Blue Sphere Corporation 8-K [blsp-8k_022718.htm]

Exhibit 10.1

 

LOAN EXTENSION, ADDITIONAL INVESTMENT & CONVERSION AGREEMENT

Addendum to the Transaction Documents Dated October 24, 2016

 

This Loan Extension, Additional Investment & Conversion Agreement, dated
February 21, 2018 (this “Agreement”), is by and between Blue Sphere Corporation,
a Nevada corporation (the “Issuer”) and JMJ Financial (the “Investor”) (referred
to collectively herein as the “Parties”).

WHEREAS, the Issuer and the Investor entered into a Securities Purchase
Agreement Document SPA-10212016 (as amended, the “SPA”) dated as of October 24,
2016, pursuant to which the Issuer issued to the Investor a Promissory Note (as
amended, the “Note”), a Warrant, and Origination Shares (all capitalized terms
not otherwise defined herein shall have the meanings given such terms in the
SPA);

WHEREAS, the Issuer issued additional common stock purchase warrants to the
Investor on December 20, 2016, February 14, 2017, March 14, 2017, April 13,
2017, May 11, 2017, and June 7, 2017 (such warrants, plus the Warrant, plus any
additional warrants the Issuer may be required to issue to the Investor in the
future under the SPA, all as previously amended, the “Warrants”);

WHEREAS, by letter agreement or amendment, on at least ten separate occasions
(the “Amendments”), (i) the Issuer and the Investor agreed to amend certain
terms and extend certain milestone dates contained in the SPA, Note and the
Warrants, with the last such Amendment extending the maturity date of the Note,
the date the Origination Shares were issuable, the date of the pricing reset on
the Origination Shares and the date to receive conditional approval from The
NASDAQ Capital Market to November 22, 2017; and (ii) the Investor agreed to
conditionally waive any default in connection with the original dates, but not
the damages, fees, penalties, liquidated damages, or other amounts or remedies
otherwise resulting from such a default under the SPA, Note and the Warrants,
and with the waiver conditioned on the Issuer not triggering an event of default
at any time subsequent to such Amendment;

WHEREAS, one of the Amendments increased the Principal Sum of the Note to
$2,106,000 and increased the amount of Consideration payable under the Note to
$2,000,000;

WHEREAS, the Investor had paid all $2,000,000 of Consideration to the Issuer
under the Note;

WHEREAS, on June 30, 2017, the Issuer repaid $1,000,000 of the outstanding
balance under the Note;

WHEREAS, the Issuer requests that the Investor agree (i) to increase the
Principal Sum of the Note to $4,212,000 and increase the amount of Consideration
payable under the Note to $4,000,000, and (ii) to invest an additional
$1,000,000 into the Issuer under the Note at this time, which would leave an
additional $1,000,000 of Consideration available for payment under the Note at a
future date if necessary;

WHEREAS, the Issuer further requests that the Investor invest an additional
$1,000,000 into the Issuer under a public offering of the Issuer’s securities to
raise gross proceeds to the Issuer of at least $5,000,000 (the “Public
Offering”), provided that such Public Offering may be for less upon the mutual
agreement of the Issuer and the Investor and further provided that such Public
Offering occurs in conjunction with an uplisting of the Issuer's securities to
The Nasdaq Capital Market or NYSE-MKT;

WHEREAS, the Issuer has requested several extensions on the Note due to delays
in the Public Offering; and

WHEREAS, in order to improve the likelihood of success of the Public Offering
and the uplisting of the Issuer's securities to The Nasdaq Capital Market or
NYSE-MKT, the Issuer requests that the Investor accept shares of stock instead
of cash to settle all of the Issuer’s obligations to the Investor.

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NOW, THEREFORE, the Issuer and the Investor agree as follows:

1.

Additional Investment and Commitment.

A.

$1,000,000 Investment into the Current Note Structure. Within five business days
after the date of this Agreement, the Investor shall invest an additional
$1,000,000 into the Issuer under the Note by paying $750,000 cash to the Issuer
and by rolling over and applying to the Note the $250,000 Principal Sum due to
the Investor under the $250,000 Note that was funded by the Investor by $250,000
wire transfer and was issued to the Investor on February 13, 2018, after which
time the $250,000 Note shall be null and void.

B.

$1,000,000 Investment into the Public Offering. The Investor commits to invest
at least $1 million in a Public Offering that occurs contemporaneously with an
uplisting of the Issuer's securities to The Nasdaq Capital Market or NYSE-MKT
(the Investor shall not commit to participating in any offering other than as
per the terms of this Agreement and in conjunction with an uplisting). The
Investor shall have the right, at its election, to invest up to $5 million in
the Public Offering, and up to $5 million in each of the Issuer's subsequent
financings during the two- year period after the Public Offering, on the same
terms as the best terms, as determined by the Investor, provided to any investor
in the Public Offering or in any such subsequent financing.

2. 

Extensions.

A.

Extension of Maturity Date. In the sentence in the Note (as previously amended)
that states “The Maturity Date is the earlier of November 22, 2017 or the third
business day after the closing of the Public Offering,” the date of November 22,
2017 shall be replaced with the date of June 30, 2018.

B. 

Extension of Origination Shares Dates. The references to the date of November
22, 2017 in Sections 1.3.1 and 1.3.2 of the SPA (as previously amended) shall be
replaced with the date of June 30, 2018.

C. 

Extension of Nasdaq Approval Date. Section 6(xxiii) of the Note and Section
1.11(xxiii) of the Warrants shall hereinafter be deleted and replaced with the
following text: “(xxiii) the Issuer fails to obtain from Nasdaq or NYSE or
another exchange mutually agreed upon by the Issuer and the Investor by June 30,
2018 and conditional approval of the listing of the Issuer’s common stock on The
Nasdaq Capital Market or NYSE-MKT or another exchange mutually agreed upon by
the issuer and the Investor subject only to completion of the Public Offering
pursuant to the Registration Statement and to the Issuer’s common stock
maintaining the minimum price requirements prior to up-listing;”.

D. 

Conditional Waiver of Default. The Investor conditionally waives the defaults
for the Issuer's failure to meet the original and previously amended Maturity
Dates of the Note and delivery dates for the Origination Shares, but the
Investor does not waive any damages, fees, penalties, liquidated damages, or
other amounts or remedies otherwise resulting from such defaults (which damages,
fees, penalties, liquidated damages, or other amounts or remedies the Investor
may choose in the future to assess, apply or pursue in its sole discretion) and
the Investor's conditional waiver is conditioned on the Issuer's not being in
default of and not breaching any term of the Note or the SPA or any other
Transaction Documents at any time subsequent to the date of this Agreement (if
the Issuer triggers an event of default or breaches any term of the Note, the
SPA, or the Transaction Documents at any time subsequent to the date of this
Agreement, the Investor may issue a notice of default for the Issuer's failure
to meet the original Maturity Date of the Note and delivery date of the
Origination Shares).

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3. 

Conversion to Equity Upon Up-listing. Provided that (i) the Issuer closes on the
Public Offering and contemporaneously uplists its shares of common stock on The
Nasdaq Capital Market or NYSE-MKT, or contemporaneously uplists to another
exchange mutually agreed upon by the Issuer and the Investor, by June 30, 2018,
and (ii) no additional event of default or breach of the Transaction Documents
occurs between the date of this Agreement and the close of the Public Offering,
the Issuer may terminate the Note and satisfy all of the Issuer's obligations to
the Investor by payment of stock as follows:

A. 

No Cash Payment. The Issuer shall not pay to the Investor any part of the Note
balance in cash at the closing of the Public Offering. In consideration of the
Investor agreeing to forego payment in cash, the Issuer agrees to pay to the
Investor $250,000 in common stock of the Issuer ("Conversion Shares").

B. 

Repayment of Note Principal Sum in Stock. The Issuer shall pay the Principal Sum
of the Note (Consideration paid plus OID (excluding the extension fees and
damages on the Note, which will be paid in stock under 3.D. and 3.E. below)) in
shares of common stock of the Issuer ("Note Balance Shares").

C.

Warrants. In order to clean up and simplify the Issuer’s capital structure, all
of the Warrants shall be exchanged for an identical dollar amount of shares of
common stock of the Issuer ("Warrant Shares").

D.

Extensions. The Issuer agrees to pay to the Investor $750,000 in shares of
common stock of the Issuer ("Extension Shares") as fees for the several
extensions the Investor has provided under the SPA, the Note, and the Warrants.
The Investor agrees that it will reduce the dollar amount of the Extension
Shares by $500,000 to $250,000 if the Issuer lists its common stock on The
Nasdaq Capital Market or NYSE-MKT or another exchange mutually agreed upon by
the Issuer and the Investor by March 31, 2018.

E.

Damages. As negotiated by the Issuer and as a gesture of good faith by the
Investor, the Investor agrees to reduce the damages otherwise payable under the
Note by approximately $500,000 in exchange for a settlement payment of
$3,000,000 that the Issuer agrees to pay in shares of common stock of the Issuer
("Settlement Shares").

F. 

Lockup Fee. The Issuer agrees to pay the Investor a lockup fee of $250,000
payable in shares of common stock of the Issuer ("Lockup Shares") as
consideration for the Investor entering into a lockup agreement on up to 50% of
the Investor Shares (defined below), not to exceed three months, that will be
effective upon closing of the Public Offering and that will prohibit the
Investor from selling more than 50% of the Investor Shares at a price lower than
the lesser of (i) the price per share of the Issuer's common stock in the Public
Offering, or (ii) the closing price of the Issuer's common stock on the date of
this Agreement. The Investor shall not be subject to a lockup on any shares that
the Investor acquires in the Public Offering.

G.

Share Delivery and Pricing.

1       Pricing in the Event of Up-listing with a Public Offering. The number of
Conversion Shares, Note Balance Shares, Warrant Shares, Extension Shares,
Settlement Shares, and Lockup Shares (collectively, "Investor Shares")
deliverable to the Investor, and the time for delivery of the Investor Shares,
shall be determined in accordance with the pricing formula and delivery
deadlines set forth in Section 1.3 of the SPA as if such Investor Shares were
Origination Shares. All Origination Shares remain due and payable as set forth
in the SPA and, for the avoidance of doubt, all of the shares deliverable to the
Investor under this Agreement are in addition to the Origination Shares due to
the Investor under the SPA.

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2       Pricing in the Event of Up-listing without a Public Offering. In the
event that Issuer does not complete the Public Offering, but instead uses an
alternative method to list its shares of common stock on The Nasdaq Capital
Market or NYSE-MKT or another exchange mutually agreed upon by the Issuer and
the Investor, and if the Issuer and the Investor agree to the Issuer settling
its obligations to the Investor by delivering Investor Shares to the Investor,
then on the fifth (5th) trading day after the day the Issuer's shares of common
stock begin trading on The Nasdaq Capital Market or NYSE-MKT or another exchange
mutually agreed upon by the Issuer and the Investor (the "Listing Date") the
Issuer shall deliver to the Investor such number of duly and validly issued,
fully paid and non-assessable Investor Shares as equals the dollar amount of the
Investor Shares divided by the lowest of (i) the lowest daily closing price of
the Issuer’s common stock during the ten days prior to delivery of the Investor
Shares or during the ten days prior to the date of this Agreement (in each case
subject to adjustment for stock splits), (ii) 80% of the closing price of the
common stock on the Listing Date, (iii) 80% of the effective offering price per
share of common stock of the Issuer in any private placement or issuance of
securities by the Issuer after the date of this Agreement and prior to the
Listing Date (if applicable), (iv) 80% of the unit offering price in any private
placement or issuance of securities by the Issuer after the date of this
Agreement and prior to the Listing Date (if applicable), or (v) $1.60 (subject
to adjustment for stock splits) (such lowest price of (i), (ii), (iii), (iv), or
(v) is hereafter referred to as the "Lowest Price"). It is the Issuer’s and the
Investor’s expectation that the issuance date of the Investor Shares dates back
to the dates of the Investor's payment of Consideration under the Note, in
proportion to the amount of each payment, for purposes of Rule 144 under the
Securities Act of 1933, as amended.

4. 

Investor Shares Beneficial Ownership Limitation. Unless otherwise agreed by both
Parties, at no time will the Issuer issue to the Investor such number of
Investor Shares that would result in the Investor owning more than 9.99% of the
number of shares of common stock outstanding of the Issuer immediately after
giving effect to the issuance of the Investor Shares (the "Beneficial Ownership
Limitation"). In the event that the number of Investor Shares deliverable to the
Investor would cause the Investor to exceed the Beneficial Ownership Limitation,
the Issuer shall deliver to the Investor such lesser number of Investor Shares
the Investor requests that would result in the Investor owning less than the
Beneficial Ownership Limitation and the Issuer shall deliver to the Investor the
remaining number of Investor Shares at such time as the Investor notifies the
Issuer that delivery of such remaining Investor Shares would not cause the
Investor to exceed the Beneficial Ownership Limitation.

5. 

Investor's Election for Preferred Stock. At the Investor's election at any time
the Issuer shall create, within five (5) business days after the Investor's
election, a series of convertible preferred stock out of the Issuer’s existing
authorized shares of preferred stock to address the Beneficial Ownership
Limitation on Investor Shares. The Issuer shall cooperate with the Investor in
drafting the terms of the series of convertible preferred stock, and in
exchanging the Investor Shares for shares of the newly created series of
convertible preferred stock, so as to accomplish the objectives of this
paragraph. The Issuer shall reserve for this purpose, until such time as the
Investor's right to elect expires, 10,000,000 shares out of the Issuer’s
500,000,000 authorized and undesignated shares of the Issuer's $0.001 par value
preferred stock.

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6.

Note Amount. The Principal Sum of the Note, as previously amended, is hereby
increased from $2,106,000 to $4,212,000 and the Consideration is increased to
$4,000,000. The first five sentences of the second paragraph of the Note are
hereby amended and replaced with the following:

 

“The Principal Sum is up to $4,212,000 (four million two hundred twelve
thousand) plus accrued and unpaid interest and any other fees. The Consideration
is $4,000,000 (four million) payable by wire. The Investor shall pay $750,000 of
Consideration in accordance with the attached Funding Schedule in its sole
election. The Investor may pay up to an additional $3,250,000 of Consideration
to the Issuer in such amounts and at such dates as the Investor may choose,
however, the Issuer has the right to reject any of those payments within 24
hours of receipt of rejected payments. The Principal Sum due to the Investor
shall be based on the Consideration actually paid by Investor (plus an
approximate 5% Original Issue Discount that is based on the Consideration
actually paid by the Investor as well as any other interest or fees) such that
the Issuer is only required to repay the amount funded and the Issuer is not
required to repay any unfunded portion of this Note.”

 

7.

SPA Amendments. The reference to a Note aggregate principal amount of $2,106,000
contained in Section 1.1 of the SPA, as previously amended, shall be amended to
refer to a Note aggregate principal amount of $4,212,000. The reference to a
total Consideration amount of $2,000,000 contained in Section 1.4 of the SPA
shall be amended to refer to a total Consideration amount of $4,000,000. All
references to the SPA or the Note in any of the Transaction Documents, including
any Warrants issued after the date of the SPA, shall refer to the SPA, as
amended, and to the Note, as amended.

8.

One Year Prohibition on Issuances of Securities. For a period of one year after
the later of the closing of the Public Offering, the Listing Date, or the
closing of a private placement of the Issuer's securities (the "Starting Date"),
without the express written consent of the Investor, the Issuer shall not issue
or sell common stock, or grant any option to purchase, or sell or grant any
right to reprice, or otherwise dispose of or issue (or announce any offer, sale,
grant or any option to purchase or other disposition) any common stock
(including pursuant to the terms of any outstanding securities issued prior to
the Starting Date (including, but not limited to, warrants, convertible notes,
or other agreements)) or any security entitling the holder thereof to acquire
common stock, including, without limitation, any debt, preferred stock, right,
option, warrant or other instrument that is convertible into or exercisable or
exchangeable for, or otherwise entitles the holder thereof to receive common
stock at an effective price per share less than the greatest of (i) the Lowest
Price (as defined Section 3.F.2 above), (ii) the common stock offering price in
the Public Offering or private placement (as may be applicable), (iii) the unit
offering price in the Public Offering or private placement (as may be
applicable), and (iv) the exercise price of any warrants issued in the Public
Offering or private placement (as may be applicable). The foregoing prohibition
on issuances of securities shall not apply to any issuances of securities to any
project partner or to any funding directly related to project financing, or to
any grant or issuance of shares of the Issuer’s common stock or options to
purchase shares of the Issuer’s common stock pursuant to the Issuer’s 2016 and
2018 Stock Incentive Plan, Non-Employee Directors Compensation Plan or service
or employment agreements outstanding as of the date of this Agreement.

9.

TA Letters. The Issuer agrees that the terms of the irrevocable instruction
letter dated October 24, 2016 in which the Issuer irrevocably authorized and
instructed ClearTrust, LLC to issue shares of common stock of the Issuer to the
Investor without any further action or confirmation by the Issuer upon
ClearTrust's receipt from the Investor of a Conversion Notice or Exercise Notice
shall apply to the Note as amended and shall apply to all warrants the Issuer
has issued or will issue to the Investor pursuant to the terms of the SPA as
amended. In addition, the Issuer agrees that the terms of the irrevocable
instruction letter dated October 24, 2016 in which the Issuer irrevocably
authorized and instructed ClearTrust, LLC to issue shares of common stock of the
Issuer to the Investor without any further action or confirmation by the Issuer
upon ClearTrust's receipt from the Investor of a request for issuance of
Origination Shares pursuant to the Issuer's obligations under the SPA shall
apply to all requests for issuance of Origination Shares pursuant to the
Issuer's obligations under the SPA as amended, and also shall apply to the
Issuer's obligation to issue Investor Shares, such that the share reserve also
may be used for requests from the Investor of Investor Shares and ClearTrust
hereby is irrevocably authorized and instructed to issue Investor Shares to the
Investor upon ClearTrust's receipt from the Investor of a request for Investor
Shares. If ClearTrust requires the Issuer and/or the Investor to deliver to
ClearTrust new irrevocable instruction letters to give effect to the terms of
this paragraph, the Issuer agrees that it will cooperate in good faith with the
Investor in drafting and executing the new irrevocable instruction letters and
any supporting documents required by ClearTrust and the Issuer shall promptly
deliver the new irrevocable instruction letters to ClearTrust.

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10.

All Other Terms Remain in Full Force and Effect. All other terms and conditions
of the Transaction Documents, including all Warrants and all amendments to such
Transaction Documents, remain in full force and effect. The terms of this
Agreement do not terminate or relieve the Issuer of its obligation to perform or
forbear from performing under any term of the Transaction Documents that is
meant to survive after the closing of the Public Offering or that does not
expressly provide for its termination upon closing of the Public Offering.

* * *

 

Please indicate acceptance and approval of this Agreement by signing below:

 

 

/s/ Shlomi Palas   /s/ JMJ Financial Shlomi Palas   JMJ Financial Blue Sphere
Corporation   Its Principal Chief Executive Officer    

 

 

 

[Loan Extension, Additional Investment &Conversion Agreement Signature Page]

 

 

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