Document:

exv10w3

Exhibit 10.3

SECURED PARTIAL RECOURSE PROMISSORY NOTE

			
	 	 	 
	$750,000
	 	Denver, Colorado

July 5, 2011

FOR VALUE RECEIVED, and at the times hereinafter specified, the undersigned (“Maker”)
hereby promises to pay to the order of Prospect Global Resources Inc. (hereinafter referred to as
“Holder”), at 600 17th Street Suite 2800 South Denver, Colorado 80202, or at
such other address as may be designated from time to time hereafter by any Holder, the principal
sum of $750,000, together with interest at the Base Rate (as hereinafter defined) on the principal
balance outstanding commencing on the date hereof (the “Commencement Date”), and from time
to time thereafter, as hereinafter provided, in lawful money of the United States of America.

This Note is executed and delivered in connection with the fee agreement dated the date hereof
(the “Fee Agreement”) between Maker and Holder. The proceeds of this Note shall only be
used to pay for the purchase shares of 200,000 shares of Holder’s common stock (the “Purchased
Stock”) pursuant to the Fee Agreement.

The term of this Note shall commence as of the Commencement Date and, if not sooner paid, the
entire unpaid principal indebtedness, all accrued and unpaid interest, and all other sums payable
in connection with this Note shall be due and payable in full on July 5, 2012 (the “Maturity
Date”).

During the period commencing on the Commencement Date and continuing until this Note is paid
in full, interest on the principal balance of this note shall accrue at the Base Rate and shall
compound annually at the long-term applicable federal rate (“AFR”) in effect on the
Commencement Date. Maker shall be required to make payments of principal and interest on the
Maturity Date. Interest shall commence on the Commencement Date and shall be computed on the basis
of a 365/366-day year, as applicable, calculated for the actual number of days elapsed. For
purposes of this Note, the “Base Rate” shall be defined as 0.37% per annum, which
is the AFR on the date hereof.

The principal outstanding amount of this Note shall be reduced by $375,000 on each of August
15, 2011 and February 3, 2012 provided that Maker’s government relations practice is representing
Holder or its subsidiaries on such dates.

Whenever any payment to be made hereunder is due on a day other than a Business Day, such
payment may be made on the next succeeding Business Day, and such extension of time shall in such
case be included in the computation of payment of interest. “Business Day” shall mean a
day on which banks are open for business in Denver, Colorado.

Maker may prepay this note in whole or in part with no penalty and without prior notice.

All payments hereunder shall, at Holder’s option, be applied first to the repayment of any
amounts due under this note (other than principal or interest); then to the payment of accrued and
unpaid interest; then to the payment of principal. Any payment not made when due hereunder,
including the interest component thereof, and including the entire balance of principal,
interest, and other sums due upon the Maturity Date hereof, by acceleration or otherwise, shall
bear interest from the date due until paid at a rate equal to eight percent per annum (the
“Default Rate”).

 

 

 

This Note is a secured partial recourse obligation of Maker. 20% of the outstanding
indebtedness under this Note is a recourse obligation of Maker.

This Note is secured by the pledge agreement (the “Pledge Agreement”) dated the date
hereof, executed by Maker in favor of Holder, in conjunction with the Fee Agreement, under which
Maker pledges the Purchased Stock (the “Pledged Interest”), subject to the terms and
conditions of the Fee Agreement. Except as set forth herein and in the Pledge Agreement, any holder
hereof shall look solely and exclusively to the Pledged Interest for payment of 80% of the
outstanding indebtedness under this Note in accordance with the terms of the Pledge Agreement.
With respect to such portion, Maker shall not have any personal or other liability hereunder or
under the Pledge Agreement, and Holder shall have no recourse against Maker, personally, or against
any of Maker’s assets, other than the Pledged Interest, by way of deficiency or otherwise, except
as set forth herein and in the Pledge Agreement. With respect to the remaining 20% of the
indebtedness under this Note, Holder shall be required to proceed against the Pledged Interest in
the Event of Default before proceeding against Maker. Notwithstanding any provision herein or in
the Pledge Agreement to the contrary, Maker shall be personally liable for remaining 20% of the
outstanding indebtedness under this Note and any costs and expenses incurred by Holder in
connection with any action to collect the amounts due under this Note (see the Pledge Agreement).

Any default in payment of any sum required hereunder or performance of any other covenant or
agreement herein contained shall constitute an “Event of Default” hereunder and each
document securing or executed in connection with this Note, including the Pledge Agreement
(collectively, the “Security Documents”), and any event of default under any of such
Security Documents shall constitute an Event of Default hereunder and under each other document
securing or executed in connection with this note. Any default in payment or other terms of any
other indebtedness owed by Maker to Holder shall constitute an Event of Default hereunder, and any
default hereunder shall constitute a default under any other such indebtedness.

Upon the occurrence of any Event of Default that is not timely cured, the entire balance of
principal, accrued interest, and other sums owing hereunder shall, at the option of Holder, become
at once due and payable without notice or demand.

Maker and all parties now or hereafter liable for the payment hereof, primarily or
secondarily, directly or indirectly, and whether as endorser, guarantor, surety, or otherwise,
hereby severally (a) waive presentment, demand, protest, notice of protest and/or dishonor, and all
other demands or notices of any sort whatever with respect to this note, (b) waive any defenses
that might be available to a surety or accommodation Maker, (c) consent to impairment or release of
collateral, extensions of time for payment, and acceptance of partial payments before, at, or after
maturity, (d) waive any right to require Holder to proceed against any security for this note
before proceeding hereunder, (e) consent to the release of any other party liable
hereunder, without diminishing or in any way affecting their liability hereunder, and (f)
agree to pay all costs and expenses, including attorneys’ fees and expenses, which may be incurred
in the collection of this note or any part thereof.

 

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The provisions of this Note and of all agreements between Maker and Holder are hereby
expressly limited so that in no contingency or event whatever shall the amount paid, or agreed to
be paid, to Holder for the use, forbearance, or detention of the money to be loaned hereunder
exceed the maximum amount permissible under applicable law. If from any circumstance whatever, the
performance or fulfillment of any provision hereof or of any other agreement between Maker and
Holder shall, at the time performance or fulfillment of such provision is due, involve or purport
to require any payment in excess of the limits prescribed by law, then the obligation to be
performed or fulfilled is hereby reduced to the limit of such validity, and if from any
circumstance whatever Holder should ever receive as interest an amount which would exceed the
highest lawful rate, the amount which would be excessive interest shall be applied to the reduction
of the principal balance owing hereunder (or, at Holder’s option, be paid over to Maker) and shall
not be counted as interest.

If any provision hereof is, for any reason and to any extent, invalid or unenforceable, then
neither the remainder of the document in which such provision is contained, nor the application of
the provision to other persons, entities, or circumstances, nor any other document referred to
herein, shall be affected thereby, but instead shall be enforceable to the maximum extent permitted
by law.

This Note may not be amended except by an instrument in writing executed by Maker and Holder.
Each provision of this note shall be and remain in full force and effect notwithstanding any
negotiation or transfer hereof to any other Holder or participant.

 

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Regardless of the place of its execution, this note shall be construed and enforced in
accordance with the laws of the State of Colorado.

	 	 	 	 	 
	 	“MAKER”

BROWNSTEIN HYATT FARBER SCHRECK, LLP

 	 
	 	By:  	/s/ Jeff Knetsch
 	 
	 	 	Jeff Knetsch 	 

 

4exv10w4

Exhibit 10.4

Pledge Agreement

THIS AGREEMENT, effective July 5, 2011 by and between Brownstein Hyatt Farber Schreck, LLP
(the “Pledgor”) and Prospect Global Resources Inc (the “Company”).

WHEREAS, Pledgor has issued a promissory note in the stated principal amount of $750,000 (the
“Note”) to the Company, dated the date hereof as payment for 200,000 shares of common stock
of the Company (the “Purchased Shares”) pursuant to a fee agreement (the “Fee
Agreement”) dated the date hereof between the Pledgor and the Company; and

WHEREAS, in order to induce the Company to finance Pledgor’s purchase of the Purchased Shares,
Pledgor has agreed to pledge to the Company all of the Purchased Shares as security for the full
and timely payment when due of the principal of, and interest on, the principal and interest
obligation under the Note including, without limitation, any accrued and unpaid interest and
expenses (such principal, interest and expenses being hereinafter collectively referred to as the
“Obligations”).

NOW THEREFORE, in consideration of the premises and of the mutual covenants herein contained,
the parties hereby agree as follows:

1. Pledge of Shares. Subject to the terms of this Agreement, Pledgor hereby
pledges and grants unto the Company, and its successors and assigns, for the benefit of the
Company, as security for the payment in full when due and payable of the Obligations, the Purchased
Shares (the “Pledged Interest”), subject to the terms and conditions of the Fee Agreement.

2. Delivery of Pledged Interest. All certificates or instruments representing or
evidencing the Pledged Interest shall be delivered to and held by or on behalf of the Company
pursuant hereto and shall be in suitable form for instruments of transfer or assignment in blank,
all in form and substance satisfactory to the Company.

3. Representations and Warranties. Pledgor represents and warrants that (a) upon
execution and delivery hereof, this Agreement shall constitute the legal, valid and binding
obligation of Pledgor enforceable against Pledgor in accordance with its terms, except to the
extent that the enforceability thereof may be limited by bankruptcy, insolvency or other similar
law affecting Pledgor’s rights generally and subject to the exercise of judicial discretion in
accordance with general principles of equity; (b) Pledgor is the legal and beneficial owner of the
Pledged Interest free and clear of all liens, charges and encumbrances and security interests of
every kind and nature, except for those transfer restrictions clearly stated in the Award
Agreement, and that in the event of default under any of the Loan Documents, the Company will have,
until the termination hereof as hereinafter provided, the right, power and authority to convey good
title to all of the Pledged Interest (subject to the transfer provisions of the Award Agreement);
(c) Pledgor has good right and lawful authority to pledge the Pledged Interest in the manner hereby
done or contemplated and will warrant and defend the title thereunder and the lien thereon conveyed
to the Company by this Agreement against all claims of all persons and will maintain and preserve
such lien; and (d) the pledge of the Pledged Interest pursuant to this Agreement creates a valid
and perfected first priority security interest in the Pledged Interest, securing the payment of the
Obligations.

 

 

 

4. Rights of Pledged Interest While No Event of Default; Transfer to Name of
Nominee. Unless there is a default under the Obligations or an event which with the
passage of time or giving of notice or both would constitute a default, Pledgor or his nominee
shall be entitled to vote any and all of the Pledged Interest, to the extent of any voting rights;
and give consents, waivers and ratifications in respect thereof; provided, however, that no vote
shall be made, or consent, waiver or ratification given or action taken, the result of which would be inconsistent with any of the
provisions hereof, or of the Loan Documents. All such rights of Pledgor to vote and give consents,
waivers and ratifications, if any, shall cease in case default shall occur and be continuing.
Further, while there is no event of default, Pledgor or its nominee shall be entitled to
distributions and/or dividends attributable to the Pledged Interest. The Company, subsequent to
any default, may transfer or cause to be transferred into the Company’s name, or into the names of
his nominee or nominees any or all of the Pledged Interest. At any time after the occurrence of a
default, the Company also may vote any or all of the Pledged Interest (whether or not so
transferred) and give all consents, waivers and ratifications, if any, in respect thereof and
otherwise act with respect thereto as though they were the outright owners thereof (Pledgor hereby
irrevocably constitutes and appoints the Company the proxy and attorneys-in-fact of Pledgor, with
all power of substitution to do so).

5. Remedies in Case of an Event of Default. In the event that a default shall
have occurred under the Note and be continuing, and after any applicable cure periods have lapsed,
the Company may sell, assign and deliver the whole or, from time to time, any part of the Pledged
Interest or any interest or any part thereof, at any private sale or at public auction with or
without demand, advertisement or notice of the time or place of sale or adjournment thereof or
otherwise (except that notice of the holding of any such sale shall be given to Pledgor of the
Pledged Interest being sold, assigned and delivered not less than ten (10) days before such sale)
for cash, on credit or for other property, for immediate or future delivery, and for such price or
prices and at such terms as the Company in his sole discretion may determine. Pledgor may bid for
purchase for its own account the whole or any part of the Pledged Interest so sold free from any
such right to equity of redemption. The proceeds of any sale of all or any part of the Pledged
Interest or any interest therein and any dividends, payments or other distributions received by the
Company in respect to the Pledged Interest (not theretofore applied as herein provided), shall be
applied by the Company, after deducting all costs and expenses of safekeeping, collection, sale and
delivery, to the payment or reduction of the Obligations unpaid and outstanding, in such manner,
order and sequence as the Company, in his sole discretion, may deem appropriate, and the excess, if
any, shall be held for the benefit of Pledgor. Neither failure or delay on the part of the Company
to exercise any right, remedy, power or privilege provided for herein or by statute or at law or in
equity shall operate as a waiver thereof, nor shall any single or partial exercise of any such
right, remedy, power or privilege preclude any other or further exercise thereof or the exercise of
any other right, remedy, power or privilege.

6. Transfer by Pledgor. Without the prior written consent of the Company, which
consent shall not be unreasonably withheld, Pledgor shall not sell, assign, transfer or otherwise
dispose of, grant any option with respect to, or mortgage, pledge or otherwise encumber any of the
Pledged Interest or any interest thereon.

7. Stock Splits, Stock Dividends or Reorganizations. In the event there is a
stock split, stock dividend or reorganization of the Company that shall cause more shares to be
issued in relation to the Pledged Interest, Pledgor shall pledge such additional shares and such
shares shall become part of the Pledged Interest and subject to all the provisions hereunder.

8. Release of Pledged Interest / Termination. Upon payment in full of all of the
Obligations, this Agreement shall terminate and the Company shall (i) forthwith assign, transfer
and deliver, against receipt, all of the Pledged Interest (and any property received in respect
thereof which has not theretofore been sold or otherwise applied pursuant to the provisions of this
Agreement) to or on the order of Pledgor, and (ii) execute, deliver, acknowledge or file, as the
case may be, and take all other action as Pledgor may, from time to time, reasonably request in
order to fully effectuate the termination of this Agreement and the security interest granted
hereby.

 

2

 

9. Notices. Any notices required or permitted under this Agreement shall be in
writing, addressed and mailed by certified mail, postage prepaid, to the parties at their
respective addresses on file at the office of the Company (or such other addresses of which they
may give notice in writing by certified mail) and shall be deemed effective upon mailing. The
effective date of notice shall be the date of deposit in the United States mail.

10. Miscellaneous. Neither this Agreement nor any provisions hereof may be
amended, modified, waived, discharged or terminated orally, but only by an instrument in writing
duly signed by or on behalf of Pledgor and the Company. This is a continuing Agreement and shall
remain in full force and effect and be binding upon Pledgor and his successors and assigns until
the Obligations are paid in full. The captions in this Agreement are for the convenience of
reference only and shall not define or omit the provisions hereof. Time is of the essence.

11. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Colorado, excluding any conflict-of-laws rule or law that
might refer such construction or governance to the laws of another jurisdiction.

12. Costs and Expenses. Pledgor will bear all costs and expenses incurred by the
Company in connection with the enforcement of this Agreement.

IN WITNESS WHEREOF, the parties have executed this Agreement effective as of July 5, 2011.

	 	 	 	 	 	 	 	 	 	 	 
	Company	 	 	 	Pledgor	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	PROSPECT GLOBAL RESOURCES INC.	 	 	 	BROWNSTEIN HYATT FARBER SCHRECK, LLP	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	/s/ Patrick L. Avery
 

Patrick L. Avery
	 	 
	 	By:
	 	/s/ Jeff Knetsch
 

Jeff Knetsch
	 	 

 

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