Document:

Exhibit 10.9

Exhibit 10.9

[SIXTH AMENDMENT TO CREDIT AGREEMENT]

 

 

 

SIXTH AMENDMENT TO

CREDIT AGREEMENT

Dated as of November 17, 2011

among

POWERSECURE INTERNATIONAL, INC.,

as the Borrower,

CITIBANK, N.A.,

as Administrative Agent and Co-Syndication Agent

BRANCH BANKING AND TRUST COMPANY,

as Documentation Agent

and

The Other Lenders Party Hereto

CITIBANK, N.A.

Sole Bookrunner

 

 

 

SIXTH AMENDMENT TO CREDIT AGREEMENT

THIS SIXTH AMENDMENT TO CREDIT AGREEMENT (this “Sixth Amendment”), dated as of
November 17, 2011, among POWERSECURE INTERNATIONAL, INC., a Delaware corporation (the
“Borrower”), the lenders as identified as Lenders on the signature pages hereof
(collectively, the “Lenders”) and CITIBANK, N.A., in its capacity as Administrative Agent
(the “Administrative Agent”).

BACKGROUND

A. The Borrower, the Lenders, SunTrust Bank and the Administrative Agent are parties to that
certain Credit Agreement, dated as of August 23, 2007, as amended by that certain First Amendment
to Credit Agreement, dated as of January 17, 2008, that certain Second Amendment to Credit
Agreement, dated as of April 18, 2008, that certain Third Amendment to Credit Agreement, dated as
of November 12, 2008, that certain Fourth Amendment to Credit Agreement, dated as of November 9,
2010, and that certain Fifth Amendment to Credit Agreement, dated as of January 14, 2011 (said
Credit Agreement, as amended, the “Credit Agreement”; the terms defined in the Credit
Agreement and not otherwise defined herein shall be used herein as defined in the Credit
Agreement).

B. The Borrower, the Lenders and the Administrative Agent desire to amend the Credit
Agreement.

NOW, THEREFORE, in consideration of the covenants, conditions and agreements hereafter set
forth, and for other good and valuable consideration, the receipt and adequacy of which are all
hereby acknowledged, the parties hereto covenant and agree as follows:

1. AMENDMENTS.

(a) Section 1.01 of the Credit Agreement is hereby amended by adding the defined term
“Stock Repurchase Program” thereto in proper alphabetical order to read as follows:

“Stock Repurchase Program” means that certain stock repurchase program approved
by the Board of Directors of the Borrower whereby the Borrower may purchase common Equity
Interests of the Borrower over a twenty-four month period, commencing November, 2011, for an
aggregate amount not to exceed $5,000,000.

(b) The definition of “Fixed Charge Coverage Ratio” set forth in Section 1.01
of the Credit Agreement is hereby amended to read as follows:

“Fixed Charge Coverage Ratio” means, as of the date of determination, for the
Borrower and its Subsidiaries on a consolidated basis in accordance with GAAP, the ratio of
(a) the sum of (i) Consolidated EBITDA, plus (ii) Consolidated Lease Expense minus (iii)
taxes based on income and paid in cash (net of tax refunds) to (b) the sum of (i)
Consolidated Interest Charges (excluding, to the extent included in Consolidated Lease
Expense, the interest component of Capital Leases), (ii) scheduled payments of principal of
Consolidated Funded Indebtedness (excluding, to the extent included in Consolidated Lease
Expense, the principal component of Capital Leases), (iii) Consolidated Lease Expense, and
(iv) Restricted Payments (excluding repurchases of Equity Interests pursuant to the Stock
Repurchase Program), in each case for the period of four consecutive Fiscal Quarters ending
on such date; provided, however, during the Revolving Availability Period
there shall also be added to the amount determined pursuant to clause (b) above an amount
equal to the product of (x) 0.20 and (y) the amount by which Total Revolving Outstandings
exceeds $15,000,000 on the last day of the Fiscal Quarter ending on such date.

 

 

 

(c) Section 7.06 of the Credit Agreement is hereby amended to read as follows:

Section 7.06. Restricted Payments. Declare or make, directly or indirectly,
any Restricted Payment, or incur any obligation (contingent or otherwise) to do so, except
so long as no Default shall have occurred and be continuing at the time of any action
described below or would result therefrom:

(a) each Subsidiary may declare and pay Dividends to the Borrower or any Subsidiary
Loan Party;

(b) the Borrower and each Subsidiary may declare and make Dividends payable solely in
the common stock or other common Equity Interests of such Person;

(c) the Borrower and each Subsidiary may purchase, redeem or otherwise acquire Equity
Interests issued by it with the proceeds received from the substantially concurrent issue of
new shares of its common stock or other common Equity Interests;

(d) the Borrower and each Subsidiary may make regularly scheduled payments of principal
and interest on Indebtedness;

(e) the Borrower may declare and pay Dividends;

(f) the Borrower may repurchase its common Equity Interests pursuant to stock option
plans approved by its Board of Directors; and

(g) the Borrower may repurchase common Equity Interests of the Borrower pursuant to the
Stock Repurchase Program.

(d) The Compliance Certificate is hereby amended to be in the form of Exhibit E
attached to this Sixth Amendment.

2. REPRESENTATIONS AND WARRANTIES. By its execution and delivery hereof, the Borrower
represents and warrants that, as of the Sixth Amendment Effective Date:

(a) the representations and warranties contained in the Credit Agreement and the other Loan
Documents are true and correct on and as of the Sixth Amendment Closing Date as made on and as of
such date, except to the extent that such representations and warranties specifically refer to an
earlier date, in which case they are true and correct as of such earlier date, and except that the
representations contained in subsections (a) and (b) of Section 5.05 of the Credit
Agreement shall be deemed to refer to the most recent statements furnish pursuant to subsections
(a) and (b), respectively, of Section 6.01 of the Credit Agreement;

 

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(b) no event has occurred and is continuing which constitutes a Default or an Event of
Default;

(c) (i) the Borrower has full power and authority to execute and deliver this Sixth Amendment,
(ii) this Sixth Amendment has been duly executed and delivered by the Borrower, and (iii) this
Sixth Amendment and the Credit Agreement, as amended hereby, constitute the legal, valid and
binding obligations of the Borrower, enforceable in accordance with their respective terms, except
as enforceability may be limited by applicable Debtor Relief Laws and by general principles of
equity (regardless of whether enforcement is sought in a proceeding in equity or at law) and except
as rights to indemnity may be limited by federal or state securities laws;

(d) neither the execution, delivery and performance of this Sixth Amendment or the Credit
Agreement, as amended hereby, nor the consummation of any transactions contemplated herein or
therein, will violate any Law or conflict with any Organization Documents of the Borrower, or any
indenture, agreement or other instrument to which the Borrower or any of it property is subject;
and

(e) no authorization, approval, consent, or other action by, notice to, or filing with, any
Governmental Authority or other Person not previously obtained is required for (i) the execution,
delivery or performance by the Borrower, of this Sixth Amendment or (ii) the acknowledgement by
each Guarantor of this Sixth Amendment.

3. CONDITIONS TO EFFECTIVENESS. All provisions of this Sixth Amendment shall be
effective upon satisfaction or completion of the following:

(a) the Administrative Agent shall have received counterparts of this Sixth Amendment executed
by the Lenders;

(b) the Administrative Agent shall have received counterparts of this Sixth Amendment executed
by the Borrower and acknowledged by each Guarantor;

(c) the Administrative Agent shall have received an opinion of the Borrower’s counsel, in form
and substance satisfactory to the Administrative Agent, with respect to matters set forth in
Sections 2(c), (d), and (e) of this Sixth Amendment; and

(d) the Administrative Agent shall have received, in form and substance satisfactory to the
Administrative Agent and its counsel, such other documents, certificates and instruments as the
Administrative Agent shall require.

4. REFERENCE TO THE CREDIT AGREEMENT.

(a) Upon the effectiveness of this Sixth Amendment, each reference in the Credit Agreement to
“this Agreement”, “hereunder”, or words of like import shall mean and be a reference to the Credit
Agreement, as affected and amended hereby.

 

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(b) The Credit Agreement, as amended by the amendments referred to above, shall remain in full
force and effect and is hereby ratified and confirmed.

5. COSTS, EXPENSES AND TAXES. The Borrower agrees to pay on demand all costs and
expenses of the Administrative Agent in connection with the preparation, reproduction, execution
and delivery of this Sixth Amendment and the other instruments and documents to be delivered
hereunder (including the reasonable fees and out-of-pocket expenses of counsel for the
Administrative Agent with respect thereto).

6. GUARANTOR’S ACKNOWLEDGMENT. By signing below, each Guarantor (a) acknowledges,
consents and agrees to the execution, delivery and performance by the Borrower of this Sixth
Amendment, (b) acknowledges and agrees that its obligations in respect of its Guaranty (i) are not
released, diminished, waived, modified, impaired or affected in any manner by this Sixth Amendment
or any of the provisions contemplated herein and (ii) cover the Aggregate Revolving Commitments as
increased by this Sixth Amendment, (c) ratifies and confirms its obligations under its Guaranty,
and (d) acknowledges and agrees that it has no claims or offsets against, or defenses or
counterclaims to, its Guaranty.

7. EXECUTION IN COUNTERPARTS. This Sixth Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed to be an original and all of which when
taken together shall constitute but one and the same instrument. For purposes of this Sixth
Amendment, a counterpart hereof (or signature page thereto) signed and transmitted by any Person
party hereto to the Administrative Agent (or its counsel) by facsimile machine, telecopier or
electronic mail is to be treated as an original. The signature of such Person thereon, for
purposes hereof, is to be considered as an original signature, and the counterpart (or signature
page thereto) so transmitted is to be considered to have the same binding effect as an original
signature on an original document.

8. GOVERNING LAW; BINDING EFFECT. This Sixth Amendment shall be governed by and
construed in accordance with the laws of the State of New York applicable to agreements made and to
be performed entirely within such state, provided that each party shall retain all rights arising
under federal law, and shall be binding upon the parties hereto and their respective successors and
assigns; provided, however, that the Borrower may not assign any of its rights
arising from this Sixth Amendment or any other Loan Document, and any prohibited assignment shall
be null and void.

9. HEADINGS. Section headings in this Sixth Amendment are included herein for
convenience of reference only and shall not constitute a part of this Sixth Amendment for any other
purpose.

10. ENTIRE AGREEMENT. THE CREDIT AGREEMENT, AS AMENDED BY THIS SIXTH AMENDMENT, AND
THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BETWEEN THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

 

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IN WITNESS WHEREOF, the parties hereto have executed this Sixth Amendment as of the date first
above written.

	 	 	 	 	 
	 	POWERSECURE INTERNATIONAL, INC.

 	 
	 	By:  	/s/ Christopher T. Hutter
 	 
	 	 	Christopher T. Hutter 	 
	 	 	Executive Vice President, Chief Financial Officer 	 
	 

Schedule 5.13

 

 

 

	 	 	 	 	 
	 	CITIBANK, N.A., as Administrative Agent and Lender

 	 
	 	By:  	/s/ Gary D. Pitcock
 	 
	 	 	Gary D. Pitcock 	 
	 	 	Vice President 	 
	 

Schedule 5.13

 

 

 

	 	 	 	 	 
	 	BRANCH BANKING AND TRUST COMPANY, as Lender

 	 
	 	By:  	/s/ Stephen G. Ballard
 	 
	 	 	Name:  	Stephen G. Ballard 	 
	 	 	Title:  	Senior Vice President 	 
	 

Schedule 5.13

 

 

 

ACKNOWLEDGED AND AGREED:

POWERSECURE, INC.

POWERSERVICES, INC.

ENERGYLITE, INC.

UTILITYENGINEERING, INC.

UTILITYDESIGN, INC.

WATERSECURE HOLDINGS, INC. (f/k/a Marcum Gas Transmission, Inc.)

REID’S TRAILER, INC.

EFFICIENTLIGHTS, LLC

POWERPACKAGES, LLC

MARCUM GAS METERING, INC. (f/k/a Metretek, Incorporated)

INNOVATIVE ELECTRONIC SOLUTIONS LIGHTING, LLC

POWERSECURE HAITI USA, INC.

	 	 	 	 	 

	By:

	 	/s/ Christopher T. Hutter
 

Christopher T. Hutter 
Chief Financial Officer for all
	 	 

Schedule 5.13

 

 

 

EXHIBIT E

FORM OF COMPLIANCE CERTIFICATE

Financial Statement Date:                    

To: Citibank, N.A., as Administrative Agent under the Agreement defined below

Ladies and Gentlemen:

Reference is made to that certain Credit Agreement, dated as of August 23, 2007 (as amended,
extended, supplemented or otherwise modified in writing from time to time, the “Agreement;”
the terms defined therein being used herein as therein defined), among PowerSecure International,
Inc. (the “Borrower”), the Lenders from time to time party thereto, and Citibank, N.A., as
Administrative Agent.

The undersigned Responsible Officer hereby certifies as of the date hereof that he/she is the                                                         
    of
the Borrower, that, as such, he/she is authorized to execute and deliver this Certificate to the
Administrative Agent on the behalf of the Borrower, and that:

[Use following for Fiscal Year-end financial statements]

1. Attached hereto as Schedule 1 are the Fiscal Year end audited financial statements
required by Section 6.01(a) of the Agreement for the Fiscal Year of the Borrower ended as
of the date set forth above as the Financial Statement Date, together with the report and opinion
of an independent certified public accountant required by such section. Such financial statements
fairly present in all material respects when considered in relation to the consolidated financial
statements of the Borrower and its Subsidiaries.

[Use following for Fiscal Quarter-end financial statements]

1. Attached hereto as Schedule 1 are the unaudited financial statements required by
Section 6.01(b) of the Agreement for the Fiscal Quarter of the Borrower ended as of the
date set forth above as the Financial Statement Date. Such financial statements fairly present in
all material respects when considered in relation to the consolidated financial statements of the
Borrower and its Subsidiaries.

2. The undersigned has reviewed and is familiar with the terms of the Agreement and has made, or
has caused to be made under his/her supervision, a detailed review of the transactions and
condition (financial or otherwise) of the Borrower during the accounting period covered by the
attached financial statements.

 

Exhibit E — Page 1

 

3. A review of the activities of the Borrower during such fiscal period has been made under the
supervision of the undersigned with a view to determining whether during such fiscal period the
Borrower performed and observed all its Obligations under the Loan Documents [add, if applicable:
except as hereinafter listed], and to the best knowledge of the undersigned as of the date hereof
no Default or Event of Default under the Agreement has occurred and is continuing
as of the date hereof [add, if applicable: except the following list of each Default or Event of
Default under the Agreement, and its nature and status, that has occurred and is continuing as of
the date of this Certificate.]

4. The financial covenant analyses and information set forth on Schedule 2 attached hereto
are true and accurate on and as of the date set forth above as the Financial Statement Date.

 

Exhibit E — Page 2

 

IN WITNESS WHEREOF, the undersigned has executed this Certificate as of _____, ______.

	 	 	 	 	 
	 	POWERSECURE INTERNATIONAL, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 

 

Exhibit E — Page 3

 

For the Fiscal Quarter/Year ended                                         (“Financial Statement Date”)

SCHEDULE 2

to the Compliance Certificate

($ in 000’s)

	I.	 	Section 7.12(a) — Fixed Charge Coverage Ratio [To be calculated for each Fiscal Quarter commencing on and after March 31, 2012].

	 	 	 	 	 
	A. Consolidated EBITDA:
	 	 	 	 
	1. Consolidated Net Income for Subject Period:
	 	$	                    	 
	2. To the extent involved in calculating such
Consolidated Net Income and without
duplication, Consolidated Interest
Charges:
	 	$	                    	 
	3. To the extent included in calculating such
Consolidated Net Income and without
duplication, amount of taxes, based on or
measured by income, deducted in
determining such Consolidated Net Income
for Subject Period:
	 	$	                    	 
	4. To the extent included in calculating such
Consolidated Net Income and without
duplication, depreciation and amortization
expense deducted in determining such
Consolidated Net Income for Subject
Period:
	 	$	                    	 
	5. To the extent included in calculating such
Consolidated Net Income and without
duplication, all non-cash charges or
losses which do not represent a cash
charge or loss for Subject Period or in a
future period:
	 	$	                    	 
	6. To the extent included in calculating such
Consolidated Net Income and without
duplication, non-recurring charges
consisting of Founders Severance Payments
and relocation expenses of not to exceed
$14,200,000 in aggregate amount:
	 	$	                    	 
	7. To the extent included in calculating such
Consolidated Net Income, Federal, state,
local and foreign income tax credits of
the Borrower and its Subsidiaries for
Subject Period:
	 	$	                    	 
	8. To the extent included in calculating such
Consolidated Net Income, Consolidated
Interest Income for Subject Period:
	 	$	                    	 
	9. To the extent included in calculating such
Consolidated Net Income, all non-cash
items increasing Consolidated Net Income
for Subject Period:
	 	$	                    	 
	10. Consolidated EBITDA (Lines I.A.1. + 2. +
3. + 4. + 5. + 6. - 7. - 8. - 9.):
	 	$	                    	 

 

4

 

	 	 	 	 	 
	B. Consolidated Lease Expense for Subject Period:
	 	$	                    	 
	C. Taxes based on income and paid in cash (net of tax refunds) for Subject Period:
	 	$	                    	 
	D. Consolidated Interest Charges (excluding, to the extent included in Consolidated Lease Expense,
the interest component of Capital Leases) for Subject Period:
	 	$	                    	 
	E. Scheduled payments of principal of Consolidated Funded Indebtedness (excluding, to the extent
included in Consolidated Lease Expense, the principal component of Capital Leases) for Subject
Period:
	 	$	                    	 
	F. Consolidated Lease Expense for Subject Period:
	 	$	                    	 
	G. Restricted Payments (excluding repurchases of common Equity Interests pursuant to Stock
Repurchase Program) for Subject Period:
	 	$	                    	 
	H. During Revolving Availability Period, an amount equal to the product of (x) 0.20 and (y) the
amount by which Total Revolving Outstandings exceeds $15,000,000 on the Financial Statement
Date:
	 	$	                    	 
	I. Fixed Charge Coverage Ratio ((Line I.A.10. + I.B. — I.C.)  ̧ (Lines I.D. + I.E. + I.F. +
I.G. + I.H., if applicable)):
	 	                     to 1.00
	Minimum permitted — See Section 7.12(a) of the Agreement
	 	 	1.25 to 1.00	 

	II.	 	Section 7.12(b) —  Leverage Ratio [To be calculated for each Fiscal Quarter commencing on and after March 31, 2012].

	 	 	 	 	 
	A. Consolidated Funded Indebtedness at Financial Statement Date:
	 	 	 	 
	1. all obligations for borrowed money and all
obligations evidenced by bonds,
debentures, notes, loan agreements or
other similar instruments:
	 	$	                    	 
	2. Non-contingent obligations outstanding in
respect of letters of credit (including
standby and commercial), bankers’
acceptances, bank guaranties, surety bonds
or other similar instruments:
	 	$	                    	 
	3. all obligations to pay the deferred
purchase price of property or services
(other than trade accounts payable in the
ordinary course of business):
	 	$	                    	 
	4. indebtedness (excluding prepaid interest
thereon) secured by a Lien on property
owned or being purchased (including
indebtedness arising under conditional
sales or other title retention
agreements), whether or not such
indebtedness shall have been assumed or is
limited in recourse:
	 	$	                    	 

 

5

 

	 	 	 	 	 
	5. Attributable Indebtedness in respect of
Capital Leases and Synthetic Lease
Obligations:
	 	$	                    	 
	6. Guarantees of Indebtedness of types
specified in Lines II.A.1., II.A.2.,
II.A.3., II.A.4. and II.A.5. above:
	 	$	                    	 
	7. Consolidated Funded Indebtedness
(Lines II.A.1. + 2. + 3. + 4. + 5. + 6.):
	 	$	                    	 
	B. Consolidated EBITDA for Subject Period:
	 	 	 	 
	1. Consolidated EBITDA for Subject Period
(See Line I.A.10.):
	 	$	                    	 
	C. Leverage Ratio (Line II.A.7.  ̧ Line II.B.1.):
	 	_____ to 1.00
	Maximum permitted — See Section 7.12(b) of the Agreement
	 	 	3.25 to 1.00	 

	III.	 	Section 7.12(c) — Asset Coverage Ratio.

	 	 	 	 	 
	A. 80% of Book Value of Accounts on the determination date:
	 	$	                    	 
	B. 60% of Book Value of Inventory on the determination date:
	 	$	                    	 
	C. 50% of Book Value of Net Fixed Assets on the determination date:
	 	$	                    	 
	D. Consolidated Funded Indebtedness (See Line II.A.7.):
	 	$	                    	 
	E. Outstanding Term Loans on the determination date:
	 	$	                    	 
	F. Minimum Asset Coverage Ratio (Lines III.A. + III.B. + III.C.)  ̧ (Lines III.D. — III.E.):
	 	_____ to 1.00
	Minimum required — See Section 7.12(c) of the Agreement
	 	 	1.25 to 1.00	 

	IV.	 	Section 7.12(d) — Consolidated Tangible Net Worth.

	 	 	 	 	 
	A. Consolidated Tangible Net Worth:
	 	$	                    	 
	B. Minimum Consolidated Tangible Net Worth:
	 	 	 	 
	1. $62,000,000:
	 	$	                    	 
	2. 50% of Consolidated Net Income for each Fiscal Year beginning with
each Fiscal Year after December 31, 2010 (with no reduction for any
net loss in any such Fiscal Year):
	 	$	                    	 
	3. 100% of the aggregate increases in Shareholders’ Equity after
December 31, 2009 by reason of issuance and sale of Equity Interests
of the Borrower or any Subsidiary (other than issuances to the
Borrower or a wholly-owned Subsidiary):
	 	$	                    	 
	4. Non-cash charges or losses after December 31, 2009 which do not
subsequently represent a cash charge or loss:
	 	$	                    	 
	5. Minimum Consolidated Tangible Net Worth (Lines IV.B.1. + 2. + 3. - 4.:
	 	$	                    	 

 

6

 

	V.	 	Section 7.12(e) — Debt to Worth Ratio.

	 	 	 	 	 
	A. Total Liabilities at Financial Statement Date:
	 	$	                    	 
	B. Consolidated Tangible Net Worth at Financial Statement Date
	 	$	                    	 
	C. Debt to Worth Ratio (Line V.A. ÷ Line V.B.):
	 	_____ to 1.00
	Maximum permitted — See Section 7.12(e) of the Agreement
	 	 	1.50 to 1.00	 

	VI.	 	Section 7.12(f) — Liquidity [In effect prior to April 1, 2012].

	 	 	 	 	 
	A. Cash Reserve at Financial Statement Date:
	 	$	                    	 
	B. Total Revolving Outstandings at Financial Statement Date:
	 	$	                    	 
	C. Liquidity Ratio: (Line VI.A. ÷ Line VI.B):
	 	$	                    	 
	Minimum permitted — see Section 7.12(f) of the Agreement:
	 	 	65	%

For purposes hereof, “Subject Period” is the period of four consecutive Fiscal Quarters ending on the Financial Statement Date.

 

7exh10-2.htm

Exhibit 10.2

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), AND HAS BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION OF THIS NOTE OR OF THE COMMON STOCK ISSUABLE UPON THE CONVERSION HEREOF MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACT.

 

 

DRAW DOWN CONVERTIBLE PROMISSORY NOTE

 

HDS International Corp.

 

$500,000                                                                                                                         August 18, 2011

 

For value received, HDS International Corp., a Nevada corporation (the “Maker”), promises to pay to Wiremu, Inc., (the “Holder”) the principal sum of five hundred thousand dollars ($500,000), together with interest as set forth herein. This draw down convertible promissory note (the “Note”) is subject to the following terms and conditions:

 

1.           Purpose of Note.  This Note evidences, and is given in consideration of, a loan in the principal amount of five hundred thousand US dollars ($500,000), pursuant to the terms more fully described herein. Unless extended or renewed, this draw down credit facility shall be payable in full on the Maturity Date (defined below).

 

2.           Advances. Maker hereby requests, and Payee hereby agrees, that Payee make such amounts available to Maker in immediately available funds as follows (each an “Advance”): (a) $100,000 shall be advanced by Payee to Maker on or before August 18, 2011; (b) $150,000 shall be advanced by Payee to Maker on or before August 26, 2011; and (c) $250,000 shall be advanced by Payee to Maker on or before September 2, 2011, pursuant to wire instructions provided to Payee by Maker.

 

3.           Terms of Advances. The Advances shall be used for working capital purposes or other general corporate purposes as determined by the Company.

 

4.           Maturity; Payment due upon Maturity. Unless converted into shares of common stock as provided in Section 6, this Note shall automatically mature and become due and payable on the February 19, 2013 (the “Maturity Date”).

 

5.           Interest.  Simple interest shall accrue on the outstanding principal balance hereof, up to and including the maximum amount available under this Note, at an annual rate of 3%.  Notwithstanding anything to the contrary herein, the liability of Maker for payment of interest under this Note shall not exceed the maximum amount permitted by law, and if any payment by Maker includes interest in excess of such maximum amount, Payee shall apply such excess to the reduction of principal or, if none is due, such excess shall be refunded to Maker. Interest shall be computed on the basis of a 360-day year.

 

6.           Repayment.

 

(a)           Prepayment. The Maker shall have the right to prepay the principal due and any accrued interest under this Note, in whole or in party, and at any time at its sole discretion, upon 5 days written notice to the Holder.

 

  

1

  

(b)           Conversion. The Maker shall have the right, but not the obligation, at any time, to convert all or any portion of the outstanding principal amount and accrued interest under the Note into fully paid and non-assessable shares of Maker’s common stock at the Conversion Price, as defined below.

 

The “Conversion Price” shall be equal to $0.25 per share of common stock.

 

7.           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 the Maker. Payment shall be credited first to the accrued interest then due and payable and the remainder applied to principal.

 

8.           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, the Holder may not assign, pledge, or otherwise transfer this Note without the prior written consent of the Maker. Subject to the preceding sentence, this Note may be transferred only upon surrender of the original Note for registration of transfer, duly endorsed, or accompanied by a duly executed written instrument of transfer in form satisfactory to the Maker.  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.

 

9.           Governing Law.  This Note shall be governed by and construed in accordance with the laws of the State of Nevada, excluding that body of law relating to conflict of laws.

 

10.           Notices.  Any notice, request or other communication required or permitted hereunder shall be in writing and shall be deemed to have been duly given if personally delivered or mailed by registered or certified mail, postage prepaid, or delivered by facsimile transmission, to the Maker at the address or facsimile number set forth herein or to the Holder at its address or facsimile number set forth in the records of the Maker.  Any party hereto may by notice so given change its address for future notice hereunder.  Notice shall conclusively be deemed to have been given when personally delivered or when deposited in the mail in the manner set forth above and shall be deemed to have been received when delivered or, if notice is given by facsimile transmission, when delivered with confirmation of receipt.

 

11.           Amendments and Waivers. No provision of this Note may be waived or amended except in a written instrument signed, in the case of an amendment, by the Maker and the Holder, or in the case of a waiver, by the party against whom enforcement of any such waiver is sought.  No waiver of any default with respect to any provision shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right.

 

12           Stockholders, Officers and Directors Not Liable. In no event shall any stockholder, officer or director of the Maker be liable for any amounts due or payable pursuant to this Note.

 

13.           Successors and Assigns.  All agreements of the Maker in this Note shall bind its successors and permitted assigns.  This Note shall inure to the benefit of the Holder and its permitted successors and assigns. The Maker shall not delegate any of its obligations hereunder without the prior written consent of Holder.

 

14.           Loss of Note. Upon receipt by the Maker of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Note or any Note exchanged for it, and indemnity reasonably satisfactory to the Maker (in case of loss, theft or destruction) or surrender and cancellation of such Note (in the case of mutilation), the Maker will make and deliver in lieu of such Note a new Note of like tenor, at the Maker’s expense.

 

[REST OF PAGE DELIBERATELY LEFT BLANK]

  

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[SIGNATURE PAGE TO DRAW DOWN CONVERTIBLE NOTE DATED AUGUST 18, 2011]

 

IN WITNESS WHEREOF, the Maker has executed this Note as of the day and year first above written.

 

HDS INTERNATIONAL CORP.

 

TASSOS D. RECACHINAS

By:           Tassos D. Recachinas

Its:           President and CEO

 

 

WIREMU, INC.

 

EVELYN QUINTERO

By:

Its:

 

 

 

 

 

 

  

3

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