Document:

Exhibit 10.3

 

FOURTH AMENDMENT TO
 SENIOR FIRST PRIORITY SECURED PROMISSORY NOTE

 

This FOURTH AMENDMENT TO SENIOR FIRST PRIORITY SECURED PROMISSORY NOTE (this “Fourth Amendment”) is made as of September 13, 2013 by and between Prospect Global Resources, Inc., a Delaware corporation (“Maker”), and the Karlsson Group, Inc., an Arizona corporation (“Holder”), with respect to the following facts:

 

RECITALS

 

WHEREAS, Maker issued to Holder that certain Senior First Priority Secured Promissory Note dated August 1, 2012 (the “Original Note”), whereby the Maker promised to pay to Holder the principal sum of One Hundred Twenty-Five Million Dollars ($125,000,000);

 

WHEREAS, American West Potash, LLC, a Delaware limited liability company (“AWP”), Prospect Global Resources, Inc., a Nevada corporation (“Prospect Nevada”), Apache County Land & Ranch, LLC, a Nevada limited liability company (“Apache”), Maker and Holder entered into that certain Extension Agreement (the “Extension Agreement”) dated as of April 15, 2013;

 

WHEREAS, Maker and Holder entered into an Amendment to Senior First Priority Secured Promissory Note dated April 15, 2013 (“First Amendment” and the Original Note as amended thereby and as otherwise amended, restated or modified from time to time, the “Note”);

 

WHEREAS, AWP, Prospect Nevada, Apache, Maker and Holder entered into that certain Second Extension Agreement dated as of June 26, 2013;

 

WHEREAS, Maker and Holder entered into a Second Amendment to Senior First Priority Secured Promissory Note dated as of June 26, 2013;

 

WHEREAS, Maker and Holder entered into a Third Amendment to Senior First Priority Secured Promissory Note dated as of September 9, 2013;

 

WHEREAS, AWP, Prospect Nevada, Apache, Maker and Holder entered into that certain Third Extension Agreement (the “Third Extension Agreement”) dated as of September 6, 2013; and

 

WHEREAS, it is a condition to the effectiveness of the Third Extension Agreement that Maker and Holder modify the Note.

 

NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Maker and Holder hereby agree as follows:

 

 

AGREEMENT

 

1.                                      Defined Terms.  All capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the Note.

 

2.                                      Amendments.

 

(a)                                 Amendment to Section 2.2.  Clause (i) of Section 2.2 of the Note is amended and restated to read in its entirety as follows:

 

“a payment equal to the 2012 453A Amount on or before November 15, 2013.”

 

(b)                                 Amendment to Section 3.2(c).  Section 3.2(c) of the Note is amended by adding the following sentences at the end thereof:

 

“Prospect acknowledges that, between April 15, 2013 and September 6, 2013, it had raised in excess of $10,000,000 from one or more Qualified Financings.  Notwithstanding anything herein to the contrary, the ten percent (10%) prepayment requirement set forth in this Section 3.2(c) shall not apply to the first $2,000,000 in Qualified Financings that Prospect Nevada arranges on or after September 6, 2013 and of which it receives the proceeds on or before November 15, 2013 (the “Fall 2013 Qualified Financings”).”

 

(c)                                  Amendment to Section 5.6.  Section 5.6 of the Note is amended to read in its entirety as follows:

 

5.6                               “Failure of Parent to Fund Escrow.  Prospect Nevada shall fail, for any reason, to deposit into the escrow account established pursuant to the Escrow Agreement (the “Escrow Account”):  (A) $2,000,000 from the Roth Offering (as defined in the Second Extension Agreement) within two (2) business days of receipt of funds from the Roth Offering; (B) from the proceeds of any Qualified Financing (other than the Roth Offering or the Fall 2013 Qualified Financings), within one (1) business day of receipt of the funds raised in such Qualified Financing, fifty percent (50%) of the proceeds of any Qualified Financing net of third party payments in satisfaction of transaction expenses or fees/commissions in connection with such Qualified Financing in an amount not to exceed the Funding Expense Cap (as defined in that certain Second Extension Agreement dated as of June 26, 2013 among Maker, Holder and the other parties thereto (the “Second Extension Agreement”)); or (C) from the proceeds of the Fall 2013 Qualified Financings, within one (1) business day of receipt of funds from such Qualified Financings, the lesser of (i) $300,000, and (ii) fifty percent (50%) of the proceeds of such Qualified Financings net of third party payments in satisfaction of transaction expenses or fees/commissions in connection with such Qualified Financings in an amount not to exceed the Funding Expense Cap, until such time as deposits aggregating $12,000,000 have been made into the Escrow Account on or after June 26, 2013.”

 

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(d)                                 New Section 5.12.  The following new Section 5.12 is hereby added after Section 5.11 of the Note:

 

5.12                        “ASLD Payments.  Maker, Apache, Prospect Nevada or Company shall fail to make to the Arizona State Land Department, in full, on or before the date on which such payment is due, any payment which such entity is required to make to such agency.

 

(e)                                  Amendment to Section 8.7.  Section 8.7 of the Note is hereby amended to read in its entirety as follows:

 

8.7                               “Successors and Assigns.  This Note shall be binding upon and shall inure to the benefit of the Parties and their respective successors and permitted assigns.  Maker may not assign its rights or obligations hereunder without the prior written consent of Holder.  Holder may, without the consent of any Person, assign the Note and/or the Loan Documents, in whole or in part, to any Person notwithstanding anything to the contrary in the Loan Documents or the Membership Interest Purchase Agreement dated as of May 30, 2012, including, without limitation, the confidentiality and covenant not to compete undertakings contained therein, and Holder (or any shareholder, director, agent, employee or officer of Holder) may actively solicit purchasers of the Note, as more fully set forth in Section 20 of the Third Extension Agreement.  Maker agrees 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 (including, but not limited to, a joint venture of which Holder or any affiliate of Holder is a member) 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 the generality of the foregoing, it shall be a condition precedent to any assignment of this Note 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 Maker and its affiliates will solely interface with respect to all rights and obligations under the Note and the Loan Documents, and to which Maker and its affiliates will remit all payments hereunder, and which Agency Agreement will provide for the Administrative Agent to provide Maker with a copy of the Agency Agreement, and any amendments thereto, upon execution of the same.”

 

3.                                      Miscellaneous.

 

(a)                                 No Other Amendment.  Except as expressly amended in this Fourth Amendment, all provisions of the Note shall remain in full force and effect, and the parties thereto and hereto shall continue to have all their rights and remedies under the Note.  In the

 

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event of a conflict between the terms and provisions of this Fourth Amendment and the terms and conditions of the Note, the provisions of this Fourth Amendment shall govern.

 

(b)                                 Relation to Note.  This Fourth Amendment constitutes an integral part of the Note.  Upon the effectiveness of this Fourth Amendment, each reference in the Note to “this Promissory Note,” “hereunder,” “hereof,” or words of like import referring to the Note, shall mean and be a reference to the Note as amended hereby.

 

(c)                                  Successors and Assigns.  This Fourth Amendment shall be binding on and shall inure to the benefit of the parties hereto and their respective successors and assigns except as otherwise provided herein.

 

(d)                                 Counterparts.  This Fourth Amendment may be executed by the parties hereto on any number of separate counterparts, any of which may be executed and transmitted by facsimile, and each of which shall be deemed an original and all of which, taken together, shall be deemed to constitute one and the same instrument.

 

IN WITNESS WHEREOF, the parties hereto have caused this Fourth Amendment to be executed and delivered as of the date first above written.

 

	
 
    	
MAKER:
    
	
 
    	
 
    
	
 
    	
PROSPECT   GLOBAL RESOURCES, INC.,
    
	
 
    	
a   Delaware corporation
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Damon Barber
    
	
 
    	
Name:   Damon Barber
    
	
 
    	
Title:   President, CEO and Secretary
    
	
 
    	
 
    
	
ACKNOWLEDGED   AND AGREED TO
    	
 
    
	
EFFECTIVE   AS OF SEPTEMBER 13, 2013:
    	
 
    
	
 
    	
 
    
	
THE   KARLSSON GROUP, INC.,
    	
 
    
	
an   Arizona corporation
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By:
    	
/s/   Anders Karlsson
    	
 
    	
 
    
	
Name:   Anders Karlsson
    	
 
    
	
Title:   President
    	
 
    
					

 

4Exhibit 10.4

 

THIRD AMENDMENT TO
 ESCROW AGREEMENT

 

This THIRD AMENDMENT TO ESCROW AGREEMENT (this “Amendment”) is made as of September 13, 2013 by and among the Karlsson Group, Inc., an Arizona corporation (“Lender”), Prospect Global Resources, Inc., a Nevada corporation (“Obligor”), and JPMorgan Chase Bank, N.A., a national banking association, as escrow agent (together with any successor in such capacity, the “Escrow Agent”), with respect to the following facts:

 

RECITALS

 

WHEREAS, Lender, Obligor and Escrow Agent entered into that certain Escrow Agreement dated as of April 15, 2013 (the “Original Agreement”);

 

WHEREAS, Lender, Obligor and Escrow Agent entered into that certain Amendment to Escrow Agreement dated as of June 26, 2013, and that certain Second Amendment to Escrow Agreement dated as of August 14, 2013, amending the Original Agreement (as amended thereby, and as hereby and hereafter amended from time to time, the “Escrow Agreement”);

 

WHEREAS, Lender, Obligor, and the other parties thereto entered into that certain Third Extension Agreement dated as of the date hereof (the “Third Extension”); and

 

WHEREAS, it is a condition to the effectiveness of the Third Extension that the parties hereto amend the Escrow Agreement.

 

NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto do hereby agree as follows:

 

AGREEMENT

 

1.             Amendments.  The Escrow Agreement is hereby amended as follows:

 

(a)           Amendment to Schedule 1.  Schedule 1 of the Escrow Agreement is hereby deleted in its entirety and replaced with Exhibit A attached hereto.

 

(b)           Amendment to Schedule 2.  Schedule 2 of the Escrow Agreement is hereby deleted in its entirety and replaced with Exhibit B attached hereto.

 

2.             Miscellaneous.

 

(a)           No Other Amendment.  Except as expressly amended in this Amendment, all provisions of the Escrow Agreement shall remain in full force and effect, and the parties thereto and hereto shall continue to have all their rights and remedies under the Escrow Agreement.  In the event of a conflict between the terms and provisions of this Amendment and

 

 

the terms and provisions of the Escrow Agreement, the provisions of this Amendment shall govern.

 

(b)           Relation to Escrow Agreement.  This Amendment constitutes an integral part of the Escrow Agreement.  Upon the effectiveness of this Amendment, each reference in the Escrow Agreement to “this Agreement,” “hereunder,” “hereof,” or words of like import referring to the Escrow Agreement, shall mean and be a reference to the Escrow Agreement as amended hereby.

 

(c)           Successors and Assigns.  This Amendment shall be binding on and shall inure to the benefit of the parties hereto and their respective successors and assigns except as otherwise provided herein.

 

(d)           Counterparts.  This Amendment may be executed by the parties hereto on any number of separate counterparts, any of which may be executed and transmitted by facsimile, and each of which shall be deemed an original and all of which, taken together, shall be deemed to constitute one and the same instrument.

 

(e)           Governing Law.  This Amendment shall be governed by, and construed in accordance with, the laws of the State of California, without regard to its principles of conflicts of law.

 

[Signature Page Follows]

 

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

 

	
 
    	
LENDER:
    
	
 
    	
 
    	
 
    
	
 
    	
THE   KARLSSON GROUP, INC.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Anders Karlsson
    
	
 
    	
Name:   Anders Karlsson
    
	
 
    	
Title:   President
    
	
 
    	
 
    	
 
    
	
 
    	
OBLIGOR:
    
	
 
    	
 
    	
 
    
	
 
    	
PROSPECT   GLOBAL RESOURCES, INC.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Damon Barber
    
	
 
    	
Name:   Damon Barber
    
	
 
    	
Title:   President, CEO and Secretary
    
	
 
    	
 
    	
 
    
	
 
    	
ESCROW   AGENT:
    
	
 
    	
 
    	
 
    
	
 
    	
JPMORGAN   CHASE BANK, N.A.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Sonny Lui
    
	
 
    	
Name:   Sonny Lui
    
	
 
    	
Title:   Vice President
    

 

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EXHIBIT A

 

Schedule 1

 

	
Amount
    	
 
    	
Escrow Deposit Date
    
	
$2,000,000
    	
 
    	
Within   two (2) Business Days of the June 26, 2013 Amendment
    
	
50%   of the proceeds from any Qualified Financing (other than the Fall 2013   Qualified Financings (as defined in the Note)) net of any third party   payments in satisfaction of transaction expenses or fees/commissions with   respect to such Qualified Financing, not to exceed the Funding Expense Cap   (as such terms “Qualified Financing” and “Funding Expense Cap” are defined in   that certain Senior First Priority Secured Promissory Note dated   August 1, 2012 issued by Prospect Global Resources, Inc., a   Delaware corporation, in favor of Lender, as amended by that certain   Amendment to Senior First Priority Secured Promissory Note dated as of   April 15, 2013, that certain Second Amendment to Senior First Priority   Secured Promissory Note dated as of June 26, 2013, that certain Third Amendment   to Senior First Priority Secured Promissory Note dated as of   September 9, 2013, and that certain Fourth Amendment to Senior First   Priority Secured Promissory Note dated as of September 13, 2013 (the   “Note”)). For the avoidance of doubt, Obligor shall only be obligated to   deposit up to $12,000,000 on or after June 26, 2013 (i.e. in addition to   amounts already deposited prior to June 26, 2013) with the Escrow Agent   in accordance with Section 3 of this Agreement.
    	
 
    	
Within   one (1) Business Day of such Qualified Financing
    
	
From   the proceeds of the Fall 2013 Qualified Financings the lesser of   (i) $300,000, and (ii) 50% of the proceeds of such Qualified   Financings net of any third party payments in satisfaction of transaction   expenses or fees/commissions with respect to such Qualified Financings, not   to exceed the Funding Expense Cap.
    	
 
    	
Within   one (1) Business Day of such Qualified Financing
    

 

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EXHIBIT B

 

Schedule 2

 

Approved Schedule

 

	
Category
    	
 
    	
Amount
    	
 
    	
Approved Vendors/Payees
    
	
Vendors   and Consultants for: Drilling; 43-101 Resource Report; Metallurgical and Rock   Mechanic testwork; a pre-feasibility study; 2013 and 2014 ASLD Permits; and   Definitive Feasibility Study (as defined in the Second Amendment to the   Senior First Priority Secured Promissory Note)
    	
 
    	
$12,563,000,   estimated breakdown as follows:

 

·      $2,850,000   for expenses related to Drilling

·      $30,000 for   expenses related to 43-101 Resource Report

·      $1,000,000   for expenses related to metallurgical and rock mechanic test work

·      $8,120,000   for expenses related to completion of pre-feasibility and Definitive   Feasibility Study

·      $563,000 for   expenses related to 2013 and 2014 ASLD permits

 

The   parties acknowledge and agree that the breakdown set forth within this box is   only an estimate and funds from any one category set forth within this box   may be used in any other category set forth within this box
    	
 
    	
(i) TetraTech,   (ii) North Rim, (iii) JT Boyd, (iv) Novopro, (v) drilling   contractors, (vi) assaying labs,  (vii) rock mechanic testwork   labs, (viii) metallurgical testwork labs, (ix) vendors and   contractors performing direct ancillary, complementary or supplemental   support work for any of the activities required to complete a pre-feasibility   study and a Definitive Feasibility Study, (x) any other consulting,   engineering, or similar firms (but, for the avoidance of doubt, excluding   attorneys, law firms, accountants, or accounting firms) performing   comparable, supplementary or complementary work with similar reputations and experience,   as determined by Obligor in its reasonable discretion, and (xi) Arizona   State Land Department (“ASLD”).
    

 

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Category
    	
 
    	
Amount
    	
 
    	
Approved Vendors/Payees
    
	
Lease   Payments for Mineral Leases
    	
 
    	
$500,000
    	
 
    	
The   Hortenstine Group (as defined in that certain Mineral Lease dated   as of July 27, 2011 by and between PAP & POP Family Ltd., a   Texas limited partnership, and 3MKJ, a Texas limited partnership   (collectively the “Hortenstine Group” or “Lessor”), and American West Potash,   LLC, a Delaware limited liability company
    
	
Lease   Payments for Mineral Leases
    	
 
    	
$500,000
    	
 
    	
AIG (as defined   in that certain Potash Sharing Agreement (the “Agreement”) dated as of   July 27, 2011 between American West Potash LLC, a Delaware limited liability   company, and the following parties: (i) the SL Group ,   (ii) American General Life Insurance Company, a Texas corporation   (“AIG”), and (iii) Pap and Pop Family Ltd., a Texas limited partnership,   and 3MKJ LP, a Texas limited partnership
    
	
Lease   Payments for Mineral Leases
    	
 
    	
$500,000
    	
 
    	
Spurlock   Lucking Group (defined in that certain Mineral Lease dated as   of July 27, 2011 by and between James Marlin Gale, a married man, David   Glen Spurlock, a married man as his sole and separate property, Ransom   Theodore Spurlock Jr., a married man, Robert H. W.W. Spurlock, a married man,   Vincent Pride Spurlock, a married man and Nancy Elizabeth Winn, a married   woman and Evelyn Lucking, a married woman, (collectively the “Spurlock   Lucking Group” or “Lessor”), and American West Potash, LLC, a Delaware   limited liability Company)
    

 

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