NOTE PURCHASE AND SECURITY AGREEMENT

 

This Note Purchase and Security Agreement is entered as of October 26, 2012,
between GBS Enterprises Incorporated, a Nevada corporation (the “Company”) and
Stephen D. Baksa, an individual having a principal residence at 2 Woods Lane,
Chatham, New Jersey 07928 (the “Lender”).

 

RECITALS

 

WHEREAS, the Company desires to borrow an aggregate of one million U.S. Dollars
and zero cents ($1,000,000.00) (the “Principal Amount”) from the Lender at an
annual rate of twenty percent (20%) (the “Interest Rate”), the Lender is willing
to lend the Company the Principal Amount at the Interest Rate, the Principal
Amount will be evidenced by a duly executed promissory note substantially in the
form of Exhibit A attached hereto (the “Note”) and the Company is negotiating
with certain other lenders for additional loans up to an aggregate principal
amount of an additional one million U.S. Dollars and zero cents ($1,000,000.00)
(such lenders, the “Co-Lenders”); and

 

WHEREAS, the Company’s obligations to the Lender under this Agreement and the
Note will be secured by a first priority security interest as described in
Section 4 of this Agreement.

 

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

 

1.           Amount and Terms of the Note and Warrant.

 

1.1          Note Purchase. Subject to the terms and conditions of this
Agreement, at the Closing, the Company agrees to sell to the Lender, and the
Lender agrees to purchase from the Company, the Note substantially in the form
of Exhibit A attached to this Agreement.

 

1.2          Warrant Purchase. Subject to the terms and conditions of this
Agreement, in consideration for the Lender purchasing the Note at the Closing,
the Company agrees to sell and issue to the Lender, and the Lender agrees to
purchase from the Company, a duly executed warrant to purchase shares of the
Company’s common stock (“Common Stock”), substantially in the form attached
hereto as Exhibit B (the “Warrant”) exercisable for 500,000 shares of Common
Stock (the “Warrant Stock”) at an exercise price per share as set forth in the
Warrant.

 

2.           Closing. Subject to the satisfaction or waiver of the conditions
set forth herein, the purchase and sale of the Note and the Warrant will take
place at 10:00 a.m. on October 26, 2012 at the offices of Baker Botts L.L.P.,
30 Rockefeller Plaza, New York, NY 10112-4498, or at such other time and place
as the Company and the Lender mutually agree upon (which time and place are
referred to as the “Closing”). At the Closing, the Lender will deliver to the
Company, as payment in full for the Note, (a) a check payable to the Company’s
order, (b) wire transfer of funds to the Company, or (c) any combination of the
foregoing. At the Closing, the Company will deliver to the Lender the Note and
the Warrant.

 

 

 

 

3.           Conditions to Closing.

 

3.1          Conditions to Lender’s Obligations. The obligations of the Lender
under this Agreement are subject to the fulfillment or waiver, on or before the
Closing, of each of the following conditions, which waiver may be given by
written, oral or telephone communication to the Company or its counsel:

 

(a)          each of the representations and warranties of the Company contained
in this Agreement shall be true and complete in all material respects on and as
of the Closing;

 

(b)          the Company shall have performed and complied with all agreements,
obligations and conditions contained in this Agreement that are required to be
performed or complied with by it on or before the Closing and shall have
obtained all approvals, consents and qualifications necessary to complete the
sale described herein; and

 

(c)          the Company shall have executed and delivered to the Lender the
Note and the Warrant.

 

3.2          Conditions to Company’s Obligations. The obligations of the Company
to the Lender under this Agreement are subject to the fulfillment or waiver on
or before the Closing of the following conditions by the Lender:

 

(a)          Each of the representations and warranties of the Lender contained
in this Agreement shall be true and complete on and as of the Closing; and

 

(b)          The Lender shall have performed and complied with all agreements,
obligations and conditions contained in this Agreement that are required to be
performed or complied with by it on or before the Closing and shall have
obtained all approvals, consents and qualifications necessary to complete the
purchase described herein.

 

4.           Security; Covenants.

 

4.1          Security Interest. As security for the full and prompt payment, in
cash, and performance of the Company’s obligations under this Agreement and the
Note, the Company hereby grants to the Lender a security interest in all of the
Company’s right, title and interest in and to the Collateral. As used herein,
“Collateral” means all the shares of IDC Global, Inc. owned by the Company

 

4.2          Permitted Liens. The Company shall keep the Collateral free and
clear of all liens, except Permitted Liens. “Permitted Liens” means (a) first
security interests granted to the Co-Lenders, pari passu with the first priority
security interest granted to the Lender in Section 4.1; (b) liens arising by
operation of law for taxes, assessments or governmental charges not yet due; (c)
statutory liens of mechanics, materialmen, shippers, warehousemen, carriers, and
other similar persons for services or materials arising in the ordinary course
of business for which payment is not past due; (d) nonconsensual liens incurred
or deposits made in the ordinary course of business in connection with workers’
compensation, unemployment insurance and other types of social security; (e)
liens for taxes or statutory liens of mechanics, materialmen, shippers,
warehousemen, carriers and other similar persons for services or materials that
are due but are being contested in good faith; (f) liens granted with the
consent of the Lender; and (g) liens of a depository institution arising solely
by virtue of any statutory or common law provision relating to banker’s liens,
rights of setoff, or similar rights and remedies as to deposit accounts or other
funds maintained with such institution.

 

2

 

 

4.3          Termination. The term of the security interest set forth in Section
4.1 above and the other obligations and restrictions set forth in this
Agreement, including under this Section 4, will extend until the aggregate
obligations to the Lender under the Note have been paid or satisfied in full, at
which time the Company and any of its duly appointed officers are hereby
authorized to file any termination statement under the Uniform Commercial Code
in effect in any jurisdiction to terminate the financing statements that
evidence the security interest in the Collateral created by this Agreement and
the Note. Upon payment in full of such obligations, the Lender will execute and
deliver to the Company all deeds, assignments and other instruments, and will
take such other actions, as may be necessary or proper to re-vest in the Company
full title to the Collateral, subject to any disposition which may have been
made by the Lender pursuant to this Agreement.

 

5.           Representations and Warranties of the Company. The Company hereby
represents and warrants to the Lender that the statements in the following
paragraphs of this Section 5 are all true and complete as of immediately prior
to the Closing, except as otherwise indicated:

 

5.1          Organization. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Nevada and has all
requisite corporate power and authority to carry on its business as now
conducted and as proposed to be conducted.

 

5.2          Authorization. All corporate action on the part of the Company
necessary for the authorization, execution and delivery of this Agreement, the
performance of the Company’s obligations hereunder, and the authorization,
issuance and delivery of the Note and the Warrant has been taken. This
Agreement, the Note and the Warrant, when executed and delivered by the Company,
shall constitute valid and legally binding obligations of the Company
enforceable in accordance with their terms, except as such enforceability may be
limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the enforcement of creditors’ rights generally and
(ii) general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).

 

5.3          Valid Issuance. The Note and the Warrant, when issued, sold, and
delivered in accordance with this Agreement, and based in part upon the
representations of the Lender in this Agreement, will be issued in compliance
with all applicable federal and state securities laws. The Warrant Stock, when
issued and delivered in accordance with the Warrant, will be duly and validly
issued, fully paid and non-assessable and, based in part upon the
representations of the Lender in this Agreement, will be issued in compliance
with all applicable federal and state securities laws, assuming that the Lender
has complied with its obligations and covenants under this Agreement and the
Warrant.

 

3

 

 

5.4          Noncontravention. The execution, delivery and performance of the
Agreement, the consummation of the transactions contemplated hereby and the
authorization, issuance and delivery of the Note, the Warrant and the Warrant
Stock (collectively, the “Securities”) will not result in any violation of or be
in conflict with or constitute, with or without the passage of time and giving
of notice, a default under any judgment, order, writ, decree or agreement to
which the Company is bound as of the date hereof.

 

6.           Representations and Warranties and Covenants of the Lender.

 

6.1          Representations and Warranties. The Lender hereby represents and
warrants to the Company that the statements in the following paragraphs of this
Section 6.1 are all true and complete as of immediately prior to the Closing,
except as otherwise indicated:

 

(a)          Authorization. This Agreement constitutes the Lender’s valid and
legally binding obligation enforceable in accordance with its terms.

 

(b)          Non-contravention. The execution, delivery and performance of the
Agreement, the consummation of the transactions contemplated hereby and the
authorization, issuance and delivery of the Securities will not result in any
violation or be in conflict with or constitute, with or without the passage of
time and giving of notice, a default under any judgment, order, writ, decree or
agreement to which the Lender is bound as of the date hereof.

 

(c)          Purchase Entirely for Own Account. The Lender acknowledges that
this Agreement is made with the Lender in reliance upon the Lender’s
representation to the Company that the Securities will be acquired for
investment for the Lender’s own account, not as a nominee or agent, and not with
a view to the resale or distribution of any part thereof, and that the Lender
has no present intention of selling, granting any participation in, or otherwise
distributing any Securities. By executing this Agreement, the Lender further
represents that he does not have any contract, undertaking, agreement or
arrangement with any person to sell, transfer or grant participation to such
person or to any third person with respect to any Securities.

 

(d)          Disclosure of Information. The Lender acknowledges that it has
received all the information it considers necessary or appropriate for deciding
whether to acquire any Securities. The Lender further represents that it has had
an opportunity to ask questions and receive answers from the Company regarding
the terms and conditions of the offering of the Securities.

 

(e)          Investment Experience. The Lender acknowledges that he can bear the
economic risk of its investment and has such knowledge and experience in
financial or business matters that it is capable of evaluating the merits and
risks of the investment in the Securities.

 

(f)          Accredited Investor. The Lender is an “affiliate” and an
“accredited investor” within the meaning of Rule 501 of Regulation D of the SEC,
as presently in effect.

 

4

 

 

(g)          Restricted Securities. The Lender understands that the Securities
are characterized as “restricted securities” and “control securities” under the
federal securities laws inasmuch as they are being acquired from the Company in
a transaction not involving a public offering and that under such laws and
applicable regulations such a Securities may be resold without registration
under the Securities Act of 1933, as amended (the “Act”), only in certain
limited circumstances. The Lender represents that he is familiar with SEC Rule
144, as presently in effect, and understands the resale limitations imposed
thereby and by the Act.

 

6.2          Covenants. The Lender hereby covenants that:

 

(a)          Further Limitations on Disposition. Without in any way limiting the
representations set forth above and any other limitations set forth in the Note
and/or Warrant, the Lender further agrees not to make any disposition of all or
any portion of the Securities unless and until the transferee has agreed in
writing for the benefit of the Company to make with respect to itself the
representations and warranties in and be bound by the covenants of this Section
6.2 and (a) there is then in effect a registration statement under the Act
covering such proposed disposition and such disposition is made in accordance
with such registration statement; or (b) the Lender shall have notified the
Company of the proposed disposition and shall have furnished the Company with a
detailed statement of the circumstances surrounding the proposed disposition,
and if requested by the Company, the Lender shall have furnished the Company
with a written opinion of counsel, which opinion and counsel are acceptable to
the Company, to the effect that that such disposition will not require
registration of any Securities under the Act.

 

(b)          Compliance with Securities Filing Requirements. The Lender
acknowledges that he may be required to make certain public filings with the
Securities and Exchange Commission (the “SEC”) or other governmental authorities
and agrees to timely file all such forms or filings.

 

7.           Miscellaneous.

 

7.1          No Transfers of Notes; Successors and Assigns. Except as otherwise
provided herein, the terms and conditions of this Agreement shall inure to the
benefit of and be binding upon the respective successors and assigns of the
parties. Nothing in this Agreement, express or implied, is intended to confer
upon any party other than the parties hereto (or their respective successors and
assigns) any rights, remedies, obligations, or liabilities under or by reason of
this Agreement, except as expressly provided in this Agreement.

 

7.2          Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without regard to the
conflict of laws provisions thereof. The parties hereby submit to the exclusive
jurisdiction of the federal or state courts located in the County of New York,
State of New York with respect to any dispute arising under this Agreement, the
Note, the Warrant or the transactions contemplated hereby or thereby.

 

7.3          Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. Delivery of an executed
counterpart of this Agreement by facsimile or other electronic imagining means
shall be effective as delivery of a manually executed counterpart of this
Agreement.

 

5

 

 

7.4          Notices. Any notice required or permitted under this Agreement, the
Note or the Warrant shall be in writing, and shall be personally delivered, or
shall be sent by certified or registered mail or by recognized overnight mail
courier, postage prepaid and addressed to such party at the address set forth
below, or at such other address as such party may designate by written notice to
the other party. Any such notice may be sent by facsimile, but shall in such
case be subsequently confirmed by a writing personally delivered or sent by
certified or registered mail or by recognized overnight mail courier as provided
above. All notices shall be deemed to have been given either at the time of the
receipt thereof by the person entitled to receive such notice at the address of
such person for purposes of this Section 7.4, or, if mailed by registered or
certified mail or with a recognized overnight mail courier, two days after
deposit with the United States Post Office or the day following deposit with
such overnight mail courier, if postage is prepaid and the mailing is properly
addressed, as the case may be.

 

If to the Company:

 

GBS Enterprises Incorporated
585 Molly Lane
Woodstock, GA 30189
Attn: Chief Executive Officer
T: (404) 474-7256

 

If to the Lender:

 

To the address written above.

 

7.5          Entire Agreement. This Agreement, the Note and the Warrant
constitute the entire understanding and agreement among the parties with regard
to the subject hereof and thereof.

 

7.6          Amendments and Waivers. Any term of this Agreement, the Note or the
Warrant may be amended or waived (either generally or in a particular instance
and either retroactively or prospectively), with the written consent of the
Company and the Lender. To the extent that any Co-Lender loans money to the
Company on terms materially more favorable to such Co-Lender than the terms
provided to the Lender, taking into account all economic terms of such
transaction, including, without limitation, the interest rate, principal amount,
term, security provided, and all other terms, the parties agree that they will
amend the terms of the Note or the Warrant so as to provide substantially
similar terms to the Lender as provided to such Co-Lender.

 

7.7          Waiver of Jury Trial. EACH OF THE COMPANY AND THE LENDER, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY IRREVOCABLY WAIVES ALL RIGHT
TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING, COUNTERCLAIM OR OTHER LITIGATION
IN ANY WAY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE NOTE. A COPY OF
THIS SECTION MAY BE FILED WITH ANY COURT AS WRITTEN EVIDENCE OF THE WAIVER OF
THE RIGHT TO TRIAL BY JURY AND THE CONSENT TO TRIAL BY COURT.

 

6

 

 

IN WITNESS WHEREOF, the parties have executed this Note Purchase and Security
Agreement as of the date first above written.

 

  GBS ENTERPRISES INCORPORATED           By:       Name: Gary D. MacDonald    
Title: Chief Executive Officer

 

LENDER           Name: Stephen D. Baksa