Item 1.01 Entry into a Material Definitive Agreement
Power Up Lending Group.
Convertible Promissory Note:
On July 24, 2020, BlackStar Enterprise Group,
Inc. (the “Company” or “we”) and Power Up Lending Group Ltd. (“Holder”) entered into a
convertible promissory note totaling $43,000 (Exhibit 10.1) and a Securities Purchase Agreement (“SPA”) (Exhibit 10.2),
(altogether, the “Transaction Documents”).
The Company executed a 10% convertible
promissory note of the Company with Holder, in the principal amount of $43,000 (the “Note”), upon the terms and subject
to the limitations and conditions set forth in such Note. The Note is attached as Exhibit 10.1. The Holder may convert the outstanding
unpaid principal amount of the Note into restricted shares of Common Stock of the Company at a discount of 39% of the Market Price.
The Company has initially reserved out of its authorized Common Stock 46,478,112 shares of Common Stock for conversion pursuant
to the Note, as evidenced by the Transfer Agent Letter attached as Exhibit 10.3.
The Note, bearing an interest rate of 10%,
dated July 24, 2020 (the “Issue Date”) for $43,000 matures on July 24, 2021. The Note and SPA were closed on July 24,
2020 (the “Closing Date”) and the Company received $40,000 on July 28, 2020, with the remaining $3,000 being retained
by the Holder to cover legal and due diligence fees. The Note additionally bears an interest rate of 22% per annum in the Event
of Default.
Prepayment. The Company may prepay the
Note in whole or in part at any time, up to 180 days after the Issue Date, by paying the principal amount to be prepaid together
with premium interest thereon to the date of prepayment (120% 1-60 days; 125% 61-90 days; 130% 91-120 days; 135% 121-150 days;
and 139% 151-180 days). After 180 days from the Issue Date, Company may not prepay any amount.
No Beneficial Ownership. The Holder
shall not be entitled to convert any portion of the Note in excess of that portion upon conversion of which the sum of (1) the
number of shares of Common Stock beneficially owned by the Holder and its affiliates (other than shares of Common Stock which may
be deemed beneficially owned through the ownership of the unconverted portion of the Notes or the unexercised or unconverted portion
of any other security of the Company subject to a limitation on conversion or exercise analogous to the limitations contained in
the Note) and (2) the number of shares of Common Stock issuable upon the conversion of the portion of this Note with respect to
which the determination of this proviso is being made, would result in beneficial ownership by the Holder and its affiliates of
more than 4.99% of the outstanding shares of Common Stock. For the purposes of the provision to the immediately preceding sentence,
beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended and
Regulations 13D-G thereunder. The beneficial ownership limitations on conversion as set forth may NOT be waived by the Holder.
Conversion Price. The conversion price
(the “Conversion Price”) shall equal the Variable Conversion Price (as defined herein) (subject to equitable adjustments
by the Borrower relating to the Borrower’s securities or the securities of any subsidiary of the Borrower, combinations,
recapitalization, reclassifications, extraordinary distributions and similar events). The "Variable Conversion Price"
shall mean 61% multiplied by the Market Price (as defined herein) (representing a discount rate of 39%). “Market Price”
means the lowest Trading Price (as defined below) for the Common Stock during the twenty (20) Trading Day period ending on the
latest complete Trading Day prior to the Conversion Date. “Trading Price” means, for any security as of any date, the
closing bid price on the OTCQB, OTCQX, Pink Sheets electronic quotation system or applicable trading market (the “OTC”)
as reported by a reliable reporting service (“Reporting Service”) designated by the Holder (i.e. Bloomberg) or, if
the OTC is not the principal trading market for such security, the closing bid price of such security on the principal securities
exchange or trading market where such security is listed or traded or, if no closing bid price of such security is available in
any of the foregoing manners, the average of the closing bid prices of any market makers for such security that are listed
in the “pink sheets”. If the Trading
Price cannot be calculated for such security on such date in the manner provided above, the Trading Price shall be the fair market
value as reasonably determined by the Borrower. “Trading Day” shall mean any day on which the Common Stock is tradable
for any period on the OTC, or on the principal securities exchange or other securities market on which the Common Stock is then
being traded.
Amounts Due in Events of Default:
Upon the failure to pay principal and interest,
the Note shall become immediately due and payable. Upon the failure to issue conversion shares when Holder exercises said right,
or other events of default outlined in the Note, then two times (2x) the Default Amount of the Note will become due and payable
immediately. Any other form of default will entitle the Holder to an immediate payment of one hundred fifty percent (150%) of the
Default Amount, being the outstanding principal amount of the Note, plus accrued and unpaid interest on the unpaid principal amount
of the Note, plus any default interest and any other amounts owed.
Securities Purchase Agreement:
The Company and the Holder executed the Securities
Purchase Agreement (“SPA”) in accordance with and in reliance upon the exemption from securities registration for offers
and sales to accredited investors afforded, inter alia, by Rule 506 under Regulation D as promulgated by the United States Securities
and Exchange Commission (the “SEC”) under the 1933 Act, and/or Section 4(a)(2) of the 1933 Act. The SPA outlines the
purchase of the Note (the “Securities”), and the Holder understands that the Securities are being offered and sold
to it in reliance on specific exemptions from the registration requirements of the 1933 Act and state securities laws and that
the Company is relying upon the truth and accuracy of, and the Holder’s compliance with, the representations, warranties,
agreements, acknowledgments and understandings of the Holder set forth in the SPA in order to determine the availability of such
exemptions and the eligibility of the Holder to acquire the Securities.
Transfer Agent Instruction Letter:
Until the Company’s obligations under
the Note are paid and performed in full, the Transfer Agent of the Company is authorized to establish a reserve of shares of authorized
but unissued Common Stock of the Company in an amount not less than 46,478,112 shares for issuance upon partial or full conversion
of the Note in accordance with the terms thereof, and the Transfer Agent shall immediately add shares of Common Stock to the reserved
shares as and when requested by Company in writing from time to time.