Document:

Exhibit 4.3

 

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:         , 2014 (“Issue 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 750,000 shares of Common Stock, at a purchase price of $[·](1) per share, subject to adjustment as provided in Section 13 (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. 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 Issue Date and ending at 5:00 p.m., Mountain Time, on the fifth anniversary of the Issue Date, 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 (as defined below) of one share of Common Stock is greater than the Exercise Price (at the date of calculation, as set forth below), in lieu of exercising this Warrant for cash, the Holder may exercise this Warrant in whole or in part, at any time, or from time to time during the term hereof, by electing to receive a number of shares of Common Stock computed using the following formula (the “Cashless Exercise”).

 

(1) The lowest price at which Common Stock is sold on or after 11/14/13 and on or before 3/    /14.

 

 

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 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

 

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two (2) trading days thereafter, the Company at its expense shall issue and deliver to the person or persons entitled to receive the shares a certificate or certificates for such number of shares issuable upon such exercise, or, if any such person so elects, shall cause such number of shares to be deposited, by electronic transfer, in such securities account as such person directs.  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 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)

 

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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 the Issue Date, 00,000,000 shares of common stock were issued and outstanding; options to purchase 0,000,000 common stock were issued and outstanding; and warrants to purchase 00,000,000 shares of common stock were issued and outstanding.  As of the Issue Date, the total number of shares outstanding on a fully diluted basis is 000,000,000.  [TO BE UPDATED TO ISSUE DATE]

 

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.

 

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.

 

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(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.

 

(iii)                               Any shares issued on or after six months from the Issue Date pursuant to a Cashless Exercise shall not be subject to the foregoing and shall be issued free of transfer restrictions and restrictive legends, except that the Holder agrees not to resell such, shares, unless the Holder confirms that adequate current public information with respect to the Company is available, as contemplated by Rule 144.

 

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
   E-mail: weisberg@weisberg-law.com
    Attention: Mr. Richard Weisberg
    

 

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If   to Company:
    	
 
    	
Prospect   Global Resources, Inc. 
   1401 17th Street, Suite 1550
   Denver, CO 80202
   Facsimile: 720-294-0402
   E-Mail: gdangler@prospectGRI.com
    Attention: Mr. Greg Dangler
    
	
 
    	
 
    	
 
    
	
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 

 

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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 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 

 

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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 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. The Company may not assign its rights or obligations hereunder without the prior written consent of Holder.  Holder may assign this Warrant and its rights hereunder.

 

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(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, 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:
    	
 
    
	
 
    	
Name:   Damon Barber
    
	
 
    	
Title:   President, CEO, and Secretary
    

 

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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 PROSPECT 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

 

FOURTH EXTENSION AGREEMENT

 

THIS FOURTH EXTENSION AGREEMENT (this “Agreement”), executed as of the 10th day of December, 2013 (the “Effective Date”), by and among The Karlsson Group, Inc., an Arizona corporation (“Karlsson”), on the one hand, and Prospect Global Resources, Inc., a Delaware corporation (“Prospect DE”), Prospect Global Resources, Inc., a Nevada corporation (“Parent”), Apache County Land & Ranch, LLC, a Nevada limited liability (“Apache”) and American West Potash, LLC, a Delaware limited liability company (“AWP” and collectively with Prospect DE, Parent and Apache the “Prospect Parties” and each a “Prospect Party”) on the other hand, is made with reference to the following facts:

 

A.                                    Prospect DE has entered into and delivered to the order of Karlsson that certain Senior First Priority Secured Promissory Note, dated as of August 1, 2012 (such Note, as so amended and as the same may hereafter be amended, modified, extended and/or restated, being hereinafter referred to as the “Note”).  Capitalized terms used herein but not otherwise defined herein shall have the meanings ascribed to them in the Note.

 

B.                                    Pursuant to the Note, Karlsson has made certain extensions of credit (the “Loan”) to Prospect DE.

 

C.                                    The Loan is secured by, among other instruments, (i) that certain Deed of Trust, Security Agreement, Assignment of Production and Proceeds, Fixture Filing and Financing Statement dated as of August 1, 2012, executed by AWP, as trustor, in favor of and for the benefit of Karlsson, as beneficiary, and recorded August 1, 2012, as Instrument No. 2012-004076 in the Official Records of Apache County, Arizona (the “Official Records”) and filed in the records of the Arizona State Land Department (the “ASLD”) (the “AWP Deed of Trust”) with respect to the land and other property interests described therein (the “AWP Property Interests”), (ii) that certain Security Agreement, dated as of August 1, 2012, executed by Prospect DE and AWP in favor of and for the benefit of Karlsson (the “Security Agreement”), (iii) that certain Membership Interest Pledge Agreement between Prospect DE and Karlsson, dated as of May 30, 2012 (the “AWP Pledge Agreement”); (iv) that certain Membership Interest Pledge Agreement between AWP and Karlsson, dated as of January 28, 2013 (the “Apache Pledge Agreement”); and (v) each of the Collateral Assignment of Mineral Leases, the Collateral Assignment of Mining Permits, and the Collateral Assignments of Royalty Agreements, each between AWP and Karlsson and each dated as of August 1, 2012 (collectively, the “Collateral Assignments”).  The Loan and all of Prospect DE’s other obligations under the Loan Documents (as defined below) are guaranteed by that certain Unconditional Guaranty dated as of August 1, 2012 executed by AWP in favor of and for the benefit of Karlsson (the “Guaranty”; by that certain Unconditional Guaranty dated as of April 15, 2013 executed by Parent in favor of and for the benefit of Karlsson (the “Parent Guarantee”); by that certain Pledge Agreement dated as of April 15, 2013 between Parent and Karlsson (the “Parent Pledge”); and by that certain Unconditional Guaranty dated as of May 30, 2013 by Apache (the “Apache Guaranty”) together with the Deed of Trust, Assignment of Leases and Rents, Security Agreement, Fixture Filing and Financing Statement made effective as of May 30, 2013 by Apache for the benefit of Karlsson and recorded in the Official Records as instrument number 2013-002676, with respect to the real property described therein (the “Apache Lands”) as

 

 

amended by the First Amendment to the Apache Deed of Trust dated October 24, 2013 and recorded as instrument number 2013-005721 of the Official Records (collectively, the “Apache Deed of Trust”).  The Parent Guaranty, the Parent Pledge, the Apache Guaranty, the Apache Deed of Trust, the AWP Guaranty, the AWP Deed of Trust, the Security Agreement, the AWP Pledge Agreement, the Apache Pledge Agreement and the Collateral Assignments and all financing statements, fixture filings, patent, trademark and copyright filings and other documents and agreements relating to the collateral for the Loan and made or delivered pursuant to the Note or any other Loan Document are collectively referred to as the “Collateral Documents”).  The Note, the Collateral Documents and all other documents, agreements and instruments delivered to Karlsson under or in connection with the Note are collectively referred to herein as the “Loan Documents.”

 

D.                                    Apache is a wholly-owned subsidiary of AWP, AWP is a wholly-owned subsidiary of Prospect DE and Prospect DE is a wholly-owned subsidiary of Parent, which has a financial interest in the success of Prospect DE.  As a result, Parent, AWP and Apache are willing to enter into this Agreement and the documents and instruments contemplated hereby and expect to benefit therefrom.

 

E.                                     Pursuant to the terms of Section 2.2 of the Note, Prospect DE was required to make the First Installment Payment consisting of (i) a principal payment plus (ii) the interest accrued through March 30, 2013 on said principal payment plus (iii) the Tax Gross-Up Amount in the amount as set forth in the Note.  The aggregate amount due for the First Installment totaled in excess of $50 million.  Prospect DE did not make the First Installment Payment on March 30, 2013 and did not subsequently make such payment.

 

F.                                      The Prospect Parties requested that Karlsson extend the payment dates under the Note and forbear from exercising its rights (i) to demand immediate repayment in full of the Loan and all other outstanding obligations of Prospect DE under the Loan Documents, (ii) to foreclose or otherwise realize on Karlsson’s liens and security interests under the AWP Deed of Trust, the Security Agreement and any other Collateral Documents and (iii) to demand repayment in full of the Loan under the Guaranty.  Karlsson agreed to enter into the Extension Agreement with the Prospect Parties dated as of April 15, 2013 (the “Extension Agreement”).

 

G.                                    In connection with the Extension Agreement, Prospect DE and Karlsson executed that certain Amendment to First Priority Senior Secured Promissory Note dated as of April 15, 2013 (the “First Note Amendment”).  The Note, as amended by the First Note Amendment, required the achievement of certain Funding Raises (as defined in the First Note Amendment) by certain deadlines.  Prospect did not timely achieve the Second Funding Raise required under the Note.

 

H.                                   The Prospect Parties requested that Karlsson amend certain provisions of the Note to substitute certain performance milestones in lieu of the Funding Raises and forbear from exercising its rights (i) to demand immediate repayment in full of the Loan and all other outstanding obligations of Prospect DE under the Loan Documents, (ii) to foreclose or otherwise realize on Karlsson’s liens and security interests under the AWP Deed of Trust, the Security Agreement and any other Collateral Documents and (iii) to demand repayment in full of the Loan under the Guaranty.  Karlsson agreed to enter into the Second Extension Agreement with

 

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the Prospect Parties dated as of June 26, 2013 (the “Second Extension Agreement”).  In connection with the Second Extension Agreement, Prospect DE and Karlsson executed that certain Second Amendment to Senior First Priority Secured Promissory Note dated as of June 26, 2013 (the “Second Note Amendment”).

 

I.                                        The Prospect Parties requested that Karlsson amend the Note to extend the due date with respect to the payment of the 2012 453A Amount (as defined in the Note) until September 13, 2012.  Prospect DE and Karlsson executed that certain Third Amendment to Senior First Priority Secured Promissory Note dated as of September 9, 2013 (the “Third Note Amendment”), and the Prospect Parties executed that certain Reaffirmation of Loan Documents as of the same date.

 

J.                                        Pursuant to the terms of clause (i) of Section 2.2 of the Note, Prospect DE was required to make a payment equal to the 2012 453A Amount on or before September 13, 2013.  Prospect DE notified Karlsson that it would not be able to make payment of the 2012 453A Amount to Karlsson on or before the date payment was required to be made pursuant to the terms of the Note.

 

K.                                   The Prospect Parties requested that Karlsson further modify and amend the Note and forbear from exercising its rights (i) to demand immediate repayment in full of the Loan and all other outstanding obligations of Prospect DE under the Loan Documents, (ii) to foreclose or otherwise realize on Karlsson’s liens and security interests under the AWP Deed of Trust, the Security Agreement and any other Collateral Documents and (iii) to demand repayment in full of the Loan under the Guaranty.  Karlsson agreed to enter into the Third Extension Agreement with the Prospect Parties dated as of September 13, 2013 (the “Third Extension Agreement”).  In connection with the Third Extension Agreement, Prospect DE and Karlsson executed that certain Fourth Amendment to Senior First Priority Secured Promissory Note dated as of June 26, 2013 (the “Fourth Note Amendment”).

 

L.                                     The Prospect Parties requested that Karlsson amend the Note to extend the due date with respect to the payment of the 2012 453A Amount further, until December 4, 2013.  Prospect DE and Karlsson executed that certain Fifth Amendment to Senior First Priority Secured Promissory Note dated as of November 13, 2013 (the “Fifth Note Amendment”), and the Prospect Parties executed that certain Reaffirmation of Loan Documents (the “November Reaffirmation”) as of the same date.

 

M.                                 The Prospect Parties requested that Karlsson amend the Note to extend yet further the due date with respect to the payment of the 2012 453A Amount, until December 10, 2013.  Prospect DE and Karlsson executed that certain Sixth Amendment to Senior First Priority Secured Promissory Note dated as of December 3, 2013 (the “Sixth Note Amendment”), and the Prospect Parties executed that certain Reaffirmation of Loan Documents (the “December Reaffirmation”) as of the same date.

 

N.                                    AWP, Apache and Karlsson are party to that certain Additional Consideration Agreement dated as of August 1, 2012 (as amended from time to time, the “Additional Consideration Agreement”).

 

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O.                                    Prospect DE, AWP and Karlsson are also party to that certain Supplemental Payment Agreement dated as of August 1, 2012 (as amended from time to time, the “Supplemental Payment Agreement”)

 

P.                                      The Prospect Parties now wish to make certain amendments to the Note and certain other Loan Documents and enter into agreements hereinafter set forth.

 

NOW, THEREFORE, in consideration of the mutual promises and agreements hereinafter contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

1.                                      Acknowledgements.

 

(a)                                 The parties acknowledge that each of the foregoing factual recitals is truthful, accurate and valid.

 

(b)                                 The parties acknowledge that as of the date of this Agreement, the outstanding principal balance of the Note is $120,078,585 and the accrued but unpaid interest due and payable on the Note through December 6, 2013 is $9,622,016.

 

(c)                                  The parties acknowledge that immediately prior to the effectiveness of this Agreement, the Loan Documents and the Additional Consideration Agreement were valid and enforceable according to their terms.

 

(d)                                 Karlsson waives any rights and remedies it may have with respect to any breach hereof (including any breach of a representation and warranty contained in any Loan document) which breach occurred prior to the Effective Date and of which breach Karlsson had actual prior knowledge prior to the Effective Date.

 

(e)                                  The parties agree that each of the Extension Agreement, the Second Extension Agreement and the Third Extension Agreement, in each case except as explicitly amended by the Second Extension Agreement, the Third Extension Agreement or hereby, remains in full force and effect.

 

(f)                                   The parties agree, for the avoidance of doubt, that consummation of Equity Issuances in order to effectuate the Discounted Payoff prior to the Prepayment Expiration Date (each as defined below) shall not be deemed to be a Company Sale for purposes of the Supplemental Payment Agreement, as defined below.

 

2.                                      No Further Disbursements.  The Prospect Parties acknowledge that Karlsson has no obligation to advance any loan proceeds under any of the Loan Documents, whether now or in the future.

 

3.                                      Closing Deliveries; Conditions Precedent.  Concurrently with the execution of this Agreement, and as a condition to the effectiveness of this Agreement, the Prospect Parties and Karlsson, as applicable, will execute and deliver, or cause to be executed and delivered, the following:

 

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(a)                                 An amendment to the Note in the form attached hereto as Exhibit A;

 

(b)                                 An amendment in the form attached hereto as Exhibit B to that certain Escrow Agreement dated as of April 15, 2013 among Karlsson, Parent, and JPMorgan Chase Bank, N.A., as escrow agent (as amended from time to time, the “Escrow Agreement”);

 

(c)                                  An Amendment No. 2 to May 30, 2012 Warrant (such warrant, as amended from time to time, the “May 2012 Warrant”) in the form attached hereto as Exhibit E (the “May 2012 Warrant Amendment”);

 

(d)                                 An Amendment No. 1 to June 26, 2013 Warrant (such warrant, as amended from time to time, the “June 2013 Warrant”) in the form attached hereto as Exhibit F (the “June 2013 Warrant Amendment”);

 

(e)                                  Karlsson shall have received a certificate of the Secretary or Assistant Secretary of each Prospect Party, dated as of the Closing Date (as defined below), certifying (i) the resolutions of the Boards of Directors or Managers, as applicable, of each Prospect Party authorizing the execution, delivery and performance of this Agreement and the other documents contemplated hereby by such Prospect Party, and (ii) the incumbency, authority and signatures of each executive officer who will act as such in connection herewith; and

 

(f)                                   Karlsson shall have received an Officer’s Certificate (the “Officer’s Certificate”) of the Chief Executive Officer or the Chief Financial Officer of Prospect DE and Parent dated as of the Effective Date, certifying the accuracy of the representations and warranties set forth in Sections 4(e) and 4(f) of this Agreement.

 

4.                                      Representations, Warranties and Covenants.  As of the Effective Date and upon the effectiveness of this Agreement, the Prospect Parties hereby represent and warrant to Karlsson as follows:

 

(a)                                 None of the Prospect Parties or any Affiliate of any Prospect Party owns any land nor any leasehold interest or license or permit for the use of such lands except AWP and Apache, and their respective real property interests shall all be described in Exhibit A to their respective Royalty Agreement.  “Affiliate” of a person or entity means for purposes of this Section 4(a) any other person or entity that, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such person or entity.  The term “control” (including the terms “controlled by” and “under common control with”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a person or entity, whether through the ownership of voting securities, by contract or otherwise.

 

(b)                                 Each representation and warranty made by Prospect DE in Section 5 of the AWP Pledge Agreement and each representation and warranty made by any Prospect Party in each other Loan Document is true and correct in all material respects on and as of the Effective Date, except to the extent such representation and warranty relates solely to an earlier date.

 

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(c)                                  This Agreement has been duly authorized and constitutes the legal, valid and binding obligation of the Prospect Parties enforceable against each of the Prospect Parties in accordance with its terms.

 

(d)                                 Neither the execution by the Prospect Parties nor the effectuation by Karlsson of any of its rights and remedies hereunder, whether upon default or otherwise, will result in a breach of or constitute a default under any charter provision or by-law of any Prospect Party or any other agreement or instrument to which any Prospect Party is a party, nor violate any law or any rule or regulation of any administrative agency or any order, writ, injunction or decree or any court or administrative agency, nor does any of the foregoing require the consent of any Person or any notice or filing with any governmental or regulatory body.

 

(e)                                  The Prospect Parties are in compliance in all material respects with all material requirements of applicable law.

 

(f)                                   There are no Events of Default under any Loan Document.

 

(g)                                  Each payment that any Prospect Party was required to make, on or before the date hereof, to the ASLD, including, but not limited to, with respect to the AWP Property Interests, was made in full to such agency on or before the due date applicable to such payment.

 

5.                                      Discounted Payoff.

 

(a)                                 The Prospect Parties, collectively and individually, shall make their best efforts to raise a sufficient aggregate amount in Equity Issuances (as defined in the Note) between the Effective Date and March 10, 2014 (the “Prepayment Expiration Date”) in order to make Twenty-Five Million Dollars ($25,000,000) in aggregate payments pursuant to the Note after the Effective Date and before the Prepayment Expiration Date.

 

(b)                                 Upon indefeasible prepayment of the Note prior to the Prepayment Expiration Date in accordance with, and subject to the conditions set forth in, Section 3.4 of the Note (such payment if made subject to such conditions and prior to such deadline, the “Discounted Payoff”), the Prospect Parties and Karlsson agree:

 

(1)                                 to execute and deliver those certain Royalty Agreements in the forms attached hereto as Exhibit H (together with all royalty agreements to be executed and delivered pursuant to Section 12(b) of this Agreement, the “Royalty Agreements”) amending the Additional Consideration Agreement dated as of August 1, 2012 among AWP, Apache, and Karlsson, as previously amended;

 

(2)                                 that the Prospect Parties, at their cost and expense shall cause the Royalty Agreements to be recorded in the Official Records and, to the extent applicable to any lands administered by the ASLD, filed in the records of the ASLD, and shall deliver a certified copy of the recorded instruments and evidence of such filing to Karlsson, subject only to the title exceptions set forth in those certain lender’s title insurance policies issued by Commonwealth Land Title Insurance Company as policy # 01771851 as to the AWP Royalty Agreement and, with respect to the Apache Royalty Agreement, Commonwealth Land Title Insurance policy # 01792291;

 

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(3)                                 that all obligations of the Prospect Parties, on the one hand, and Karlsson, on the other, under the Loan Documents shall be terminated and any such documents or instruments as are reasonably required to evidence such termination (including but not limited to UCC Termination Statements) shall, upon the written request of the Prospect Parties, be executed and, if required, filed.  Notwithstanding the foregoing, the covenants, terms, conditions and obligations of the Prospect Parties and rights of Karlsson under the Supplemental Payment Agreement, the Additional Consideration Agreement (for the avoidance of doubt, including but not limited to the Royalty Agreements), Sections 4(a), 5(b), 7, 11 and 12 of this Agreement, the Registration Rights Agreement, the May 2012 Warrant, the June 2013 Warrant and the Additional Warrant (collectively, the “Surviving Agreements”) shall survive pursuant to the terms and conditions of such agreements and not be affected by any payment under or prepayment of the Note;

 

(4)                                 to execute and deliver that certain Mutual Release of Claims in the form attached hereto as Exhibit I;

 

(5)                                 to execute and deliver jointly to the Escrow Agent an Approved Schedule (each as defined in the Escrow Agreement) providing for the immediate disbursement to Parent of all escrowed funds;

 

(6)                                 that Parent shall execute and deliver a Warrant in the form attached hereto as Exhibit C (the “Additional Warrant”);

 

(7)                                 to execute and deliver an Amendment No. 2 to Registration Rights Agreement in the form attached hereto as Exhibit D, amending the Registration Rights Agreement dated as of August 1, 2012 between Parent and Karlsson (as amended from time to time, the “Registration Rights Agreement”); and

 

(8)                                 to execute and deliver an amendment to the Supplemental Payment Agreement in the form attached hereto as Exhibit G.

 

For the avoidance of doubt, until such time (if any) as the Discounted Payoff occurs, except as specifically set forth in this Agreement or in the documents referenced in Sections 3(a) through (f) hereof, all provisions of the Loan Documents and any other agreements between one or more of the Prospect Parties and Karlsson shall remain in full force and effect, and the parties thereto shall continue to have all of their rights and remedies thereunder.

 

6.                                      Closing Date.  As used in this Agreement, the Closing Date shall mean the Effective Date, unless otherwise agreed to in writing by all the parties hereto.

 

7.                                      Karlsson’s Costs.  Within two business days of the date on which the first of the Prospect Parties executes this Agreement, they shall pay Karlsson $50,000 in respect of the unreimbursed out-of-pocket legal costs and expenses incurred by Karlsson in connection with this Agreement and/or the Note and the negotiations and documents prepared and executed in connection therewith (collectively, the “Karlsson Legal Expenses”).  No later than the earliest of (i) March 10, 2014, (ii) two (2) business days after the date on which Discounted Payoff occurs, and (iii) the date of occurrence of the first Event of Default to occur under the Note on or after the Effective Date (provided such Event of Default shall have occurred and be continuing)

 

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the Prospect Parties shall reimburse out-of-pocket Karlsson for all other unreimbursed Karlsson Legal Expenses.

 

8.                                      Confirmation of Obligations.  As of the Closing Date and subject to the terms of this Agreement, each Prospect Party confirms, ratifies and restates all of its respective obligations under the Loan Documents and Prospect DE agrees to pay all of the indebtedness evidenced by the Loan Documents according to their terms and provisions as amended to date.  Prospect DE confirms, ratifies and restates that Karlsson has first lien priority interests in all of the Collateral described in the Security Agreement and the other Loan Documents.  Subject to the terms of this Agreement, all of the terms, covenants and provisions of the Note, the Collateral Documents and the other Loan Documents shall remain in full force and effect.  Without limiting the generality of the foregoing, each Prospect Party hereby expressly acknowledge and agree that, as of the Closing Date, it has no offsets, claims, counterclaims or defenses whatsoever against any of its obligations under the Note, the Collateral Documents or any other Loan Document, including those which would in any way reduce the amount of the indebtedness owed to Karlsson under the Loan Documents or affect the validity of any foreclosure sale of any of the Collateral, and if any of the same now exists, each Prospect Party irrevocably waives, and agrees not to assert, any such existing offset, claim, counterclaim, defense or other cause of action against Karlsson.

 

9.                                      Deficiency; Waivers.  To the fullest extent permitted by applicable law, Prospect DE and Parent unconditionally and irrevocably waives any rights or benefits arising under A.R.S. §§ 12-1566, 12-1641 through and including 12-1644, 33-814, 33-725, 33-727 and 44142, and Ariz. R. Civ. P. 17(f) or such statutes, rules or similar provisions as may be enacted or adopted hereafter.

 

10.                               General Release.  To the maximum extent permitted by law, each Prospect Party hereby waives, releases and discharges Karlsson and its directors, shareholders, officers, employees and counsel from any and all suits, causes of action, legal or administrative proceedings, liabilities, claims, damages, losses, costs or expenses of any kind (collectively, “Claims”), known or unknown, which such Prospect Party may have, arising out of acts, omissions, or events occurring at any time prior to and including the Effective Date.  Each Prospect Party hereby agrees and represents that the matters released herein are not limited to the matters which are known, disclosed or foreseeable.  The Prospect Parties intend to waive all Claims, including Claims which they do not know or suspect to exist in their favor to no less extent than a waiver of such Claims under California law will be effected by a waiver by the Prospect Parties under California law of any and all rights and benefits which they now have or in the future may have by virtue of the provisions of Section 1542 of the California Civil Code which provides:

 

“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN ITS FAVOR AT THE TIME OF EXECUTING THE RELEASE WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.”

 

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The Prospect Parties hereby agree, represent and warrant that they are familiar with and have read and understand and have consulted legal counsel of their choosing with respect to California Civil Code Section 1542, and the Prospect Parties realize and acknowledge that factual matters now unknown to them may have given or may hereafter give rise to actions, legal or administrative proceedings, claims, demands, debts, controversies, damages, costs or losses, liabilities and expenses which are presently unknown, unanticipated and unsuspected.

 

	
 
    	
INITIALS:
    	
Prospect   DE
    
	
 
    	
 
    	
Parent
    
	
 
    	
 
    	
AWP
    
	
 
    	
 
    	
Apache
    

 

11.                               Indemnification.  The Prospect Parties, jointly and severally, shall indemnify Karlsson, any affiliate thereof, and each of their respective directors, shareholders, officers, employees, agents, counsel and other advisors (each an “Indemnified Person”), against and hold each of them harmless for, from and against any and all liabilities, obligations, losses, claims, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever, including the reasonable fees and disbursements of counsel to an Indemnified Person (including allocated costs of internal counsel), which may be imposed on, incurred by, or asserted against any Indemnified Person in connection with (a) any investigation, litigation or other proceeding, irrespective of whether the Indemnified Person shall be designated a party thereto, in any way relating to or arising out of this Agreement or any other Loan Document, (b) the use or intended use of the proceeds of the Loan, (c) any actual or asserted violation of any environmental law with respect to the AWP Property Interests or the Apache Lands and/or any foreclosure proceeding affecting the AWP Property Interests or the Apache Lands or any other collateral; and (d) the transactions contemplated hereby or thereby (the “Indemnified Liabilities”); provided, however, that neither Prospect DE nor Parent shall be liable for any portion of such Indemnified Liabilities resulting from an Indemnified Person’s gross negligence or willful misconduct or breach of this Agreement or the Loan Documents.  Each Indemnified Party is authorized to employ counsel of its own choosing in enforcing its rights hereunder and in defending against any claim, demand, action or cause of action covered by this Section 11.  All of the Prospect Parties’ obligations or liabilities to any Indemnified Party under this Section 11 shall be and hereby are covered and secured by the Loan Documents, and shall survive the expiration or termination of this Agreement.  If and to the extent that the foregoing indemnification is for any reason held unenforceable, the Prospect Parties agree to make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law.

 

12.                               Further Assurances.

 

(a)                                 The Prospect Parties shall, at Karlsson’s request, execute (either alone or with Karlsson, as Karlsson may require) deliver to Karlsson, any and all additional instruments and documents, and Prospect DE and Parent will, and will cause each other Prospect Party to, perform all actions, which from time to time may be necessary to maintain a perfected lien and security interest in the security described in the Extension Agreement, the Second Extension

 

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Agreement, the Third Extension Agreement, this Agreement, the Security Agreement, the AWP Deed of Trust, the Apache Deed of Trust or any other Collateral Document or any other Loan Document, including but not limited to procuring additional policies of title insurance, or endorsements with respect to existing policies of title insurance, with regard to the properties of Apache or AWP or similar acts reasonably required in connection with the foregoing provided, however, such further assurances do not increase the liability or obligations or decrease the rights of Karlsson or the Prospect Parties from those provided for herein or in the Loan Documents.

 

(b)                                 In the event that, at any time prior to payment in full of all amounts payable under the Additional Consideration Agreement, any Prospect Party (which for the purposes of this 12(b) shall be defined as in Section 4(a) but shall be deemed to include not only (i) any Affiliate (as so defined) of any Prospect Party, but also (ii) any joint venture to which any Prospect Party is a party, and (iii) any successor or assign of any Prospect Party or of any Affiliate of any Prospect Party (but, in the case of clauses (ii) and (iii) only, solely to the extent that such joint venture or successor or assign acquired the applicable interest in lands, or leases of lands or permits or licenses for the use of lands, directly or indirectly from a Prospect Party or an Affiliate of a Prospect Party)) shall hold or acquire any interest in any lands, or leases of lands or permits or licenses for the use of lands, such Prospect Party shall (A) within thirty (30) days after the acquisition of such interest by such Prospect Party provide Karlsson with a reasonable written description of such interest and the date of its acquisition, and (B) shall execute and deliver in favor of Karlsson with respect to all such interests a Royalty Agreement in substantially the form of Exhibit H.

 

13.                               No Novation; Loan Document.  This Agreement is a revision to the Note and the other Loan Documents only, and not a novation.  This Agreement is a Loan Document.  The November Reaffirmation and the December Reaffirmation are Loan Documents.

 

14.                               Waivers.

 

(a)                                 In order to hold the Prospect Parties liable under the Loan Documents, there shall be no obligation on the part of Karlsson, at any time, to resort to payment from Prospect DE or to anyone else, or to any collateral, security, property, liens or other rights and remedies whatsoever, all of which are hereby expressly waived by the Prospect Parties.

 

(b)                                 Each Prospect Party hereby expressly waives diligence in collection or protection, presentment, demand or protest or in giving notice (except as provided in the Loan Documents) to anyone of the protest, dishonor, default, or nonpayment or of the creation or existence of any of the obligations or of any security or collateral therefor or of the acceptance of this Agreement.

 

(c)                                  Each Prospect Party waives any and all defenses, claims and discharges of Prospect DE, or any other obligor, pertaining to the Secured Obligations, in each case, only to the extent permitted under applicable law.  Without limiting the generality of the foregoing, but only to the extent permitted under applicable law, no Prospect Party will assert, plead or enforce against Karlsson any defense of waiver, release, discharge in bankruptcy, statute of limitations, res judicata, statute of frauds, anti-deficiency statute, fraud, incapacity, minority, usury, illegality or unenforceability which may be available to Prospect DE or any other person liable in respect

 

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of any of the Secured Obligations, or any setoff available against Karlsson to Prospect DE or any such other person, whether or not on account of a related transaction.  Each Prospect Party expressly agrees that, subject to applicable law, it shall be and remain liable for any deficiency remaining after foreclosure of any security interest securing the Secured Obligations, whether or not the liability of Prospect DE is discharged pursuant to statute or judicial decision.  For the avoidance of doubt, but only to the extent permitted under applicable law, each Prospect Party waives any relief available under valuation and appraisement laws and any and all rights or defenses based on suretyship or impairment of collateral including, but not limited to, any rights or defenses arising by reason of: (i) any “one action” or “anti-deficiency” law or any other law which may prevent Karlsson from bringing any action, including a claim for deficiency, against such Prospect Party, before or after Karlsson’s commencement or completion of any foreclosure action, either judicially or if permitted by applicable law by exercise of a power of sale including, but not limited to, any right to a fair market value hearing, any right to offset the amount owed by any amount other than the amount paid at the trustee’s sale, any right to a statute of limitations shorter than six (6) years, and the provisions of A.R.S. §§ 121566, 33-814, 33-725, and 33-727; (ii) any election of remedies by Karlsson which destroys or otherwise adversely affects such Prospect Party’s subrogation rights or rights to proceed against Karlsson for reimbursement, including without limitation, any loss of rights such Prospect Party may suffer by reason of any law limiting, qualifying, or discharging any indebtedness; (iii) any disability or other defense of Prospect DE, of any other guarantor, or of any other person, or by reason of the cessation of Prospect DE’s liability from any cause whatsoever, other than payment in full in legal tender, of the Secured Obligations; (iv) any right to claim discharge of the Secured Obligations on the basis of unjustified impairment of any collateral for the Secured Obligations; (v) any statute of limitations, if at any time any action or suit brought by Karlsson against such Prospect Party is commenced, there are outstanding Secured Obligations which are not barred by any applicable statute of limitations; or (vi) any defenses given to guarantors at law or in equity other than actual payment and performance of the Secured Obligations.  If payment is made by Prospect DE, whether voluntarily or otherwise, or by any third party, on the Secured Obligations and thereafter Karlsson is forced to remit the amount of that payment to Prospect DE’s trustee in bankruptcy or to any similar person under any federal or state bankruptcy law or law for the relief of debtors, the Secured Obligations shall be considered unpaid for the purpose of the enforcement of this Agreement or any other obligor for such deficiency is discharged pursuant to statute or judicial decision.

 

(d)                                 TO THE FULLEST EXTENT PERMITTED BY LAW, EACH PROSPECT PARTY UNCONDITIONALLY AND IRREVOCABLY WAIVES ALL RIGHTS AND BENEFITS UNDER A.R.S. § 44-142, § 12-1641, ET SEQ. AND RULE 17(F) OF THE ARIZONA RULES OF CIVIL PROCEDURE AND ANY SIMILAR STATUTES OR RULES OF PROCEDURE.  EACH PROSPECT PARTY WAIVES EVERY DEFENSE, CAUSE OF ACTION, COUNTERCLAIM OR SETOFF, WHICH SUCH PROSPECT PARTY MAY NOW HAVE OR HEREAFTER MAY HAVE TO ANY ACTION BY KARLSSON IN ENFORCING THIS AGREEMENT.  ANY AND ALL DEBTS AND LIABILITIES NOW OR HEREAFTER ARISING AND OWING TO ANY PROSPECT PARTY BY PROSPECT DE, OR TO ANY OTHER PARTY LIABLE TO KARLSSON FOR THE SECURED OBLIGATIONS, ARE HEREBY SUBORDINATED TO KARLSSON’S CLAIMS AND ARE HEREBY ASSIGNED TO KARLSSON.  EACH PROSPECT PARTY HEREBY AGREES THAT SUCH PROSPECT PARTY MAY BE JOINED AS A PARTY DEFENDANT IN ANY LEGAL PROCEEDING

 

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(INCLUDING, BUT NOT LIMITED TO, A FORECLOSURE PROCEEDING) INSTITUTED BY KARLSSON AGAINST PROSPECT DE.  EACH PROSPECT PARTY AND KARLSSON, AFTER CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL, EACH KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE IRREVOCABLY THE RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY SUCH LEGAL PROCEEDING IN WHICH ANY PROSPECT PARTY AND KARLSSON ARE ADVERSE PARTIES.  THIS PROVISION IS A MATERIAL INDUCEMENT TO KARLSSON GRANTING ANY FINANCIAL ACCOMMODATION TO PROSPECT DE AND ACCEPTING THIS AGREEMENT

 

15.                               Notices.  Notwithstanding anything to the contrary contained in the Loan Documents, all notices, demands, requests and other communications of any kind which any party hereto may be required to or may desire to serve upon any other party (“Notice”) shall be in writing and shall be deemed to have been properly given or served for all purposes (i) if sent by Federal Express or other nationally recognized overnight carrier for next business day delivery, on the first business day following deposit of such Notice with such carrier, or (ii) if personally delivered, on the actual date of delivery, or (iii) if sent by certified mail, return receipt requested postage prepaid, on the third (3rd) business day following the date of mailing, or (iv) if sent by facsimile, then on the actual date of delivery (as evidenced by a facsimile confirmation) addressed as follows:

 

If to Karlsson:                                                                                                                 The Karlsson Group, Inc.
 18 Ozone Avenue
 Venice, California 90291
 Attention: Michael Stone
 Fax: (310) 933-0262

 

With a copy to:                                                                                                            Richard C. Weisberg
 Law Offices
 33 Derwen Road
 Bala Cynwyd, Pennsylvania 19004
 Fax: (215) 689 1504

 

Loeb & Loeb LLP
 10100 Santa Monica Boulevard, Suite 2200
 Los Angeles, California 90067
 Attention: Lance N. Jurich, Esq.
 Fax: (310) 282-2211

 

If to the Prospect Parties:                                                        Prospect Global Resources, Inc.
 1401 17th Street, Suite 1550
 Denver, Colorado 80202
 Attention: Mr. Damon Barber, Chief Executive Officer
 Fax: (303) 990-8440

 

12

 

With a copy to:                                                                                                            Eisner Kahan Gorry Chapman Ross & Jaffe PC
 9601 Wilshire Boulevard, Suite 700
 Beverly Hills, California 90210
 Attention: Mr. Michael Eisner
 Fax: (310) 855-3201

 

Any party may change its address by giving the other party written notice of its new address as herein provided.

 

16.                               Headings.  The headings in this Agreement are for purposes of reference only and shall not limit or otherwise affect the meaning hereof.

 

17.                               Representation by Counsel.  The Prospect Parties (a) have retained counsel to represent them in the transactions contemplated herein; (b) have read and understand this Agreement; (c) have been advised by their counsel with respect to its rights and obligations under this Agreement; and (d) agree that the principle of construction against draftsmen shall have no application in the interpretation of this Agreement.

 

18.                               Entire Agreement.  This Agreement and the Exhibits attached hereto contains the entire understanding between the parties with respect to the subject matter hereof.  The Loan Documents shall remain in full force and effect and shall not be further amended except by a writing signed by Karlsson and all of the parties to this Agreement, including any consenting parties hereto.

 

19.                               Successors and Assigns; Assignment.  This Agreement shall be binding upon, and shall inure to the benefit of, the parties hereto and their respective successors and assigns.  Without limiting Karlsson’s rights under the Loan Documents, Karlsson may, without the consent of any Person, assign this Agreement and its rights hereunder and under any other Loan Document to any Person at any time; provided, however, that, it shall be a condition precedent to any assignment hereunder as a result of which there will be multiple simultaneous holders of the Note and/or the related rights under the Loan Documents that such holders shall have put in place, between or among themselves, a written agreement (an “Agency Agreement”), which includes agency provisions pursuant to the terms of which a single administrative agent (the “Administrative Agent”) is appointed, with which Prospect DE and its affiliates will solely interface with respect to all rights and obligations under the Note and the Loan Documents, and to which Prospect DE and its affiliates will remit all payments hereunder, and which Agency Agreement will provide for the Administrative Agent to provide Prospect DE with a copy of the Agency Agreement, and any amendments thereto, upon execution of the same; and provided further that the assignee agrees to be bound by the provisions of Sections 5(b)(3)-(5) hereof.  The Prospect Parties agree that, for purposes of this Agreement, an “assignment” shall be deemed to include, but not be limited to, a sale, a contribution to a new or existing entity, or an exchange with any such entity, or any other transfer for any medium of value, including, without limitation, equity securities, royalty interests, property rights or any form of contingent consideration and notwithstanding whether such assignment is effected in a private sale or under judicial supervision.  Notwithstanding anything to the contrary in any Loan Document or in the Purchase Agreement, but subject to the provisions of this Section 19, Karlsson (or any shareholder, director, agent, employee or officer of Karlsson) may actively solicit any Person to

 

13

 

be a purchaser, or to be a counterparty to an assignment, of the Note (whether such potential purchaser, or counterparty to an assignment, of the Note wishes to purchase, or receive the assignment of, the Note and the Loan Documents in a free-standing transaction or contemplates such purchase, or receipt of an assignment, of the Note as a part of a larger transaction or series of transactions involving any Prospect Party or any of its assets).  Karlsson or any director, shareholder, employee, Affiliate or Representative (each as defined in the Purchase Agreement) or agent of Karlsson (each, a “Karlsson Party”) may, in connection with (A) Karlsson’s efforts to sell, assign or otherwise dispose of the Note; (B) any restructuring of the indebtedness represented by the Note and the Loan Documents; or (C) any “assignment” (as defined in the Note), disclose any information related to Parent or any of its subsidiaries as such Karlsson Party shall deem appropriate in its sole discretion; provided, however, that prior to providing any non-public information regarding Parent or any of its subsidiaries, Karlsson shall obtain from the person to which disclosure is to be made an executed confidentiality agreement which shall provide that (i) such person agrees to be bound by the terms of Section 5.06 of the Purchase Agreement, and (ii) Parent and its subsidiaries are intended third party beneficiaries of such confidentiality agreement.  This Section 19 of this Agreement amends, supersedes and replaces Section 19 of the Third Extension Agreement.

 

20.                               Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of Arizona.

 

21.                               Counterparts.  This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which, together, shall constitute one and the same instrument.

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first hereinabove written.

 

	
 
    	
KARLSSON:
    
	
 
    	
 
    	
 
    
	
 
    	
The   Karlsson Group, Inc.
    
	
 
    	
an   Arizona corporation
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Anders Karlsson
    
	
 
    	
Name:
    	
Anders   Karlsson
    
	
 
    	
Its:
    	
President
    
	
 
    	
 
    	
 
    
	
 
    	
 
    
	
 
    	
PROSPECT   DE:
    
	
 
    	
 
    	
 
    
	
 
    	
Prospect   Global Resources, Inc.,
    
	
 
    	
a   Delaware corporation
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Damon Barber
    
	
 
    	
Name:   Damon Barber
    
	
 
    	
Its:    President, CEO and Secretary
    
							

 

14

 

	
 
    	
PARENT:
    
	
 
    	
 
    
	
 
    	
Prospect   Global Resources, Inc.,
    
	
 
    	
a   Nevada corporation
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Damon Barber
    
	
 
    	
Name:  Damon Barber
    
	
 
    	
Its:   President, CEO and Secretary
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
AWP:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
American   West Potash, LLC
    
	
 
    	
a   Delaware limited liability company
    
	
 
    	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Damon Barber
    
	
 
    	
Name:   Damon Barber
    
	
 
    	
Its:   President, CEO and Secretary
    
	
 
    	
 
    	
 
    
	
 
    	
 
    
	
 
    	
APACHE:
    
	
 
    	
 
    	
 
    
	
 
    	
Apache   County Land & Ranch, LLC
    
	
 
    	
a   Nevada limited liability company
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Damon Barber
    
	
 
    	
Name:   Damon Barber
    
	
 
    	
Its:   President, CEO and Secretary
    
					

 

15

 

Exhibit A

 

FORM OF SEVENTH AMENDMENT TO NOTE

 

 

Exhibit B

 

FORM OF FOURTH AMENDMENT TO ESCROW AGREEMENT

 

17

 

Exhibit C

 

FORM OF WARRANT

 

18

 

Exhibit D

 

FORM OF AMENDMENT NO. 2 TO REGISTRATION RIGHTS AGREEMENT

 

19

 

Exhibit E

 

FORM OF AMENDMENT NO. 2 TO MAY 30, 2012 WARRANT

 

20

 

Exhibit F

 

FORM OF AMENDMENT NO. 1 TO JUNE 26, 2013 WARRANT

 

21

 

Exhibit G

 

FORM OF THIRD AMENDMENT TO SUPPLEMENTAL PAYMENT AGREEMENT

 

22

 

Exhibit H

 

FORM OF ROYALTY AGREEMENTS

 

23

 

Exhibit I

 

FORM OF MUTUAL RELEASE OF CLAIMS

 

24

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