   Avery
    
	
 
    	
Title:
    	
CEO
    

 

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NOTICE OF EXERCISE

 

(1)            The undersigned hereby elects to purchase              shares of Common Stock of PROSPECT GLOBAL RESOURCES INC., pursuant to the provisions of Section 2(a) of the attached Warrant, and tenders herewith payment of the purchase price for such shares in full.

 

(2)           Please issue a certificate or certificates representing said shares of Common Stock in the name of the undersigned or in such other name as is specified below:

 

 

	
 
    	
(Name)
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
(Name)
    

 

(4)            Please issue a new Warrant for the unexercised portion of the attached Warrant in the name of the undersigned or in such other name as is specified below:

 

 

	
 
    	
(Name)
    
	
 
    	
 
    
	
(Date)
    	
(Signature)
    

 

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ASSIGNMENT

 

FOR VALUE RECEIVED, the undersigned registered owner of this Warrant hereby sells, assigns and transfers unto the Assignee named below all of the rights of the undersigned under the within Warrant, with respect to the number of shares of Common Stock set forth below:

 

	
Name of Assignee
    	
 
    	
Address
    	
 
    	
No. of Shares
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    

 

and does hereby irrevocably constitute and appoint                                  Attorney to make such transfer on the books of PROSPCET GLOBAL RESOURCES INC., maintained for the purpose, with full power of substitution in the premises.

 

The undersigned also represents that, by assignment hereof, the Assignee acknowledges that this Warrant and the shares of stock to be issued upon exercise hereof are being acquired for investment, and that the Assignee will not offer, sell or otherwise dispose of this Warrant or any shares of stock to be issued upon exercise hereof except under circumstances which will not result in a violation of the Securities Act of 1933, as amended, or any applicable state securities laws.

 

	
Dated:
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Signature   of Holder
    

 

13Exhibit 10.1

 

Employment Agreement

 

Employment Agreement (this “Agreement”) dated as of June 13, 2012 by and between Prospect Global Resources Inc. a Nevada corporation (the “Company”), and Brian W. Wallace (the “Executive”).

 

WHEREAS, the Company recognizes that the Executive’s talents and abilities are unique, and are integral to the success of the Company, and thus wishes to secure the ongoing services of the Executive on the terms and conditions set forth herein;

 

NOW, THEREFORE, in consideration of the promises and the mutual covenants set forth below, Company and the Executive agree as follows:

 

1.              Employment:  The Company hereby agrees to employ the Executive as Executive Vice President and Chief Operating Officer (“COO”) of the Company, and the Executive hereby accepts such employment, commencing on August 15, 2012 (the “Effective Date”) on the terms and conditions set forth below.  The Executive shall work exclusively for the Company; provided that nothing contained herein shall preclude the Executive from managing personal investments, participating in charitable, community, and academic activities, and, after the first anniversary of the Effective Date, serving as an independent member of the board of directors (and any board committees) of not more than one for-profit business that does not compete with the Company.

 

2.              Compensation and Related Matters:

 

a.              Base Salary. During the Executive’s term of service commencing on the Effective Date (the “Employment Period”), the Company shall pay the Executive a base salary at the rate of not less than $450,000 per year (“Base Salary”).  The Executive’s Base Salary shall be paid in accordance with the Company’s normal payroll practice.  The Executive’s Base Salary shall be reviewed at least annually by the Company in accordance with its procedures for reviewing the compensation of senior officers, and may be increased, but not decreased, in the Company’s discretion, other than as part of a general reduction of senior management base compensation that does not apply disproportionately to the Executive.  If the Executive’s Base Salary is increased by the Company, such increased Base Salary shall then constitute the Base Salary for all purposes of this agreement.

 

b.              Stock Options: Subject to approval by the Compensation Subcommittee (the “Compensation Committee”) of the Governance, Nominating and Compensation Committee of the Board, but in no event later than November 15, 2012, the Executive will be granted options to purchase

 

 

1,000,000 shares (the “Options”) of the Company’s common stock (“Common Stock”) at fair market value (as determined pursuant to the Company’s 2011 Employee Equity Incentive Plan).  The Options shall vest, subject to acceleration as provided below, as follows:  500,000 Options on the later of the Effective Date or the grant date, 250,000 Options on the one year anniversary of the Effective Date and 250,000 Options on the second year anniversary of the Effective Date, in each case so long as the Executive either (i) is employed as the Company’s COO on such date or (ii) has died or become permanently disabled prior to such date and was employed as the Company’s COO at the time of death or disability.  The Executive shall also be eligible for additional grants of equity or long-term incentive compensation, in the Committee’s discretion, on the same basis as other senior executives of the Company.  In the event of any conflict between the terms of this Agreement and either the 2011 Employee Equity Incentive Plan or any agreement evidencing the grant of the Options, the terms of this Agreement shall control.

 

Notwithstanding any provision to the contrary, the Options shall immediately vest in full upon either a “Change in Control” or the termination of the Executive’s services as COO by the Company other than for “Cause” or by the Executive for “Good Reason” (as all such terms are defined below).

 

For purposes of this Agreement, “Change in Control” shall mean the occurrence, subsequent to the Effective Date, of any of the following: (A) by a transaction or series of transactions, any “person” or “group” (within the meaning of Section 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of more than 35% of the combined voting power of the Company’s then outstanding securities (provided such person or group was not a beneficial owner of more than 35% of the combined voting power of the Company’s then outstanding securities as of the Effective Date); (B) as a result of any merger, consolidation, combination or sale or issuance of securities of the Company, or as a result of or in connection with a contested election of directors, the persons who were directors of the Company as of the Effective Date cease to constitute a majority of the Board of Directors of the Company (the “Board”); (C) by a transaction or series of transactions, the authority of the Board over any activities of the Company becomes subject to the consent, agreement or cooperation of a third party other than shareholders of the Company.

 

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For purposes of this Agreement, “Cause” shall mean (A) the Executive’s conviction by a court of competent jurisdiction as to which no further appeal can be taken of a felony (other than a violation based on operation of a vehicle) or entering the plea of nolo contendere to such crime by the Executive; (B) the Executive’s commission of a crime involving fraud or intentional dishonesty, which results in the Executive’s substantial personal enrichment and material adverse effect to the Company; or (C) the Executive becoming subject to any securities related sanctions related to the Company other than those based on an act of the Company itself for which the Executive is charged solely as a result of his position with the Company.

 

For purposes of this Agreement, “Good Reason” shall mean any of the following:  (A) reduction of Executive’s title, position, responsibilities, authority or duties to a level less than the title, position, responsibilities, authorities or duties he occupied or possessed, on the date immediately preceding such reduction; (B) a reduction in Executive’s Base Salary or Annual Bonus opportunity, other than as part of a general reduction of senior management compensation that does not apply disproportionately to the Executive; (C) the Company requiring the Executive to be based at a materially different geographic location, other than as part of a relocation of a significant portion of the Company’s senior management; (D) the Company’s material breach of any provision of this Agreement, or any other agreement between the Company and the Executive; or (E) a failure by the Company to obtain the assumption of this Agreement by any successor to or assignee of substantially all of the Company’s business and/or assets.  Notwithstanding the foregoing, the Executive’s resignation shall not be considered to be for Good Reason unless the Company receives, within 90 days following the date on which the Executive knows, or with the exercise of reasonable diligence would know, of the occurrence of any of the events set forth in clauses (A) through (E) above, written notice from the Executive specifying the specific basis for his belief that he is entitled to terminate employment for Good Reason, the Company fails to cure the event constituting Good Reason within 30 days after receipt of such written notice thereof, and the Executive terminates employment within 30 days following expiration of such cure period.

 

c.               Annual Bonus: For each full fiscal year of the Company that begins and ends during the Employment Period, and for the portion of the fiscal year of the Company that begins in 2012 (“Fiscal Year 2012”), the Executive shall be eligible to earn an annual cash bonus in such amount as shall be determined by the Compensation Committee (the “Annual Bonus”); provided, that each Annual Bonus shall be no greater than 120% of the

 

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then-current Base Salary. The Compensation Committee (or the Board if there is no Compensation Committee) shall establish objective criteria to be used to determine the extent to which performance goals have been satisfied.  These criteria shall be established, in consultation with the Executive, within 60 days of the Effective Date in the case of Fiscal Year 2012, and within the first 60 days of each subsequent fiscal year.

 

d.              Vacation: The Executive shall be entitled to four weeks of vacation per fiscal year. Up to three weeks of vacation not taken during the applicable fiscal year shall be carried over to the next following fiscal year.  Vacation shall accrue to the Executive at rate of not less than one week per quarter in advance.

 

e.               Expenses: The Company will reimburse the Executive for all expenses related to Company business, including, but not limited to travel, marketing, communication, due diligence, legal fees and expenses, etc.

 

f.                Welfare, Pension and Incentive Benefit Plans: During the Employment Period, the Executive (and his eligible spouse and dependents) shall be entitled to participate in all the welfare benefit plans and programs maintained by the Company from time to time for the benefit of its senior executives including, without limitation, all medical, hospitalization, dental, disability, accidental death and dismemberment and travel accident insurance plans and programs.  In addition, during the Employment Period, the Executive shall be eligible to participate in all pension, retirement, savings and other employee benefit plans and programs maintained from time to time by the Company for the benefit of its senior executives.

 

g.               Professional Development.  The Company will reimburse the Executive for education and professional development expenses related to courses or programs selected by the Executive in the natural resources sector up to $10,000 per calendar year. The Executive may take such courses during normal business hours and will not be required to utilize vacation time.

 

3.              Responsibilities: As the COO, the Executive will have the responsibilities and authority customary for a chief operating officer of a company comparable to the Company in the United States, and shall also assist the Company’s President and Chief Executive Officer in developing the Company’s strategic direction, identifying and pursuing acquisition targets, personnel hiring, budget preparation, development of an annual operating plan and periodic long range plans, overseeing all portfolio companies’ operations, budgets and strategic direction, and compliance with all regulatory requirements developing and

 

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implementing the Company’s business plan.  The COO shall report directly to the Company’s Chief Executive Officer.

 

4.              At-Will Employment; Severance: The Executive’s employment with the Company is on an at-will basis.  If terminated by the Company for any reason other than Cause, including a Change in Control, or by the Executive for Good Reason, the Company shall provide severance to the Executive, payable in installments, each of which shall be considered a separate “payment” for purposes of Section 409A of the Internal Revenue Code (“Section 409A”), accordance with the Company’s normal payroll practice, of 12 month’s Base Salary, the Executive’s Annual Bonus for the fiscal year prior to the fiscal year in which the termination occurs to the extent not paid prior to termination, an Annual Bonus of 120% of the then-current Base Salary, Base Salary through the date of termination, accrued vacation, any reimbursement of all business and professional development expenses incurred but not yet reimbursed, and any benefits payable upon termination of employment under the Company’s employee benefit plans (other than any severance pay plan).  In addition the Company shall reimburse the Executive for COBRA payments made by the Executive for himself and his eligible dependents for 12 months following termination by the Company for any reason other than Cause, including a Change in Control, or by the Executive for Good Reason.

 

Notwithstanding the foregoing, the Executive shall not be entitled to receive the severance pay and benefits described in the preceding paragraph (other than Base Salary through the date of termination, accrued vacation, any reimbursement of all business and professional development expenses incurred but not yet reimbursed, and any benefits payable upon termination of employment under the Company’s employee benefit plans), until the Executive has executed a general release (the “Release”) of all claims against the Company arising out of his employment, other than claims arising after the date of execution, the Executive’s right to indemnification and continued coverage under the Company’s Director’s and Officer’s policy, and claims that cannot by law be released.  The Release shall be on commercially reasonable terms, in the form customarily used by the Company for its senior executives, and shall also provide for the Company to release any claims against the Executive not involving fraudulent or illegal conduct.  In order to receive such severance, the Executive must have signed the Release, and the period provided therein for revocation must have expired, by the sixtieth day after the date of termination.  Payment of severance shall commence as soon as practical after the revocation period has expired, provided that if the 60th day following the date of termination falls in the calendar year after the year of termination, no form of severance that is subject to Section 409A shall be paid until the first day of the second calendar year.

 

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The Executive shall not be required to mitigate damages in order to receive the severance pay and benefits, and the Executive’s severance pay and benefits shall not be offset by any compensation received by the Executive from other sources, except to the extent that the Executive’s medical coverage is discontinued by reason of his becoming covered by another medical plan in accordance with COBRA.

 

In the event of the Executive’s termination of employment by reason of death or permanent disability, the Executive or his personal representative shall be entitled to receive the Executive’s Annual Bonus for the fiscal year prior to the fiscal year in which the termination occurs to the extent not paid prior to termination, an Annual Bonus of 120% of the then-current Base Salary, Base Salary through the date of termination, accrued vacation, any reimbursement of all business and professional development expenses incurred but not yet reimbursed, and any benefits payable upon termination of employment under the Company’s employee benefit plans.

 

5.              Location: The Executive will be based in the Denver, Colorado, metropolitan area.  During the Employment Period, the Company shall provide the Executive with an office and appropriate equipment and support staff.  The Company shall reimburse the Executive for all reasonable relocation expenses incurred by the Executive, including without limitation brokerage commissions in connection with sale of current residence, commuting expenses prior to relocation, temporary housing, moving expenses, and up to two trips for the Executive and his spouse to search for a new residence.

 

6.              Representations and Warranties:

 

a.              The Company represents and warrants to the Executive that this Agreement has been duly authorized, executed and delivered by the Company and, assuming the due execution by the Executive, constitutes a legal, valid and binding agreement of the Company, enforceable against the Company in accordance with its terms.

 

b.              The Executive has furnished the Company with true and complete copies of any noncompete, confidentiality, or other restrictive covenant agreement to which he is a party, and the Company acknowledges receipt of such agreements.  The Executive and the Company each agrees that it has satisfied itself that such agreements will not preclude the Executive from accepting employment by the Company or performing his obligations in accordance with the provisions of this Agreement.  The Executive represents and warrants that he is not a party to, or bound by, any other agreement that would preclude him from entering into this Agreement and performing his obligations hereunder.

 

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7.              Indemnity:  The Company agrees that if the Executive is made a party or is threatened to be made a party to any action, suit or proceeding, whether civil, criminal, administrative or investigative (a “Proceeding”) by reason of the fact that the Executive is or was a trustee, director, member, agent or officer of the Company or any predecessor to the Company or any of their affiliates or is or was serving at the request of the Company, any predecessor to the Company or any of their affiliates as a trustee, director, officer, member, employee or agent of another corporation or a partnership, joint venture, limited liability company, trust or other enterprise, including, without limitation, service with respect to employee benefit plans, whether or not the basis of such Proceeding is alleged action in an official capacity as a trustee, director, officer, member, employee or agent while serving as a trustee, director, officer, member, employee or agent, the Executive shall be indemnified and held harmless by the Company to the fullest extent authorized by Nevada law, as the same exists or may hereafter be amended, against all Expenses incurred or suffered by the Executive in connection therewith, and such indemnification shall continue as to the Executive even if the Executive has ceased to be an officer, director, trustee or agent, or is no longer employed by the Company and shall inure to the benefit of his heirs, executors and administrators.

 

a.              Expenses. As used in this Section 7, the term “Expenses” shall include, without limitation, damages, losses, judgments, liabilities, fines, penalties, excise taxes, settlements, and costs, attorneys’ fees, accountants’ fees, and disbursements and costs of attachment or similar bonds, investigations, and any expenses of establishing a right to indemnification under this Agreement.

 

b.              Enforcement. If a claim or request under this Section 7 is not paid by the Company or on its behalf, within 30 days after a written claim or request has been received by the Company, the Executive may at any time thereafter bring suit against the Company to recover the unpaid amount of the claim or request and if successful in whole or in part, the Executive shall be entitled to be paid also the expenses of prosecuting such suit. All obligations for indemnification hereunder shall be subject to, and paid in accordance with, applicable Colorado law.

 

c.               Advances of Expenses. Expenses incurred by the Executive in connection with any Proceeding shall be paid by the Company in advance upon request of the Executive that the Company pay such Expenses, but only in the event that the Executive shall have delivered in writing to the Company (i) an undertaking to reimburse the Company for Expenses with respect to which the Executive is not entitled to indemnification and (ii) a statement of his good faith belief that the

 

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standard of conduct necessary for indemnification by the Company has been met.

 

d.              Insurance.  The Company will maintain a Director’s and Officer’s Insurance Policy naming the Executive as a covered party in an amount deemed mutually sufficient to the Company and the Executive.  The Company will use its best commercial efforts to have this policy in place within 90 days of the Effective Date.  The Executive shall continue to be covered by the policy following the termination of his employment for any reason, at the same level of coverage as the most senior executives in active employment.

 

8.              Nondisparagement.  During the term of his employment and thereafter, the Executive will not make any negative or disparaging statements or comments, either as fact or as opinion, about Company, its employees, officers, directors, shareholders, vendors, products or services, business, technologies, market position or performance, and the Company (including its subsidiaries and affiliates) will not make, and agrees to use reasonable efforts to cause its directors and senior executives to refrain from making, any negative or disparaging statements or comments, either as fact or as opinion, about the Executive (or authorizing any statements or comments to be reported as being attributed to the Company).  Nothing in this Section 8 shall prohibit the Executive or the Company from providing truthful information in response to a subpoena or other legal process.

 

9.              Survival of Certain Provisions: All provisions of this Agreement, including without limitation the representations, warranties and covenants and indemnity provisions contained in Sections 2, 4, 6 and 7 of this Agreement and the Company’s obligation to pay the Executive any compensation earned pursuant hereto shall remain operative and in full force and effect regardless of any completion or termination of this Agreement or the Executive’s employment to the extent necessary to enable the parties to enforce their respective rights hereunder, and shall be binding upon, and shall inure to the benefit of, any successors, assigns, heirs and personal representatives of the Company, the indemnified parties and any such person.

 

10.       Notices: Any notice given with respect to this Agreement shall be in writing and shall be mailed or delivered (a) if to the Company, at its offices at 1621 18th Street, Suite 200, Denver, CO 80202, and (b) if to the Executive, at 3530 E. Big Cottonwood Canyon Rd., Salt Lake City, UT  84121, in either case with a copy to the Company’s legal counsel, Jeff Knetsch, Brownstein Hyatt Farber Schreck, LLP, 410 17th Street, 22nd Floor, Denver, CO 80202.  Either party may change the address to which notices shall be given by notice given in the same manner.

 

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11.       Counterparts: This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument.

 

12.       Third Party Beneficiaries: This Agreement has been and is made solely for the benefit of the parties hereto, and their respective successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement.

 

13.       Validity: The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

 

14.       Dispute Resolution: If a dispute arises out of or relating to this Agreement or the breach of this Agreement, and if the dispute cannot be settled through direct discussions, the parties agree to first endeavor to settle the dispute in an amicable manner by mediation. Mediation shall consist of an informal, nonbinding conference or conferences between the parties and the mediator jointly, and at the discretion of the mediator, then in separate caucuses in which the mediator will seek to guide the parties to a resolution of the case. Each party shall pick a mediator selector and the two mediator selectors shall then pick and appoint a mediator.  The Company will pay all mediation related costs, including, without limitation, the Executive’s costs and reasonable fees, including attorneys’ fees, incurred in selecting a mediator and obtaining counsel for purposes of the mediation.

 

15.       Choice of Law, Jurisdiction and Venue: This Agreement shall be governed by, construed, and enforced in accordance with the laws of the State of Colorado. Any and all actions, suits, or judicial proceedings upon any claim arising from or relating to this Agreement, shall be instituted and maintained in the State or Federal courts sitting in the State of Colorado.  Each party waives the right to change of venue.

 

16.       Expenses:  The Company agrees to reimburse the Executive for up to $10,000 in legal expenses in connection with the preparation and review of this Agreement and all related documents.

 

17.       Miscellaneous: No provisions of this Agreement may be amended, modified, or waived unless such amendment or modification is agreed to in writing signed by the Executive and by a duly authorized officer or a director of the Company, and such waiver is set forth in writing and signed by the party to be charged. No waiver by either party hereto at any time of any breach by the other party hereto of any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions

 

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at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not set forth expressly in this Agreement. The respective rights and obligations of the parties hereunder of this Agreement shall survive the Executive’s termination of employment and the termination of this Agreement to the extent necessary for the intended preservation of such rights and obligations.

 

18.       Section 409A:  It is the intent of the parties that all amounts payable to the Executive pursuant to this Agreement or otherwise shall either be exempt from Section 409A, or shall be paid in a manner that complies with all requirements of Section 409A, and to the maximum extent possible this Agreement shall be so construed.  Without limiting the generality of the foregoing, any reimbursement of expenses that constitutes taxable income shall be paid to the Executive not later than the last day of the year following the year in which the expense is incurred, and, to the extent that any amount payable to the Executive by reason of his termination of employment constitutes deferred compensation subject to Section 409A, (A) if the Executive incurs a termination of employment that does not constitute a “separation from service” as defined in Section 409A, then Executive’s right to payment of such amount shall be vested at the time of his termination of employment, but payment shall be deferred until the Executive incurs a separation from service as so defined or dies, and (B) if the Executive is a “specified employee” as defined in Section 409A at the time he incurs a separation from service, any amount payable by reason of such separation from service (including an amount deferred pursuant to (A)) shall not be paid until the first day of the seventh month following the month that includes the separation from service, or if earlier the date of the Executive’s death.  Any amounts deferred pursuant to (A) or (B) shall be paid in a lump sum, without interest, at the time specified in (A) or (B).

 

19.       Section Headings: The section headings in this Agreement are for convenience of reference only, and they form no part of this Agreement and shall not affect its interpretation.

 

The parties have executed this Agreement as of the date first written above.

 

 

	
Brian W. Wallace
    	
 
    	
Prospect Global Resources Inc.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
/s/ Brian W. Wallace
    	
 
    	
By:
    	
/s/ Patrick L. Avery
    
	
 
    	
 
    	
 
    	
Patrick   L. Avery
    
	
 
    	
 
    	
 
    	
President   and Chief Executive Officer
    

 

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