Blue Sphere Corporation 8-K

Exhibit 10.1

DEBENTURE REFINANCE AND PURCHASE AGREEMENT

THIS DEBENTURE REFINANCE AND PURCHASE AGREEMENT (this “ Agreement ”), dated as of May 26, 2017, by and between Blue Sphere Corporation, a Nevada corporation (the “ Company ”), Mstead Ltd, a corporation formed under the laws of the Republic of Mauritius (“ Mstead ”), the undersigned debenture holders (the “ Holders ”), and Cliffordale Capital, LLC, a New York limited liability company and one of the Holders (the “ Investor ”).

WHEREAS, the Company issued, in total, six (6) Senior Debentures, dated December 23, 2015, to the Holders in the aggregate principal amount of $3,000,000 (collectively, the “ Debentures ”), each of which bears interest at a rate of 11% per annum (“ Interest ”) and matures on December 22, 2017;

WHEREAS, the Company issued to each Holder a Senior Debenture, dated December 23, 2015, numbered and in the principal amount as set forth on the signature page hereto (the “ Debenture ”);

WHEREAS, on or about March 23, 2017, certain Holders and the Company amended the Debentures, as more fully described on that certain First Amendment to Senior Debenture;

WHEREAS, Mstead has expressed an interest in purchasing directly from certain Holders (the “ Sellers ”) $2,000,000 of the principal face amount of the Debentures (the “ Debenture Purchase ”), and exchanging such Debentures for newly issued securities of the Company consisting of the following (a) a Senior Subordinated Convertible Debenture, the form of which is attached hereto as Exhibit A (the “ New Debentures ”), having a face value of $2,000,000 (the “ New Mstead Debenture ”); and (b) a 5-year warrant (the “ New Mstead Warrant ”) to purchase up to 150,000 shares of the Company’s common stock, $0.001 par value per share (“ Common Stock ”), the form of which is attached hereto as Exhibit B (the “ New Warrants ”, together with the New Debentures, the “ New Securities ”);

WHEREAS , the Company has expressed an interest in issuing, and the Investor, has expressed an interest in receiving, in exchange for his Debenture in the principal amount of $1,000,000, (a) a New Debenture having a face value of $1,000,000 (the “ New Investor Debenture ”); and (b) a New Warrant to purchase up to 75,000 shares of Common Stock (the “ New Investor Warrant ”);

WHEREAS , in connection with the Debenture Purchase, the Sellers and Mstead are executing and delivering this Agreement in reliance upon an exemption from securities registration afforded by the provisions of Section 4(7) of the Securities Act of 1933, as amended (the “ Securities Act ”);

WHEREAS , in connection with the purchase and sale of the New Securities, the Company, the Investor and Mstead are executing and delivering this Agreement in reliance upon an exemption from securities registration afforded by the provisions of Section 4(2) and/or Regulation D (“ Regulation D ”) promulgated by the United States Securities and Exchange Commission (the “ SEC ”) under the Securities Act;

WHEREAS , the Company, the Holders, the Investor and Mstead desire that, upon the terms and subject to the conditions contained herein, the Company shall issue the New Debentures, New Warrants and a Pledge Agreement, the form of which is attached hereto as Exhibit C (the “ Pledge Agreement ”). The New Debentures, New Warrants, and any shares of Common Stock issuable upon (a) conversion of the New Debentures (“ New Debenture Shares ”) and (b) exercise of the New Warrants (“ New Warrant Shares ”) shall be referred to herein as the “ New Securities ”. The New Debentures, New Warrants, Pledge Agreement and this Agreement shall be collectively referred to herein as the “ Transaction Documents .”

NOW, THEREFORE , in consideration of the mutual covenants and other agreements contained in this Agreement, the parties hereby agree as follows:

1.             Debentures .

(a)           Purchase and Sale. Upon the terms and subject to the conditions of this Agreement, at the Closing (as defined below), each Seller set forth on Schedule I attached hereto agrees to sell the Debenture set forth next to such Holder’s name on Schedule I to Mstead, and Mstead agrees to purchase such Debentures from the Holders representing, in the aggregate, a principal amount of $2,000,000. The Holders and their respective principal amount of Debentures being purchased are listed on Schedule I.

(b)           Interest and Prepay Premium. In connection with the purchase and sale of the Debentures as provided in Section 1(a) above, the Company shall, on the next interest payment date set forth in the Debentures, pay to each Holder all accrued and unpaid interest on such Holder’s Debenture through the Closing Date (as defined below).

(c)           Seller Representations and Warranties. Each Seller, severally and not jointly, hereby represents and warrants to Mstead as follows:

(i)            Ownership of Debentures . Such Seller owns all of its Debentures as set forth on Schedule I hereto free and clear of all liens, pledges, mortgages, security interests, charges, restrictions, adverse claims or other encumbrances of any kind or nature whatsoever (“ Encumbrances ”), and, as a result of the Debenture Purchase, Mstead will, at the Closing, acquire good, valid and marketable title to the Debenture free and clear of all Encumbrances, other than those that may be created or incurred by Mstead, and at the Closing. Such Seller has not granted any power of attorney with respect to its Debenture and no such power of attorney shall be granted by such Seller.

(ii)           Authority Relative to this Agreement . Such Seller has all requisite right, power and authority to execute and deliver the Agreement to which such Seller is a party, to perform its obligations hereunder and to consummate the transactions contemplated hereby and shall have all such requisite right, power and authority as of the Closing. This Agreement has been duly and validly executed and delivered by such Seller and, assuming this Agreement has been duly authorized, executed and delivered by the other parties hereto, this Agreement constitutes a legal, valid and binding obligation of such Seller, enforceable against such Seller in accordance with the terms contained herein.

(iii)          Consents and Approvals; No Violations . The execution or delivery of this Agreement by such Seller, the performance by such Seller of any of such Seller’s obligations hereunder will not (a) require such Seller to obtain or make any consent, waiver, approval, exemption, declaration, license, authorization or permit of, or registration or filing with or notification or (b) require a consent under, result in a material violation or material breach of, constitute (with or without notice or lapse of time or both) a material default (or give rise to any right of termination, cancellation, amendment or acceleration or any obligation) under, or result in the creation of any Encumbrance on any of the properties or assets of such Seller pursuant to, any of the terms, conditions or provisions of any contract to which such Seller is a party or by which such Seller is bound.

(iv)         No General Solicitation . Neither such Seller, nor any of its affiliates, nor any person or entity acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D under the Securities Act) in connection with the offer or sale of the Debentures.

(v)          No Disqualification Events . Neither such Seller, nor any person that has been or will be paid (directly or indirectly) remuneration or a commission for their participation in the offer or sale of the Debentures, including solicitation of purchasers for such Seller is subject is subject to any of the “Bad Actor” disqualifications described in Rule 506(d)(1) under the Securities Act or is subject to a statutory disqualification described under Section 3(a)(39) of the Securities Exchange Act of 1934, as amended.

(vi)        Such Seller is not an issuer or a subsidiary, either directly or indirectly, of the Company.

(vii)        Reliance .   The foregoing representations and warranties in this Section 1(c) are made by such Seller as of the date hereof with the knowledge and expectation that Mstead and the Company are relying upon them.

2.             Purchase and Sale of New Securities .

(a)         Upon the terms and subject to the conditions set forth in this Agreement and in consideration of the aggregate principal amount delivered by Mstead to all of the Sellers as set forth in Schedule I (the “ Principal Amount ”), the Company hereby agrees to issue and deliver the New Mstead Debenture and the New Mstead Warrants to Mstead in exchange for the Debentures purchased from the Sellers as set forth in Schedule I, free of all Encumbrances, and Mstead hereby agrees to accept such New Securities free of all Encumbrances.

(b)         Upon the terms and subject to the conditions set forth in this Agreement, and in exchange for the Investor’s Debenture, the Company hereby agrees to issue and deliver the New Investor Debenture and the New Investor Warrants to the Investor, free of all Encumbrances, and the Investor hereby agrees to accept such New Securities free of all Encumbrances.

3.             Closing . Subject to the terms and conditions of this Agreement, the closing of the Debenture Purchase and the purchase of the New Securities (the “ Closing ”) shall take place no later than two (2) business days after the last of the conditions set forth in Section 3(a) through Section 3(c) have been satisfied or waived (other than conditions which, by their nature, are to be satisfied on the Closing Date), or at such other time or on such other date as the parties hereto may mutually agree upon in writing (the day on which the Closing takes place being the “ Closing Date ”).

(a)          Company Closing Deliverables . At or prior to the Closing, the Company shall deliver to the other parties hereto, as applicable, the following:

(i)          to all parties hereto, a certificate, dated the Closing Date and signed by a duly authorized officer of the Company, that each of the conditions below have been satisfied:

(1)       the Company has completed the listing of its Common Stock on The NASDAQ Capital Market (the “ Uplist ”) in connection with its Company’s public offering of its Common Stock and warrants to purchase shares of Common Stock (the “ Public Offering ”), as fully contemplated in the Company’s Registration Statement on Form S-1, as amended, filed with the SEC under Registration No. 333-215110;

(2)       the Company has raised at least USD $12 million in capital, in the aggregate pursuant to the Public Offering; and

(3)       the Company has met all conditions necessary to the Closing;

(ii)         to Mstead, written notice from Maxim Group, LLC, confirming that the Company has completed the Uplist and has raised at least USD $12 million in capital, in the aggregate, pursuant to the Public Offering;

(i)          to Mstead, a copy by email of the New Mstead Debenture and New Mstead Warrants purchased by Mstead hereby, and notice (including tracking information) that the New Mstead Debenture and New Mstead Warrants have been sent by registered international delivery service to Mstead at the address set forth in Section 11; and

(iv)         to the Investor, a copy by email of the New Investor Debenture and the New Investor Warrants purchased by the Investor hereby, and notice (including tracking information) that the New Investor Debenture and the New Investor Warrants have been sent by registered or certified mail to the Investor at the address set forth in Section 11.

(b)          Mstead Closing Deliverables . At or prior to the Closing, Mstead shall deliver to the other parties hereto a certificate, dated the Closing Date and signed by a duly authorized officer of Mstead, that each of the conditions below have been satisfied:

(i)           Mstead has participated in the Public Offering;

(ii)          the Principal Amount has been deposited by Mstead into all of the bank accounts of the Sellers, as specified by the Sellers by separate payment instruction; and

(iii)         Mstead has met all conditions necessary to the Closing.

(c)          Investor and Seller Closing Deliverables . At or prior to the Closing, the Investor and each Seller shall each deliver to the other parties hereto, as applicable, the following:

(i)           to all parties hereto, a signed notice that it has met all conditions necessary to the Closing; and

(ii)          to the Company, the original version of the Investor’s Debenture or Seller’s Debenture, as applicable.

4.             Mstead and Investor Representations and Warranties . Each of Mstead and the Investor, severally and not jointly, hereby represents and warrants to the Company and, solely in the case of Mstead, the Sellers, that:

(a)          Standing . It has the legal capacity and power to enter into this Agreement.

(b)          Authorization and Power . It has the requisite power and authority to enter into and perform this Agreement and accept the New Debenture and New Warrants acquired by it. The execution, delivery and performance of this Agreement by it, and the consummation by it of the transactions contemplated hereby, have been duly authorized by all necessary action, and no further consent or authorization is required. This Agreement has been duly authorized, executed and delivered by it and constitutes, or shall constitute, when executed and delivered, a valid and binding obligation of it enforceable against it in accordance with the terms hereof.

(c)          Accredited Investor Status . It is, and reasonably believes it will be at the time of the conversion of the New Debentures and exercise of the New Warrants acquired by it, an “accredited investor,” as such term is defined in Regulation D promulgated by the SEC under the Securities Act, is experienced in investments and business matters, has made investments of a speculative nature and has purchased securities of publicly-owned companies listed on the London Stock Exchange and Johannesburg Stock Exchange in private placements in the past and, with its representatives, has such knowledge and experience in financial, tax and other business matters as to enable it to utilize the information made available by the Company to evaluate the merits and risks of, and to make an informed investment decision with respect to, the proposed purchase, which it hereby agrees represents a speculative investment. It has the authority and is duly and legally qualified to purchase and own the New Securities acquired by it. It acknowledges that an investment in the Company’s New Debentures and New Securities is highly speculate and it is able to bear the risk of such investment for an indefinite period and to afford a complete loss thereof.

(d)          Purchase of New Securities . It is purchasing the New Securities acquired by it for its own account for investment and not with a view toward, or for resale in connection with, the public sale or any distribution thereof in violation of the Securities Act or any applicable state securities law, and has no direct or indirect arrangement or understandings with any other person or entity to distribute, or regarding the distribution of, the New Debenture Shares and New Warrant Shares.

(e)           Compliance with Securities Act . It understands and agrees that the New Securities have not been registered under the Securities Act or any applicable state securities laws by reason of their issuance in a transaction that does not require registration under the Securities Act (based in part on the accuracy of its representations and warranties contained herein), and that such New Securities must be held indefinitely unless a subsequent disposition is registered under the Securities Act or any applicable state securities laws or is exempt from such registration.

(f)           Share Legend . The New Securities shall bear the following or similar legend:

THE SECURITIES WHICH ARE REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNTIL A REGISTRATION STATEMENT WITH RESPECT THERETO IS DECLARED EFFECTIVE UNDER SUCH ACT, OR THE COMPANY RECEIVES AN OPINION OF COUNSEL FOR THE COMPANY THAT AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT IS AVAILABLE.

(g)          Communication of Offer . At no time was it presented with or solicited by any leaflet, newspaper or magazine article, radio or television advertisement, or any other form of general advertising or solicited or invited to attend a promotional meeting otherwise than in connection and concurrently with such communicated offer.

(h)          No Governmental Endorsement . It understands that no United States federal or state agency or any other governmental or state agency has passed on or made recommendations or endorsement of the New Securities, or the suitability of the investment in the New Securities, nor have such authorities passed upon or endorsed the merits of the offering of the New Securities.

(i)           Receipt of Information . It believes it has received all the information it considers necessary or appropriate for deciding whether to invest in and to accept the New Securities acquired by it. It further represents that through its representatives it has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of the New Securities and the business, properties and financial condition of the Company and to obtain additional information (to the extent the Company possessed such information or could acquire it without unreasonable effort or expense) necessary to verify the accuracy of any information furnished to it or to which it had access.

(j)           No Market Manipulation . It has not taken, and will not take, directly or indirectly, any action designed to, or that might reasonably be expected to, cause or result in stabilization or manipulation of the price of the Common Stock, to facilitate the sale or resale of the New Securities or affect the price at which the New Securities may be issued or resold.

(k)           Risk of Loss . It acknowledges that there may be no market for the New Securities and that it may not be able to sell or dispose of the New Securities acquired by it; it has liquid assets sufficient to assure that the illiquid nature of the New Securities will cause no undue financial difficulties and that, after purchasing the New Securities acquired by it, it will be able to provide for any foreseeable current needs and possible personal contingencies. It is financially able to bear the economic risk of this investment, including the ability to hold the New Securities acquired by it indefinitely or to afford a complete loss of its investment in the New Securities acquired by it.

(l)          (i) It was not organized or reorganized for the specific purpose of acquiring the New Securities, (ii) it has the full power and authority to execute this Agreement on behalf of itself and to make the representations and warranties made herein on its behalf, and (iii) this investment in the Company has been affirmatively authorized, if required, by the governing board of such entity and is not prohibited by the governing documents of the entity.

5.             Company Representations and Warranties . The Company represents and warrants to, and agrees with, Mstead and the Investor that:

(a)           Due Incorporation . The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Nevada.

(b)          Authority; Enforceability . The Transaction Documents have been duly authorized, executed and delivered by the Company and are the valid and binding agreements of the Company, enforceable in accordance with their terms, except as may be limited by bankruptcy, insolvency, moratorium or other similar laws affecting the enforcement of creditors’ rights generally, or principles of equity. The Company has full corporate power and authority necessary to enter into and deliver the Transaction Documents and to perform its obligations thereunder.

(c)          Consents . No consent, approval, authorization or order of any court, governmental agency or body having jurisdiction over the Company or of any other person is required for the execution by the Company of the Transaction Documents and compliance and performance by the Company of its obligations hereunder and thereunder, including, without limitation, the issuance of the Securities.

(d)          No Violation or Conflict . Neither the issuance of the New Securities nor the entry into and performance of the Company’s obligations under the Transaction Documents will:

(i)           violate, conflict with, result in a breach of, or constitute a default (or an event which with the giving of notice or the lapse of time or both would be reasonably likely to constitute a default) under (a) the charter or bylaws of the Company or (b) any decree, judgment, order or determination applicable to the Company of any court, governmental agency or body having jurisdiction over the Company or over the properties or assets of the Company; or

(ii)          result in the creation or imposition of any lien, charge or Encumbrance upon the Shares except in favor of Mstead as described herein;

(e)          The New Debenture Shares and New Warrant Shares . Upon issuance, the New Debenture Shares and the New Warrant Shares:

(i)           shall be free and clear of any security interests, liens, claims or other Encumbrances, subject only to restrictions upon transfer under the Securities Act and any applicable state securities laws;

(ii)          shall have been duly and validly issued, fully paid and non-assessable; and

(iii)         will not subject the holders thereof to personal liability by reason of being such holders.

(f)          No General Solicitation . Neither the Company, nor any of its affiliates, nor any person or entity acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D under the Securities Act) in connection with the offer or sale of the Securities.

(g)         The Company is engaged in business, is not in the organizational stage or in bankruptcy or receivership, and is not a blank check, blind pool, or shell company that has no specific business plan or purposes or has indicated that the Company’s primary business plan is to engage in a merger or combination of the business with, or an acquisition of, an unidentified person.

(h)         The Debentures have been authorized and outstanding for at least 90 days prior to the date hereof. The Debentures do not constitute the whole or part of an unsold allotment to, or a subscription or participation by, a broker dealer as an underwriter of the Debentures or a redistribution.

(i)          Investment Company . The Company is not an “investment company” within the meaning of the Investment Company Act of 1940, as amended.

6.             Board Member . After the Closing Date and during such time as Mstead owns or has a right to own five percent (5%) or more of the Company’s Common Stock, on a fully diluted basis (“ Minimum Threshold ”), Mstead shall have the right to designate one (1) individual as a member (the “ Mstead Board Member ”) of the Company’s Board of Directors (the “ Board ”); provided, however that, in accordance with Nasdaq Corporate Governance Rules, if Mstead’s beneficial ownership position declines below the Minimum Threshold whether through sales by Mstead or additional issuances by the Company, then Mstead’s right to designate the Mstead Board Member, shall terminate and the Mstead Board Member shall not stand for re-election at the next election of the Board unless nominated by a party unrelated to Mstead.

7.             Participation Rights . If, during a period that Mstead and/or the Investor, as the case may be, holds shares of Common Stock, rights to acquire shares Common Stock, or other equity linked securities of the Company, the Company grants, issues or sells any options, convertible securities or rights to purchase stock, warrants, securities or other equity linked securities (the “ Subsequent Financing ”), then, in each such case, Mstead and/or the Investor, as the case may be, shall have the right to participate on a fully-diluted (assuming the full conversion or exercise of the New Debentures and the New Warrants then outstanding and held by Mstead and/or the Investor, as the case may be) pro rata basis to acquire up to an aggregate maximum of thirty-three percent (33%) of the securities sold in such Subsequent Financing, upon the terms and conditions applicable to any such other investors.

8.             Registration Rights . The Company shall, within one hundred and eighty (180) days after the date hereof (the “ Filing Date ”), use its reasonable best efforts to prepare and file with the SEC a registration statement covering the New Debenture Shares and the New Warrant Shares for an offering to be made on a continuous basis pursuant to Rule 415; provided, however, that the Company shall have no obligation to file such registration statement pursuant to this Section 8 if the New Debenture Shares and New Warrant Shares are freely tradeable pursuant to Rule 144. The Company shall use its reasonable best efforts to cause such registration statement to be declared effective under the Securities Act as promptly as possible after the Filing Date.

9.             Company Fees . The parties hereto represent to the other that there are no parties entitled to receive fees, commissions, finder’s fees, due diligence fees or similar payments in connection with the consummation of the transactions contemplated hereby, other than (a) a five percent (5%) placement fee payable in cash by the Company to Maxim Group, LLC, as placement agent; (b) a five percent (5%) commitment fee payable in cash by the Company to Mstead; (c) a five percent (5%) structuring fee payable in cash by the Company to Mstead; and (d) a ten-thousand dollar ($10,000) extension fee payable by the Company to the Investor. The Company agrees to pay the foregoing fees on the Closing Date, which in the case of Mstead, shall be payable as an offset against Mstead’s subscription in the Public Offering.

10.           Covenants Regarding Indemnification . Each party hereto agrees to indemnify, hold harmless, reimburse and defend the other parties and the other parties’ officers, directors, agents, counsel, affiliates, members, managers, control persons, and principal shareholders, as applicable, against any claim, cost, expense, liability, obligation, loss or damage (including reasonable legal fees) of any nature, incurred by or imposed upon the indemnified party or any such person which results, arises out of or is based upon (a) any breach of any representation or warranty by the indemnifying party in this Agreement or (b) any breach or default in performance by the indemnifying party of this Agreement or any covenant or undertaking to be performed by the indemnifying party hereto.

11.           Miscellaneous .

(a)          Notices . All notices, requests, demands, claims and other communications hereunder shall be in writing and shall be delivered by certified or registered mail (first class postage pre-paid), guaranteed overnight delivery, or email transmission if such transmission is confirmed by delivery by certified or registered mail (first class postage pre-paid) or guaranteed overnight delivery, to the following addresses (or to such other addresses which such party shall subsequently designate in writing to the other party):

(i)           if to the Company: [ ]

with a copy to: [ ]

(ii)          if to Mstead: [ ]                    

(ii)          if to Investor: [ ]               

(iii)         if to Holder, to the address set forth next to its name on the signature page hereto.

(b)          Entire Agreement . This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and may be amended only by a writing executed by both parties hereto. Neither the Company nor Holder has relied on any representations not contained or referred to in this Agreement and the Offering Summary delivered herewith.

(c)          Counterparts/Execution . This Agreement may be executed in any number of counterparts and by the different signatories hereto on separate counterparts, each of which, when so executed, shall be deemed an original, but all such counterparts shall constitute but one and the same instrument. This Agreement may be executed by facsimile transmission, PDF, electronic signature or other similar electronic means with the same force and effect as if such signature page were an original thereof.

(d)          Law Governing this Agreement and Disputes . This Agreement shall be governed by and construed in accordance with the laws of the State of Nevada without regard to principles of conflicts of laws. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

The parties to this Agreement shall submit all disputes arising under this Debenture to arbitration in New York, New York before a single arbitrator of the American Arbitration Association (the “ AAA ”). The arbitrator shall be selected by application of the rules of the AAA, or by mutual agreement of the parties, except that such arbitrator shall be an attorney admitted to practice law in the State of New York. No party hereto will challenge the jurisdiction or venue provisions as provided in this section. Nothing in this section shall limit the Holder’s right to obtain an injunction for a breach of this Agreement from a court of law. Any injunction obtained shall remain in full force and effect until the arbitrator fully adjudicates the dispute.

(e)          Severability . In the event that any provision of this Agreement or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement.

(f)          Counsel; Ambiguities . Each party and its counsel have participated, or have had the opportunity to participate, fully in the review of this Agreement and the other Transaction Documents. The parties understand and agree that any rule of construction to the effect that ambiguities are to be resolved against the drafting party shall not apply in interpreting the Transaction Documents.

(g)          Expenses . The Company, the Holder and Mstead will each bear their own legal and other expenses with respect to the transactions contemplated herein.

(h)          Headings . The headings of the various sections and paragraphs of this Agreement have been inserted only for the purposes of convenience; such captions are not a part of this Agreement and shall not be deemed in any manner to modify, explain, enlarge or restrict any of the provisions of this Agreement.

[Signature Page Follows]

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed on and as of the date set forth above.

[ Signature Page of Holders Follows ]

[Signature Page to Debenture Refinance and Purchase Agreement]

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed on and as of the date set forth above.

Holder:

[ Signatures Continue on Next Page ]

[Signature Page to Debenture Refinance and Purchase Agreement]

Blue Sphere Corporation 8-K

FOR VALUE RECEIVED, BLUE SPHERE CORPORATION, a Nevada corporation (the “ Company ”), as of [___], 2017 (the “ Issuance Date ”), hereby unconditionally promises to pay subject to the provisions stated herein to the order of [______] (“ Holder ”), in lawful money of and within the United States of America and in immediately available funds, up to USD $[_____] (the “ Principal Amount ”), together with accrued and unpaid interest (“ Interest ”) thereon, at December 31, 2018 (the “ Maturity Date ”).

This Convertible Senior Debenture (this “ Debenture ”) and all other identical Convertible Senior Debentures dated the date hereof (collectively, the “ Debentures ”) are issued in connection with and in accordance with a Debenture Refinance and Purchase Agreement, dated [ ], 2017, by and among the Company, the debenture holders signatory thereto, and Mstead Ltd (the “ Refinance Agreement ”), a copy of which agreement is available for inspection at the Company’s principal office. Notwithstanding any provision to the contrary contained herein, this Debenture is subject and entitled to certain terms, conditions, covenants and agreements contained in the Refinance Agreement. Any transferee of this Debenture, by its acceptance hereof, assumes the obligations of the Holder in the Refinance Agreement with respect to the conditions and procedures for transfer of this Debenture. Reference to the Refinance Agreement shall in no way impair the absolute and unconditional obligation of the Company to pay both Principal Amount and Interest.

(a)           Repayment of the Principal Amount by the Company to the Holder shall be made in full no later than the Maturity Date; provided that before making any repayment that will occur before the Maturity Date, the Company shall provide notice to the Holder at least five (5) business days prior to the date specified for repayment in such notice, and the Holder shall have the right, during such period and through the date immediately preceding the date specified for such repayment, to deliver a Conversion Notice pursuant to Section 2 hereof. Any repayment of the Principal Amount by the Company pursuant to this Section 1(a) must be in full, unless otherwise agreed to in writing by the Holder.

(b)           Interest shall accrue on the outstanding principal balance of this Debenture for the period beginning on the Issuance Date of this Debenture through and including the Maturity Date, unless redeemed pursuant to the terms hereof, at a rate of eleven percent (11%) per annum. All Interest payable under this Debenture shall be paid quarterly in arrears on or before the fifteenth (15th) day of each month following the end of the calendar quarter throughout the term of this Debenture Agreement with the first interest payment due at the end of the first calendar quarter after closing, and each calendar quarter thereafter.

(c)           This Debenture is, for so long as it is outstanding, subject to the terms and conditions set forth in the Pledge Agreement between the Company and Subscriber dated as of the date hereof (the “ Pledge Agreement ”).

(a)           On or after the six (6) month anniversary of the Issuance Date, Holder may, at any time that is not less than ten (10) days prior to the Maturity Date, deliver a dated and signed notice to the Company (a “ Conversion Notice ”), a copy of which is attached hereto, of its election to convert some or all of the outstanding Principal Amount and accrued but unpaid interest into shares of the Company’s common stock, $0.001 par value per share (“ Common Stock ”). The Holder shall have the right to deliver one (1) or more Conversion Notices to the Company in accordance with this Section 2.

(b)           The “ Conversion Price ” shall be the lesser of (i) 80% of the price per combination of Common Stock and warrants to purchase shares of Common Stock offered in the Public Offering, less the closing price of such warrants on the first day of the Uplist, or (ii) an amount that is equal to 80% of the volume weighted average price (VWAP), calculated using the five (5) trading days immediately following the Uplist.

(c)           For the purposes of this Debenture, the “ Uplist ” shall mean the initial listing on [ ], 2017 of the Company’s Common Stock on The NASDAQ Capital Market, and the “ Public Offering ” shall mean the Company’s public offering of its Common Stock and warrants to purchase shares of Common Stock, as fully contemplated in the Company’s Registration Statement on Form S-1, as amended, filed with the U.S. Securities and Exchange Commission under Registration No. 333-215110.

(d)           The number of shares of Common Stock that shall be issuable upon any conversion pursuant to a Conversion Notice shall equal the number derived by dividing the amount of the Principal Amount and accrued but unpaid interest that the Holder elects to convert to Common Stock (the “ Conversion Amount ”) by the Conversion Price. The Conversion Notice shall be deemed delivered to the Company on a date based on the form of delivery, in each case in accordance with Section 9.

(e)           The issuance of shares of the Company’s Common Stock and delivery of certificates representing such shares shall be made promptly following the Company’s receipt of the Conversion Notice, and without charge to the Holder. Immediately upon the issuance of shares of Common Stock pursuant to a Conversion Notice, the Principal Amount of the Debenture shall be automatically amended to subtract the Principal Amount of the Debenture converted, as set forth on such Conversion Notice.

(f)            If a timely Conversion Notice is not received by the Company, the Debenture shall be subject to repayment as set forth in Section 1(a). If a Conversion Notice is received by the Company after the deadline for such notice, the Company may, in its sole discretion, waive the deadline for such notice, or deem the Debenture to be subject to repayment as set forth in Section 1(a).

(g)           Immediately upon the satisfaction of the Principal Amount and all interest due under the Debenture, whether such satisfaction is by conversion, repayment, or a combination of both, the Debenture and any and all obligations of the Company thereunder, including the Pledge Agreement, shall be automatically terminated.

3.             Place of Payment; Application of Payments . All Principal Amount and Interest due hereunder shall be payable to Holder in United States Dollars to such bank account as shall be designated by Holder in immediately available funds or as otherwise specified to the Company in writing. Payment on this Debenture shall be applied first to any expenses of collection, then to accrued interest, and thereafter to the outstanding principal balance hereof.

4.             Default . The occurrence of any of the following events of default shall each constitute and be an “ Event of Default ” under this Debenture:

(a)           Bankruptcy or insolvency of the Company;

(b)           The Company’s failure to pay any of the Principal Amount due under this Debenture on the date the same becomes due and payable, or any accrued Interest or other amounts due under this Debenture after the same becomes due and payable;

(c)           Breach of any material covenant or agreement contained in this Debenture and such breach remains uncured for a period of fifteen (15) days after written notice thereof is received by the Company from Holder;

(d)           The dissolution of the Company or any vote in favor thereof by the board of directors (or similar governing body) and/stockholders of the Company; and

(e)           The Company makes an assignment for the benefit of creditors, or files an application for the appointment of a receiver or similar official with respect to it or any substantial part of its assets.

Upon the occurrence of an Event of Default, the unpaid Principal Amount, all unpaid accrued Interest thereon and all other amounts owing hereunder may, at the option of Holder, become immediately due and payable to Holder, provided, however, that upon the occurrence of an Event of Default described in Section 4(a), all indebtedness of the Company to Holder shall become immediately due and payable without any action of Holder.

5.             Adjustments .

(a)            Adjustment for Subdivisions, Combinations and Other Issuances . If the outstanding shares of Common Stock are divided into a greater number of shares, by forward stock split or otherwise, if a dividend in stock is paid on the Common Stock, or if the outstanding shares of Common Stock are combined into a smaller number of shares of Common Stock, by reverse stock split or otherwise, then the Conversion Price will be proportionately adjusted. The adjustments provided for in this Section 5(a) will be made with the intent and, as nearly as practicable, the effect that neither the percentage of the total equity of the Company obtainable on conversion of the Debenture nor the price payable for such percentage upon such exercise will be affected by any event described in this Section 5(a).

(b)           Adjustment for Merger, Consolidation, Reclassification, Reorganization, Etc . In case of any change in Common Stock through merger, consolidation, reclassification, reorganization, partial or complete liquidation, purchase of all or substantially all the assets of the Company, or other change in the capital structure of the Company, then, as a condition of such change, lawful and adequate provision will be made so that the Holder will have the right thereafter to receive upon conversion of this Debenture the kind and amount of shares of stock or other securities or property to which the Holder would have been entitled if, immediately prior to such event, the Holder had held the number of shares then-obtainable upon the conversion of this Debenture. In any such case, appropriate adjustment will be made in the application of the provisions set forth herein with respect to the rights and interest thereafter of the Holder, to the end that the provisions set forth herein will thereafter be applicable, as nearly as reasonably may be, in relation to any shares of stock deliverable upon the conversion of this Debenture. The Company will not permit any change in its capital structure to occur unless the issuer of the shares of stock or other securities to be received by the Holder agrees to comply with the provisions of this Debenture.

(c)           Adjustment Upon Issuance of Common Stock .

(i)           Except as provided in Section 5(c)(ii) and except in the case of an event described in either Section 5(c)(iv) or Section 5(c)(v), if the Company shall, at any time or from time to time after the Issuance Date, issue or sell, or in accordance with Section 5(c)(iii) is deemed to have issued or sold, any shares of Common Stock without consideration or for consideration per share less than the Conversion Price in effect immediately prior to such issuance or sale (or deemed issuance or sale), then immediately upon such issuance or sale (or deemed issuance or sale), the Conversion Price in effect immediately prior to such issuance or sale (or deemed issuance or sale) shall be reduced (and in no event increased) to a Conversion Price equal to the quotient obtained by dividing:

(A)       the sum of (1) the product obtained by multiplying the Common Stock Deemed Outstanding immediately prior to such issuance or sale (or deemed issuance or sale) by the Conversion Price then in effect plus (2) the aggregate consideration, if any, received by the Company upon such issuance or sale (or deemed issuance or sale); by

(B)       the sum of (1) the Common Stock Deemed Outstanding immediately prior to such issuance or sale (or deemed issuance or sale) plus (2) the aggregate number of shares of Common Stock issued or sold (or deemed issued or sold) by the Company in such issuance or sale (or deemed issuance or sale).

(ii)          Anything herein to the contrary notwithstanding, there shall be no adjustment to the Conversion Price with respect to any Excluded Issuance.

(iii)         For purposes of determining the adjusted Conversion Price under Section 5(c)(i) hereof, the following shall be applicable:

(A)       If the Company shall, at any time or from time to time after the Issuance Date, in any manner grant or sell (whether directly or by assumption in a merger or otherwise) any Options, whether or not such Options or the right to convert or exchange any Convertible Securities issuable upon the exercise of such Options are immediately exercisable, and the lowest price per share (determined as provided in this paragraph and in Section 5(c)(iii)(E)) for which any one share of Common Stock is issuable upon the exercise of any such Option or upon the conversion or exchange of any Convertible Security issuable upon the exercise of any such Option is less than the Conversion Price in effect immediately prior to the time of the granting or sale of such Options, then such share of Common Stock issuable upon the exercise of such Option or upon conversion or exchange of such Convertible Security issuable upon the exercise of such Option shall be deemed to have been issued as of the date of granting or sale of such Options (and thereafter shall be deemed to be outstanding for purposes of adjusting the Conversion Price under Section 5(c)(i)), at a price per share equal to such lowest price per share. For purposes of this Section 5(c)(iii)(A) , the lowest price per share for which any one share of Common Stock is issuable upon the exercise of any such Option or upon the conversion or exchange of any Convertible Security issuable upon the exercise of any such Option shall be equal to the sum (which sum shall constitute the applicable consideration received for purposes of Section 5(c)(i)) of the lowest amounts of consideration, if any, received or receivable by the Company as consideration with respect to any one share of Common Stock upon each of (1) the granting or sale of the Option, plus (2) the exercise of the Option, plus (3) in the case of an Option which relates to Convertible Securities, the issuance or sale of the Convertible Security and the conversion or exchange of the Convertible Security. Except as otherwise provided in Section 5(c)(iii)(C), no further adjustment of the Conversion Price shall be made upon the actual issuance of Common Stock or of Convertible Securities upon exercise of such Options or upon the actual issuance of Common Stock upon conversion or exchange of Convertible Securities issuable upon the exercise of such Options.

(B)       If the Company shall, at any time or from time to time after the Issuance Date, in any manner grant or sell (whether directly or by assumption in a merger or otherwise) any Convertible Securities, whether or not the right to convert or exchange any such Convertible Securities is immediately exercisable, and the lowest price per share (determined as provided in this paragraph and in Section 5(c)(iii)(E)) for which one share of Common Stock is issuable upon the conversion or exchange of any such Convertible Securities is less than the Conversion Price in effect immediately prior to the time of the granting or sale of such Convertible Securities, then such share of Common Stock issuable upon conversion or exchange of such Convertible Security shall be deemed to have been issued as of the date of granting or sale of such Convertible Securities (and thereafter shall be deemed to be outstanding for purposes of adjusting the Conversion Price under Section 5(c)(i)), at a price per share equal to such lowest price per share. For purposes of this Section 5(c)(iii)(B), the lowest price per share for which any one share of Common Stock is issuable upon the conversion or exchange of any such Convertible Security shall be equal to the sum (which sum shall constitute the applicable consideration received for purposes of Section 5(c)(i)) of the lowest amounts of consideration, if any, received or receivable by the Company as consideration with respect to any one share of Common Stock upon each of (1) the granting or sale of the Convertible Security, plus (2) the conversion or exchange of the Convertible Security. Except as otherwise provided in Section 5(c)(iii)(C), no further adjustment of the Conversion Price shall be made upon the actual issuance of Common Stock upon conversion or exchange of such Convertible Securities or by reason of the issue or sale of Convertible Securities upon exercise of any Options to purchase any such Convertible Securities for which adjustments of the Conversion Price have been made pursuant to the other provisions of this Section 5(c)(iii).

(C)       Upon any change in any of (1) the lowest amounts of consideration, if any, received or receivable by the Company as consideration with respect to any one share of Common Stock upon the granting or sale of any Options or Convertible Securities referred to in Section 5(c)(iii)(A) or Section 5(c)(iii)(B) hereof, (2) the lowest amounts of additional consideration, if any, payable to the Company with respect to any one share of Common Stock upon exercise of any Options or upon the issuance, conversion or exchange of any Convertible Securities referred to in Section 5(c)(iii)(A) or Section 5(c)(iii)(B) hereof, (3) the rate at which Convertible Securities referred to in Section 5(c)(iii)(A) or Section 5(c)(iii)(B) hereof are convertible into or exchangeable for Common Stock, or (4) the maximum number of shares of Common Stock issuable in connection with any Options referred to in Section 5(c)(iii)(A) hereof or any Convertible Securities referred to in Section 5(c)(iii)(B) hereof (in each case, other than in connection with an Excluded Issuance), then (whether or not the original issuance or sale of such Options or Convertible Securities resulted in an adjustment to the Conversion Price pursuant to this Section 5(c)) the Conversion Price in effect at the time of such change shall be adjusted or readjusted, as applicable, to the Conversion Price which would have been in effect at such time pursuant to the provisions of this Section 5(c) had such Options or Convertible Securities still outstanding provided for such changed consideration, conversion rate or maximum number of shares, as the case may be, at the time initially granted, issued or sold, but only if as a result of such adjustment or readjustment the Conversion Price then in effect is reduced.

(D)       Upon the expiration or termination of any unexercised Option (or portion thereof) or any unconverted or unexchanged Convertible Security (or portion thereof) for which any adjustment (either upon its original issuance or upon a revision of its terms) was made pursuant to this Section 5(c) (including without limitation upon the redemption or purchase for consideration of all or any portion of such Option or Convertible Security by the Company), the Conversion Price then in effect hereunder shall forthwith be changed pursuant to the provisions of this Section 5(c) to the Conversion Price which would have been in effect at the time of such expiration or termination had such unexercised Option (or portion thereof) or unconverted or unexchanged Convertible Security (or portion thereof), to the extent outstanding immediately prior to such expiration or termination, never been issued.

(E)       If the Company shall, at any time or from time to time after the Issuance Date, issue or sell, or is deemed to have issued or sold in accordance with Section 5(c)(iii), any shares of Common Stock, Options or Convertible Securities: (1) for cash, the consideration received therefor shall be deemed to be the net amount received by the Company therefor; (2) for consideration other than cash, the amount of the consideration other than cash received by the Company shall be the fair value of such consideration, except where such consideration consists of marketable securities, in which case the amount of consideration received by the Company shall be the market price (as reflected on any securities exchange, quotation system or association or similar pricing system covering such security) for such securities as of the end of business on the date of receipt of such securities; (3) for no specifically allocated consideration in connection with an issuance or sale of other securities of the Company, together comprising one integrated transaction, the amount of the consideration therefor shall be deemed to be the fair value of such portion of the aggregate consideration received by the Company in such transaction as is attributable to such shares of Common Stock, Options or Convertible Securities, as the case may be, issued in such transaction; or (4) to the owners of the non-surviving entity in connection with any merger in which the Company is the surviving corporation, the amount of consideration therefor shall be deemed to be the fair value of such portion of the net assets and business of the non-surviving entity as is attributable to such shares of Common Stock, Options or Convertible Securities, as the case may be, issued to such owners. The net amount of any cash consideration and the fair value of any consideration other than cash or marketable securities shall be determined in good faith jointly by the Board of Directors of the Company and the Holder.

(F)        For purposes of any adjustment to the Conversion Price in accordance with this Section 5(c), in case the Company shall take a record of the holders of its Common Stock for the purpose of entitling them (1) to receive a dividend or other distribution payable in Common Stock, Options or Convertible Securities or (2) to subscribe for or purchase Common Stock, Options or Convertible Securities, then such record date shall be deemed to be the date of the issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be; provided, that if before the distribution to its holders of Common Stock the Company legally abandons its plan to pay or deliver such dividend, distribution, subscription or purchase rights, then thereafter no adjustment shall be required by the taking of such record and any such adjustment previously made in respect thereof shall be rescinded and annulled.

(G)       The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company or any of its wholly-owned subsidiaries, and the disposition of any such shares (other than the cancellation or retirement thereof or the transfer of such shares among the Company and its wholly-owned subsidiaries) shall be considered an issue or sale of Common Stock for the purpose of this Section 5(c).

(H)       For purposes of this Section 5(c):

“ Common Stock Deemed Outstanding ” means, at any given time, the number of shares of Common Stock actually outstanding at such time.

“ Convertible Securities ” means any securities (directly or indirectly) convertible into or exchange for Common Stock, but excluding Options.

“ Excluded Issuances ” means any issuance or sale (or deemed issuance or sale in accordance with Section 5(d)(iii)) by the Company after the Issuance Date of: (1) shares of Common Stock issued upon the conversion of this Debenture; (2) shares of Common Stock (as such number of shares is equitably adjusted for subsequent stock splits, stock combinations, stock dividends and recapitalizations) issued directly or upon the exercise of Options to directors, officers, employees, or consultants of the Company in connection with their service as directors of the Company, their employment by the Company or their retention as consultants by the Company, in each case authorized by the Board of Directors of the Company and issued pursuant to the Company’s Global Share and Options Incentive Enhancement Plan (2016) (including all such shares of Common Stock and Options outstanding prior to the Issuance Date); or (3) shares of Common Stock issued upon the conversion or exercise of Options (other than Options covered by clause (2) above) or Convertible Securities issued prior to the Issuance Date, provided that such securities are not amended after the date hereof to increase the number of shares of Common Stock issuable thereunder or to lower the exercise or conversion price thereof.

“ Options ” means any warrants or other rights or options to subscribe for or purchase Common Stock or Convertible Securities.

6 .             Covenants .

(a)            Use of Proceeds . The Company shall use the net cash proceeds loaned to the Company pursuant to this Debenture for working capital and general corporate purposes, provided however, the Company shall have broad discretion in the application of the net proceeds allocated to working capital and general corporate purposes.

(b)            Compliance with Agreements . The Company shall perform and observe, or cause to be performed or observed, as the case may be, all of the provisions in its certificate of incorporation, its by-laws, and the obligations pursuant to the terms, agreements, and covenants of this Debenture and all documents and agreements executed or delivered in connection with this Debenture. The Company expressly represents that the Company has the full power and authority to deliver this Debenture that this Debenture has been duly authorized, executed, and delivered by the Company, and that the Company’s obligations under this Debenture are legal, valid, binding, and enforceable, absolute, and unconditional.

(c)            Preservation of Corporate Existence and Business . The Company shall use its best efforts to preserve intact its present business organization, rights, and privileges and present goodwill and, to the best of its ability, its relationships existing with other parties and shall at all times cause to be done all things necessary to maintain, preserve, and renew its corporate existence in the State of Nevada, and shall observe and conform with all valid requirements of such governmental authorities relating to the conduct of the business of the Company, the failure of which would have a material adverse effect upon the Company’s business or financial condition. The Company shall maintain and keep in force all material licenses, permits and agreements necessary to the conduct of its businesses.

(d)            Maintenance of Properties . The Company shall maintain and keep its properties, real and personal, in good repair, working order, and condition, and from time to time make all necessary or desirable repairs, renewals, and replacements, so that its business may be properly and advantageously conducted at all times.

(e)            Compliance with Obligations, Laws, etc . The Company shall comply with all of the obligations which it has incurred or to which it becomes subject pursuant to any contract or agreement, whether oral or written, express or implied, the breach of which might have a material adverse effect upon its business or financial condition, unless and to the extent that the same are being contested in good faith and by appropriate proceedings and adequate reserves have been set aside on its books with respect thereto. The Company shall comply with all applicable laws, rules, and regulations of all governmental authorities.

(f)             Books of Account . The Company will, and will cause each of its subsidiaries to, at all times maintain books of account in which its financial transactions are duly recorded in conformance with generally accepted accounting principles.

(g)            Unconditional Obligation; No Waiver . The obligations to make payments provided for in this Debenture are absolute and unconditional and are not subject to any defense, set-off counterclaim, rescission, recoupment, or adjustment whatsoever. No forbearance, indulgence, delay, or failure to exercise any right or remedy with respect to this Debenture shall operate as a waiver or as an acquiescence in any default, nor shall any single or partial exercise of any right or remedy preclude any other or further exercise thereof or exercise of any other right or remedy.

7.             Waiver and Arbitration . TO THE FULLEST EXTENT PERMITTED BY LAW, HOLDER AND THE COMPANY AGREE THAT NEITHER OF THEM NOR ANY ASSIGNEE OR SUCCESSOR SHALL (i) SEEK A JURY TRIAL IN ANY LAWSUIT, PROCEEDING, COUNTERCLAIM OR ANY OTHER ACTION BASED UPON, OR ARISING OUT OF, THIS DEBENTURE, ANY RELATED AGREEMENTS OR INSTRUMENTS OR THE DEALINGS OR THE RELATIONSHIP BETWEEN THEM, (ii) SEEK TO CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED, OR (iii) MAKE ANY CLAIM FOR CONSEQUENTIAL, PUNITIVE, OR SPECIAL DAMAGES. THE PROVISIONS OF THIS PARAGRAPH HAVE BEEN FULLY DISCUSSED BY HOLDER AND THE COMPANY, AND THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. NEITHER HOLDER NOR THE COMPANY HAS AGREED WITH OR REPRESENTED TO THE OTHER THAT THE PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY ENFORCED IN ALL INSTANCES. THE COMPANY WAIVES PRESENTMENT AND WRITTEN DEMAND FOR PAYMENT, NOTICE OF DISHONOR, PROTEST, AND NOTICE OF PROTEST OF THIS DEBENTURE.

All disputes arising under this Debenture shall be governed by and interpreted in accordance with the laws of the State of Nevada, without regard to principles of conflict of laws. The parties to this Debenture shall submit all disputes arising under this Debenture to arbitration in New York, New York before a single arbitrator of the American Arbitration Association (the “ AAA ”). The arbitrator shall be selected by application of the rules of the AAA, or by mutual agreement of the parties, except that such arbitrator shall be an attorney admitted to practice law in the State of New York. No party hereto will challenge the jurisdiction or venue provisions as provided in this Section 7. Nothing in this Section 7 shall limit the Holder’s right to obtain an injunction for a breach of this Debenture from a court of law. Any injunction obtained shall remain in full force and effect until the arbitrator fully adjudicates the dispute.

8.             Attorney’s Fees; Collection Costs . If there has been an Event of Default by the Company hereunder, Holder shall be entitled to receive and the Company agrees to pay all costs of enforcement and collection incurred by Holder, including, without limitation, reasonable attorney’s fees relating thereto.

9.              Notices . Unless otherwise specified herein, all notices, requests, demands, claims and other communications hereunder shall be in writing and shall be delivered by certified or registered mail (first class postage pre-paid), guaranteed overnight delivery, or email transmission if such transmission is confirmed by delivery by certified or registered mail (first class postage pre-paid) or guaranteed overnight delivery, to the addresses set forth in the Refinance Agreement (or to such other addresses which such party shall subsequently designate in writing to the other party).

10.            No Waivers of Holder’s Rights . No failure or delay by Holder in exercising any right, power, or privilege hereunder or under any other documents or agreements executed in connection herewith shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies in this Debenture provided are cumulative and not exclusive of any rights or remedies otherwise provided by agreement or law.

11.            Record Ownership . The Company or its attorney shall maintain a register of the Holder of the Debentures (the “ Register ”) showing their names and addresses and the serial numbers and principal amounts of Debentures issued to them. The Register may be maintained in electronic, magnetic or other computerized form. The Company may treat the person named as the Holder of this Debenture in the Register as the sole owner of this Debenture. The Holder of this Debenture is exclusively entitled to receive payments on this Debenture, receive notifications with respect to this Debenture and otherwise exercise all of the rights and powers as the absolute owner hereof.

12.            Worn or Lost Debenture . If this Debenture becomes worn, defaced or mutilated but is still substantially intact and recognizable, the Company or its agent may issue a new Debenture in lieu hereof upon its surrender. Where the Holder of this Debenture claims that the Debenture has been lost, destroyed or wrongfully taken, the Company shall issue a new Debenture in place of the Debenture if the Holder so requests by written notice to the Company.

13.            Amendments . Neither this Debenture nor any provision hereof may be waived, discharged or terminated except by a written instrument signed by the Holder. Neither this Debenture nor any provision hereof may be amended except by a written instrument signed by the Holder and the Company.

14.            Transferability . This Debenture has been issued by the Company for the sole benefit of Holder and may not be sold, transferred or otherwise assigned without the prior written consent of the Company, such consent not to be unreasonably withheld, and the Holder agrees not to take any actions which would cause any third party to have such an interest in this Debenture.

15.            Assignment . The rights and obligations of the Company and Holder shall be binding upon any entity which becomes the successor of the Company or which otherwise assumes the Company’s obligations hereunder.

16.            Partial Invalidity . The invalidity or unenforceability of any one or more phrases, clauses or sections of this Debenture shall not affect the validity or enforceability of the remaining portions of it.

17.            Captions . The captions and headings of the various sections and subsections of this Debenture are provided for’ convenience only and shall not be construed to modify the meaning of such sections or’ subsections.

18.            Entire Agreement . This Debenture and the documents and any agreements executed in connection herewith constitute the ‘final agreement of the parties hereto and supersede any prior agreement or understanding, written or oral, with respect to the matters contained herein and therein.

[Signature Page Follows]

EXHIBIT A

NOTICE OF CONVERSION

(To Be Signed Only Upon Conversion of the Debenture)

The undersigned, the holder of the foregoing Convertible Secured Debenture dated ________, 2017 (the “Debenture”), hereby surrenders such Debenture for conversion into shares of Common Stock of Blue Sphere Corporation to the extent of the Conversion Amount of $ _______________, representing unpaid Principal Amount and accrued but unpaid interest of such Debenture, and requests that the certificates for such Common Stock be issued in the name of, and delivered to:

At the following address:

The date of this Conversion Notice is: ____________________________________

Blue Sphere Corporation 8-K

Exhibit 10.3  

BLUE SPHERE CORPORATION

WARRANT

THIS WARRANT AND THE SECURITIES ISSUABLE UPON ITS EXERCISE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ SECURITIES ACT ”), OR QUALIFIED UNDER APPLICABLE STATE SECURITIES LAWS AND MAY ONLY BE ACQUIRED FOR INVESTMENT PURPOSES ONLY AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. THIS WARRANT AND THE SECURITIES ISSUABLE UPON ITS EXERCISE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT OR SUCH SECURITIES UNDER THE SECURITIES ACT AND QUALIFICATION UNDER APPLICABLE STATE LAW WITHOUT AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION AND QUALIFICATION ARE NOT REQUIRED UNDER THE SECURITIES ACT OR RECEIPT OF A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION.

FOR VALUE RECEIVED , BLUE SPHERE CORPORATION, a Nevada corporation (the “ Company ”), as of [___], 2017 (the “ Issuance Date ”), hereby certifies that [___], or its registered assigns (the “ Warrant Holder ”), is entitled, subject to the terms set forth below, to purchase from the Company [___] shares (the “ Warrant Shares ”) of the Company’s common stock, $0.001 par value per share (“ Common Stock ”), exercisable at the per share Exercise Price (as defined in Section 7). This Warrant may be exercised any time after issuance through and including the fifth (5th) anniversary of the Issuance Date (the “ Expiration Date ”), subject to the following terms and conditions set out in this Warrant.

1.           Registration of Warrant . The Company shall register this Warrant upon records to be maintained by the Company for that purpose (the “ Warrant Register ”), in the name of the record Warrant Holder hereof from time to time. The Company may deem and treat the registered Warrant Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Warrant Holder, and for all other purposes, and the Company shall not be affected by notice to the contrary.

2.           Investment Representation . The Warrant Holder by accepting this Warrant represents that the Warrant Holder is acquiring this Warrant for its own account or the account of an affiliate for investment purposes and not with the view to any offering or distribution and that the Warrant Holder will not sell or otherwise dispose of this Warrant or the underlying Warrant Shares in violation of applicable securities laws. The Warrant Holder acknowledges that the certificates representing any Warrant Shares may bear a legend indicating that they have not been registered under the Securities Act and may not be sold by the Warrant Holder except pursuant to an effective registration statement or pursuant to an exemption from registration requirements of the Securities Act and in accordance with federal and state securities laws. If this Warrant was acquired by the Warrant Holder pursuant to the exemption from the registration requirements of the Securities Act afforded by Regulation S thereunder, the Warrant Holder acknowledges and covenants that this Warrant may not be exercised by or on behalf of a Person during the one year distribution compliance period (as defined in Regulation S) following the date hereof. “ Person ” means an individual, partnership, firm, limited liability company, trust, joint venture, association, corporation, or any other legal entity.

3.          Validity of Warrant and Issue of Shares . The Company represents and warrants that this Warrant has been duly authorized and validly issued and warrants and agrees that all of Common Stock that may be issued upon the exercise of the rights represented by this Warrant will, when issued upon such exercise, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges with respect to the issue thereof. The Company further warrants and agrees that during the period within which the rights represented by this Warrant may be exercised, the Company will at all times have authorized and reserved a sufficient number of shares of Common Stock to provide for the exercise of the rights represented by this Warrant.

4.          Registration of Transfers and Exchange of Warrants .

(a)          Subject to compliance with the legend set forth on the face of this Warrant, the Company shall register the transfer of any portion of this Warrant in the Warrant Register, upon surrender of this Warrant with the Form of Assignment attached hereto duly completed and signed, to the Company at the office specified in or pursuant to Section 10. Upon any such registration or transfer, a new warrant to purchase Common Stock, in substantially the form of this Warrant (any such new warrant, a “ New Warrant ”), evidencing the portion of this Warrant so transferred shall be issued to the transferee and a New Warrant evidencing the remaining portion of this Warrant not so transferred, if any, shall be issued to the transferring Warrant Holder. The acceptance of the New Warrant by the transferee thereof shall be deemed the acceptance of such transferee of all of the rights and obligations of a Warrant Holder of a Warrant.

(b)          This Warrant is exchangeable, upon the surrender hereof by the Warrant Holder to the office of the Company specified in or pursuant to Section 10 for one or more New Warrants, evidencing in the aggregate the right to purchase the number of Warrant Shares which may then be purchased hereunder. Any such New Warrant will be dated the date of such exchange.

5.          Exercise of Warrants .

(a)          This Warrant may be exercised at any time and from time to time from and after the Issuance Date and through and including the Expiration Date, for such number of Warrant Shares as is indicated in the form of “ Election to Purchase ”, which is attached hereto and incorporated herein as Exhibit A . If less than all of the Warrant Shares which may be purchased under this Warrant are exercised at any time, the Company shall issue or cause to be issued, at its expense, a New Warrant evidencing the right to purchase the remaining number of Warrant Shares for which no exercise has been evidenced by this Warrant. At 5:00 P.M., New York time on the Expiration Date, the portion of this Warrant not exercised prior thereto shall be and become void and of no value.

(b)          Exercise of this Warrant shall be made upon surrender of this Warrant with an Election to Purchase in the form attached hereto (or attached to such New Warrant), duly completed and signed to the Company, at its address set forth in Section 10.

(c)          A “ Date of Exercise ” means the date on which the Company shall have received (i) this Warrant (or any New Warrant, as applicable), with an Election to Purchase in the form attached hereto (or attached to such New Warrant), appropriately completed and duly signed, and (ii) payment of the Exercise Price for the number of Warrant Shares so indicated by the Warrant Holder to be purchased, as set forth herein.

(d)          Payment upon exercise may be made at the written option of the Warrant Holder either by cashless exercise, as set forth in Section 6, or in cash, wire transfer or by certified or official bank check payable to the order of the Company equal to the applicable aggregate purchase price, for the number of Warrant Shares specified in the Election to Purchase (as such exercise number shall be adjusted to reflect any adjustment in the total number of Warrant Shares issuable to the Warrant Holder per the terms of this Warrant) and the Warrant Holder shall thereupon be entitled to receive the number of duly authorized, validly issued, fully-paid and non-assessable Warrant Shares determined as provided herein.

(e)          The Company shall promptly, but in no event later than ten (10) business days after the Date of Exercise as defined herein, issue or cause to be issued and cause to be delivered to or upon the written order of the Warrant Holder and in such name or names as the Warrant Holder may designate (subject to the restrictions on transfer described in the legend set forth on the face of this Warrant), a certificate for the Warrant Shares issuable upon such exercise, with such restrictive legend as required by the Act. If no such restrictive legend is applicable, upon request of the Warrant Holder, the Warrant Shares will be recorded by book entry with the Company’s transfer agent. Any person so designated by the Warrant Holder to receive Warrant Shares shall be deemed to have become holder of record of such Warrant Shares as of the Date of Exercise of this Warrant.

6.          Cashless Exercise .

(a)          If at any time after six (6) months following the Issuance Date and prior to the Expiration Date there is not an effective registration statement on file with the U.S. Securities and Exchange Commission covering the resale of the Warrant Shares by the Warrant Holder, then at such time this Warrant may also be exercised by means of a cashless exercise. In such event, the Holder shall surrender this Warrant to the Company, together with a notice of cashless exercise, and the Company shall issue to the Holder the number of Warrant Shares determined as follows:

X = Y (A-B)/A

where:

X   =   The number of Warrant Shares to be issued to the Holder.

Y   =   The number of Warrant Shares with respect to which this Warrant is being exercised.

A   =   The average closing price of Common Stock for the five (5) trading days immediately prior to the Date of Exercise.

B   =   The Exercise Price.

(b)          For purposes of Rule 144 of the Act, it is intended, understood and acknowledged that the Warrant Shares issued in a cashless exercise transaction shall be deemed to have been acquired by the Warrant Holder, and the holding period for the Warrant Shares shall be deemed to have been commenced, on the issue date.

7.          Exercise Price . The “ Exercise Price ” shall be the lesser of (a) 80% of the price per combination of Common Stock and warrants to purchase shares of Common Stock offered in the Public Offering, less the closing price of such warrants on the first day of the Uplist, or (b) an amount that is equal to 80% of the volume weighted average price (VWAP), calculated using the five (5) trading days immediately following the Uplist. For the purposes of this Warrant, the “ Uplist ” shall mean the initial listing on [ ], 2017 of the Company’s Common Stock on The NASDAQ Capital Market, and the “ Public Offering ” shall mean the Company’s public offering of its Common Stock and warrants to purchase shares of Common Stock, as fully contemplated in the Company’s Registration Statement on Form S-1, as amended, filed with the U.S. Securities and Exchange Commission under Registration No. 333-215110.

8.          Fractional Shares . The Company shall not be required to issue or cause to be issued fractional Warrant Shares on the exercise of this Warrant. The number of full Warrant Shares that shall be issuable upon the exercise of this Warrant shall be computed on the basis of the aggregate number of Warrants Shares purchasable on exercise of this Warrant so presented. If any fraction of a Warrant Share would, except for the provisions of this Section 8, be issuable on the exercise of this Warrant, the Company shall, at its option, (a) pay an amount in cash equal to the Exercise Price multiplied by such fraction or (b) round the number of Warrant Shares issuable, up to the next whole number.

9.          Adjustments .

(a)           Adjustments for Subdivisions, Combinations and Other Issuances . If the outstanding shares of Common Stock are divided into a greater number of shares, by forward stock split or otherwise, or a dividend in stock is paid on the Common Stock, then the number of shares of Warrant Shares for which the Warrant is then exercisable will be proportionately increased and the Exercise Price will be proportionately reduced. Conversely, if the outstanding shares of Common Stock are combined into a smaller number of shares of Common Stock, by reverse stock split or otherwise, then the number of Warrant Shares for which the Warrant is then exercisable will be proportionately reduced and the Exercise Price will be proportionately increased. The increases and reductions provided for in this Section 9(a) will be made with the intent and, as nearly as practicable, the effect that neither the percentage of the total equity of the Company obtainable on exercise of the Warrants nor the price payable for such percentage upon such exercise will be affected by any event described in this Section 9(a).

(b)           Adjustments for Merger, Consolidation, Reclassification, Reorganization, Etc . In case of any change in Common Stock through merger, consolidation, reclassification, reorganization, partial or complete liquidation, purchase of all or substantially all the assets of the Company, or other change in the capital structure of the Company, then, as a condition of such change, lawful and adequate provision will be made so that the Warrant Holder will have the right thereafter to receive upon the exercise of the Warrant the kind and amount of shares of stock or other securities or property to which the Warrant Holder would have been entitled if, immediately prior to such event, the Warrant Holder had held the number of Warrant Shares obtainable upon the exercise of the Warrant. In any such case, appropriate adjustment will be made in the application of the provisions set forth herein with respect to the rights and interest thereafter of the Warrant Holder, to the end that the provisions set forth herein will thereafter be applicable, as nearly as reasonably may be, in relation to any shares of stock deliverable upon the exercise of the Warrant. The Company will not permit any change in its capital structure to occur unless the issuer of the shares of stock or other securities to be received by the Warrant Holder agrees to comply with the provisions of this Warrant.

(c)          Adjustment Upon Issuance of Common Stock .

(i)          Except as provided in Section 9(c)(iii) and except in the case of an event described in either Section 9(c)(v) or Section 9(c)(vi), if the Company shall, at any time or from time to time after the Issuance Date, issue or sell, or in accordance with Section 5(d)(iv) is deemed to have issued or sold, any shares of Common Stock without consideration or for consideration per share less than the Exercise Price in effect immediately prior to such issuance or sale (or deemed issuance or sale), then immediately upon such issuance or sale (or deemed issuance or sale), the Exercise Price in effect immediately prior to such issuance or sale (or deemed issuance or sale) shall be reduced (and in no event increased) to an Exercise Price equal to the quotient obtained by dividing:

(A)          the sum of (1) the product obtained by multiplying the Common Stock Deemed Outstanding immediately prior to such issuance or sale (or deemed issuance or sale) by the Exercise Price then in effect plus (2) the aggregate consideration, if any, received by the Company upon such issuance or sale (or deemed issuance or sale); by

(B)          the sum of (1) the Common Stock Deemed Outstanding immediately prior to such issuance or sale (or deemed issuance or sale) plus (2) the aggregate number of shares of Common Stock issued or sold (or deemed issued or sold) by the Company in such issuance or sale (or deemed issuance or sale).

(ii)          Upon any and each adjustment of the Exercise Price as provided in Section 9(c)(i), the number of Warrant Shares issuable upon the exercise of this Warrant immediately prior to any such adjustment shall be increased to a number of Warrant Shares equal to the quotient obtained by dividing:

(A)          the product of (1) the Exercise Price in effect immediately prior to any such adjustment multiplied by (2) the number of Warrant Shares issuable upon exercise of this Warrant immediately prior to any such adjustment; by

(B)           the Exercise Price resulting from such adjustment.

(iii)          Anything herein to the contrary notwithstanding, there shall be no adjustment to the Exercise Price or the number of Warrant Shares issuable upon exercise of this Warrant with respect to any Excluded Issuance.

(iv)         For purposes of determining the adjusted Exercise Price under Section 9(c)(i) hereof, the following shall be applicable:

(A)          If the Company shall, at any time or from time to time after the Issuance Date, in any manner grant or sell (whether directly or by assumption in a merger or otherwise) any Options, whether or not such Options or the right to convert or exchange any Convertible Securities issuable upon the exercise of such Options are immediately exercisable, and the lowest price per share (determined as provided in this paragraph and in Section 9(c)(iv)(E)) for which any one share of Common Stock is issuable upon the exercise of any such Option or upon the conversion or exchange of any Convertible Security issuable upon the exercise of any such Option is less than the Exercise Price in effect immediately prior to the time of the granting or sale of such Options, then such share of Common Stock issuable upon the exercise of such Option or upon conversion or exchange of such Convertible Security issuable upon the exercise of such Option shall be deemed to have been issued as of the date of granting or sale of such Options (and thereafter shall be deemed to be outstanding for purposes of adjusting the Exercise Price under Section 9(c)(i)), at a price per share equal to such lowest price per share. For purposes of this Section 9(c)(iv)(A) , the lowest price per share for which any one share of Common Stock is issuable upon the exercise of any such Option or upon the conversion or exchange of any Convertible Security issuable upon the exercise of any such Option shall be equal to the sum (which sum shall constitute the applicable consideration received for purposes of Section 9(c)(i)) of the lowest amounts of consideration, if any, received or receivable by the Company as consideration with respect to any one share of Common Stock upon each of (1) the granting or sale of the Option, plus (2) the exercise of the Option, plus (3) in the case of an Option which relates to Convertible Securities, the issuance or sale of the Convertible Security and the conversion or exchange of the Convertible Security. Except as otherwise provided in Section 9(c)(iv)(C), no further adjustment of the Exercise Price shall be made upon the actual issuance of Common Stock or of Convertible Securities upon exercise of such Options or upon the actual issuance of Common Stock upon conversion or exchange of Convertible Securities issuable upon the exercise of such Options.

(B)          If the Company shall, at any time or from time to time after the Issuance Date, in any manner grant or sell (whether directly or by assumption in a merger or otherwise) any Convertible Securities, whether or not the right to convert or exchange any such Convertible Securities is immediately exercisable, and the lowest price per share (determined as provided in this paragraph and in Section 9(c)(iv)(E)) for which one share of Common Stock is issuable upon the conversion or exchange of any such Convertible Securities is less than the Exercise Price in effect immediately prior to the time of the granting or sale of such Convertible Securities, then such share of Common Stock issuable upon conversion or exchange of such Convertible Security shall be deemed to have been issued as of the date of granting or sale of such Convertible Securities (and thereafter shall be deemed to be outstanding for purposes of adjusting the Exercise Price under Section 9(c)(i)), at a price per share equal to such lowest price per share. For purposes of this Section 9(c)(iv)(B), the lowest price per share for which any one share of Common Stock is issuable upon the conversion or exchange of any such Convertible Security shall be equal to the sum (which sum shall constitute the applicable consideration received for purposes of Section 9(c)(i)) of the lowest amounts of consideration, if any, received or receivable by the Company as consideration with respect to any one share of Common Stock upon each of (1) the granting or sale of the Convertible Security, plus (2) the conversion or exchange of the Convertible Security. Except as otherwise provided in Section 9(c)(iv)(C), no further adjustment of the Exercise Price shall be made upon the actual issuance of Common Stock upon conversion or exchange of such Convertible Securities or by reason of the issue or sale of Convertible Securities upon exercise of any Options to purchase any such Convertible Securities for which adjustments of the Exercise Price have been made pursuant to the other provisions of this Section 9(c)(iv).

(C)          Upon any change in any of (1) the lowest amounts of consideration, if any, received or receivable by the Company as consideration with respect to any one share of Common Stock upon the granting or sale of any Options or Convertible Securities referred to in Section 9(c)(iv)(A) or Section 9(c)(iv)(B) hereof, (2) the lowest amounts of additional consideration, if any, payable to the Company with respect to any one share of Common Stock upon exercise of any Options or upon the issuance, conversion or exchange of any Convertible Securities referred to in Section 9(c)(iv)(A) or Section 9(c)(iv)(B) hereof, (3) the rate at which Convertible Securities referred to in Section 9(c)(iv)(A) or Section 9(c)(iv)(B) hereof are convertible into or exchangeable for Common Stock, or (4) the maximum number of shares of Common Stock issuable in connection with any Options referred to in Section 9(c)(iv)(A) hereof or any Convertible Securities referred to in Section 9(c)(iv)(B) hereof (in each case, other than in connection with an Excluded Issuance), then (whether or not the original issuance or sale of such Options or Convertible Securities resulted in an adjustment to the Exercise Price pursuant to this Section 9(c)) the Exercise Price in effect at the time of such change shall be adjusted or readjusted, as applicable, to the Exercise Price which would have been in effect at such time pursuant to the provisions of this Section 9(c) had such Options or Convertible Securities still outstanding provided for such changed consideration, conversion rate or maximum number of shares, as the case may be, at the time initially granted, issued or sold, but only if as a result of such adjustment or readjustment the Exercise Price then in effect is reduced, and the number of Warrant Shares issuable upon the exercise of this Warrant immediately prior to any such adjustment or readjustment shall be correspondingly adjusted or readjusted pursuant to the provisions of Section 9(c)(ii).

(D)          Upon the expiration or termination of any unexercised Option (or portion thereof) or any unconverted or unexchanged Convertible Security (or portion thereof) for which any adjustment (either upon its original issuance or upon a revision of its terms) was made pursuant to this Section 9(c) (including without limitation upon the redemption or purchase for consideration of all or any portion of such Option or Convertible Security by the Company), the Exercise Price then in effect hereunder shall forthwith be changed pursuant to the provisions of this Section 9(c) to the Exercise Price which would have been in effect at the time of such expiration or termination had such unexercised Option (or portion thereof) or unconverted or unexchanged Convertible Security (or portion thereof), to the extent outstanding immediately prior to such expiration or termination, never been issued.

(E)          If the Company shall, at any time or from time to time after the Issuance Date, issue or sell, or is deemed to have issued or sold in accordance with Section 9(c)(iv), any shares of Common Stock, Options or Convertible Securities: (1) for cash, the consideration received therefor shall be deemed to be the net amount received by the Company therefor; (2) for consideration other than cash, the amount of the consideration other than cash received by the Company shall be the fair value of such consideration, except where such consideration consists of marketable securities, in which case the amount of consideration received by the Company shall be the market price (as reflected on any securities exchange, quotation system or association or similar pricing system covering such security) for such securities as of the end of business on the date of receipt of such securities; (3) for no specifically allocated consideration in connection with an issuance or sale of other securities of the Company, together comprising one integrated transaction, the amount of the consideration therefor shall be deemed to be the fair value of such portion of the aggregate consideration received by the Company in such transaction as is attributable to such shares of Common Stock, Options or Convertible Securities, as the case may be, issued in such transaction; or (4) to the owners of the non-surviving entity in connection with any merger in which the Company is the surviving corporation, the amount of consideration therefor shall be deemed to be the fair value of such portion of the net assets and business of the non-surviving entity as is attributable to such shares of Common Stock, Options or Convertible Securities, as the case may be, issued to such owners. The net amount of any cash consideration and the fair value of any consideration other than cash or marketable securities shall be determined in good faith jointly by the Board of Directors of the Company and the Holder.

(F)         For purposes of any adjustment to the Exercise Price or the number of Warrant Shares in accordance with this Section 9(c), in case the Company shall take a record of the holders of its Common Stock for the purpose of entitling them (1) to receive a dividend or other distribution payable in Common Stock, Options or Convertible Securities or (2) to subscribe for or purchase Common Stock, Options or Convertible Securities, then such record date shall be deemed to be the date of the issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be; provided, that if before the distribution to its holders of Common Stock the Company legally abandons its plan to pay or deliver such dividend, distribution, subscription or purchase rights, then thereafter no adjustment shall be required by the taking of such record and any such adjustment previously made in respect thereof shall be rescinded and annulled.

(G)         The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company or any of its wholly-owned subsidiaries, and the disposition of any such shares (other than the cancellation or retirement thereof or the transfer of such shares among the Company and its wholly-owned subsidiaries) shall be considered an issue or sale of Common Stock for the purpose of this Section 9(c).

(H)         For purposes of this Section 9(c):

“ Common Stock Deemed Outstanding ” means, at any given time, the number of shares of Common Stock actually outstanding at such time.

“ Convertible Securities ” means any securities (directly or indirectly) convertible into or exchange for Common Stock, but excluding Options.

“ Excluded Issuances ” means any issuance or sale (or deemed issuance or sale in accordance with Section 9(c)(iv)) by the Company after the Issuance Date of: (1) shares of Common Stock issued upon the exercise of this Warrant; (2) shares of Common Stock (as such number of shares is equitably adjusted for subsequent stock splits, stock combinations, stock dividends and recapitalizations) issued directly or upon the exercise of Options to directors, officers, employees, or consultants of the Company in connection with their service as directors of the Company, their employment by the Company or their retention as consultants by the Company, in each case authorized by the Board of Directors of the Company and issued pursuant to the Company’s Global Share and Options Incentive Enhancement Plan (2016) (including all such shares of Common Stock and Options outstanding prior to the Issuance Date); or (3) shares of Common Stock issued upon the conversion or exercise of Options (other than Options covered by clause (2) above) or Convertible Securities issued prior to the Issuance Date, provided that such securities are not amended after the date hereof to increase the number of shares of Common Stock issuable thereunder or to lower the exercise or conversion price thereof.

“ Options ” means any warrants or other rights or options to subscribe for or purchase Common Stock or Convertible Securities.

10.         Notice . All notices, requests, demands, claims and other communications hereunder shall be in writing and shall be delivered by certified or registered mail (first class postage pre-paid), guaranteed overnight delivery, or email transmission if such transmission is confirmed, by certified or registered mail (first class postage pre-paid) or guaranteed overnight delivery, to the following addresses (or to such other addresses which such party shall subsequently designate in writing to the other party):

(a)          If to the Company:

Blue Sphere Corporation 

301 McCullough Drive, 4th Floor 

Charlotte, North Carolina 28262 

Attention: Shlomi Palas 

Email: shlomi@bluespherecorporate.com

with a copy to:

Thompson Hine LLP 

335 Madison Avenue, 12th Floor 

New York, NY 10017 

Attention: Peter J. Gennuso, Esq. 

Email: peter.gennuso@thompsonhine.com

(b)          If to the Warrant Holder:

11.        Miscellaneous .

(a)          This Warrant shall be binding on and inure to the benefit of the parties hereto and their respective successors and permitted assigns. This Warrant may be amended only in writing and signed by the Company and the Warrant Holder.

(b)          Nothing in this Warrant shall be construed to give to any person or corporation other than the Company and the Warrant Holder any legal or equitable right, remedy or cause of action under this Warrant; this Warrant shall be for the sole and exclusive benefit of the Company and the Warrant Holder.

(c)          Without the prior written consent of the Company, this Warrant, or any of the rights granted hereunder, shall not be transferred, assigned, pledged, hypothecated or otherwise disposed of (whether by operation of law or otherwise) by the Warrant Holder, and shall not be subject to execution, attachment or similar process, unless (i) an effective registration statement is on file with the U.S. Securities and Exchange Commission covering the resale of the Warrant Shares by the Warrant Holder, or (ii) the Warrant Shares are otherwise exempt from the registration requirements under the Act. Any such attempted transfer or disposition of the Warrant or of any rights granted hereunder contrary to the provisions of this section, or the levy of any attachment or similar process upon the Warrant or such rights, shall be null and void.

(d)          The headings herein are for convenience only, do not constitute a part of this Warrant and shall not be deemed to limit or affect any of the provisions hereof.

(e)          In case any one or more of the provisions of this Warrant shall be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Warrant shall not in any way be affected or impaired thereby and the parties will attempt in good faith to agree upon a valid and enforceable provision which shall be a commercially reasonably substitute therefore, and upon so agreeing, shall incorporate such substitute provision in this Warrant.

(f)          The Warrant Holder shall not, by virtue hereof, be entitled to any voting or other rights of a shareholder of the Company, either at law or equity, and the rights of the Warrant Holder are limited to those expressed in this Warrant.

(g)          This Warrant shall be governed by and construed in accordance with the laws of the State of Nevada without regard to principles of conflicts of laws.

(h)          The Company and the Warrant Holder shall submit all disputes arising under this Warrant to arbitration in New York, New York before a single arbitrator of the American Arbitration Association (the “ AAA ”). The arbitrator shall be selected by application of the rules of the AAA, or by mutual agreement of the parties, except that such arbitrator shall be an attorney admitted to practice law in the State of New York. No party hereto will challenge the jurisdiction or venue provisions as provided in this section. Nothing in this section shall limit the Warrant Holder’s right to obtain an injunction for a breach of this Agreement from a court of law. Any injunction obtained shall remain in full force and effect until the arbitrator fully adjudicates the dispute.

IN WITNESS WHEREOF , the Company and Holder have caused this Warrant to be duly executed by the authorized officer as of the date first above stated.

[Signature Page to Warrant]

FORM OF ELECTION TO PURCHASE

(To be executed by the Warrant Holder to exercise the right to

purchase shares of Common Stock under the foregoing Warrant)

Blue Sphere Corporation

Re: Election to Purchase Shares of Common Stock Under the Warrant

Gentlemen:

In accordance with the Warrant enclosed with this Election to Purchase, the undersigned hereby irrevocably elects to purchase _____________ shares of Common Stock of Blue Sphere Corporation at an original Exercise Price of USD $________ per share, subject to adjustment under the terms and conditions of the Warrant, and encloses herewith $____________ in cash, certified or official bank check(s), which sum represents the aggregate price for the number of shares of Common Stock to which this Election to Purchase relates, together with any applicable taxes payable by the undersigned pursuant to the Warrant. Any capitalized terms used but not defined in this Election to Purchase shall have the meaning ascribed to them in the accompanying Warrant.

The undersigned requests that certificates for the shares of Common Stock issuable upon this exercise be issued in the name of:

If the number of shares of Common Stock issuable upon this exercise shall not be all of the shares of Common Stock which the undersigned is entitled to purchase in accordance with the enclosed Warrant, the undersigned requests that a New Warrant evidencing the right to purchase the shares of Common Stock not issuable pursuant to the exercise evidenced hereby be issued in the name of and delivered to:

The undersigned represents and warrants that all offers and sales by the undersigned of the securities issuable upon exercise of the within Warrant shall be made pursuant to registration of the Common Stock under the Securities Act of 1933, as amended (the “Securities Act”), or pursuant to an exemption from registration under the Securities Act.

(Signature must conform in all respects to name of Holder as specified on the face of the Warrant)

NOTICE OF CASHLESS EXERCISE

TO: Blue Sphere Corporation 

[Address] 

Attn: Secretary

The undersigned hereby elects to purchase ______________ shares (the “ Shares ”) of the Common Stock of Blue Sphere Corporation, at an original Exercise Price of USD $______ per share, pursuant to the cashless exercise provision of Section 6 of the attached Warrant.

Please issue a certificate or certificates representing the Shares in the name of the undersigned or in such other name as is specified below:

The undersigned represents that the undersigned is an “accredited investor,” and that the Shares are being acquired for the account of the undersigned for investment and not with a view to, or for resale in connection with, the distribution thereof, and that the undersigned has no present intention of distributing or reselling such shares.

Blue Sphere Corporation 8-K

Exhibit 10.4

PLEDGE AGREEMENT

THIS PLEDGE AGREEMENT (this “ Pledge ” or this “ Agreement ”) is dated as of [ ], 2017, by and between Blue Sphere Corporation, a Nevada corporation (the “ Company ” or “ Pledgor ”), and the undersigned investors (the “ Pledgees ”).

WHEREAS , the Company and Pledgees are executing and delivering this Agreement in connection with a Debenture Refinance and Purchase Agreement, dated the date hereof (as such may be amended, restated or otherwise modified from time to time, the “ Refinance Agreement ”), by and among the Company, the debenture holders signatory thereto and Mstead Ltd, pursuant to which the Company shall issue to each Pledgee a certain Convertible Senior Debenture and (the “ Debentures ”) and a Warrant to purchase shares of the Company’s common stock (“ Warrants ”, together with the Debentures and the Refinance Agreement, the “ Transaction Documents ”);

WHEREAS , the Pledgor owns 100 ordinary shares of Eastern Sphere Ltd., a company formed and existing under the laws of Israel (“ Eastern Sphere ”), representing 100% of the issued and outstanding shares of Eastern Sphere; and

WHEREAS, it is a condition of the Refinance Agreement that the parties enter into this Agreement.

NOW, THEREFORE , in consideration of the mutual covenants and other agreements contained in this Agreement, the Company and Pledgee hereby agree as follows:

1.             Defined Terms .

(a)       Capitalized terms defined in the Transaction Documents and not otherwise defined herein shall have the meanings given to them in the Transaction Documents.

(b)       As used in this Agreement, the following terms shall have the meanings indicated:

“ Event of Default ” has the meaning given to such term in the Refinance Agreement.

“ Obligations ” means the payment and performance of (a) the outstanding principal amount under the Debentures, (b) all accrued and unpaid interest on the Debentures, and (c) all other debts, obligations, liabilities, agreements or covenants of the Pledgor under or in connection with the Debentures.

“ Pledged Shares ” means 49 ordinary shares of Eastern Sphere, representing forty-nine percent (49%) of its issued and outstanding shares, owned by the Company, including all rights attached thereto.

“ Security Interest ” has the meaning given to such term in Section 2 of this Agreement.

“ UCC ” means the Uniform Commercial Code as in effect from time to time in the State of Nevada, or in any other state whose laws are held to govern this Agreement or any portion hereof.

(c)        Terms Defined in Uniform Commercial Code . All other terms used in this Agreement that are not specifically defined in this Agreement or the Transaction Documents shall have the meaning assigned to such terms in the UCC to the extent such other terms are defined therein.

(d)        Singular/Plural, Etc . Unless the context of this Agreement otherwise clearly requires, references to the plural include the singular, references to the singular include the plural and “or” has the inclusive meaning represented by the phrase “and/or.” The words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation.” The words “hereof,” “herein,” “hereunder,” and similar terms in this Agreement refer to this Agreement as a whole and not to any particular provision of this Agreement. References to Sections are references to Sections in this Agreement unless otherwise provided.

2.             Pledge . As security for the payment and performance of all of the Obligations, the Pledgor hereby grants, pledges, hypothecates, assigns and transfers to the Pledgees a security interest (the “ Security Interest ”) in all of the Pledgor’s right, title and interest in and to the Pledged Shares.

3.             Registrar . The Pledgor will file the Pledge with the Registrar of Chattel Mortgages in Jerusalem concurrently with the execution hereof and deliver to Pledgees copies of the Register showing that the pledge has been duly recorded.

4.             Warranties and Covenants . The Pledgor makes the following warranties and covenants:

(a)       The Pledgor has title to the Pledged Shares, free of all Liens except the Security Interest.

(b)       The Pledgor has full power and authority to execute this Agreement, to perform the Pledgor’s obligations hereunder and to subject the Pledged Shares to the Security Interest created hereby.

(c)       No financing statement covering all or any part of the Pledged Shares is on file in any public office (except for any financing statements filed by the Pledgees).

(d)       The Pledged Shares have been duly authorized and validly issued by Eastern Sphere, Ltd. thereof and are fully paid and non-assessable. The Pledged Shares are not subject to any offset or similar right or claim of the issuer thereof.

(e)       The Pledgor has the legal capacity, power and authority and the legal right to execute and deliver, and to perform its obligations under this Agreement and has taken all necessary corporate action to authorize such execution, delivery and performance.

(f)       This Agreement constitutes a legal, valid and binding obligation of the Pledgor enforceable in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law).

(g)       The execution, delivery and performance of this Agreement will not (i) violate any provision of any law, statute, rule or regulation or any order, writ, judgment, injunction, decree, determination or award of any court, governmental agency or arbitrator presently in effect having applicability to the Pledgor, or (ii) result in a breach of or constitute a default under any indenture, loan or credit agreement or any other agreement, lease or instrument to which the Pledgor is a party or by which it or any of its properties may be bound or result in the creation of any Lien thereunder (other than in favor of the Pledgees). The Pledgor is not in default under or in violation of any such law, statute, rule or regulation, order, writ, judgment, injunction, decree, determination or award or any such indenture, loan or credit agreement or other agreement, lease or instrument in any case in which the consequences of such default or violation could have a material adverse effect on the properties, assets or condition (financial or otherwise) of the Pledgor.

(h)       Except for filings, recordings and registrations to perfect the Security Interest, no order, consent, approval, license, authorization or validation of, or filing, recording or registration with, or exemption by, any governmental or public body or authority is required on the part of the Pledgor to authorize, or is required in connection with the execution, delivery and performance of, or the legality, validity, binding effect or enforceability of, this Agreement.

(i)       Except as disclosed in writing to the Pledgees, there are no actions, suits or proceedings pending or, to the knowledge of the Pledgor, threatened against or affecting the Pledgor or any of its properties before any court or arbitrator, or any governmental department, board, agency or other instrumentality which, if determined adversely to the Pledgor could reasonably be expected to have a material adverse effect on the business, operations, property or condition (financial or otherwise) of the Pledgor or on the ability of the Pledgor to perform its obligations hereunder.

(j)       The Pledgees will have a first ranking security interest in and to the Pledged Shares.

(k)       The Obligations, for so long as outstanding under the Debentures, shall rank senior to all other indebtedness and liabilities of the Pledgor but subordinate to all indebtedness and liabilities of the Pledgor’s subsidiaries and project level operating entities in which the Pledgor holds an equity interest.

5.              Further Assurances . The Pledgor agrees that at any time and from time to time, at its own expense, it will promptly execute and deliver all further instruments and documents, and take all further action that may be necessary or that the Pledgees may reasonably request, in order to perfect and protect the Security Interest or to enable the Pledgees to exercise and enforce its rights and remedies hereunder with respect to the Pledged Shares (but any failure to request or assure that the Pledgor execute and deliver such instruments or documents or to take such action shall not affect or impair the validity, sufficiency or enforceability of this Agreement and the Security Interest, regardless of whether any such item was or was not executed and delivered or action taken in a similar context or on a prior occasion). The Pledgor hereby authorizes the Pledgees to file one or more financing statements or continuation statements in respect thereof, and amendments thereto, relating to all or any part of the Pledged Shares.

6.              Voting Power, Dividends, and Default . Unless and until an Event of Default has occurred, Pledgor shall have the right to exercise all voting, consensual, and other powers of ownership pertaining to the Pledged Shares and Pledgor shall receive any dividends or distributions on the Pledged Shares, except as provided in the Debentures. If any Event of Default shall occur, then the Pledgees may take whatever action Pledgees determine in accordance with the Law in Israel in order to collect the outstanding Obligations.

8.              Taxes and Claims . The Pledgor will promptly pay all taxes and other governmental charges levied or assessed upon or against any Pledged Shares or upon or against the creation, perfection or continuance of the Security Interest, as well as all other claims of any kind against or with respect to the Collateral, except to the extent (a) such taxes, charges or claims are being contested in good faith by appropriate proceedings, (b) such proceedings do not involve any material danger of the sale, forfeiture or loss of any of the Pledged Shares or any interest therein and (c) such taxes, charges or claims are adequately reserved against on the Pledgor’s books in accordance with generally accepted accounting principles.

10.            Pledgee May Perform . If the Pledgor fails to perform any agreement contained herein, the Pledgee may itself perform, or cause performance of, such agreement, and the reasonable expenses of the Pledgee incurred in connection therewith shall be payable by the Pledgor.

11.            The Pledgees’ Duties . The powers conferred on the Pledgees hereunder are solely to protect its interest in the Pledged Shares and shall not impose any duty upon it to exercise any such powers.

12.            Remedies upon Default . The Pledgees’ recourse in an Event of Default shall be the foreclosure of such a number of Pledged Shares representing at the time of their foreclosure value equal to the outstanding Obligations at that time by the exercise of this Pledge in accordance with the Laws of Israel. In addition, Pledgees may exercise any other right or remedy the Pledgees may have pursuant to the Transaction Documents, but in no event may Pledgees collect in total more than the outstanding Obligation owed to Pledgees at that time. Pledgees shall submit written notice of its intention to exercise the Pledge as aforementioned to the Pledgor and Pledgor shall have the right to cure any Event of Default by payment in full of any sums then due, whether by acceleration or otherwise, within ten (10) days of receipt of such notice. In the event that Pledgor does not cure such Event of Default within the aforementioned period, the Pledgees may take whatever action it deems fit in accordance with the terms of this Agreement.

13.            Costs and Expenses; Indemnity . The Pledgor will pay or reimburse the Pledgees on demand for all out-of-pocket expenses (including in each case all filing and recording fees and taxes and all reasonable fees and expenses of counsel and of any experts and agents) incurred by the Pledgees in connection with the creation, perfection, protection, satisfaction, foreclosure or enforcement of the Security Interest and the preparation, administration, continuance, amendment or enforcement of this Agreement, and all such costs and expenses shall be part of the Obligations secured by the Security Interest. The Pledgor shall indemnify and hold the Pledgees harmless from and against any and all claims, losses and liabilities (including reasonable attorneys’ fees) growing out of or resulting from this Agreement (including enforcement of this Agreement) or the Pledgees’ actions pursuant hereto, except that no Person shall be indemnified with respect to claims, losses or liabilities resulting from the Pledgees’ gross negligence or willful misconduct as determined by a final judgment of a court of competent jurisdiction. Any liability of the Pledgor to indemnify and hold the Pledgees harmless pursuant to the preceding sentence shall be part of the Obligations secured by the Security Interest. The obligations of the Pledgor under this Section 13 shall survive any termination of this Agreement. Furthermore, if and to the extent that any of the foregoing agreements described in this Section 13 may be unenforceable for any reason, the Pledgor agrees to make the maximum contribution to the payment and satisfaction of such liabilities that is permissible under applicable law.

14.            Waivers; Remedies; Marshaling . This Agreement can be waived, modified, amended, terminated or discharged, and the Security Interest can be released, only explicitly in a writing signed by the Pledgees and/or the party sought to be charged with any such amendment or modification. A waiver so signed shall be effective only in the specific instance and for the specific purpose given. Mere delay or failure to act shall not preclude the exercise or enforcement of any rights and remedies available to the Pledgees. All rights and remedies of the Pledgees shall be cumulative and may be exercised singly in any order or sequence, or concurrently, at the Pledgees’ option, and the exercise or enforcement of any such right or remedy shall neither be a condition to nor bar the exercise or enforcement of any other. The Pledgor hereby waives all requirements of law, if any, relating to the marshaling of assets which would be applicable in connection with the enforcement by the Pledgees of its remedies hereunder, absent this waiver.

15.            Notices . Any notice or other communication to any party in connection with this Agreement shall be in writing and shall be sent by manual delivery, telegram, telex, facsimile transmission (with machine or oral confirmation of delivery), overnight courier or United States mail (postage prepaid) addressed to such party at the address specified on the signature page hereof, or at such other address as such party shall have specified to the other party hereto in writing delivered as required as required under this Section 15. All periods of notice shall be measured from the date of delivery thereof if manually delivered, from the date of sending thereof if sent by telegram, telex or facsimile transmission (with machine or oral confirmation of delivery), from the first business day after the date of sending if sent by overnight courier, or from four days after the date of mailing if mailed.

16.            Pledgor Acknowledgments . The Pledgor hereby acknowledges that (a) the Pledgor has been advised by counsel in the negotiation, execution and delivery of this Agreement, (b) the Pledgees do not have a fiduciary relationship to the Pledgor, the relationship being solely that of debtor and creditor, and (c) no joint venture exists between the Pledgor and the Pledgees.

17.            Continuing Security Interest; Assignments under Loan Agreement . This Agreement shall (a) create a continuing security interest in the Pledged Shares and shall remain in full force and effect until payment in full of the Obligations and the expiration or termination of the obligations, if any, of the Pledgees to extend credit accommodations to the Borrower, (b) be binding upon the Pledgor, its successors and assigns, and (c) be enforceable by the Pledgees and shall inure to the benefit of the Pledgees’ successors, transferees, and assigns. Without limiting the generality of the foregoing clause (c), the Pledgees may assign or otherwise transfer all or any portion of its rights and obligations under the Loan Agreement to any other Persons to the extent and in the manner provided in the Loan Agreement and may similarly transfer all or any portion of its rights under this Agreement to such Persons.

18.            Termination of Security Interest . Upon payment in full of the Obligations, the security interest granted hereby shall terminate and all rights to the Pledged Shares shall revert to the Pledgor.

19.            Law Governing this Agreement and Disputes . This Agreement shall be governed by and construed in accordance with the laws of the State of Nevada without regard to principles of conflicts of laws; provided, however, that any matter relating to the registration of the Pledge, as provided herein, or the enforcement of the Pledge in Israel, shall be governed by and construed in accordance with the laws of Israel. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

The parties to this Agreement shall submit all disputes arising under this Debenture to arbitration in New York, New York before a single arbitrator of the American Arbitration Association (the “ AAA ”). The arbitrator shall be selected by application of the rules of the AAA, or by mutual agreement of the parties, except that such arbitrator shall be an attorney admitted to practice law in the State of New York. No party hereto will challenge the jurisdiction or venue provisions as provided in this Section 19. Nothing in this Section 19 shall limit the Pledgee’s right to obtain an injunction for a breach of this Agreement from a court of law. Any injunction obtained shall remain in full force and effect until the arbitrator fully adjudicates the dispute.

20.            Counterparts . This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument.

21.            General . All representations and warranties contained in this Agreement, any other Loan Document to which the Pledgor is a party or in any other agreement between the Pledgor and the Pledgees shall survive the execution, delivery and performance of this Agreement and the creation and payment of the Obligations. The Pledgor waives notice of the acceptance of this Agreement by the Pledgees. Captions in this Agreement are for reference and convenience only and shall not affect the interpretation or meaning of any provision of this Agreement.

IN WITNESS WHEREOF, the Pledgor has caused this Agreement to be duly executed and delivered by its officer thereunto duly authorized as of the date first above written.

THE COMPANY:

BLUE SPHERE CORPORATION

[ Signature Page of Pledgees Follows ]

IN WITNESS WHEREOF, the undersigned have caused this Agreement to be duly executed and delivered by its officer thereunto duly authorized as of the date first above written.

THE PLEDGEES:   

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