[logo.jpg]

 

THIS CONVERTIBLE NOTE SUBSCRIPTION AGREEMENT (this “Agreement”) is made as of
February 6st., 2012 by and among Bluesphere Corporation, a company organized and
existing under the laws of the State of Nevada (“BSC”), and FRUITFUL HOLDINGS
LIMITED (the “Purchaser”).

 

Whereas, BSC has agreed to sell and the Purchaser has agreed to purchase notes
convertible into shares of common stock of BSC described more fully in the term
sheet delivered to the Purchaser separately herefrom (the “Notes”) subject to
the terms and on the conditions set forth below.

 

Now, therefore, in consideration of the mutual premises and covenants contained
herein, and intending to be legally bound, the parties hereto agree as follows:

 

1.            Sale and Purchase of Notes.

 

1.1           Sale of Notes.      Subject to the terms and conditions hereof,
BSC hereby issues and sells to the Purchaser, and the Purchaser hereby purchases
from BSC $100,000 in principal amount Notes.

  

1.2           Purchase Price.    The aggregate purchase price for the Notes is
U.S. $100,000 (the “Purchase Price”). Subject to Section 1.5 below, U.S. $30,000
of the Purchase Price (the “Advance Payment”) shall be delivered to BSC in
accordance with instructions to be provided separately in immediately available
funds upon signing this Agreement. U.S. $70,000 of the Purchase Price (the
“Escrow Payment”) shall be deposited into an escrow account to be released to
BSC when the balance of such escrow account reaches U.S. $1,070,000.

 

1.3           Interest.   Notwithstanding anything else to the contrary in the
description of the notes in the term sheet delivered to the Purchaser separately
hereto (the “Term Sheet”), but subject to Section 1.5 below, the Notes
representing the Advance Payment shall bear interest at a rate of 8% per annum.
Subject to Section 1.5 below, all accrued and unpaid interest shall be payable
at the same time as the principal (as described in Section 1.4 below). The Notes
representing the Escrow Payment will bear interest at a rate of 6.5%. All other
terms and conditions of the Notes shall be the same regardless of when the
purchase price for which was received by BSC.

 

1.4           Principal Repayment.    Subject to Section 1.5 below, 100% of the
outstanding principal amount of the Notes representing the Advance Payment shall
be repaid within 90 days of the date on which BSC decides not to consummate the
CTG acquisition, the details of which have been communicated to the Purchaser
separately. BSC shall have the right to prepay all or a part of the outstanding
principal balance at any time without any penalty.

 

1.5           Principal Repayment and Interest Adjustment.     It is
acknowledged and agreed that BSC is contemplating the purchase of a majority
interest in the ownership of CTG within 90 days from the date hereof (the
“Transaction”). No assurance is given that BSC will consummate such Transaction.
Notwithstanding anything else to the contrary herein or in the Term Sheet, if
BSC consummates the Transaction, (i) the interest rate applicable to the Notes
representing the Advance Payment shall be not 8%, but 6.5% per annum and (ii)
the principal repayment and interest payment schedule of the Notes representing
the Advance Payment shall be the same as for the Notes representing the Escrow
Payment.

 

35 Asuta St. Even Yehuda, Israel 40500 | Tel: +972-9-8917438, Fax:
+972-9-8998615 London Office: Pall Mall 100 St. James London, SW1Y 5NQ UK | Tel:
+44-020-73213716 www.bluespherecorporate.com

 

 

 

 

[logo.jpg]

 

1.6           Bonus Share Issuance. As an inducement to make payment of the
Advance Payment upon signing this Agreement, BSC shall issue and deliver 150,000
shares of common stock of BSC within two weeks of the date hereof.

 

2.            Further Assurances. Each party hereto agrees to execute, on
request, all other documents and instruments as the other party shall reasonably
request, and to take any actions, which are reasonably required or desirable to
carry out obligations imposed under, and affect the purposes of, this Agreement.

 

3.            Governing Law and Jurisdiction. This Agreement shall be governed
by the substantive law of Israel, without application of any conflict of laws
principle that would require the application of the law of any other
jurisdiction.

 

IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first above written.

 

Blue Sphere Corporation       [sign.jpg]       By:  Shlomi Palas   Title:  CEO  

 

FRUITFUL HOLDINGS LIMITED           By:       Title:  

 

35 Asuta St. Even Yehuda, Israel 40500 | Tel: +972-9-8917438, Fax:
+972-9-8998615 London Office: Pall Mall 100 St. James London, SW1Y 5NQ UK | Tel:
+44-020-73213716 www.bluespherecorporate.com

 

 

 

 

[logo.jpg]

 

Annex A

 

This Term Sheet summarizes the principal terms of the Notes Convertible into
Shares of common stock of Bluesphere Corp., a Nevada corporation (the
“Company”). In consideration of the time and expense devoted and to be devoted
by the Company and Lenders with respect to this investment, the confidentiality,
governing law and expense provisions of this Term Sheet shall be binding
obligations whether or not a purchase of the Notes is consummated. No other
legally binding obligations will be created until definitive agreements are
executed and delivered by all parties. This Term Sheet is not a commitment to
invest and is conditioned on the completion of due diligence, legal review and
documentation that is satisfactory to the Lenders.

 

Offering Terms  
Closing Date: The Company may, in its discretion, call in the purchase money for
the Notes any time after it has received commitments to invest a minimum of U.S.
$1,100,000 (the “Closing”). There may be subsequent closings if and when
additional Notes are purchased after the initial Closing.     Escrow: Within two
(2) days after signing this Term Sheet and receiving relevant account details,
each Lender will deposit into an escrow account to be opened by the Company cash
equal to the amount of Notes it is purchasing.  The aggregate cash in the escrow
account will be released to the Company when the amount of such cash equals or
exceeds U.S. $1,100,000.  If the amount of cash does not equal or exceed U.S.
$1,100,000, the amount deposited by the Lender will be returned to such Lender.
    Lenders: Lender No. 1:  U.S. $[_________] Notes.     Notes: Up to an
aggregate amount of U.S. $1,500,000 6.5% Notes Convertible into Shares of common
stock.     Interest Payments: Interest will be paid annually on the Notes in the
amount of 6.5%.     Principal Repayment: The term of the Notes shall be for
three years.  At such time, the principal, together with any accrued and unpaid
interest, shall be paid on any Note that is not converted into shares of common
stock on a quarterly basis such that 25% of the principal and accrued and unpaid
interest will be paid each quarter for the next four quarters.     Conversion
Terms and Price: At the option of the Lenders, the Notes will be convertible
into shares of the Company’s common stock at a discount of 20% to the then
market price (average of the 15 prior trading days) of such stock.

 

35 Asuta St. Even Yehuda, Israel 40500 | Tel: +972-9-8917438, Fax:
+972-9-8998615 London Office: Pall Mall 100 St. James London, SW1Y 5NQ UK | Tel:
+44-020-73213716 www.bluespherecorporate.com

 

 

 

 

[logo.jpg]

 

Equity Kicker:

Simultaneously with the purchase of the Notes, each Lender will receive shares
of the Company’s common stock in an amount equal to 20% of the amount loaned so
that, by way of example, if an Lender purchases $1,500,000 in Notes, such Lender
will receive the number of shares of common stock equal to $300,000 based on the
closing price for the 15 trading days prior to such purchase. The Company is
also offering $150,000 in warrants each exercisable within 3 years at a price of
$0.25. Each Lender will receive its pro rata share of such warrants.
Additionally, the Company is offering another $150,000 in warrants each
exercisable at a price of $0.50 cents. Each Lender that converts its Notes into
shares will receive its pro rata share of such warrants. By way of example, a
Lender who purchases $500,000 in notes, will receive $50,000 in such warrants.

    Short Sale and Manipulation: There will be no short selling or other
manipulation, directly or indirectly, of the price of the shares of the
Company’s common stock at any time during which the Notes are outstanding.

 

Anti-dilution Provisions:

In the event that the Company issues additional securities at a purchase price
less than the current conversion price on the common shares being offered
hereby, such conversion price shall be adjusted in accordance with the following
formula:

 

       CP2 = CP1 * (A+B) / (A+C)

 

    CP2   = Conversion price in effect immediately after new issue            
CP1   = Conversion price in effect immediately prior to new issue            
A      = Number of shares of common stock deemed to be outstanding immediately
prior to new issue (includes all shares of outstanding common stock and all
outstanding options on an as-exercised basis; and does not include any
convertible securities converting into this round of financing)            
B     = Aggregate consideration received by the Company with respect to the new
issue divided by CP1             C     = Number of shares of stock issued in the
subject transaction

 

35 Asuta St. Even Yehuda, Israel 40500 | Tel: +972-9-8917438, Fax:
+972-9-8998615 London Office: Pall Mall 100 St. James London, SW1Y 5NQ UK | Tel:
+44-020-73213716 www.bluespherecorporate.com

 

 

 

 

[logo.jpg]

 

 

The following issuances shall not trigger anti-dilution adjustment:

 

(i)          securities issued upon the conversion

 

(ii)         of any debenture, warrant,

 

option, or other convertible security; (ii) common stock issuable upon a stock
split, stock dividend, or any subdivision of shares of common stock; and (iii)
shares of common stock (or options to purchase such shares of common stock)
issued or issuable to employees or directors of, or consultants to, the Company
pursuant to any plan approved by the Company’s Board of Directors.

    Note PURCHASE AGREEMENT   Representations and Warranties: Standard
representations and warranties by the Company.     Conditions to Closing:
Standard conditions to Closing, which shall include, among other things,
satisfactory completion of financial and legal due diligence.      Counsel and
Expenses: Company counsel to draft closing documents. Each party will bear its
own expenses.
LENDERS’ RIGHTS AGREEMENT   Registrable Securities: All shares of Common Stock
issuable upon conversion of the Notes will be deemed “Registrable Securities.”  
 
Piggyback Registration: The holders of Registrable Securities will be entitled
to “piggyback” registration rights on all registration statements of the
Company, subject to the right, however, of the Company and its underwriters to
reduce the number of shares proposed to be registered to a minimum of 20% on a
pro rata basis. In all events, the shares to be registered by holders of
Registrable Securities will be reduced only after all other stockholders’ shares
are reduced.     Expenses: The registration expenses (exclusive of stock
transfer taxes, underwriting discounts and commissions will be borne by the
Company.      Lock-up: Lenders shall agree in connection with any underwritten
secondary offering, if requested by the managing underwriter, not to sell or
transfer any shares of Common Stock of the Company for a period of up to 180
days following such offering.     Termination:

Upon a Deemed Liquidation Event and/or when all shares of an Lender are eligible
to be sold without restriction under Rule 144.

 

No future registration rights may be granted without consent of the holders of a
majority of the Registrable Securities unless subordinate to the Lender’s
rights.

 

35 Asuta St. Even Yehuda, Israel 40500 | Tel: +972-9-8917438, Fax:
+972-9-8998615 London Office: Pall Mall 100 St. James London, SW1Y 5NQ UK | Tel:
+44-020-73213716 www.bluespherecorporate.com

 

 

 

 

[logo.jpg]

 

Right to Participate Pro Rata in Future Rounds:

All Lenders shall have a pro rata right, based on their percentage equity
ownership in the Company (assuming the exercise of all options outstanding under
the Company’s stock plans), to participate in subsequent issuances of equity
securities of the Company (excluding those issuances listed at the end of the
“Anti-dilution Provisions” section of this Term Sheet. In addition, should any
Lender choose not to purchase its full pro rata share, the remaining Lenders
shall have the right to purchase the remaining pro rata shares.

 

GENERAL

 

Representations and Warranties: Customary for this type of transaction.     
Confidentiality: The terms and existence of this Term Sheet and the transactions
contemplated hereby shall be kept confidential except to the extent necessary to
comply with applicable law.     Securities Laws: Lenders and Company will
observe and comply with all applicable U.S. and non-U.S. securities laws.    
Costs and Fees: Each party will bear its own costs and expenses in connection
with the negotiation and execution of this Term Sheet.     Governing Law and
Dispute Resolution Venue: Israel.

 

EXECUTED this [__] day of january 2012.

 

Bluesphere Corporation           By:   Title:  

  

35 Asuta St. Even Yehuda, Israel 40500 | Tel: +972-9-8917438, Fax:
+972-9-8998615 London Office: Pall Mall 100 St. James London, SW1Y 5NQ UK | Tel:
+44-020-73213716 www.bluespherecorporate.com

 

 

 

 

[logo.jpg]

 

FRUITFUL HOLDINGS LIMITED           By:   Title:  

 

35 Asuta St. Even Yehuda, Israel 40500 | Tel: +972-9-8917438, Fax:
+972-9-8998615 London Office: Pall Mall 100 St. James London, SW1Y 5NQ UK | Tel:
+44-020-73213716 www.bluespherecorporate.com