NEITHER THIS NOTE NOR THE SECURITIES REPRESENTED HEREBY HAVE BEEN REGISTERED
UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”). THE HOLDER HEREOF, BY PURCHASING SUCH SECURITIES, AGREES FOR THE BENEFIT
OF EITHER SEI OR SPARK HOLDCO THAT SUCH SECURITIES MAY BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED ONLY (A) TO EITHER SEI OR SPARK HOLDCO, (B) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT, (C) IN ACCORDANCE WITH RULE 144, RULE 145 OR
RULE 144A UNDER THE SECURITIES ACT, IF APPLICABLE, AND IN ACCORDANCE WITH ANY
APPLICABLE STATE SECURITIES OR “BLUE SKY” LAWS OR (D) IF EITHER SEI OR SPARK
HOLDCO HAS RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO EITHER SEI
OR SPARK HOLDCO, OR OTHERWISE SATISFIED ITSELF, THAT THE TRANSACTION DOES NOT
REQUIRE REGISTRATION UNDER THE SECURITIES ACT OR ANY APPLICABLE U.S. STATE LAWS
AND REGULATIONS GOVERNING THE OFFER AND SALE OF SECURITIES.

SPARK HOLDCO, LLC AND SPARK ENERGY, INC.
SUBORDINATED PROMISSORY NOTE
 
 
 

Note No. 3
Issuance Date: December 27, 2016
 
Houston, Texas

For value received, Spark Energy, Inc., a Delaware corporation (“SEI”), and
Spark HoldCo, LLC, a Delaware limited liability company (“Spark HoldCo,” and
together with SEI, the “Issuers”), jointly and severally, promises to pay to the
order of Retailco, LLC (the “Holder”), the principal sum of Twenty-Five Million
and No/100 US Dollars ($25,000,000.00) (the “Loan”) or, if less, the aggregate
outstanding principal amount of the Advances (as defined below) made by the
Holder to the Issuers. This promissory note (this “Note”) is subject to the
following terms and conditions.

1.Commitment, Advances, Interest, Maturity and Default

(a)The Holder shall make available to the Issuers in one or more disbursements
pursuant to subsection (b) (each an “Advance”) during the period from the
Issuance Date until the Maturity Date in an aggregate amount not to exceed the
Loan.

(b)As a condition to the disbursement of any Advance, the Borrower shall, at
least three days prior to the requested disbursement date, deliver to the Holder
a written notice (the "Borrowing Notice") setting out: (i) the amount of the
Advance, which amount must be in a minimum principal amount of $1,000,000; and
(ii) the date on which the Advance is to be disbursed. Upon receipt of

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the Borrowing Notice, the Holder shall make available to the Issuers on the
disbursement date the amount set out in the notice in immediately available
funds.

(c)Interest on this Note shall accrue on the unpaid principal balance of all
Advances from the date each such Advance was made at a rate equal to five
percent (5%) per annum, simple interest compounding annually with interest only
payable semiannually in arrears on January 1 and July 1 of each year, commencing
July 1, 2017 (each an “Interest Payment Date”), provided, however, that Issuers
shall have the right to elect to pay-in-kind all or portions of the interest
payable under this Note by sending to Holder a notice of such election (a “PIK
Election Notice”) at least two (2) business days prior to the applicable
Interest Payment Date specifying (i) the amount of interest that will be paid in
kind and (ii) the amount of cash that will be paid to Holder on the applicable
Interest Payment Date, if any. Irrespective of the date a PIK Election Notice is
made, the actual payment in kind will occur on the applicable Interest Payment
Date. If a PIK Election Notice electing to pay interest in kind is made, on the
applicable Interest Payment Date, the amount elected to be paid in kind will be
capitalized, compounded and added to the unpaid principal amount of this Note
effective as of such Interest Payment Date. Unless otherwise consented to in
writing by the Holder, if the Issuers fail to deliver a PIK Election Notice to
Holder on or before the date specified above for such notice and do not make an
interest payment in cash on the applicable Interest Payment Date for all
interest due, it shall be deemed that the Issuers have elected to pay the
balance of the interest due on the applicable Interest Payment Date in kind. The
principal and interest due under this Note shall be paid in full on July 1, 2020
(the “Maturity Date”), and if any principal or interest under this Note remains
unpaid after the Maturity Date the interest rate on such unpaid amounts shall
increase from five percent (5%) per annum to ten percent (10%) per annum, simple
interest. Subject to Section 2, principal and any accrued but unpaid interest
under this Note shall be due and payable upon written demand by the Holder at
any time after the Maturity Date.

(d)Notwithstanding the provisions of Section 1(c) above and subject to Section 2
below, the entire unpaid principal sum of this Note, together with accrued and
unpaid interest thereon, shall become immediately due and payable upon (i) the
execution by either Issuer of a general assignment for the benefit of creditors,
(ii) the filing by or against either Issuer of a petition in bankruptcy or any
petition for relief under the federal bankruptcy act or the continuation of such
petition without dismissal for a period of ninety (90) days or more, (iii) the
appointment of a receiver or trustee to take possession of the property or
assets of either Issuer or (iv) one or more of the Issuers is involved either
directly or indirectly in a Corporate Transaction; provided, however, that this
subsection (iv) shall not apply until the later of (A) the date the Discharge of
Senior Obligations (as defined in the Subordination Agreement (as defined
below)) occurs, and (B) July 9, 2017. For all purposes hereof, the term
“Corporate Transaction” means (a) a sale by either of the Issuers of all or
substantially all of its assets, (b) a merger of one or more of the Issuers with
or into another entity (if after such merger the holders of a majority of such
Issuer’s voting securities immediately prior to the transaction do not hold a
majority of the voting securities of the successor entity) or (c) the transfer
of more than fifty percent (50%) of such Issuer’s voting securities to a natural
person, corporation, limited partnership, general partnership, limited liability
company, joint stock company, joint venture, association, company, estate,
trust, bank trust company, land trust, business trust, or other organization,
whether or not a legal entity, custodian, trustee-executor, administrator,
nominee or entity in a representative capacity and any executive, legislative,
judicial, regulatory or

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administrative agency, body, commission, department, board, court, tribunal,
arbitrating body or authority of the United States or any foreign country, or
any state, local or other governmental subdivision thereof.

2.Subordination

(a)The indebtedness evidenced by this Note, including principal and interest, is
hereby expressly subordinated and junior, to the extent and in the manner
hereinafter set forth, in right of payment to the prior payment in full of all
of the Issuers’ Senior Indebtedness. “Senior Indebtedness” shall mean the
principal of and unpaid interest and premium, if any, on (i) indebtedness of the
Issuers or with respect to which either or both of the Issuers is a guarantor,
whether outstanding on the date hereof or hereafter created, to banks, insurance
companies or other lending or thrift institutions regularly engaged in the
business of lending money, whether or not secured, and (ii) any deferrals,
renewals, extensions, refunding, amendment, modification or any debentures,
notes or other evidence of indebtedness issued in exchange for such Senior
Indebtedness.

(b)Upon any receivership, insolvency, assignment for the benefit of creditors,
bankruptcy, reorganization, or arrangement which creditors (whether or not
pursuant to bankruptcy or other insolvency laws), sale of all or substantially
all of the assets, dissolution, liquidation, or any other marshaling of the
assets and liabilities of the Issuers or in the event this Note shall be
declared due and payable, (i) no amount shall be paid by the Issuers, whether in
cash or property in respect of the principal of or interest on this Note at the
time outstanding, unless and until the full amount of any Senior Indebtedness
then outstanding shall be paid in full, and (ii) no claim or proof of claim
shall be filed with either Issuer or otherwise by or on behalf of the holder of
this Note which shall assert any right to receive any payments in respect of the
principal of and interest on this Note except subject to the payment in full of
all of the Senior Indebtedness then outstanding.

(c)If an event of default has occurred with respect to any Senior Indebtedness,
permitting the holder thereof to accelerate the maturity thereof, then unless
and until such event of default shall have been cured or waived or shall have
ceased to exist, or all Senior Indebtedness shall have been paid in full, no
payment shall be made in respect of the principal of or interest on this Note.

(d)Nothing contained in the preceding paragraphs shall impair, as between the
Issuers and the Holder, the obligation of the Issuers, which is absolute and
unconditional, to pay to the Holder hereof the principal hereof and interest
hereon as and when the same shall become due and payable, or shall prevent the
Holder, upon default hereunder, from exercising all rights, powers and remedies
otherwise provided herein or by applicable law, all subject to the rights, if
any, of the holders of Senior Indebtedness under the preceding paragraphs to
receive cash or other properties otherwise payable or deliverable to the Holder
pursuant to this Note. This Note and the indebtedness hereunder (including any
payments thereof) are subject to that certain Subordination and Intercreditor
Agreement dated as of July 8, 2015 among SEI, Spark HoldCo, Spark Energy Gas,
LLC, Spark Energy, LLC and Holder, as amended by Amendment No. 1 to
Subordination and Intercreditor Agreement dated as of July 31, 2015 and Joinder
and Amendment No. 2 to Subordination and Intercreditor Agreement dated as of
December 27, 2016 (as amended and as may be further amended, restated,
supplemented or otherwise modified from time to time, the “Subordination
Agreement”).

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3.Payment

All payments shall be made in lawful money of the United States of America at
such place as the Holder hereof may from time to time designate in writing to
either SEI or Spark HoldCo. Payment shall be credited first to the accrued but
unpaid interest then due and payable and the remainder applied to principal. Any
amounts due in connection with this Note may be prepaid in whole or in part at
any time without penalty upon ten (10) days’ advance notice by either SEI or
Spark HoldCo to the registered holder of this Note.

4.Payment of Taxes

Issuers, jointly and severally, will pay all taxes (other than taxes based upon
income or gross margin) and other governmental charges, if any, that may be
imposed with respect to the issue or delivery of this Note.

5.Representations and Warranties of Holder

Holder hereby makes the representations and warranties set forth on attached
Appendix A.

6.Transfer; Successors and Assigns

The terms and conditions of this Note shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties.
Notwithstanding the foregoing, except for a pledge of this Note to a bank or
other financial institution that creates a mere security interest in this Note
in connection with a bona fide loan transaction, the Holder may not assign,
pledge, or otherwise transfer this Note without the prior written consent of
both Issuers. Subject to the preceding sentence, this Note may be transferred
only upon surrender of the original Note to either Issuer for registration of
transfer, duly endorsed, or accompanied by a duly executed written instrument of
transfer in form satisfactory to both Issuers, and, thereupon, a new note for
the same principal amount and interest will be issued to, and registered in the
name of, the transferee. Interest and principal are payable only to the
registered holder of this Note.

7.Evidence of Debt

The Holder is authorized to record on the grid attached hereto as Appendix B
each Advance made to the Issuers and each payment or prepayment thereof. The
entries made by the Holder shall, to the extent permitted by applicable Law, be
prima facie evidence of the existence and amounts of the obligations of the
Borrower therein recorded; provided, however, that the failure of the Holder to
record such payments or prepayments, or any inaccuracy therein, shall not in any
manner affect the obligation of the Borrower to repay (with applicable interest)
the Advances in accordance with the terms of this Note.

8.Governing Law; Jurisdiction

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This Note shall be governed by and construed under the laws of the State of
Texas as applied to agreements among Texas residents, entered into and to be
performed entirely within the State of Texas, without giving effect to
principles of conflicts of law. The parties irrevocably consent to the
jurisdiction and venue of the state and federal courts located in Harris County,
Texas in connection with any action relating to this Note.

9.Specific Performance.

Issuers acknowledge and agree that the remedies at law of Holder in the event of
any default by SEI or Spark HoldCo in the performance of or compliance with any
of the terms of this Note are not adequate and may be enforced by a decree for
the specific performance of any agreement contained herein or by an injunction
against a violation of any of the terms hereof or otherwise.

10.Notices

Any notice required or permitted by this Note shall be given in writing and
shall be deemed effectively given (a) upon personal delivery to the party to be
notified, (b) upon confirmation of receipt by fax by the party to be notified,
(c) one (1) business day after deposit with a reputable overnight courier,
prepaid for overnight delivery and addressed as set forth in subsection (d), or
(d) three (3) days after deposit with the United States Post Office, postage
prepaid, registered or certified with return receipt requested and addressed to
the party to be notified at the address of such party indicated directly below,
or at such other address as such party may designate by ten (10) days’ advance
written notice to the other party given in the foregoing manner.

SEI
Spark HoldCo
Holder
12140 Wickchester Ln.
Suite 100
Houston, TX 77079
Attn: Chief Executive Officer
12140 Wickchester Ln.
Suite 100
Houston, TX 77079
Attn: Chief Executive Officer
12140 Wickchester Ln.
Suite 100
Houston, TX 77079
Attn: Chief Executive Officer

11.Amendments and Waivers

Any term of this Note may be amended only with the written consent of the
Issuers and the Holder. Any amendment or waiver effectuated in accordance with
this Section 11 shall be binding upon Issuers, Holder and each transferee of
this Note.

12.Shareholders, Officers and Directors Not Liable

In no event shall any shareholder, officer or director of either SEI or Spark
HoldCo be liable for any amounts due or payable pursuant to this Note.

13.Action to Collect on Note

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If action at law or equity is necessary to enforce or interpret the terms of
this Note, the prevailing party shall be entitled to reasonable attorney’s fees,
costs and necessary disbursements in addition to any other relief to which such
party may be entitled.

14.Severability

If any provision of this Note shall be judicially declared to be illegal,
invalid or unenforceable under any present or future law, and if the rights or
obligations of the parties under this Note would not be materially and adversely
affected thereby, such provision shall be fully separable, and this Note shall
be construed and enforced as if such illegal, invalid or unenforceable provision
had never comprised a part thereof, and the remaining provisions of this Note
shall remain in full force and effect and shall not be affected by the illegal,
invalid or unenforceable provision or by its severance therefrom.

15.Waiver of Jury Trial

Each of SEI, Spark HoldCo and Holder hereby waives its right to trial by jury in
any claim (whether based upon contract, tort or otherwise) under, related to or
arising in connection with this Note.

16.Waivers By Issuers

EACH OF SEI AND SPARK HOLDCO HEREBY WAIVE PRESENTMENT, NOTICE OF DISHONOR,
PROTEST AND NOTICE OF PROTEST, AND ANY OR ALL OTHER NOTICES OR DEMANDS IN
CONNECTION WITH THE DELIVERY, ACCEPTANCE, PERFORMANCE, DEFAULT, ENDORSEMENT OR
COLLECTION OF THIS NOTE.

[Signature Page Follows]

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SEI:
 
 
 
 
 
SPARK ENERGY, INC.
 
 
 
 
 
 
 
 
By: /s/ Nathan Kroeker
 
 
Name: Nathan Kroeker 
 
 
Title: CEO
 
 
 
 
 
 
 
 
SPARK HOLDCO:
 
 
 
 
 
SPARK HOLDCO, LLC
 
 
 
 
 
 
 
 
By: /s/ Nathan Kroeker
 
 
Name: Nathan Kroeker 
 
 
Title: CEO
 
 
 
 
 
 
 
 
 
AGREED TO AND ACCEPTED:
 
 
 
 
 
HOLDER:
 
 
 
 
 
RETAILCO, LLC
 
 
 
 
 
 
 
 
By: /s/ William K, Maxwell
 
 
Name: William K Maxwell __________________________
 
 
Title: Chief Executive Officer
 
 
 
 
 

Signature Page to Spark HoldCo, LLC and Spark Energy, Inc.
Subordinated Promissory Note

APPENDIX A
To Subordinated Promissory Note

REPRESENTATIONS AND WARRANTIES OF THE HOLDER

The Holder represents and warrants to Issuers as follows:

A.Investment Intent. Holder hereby represents and warrants that Holder is
acquiring the Note for the Holder’s own account, not as nominee or agent, for
beneficial interests and investment and not with a view to, or for resale in
connection with, any distribution or public offering thereof within the meaning
of the Securities Act of 1933, as amended (the “Securities Act”), or any state
securities laws.

B.Restricted Securities. The Holder understands that this Note is not a
“restricted security” under the federal securities laws inasmuch as it is being
acquired from Issuers in a transaction not involving a public offering and that
under such law and applicable regulations such securities may be resold without
registration under the Securities Act only in certain limited circumstances. The
Holder represents that is it familiar with Rule 144, as presently in effect, and
understands the resale limitations imposed thereby and by the Securities Act.

C.Information Made Available to Holder. Holder acknowledges that the Issuers
have made available to the Holder, or to the Holder’s attorney, accountant or
representative, all documents that the Holder has requested, and the Holder has
requested all documents and other information that the Holder has deemed
necessary to consider in connection with an investment in Issuers. Holder
acknowledges that it has had an opportunity to consult with Issuers management
regarding SEI’s and Spark HoldCo’s prospects and the risks associated with SEI’s
and Spark HoldCo’s business. Holder acknowledges that it has had an opportunity
to review financial information relating to SEI’s and Spark HoldCo’s businesses.
Holder is familiar with the current capitalization and ownership of Issuers.

APPENDIX B
To Subordinated Promissory Note
ADVANCES AND PAYMENTS ON THE LOAN

Date of Advance
Amount of Advance
Amount of Principal Paid
Unpaid Principal Amount of Note
Name of Person Making the Notation
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

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