AMENDMENTS TO SETTLEMENT AGREEMENT

WHEREAS, STW and GE executed the Settlement Agreement on August 31, 2010, along with a related Corporate Promissory Note (the "Original Note") in the amount of $1,400,000.00.

 

A.      Under the terms of the Note, STW will have until September 1, 2013 to pay off the $2,100,000.00, plus interest accrued after October 1, 2011 under the Note in accordance with its terms. After execution of this Agreement and the Note, upon the consummation and closing of a debt or equity financing, STW will pay GE 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 STW or any affiliated entity by third parties, but excluding any conversions of pre-existing debt to equity by any of STW's current convertible note holders or creditors) until the Note is paid in full, with accrued interest on the Note. The obligation of STW to Pay GE the 30% of all Tranches received by STW and its affiliates is subject to the following agreed upon exceptions:

 

(1) 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 STW and its affiliates to initiate pilots for new projects, and make initial deposits for equipment purchase financing.

 

(2) Proceeds from commercial equipment financing for STW and its affiliates, whereby the GE 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.

 

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

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

 

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

 

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

 

STW must inform GE 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 GE within the earlier to expire of (i) ten (10) business days from STW's receipt of GE's invoice (by e-mail or facsimile transmission) or (ii) ninety days from STW's receipt of the relevant Tranche. STW's obligation to pay the Note and accrued interest to GE is unconditional and not conditioned on the level of Tranches received by STW.

 

Beginning on January 01, 2012, STW shall begin making a regular series of installment payments of $10,000.00 per month, starting 01/01/2012; $15,000.00 per month, starting 06/01/2012; and $15,000.00 per month until the Note is paid off in full. With regard to any late installment payment by STW, GE will allow STW a thirty (30) day cure period before GE would declare STW in material default on the Note.

 

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

 

FIFTH AMENDMENT: Paragraph l.C is deleted.

 

1 .C.    GE will retain all monies paid to date by STW under the Purchase Order and the Note, as well as the equipment (thermal evaporator) ordered and fabricated (partially or fully) under the Purchase Order. Once the Note has been paid in full prior to the expiration of the thirteen (13) month period, STW Resources, Inc. and STW shall have no further financial obligations to GE. If, for any reason, STW defaults under the Note and GE chooses to enforce the Original Debt, this Agreement shall not affect any defenses which would be available to STW as a "buyer" under the UCC with respect to goods which are subsequently sold to a third party. Provided, however, that STW may not assert any such defenses to its obligation of to pay the $ 1,400,000 and accrued interest and costs under the Note. By GE entering into this Agreement, and the related Note, GE is not prejudiced from its right to claim the Original Debt from STW or any other right or remedy that may be available to GE under the UCC or otherwise at law. In the event of any default hereunder, GE shall be entitled to recover under both this Agreement and/or the Note up to a total equal to the Original Debt plus accrued interest at the interest rate specified in the original Purchase Order.

1 .C.    GE will retain all monies paid to date by STW under the Purchase Order and the Note, as well as the equipment (thermal evaporator) ordered and fabricated (partially or fully) under the Purchase Order. Once the Note has been paid in full prior to September 30, 2013, STW Resources, Inc. and STW shall have no further financial obligations to GE. If, for any reason, STW defaults under the Note and GE chooses to enforce the Original Debt, this Agreement shall not affect any defenses which would be available to STW as a "buyer" under the UCC with respect to goods which are subsequently sold to a third party. Provided, however, that STW may not assert any such defenses to its obligation of to pay the $2,100,000.00 and accrued interest and costs under the Note. By GE entering into this Agreement, and the related Note, GE is not prejudiced from its right to claim the Original Debt from STW or any other right or remedy that may be available to GE under the UCC or otherwise at law. In the event of any default hereunder, GE shall he entitled to recover under both this Agreement and/or the Note up to a total equal to the Original Debt plus accrued interest at the interest rate specified in the original Purchase Order.

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.

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.

Beginning on January 01, 2012, Borrower shall begin making a regular series of installment payments of $10,000.00 per month, starting 01/01/2012; $15,000.00 per month, starting 06/01/2012; and $15,000.00 per month until the Note is paid off in full. With regard to any late installment payment by Borrower, Lender will allow Borrower a thirty (30) day cure period before Lender would declare Borrower in material default on the Note.

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