Blue Sphere Corporation 8-K [blsp-8k_081815.htm]

 

EXHIBIT 10.1

LONG TERM MEZZANINE LOAN AGREEMENT

This Long Term Mezzanine Loan Agreement (“Agreement”) is entered into on this 18
day of August 2015 by and between:

1.

Bluesphere Italy SRL, a private limited liability company organized and existing
under the laws of Italy under registration no. 2067596, having its registered
office at Milan, Corso G. Matteotti 1, and established by BSC, via Eastern
Sphere, as the investment vessel and a holding company (“Borrower”);

2.

Blue Sphere Corporation, a publically traded company incorporated under the laws
of Nevada, USA (“BSC”);

3.

Eastern Sphere Ltd., a company incorporated under the laws of Israel established
and fully owned by BSC (“Eastern Sphere”); and

4.

Helios Italy Bio-Gas 1 L.P, a limited partnership organized under the laws of
the State of Israel (partnership number [_] of Hakfar Hayarok Street, Ramat
Hasharon, Israel (“Lender”).

 Each of the Borrower, BSC, Eastern Sphere and the Lender may be referred to as
a “Party” separately and the “Parties” jointly.

WHEREAS The Borrower is a special purpose company fully owned (100%) by BSC, via
Eastern Sphere; and     WHEREAS The Borrower intends to enter into several share
purchase agreements pursuant to and at the closing of which the Borrower will
acquire, 100% of the issued and outstanding share capital (on a fully diluted
basis) of several special purpose companies owning  Biogas Power Plants each of
1MW located in Italy; and    

WHEREAS

 

The Lender is limited partnership whose initial Limited Partner is Helios E.M.
Investment L.P. (“Helios”) and both the Lender’s and Helios’ General Partner is
Helios General Partner LTD an Israeli corporation number [_]; and    

WHEREAS

 

Helios and BSC have entered into a Term Sheet dated November 12, 2014 (“Term
Sheet”) pursuant to which Helios (through its affiliate) will make available a
mezzanine facility to the Borrower in connection with the transaction
contemplated above; and     WHEREAS In order to finance a portion of the initial
consideration amount for the transactions contemplated by the above mentioned
share purchase agreements, Lender will make available a mezzanine facility to
the Borrower, all in accordance with the terms of this Agreement.

  

 

 

NOW THEREFORE, the Parties agree as follows:

1.

DEFINITIONS

1.1.

Capitalised terms shall have the meanings ascribed to such terms throughout this
Agreement and in addition, the following terms shall have the following
meanings:

Affiliate

 

(a) In respect of a natural person, the immediate family of such person; and (b)
in respect to a legal person other than a natural person, an entity with
Control, under the Control of by or under common Control with such person.
Applicable Law Any law, treaty, statute, regulation, ordinance, rule, judgement,
decision, official order, judicial order, court decision, writ, decree,
approval, binding directive, requirement or other governmental restriction
whether in effect as of the date hereof or thereafter and in each case as
amended, re-enacted or replaced. Broker Fee Claudio  Peraino and Giza Singer
Even - broker fee of up to 120,000 Euro per SPC. Business Plan

means:

(a)  on or before the effective date of this Agreement, the Financial Model; and

 

(b)  at any time thereafter, the Financial Model as updated, revised, amended or
replaced from time to time, and as approved by the Lender in writing, all as
further detailed under Section ‎10.16 below;

 

Arbitrator Adam Eitan or as otherwise agreed between the Parties.

 

 

 

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Bank Account

 

The Borrower’s bank account with Bank [_______], branch [_______], account no.
[_______], located at [______]. Bank Account Pledge A first degree fixed pledge
over the Bank Account in the standard form provided by the Bank.

Business Day

 

Any day other than: (a) Friday; (b)  Saturday; (c) Sunday ; (d) a day on which
banking institutions licensed in the State of Israel or in the State of  Italy
are required or authorised to be closed, nor any day which is recognised by the
Bank of Israel as not being a business day. Budget Versus Actual Report A report
in a form as shall be agreed mutually upon between the Parties within 90 days of
the first SPA Closing, for the 12 months period until the date of issuance of
the Budget Versus Actual Report setting forth all actual revenues, expenses and
cash flow of each of the SPCs and the Borrower versus the budget for the
respective period.   Control The power, direct or indirect, to direct or cause
the direction of the management and policies of an entity whether by voting
power, contract or otherwise. Distributions

Any payment by the Borrower to any shareholder of the Borrower, or any Related
Party thereof and including, without limitation:

  (a) any dividend or other distribution (in cash or in kind) on or in respect
of any of the shareholdings in the Borrower;   (b) any payment or repayment in
connection with any loans provided to the Borrower or redemption of any capital
notes issued by the Borrower;   (c) any other payment of monies or in respect of
any liability under any agreement with the Borrower for any sums owing to a
shareholder of the Borrower or any Related Party thereof

 

 

 

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Distributions Bank Account With respect to each SPC, the bank account of the SPC
from which the SPC makes distributions to its shareholders. Equity Pledge The
pledge over Eastern Sphere shareholdings in the Borrower (constituting the
entire share capital of the Borrower), which shall be registered in Italy, in
the form attached hereto as Schedule B. Event of Default Any of the events set
out in Section ‎12 below. Field of Operation Acting in the capacity of an
investment vessel in the field of waste to energy in Italy as holding company of
the SPCs, including providing of finance for the acquisition of the holding in
the SPCs subject to the terms of this Agreement.

Final Repayment Date

 

In respect to each Loan made under the Mezzanine Facility :

the date falling no later than the earlier of the following: (a) 13 (thirteen)
years and 6 (six) months from the date of making the Loan available to the
Borrower; and (b) the date of expiration of the Feed in Tariff license granted
to the Plant for which the corresponding Loan was made available.

First Repayment Date As defined in Section ‎4.2 below. Government Authority Any
government and/or governmental department, ministry, cabinet, commission, board,
bureau, agency, court, tribunal, regulatory authority, instrumentality,
judicial, legislative or administrative body or entity, domestic or foreign,
federal, national, state, regional, provincial or local, having or exercising
jurisdiction over the matter or matters in question.

 

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Financial Model The Financial Model in relation to the Borrower (on a per SPC
basis and consolidated basis) and including the business plan of the Borrower as
of the date of each Loan Closing as shall be approved by the Lender. Initial SPA
Consideration With respect to each SPA – the consideration to be paid by the
Brower to the Seller pursuant to the SPA upon SPA Closing date; for the removal
of doubt – excluding any additional consideration or payment to be paid by
Borrower to the Seller following SPA closing date (such as the Second
Consideration Payment). Interest Rate As defined in Section ‎6.5.1 Interest
Period As defined in Section ‎6.5.1. Lender’s Project Approval The prior written
approval of the Lender for investment of the Borrower in each SPC provided in
accordance with Section ‎3.1.1 below. The Lender’s Project Approval has been
provided for the first four SPC’s to be purchased, as detailed in Schedule E.
ADSCR

The annual debt service cover ratio which shall, for any 12 month period, be the
ratio of A:B where:

  A - is the available free cash flow of the Borrower for the relevant period;
and   B -

is the sum of all payments due by the Borrower under this Agreement for the
relevant period, including principal, interest and the Operation Fee.

 

Loan(s) A drawdown made by the Borrower from the Lender under any Mezzanine
Facility or (if the context so requires) the principal amount outstanding for
the time being of that loan.

 

 

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Loan Closing With respect to each of the Loans - the closing of the transaction
subject matter and utilization of the Loan, according to the procedure set forth
in Section ‎3.2 below. Loan Closing Date As defined in Section ‎3.2. 3.1.13 ‎
below. Material Adverse Change

Any event, occurrence, change or effect of any nature that, individually or in
the aggregate, has a material adverse effect on: 

  (a) a deviation of 10% from the annual free cash flow under the Financial
Model on a three year average basis;   (b) the ability of the Borrower to
perform its material obligations under any Mezzanine Document;   (c) the
validity or enforceability of any Mezzanine Document;   (d)

the validity, enforceability or priority of any security under the a Mezzanine
Facility Securities.

 

Mezzanine Documents Each of:   (a) this Agreement;   (c) the Mezzanine
Securities and the forms for registration thereof;   (d) the Subordination
Agreement, attached hereto as Schedule G;   (f) any agreement or instrument
entered into or executed pursuant to and as expressly contemplated by any of the
above agreements; and   (e) any other document designated as such by the written
agreement of the Lender and the Borrower.

 

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Mezzanine Facility A mezzanine facility up to an aggregate principal amount of
5,000,000 (five million) Euro. Mezzanine Securities Each of:   (a) the Bank
Account Pledge;   (b) the Equity Pledge;   (c) the irrevocable notice regarding
SPCs Distributions;   (d) appointment of the Participator (pursuant to Section
3.2.3 below);   (e) The nomination of the authorized signatories in the Bank
Account, the Proceed Bank Accounts and the Distribution Bank Accounts pursuant
to Section ‎3.2.2 below.   (f) and any other document designated as such by the
written agreement of the Lender and the Borrower. Operation Fee As defined in
Section ‎6.2. Operations Bank Account With respect to each SPC, the bank account
of the SPC from which the SPC makes payments for its operations.

Organisational Documents

 

Organisational documents including without limitation, the memorandum of
association, articles of association and shareholders’ agreement, joint venture
agreement, partnership agreement and general partner governing documents, of
such entity, as applicable, attached hereto as Schedule C. Mandate to Sell
Mandate to Sell Agreement attached hereto as Schedule H. Plants or Projects
Biogas Power Plants each of up to 1MW located in Italy, the acquisition thereof,
via the SPCs, by the Borrower, pursuant to the Sale Agreements as are listed in
Schedule E.

 

 

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Prepayment Fee As such terms is defined in section ‎5.3.4. Proceed Bank Account
With respect to each SPC, the bank account of the SPC to which all payments due
to the SPC for electricity generated in the Plant owned by the SPC are been
paid. Project Authorisations Any authorisations, permits, licences, consents or
approvals required to be held in connection with the ownership, operation and
maintenance of the Plants. Related Party With respect to any entity, its
shareholders, partners, or other owners and any Affiliates thereof; Repayment
Date Each quarterly date for the payment of outstanding principal amounts
hereunder (together with accrued interest thereon) as set out in Section ‎4.1
below. Repayment Instalments As defined in Section ‎4.1 below. Repayment
Schedule As defined in Section ‎4.1 below. Second Consideration Payment
Additional consideration payments due to the Seller pursuant to the SPA,
following the Initial Consideration Payment.

Security Interests

 

Any interest or equity of any person (including any right to acquire, option, or
right of pre-emption) or any mortgage, charge, pledge, lien, attachment,
assignment or any other encumbrance, security interest, arrangement or similar
third party right of any nature over or in the property to which such interest
relates.   SPA Each of the Share Purchase Agreements the Brower  shall enter
into, as shall be approved in advance by the Lender, for the purpose of
acquiring holdings in SPCs;

 

 

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SPA Closing The closing as defined in the relevant SPA; SPC(s) Each of the
entities implementing the Projects (and holding the electricity production
licenses in respect thereto), as listed in Schedule E. SPCs Distributions Any
payment by an SPC to any shareholder of the SPC, or any Related Party thereof
and including, without limitation:   (a) any dividend or other distribution (in
cash or in kind) on or in respect of any of the shares held by the Borrower in
the SPC;   (b) any payment or repayment in connection with any loans provided to
the Borrower to a SPC or redemption of any capital notes issued by the a SPC;  
(c) any other payment of monies or in respect of any liability under any
agreement with an SPC, for the avoidance of doubt, any sums owing to a
shareholder of the SPC or any Related Party thereof in its capacity as:     (i)
the provider of general and administrative management services. SPCs’ Finance
Documents The facility agreements entered into by each of the SPCs with senior
lenders prior to the engagement of the Borrower in each SPA for the provision of
senior financing for the Plants, together with any replacement or amendment to
such agreements which have been approved in advance and in writing by the Lender
pursuant to the terms of this Agreement. Suggested Business Plan As defined in
Section ‎10.16 below; Tax Any present and future income, value added and other
taxes, levies, imposts, deductions, charges and withholdings in the nature of
taxes whatsoever (including, without limitation, taxes concerning income,
capital gains, sales, value added, franchise, withholding, payroll, employment,
national insurance and health, social security, severance, stamp or property
tax) together with linkage differentials, interest thereon and penalties with
respect thereto, if any, and any payments made on or in respect thereof.

 

 

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Tax Deduction A deduction or withholding for or on account of Tax from a payment
hereunder. Transfer Any transfer, assignment, sale, creation of a Security
Interest or other disposition of similar nature. Trustee Fischer Behar Chen
Trustees Ltd. VAT Bank Account With respect to each SPC, the bank account of the
SPC from which the SPC makes VAT payments.

 

1.2.

Words and defined terms denoting the singular number include the plural and vice
versa and the use of any gender shall be applicable to all genders.

1.3.

The paragraph headings are for the sake of convenience only and shall not affect
the interpretation of this Agreement.

1.4.

The recitals and Schedules hereto form an integral part of this Agreement. The
following table sets forth the Schedules to this Agreement:

 

Schedule A Reserved   Schedule B Equity Pledge Schedule C Organizational
Documents Schedule D Reserved

 

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Schedule E Plants and SPC’s Schedule F Reserved Schedule G Form of Subordination
Agreement Schedule H Mandate to Sell Schedule I Legal Opinion Schedule J
Reserved Schedule K Irrevocable Instructions Regarding SPC’s Distributions
Schedule L Reserved Schedule M Form of Borrower’s Officer’s Certificate Schedule
N Financial Model (including Repayment Schedule and Operation Fee) Schedule O
Budget Versus Actual Report Schedule P Signatories Schedule Q Reserved Schedule
R Reserved

 

2.             MEZZANINE FACILITY AND LOANS 

 

2.1.

Subject to the terms of this Agreement, the Lender shall make available to the
Borrower the Mezzanine Facility in accordance with the terms of this Agreement.

2.2.

Subject to the satisfaction, or waiver by Lender, of the conditions precedent
set out in Section ‎3.1 below, Lender shall make long term Mezzanine Loans
available to the Borrower, in EURO, as specified below, provided that the
aggregate amount of the Mezzanine Loans shall not exceed the Mezzanine Facility
amount of 5,000,000 (five million) Euro, and in accordance with the following:

2.2.1.          The Lender shall make long term Mezzanine Loans available to the
Borrower, in EURO of: (i) 90 (ninety) percent of the Initial SPA Consideration
and the Broker Fee for each of the first 4 (four) Plants and any taxes
associated with registration of the Equity Pledge; and (ii) 80 (eighty) percent
of the Initial SPA Consideration and Broker Fee and any taxes associated with
registration of the Equity Pledge for up to three (3) subsequent Plants (the
“Subsequent Plants”) to be purchased from Volteo Energie S.p.A. all subject to
the maximum Mezzanine Facility amount as set forth above and to the conditions
precedent set out in Section ‎3.1 below.

 

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2.2.2.          No later than within 90 days following Loan Closing, the Lender
shall instruct BSC in writing whether: (i) BSC shall remit to the Borrower, a
sum equal to 10 (ten) percent of the Initial SPA Consideration and the Broker
Fee, and shall cause the Borrower to repay such funds to the Lender, so that
following such remittance and repayment, the Lender’s financing shall constitute
80 (eighty) percent of the Initial SPA Consideration for all Plants; or (ii) it
does not request BSC to remit the abovementioned 10 (ten) percent and
subsequently it shall have the right to reduce its portion of the Loan as set
forth in Section ‎2.2.1(ii) to seventy (70)-eighty (80) percent for any
Subsequent Plants and the remaining amount shall be provided by BSC.

 

2.2.3.          Lender shall remit the Mezzanine Loans to the Borrower by wire
transfer to the Bank Account.

 

2.3.

The Borrower shall use each of the Mezzanine Loans solely to finance a portion
of the Initial SPA Consideration payable by Borrower to the seller pursuant to
the corresponding SPA as well as for the Broker Fee, and the Borrower shall not
be entitled to use the Mezzanine Loans for any other purpose.

2.4.

Each of the Plants shall be approved by the Lender in writing by the issuance of
a Lender Project Approval, at its sole discretion. Such approval was already
received for the plants set forth in Schedule E.

2.5.

Any additional payments due to the Seller pursuant to the corresponding SPA and
any other additional cash investments in the SPC’s or in the Borrower shall be
provided solely by the Borrower and/or Eastern Sphere and/or BSC and in
accordance with the terms of this Agreement and the Lender shall have no
responsibility and/or liability in connection therewith.

 

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2.6.

On the Loan Closing Date each SPC shall maintain a sum equal to €160,000 (one
hundred and sixty thousand Euro) of Net Assets (as defined in each SPA) per SPC
(the “Reserved Amount”). No later than 90 days following each SPA Closing each
SPC shall transfer such Reserved amount to the Borrower, which shall be used
solely for the payment of the Second Consideration Payments pursuant to each SPA
and shall be maintained at all times until such payment has been completed. In
the event that on the transferring date of the Reserved Amount the applicable
Reserve Amount of a SPC possesses less than the full amount of the Reserve
Amount, the Lender and BSC hereby undertake to deposit in the Bank Account, the
sum in cash necessary to complete the full amount of the Reserve Amount, each in
accordance to its portion of the financing (80-20), provided that the Reserved
Amount is not less than 100,000 Euro per SPC. In the event that the Reserve
Amount is less than 100,000 Euro per SPC, BSC shall furnish the balance up to
100,000 Euro and the remaining shall be covered 80-20.

3.             CLOSING

 

3.1.

The obligations of Lender to consummate the transactions contemplated hereby in
relation to the Mezzanine Facility, are subject to the fulfilment, prior to or
at each of the Loan Closing Dates, of each of the following conditions in
relation to each SPA and each Loan (any or all of which may be waived in writing
by Lender at its sole discretion):

3.1.1.           The Lender has reviewed and approved with respect to each of
the Plants: the terms of the investment, the Financial Model, the due diligence
(including conducting its own due diligence if so desired by the Lender) and in
its sole and absolute discretion has provided the Borrower with the Lender’s
Project Approval with regard to each Plant; it being clarified that the
condition set forth in this Section ‎3.1.1 has been fulfilled with respect to
each of the first 4 (four) Plants to be purchased, as specified in Schedule E.

 

3.1.2.           Each SPA has been approved by the Lender in its sole discretion
and has been signed prior to December 31, 2015; it being clarified that the
condition set forth is this Section ‎3.1.2 has been fulfilled with respect to
each of the first 4 (four) Plants to be purchased, as specified in Schedule E.

 

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3.1.3.           the representations and warranties of the Borrower were true
and correct when made and shall be true and correct at the Loan Closing as
though made again at each of the Loan Closing Date;

 

3.1.4.           the Borrower shall have performed and complied with all
obligations and covenants required by this Agreement to be performed or complied
with by it prior to or at the Loan Closing;

 

3.1.5.           all conditions precedent to the relevant SPA Closing other than
the payment of the consideration thereunder, have been met and complied with
such that the SPA Closing shall occur simultaneously with the Loan Closing;

 

3.1.6.           all Mezzanine Documents (other than this Agreement, and the
nomination of the authorized signatories in the Proceed Bank Accounts and
Distribution Bank Accounts, which shall be completed no later than 14 Business
Days following the Loan Closing Date) have been duly executed by all parties
thereto and shall be delivered simultaneously to the delivery of an executed
copy of this Agreement;

 

3.1.7.           no action, proceeding, investigation, regulation or legislation
shall have been instituted or threatened before any Government Authority which
to enjoin, restrain, prohibit or obtain substantial damages in respect of, or
which is related to, or arises out of, this Agreement, or consummation of the
transactions contemplated hereby;

 

3.1.8.           no Material Adverse Change has occurred between the date of
execution of this Agreement and each Loan Closing Date.

 

3.1.9.           the Mezzanine Securities, other than the nomination of the
authorized signatories in the Proceed Bank Accounts and Distribution Bank
Accounts have been duly signed, filed and registered with all relevant
Government Authorities required in order to perfect such Security in accordance
with Applicable Law and Borrower shall have delivered to Lender certificates of
registration and perfection thereof.

 

3.1.10.         BSC shall have made an equity investment in the Borrower, in
EURO, of at least 10% of the payment due on SPA Closing of each initial four (4)
Project as set forth in Schedule E attached hereto and any other investment due
in the Borrower to meet its obligations to date;

 

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3.1.11.         BSC shall have made an equity investment in the Borrower, in
EURO, of at least 20% of the payment due on SPA Closing of each Subsequent
Project, as set forth in Section ‎2.2.1 above;

 

3.1.12.         The Borrower is in possession of all sums (provided it receives
the Loans hereunder) required in order to meet its commitments toward the Seller
and for completion of acquisition of the share capital of the SPC’s as described
under the respective SPA’s. The Reserve Amount shows sum equal to 160,000 Euro
of Net Assets per SPC (as such term is defined in the SPAs) 

3.1.13.         The Framework Guaranteed EBITDA Agreement has been executed by
BSC and Austep. The plant guaranteed EBITDA agreements of the Projects (“Plant
Guaranteed EBITDA Agreements”) will be executed by Austep and each SPC no later
than 7 Business Days following each SPA Closing.

 

3.1.14.         The Mandate to Sell and all signed consents and deeds required
for the transfer of the shares of the Borrower, which are subject to the Equity
Pledge, has been granted and delivered by the Borrower to the Agent.

 

3.2.

Closing Procedure

Subject to Borrower providing Lender with prior written notice of at least 21
days, the closing of the transactions in relation to each Loan (the “Loan
Closing”) shall occur one week prior to the closing of each of the SPA,
following satisfaction or waiver of all the conditions precedent to Loan
Closing, or at such other time, date and place as may be agreed by the Parties
in writing (the time and date of the Loan Closing being herein referred to as
the “Loan Closing Date”).

Immediately prior to Loan Closing, the Borrower shall deliver to the Lender a
certificate signed by an officer of the Borrower, in the form attached as
Schedule M, confirming that all conditions precedent to the Loan Closing as set
out in Section ‎3.1 above have been met and complied with.

At the Loan Closing, the following actions and occurrences will take place, all
of which shall be deemed to have occurred simultaneously and no action shall be
deemed to have been completed and no document or certificate shall be deemed to
have been delivered, until all actions are completed and all documents and
certificates delivered:

3.2.1.           The Borrower shall deliver to Lender original certificates
evidencing registration and perfection of the Mezzanine Securities other than
the nomination of the authorized signatories in the Proceed Bank Accounts and
Distribution Bank Accounts;

 

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3.2.2.           The Borrower shall deliver to Lender approvals of the Board of
Directors of the Borrower and the relevant SPC no later than 14 Business Days
following the Loan Closing Date, evidencing the nomination of the authorized
signatories on behalf of the Lender and the relevant SPC in the Bank Account,
Proceed Bank Accounts and Distribution Bank Accounts; and shall deliver to
Lender approvals of the relevant banks to the Lender’s satisfaction, evidencing
receipt of documents nominating the authorized signatories on behalf of the
Lender and the relevant SPC in the Bank Account, Proceed Bank Accounts and
Distribution Bank Accounts no later than 30 Business Days following the Loan
Closing Date as set forth in Section ‎10.11.2.

 

3.2.3.           The Borrower shall deliver to Lender an irrevocable
instructions notice to the relevant SPC in the from attached hereto as Schedule
K, that: (a) all SPC Distributions to the Borrower shall be payable solely to
the Bank Account; and (b) the Participator, as an observer to the Board of
Directors of each SPC and of the Borrower, on behalf of the Lender, shall be
invited to any such meeting and shall have the information rights as set forth
in Schedule K.

 

3.2.4.           The Borrower shall deliver to Lender legal opinions addressed
to the Lender by the external legal counsels of the Borrower in Italy, in the
form attached hereto as Schedule I.

 

3.2.5.           The Borrower shall deliver to Lender the Subordination
Agreement attached hereto as Schedule G, duly signed by the Borrower, Eastern
Sphere and BSC.

 

3.2.6.           The Borrower shall deliver to Lender certified copies of the
resolutions of BSC, Eastern Sphere and Borrowers relevant corporate bodies
required for approving the execution, delivery and performance of the Mezzanine
Documents and all other documents and actions contemplated thereby;

 

3.2.7.           The Lender shall make the applicable Loan available to the
Borrower by wire transfer to the Bank Account

 

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3.2.8.           The Borrower shall use each Loan solely to pay the Initial SPA
Consideration under the SPA for which such loan has been provided for as
described hereunder;

 

3.2.9.           The SPA Closing shall occur and the Borrower shall use the
Mezzanine Loan for the purpose set out in Section ‎2.3. 

3.2.10.         Within 7 Business Days following the SPA Closing the Borrower
shall provide the Lender with a resolution of each SPC’s board of directors
pursuant to which the Participator on behalf of the Lender shall be invited to
participate as an observer in any board of directors meetings of the SPCs and
shall receive all correspondence accordingly and have the information rights
specified under Schedule K. The Borrower shall provide the Participator with all
resolutions of the shareholder meetings (written resolution and protocol of
shareholder meetings) within 7 Business Days of such meeting.

 

3.3.

Second Closing Procedure

For the avoidance of doubt, any further consideration and/or amounts due to the
Seller in addition to the Initial SPA Consideration (such as the Second
Consideration Payment) shall be the responsibility and liability of BSC, Eastern
Sphere and the Borrower and the Lender shall under no circumstances have any
responsibility in connection therewith. For the avoidance of doubt, Lender
confirms that it is aware that the Reserve Amount and the accumulated funds in
accordance with the Financial Model during the first three years of operation
following each SPA Closing shall be used to perform each Second Consideration
Payment.

3.4.

Drop Dead Date

The commitment of the Lender to provide Loans to Borrower under the Mezzanine
Facility not actually utilized (by way of Loan Closing) by June 30, 2016, unless
extended in writing by the Lender, will be automatically cancelled as of that
date, and no Party shall have any claim and/or demand in that respect against
any other Party, except for claims for breaches of obligations by any Party
hereto prior to such automatic cancellation of commitment and the Lenders’
entitlement to receive payments from the Borrower in respect of indemnities to
the extent payable in accordance with the terms hereof.

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4.             REPAYMENT

 

4.1.

Commencing on the last day of the calendar quarter following each Loan Closing
(“First Repayment Date”), the Borrower shall commence repaying the applicable
Loan (together with any accrued Interest Rate) in quarterly instalments on each
Repayment Date in accordance with the repayment schedule attached hereto as
Schedule N (“Repayment Instalments” and the “Repayment Schedule”, respectively).

4.2.

Notwithstanding anything to the contrary set out herein, all amounts outstanding
hereunder shall be repaid by and on the Final Repayment Date.

4.3.

Any amounts repaid by the Borrower may not be subsequently re-borrowed.

 

5.             PREPAYMENT

5.1.

Except as set forth in Section ‎2.2 above, Section ‎5.2, Section ‎12.6.2 and
Section ‎16.2 below, the Borrower shall not be entitled to prepay any or all of
the amounts outstanding hereunder.

5.2.

Subject to the fulfilment of the conditions precedent set forth in Section ‎5.3
herein, and to the Right of First Refusal of the Lender as set forth in Section
‎5.4 below, the Borrower may refinance the Plants and prepay the entire
outstanding amount of the Loans in cash (“Prepayment Transaction” and
“Prepayment”, respectively).

5.3.

Prepayment of the Loans pursuant to the provisions of Section ‎5.2 is subject to
the cumulative fulfilment of each of the following conditions:

5.3.1.           At least five (5) years have lapsed since the applicable Loan
Closing Date;

 

5.3.2.           Refinance Notice (as defined in Section ‎5.4.1 below) was
delivered to the Lender;

 

5.3.3.           No Notice of Execution of Right of First Refusal (as defined in
Section ‎5.4.1 below) has been delivered to the Borrower;

 

5.3.4.           The net consideration for the Prepayment shall be: the
principal amount of the Loan multiplied by 2.12 minus the aggregate repayment
amount of the Loan principle and interest and Operation Fee, actually paid to
the Lender until such Prepayment (“Prepayment Fee”).

 

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5.4.

Lender shall be entitled to a Right of First Refusal with respect to Prepayment
of the Loans, in accordance with the following procedure:

5.4.1.           The Borrower shall deliver the Lender a written notice of its
intent to enter into the Prepayment Transaction, which shall detail the
following information: (a) the vending (i.e. shares or assets); (b) the
consideration and payment terms of consideration; (c) the terms and conditions
of refinance to be provided with respect to the Prepayment Transaction; and (d)
any other material term or condition with respect to Prepayment (“Refinance
Notice”).

 

5.4.2.           the Lender shall be entitled (at its sole discretion) to notify
the Borrower that it wishes, to amend the terms in which the Loan has been
provided by the Lender such that it shall be provided upon the terms and
conditions set forth in the Refinance Notice, by delivery to the Borrower of a
written notice within 21 (twenty one) days as of the receipt of a Refinance
Notice (“Notice of Execution of Right of First Refusal”).

5.4.3.           Should the Lender deliver to the Borrower a Notice of Execution
of Right of First Refusal, then the Parties shall make the necessary amendments
to this Agreement within fourteen (14) days as of the delivery of the Notice of
Execution of Right of First Refusal.

 

5.4.4.           In the event that Lender failed to deliver Borrower a Notice of
Execution of Right of First Refusal within the period of time set forth in
section ‎5.4.2 above or has sent written notice waiving its right of first
refusal, The Borrower shall be free to prepay the relevant Loan only in
accordance with the terms specified in the Refinance Notice and Section ‎5.3 and
by paying the Prepayment Fee . In the event that a Prepayment Transaction has
not been closed within ninety (90) days as of the lapse of the period of time
set forth in subsection ‎5.4.2 above, any Prepayment shall be subject to Lender
right of first refusal according to the procedure set forth in this Section
‎5.4.1.

 

5.4.5.           In the event that the Lender does not exercise its Right of
First Refusal, it shall be entitled to the Prepayment Fee.

 

 

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6.            INTEREST AND OPERATION FEE

6.1.

Interest Rate

The rate of interest on the Loans, shall be 14.5% per annum, calculated on a
quarterly basis (“Interest Rate”).

6.2.

In addition to the Interest Rate, the Lender shall be entitled to an annual
operation fee as specified in Schedule N (the “Operation Fee”). The Operation
Fee shall be paid quarterly at the same time as each interest repayment is due.

6.3.

It is hereby clarified that the principal payments, interest payments and the
Operation Fee as mentioned in sections ‎5, ‎6.1 and ‎6.2shall not exceed jointly
a repayment of the principal of the Loan with a daily interest rate of 0.041% .

6.4.

In the event that any of the provisions of this section ‎6 shall be deemed
illegal or unenforceable, in whole or in part, due to a change in Italian
regulations, than this section shall be given the broadest interpretation
permissible in order for it to have the fullest effect possible as intended by
the Parties, and the Borrower, Eastern Sphere and BSC shall be obligated to pay
Lender the balance created due to the change of the Italian regulations by any
legal means, and if it is unable to pay such balance it shall Pay the Prepayment
Fee shall apply, within 90 days of Lenders written instruction.

6.5.

Interest Periods

6.5.1.           The Interest Period for any Loan will, subject to the other
provisions of this Section ‎6.5.1 be calculated according Section [6.3] above
(“Interest Period”). The first Interest Period for each Loan shall commence on
the Loan Closing for such Loan and shall end on the last day of the calendar
quarter in which the Loan Closing occurred. Each subsequent Interest Period
shall commence on the expiry of the previous Interest Period.

 

6.5.2.           If an Interest Period would otherwise end on a day which is not
a Business Day, that Interest Period will instead end on the next Business Day
in that calendar month (if there is one) or the preceding Business Day (if there
is not).

 

6.5.3.           If an Interest Period would otherwise overrun the Final
Maturity Date, it will be shortened so that it ends on that Final Maturity Date.

 

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6.5.4.           The Borrower shall pay accrued interest on the Loans on the
last day of each Interest Period.

 

6.6.

Interest on Overdue Amounts

As of the third instance of delayed payment, interest on any overdue amounts (if
any), shall be payable at a rate of 4% per annum above the rate of interest
payable on the Loans prior to such increase.

7.             TAXES

 

7.1.

Tax Deductions

7.1.1.           The Borrower shall make all payments to be made by it to Lender
without any Tax Deduction, unless a Tax Deduction is required by Applicable Law.

 

7.1.2.           If the Borrower is aware that it must make a Tax Deduction (or
that there is a change in the rate or the basis of a Tax Deduction), it must
promptly notify Lender.

 

7.1.3.           If a Tax Deduction is required by Applicable Law to be made by
the Borrower in respect of amounts payable hereunder, then the Borrower will:
make the minimum Tax Deduction allowed by Applicable Law and must make any
payment required in connection with that Tax Deduction within the time allowed
by Applicable Law.

7.1.1.           Within 30 days of making either a Tax Deduction or a payment
required in connection with a Tax Deduction, the Borrower must deliver to Lender
evidence satisfactory to Lender that the Tax Deduction has been made or (as
applicable) the appropriate payment has been paid to the relevant Tax Authority.

 

7.2.

Value Added Taxes

Any amount payable hereunder by the Borrower is exclusive of any value added
tax. If any value added tax is chargeable, the Borrower shall add such value
added tax amount to payments due to Lender, as appropriate, against receipt of a
duly issued VAT invoice.

 

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8.             REPRESENTATION AND WARRANTIES

The Borrower, Eastern Sphere and BSC, jointly and severally, hereby represent
and warrant to the Lender, as of the date hereof, as follows:

8.1.

Corporate Matters

8.1.1.           Each of the Borrower, Eastern Sphere and BSC is duly
incorporated and organized and is validly existing and in good standing under
the laws of the jurisdiction of its incorporation, with power and authority to
carry on its business as now being conducted and as contemplated to be
conducted.

 

8.1.2.           Each of the Borrower, Eastern Sphere and BSC has all necessary
corporate power and authority to enter into this Agreement and other Mezzanine
Documents and to perform its obligations hereunder and to consummate the
transactions contemplated thereunder.

 

8.1.3.           All corporate action on the part of each of the Borrower, its
directors or shareholders necessary for the authorisation and execution of each
Mezzanine Document and the performance of all of its obligations thereunder have
been taken. Each Mezzanine Document constitutes valid and legally binding
obligations of the Borrower, enforceable in accordance with its terms.

 

8.1.4.           The execution and delivery of each Mezzanine Document by the
Borrower, Eastern Sphere and BSC does not, and the consummation of the
transactions contemplated thereby will not, violate any provisions of the
Organisational Documents of the Borrower, Eastern Sphere or BSC or any
undertaking of any nature that is binding on it.

 

8.1.5.           The execution and delivery of each Mezzanine Document by the
Borrower, Eastern Sphere and BSC and the consummation by the Borrower, Eastern
Sphere and BSC of the transactions contemplated thereby does not require the
consent or agreement of any Government Authority or any other third party under
Applicable Law, which have not been received.

 

8.2.

Framework Guaranteed EBITDA Agreement between BSC and Austep S.p.A regarding the
Plants, have been signed on July 17th 2015 (the “Framework Guaranteed EBITDA
Agreements”).

 

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8.3.

Capitalization / Ownership

8.3.1.           The authorized share capital of the Borrower is 10,000 Euro.

8.3.2.           One hundred per cent (100%) of the issued and outstanding share
capital of the Borrower, on a fully diluted basis taking into account all issued
and outstanding shares of the Borrower of any class, after giving effect to the
conversion or exercise (as the case may be) of all convertible securities,
options and warrants as well as all other rights of any kind to acquire shares
or exchangeable for shares of the Borrower), is held by BSC, via Eastern Sphere,
and all such shares are, and except as permitted pursuant to this Agreement,
will continue to be, held by BSC, via Eastern Sphere, free and clear of any
Security Interests.

 

8.3.3.           There are no outstanding or authorised subscriptions, options,
warrants, calls, rights, commitments, or any other agreements of any character
directly or indirectly obligating the Borrower to issue any securities, whether
convertible or not, or any rights to the foregoing, whether for consideration or
otherwise.

 

8.4.

Business to Date

The Borrower’s sole purpose is to operate in the Field of Operation. Since its
incorporation, the Borrower has not engaged in any other business activity.

8.5.

Financial Status

The Borrower does not have any liabilities, claims, or obligations of any
nature, whether accrued, absolute, contingent, anticipated, or otherwise,
whether due or to become due, other than pursuant to this Agreement, and the
SPAs.

8.6.

No Default

8.6.1.           No breach or default by the Borrower and no breach or default
by the SPCs, is outstanding or will result from the execution of the Mezzanine
Documents or the performance of any transaction contemplated hereby and thereby.

 

8.6.2.           To the Borrower’s knowledge, no person has disputed, repudiated
or disclaimed liability under any SPC’s Finance Document to which such person is
a party nor evidenced an intention to do so.

 

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8.6.3.           No other event is (and in respect of the SPCs or any of their
respective assets, to the Borrower’s knowledge is) outstanding which constitutes
(or, with the expiry of a grace period, the giving of notice, the making of any
determination or any combination of the foregoing, would constitute) a default
or termination event (however described) under any document which is binding on
the Borrower, the SPC or any of their respective assets to an extent or in a
manner which has or would give rise to a Material Adverse Change.

 

8.7.

Insolvency

No action, legal proceeding or other procedure or step described in Section
‎12.4 (Insolvency / Liquidation) has been taken in relation to the Borrower nor
has been taken or is threatened in writing in relation to the Borrower and to
the best knowledge of the Borrower or any SPCs.

8.8.

Business Plan

The Financial Model shall be attached hereto as Schedule N.

8.9.

Litigation

No litigation, arbitration or administrative proceedings or injunction, writ,
restricting order or order of any nature are (i) current or have been issued or,
are pending before a court or other authorised authority or, are threatened in
writing against the Borrower; nor (ii) current or have been issued or, are
pending before a court or other authorised authority or, to the Borrower’s
knowledge, threatened in writing against any SPC, which have or, if adversely
determined, would give rise to a Material Adverse Change.

9.             LENDER REPRESENTATIONS

 

The Lender hereby represents and warrants as follows:\ 

9.1.

(i) it has the knowledge and experience in business and financial matters
similar to the subject matter of this Agreement; (ii) it has been allowed to
review the purchase opportunity of each Plant including the terms of the
investment, the financial model and the due diligence reports, and has further
conducted its own due diligence, and has been provided with all material
documents it has requested ; and (iii) it has been given reasonable opportunity
to meet with representative(s) of the BSC/ Eastern Sphere / the Borrower for the
purpose of receiving information concerning the investment in the SPCs.

 

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9.2.

It has and shall have the financial capability to carry out its obligations
under this Agreement in full, when and as set forth herein.

9.3.

Corporate Matters

9.3.1.           The Lender is duly incorporated and organized and is validly
existing and in good standing under the laws of the jurisdiction of its
incorporation, with power and authority to carry on its business as now being
conducted and as contemplated to be conducted.

 

9.3.2.           The Lender has all necessary corporate power and authority to
enter into this Agreement and other Mezzanine Documents and to perform its
obligations hereunder and to consummate the transactions contemplated
thereunder.

 

9.3.3.           All corporate action on the part of each of The Lender, its
investment committees, directors or shareholders necessary for the authorisation
and execution of each Mezzanine Document and the performance of all of its
obligations thereunder have been taken. Each Mezzanine Document constitutes
valid and legally binding obligations of the Lender, enforceable in accordance
with its terms.

 

9.3.4.           The execution and delivery of each Mezzanine Document by the
Lender does not, and the consummation of the transactions contemplated thereby
will not, violate any provisions of the Organisational Documents of the Lender
or any undertaking of any nature that is binding on it.

 

9.3.5.           The Lender shall deliver upon Loan Closing Date to Borrower
certified copies of the resolutions of Lender’s relevant corporate bodies
required for approving the execution, delivery and performance of the Mezzanine
Documents and all other documents and actions contemplated thereby.

 

 

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10.          COVENANTS

10.1.

Existence

10.1.1.         The Borrower shall, unless otherwise consented to by the Lender
at its sole discretion, at all times preserve and maintain in full force and
effect: (a) its existence as a limited company under the Applicable Laws of the
State of Italy; and (b) good title to its properties and assets.

 

10.1.2.         The Borrower must not, without the consent of the Lender acting
in their sole and exclusive discretion, enter into any amalgamation, demerger,
merger or reconstruction or create or register a Security Interest over its
shares or other securities.

 

10.1.3.         The Borrower shall not make any changes, which adversely affect
the Lender or its rights under the Mezzanine Documents, to its Organisational
Documents or capital structure without the prior consent of the Lender.

 

10.2.

Compliance with laws

The Borrower shall comply with all Applicable Laws, including in relation to any
Tax.

10.3.

Ranking

The Borrower must ensure that its payment obligations under the Mezzanine
Documents rank in priority to all its other present and future unsecured payment
obligations, except for obligations mandatorily preferred by law and/or
obligations toward Senior Lenders.

10.4.

Exclusivity

10.4.1.         Each of the Borrower, Eastern Sphere, BSC and any Related Party
of BSC may not, directly or indirectly, be involved in a transaction for the
acquisition of those certain plants owned by Volteo Energie S.p.A. set forth in
Schedule E hereto (each an “Exclusive Project”), unless: (i) BSC, Eastern Sphere
and the Borrower have addressed the Lender in writing and provided all
information required for the Lender to determine whether to provide a Lender’s
Project Approval; and (ii) the Lender has issued a written notice to Borrower
declining to issue such Lender’s Project Approval with respect to such Plant, or
has not responded within 30 days from receipt of such notice.

 

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10.5.

Negative pledge 

10.5.1.         The Borrower shall not, and shall exercise its voting power to
procure that the SPCs shall not, create or allow to exist any Security Interest
on any of their respective assets other than in relation to any of the Mezzanine
Documents or SPCs’ Finance Document.

 

10.5.2.         The Borrower shall not and shall exercise its voting power to
procure that the SPCs shall not:

 

(a)

sell, transfer or otherwise dispose of any of their respective assets on terms
where they are or may be leased to or re-acquired or acquired by the Borrower or
any of its related entities prior to repayment in full of amounts owing to the
Lender pursuant to this Agreement;

(b)

sell, transfer or otherwise dispose of any of their respective receivables on
recourse terms;

(c)

enter into any arrangement under which money or the benefit of a bank or other
account may be applied, set-off or made subject to a combination of accounts; or

10.6.

Disposals

The Borrower must not either in a single transaction or in a series of
transactions and whether related or not, dispose of all or any material part of
its assets.

10.7.

Financial Indebtedness

The Borrower:

10.7.1.         must not incur, other than under the Mezzanine Documents and the
SPCs’ Finance Documents any financial indebtedness of any nature during each of
the Loan Periods, it being clarified that any indebtedness owing to the Sellers
under the SPA shall be permitted to remain in place without breach hereof;

 

10.7.2.         shall not issue, provide or otherwise, other than the SPCs’
Finance Documents, incur any guarantee, counter indemnity or similar obligation;
and

 

10.7.3.         must not be the creditor in respect of any financial
indebtedness other than in the pursuit of its Field of Operation and within the
framework of the Business Plan.

 

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10.8.

Ratios

If, at any time following the elapse of 6 months following the Loan Closing, the
Financial Model will show ADSCR which has fallen below 1:1.17, or pursuant to
the Borrower’s most updated Financial Model it is projected that the ADSCR will
fall below such level, the Borrower shall not make any Distributions to its
shareholders until the earlier of such time as the Borrower’s ADSCR reaches a
level of at least 1:1.22 or the final repayment of all amounts payable by the
Borrower hereunder have been made. 

The projected ADSCR for the period commencing on Loan Closing and until the
Final Repayment Date is as set out in Schedule N.

10.9.

Change of business

The Borrower must not carry on any business other than the Field of Operation.

10.10.

Mezzanine Securities

10.10.1.       The Borrower will maintain all Security Interests created under
the Mezzanine Securities for the benefit of the Lender and will affect all
registrations relating thereto.

10.10.2.       As of the first Loan Closing, the signatory rights in the Bank
Account will be as set forth in Schedule P.

 

10.11.

Bank Accounts of the SPCs

10.11.1.       The Borrower shall procure that each SPC shall hold only the
following bank accounts and shall not open any additional bank accounts without
the prior written consent of the Lender: (i) the Proceed Bank Account; (ii) the
Distributions Bank Account; (iii) the Operations Bank Account; and (iv) the VAT
Bank Account.

 

10.11.2.       No later than 30 Business Days following the Loan Closing Date,
the signatory rights in the Proceed Bank Account and the Distribution Bank
Account will be as set forth in Schedule P.

 

10.12.

Material Contracts

10.12.1.       Without the written consent of the Lender, the Borrower shall not
enter into any material contract other than the Mezzanine Documents or as may be
required pursuant to the SPCs’ Finance Documents

 

 

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10.12.2.       Any amendment, supplement or replacement of the SPC’s Finance
Documents or waiver of rights under the SPC’s Finance Documents (in this
Section, “Amendments”) shall be subject to the advance written approval of the
Lender as set out below. Requests for approval of Amendments shall be provided
to the Lender in writing, together with the form of the suggested Amendment and
any clarifications reasonably requested by the Lender. The Lender shall provide
its reply to the request for approval of an Amendment within 14 Business Days of
submission.

10.13.

Shareholder Interests

10.13.1.       the Borrower must not without the written consent of the Lender
which consent shall not be unreasonably withheld :

 

 (a)

issue any shares, options, warrants or other rights to subscribe, purchase or
acquire any shares or other securities convertible into or exchangeable for its
shares;

 (b)

alter any rights attaching to its shares as at the date of this Agreement;

 (c)

grant or create any new rights or options to participate directly or indirectly
in its revenues or profits ;

 (d)

purchase, cancel, redeem or take steps to reduce any of its shares.

Without derogating from the above, the Borrower shall not issue, purchase,
cancel, redeem or repay any capital notes prior to repayment of due and payable
amounts owing to the Lender pursuant to this Agreement.

10.14.

Plant EBITDA Agreement Equity Subscription

10.14.1.       

Any amendment to the Plant Guaranteed EBITDA Agreements of the Projects, shall
be subject to the prior written consent of the Lender and any breach thereof
shall be considered an Event of Default under Section 11 hereunder

 

10.14.2.       

Any amendment to the Framework Guaranteed EBITDA Agreements which in any way
directly affects the Plant Guaranteed EBITDA Agreements of the Projects, shall
be subject to the prior written consent of the Lender.

 

10.14.3.       

The Plant Guaranteed EBITDA Agreements of the Projects shall not confer any
rights on BSC and/or Eastern Sphere and/or any of their Affiliates (other than
the Borrower).

 

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10.15.

Arrangements with Related Parties

Without the written consent of the Lender at the Lender’s sole discretion, the
Borrower and each SPC must not enter into any transaction, agreement or
arrangement with a Related Party, with the exception of an agreement for the
withdrawal of management fees deferred to the Loans hereunder, and subject to
limitation on Distribution under this Agreement.

10.16.

Business Plan

10.16.1.        

The Borrower shall provide the Lender: (a) with respect to the Borrower: by
September, 30 of each calendar year; and (b) with respect to each SPC - by
September, 30 of each calendar year - business plans including cash budget
detailed on a monthly basis in the form of Schedule I (“Suggested Business
Plan”) as well as an annual budget for the next 5 years.

 

10.16.2.

 Any deviation exceeding 10% of the free cash flow in any year under the
Financial Model requires the Lender’s written preapproval.

10.16.3.         

The Borrower shall make any amendment in the Suggested Business Plan agreed
between the Lender and the Borrower.

 

10.16.4.         

The Borrower shall exercise its best efforts to ensure that that Borrower and
SPC expenses shall be in accordance with the approved Business Plan.

 

10.16.5.         

The Borrower shall accumulate in the Bank Account the cash reserve amount
required for the payment of the Second Consideration Payment according to the
Financial Model (the “Cash Reserve For Second Closing”).

 

10.17.

Distributions

The Borrower shall not make any Distribution unless all of the following
conditions are satisfied:

(i)         

Borrower, Eastern Sphere and BSC are in compliance with their obligations in
relation to the Reserved Amount, as detailed in Section ‎2.6 above;

 

(ii)        

Any amounts, including the Repayment Installments and Operation Fee due and
payable, up to such time, pursuant to any Mezzanine Document have been paid to
the Lender;

 

(iii)      

The Budget versus Actual Report has been provided to the Lender;

 

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(iv)       The ADSCR ratio as set forth under Section ‎10.8;

 

(v)        No Event of Default is outstanding (or would result from the payment
or transfer);

 

(vi)       Such Distribution is permitted by Applicable Law;

 

(vii)      The accumulation of the Cash Reserve For Second Closing, as set forth
in Section ‎10.16.5 above.

 

(viii)     With respect to Material Adverse Change as set forth under Section
‎10.18 hereunder.

10.18.

In the event of any evidence of any Material Adverse Change, including inter
alia, future substantial decline in the financial performance of the Plants
(such as material tariff changes, pending cancelation of raw material supply
agreement without any parallel alternative agreement) resulting in a decline in
any of the years of the repayment of the Loan in the cash flow available for
Distribution of the SPCs or the Borrower by more than 10% compared to the
Financial Model the Borrower shall not be allowed to make any further
Distributions until the Lender is reasonably satisfied that the Borrower can
meet its commitment to repay the Loans in full. Notwithstanding the above, the
Borrower shall be entitled to make Distributions, subject to accumulating an
amount equal to two Repayment Instalment and two Operation Fee payments in a
reserve fund, which is pledged in favour of the Lender, prior to such
Distribution.

10.19.

Subject to limitation set forth in Section ‎10.17 above and after Lender has
received each of the respective Repayment Installments, the Borrower shall be
entitled to transfer any remaining amounts in the Bank Account (“Remaining
Amounts”) to any bank account, and shall be entitled to use such Remaining
Amounts in accordance with its sole discretion, including without limitation,
transfer such Remaining Amounts or any part thereof to its shareholders as
distributable proceeds, dividends or otherwise.

10.19.1.        

Without derogating from the terms of this Section‎10.18, the Borrower shall
notify the Lender in writing of any Distribution, at least 10 (ten) days prior
to the proposed Distribution date.

 

10.20.

SPCs’ Distributions

10.20.1.        

The Borrower will exercise its voting rights in the SPCs to vote in favour of
the SPCs making Distributions of the maximum amount that may be so distributed
by it.

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10.20.2.        

The Borrower will not, without the prior written approval of Lender, agree to
any additional restrictions being imposed on the making of SPCs Distributions
other than those under Applicable Law, the SPCs’ Finance Documents and the
Guaranteed EBITDA Agreements, and will exercise its voting rights in the SPCs to
oppose any change or amendment to the SPC’s Finance Documents and/or the Plant
Guaranteed EBITDA Agreements which could result in such additional restrictions
being imposed.\

 

10.21.

Information Rights

The Borrower undertakes to provide Lender with the following:

10.21.1.         

Within sixty (60) days of the end of each fiscal year, the audited annual
financial statements of the Borrower and each SPC audited by an accounting firm
approved by the Lender in writing

 

10.21.2.        

 within forty five (45) days of the end of each quarter, the reviewed financial
statements of the Borrower and each SPC reviewed by an accounting firm approved
by the Lender in writing.

10.21.3.         

At least twice annually and within fourteen (14) days of request by the Lender,
confirmation that the ADSCR of the Borrower meets the levels set forth in
Section ‎10.8, such confirmation to be provided as follows: (i) by 1 March of
every calendar year - by an independent advisor reasonably acceptable to the
Lender, and (ii) by 1 September of every calendar year and with respect to any
additional confirmation requested by the Lender - by an officer of the Borrower;

10.21.4.         

Within fifteen (15) days of the end of each calendar month a Budget versus
Actual Report for each SPC and for the Borrower;

 

10.21.5.         

without derogating from the necessity of Lender approval in accordance with the
terms of this Agreement, promptly following execution, copies of all agreements
or arrangements entered into with the Senior Lender, including any revisions of
the SPCs’ Finance Documents; immediately upon being aware thereof, notice of any
breach or potential breach by the Borrower of the Mezzanine Documents;

 

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10.21.6.         

promptly following issuance or receipt of same and no later than 7 (seven) days
of the receipt thereof, copies of all reports and material documents relating to
the SPCs. the Plants or the Borrower such as management reports, O&M reports,
financial reports, etc. any other information or data reasonably requested by
the Lender from time to time, provided that such information is held by the
Borrower.

 

10.21.7.         

The Participator, on behalf of the Lender, shall be invited to participate as an
observer in any board of directors meetings of the SPCs and shall receive all
correspondence accordingly and have the information rights specified under
Schedule K

11.          UNDERTAKING OF THE LENDER

If the signature of the Lender, as a signatory of the Proceed Bank Account was
requested with respect to a payment: (i) included in the most recent Financial
Model or budget approved in writing by the Lender and (ii) included in an
agreement approved in writing by the Lender or payment due by any authority by
regulation, and was not approved within 7 Business Days of providing the Lender
with all required detail concerning such expenditure, the Board of Directors of
the SPC shall be entitled to adopt a new signature rights resolution to allow
such payment with the sole signature of the Company’s director. It is hereby
clarified, that said new signature rights resolution shall be valid apply only
in relation to such payment not approved by the Lender as specified above, and
that following such payment, the Board of Directors of the Borrower shall
immediately reinstate the signature rights set forth in Schedule P and deliver
such resolution to the Bank.

12.          EVENTS OF DEFAULT

 

12.1.

The occurrence of any of the events or circumstances set forth in Sections
‎12.2- ‎12.5 shall constitute an Event of Default hereunder. The Borrower
undertakes to notify the Lender promptly upon the occurrence of an Event of
Default or of any circumstances which come to the Borrower’s attention which
would give rise to an Event of Default.

12.2.

Non-Payment

The Borrower fails to pay two consecutive Repayment Instalments or Operation
Fee. 

 

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12.3.

Other Breaches

The Borrower breaches any material obligation, covenant or undertaking under any
Mezzanine Document (including, without limitation: (i) failure to register,
provide and/or carry out any of the Mezzanine Securities; (ii) any payment from
a SPC to Eastern Sphere or BSC or any of their Affiliates other than the
Borrower; (iii) failure to deposit the Reserved Amount in accordance with
Section ‎2.6; (iv) failure of BSC to remit to the Borrower the amount in
accordance with Section ‎2.2.2; (v) accumulation of the Cash Reserve Amount For
Second Closing in accordance with Section ‎10.16.5) which is not referred to in
this Section ‎12, and such breach has not been cured within 21 (twenty-one)
days, or such other written notice period which may be stated in the respective
Mezzanine Document, from receipt of notice from any of the Borrower’s
counterparties to such Mezzanine Document that a breach has occurred, or any
longer period permitted for cure pursuant to the relevant Mezzanine Document, or
any representation or warranty made by the Borrower hereunder was, when made,
untrue or misleading in any material way. It is hereby claridied that a strike
of the Bank or any act or omission by the Lender which delays the compliance
with Section ‎3.2.2 shall not constitute a material breach under this Section.

12.4.

Insolvency / Liquidation

12.4.1.           

The Borrower or any of the SPCs (whether simultaneously or not) is unable to pay
its debts or becomes unable to pay its debts as they fall due or suspends making
payments (whether of principal or interest) with respect to all or any class of
its debts.

12.4.2.           

A trustee, liquidator, receiver or similar officer is appointed in respect of
the Borrower or any of the SPCs (or any material asset thereof and whether
simultaneously or not) or distress or any form of execution is levied or
enforced upon or claimed against any such assets, which proceedings are not
dismissed, denied, stayed, discharged or struck out within 90 (ninety) days.

 

12.4.3.          

The Borrower, or any of the SPCs convenes a meeting of its creditors or proposes
to make any arrangement or composition with, or any assignment for the benefit
of, its creditors or a petition is filed or a meeting is convened for the
purpose of considering a resolution or other steps are taken for the making of
an administration order in relation to such entity or for its winding up,
bankruptcy or dissolution.

 

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12.4.4.           

Any person presents a petition, or files documents with a court or any registrar
for its winding-up, administration or dissolution (including on a temporary
basis) of the Borrower or any of the SPCs (whether simultaneously or not) or an
order for their winding-up, administration or dissolution is made, including on
a temporary basis, (unless any such proceedings or acts are dismissed, denied,
stayed, discharged or struck out within 90 (ninety) days).

 

12.4.5.           

Sections ‎12.4.1-‎12.4.2 above shall apply with relation to BSC or Eastern
Sphere in the event that such occurrence has an actual effect on the repayment
of the Loans under the terms of this Agreement.

 

12.5.

SPCs’ Finance Documents

The Senior Lenders declares that an event of default has occurred pursuant to
the SPCs’ Finance Documents or takes any steps to accelerate the debt thereunder
or to realize any Security Interest afforded thereunder and such declaration or
action is not stayed or cancelled within 90 (ninety) days. 

12.6.

Remedies

12.6.1.           

Lender shall deliver written notice to the Borrower informing it of the
occurrence of an Event of Default (“Notice of Default”).

 

12.6.2.           

Borrower shall have 7 (seven) days following the receipt of a Notice of Default
(the “Cure Period”) to either (i) Cure such Event of Default; or (ii) Prepay the
Prepayment Fee.

 

12.6.3.          

In the event that the Borrower does not cure such Event of Default or doesn’t
Prepay the Loans as aforementioned within the Cure Period, the Lender shall be
entitled to take all steps required to enforce any of the Mezzanine Securities
and the Security Interests thereunder (including through use of the Mandate to
Sell attached hereto as Schedule H) and the Prepayment Fee shall be immediately
due and payable without any further action by the Lender. It is hereby
clarified, that parallel to realization of the Mezzanine Securities and until
final repayment of all sums under this Agreement to the Lender, in the event of
such an uncured Event of Default, the Lender will be entitled to exercise all
voting rights in the Borrower and, therefore, to immediately convene a
shareholder meeting for the purpose of revoking/appointing the Board of
Directors of the Borrower, all according to the Equity Pledge Agreement.

 

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12.6.4.           

In the event that it is judicially determined that the Lender has exercised the
Equity Pledge and transferred the shares of the Borrower via the Mandate to
Sell, not in accordance with the terms of this Agreement, the shares shall be
returned to Eastern Sphere and the Borrower shall be entitled to the higher of:
(i) a payment of `1,000,000 Euro from the Lender; or (ii) to retain the
remaining amount of the Loan.

 

13.          PRIORITY OF MEZZANINE LOANS

 

13.1.

Insufficient Funds

In the event that the Borrower has insufficient funds to discharge all the
amounts then due hereunder, such payment shall be applied towards the
obligations of the Borrower hereunder in the following order:

13.1.1.           first, in or towards payment of due and payable fees as set
out in Section ‎15 (expenses), if any;

 

13.1.2.           second, in or towards payment of due and payable late interest
and default interest (including any linkage differentials thereon); if any;

 

13.1.3.           third, in or towards payment of due and payable interest
(including any linkage differentials thereon) and Operation Fee, if any;

 

13.1.4.           fourth, in or towards repayment of overdue amounts of
principal of the Loan, if any;

 

13.1.5.           fifth, in or towards repayment of due and payable amounts of
principal (including any interest thereon), if any; and

 

13.1.6.           sixth, in or towards payment of any other sum due but unpaid
hereunder.

 

   The Lender may vary the order set out above.

14.          CALCULATIONS

14.1.

Accounts

As between the Borrower and the Lender, entries made into the accounts
maintained by the Lender in connection with this Agreement are prima facie
evidence of the matters to which they relate for the purpose of any litigation
or arbitration proceedings.

 

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14.2.

Certificates and determinations

Any certification or determination by the Lender of a rate or amount hereunder
shall set out the calculation in reasonable detail and will be prima facie
evidence of the matters to which it relates.

14.3.

Calculations

Any interest or fee accruing hereunder accrues from day to day and is calculated
on the basis of the actual number of days elapsed and a 365 day year.

15.          FEES AND EXPENSES

 

15.1.

Each party shall bear all costs and expenses (including legal fees) incurred by
it in connection with this Agreement including the enforcement of any of its
rights hereunder. All fees required to arrange for the securities shall be paid
by the Borrower.

16.          ASSIGNMENTS AND TRANSFERS

 

16.1.

Transfers by the Borrower

16.1.1.           

The Borrower must not permit or consent to any Transfer or disbursement of
shares of the Borrower unless permitted under this Agreement or in respect of
any change in the shareholder register of the Borrower by virtue of the
perfection and enforcement of any Security Interest in the Borrower’s shares.

 

16.1.2.           

Until payment in full of the Second Consideration Payment, BSC (via Eastern
Sphere) shall not Transfer more than 50% of its interests in the Borrower and
shall retain Control and management thereof. In any event of Transfer, such
Transfer shall be subject to transferee signing this Agreement and agreeing to
its terms, including, inter alia, with respect to the Mezzanine Securities.
Following payment in full of the Second Consideration Payment –BSC (via Eastern
Sphere) shall be entitled to Transfer any percentage of its interest in the
Borrower subject to prior written approval of the Transferee’s identity by the
Lender.

 

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16.1.3.           

Without derogating from Section ‎16.1.2 above, the Borrower and/or BSC and/or
Eastern Sphere may not Transfer any of their rights or obligations hereunder
without the prior consent of the Lender

 

16.2.

Transfers by Lender

Subject to obtaining any approvals required under Applicable Law (if any) and
subject to the Borrower’s right to Prepay the Loan under this section ‎16.2, the
Lender shall be entitled to Transfer any of its rights or obligations hereunder
(including any charge or pledge issued as a security for the repayment of the
Loans) without the prior consent of the Borrower, provided that the Lender shall
notify the Borrower in a written notice of any such intent of Transfer no fewer
than thirty (30) days prior to such Transfer. The Notice shall include
information regarding the identity of the transferee and its written commitment
to take on itself all rights and obligations under this agreement (“Notification
of Transfer”). In the event of a Transfer by the Lender, the Borrower shall have
the right to notify the Lender that it wishes to Prepay the Prepayment Fee,
within 30 days of receiving the Notification of Transfer (“Prepayment
Notification”). Should the Borrower deliver to the Lender a Prepayment
Notification and subject to the execution of such Prepayment including the
Prepayment Fee in full within 30 days, no Transfer shall occur.

17.          CONFIDENTIALITY

 

17.1.

No public announcement or other disclosure concerning the transactions
contemplated hereunder shall be made by the Parties save in a form agreed
between the Parties or otherwise as required by Applicable Law. To the extent an
announcement is required under Applicable Law, the parties shall use their best
efforts to agree the form of such announcement in due time and shall otherwise
fulfil its obligations as required by Applicable Law by providing the minimum
information required pursuant to such Applicable Law, at the discretion of the
disclosing party, acting reasonably.

17.2.

The Parties shall not disclose any information concerning the transactions
contemplated hereunder or the Plants and shall keep all such information
confidential.

The foregoing shall not apply with respect to:

17.2.1.           

information which is or becomes part of the public domain, other than as a
result of any breach of the obligations of the recipient Party under this
Agreement;

 

17.2.2.           

information explicitly approved for release by prior written authorization of
the Parties;

 

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17.2.3.           

information which is required to be disclosed by Applicable Law, provided that
the relevant Party shall provide the other parties with prior written notice of
the required disclosure and the disclosure shall be limited to the extent
expressly required;

 

17.2.4.           

disclosure of any information to the employees, agents, representatives,
advisors, current or potential investors of such party, provided that they are
subject to obligations to keep such information confidential.

18.          WAIVER OF CLAIMS

The Borrower shall protect, defend, indemnify, and hold the Lender and its
directors, employees and advisors harmless against and in respect of any and all
loss, liability, deficiency, damage, cost, or expense, or actions (including
reasonable legal fees and expenses) in respect of third party claims arising
from actions or omissions of the Borrower in relation to the Mezzanine Documents

19.          MISCELLANEOUS\

 

19.1.

Communications

All notices or other communications hereunder shall be in writing and shall be
given in person, by registered mail (registered international air mail if mailed
internationally), by an overnight courier service which obtains a receipt to
evidence delivery, or by facsimile transmission (provided that written
confirmation of receipt is provided) with a copy by mail, addressed as set forth
below:

 

If to Lender:  

If to the Borrower:

If to BSC:

If to Eastern Sphere:

 

 

 

or such other address as any party may designate to the other in accordance with
the aforesaid procedure. All communications delivered in person or by courier
service shall be deemed to have been given upon delivery, those given by
facsimile transmission shall be deemed given on the business day following
transmission with confirmed answer back, and all notices and other
communications sent by registered mail (or registered air mail if the posting is
international) shall be deemed given ten (10) days after posting.

All communications between the parties with respect to this Agreement shall be
in the English language.

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19.2.

Successors and Assignees

This Agreement shall be binding upon and inure to the benefit of and be
enforceable by the parties and their respective successors and assigns.

19.3.

Delays or Omissions; Waiver

The rights of a Party under this Agreement may be waived by such party only in
writing and specifically; the conduct of any one of the Parties shall not be
deemed a waiver of any of its rights pursuant to this Agreement and/or as a
waiver or consent on its part as to any breach or failure to meet any of the
terms of this Agreement or as an amendment hereto. A waiver by a Party in
respect of a breach by the other party of its obligations shall not be construed
as a justification or excuse for a further breach of its obligations.

No delay or omission to exercise any right, power, or remedy accruing to any
party hereto upon any breach or default by the other under this Agreement shall
impair any such right or remedy nor shall it be construed to be a waiver of any
such breach or default, or any acquiescence therein or in any similar breach or
default thereafter occurring.

19.4.

Amendment

This Agreement may be amended or modified only by a written document signed by
all the Parties hereto.

19.5.

Entire Agreement

This Agreement (together with the other documents contemplated hereby) contains
the entire understanding of the Parties with respect to its subject matter and
all prior and contemporaneous negotiations, discussions, agreements,
representations, commitments and understandings between them with respect
thereto not expressly contained herein shall be null and void in their entirety,
effective immediately with no further action required.

 

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19.6.

Severability

If a provision of this Agreement is or becomes illegal, invalid or unenforceable
in any jurisdiction, that shall not affect the validity or enforceability in
that jurisdiction of any other provision hereof or the validity or
enforceability in other jurisdictions of that or any other provision hereof.

Where provisions of any Applicable Law resulting in such illegality, invalidity
or unenforceability may be waived, they are hereby waived by each party to the
full extent permitted so that this Agreement shall be deemed valid and binding
agreements, in each case enforceable in accordance with its terms.

19.7.

Counterparts, Facsimile Signatures

This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original but all of which together shall constitute one and
the same instrument. A signed Agreement received by a party hereto via facsimile
will be deemed an original, and binding upon the party who signed it.

19.8.

Agent for Service of Process

BSC and the Borrower hereby appoint Eastern Sphere, with an office as at 35
Assuta St. Even Yehuda Israel, 40500, Israel as its agent to receive on behalf
of BSC and/or the Borrower and/or Eastern Sphere, service of copies of the
summons and complaint and any other process which may be served in any action or
proceeding in Israel in connection with this Agreement. Such service may be made
by post or personal delivery, care of Eastern Sphere at the above address, and
BSC and the Borrower hereby authorizes and directs Eastern Sphere to accept such
service on its behalf and agrees that failure by such agent to notify either
BSC, Eastern Sphere or the Borrower of the process will not invalidate the
proceedings concerned.

19.9.

Governing Law, Disputes and Venue

19.9.1.           

This Agreement shall be governed by and construed in accordance with the laws of
the State of Israel without regard to conflicts of laws or the choice of law
principles of any jurisdiction and without the need of any party to establish
the reasonableness of the relationship between such laws and the subject matter
of this Agreement.

 

19.9.2.           

All disputes, controversies, claims or differences between the Parties arising
out of, in relation to or in connection with the Agreement, shall be referred to
the arbitration upon the request of either Party, before the Arbitrator.

 

 

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19.9.3.           

The arbitration shall be conducted in accordance with the Arbitration Law,
5728-1968 of Israel and shall be held as promptly as possible in Tel Aviv and at
such time as the Arbitrator may determine. This Clause constitutes an
arbitration agreement of the Parties as defined in the aforesaid Arbitration
Law.

 

19.9.4.           

The Arbitrator shall resolve the dispute within 90 days. All arbitration
proceedings shall be conducted in the Hebrew language (unless agreed otherwise
by the Parties). The Arbitrator shall not be bound by the rules of evidence nor
shall he/she be bound by procedure laws, but he/she shall be bound by
substantive law and he/she will give reasons for his/her decision. The
Arbitrator shall be entitled to make interim or temporary awards whether
mandatory or prohibitive. The decision of the Arbitrator shall constitute an
award but shall be subject to appeal in accordance with Section 29B of the
Arbitration Law. The costs of the arbitral process, including fees and expenses
of the Arbitrator, shall be borne as shall be decided by the Arbitrator.

 

19.10.

Further Actions

At any time and from time to time, each party agrees, without further
consideration, to take such actions and to execute and deliver such documents as
may be reasonably necessary to effectuate the purposes of this Agreement.

19.11.

No Third-Party Beneficiaries

Nothing in this Agreement shall create or confer upon any person or entity,
other than the parties hereto or their respective successors and permitted
assigns, any rights, remedies, obligations or liabilities.

 

***

 

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[Signature Page of Long Term Mezzanine Loan Agreement]

 

IN WITNESS WHEREOF, this Agreement has been duly executed on the date herein
above set forth.

 

/s/ Roy Amitzur

Blue Sphere Corporation

 

 

 

/s/ Nimrod Goor

Helios E.M. Investments L.P

 

 

Name: Roy Amitzur   Name: Nimrod Goor Title:  Executive V.P.   Title:  General
Partner            

/s/ Roy Amitzur

Bluesphere Italy SRL

 

 

 

/s/ Roy Amitzur

Eastern Sphere Ltd.

 

Name: Roy Amitzur   Name: Roy Amitzur Title:   Executive V.P.  
Title:   Executive V.P.