STW Resources Holding Corp. AMENDED AND RESTATED CORPORATE PROMISSORY NOTE

Exhibit 4.2

 

THIS NOTE HAS NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE. THE SECURITIES ARE BEING OFFERED PURSUANT TO A SAFE HARBOR FROM REGISTRATION UNDER REGULATION D PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THE SECURITIES ARE "RESTRICTED" AND MAY NOT BE OFFERED OR SOLD UNLESS THE SECURITIES ARE REGISTERED UNDER THE ACT, PURSUANT TO REGULATION D OR PURSUANT TO AVAILABLE EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND THE COMPANY WILL BE PROVIDED WITH OPINION OF COUNSEL OR OTHER SUCH INFORMATION AS IT MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH EXEMPTIONS ARE AVAILABLE. FURTHER HEDGING TRANSACTIONS INVOLVING THE SECURITIES MAY NOT BE MADE EXCEPT IN COMPLIANCE WITH THE ACT.

 

STW Resources Holding Corp.

 

Amount: $2,100,000.00

Midland, Texas

 

Effective October 01, 2011

 

This Amended and Restated Promissory Note (the "Note") amends, restates, and replaces the August 31, 2010 Promissory Note (the "Original Note") executed by STW Resources Holding Corp., a Nevada corporation ("Borrower") in favor of GE Ionics, Inc. (the "Lender"), in the original principal sum of one million and four hundred thousand dollars ($1,400,000), in lawful money of the United States of America.

 

As of October 01, 2011, the original principal sum had been paid down to one million, three hundred and two thousand and five hundred dollars ($1,302,500.00). Borrower requested a two-year extension on the Original Note. On September 29, 2011, Borrower and Lender agreed to a one-month extension of the due date of the Original Note to October 30, 2011. As a result of a mutual agreement between Borrower and Lender, the principal sum to be repaid was increased to two million, one hundred thousand dollars ($2,100,000.00) (the "Principal Amount"), with said increased Principal Amount taking account for Lender's costs of capital and holding charges for the originally financed thermal evaporator equipment, plus interest accrued on the Original Note through 09/30/2011. This Note is a material part of the August 31, 2010 Settlement Agreement between Borrower and Lender, as amended on October 28, 2011, such that Borrower is not fully released from its original $11.4 million thermal evaporator purchase order obligation to Lender, which shall remain in place until and when the Note is timely paid in full with accrued interest.

 

FOR VALUE RECEIVED, the adequacy of which is hereby acknowledged, Borrower hereby promises to pay to the order of Lender the currently due Principal Amount, plus accrued interest from October 01, 2011, as provided herein, in lawful money of the United States of America, on or before September 01, 2013 (the "Maturity Date").

 

Lender is entitled to the benefits of this Note ("the Note") and, subject to the terms and conditions set forth herein and therein, may enforce the agreements contained herein and therein and exercise the remedies provided, for hereby and thereby or otherwise available in respect hereto and thereto.

 

1.	Seniority. The Note shall be senior to all other obligations of the Borrower, whether secured or unsecured.

 

2.

Interest. The interest on the Principal Amount, commencing on the date of the Original Note, August 31, 2010 shall accrue and be calculated on the basis of a 365-day year for the actual days elapsed, and shall be at a rate of the WSJ Prime Rate (as published daily in the Wall Street Journal) plus two percent (2%) per annum paid upon the reducing balance of the Principal Amount, upon maturity of the Note. As of the date of this Note, the WSJ Prime Interest Rate is 3.25%. Interest due also includes the accrued and unpaid interest on the Original Note as of the date of this Note.

 

3.

Repayment Schedule prior to maturity of Note. After execution of this Agreement and the Note, upon the consummation and closing of a debt or equity financing, Borrower will pay Lender thirty percent (30%) of any and all Tranches ("Tranches" being defined as the cash receipts of the proceeds of any equity investments in or loans to Borrower or any affiliated entity by third parties, but excluding any conversions of pre-existing debt to equity by any of Borrower's current convertible note holders or creditors) until the Note is paid in full, with accrued interest on the Note. The obligation of Borrower to Pay Lender the 30% of all Tranches received by Borrower and its affiliates is subject to the following agreed upon exceptions:

 

a.	Proceeds received from commercial paper short-term "bridge loans" of $200,000.00 or less, up to a cumulative maximum of $500,000.00 in through 12/31/2012, so as to allow Borrower and its affiliates to initiate pilots for new projects, and make initial deposits for equipment purchase financing.

b.	Proceeds from commercial equipment financing for Borrower and its affiliates, whereby the lender is taking a secured note (UCC-9) filing in the purchased equipment, and there is no additional cash received from which a 30% payment could otherwise be paid.

 

c.

Proceeds of project, lease and equity funding to any partially or wholly-owned subsidiary of Borrower, so long as the funding proceeds are not going upstream to Borrower; and, to the extent any funding proceeds go upstream, those upstream proceeds payments would be subject to paying 50% of them to Lender on the Note. For monies, equipment, etc. contributed as paid-in capital by the non-Borrower partial owner of a subsidiary, Borrower would not be required to pay 30% of that value to Lender. For monies coming into a subsidiary from a third party, Borrower would be required to pay to Lender 30% of Borrower's equity share in the subsidiary (e.g., if Borrower owns 51%, it would be required to pay Lender 15.3% of the third party funds).

d.

A one-time, general exception for $1,500,000.00 of new equity financing into Borrower (share purchases, convertible notes, preferred shares, etc.), provided that Borrower's use of the $1,500,000.00 is limited to equipment purchases, ongoing operational expenses, and current salaries, for which Borrower will provide Lender a projected "use of funds" schedule.

e.

Borrower will not pay any dividends to its common stock holders (Borrower has only on class of voting common stock, and no preferred stock holders) until such time that the Note obligation to Lender is paid in full, unless Lender consents in writing to a dividend payment prior to payoff of the Note.

f.	Borrower, on a quarterly basis, in conjunction with its Quarterly Financials, will provide Lender access to Borrower's and its subsidiaries; bank statements and other reasonable audit rights and will reply to all reasonable requests for compliance statements.

 

Borrower must inform Lender within three (3) business days whenever a Tranche is received, noting the date and amount received. Thereafter, payment of the thirty percent (30%) shall be made to Lender within the earlier to expire of (i) ten (10) business days from Borrower's receipt of Lender's invoice (by e-mail or facsimile transmission) or (ii) ninety days from Borrower's receipt of the relevant Tranche. Borrower's obligation to pay the Note and accrued interest to Lender is unconditional and not conditioned on the level of Tranches received by Borrower.

 

 

Borrower is entitled, without a prepayment penalty, to pay off the Note, with accrued interest, at any time prior to 09/30/2013.

 

4.	Events of Default. The following events shall constitute an "Event of Default" under this Note: Failure by Borrower to pay principal, fees, or accrued interest when due.

 

5.

Remedies Upon an Event of Default. If an Event of Default shall occur for any reason whatsoever (and whether such occurrences shall be voluntary or involuntary, or come about or be effected by operation of law or pursuant to or in compliance with any judgment, decree, or order of any court, or any order, rule or regulation of any administrative or governmental body), or the discovery by Lender of the occurrence of any Event of Default, Lender shall have all of the rights and remedies under applicable law and, in addition, without limiting the foregoing, the right to (a) cure such defaults, with the result that all costs and expenses incurred or paid by Lender in effecting such cure shall bear interest at the highest rate permitted by law, and shall be payable upon demand; and (b) accelerate the maturity of the Note and demand the immediate payment thereof, without presentment, demand, protest or other notice of any kind, all of which are expressly waived, and the Lender shall have all of the rights, powers., and remedies available under the terms of this Agreement and all applicable laws.

 

 

6.

Expenses. Borrower agrees to pay any and all expenses (including attorneys' fees and expenses) incurred by the Lender which are incurred in endeavoring to collect any amounts payable hereunder which are not paid when due (whether by acceleration or otherwise) or in otherwise enforcing any rights under this Note.

 

7.

Notices. All notices and other communications provided for herein shall be in writing and shall be deemed to have been duly given if delivered personally, sent by registered or certified mail, return receipt requested, postage prepaid, sent via overnight delivery service or sent via facsimile, and shall be effective (1) when personally delivered, (2) on the day following delivery to an overnight courier service if sent for delivery within the United States (or on the second business day following delivery to such courier service if sent for delivery outside the United States), (3) on the business day following receipt of transmission if sent via facsimile, or (4) on the fifth business day after the date of mailing if sent by registered or certified mail, in each case to the following addresses:

 

(a) If to the Borrower:

 

Stanley T. Weiner, CEO

STW Resources, Inc.

619 West Texas Ave, Suite 126

Midland, TX 79701

E-Mail: ***@***

 

With a Copy to:

 

D. Grant Seabolt, Jr., Esq.

Seabolt Law Group

2101 Cedar Springs Rd. Suite 1050

Dallas, TX 75201

Phone: (214) 871-5079

Fax: (214)-347-0578

E-Mail: ***@***

 

(b) If to the Lender

 

GE Water & Process Technologies 3006 Northup Way, Suite 200 Bellevue, WA 98004 Attention: William F. Heins

 

8.

Assignment. This Note shall be binding on the Borrower and its successors and permitted assigns, and shall be binding upon and inure to the benefit of the Lender, any future holder of this Note and their respective successors and permitted assigns. The Borrower may not assign or transfer this Note or any of its rights or obligations hereunder (other than by operation of law) without the Lender's prior written consent. The Lender may assign this Note to the maximum extent permitted by applicable law.

 

9.

Waivers; Amendments. No delay or omission of Lender in exercising any right or power hereunder shall impair such right or power or be a waiver of any default or an acquiescence therein; and no single or partial exercise of any such right or power shall preclude other or further exercise thereof, or the exercise of any other right; and no waiver shall be valid unless in writing signed by Lender, and then only to the extent specifically set forth in such writing. All remedies hereunder or by law afforded shall be cumulative and shall be available to Lender until the principal amount of and all interest on this Note have been paid in full. No amendment of any provision of this Note shall be effective unless the same shall be in writing and signed by the Borrower and the Lender.

 

10.

Governing Law. This Note shall be governed by and construed in accordance with the laws of the State of New York, without regard for the conflicts of laws principles thereof, and any actions, claims or proceedings shall be subject to the exclusive venue and jurisdiction of the State and Federal Courts in the Borough of Manhattan in the City of New York.

 

11.

Severability. In the event any one or more of the provisions contained in this Note shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision hereof, and this Note shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein.

 

 

IN WITNESS WHEREOF, Borrower has executed this Note as of the date first above written.

 

 

	BORROWER:
	STW Holding Corp.
	By:	/s/ Stanley T. Weiner
	Name:	Stanley T. Weiner
	Title:	CEO and President
IN WITNESS WHEREOF, Lender has executed this Note as of the date first above written.
	LENDER:
	G.E. Ionics, Inc.
	By:	/s/ William F. Heins
	Name:	William F. Heins
	Title:	VP, ZLD Systems General Manager