Document:

Exhibit 10.3

skm
media group, INC.

2012
INCENTIVE STOCK PLAN

 

This SKM Media Group, Inc. 2012
Incentive Stock Plan (the “Plan”) is designed to retain directors, executives and selected employees
and consultants and reward them for making contributions to the success of the Company. These objectives are accomplished by making
long-term incentive awards under the Plan thereby providing Participants with a proprietary interest in the growth and performance
of the Company.

 

		1.	Definitions.

 

“Board” -
The Board of Directors of the Company.

 

“Cause” -
means:

 

		(i)	A material breach committed by the Participant of the Participant’s service or fiduciary
obligations to the Company (other than mental illness), which is not remedied in a reasonable period of time after receipt of written
notice from the Company specifying such breach; or

 

		(ii)	The Participant terminating his services with the Company other than for “Good Reason”
(as such term is set forth in any employment, consulting, Grant or other agreement between the Company and the Participant); or

 

		(iii)	The conviction of the Participant of a felony based upon a violent crime or a sexual crime involving
baseness, vileness or depravity; or

 

		(iv)	Substance abuse by the Participant in a manner which materially affects the performance of the
Participant's obligations hereunder; or

 

		(v)	Any act or omission of the Participant which is materially contrary to the business interests,
representations or goodwill of the Company; or

 

		(vi)	Such other definition as set forth in any employment, consulting, Grant or other agreement between
the Company and the Participant, which agreement shall control.

 

“Change in Control”
- Means, and shall be deemed to have occurred upon the occurrence of, any one of the following events:

 

		(vii)	The acquisition in one transaction by any individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Exchange Act) (a “Person”) of beneficial ownership (within the meaning of
Rule 13(d)(3) promulgated under the Exchange Act) of shares or other securities (as defined in Section 3(a)(10) of the Exchange
Act) representing more than fifty percent (50%) of outstanding Stock of the Company; provided, however, that a Change in Control
as defined in this clause (1) shall not be deemed to occur in connection with any acquisition by the Company, an employee benefit
plan of the Company or any Person who immediately prior to the effective date of this Plan is a holder of Stock (a “Current
Shareholder”) so long as such acquisition does not result in any Person other than the Company, such employee benefit
plan or such Current Shareholder beneficially owning shares or securities representing more than fifty percent (50%) or more of
the outstanding Stock; or

 

		(viii)	On the date that, during any 12-month period, an election occurs of persons as directors of the
Company that causes two-thirds or more of the Board to consist of persons other than (i) persons who, were members of the Board
on the effective date of this Plan and (ii) persons who were nominated by the Board for election as members of the Board at a time
when at least two-thirds of the Board consisted of persons who were members of the Board on the effective date of this Plan; provided,
however, that any person nominated for election by the Board when at least two-thirds of the members of the Board are persons described
in subclause (i) or (ii) and persons who were themselves previously nominated in accordance with this clause (2) shall, for this
purpose, be deemed to have been nominated by a Board composed of persons described in subclause (ii); or

 

    	 

    	 

    

		(ix)	Closing of a reorganization, merger, consolidation or similar transaction of the Company (a “Reorganization
Transaction”), in each case, unless, immediately following such Reorganization Transaction, more than fifty percent
(50%) of, respectively, the outstanding shares of common stock (or similar equity security) of the corporation or other entity
resulting from or surviving such Reorganization Transaction and the combined voting power of the securities of such corporation
or other entity entitled to vote generally in the election of directors, is then beneficially owned, directly or indirectly, by
the individuals and entities who were the respective beneficial owners of the outstanding Stock immediately prior to such Reorganization
Transaction in substantially the same proportions as their ownership of the outstanding Stock immediately prior to such Reorganization
Transaction; or

 

		(x)	The Company Closing of (i) a complete liquidation or dissolution of the Company or (ii) the sale
or other disposition of all or substantially all of the assets of the Company to a corporation or other entity, unless, with respect
to such corporation or other entity, immediately following such sale or other disposition more than fifty percent (50%) of, respectively,
the outstanding shares of common stock (or similar equity security) of such corporation or other entity and the combined voting
power of the securities of such corporation or other entity entitled to vote generally in the election of directors, is then beneficially
owned, directly or indirectly, by the individuals and entities who were the respective beneficial owners of the outstanding Stock
immediately prior to such sale or disposition in substantially the same proportions as their ownership of the outstanding Stock
immediately prior to such sale or disposition.

 

“Code” -
The Internal Revenue Code of 1986, as amended from time to time.

 

“Committee” -
The Compensation Committee of the Company's Board, or such other committee of the Board that is designated by the Board to administer
the Plan, composed of not less than two members of the Board who are disinterested persons, as contemplated by Rule 16b-3 (“Rule
16b-3”) promulgated under the Securities Exchange Act of 1934.

 

“Company” –
SKM Media Group, Inc., a Nevada corporation and its subsidiaries including subsidiaries of subsidiaries.

 

“Disability”
- Means, and a Participant shall be considered disabled, if the Participant meets one of the following requirements:

 

		(xi)	The Participant is unable to engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous
period of not less than twelve (12) months; or

 

		(xii)	The Participant is, by reason of any medically determinable physical or mental impairment that
can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving
income replacement benefits for a period of not less than three months under an accident and health plan covering employees of
the Participant's employer; or

 

		(xiii)	Such other definition of Disability as provided in an employment, consulting, Grant or other agreement
between the Company and the Participants, the provisions of which agreement shall control.

 

“Exchange Act”
- The Securities Exchange Act of 1934, as amended from time to time.

 

“Fair Market Value”
- The fair market value of the Company's issued and outstanding Stock as determined in good faith by the Board or Committee,
which determination shall be conclusive and binding; provided however, that if there is a public market for such Stock, the Fair
Market Value per share shall be the average of the bid and asked prices on the date of grant of the Option, or if listed on Nasdaq
or a stock exchange, the closing price on Nasdaq or such exchange on such date of grant.

 

    	 

    	 

    

 

“Grant” -
The grant of any form of stock option, stock award, or stock purchase offer, whether granted singly, in combination, or in
tandem, to a Participant pursuant to such terms, conditions and limitations as the Committee may establish in order to fulfill
the objectives of the Plan.

 

“Grant Agreement”
- An agreement between the Company and a Participant that sets forth the terms, conditions and limitations applicable
to a Grant.

 

“Incentive Stock Option”
– An employee stock option that meets the requirements of Section 422 of Code when granted and at all times beginning from
the grant until its exercise.

 

“Nonstatutory Option”
– Defined in Section 3 of the Plan.

 

“Option” -
Either an Incentive Stock Option, in accordance with Section 422 of Code, or a Nonstatutory Option, to purchase the Company's
Stock that may be awarded to a Participant under the Plan. A Participant who receives an award of an Option shall be referred to
as an “Optionee.”

 

“Participant”
- A director, officer and employee of or consultant to the Company to whom an Award has been made under the Plan.

 

“Restricted Stock”
– Defined in Section 6 of the Plan.

 

“Restricted Stock Award”
– A grant made under the Plan in Restricted Stock.

 

“Restricted Stock Unit”
- A Grant made under the Plan denominated in units of Restricted Stock.

 

“Securities Act”
- The Securities Act of 1933, as amended from time to time.

 

“Stock” - Authorized
and issued or unissued shares of common stock of the Company.

 

“Stock Award”
- A Grant made under the Plan in Restricted Stock or denominated in units of Restricted Stock.

 

“Ten Percent Holder”
– Defined in Section 3 of the Plan.

 

		2.	Administration. The Plan shall be administered by the Board, provided however, that
the Board may delegate such administration to the Committee. Subject to the provisions of the Plan, the Board and/or the Committee
shall have authority to (a) grant, in its discretion, Incentive Stock Options in accordance with Section 422 of the Code, or Nonstatutory
Options, Stock Awards; (b) determine in good faith the fair market value of the Stock covered by any Grant; (c) determine which
eligible persons shall receive Grants and the number of shares, restrictions, terms and conditions to be included in such Grants;
(d) construe and interpret the Plan; (e) promulgate, amend and rescind rules and regulations relating to its administration, and
correct defects, omissions and inconsistencies in the Plan or any Grant; (f) consistent with the Plan and with the consent of the
Participant, as appropriate, amend any outstanding Grant or amend the vesting date or dates thereof; (g) determine the duration
and purpose of leaves of absence which may be granted to Participants without constituting termination of their employment for
the purpose of the Plan or any Grant; and (h) make all other determinations necessary or advisable for the Plan's administration.
The interpretation and construction by the Board of any provisions of the Plan or selection of Participants shall be conclusive
and final. No member of the Board or the Committee shall be liable for any action or determination made in good faith with respect
to the Plan or any Grant made thereunder. The Board shall have the power to add or remove members of the Committee, from time to
time, and to fill vacancies thereon arising by resignation, death, removal, or otherwise. Meetings shall be held at such times
and places as shall be determined by the Committee. A majority of the members of the Committee shall constitute a quorum for the
transaction of business, and the vote of a majority of those members present at any meeting shall decide any question brought before
that meeting.

 

    	 

    	 

    

		3.	Eligibility.

 

General: The persons who
shall be eligible to receive Grants shall be directors, officers and employees of or consultants to the Company. The term consultant
shall mean any person, other than an employee, who is engaged by the Company to render services and is compensated for such services.
An Optionee may hold more than one Option.

 

Incentive Stock Options: Incentive
Stock Options may only be issued to employees of the Company. Incentive Stock Options may be granted to officers or directors,
provided they are also employees of the Company. Payment of a director's fee shall not be sufficient to constitute employment by
the Company.

 

The Company shall not grant an
Incentive Stock Option under the Plan to any employee if such Grant would result in such employee holding the right to exercise
for the first time in any one calendar year, under all Incentive Stock Options granted under the Plan or any other plan maintained
by the Company, with respect to shares of Stock having an aggregate fair market value, determined as of the date the Option is
granted, in excess of $100,000. Should it be determined that an Incentive Stock Option granted under the Plan exceeds such maximum
for any reason other than a failure in good faith to value the Stock subject to such option, the excess portion of such option
shall be considered a “Nonstatutory Option”. To the extent the employee holds two (2) or more such Options which
become exercisable for the first time in the same calendar year, the foregoing limitation on the exercisability of such Option
as Incentive Stock Options under the Federal tax laws shall be applied on the basis of the order in which such Options are granted.
If, for any reason, an entire Option does not qualify as an Incentive Stock Option by reason of exceeding such maximum, such Option
shall be considered a Nonstatutory Option.

 

Nonstatutory Option: The
provisions of the foregoing Section 3 shall not apply to any Option designated as a “Nonstatutory Option”
or sets forth the intention of the parties that the Option be a Nonstatutory Option.

 

Stock Awards: The provisions
of this Section 3 shall not apply to any Stock Award under the Plan.

 

		4.	Stock.

 

Authorized Stock: Stock
subject to Grants may be either unissued or reacquired Stock.

 

Number of Shares: Subject
to adjustment as provided in Sections 5 and 9 of the Plan, the total number of shares of Stock which may be purchased
or granted directly by Options or Stock Awards, or purchased indirectly through exercise of Options granted under the Plan shall
not exceed Ten Million (10,000,000) shares of Stock. If any Grant shall for any reason terminate or expire, any shares allocated
thereto but remaining unpurchased upon such expiration or termination shall again be available for Grants with respect thereto
under the Plan as though no Grant had previously occurred with respect to such shares. Any shares of Stock issued pursuant to a
Grant and repurchased pursuant to the terms thereof shall be available for future Grants as though not previously covered by a
Grant.

 

Reservation of Shares: The
Company shall reserve and keep available at all times during the term of the Plan such number of shares as shall be sufficient
to satisfy the requirements of the Plan. If, after reasonable efforts, which efforts shall not include the registration of the
Plan or Grants under the Securities Act, the Company is unable to obtain authority from any applicable regulatory body, which authorization
is deemed necessary by legal counsel for the Company for the lawful issuance of shares hereunder, the Company shall be relieved
of any liability with respect to its failure to issue and sell the shares for which such requisite authority was so deemed necessary
unless and until such authority is obtained.

 

Application of Funds: The
proceeds received by the Company from the sale of Stock pursuant to the exercise of Options or rights under Stock Purchase Agreements
will be used for general corporate purposes.

 

No Obligation to Exercise: The
issuance of a Grant shall not impose any obligation upon the Participant to exercise any rights under such Grant.

 

		5.	Terms and Conditions of Options. Options granted hereunder shall be evidenced by
agreements between the Company and the respective Optionees, in the form approved by the Board or Committee. Option agreements
need not be identical, and in each case may include such provisions as the Board or Committee may determine, but all such agreements
shall be subject to and limited by the following terms and conditions:

 

    	 

    	 

    

 

Number of Shares: Each Option
shall state the number of shares to which it pertains.

 

Exercise Price: Each Option
shall state the exercise price, which shall be determined as follows:

 

		(xiv)	Any Incentive Stock Option granted to a person who at the time the Option is granted owns (or is
deemed to own pursuant to Section 424(d) of the Code) stock possessing more than ten percent (10%) of the total combined voting
power or value of all classes of stock of the Company (“Ten Percent Holder”) shall have an exercise price
of no less than one hundred ten percent (110%) of the Fair Market Value of the Stock as of the date of grant; and

 

		(xv)	Incentive Stock Options granted to a person who at the time the Option is granted is not a Ten
Percent Holder shall have an exercise price of no less than 100% of the Fair Market Value of the Stock as of the date of grant.

 

		(xvi)	In no event shall an Option’s exercise price be less than fair market value of the underlying
Stock on the date of grant.

 

Medium and Time of Payment:
The exercise price shall become immediately due upon exercise of the Option and shall be paid in cash or check made payable
to the Company. Should the Company's outstanding Stock be registered under Section 12(g) of the Exchange Act at the time the Option
is exercised, then the exercise price may also be paid as follows:

 

		(xvii)	In shares of Stock held by the Optionee for the requisite period necessary to avoid a charge to
the Company's earnings for financial reporting purposes and valued at Fair Market Value on the exercise date, or

 

		(xviii)	Through a special sale and remittance procedure pursuant to which the Optionee shall concurrently
provide irrevocable written instructions (a) to a Company designated brokerage firm to effect the immediate sale of the purchased
shares and remit to the Company, out of the sale proceeds available on the settlement date, sufficient funds to cover the aggregate
exercise price payable for the purchased shares plus all applicable Federal, state and local income and employment taxes required
to be withheld by the Company by reason of such purchase and (b) to the Company to deliver the certificates for the purchased shares
directly to such brokerage firm in order to complete the sale transaction.

 

At the discretion of the Board or the Committee,
exercisable either at the time of Option grant or of Option exercise, the exercise price may also be paid in such other form of
consideration permitted by the Delaware corporations law as may be acceptable to the Board, or the Committee, including, without
limitation, a promissory note or by means of a “cashless” exercise.

 

Term and Exercise of Options:
Any Option granted hereunder shall become exercisable over a period of no longer than five (5) years, subject to such other
conditions imposed by the Board or the Committee in its sole discretion, provided however, to the extent the right to exercise
any Option(s) pursuant to an agreement between the Company and a Participant is based upon an event. In no event shall any Option
be exercisable after the expiration of ten (10) years from the date it is granted, and no Incentive Stock Option granted to a Ten
Percent Holder shall, by its terms, be exercisable after the expiration of five (5) years from the date of the Option. Unless otherwise
specified by the Board or the Committee in the resolution authorizing such Option, the date of grant of an Option shall be deemed
to be the date upon which the Board or the Committee authorizes the granting of such Option.

 

Each Option shall be exercisable to the
nearest whole share, in installments or otherwise, as the respective Option agreements may provide. During the lifetime of an Optionee,
the Option shall be exercisable only by the Optionee and shall not be assignable or transferable by the Optionee, and no other
person shall acquire any rights therein. To the extent not exercised, installments (if more than one) shall accumulate, but shall
be exercisable, in whole or in part, only during the period for exercise as stated in the Option agreement, whether or not other
installments are then exercisable.

 

    	 

    	 

    

 

Termination of Status as Director,
Officer, Employee or Consultant: If the services of a director, officer, employee or consultant are terminated, the Board may
specify the period during which Options granted to such Participants may be exercised after termination of Optionee’s employment
or services, which shall not be less than thirty (30) days nor more than one (1) year after such termination, but in no event more
than the remaining term of the Option. Notwithstanding the foregoing, in the case of termination for “Cause,”
the Option shall automatically terminate as of the termination of employment or services. The Option may be exercised only
with respect to installments that the Optionee could have exercised at the date of termination of employment or services. Nothing
contained herein or in any Option granted pursuant hereto shall be construed to affect or restrict in any way the right of the
Company to terminate the employment or services of an Optionee with or without cause.

 

Disability of Optionee: If
an Optionee is disabled (within the meaning of this Plan) at the time of termination, the portion of such Optionee’s Option
which was exercisable at the date of termination may be exercised in whole or in part, for such period, as determined by the Board
and set forth in the Option, of not less than six (6) months nor more than one year after such termination, but in no event more
than the remaining term of the Option. The Option may be so exercised only with respect to installments exercisable at the time
of Optionee’s Disability and not previously exercised by Optionee.

 

Death of Optionee: If an
Optionee dies while employed by, engaged as a consultant to, or serving as a Director of the Company, the portion of such Optionee's
Option which was exercisable at the date of death may be exercised, in whole or in part, by the estate of the decedent or by a
person succeeding to the right to exercise such Option at any time within (i) a period, as determined by the Board and set forth
in the Option, of not less than six (6) months nor more than one (1) year after Optionee's death, which period shall not be more,
in the case of a Nonstatutory Option, than the period for exercise following termination of employment or services, or (ii) during
the remaining term of the Option, whichever is the lesser. The Option may be so exercised only with respect to installments exercisable
at the time of Optionee's death and not previously exercised by Optionee.

 

Non-transferability of Option:
No Option shall be transferable by the Optionee, except by will or by the laws of descent and distribution.

 

Recapitalization: Subject
to any required action of shareholders, the number of shares of Stock covered by each outstanding Option, and the exercise price
per share thereof set forth in each such Option, shall be proportionately adjusted for any increase or decrease in the number of
issued shares of Stock of the Company resulting from a stock split, stock dividend, combination, subdivision or reclassification
of shares, or the payment of a stock dividend, or any other increase or decrease in the number of such shares affected without
receipt of consideration by the Company; provided, however, the conversion of any convertible securities of the Company shall not
be deemed to have been “effected without receipt of consideration” by the Company.

 

In the event of a proposed dissolution
or liquidation of the Company, a merger or consolidation in which the Company is not the surviving entity, or a sale of all or
substantially all of the assets or capital stock of the Company (collectively, a “Reorganization”), unless
otherwise provided by the Board, this Option shall terminate immediately prior to such date as is determined by the Board, which
date shall be no later than the consummation of such Reorganization. In such event, if the entity which shall be the surviving
entity does not tender to Optionee an offer, for which it has no obligation to do so, to substitute for any unexercised Option
a stock option or capital stock of such surviving entity, as applicable, which on an equitable basis shall provide the Optionee
with substantially the same economic benefit as such unexercised Option, then the Board may grant to such Optionee, in its sole
and absolute discretion and without obligation, the right for a period commencing thirty (30) days prior to and ending immediately
prior to the date determined by the Board pursuant hereto for termination of the Option or during the remaining term of the Option,
whichever is the lesser, to exercise any unexpired Option or Options without regard to the installment provisions of Section
6 of the Plan; provided, that any such right granted shall be granted to all Optionees not receiving an offer to receive substitute
options on a consistent basis, and provided further, that any such exercise shall be subject to the consummation of such Reorganization.

 

Subject to any required
action of shareholders, if the Company shall be the surviving entity in any merger or consolidation, each outstanding Option thereafter
shall pertain to and apply to the securities to which a holder of shares of Stock equal to the shares subject to the Option would
have been entitled by reason of such merger or consolidation.

 

In the event of a change
in the Stock of the Company as presently constituted, which is limited to a change of all of its authorized shares without par
value into the same number of shares with a par value, the shares resulting from any such change shall be deemed to be the Stock
within the meaning of the Plan.

 

    	 

    	 

    

 

To the extent that
the foregoing adjustments relate to stock or securities of the Company, such adjustments shall be made by the Board, whose determination
in that respect shall be final, binding and conclusive. Except as expressly provided in this Section 5, the Optionee
shall have no rights by reason of any subdivision or consolidation of shares of stock of any class or the payment of any stock
dividend or any other increase or decrease in the number of shares of stock of any class, and the number or price of shares of
Stock subject to any Option shall not be affected by, and no adjustment shall be made by reason of, any dissolution, liquidation,
merger, consolidation or sale of assets or capital stock, or any issue by the Company of shares of stock of any class or securities
convertible into shares of stock of any class.

 

The Grant of an Option
pursuant to the Plan shall not affect in any way the right or power of the Company to make any adjustments, reclassifications,
reorganizations or changes in its capital or business structure or to merge, consolidate, dissolve, or liquidate or to sell or
transfer all or any part of its business or assets.

 

Rights as a Shareholder: An
Optionee shall have no rights as a shareholder with respect to any shares covered by an Option until the effective date of the
exercise of such Option by Optionee. No adjustment shall be made for dividends (ordinary or extraordinary, whether in cash, securities
or other property) or distributions or other rights for which the record date is prior to the date such stock certificate is issued,
except as expressly provided in this Section 5.

 

Modification, Acceleration,
and Renewal of Options: Subject to the terms and conditions and within the limitations of the Plan, the Board may modify an
Option, or, once an Option is exercisable, accelerate the rate at which it may be exercised, or accept the surrender of outstanding
Options (to the extent not theretofore exercised) and authorize the granting of new Options in substitution for such Options, provided
such action is permissible under Section 422 of the Code and applicable state securities laws. Notwithstanding the provisions of
this Section 5, however, no modification of an Option shall, (i) extend beyond its original term; and (ii) without
the consent of the Optionee, alter to the Optionee's detriment or impair any rights or obligations under any Option theretofore
granted under the Plan.

 

Other Provisions: The Option
agreements authorized under the Plan shall contain such other provisions, including, without limitation, restrictions upon the
exercise of the Options, as the Board or the Committee shall deem advisable. Shares shall not be issued pursuant to the exercise
of an Option, if the exercise of such Option or the issuance of shares thereunder would violate, in the opinion of legal counsel
for the Company, the provisions of any applicable law or the rules or regulations of any applicable governmental or administrative
agency or body, such as the Code, the Securities Act, the Exchange Act, applicable state securities laws, Delaware corporation
law, and the rules promulgated under the foregoing or the rules and regulations of any exchange upon which the shares of the Company
are listed. Without limiting the generality of the foregoing, the exercise of each Option shall be subject to the condition that
if at any time the Company shall determine that (i) the satisfaction of withholding tax or other similar liabilities, or (ii) the
listing, registration or qualification of any shares covered by such exercise upon any securities exchange or under any state or
federal law, or (iii) the consent or approval of any regulatory body, or (iv) the perfection of any exemption from any such withholding,
listing, registration, qualification, consent or approval is necessary or desirable in connection with such exercise or the issuance
of shares thereunder, then in any such event, such exercise shall not be effective unless such withholding, listing registration,
qualification, consent, approval or exemption shall have been effected, obtained or perfected free of any conditions not acceptable
to the Company. Notwithstanding the foregoing, the Company shall take all commercially reasonable efforts to ensure that the shares
may be issuable upon exercise of an Option.

 

		6.	Stock Awards.

 

Types of Grants. 

 

Restricted Stock Awards.
Restricted Stock Awards may be granted to any eligible Participant selected by the Board or the Committee in such amounts and subject
to such terms and conditions as determined by the Board or the Committee. The Board or the Committee shall specify the purchase
price, if any, to be paid by an eligible Participant to the Company with respect to any Restricted Stock Award; provided, however,
that value of the consideration shall not be less than the par value of Stock, unless otherwise permitted by applicable law. All
Restricted Stock Awards will be made pursuant to the execution of a Restricted Stock Award Agreement in the form approved by the
Board or Committee.

 

    	 

    	 

    

 

Vesting of Restricted Stock
Awards. At the time of grant, the Board or the Committee shall specify the date(s) on which the Restricted Stock Award shall
become fully vested and nonforfeitable, and may specify such conditions to vesting as it deems appropriate, including, without
limitation, vesting based upon duration of employment or directorship with the Company or any affiliate, one or more performance
criteria, Company performance, individual performance or other specific criteria, in each case on a specified date or dates or
over any period or periods, as determined by the Board or the Committee.

 

Restricted Stock Units.
Restricted Stock Units may be granted to any eligible Participant selected by the Board or the Committee in such amounts and subject
to such terms and conditions as determined by the Board or the Committee. Except as otherwise provided herein, the term of a Restricted
Stock Unit award shall be set by the Board or the Committee in its sole discretion. The Board or the Committee shall specify the
purchase price, if any, to be paid by to the Company with respect to any Restricted Stock Unit award; provided, however, that value
of the consideration shall not be less than the par value of Stock, unless otherwise permitted by applicable law. All Restricted
Stock Units will be made pursuant to the execution of a Restricted Stock Units Agreement in the form approved by the Board or Committee.

 

Vesting of Restricted Stock
Units. At the time of grant, the Board or the Committee shall specify the date(s) on which the Restricted Stock Units shall
become fully vested and nonforfeitable, and may specify such conditions to vesting as it deems appropriate, including, without
limitation, vesting based upon duration of employment or directorship with the Company or any affiliate, one or more performance
criteria, Company performance, individual performance or other specific criteria, in each case on a specified date or dates or
over any period or periods, as determined by the Board or the Committee.

 

Maturity and Payment.
At the time of grant, the Board or the Committee shall specify the maturity date applicable to each grant of Restricted Stock Units
which shall be no earlier than the vesting date(s) of the award and may be determined at the election of the Participant; provided
that, except as otherwise determined by the Board or the Committee, set forth in any applicable Stock Award Agreement, and subject
to compliance with Section 409A of the Code, in no event shall the maturity date relating to each Restricted Stock Unit occur following
the later of (a) the fifteenth (15th) day of the third month following the end of calendar year in which the Restricted
Stock Unit vests; or (b) the fifteenth (15th) day of the third month following the end of the Company’s fiscal
year in which the Restricted Stock Unit vests. On the maturity date, the Company shall transfer to the Participant one unrestricted,
fully transferable share of Stock for each Restricted Stock Unit scheduled to be paid out on such date and not previously forfeited,
or in the sole discretion of the Board or the Committee, an amount in cash equal to the Fair Market Value of such shares on the
maturity date or a combination of cash and Stock as determined by the Board or the Committee.

 

Payment upon Termination of
Service. An award of Restricted Stock Units shall only be payable while the Participant is an employee or member of the Board,
as applicable; provided, however, that the Board or the Committee, in its sole and absolute discretion may provide (in a Stock
Award Agreement or otherwise) that a Restricted Stock Unit award may be paid subsequent to a termination of service in certain
events, including a Change in Control, the Participant’s death, retirement or disability or any other specified termination
of service.

 

No Rights as a Shareholder.
Unless otherwise determined by the Board or the Committee, a Participant who is awarded Restricted Stock Units shall possess no
incidents of ownership with respect to the shares represented by such Restricted Stock Units, unless and until the same are transferred
to the Participant pursuant to the terms of this Plan and the Stock Award Agreement.

 

    	 

    	 

    

 

Conditions and Restrictions.
Shares of Stock which Participants may receive as a Stock Award under a Stock Award Agreement may include such restrictions
as the Board or Committee, as applicable, shall determine, including restrictions on transfer, repurchase rights, right of first
refusal, and forfeiture provisions. When transfer of Stock is so restricted or subject to forfeiture provisions it is referred
to as “Restricted Stock.” Further, with Board or Committee approval, Stock Awards may be deferred, either in
the form of installments or a future lump sum distribution. The Board or Committee may permit selected Participants to elect to
defer distributions of Stock Awards in accordance with procedures established by the Board or Committee to assure that such deferrals
comply with applicable requirements of the Code including, at the choice of Participants, the capability to make further deferrals
for distribution after retirement. Any deferred distribution, whether elected by the Participant or specified by the Stock Award
Agreement or by the Board or Committee, may require the payment be forfeited in accordance with the provisions of Section 6.
Dividends or dividend equivalent rights may be extended to and made part of any Stock Award denominated in Stock or units of Stock,
subject to such terms, conditions and restrictions as the Board or Committee may establish.

 

		7.	Cancellation and Rescission of Grants. Unless the Stock Award Agreement specifies
otherwise, the Board or Committee, as applicable, may cancel any unexpired, unpaid, or deferred Grants at any time if the Participant
is not in compliance with all other applicable provisions of the Stock Award Agreement, the Plan and with the following conditions:

 

		(a)	A Participant shall not render services for any organization or engage directly or indirectly in
any business which, in the judgment of the chief executive officer of the Company or other senior officer designated by the Board
or Committee, is or becomes competitive with the Company, or which organization or business, or the rendering of services to such
organization or business, is or becomes otherwise prejudicial to or in conflict with the interests of the Company. For Participants
whose employment has terminated, the judgment of the chief executive officer shall be based on the Participant's position and responsibilities
while employed by the Company, the Participant's post-employment responsibilities and position with the other organization or business,
the extent of past, current and potential competition or conflict between the Company and the other organization or business, the
effect on the Company's customers, suppliers and competitors and such other considerations as are deemed relevant given the applicable
facts and circumstances. A Participant who has retired shall be free, however, to purchase as an investment or otherwise, stock
or other securities of such organization or business so long as they are listed upon a recognized securities exchange or traded
over-the-counter, and such investment does not represent a substantial investment to the Participant or a greater than ten percent
(10%) equity interest in the organization or business.

 

		(b)	A Participant shall not, without prior written authorization from the Company, disclose to anyone
outside the Company, or use in other than the Company's business, any confidential information or material, as defined in a Company
agreement regarding confidential information and intellectual property, relating to the business of the Company, acquired by the
Participant either during or after employment with the Company.

 

		(c)	A Participant shall disclose promptly and assign to the Company all right, title and interest in
any invention or idea, patentable or not, made or conceived by the Participant during employment by the Company, relating in any
manner to the actual or anticipated business, research or development work of the Company and shall do anything reasonably necessary
to enable the Company to secure a patent where appropriate in the United States and in foreign countries.

 

		(d)	Upon exercise, payment or delivery pursuant to a Grant, the Participant shall certify on a form
acceptable to the Committee that he or she is in compliance with the terms and conditions of the Plan. Failure to comply with all
of the provisions of this Section 7 prior to, or during the six months after, any exercise, payment or delivery pursuant
to a Grant shall cause such exercise, payment or delivery to be rescinded. The Company shall notify the Participant in writing
of any such rescission within two (2) years after such exercise, payment or delivery. Within ten (10) days after receiving such
a notice from the Company, the Participant shall pay to the Company the amount of any gain realized or payment received as a result
of the rescinded exercise, payment or delivery pursuant to a Grant. Such payment shall be made either in cash or by returning to
the Company the number of shares of Stock that the Participant received in connection with the rescinded exercise, payment or delivery.

 

    	 

    	 

    

 

Nonassignability.

 

		(xix)	Except pursuant to Section 5, no Grant or any other benefit under the Plan shall
be assignable or transferable, or payable to or exercisable by, anyone other than the Participant to whom it was granted.

 

		(xx)	Where a Participant terminates employment and retains a Grant pursuant to Section 5 in order
to assume a position with a governmental, charitable or educational institution, the Board or Committee, in its discretion and
to the extent permitted by law, may authorize a third party (including but not limited to the trustee of a “blind”
trust), acceptable to the applicable governmental or institutional authorities, the Participant and the Board or Committee, to
act on behalf of the Participant with regard to such Stock Awards.

 

Termination of Employment. If
the employment or service to the Company of a Participant terminates, other than pursuant to any of the following provisions under
this Section 7, all unexercised, deferred and unpaid Stock Awards shall be cancelled immediately, unless the Stock
Award Agreement provides otherwise:

 

		(xxi)	Retirement Under a Company Retirement Plan. When a Participant's employment terminates as
a result of retirement in accordance with the terms of a Company retirement plan, the Board or Committee may permit Stock Awards
to continue in effect beyond the date of retirement in accordance with the applicable Grant Agreement and the exercisability and
vesting of any such Grants may be accelerated.

 

		(xxii)	Rights in the Best Interests of the Company. When a Participant resigns from the Company
or terminates providing its services to the Company and, in the judgment of the Board or Committee, the acceleration and/or continuation
of outstanding Stock Awards would be in the best interests of the Company, the Board or Committee may (i) authorize, where appropriate,
the acceleration and/or continuation of all or any part of Grants issued prior to such termination and (ii) permit the exercise,
vesting and payment of such Grants for such period as may be set forth in the applicable Grant Agreement, subject to earlier cancellation
pursuant to Section 10 or at such time as the Board or Committee shall deem the continuation of all or any part of the Participant's
Grants are not in the Company's best interest.

 

		(xxiii)	Death or Disability of a Participant.

 

		(1)	In the event of a Participant's death, the Participant's estate or beneficiaries shall have a period
up to the expiration date specified in the Grant Agreement within which to receive or exercise any outstanding Grant held by the
Participant under such terms as may be specified in the applicable Grant Agreement. Rights to any such outstanding Grants shall
pass by will or the laws of descent and distribution in the following order: (a) to beneficiaries so designated by the Participant;
if none, then (b) to a legal representative of the Participant; if none, then (c) to the persons entitled thereto as determined
by a court of competent jurisdiction. Grants so passing shall be made at such times and in such manner as if the Participant were
living.

 

		(2)	In the event a Participant is deemed by the Board or Committee to be disabled, Grants and rights
to any such Grants may be paid to or exercised by the Participant, if legally competent, or a committee or other legally designated
guardian or representative if the Participant is legally incompetent by virtue of such disability.

 

    	 

    	 

    

		(3)	After the death or disability of a Participant, the Board or Committee may in its sole discretion
at any time (i) terminate restrictions in Grant Agreement; (ii) accelerate any or all installments and rights; and (iii) instruct
the Company to pay the total of any accelerated payments in a lump sum to the Participant, the Participant's estate, beneficiaries
or representative; notwithstanding that, in the absence of such termination of restrictions or acceleration of payments, any or
all of the payments due under the Grant might ultimately have become payable to other beneficiaries.

 

		(4)	In the event of uncertainty as to interpretation of or controversies concerning this Section
7, the determinations of the Board or Committee, as applicable, shall be binding and conclusive.

 

		8.	Change in Control.  Unless otherwise provided in the applicable Grant Agreement,
in the event of a Change in Control, one hundred percent (100%) of the vesting restrictions applicable to each Participant's Grant(s)
shall terminate fully and the Participant shall immediately have the right to the delivery of share certificates or exercise of
Options, to the extent that a Participant's Option(s) are unvested, one hundred percent (100%) of such unvested portion shall vest.

 

		9.	Investment Intent. All Grants under the Plan are intended to be exempt from registration
under the Securities Act provided by Rule 701 thereunder. Unless and until the granting of Options or sale and issuance of Stock
subject to the Plan are registered under the Securities Act or shall be exempt pursuant to the rules promulgated thereunder, each
Grant under the Plan shall provide that the purchases or other acquisitions of Stock thereunder shall be for investment purposes
and not with a view to, or for resale in connection with, any distribution thereof. Further, unless the issuance and sale of the
Stock have been registered under the Securities Act, each Grant shall provide that no shares shall be purchased upon the exercise
of the rights under such Grant unless and until (i) all then applicable requirements of state and federal laws and regulatory agencies
shall have been fully complied with to the satisfaction of the Company and its counsel, and (ii) if requested to do so by the Company,
the person exercising the rights under the Grant shall (A) give written assurances as to knowledge and experience of such person
(or a representative employed by such person) in financial and business matters and the ability of such person (or representative)
to evaluate the merits and risks of exercising the Option, and (B) execute and deliver to the Company a letter of investment intent
and/or such other form related to applicable exemptions from registration, all in such form and substance as the Company may require.
If shares are issued upon exercise of any rights under a Grant without registration under the Securities Act, subsequent registration
of such shares shall relieve the purchaser thereof of any investment restrictions or representations made upon the exercise of
such rights.

 

		10.	Amendment, Modification, Suspension or Discontinuance of the Plan. The Board may,
insofar as permitted by law, from time to time, with respect to any shares at the time not subject to outstanding Grants, suspend
or terminate the Plan or revise or amend it in any respect whatsoever, except that without the approval of the shareholders of
the Company, no such revision or amendment shall (i) increase the number of shares subject to the Plan, (ii) decrease the price
at which Grants may be granted, (iii) materially increase the benefits to Participants, or (iv) change the class of persons eligible
to receive Grants under the Plan; provided, however, no such action shall alter or impair the rights and obligations under any
Option, or Stock Award, outstanding as of the date thereof without the written consent of the Participant thereunder. No Grant
may be issued while the Plan is suspended or after it is terminated, but the rights and obligations under any Grant issued while
the Plan is in effect shall not be impaired by suspension or termination of the Plan.

 

In the event of any change in
the outstanding Stock by reason of a stock split, stock dividend, combination or reclassification of shares, recapitalization,
merger, or similar event, the Board or the Committee may adjust proportionally (a) the number of shares of Stock (i) reserved under
the Plan, (ii) available for Incentive Stock Options and Nonstatutory Options and (iii) covered by outstanding Stock Awards; (b)
the Stock prices related to outstanding Grants; and (c) the appropriate Fair Market Value and other price determinations for such
Grants. In the event of any other change affecting the Stock or any distribution (other than normal cash dividends) to holders
of Stock, such adjustments as may be deemed equitable by the Board or the Committee, including adjustments to avoid fractional
shares, shall be made to give proper effect to such event. In the event of a corporate merger, consolidation, acquisition of property
or stock, separation, reorganization or liquidation, the Board or the Committee shall be authorized to issue or assume stock options,
whether or not in a transaction to which Section 424(a) of the Code applies, and other Grants by means of substitution of new Grant
Agreements for previously issued Grants or an assumption of previously issued Grants.

 

    	 

    	 

    

		11.	Tax Withholding. The Company shall have the right to deduct applicable taxes from
any Grant payment and withhold, at the time of delivery or exercise of Options, Stock Awards or vesting of shares under such Grants,
an appropriate number of shares for payment of taxes required by law or to take such other action as may be necessary in the opinion
of the Company to satisfy all obligations for withholding of such taxes. If Stock is used to satisfy tax withholding, such stock
shall be valued based on the Fair Market Value when the tax withholding is required to be made.

 

		12.	Availability of Information. During the term of the Plan and any additional period
during which a Grant granted pursuant to the Plan shall be exercisable, the Company shall make available, not later than one hundred
and twenty (120) days following the close of each of its fiscal years, such financial and other information regarding the Company
as is required by the bylaws of the Company and applicable law to be furnished in an annual report to the shareholders of the Company.

 

		13.	Notice. Any written notice to the Company required by any of the provisions of the
Plan shall be addressed to the chief personnel officer or to the chief executive officer of the Company, and shall become effective
when it is received by the office of the chief personnel officer or the chief executive officer.

 

		14.	Indemnification of Board.  In addition to such other rights or indemnifications as
they may have as directors or otherwise, and to the extent allowed by applicable law, the members of the Board and the Committee
shall be indemnified by the Company against the reasonable expenses, including attorneys' fees, actually and necessarily incurred
in connection with the defense of any claim, action, suit or proceeding, or in connection with any appeal thereof, to which they
or any of them may be a party by reason of any action taken, or failure to act, under or in connection with the Plan or any Grant
granted thereunder, and against all amounts paid by them in settlement thereof (provided such settlement is approved by independent
legal counsel selected by the Company) or paid by them in satisfaction of a judgment in any such claim, action, suit or proceeding,
except in any case in relation to matters as to which it shall be adjudged in such claim, action, suit or proceeding that such
Board or Committee member is liable for negligence or misconduct in the performance of his or her duties; provided that within
sixty (60) days after institution of any such action, suit or Board proceeding the member involved shall offer the Company, in
writing, the opportunity, at its own expense, to handle and defend the same.

 

		15.	Governing Law. The Plan and all determinations made and actions taken pursuant hereto,
to the extent not otherwise governed by the Code or the securities laws of the United States, shall be governed by the laws of
the State of Nevada and construed accordingly.

  

		16.	Effective and Termination Dates. The Plan shall become effective on the date it is
approved by the Board. The Plan shall terminate ten years later, subject to earlier termination by the Board pursuant to Section
10.

 

THIS 2012 INCENTIVE STOCK PLAN was duly adopted and approved
by the Board and shareholders holding a majority of the Company’s outstanding Stock effective the 19th day of
July, 2012.Exhibit 10.1

 

 

NEITHER THE ISSUANCE AND SALE OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE
FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING
THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT
SECURED BY THE SECURITIES. 

 

	Principal Amount: $53,000.00	Issue Date: March 26, 2012 
	Purchase Price: $53,000.00	 

  

CONVERTIBLE PROMISSORY NOTE

 

FOR VALUE RECEIVED,
BLUE SPHERE CORP., a Nevada corporation (hereinafter called the “Borrower”), hereby promises to pay to the order
of ASHER ENTERPRISES, INC., a Delaware corporation, or registered assigns (the “Holder”) the sum of $53,000.00
together with any interest as set forth herein, on December 28, 2012 (the “Maturity Date”), and to pay interest on
the unpaid principal balance hereof at the rate of eight percent (8%) (the “Interest Rate”) per annum from the date
hereof (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment
or otherwise. This Note may not be prepaid in whole or in part except as otherwise explicitly set forth herein. Any amount of principal
or interest on this Note which is not paid when due shall bear interest at the rate of twenty two percent (22%) per annum from
the due date thereof until the same is paid (“Default Interest”). Interest shall commence accruing on the date that
the Note is fully paid and shall be computed on the basis of a 365-day year and the actual number of days elapsed. All payments
due hereunder (to the extent not converted into common stock, $0.001 par value per share (the “Common Stock”) in accordance
with the terms hereof) shall be made in lawful money of the United States of America. All payments shall be made at such address
as the Holder shall hereafter give to the Borrower by written notice made in accordance with the provisions of this Note. Whenever
any amount expressed to be due by the terms of this Note is due on any day which is not a business day, the same shall instead
be due on the next succeeding day which is a business day and, in the case of any interest payment date which is not the date on
which this Note is paid in full, the extension of the due date thereof shall not be taken into account for purposes of determining
the amount of interest due on such date. As used in this Note, the term “business day” shall mean any day other than
a Saturday, Sunday or a day on which commercial banks in the city of New York, New York are authorized or required by law or executive
order to remain closed. Each capitalized term used herein, and not otherwise defined, shall have the meaning ascribed thereto in
that certain Securities Purchase Agreement dated the date hereof, pursuant to which this Note was originally issued (the “Purchase
Agreement”).

 

    	 

    	 

    

 

This Note is free from
all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other
similar rights of shareholders of the Borrower and will not impose personal liability upon the holder thereof.

 

The following terms shall apply to this Note:

 

ARTICLE I.
CONVERSION RIGHTS

 

1.1
Conversion Right. The Holder shall have the right from time to time, and at any time during the period beginning
on the date which is one hundred eighty (180) days following the date of this Note and ending on the later of: (i) the Maturity
Date and (ii) the date of payment of the Default Amount (as defined in Article III) pursuant to Section 1.6(a) or Article III,
each in respect of the remaining outstanding principal amount of this Note to convert all or any part of the outstanding and unpaid
principal amount of this Note into fully paid and non- assessable shares of Common Stock, as such Common Stock exists on the Issue
Date, or any shares of capital stock or other securities of the Borrower into which such Common Stock shall hereafter be changed
or reclassified at the conversion price (the “Conversion Price”) determined as provided herein (a “Conversion”);
provided, however, that in no event shall the Holder be entitled to convert any portion of this Note in excess of
that portion of this Note 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 Borrower subject to a
limitation on conversion or exercise analogous to the limitations contained herein) 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 purposes of the proviso 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 (the “Exchange Act”), and Regulations 13D-G thereunder,
except as otherwise provided in clause (1) of such proviso. The number of shares of Common Stock to be issued upon each conversion
of this Note shall be determined by dividing the Conversion Amount (as defined below) by the applicable Conversion Price then
in effect on the date specified in the notice of conversion, in the form attached hereto as Exhibit A (the “Notice of Conversion”),
delivered to the Borrower by the Holder in accordance with Section 1.4 below; provided that the Notice of Conversion is submitted
by facsimile or e-mail (or by other means resulting in, or reasonably expected to result in, notice) to the Borrower before 6:00
p.m., New York, New York time on such conversion date (the “Conversion Date”). The term “Conversion Amount”
means, with respect to any conversion of this Note, the sum of (1) the principal amount of this Note to be converted in such conversion
plus (2) at the Borrower’s option, accrued and unpaid interest, if any, on such principal amount at the interest
rates provided in this Note to the Conversion Date, plus (3) at the Borrower’s option, Default Interest, if any,
on the amounts referred to in the immediately preceding clauses (1) and/or (2) plus (4) at the Holder’s option, any
amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof.

 

    	2

    	 

    

 

1.2
Conversion Price. 

 

(a)  Calculation
of Conversion Price. The conversion price (the “Conversion Price”) shall equal the Variable Conversion Price (as
defined herein) (subject to equitable adjustments for stock splits, stock dividends or rights offerings 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 58% multiplied by the Market
Price (as defined herein) (representing a discount rate of 42%). “Market Price” means the average of the lowest three
(3) Trading Prices (as defined below) for the Common Stock during the ten (10) 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 Over-the-Counter Bulletin Board, or applicable trading market (the “OTCBB”) as reported by a reliable reporting
service (“Reporting Service”) designated by the Holder (i.e. Bloomberg) or, if the OTCBB 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” by the National
Quotation Bureau, Inc. 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 mutually determined by the Borrower and the holders of a majority in interest of
the Notes being converted for which the calculation of the Trading Price is required in order to determine the Conversion Price
of such Notes. “Trading Day” shall mean any day on which the Common Stock is tradable for any period on the OTCBB,
or on the principal securities exchange or other securities market on which the Common Stock is then being traded.

 

(b)  Conversion
Price During Major Announcements. Notwithstanding anything contained in Section 1.2(a) to the contrary, in the event the Borrower
(i) makes a public announcement that it intends to consolidate or merge with any other corporation (other than a merger in which
the Borrower is the surviving or continuing corporation and its capital stock is unchanged) or sell or transfer all or substantially
all of the assets of the Borrower or (ii) any person, group or entity (including the Borrower) publicly announces a tender offer
to purchase 50% or more of the Borrower’s Common Stock (or any other takeover scheme) (the date of the announcement referred
to in clause (i) or (ii) is hereinafter referred to as the “Announcement Date”), then the Conversion Price shall, effective
upon the Announcement Date and continuing through the Adjusted Conversion Price Termination Date (as defined below), be equal to
the lower of (x) the Conversion Price which would have been applicable for a Conversion occurring on the Announcement Date and
(y) the Conversion Price that would otherwise be in effect. From and after the Adjusted Conversion Price Termination Date, the
Conversion Price shall be determined as set forth in this Section 1.2(a). For purposes hereof, “Adjusted Conversion Price
Termination Date” shall mean, with respect to any proposed transaction or tender offer (or takeover scheme) for which a public
announcement as contemplated by this Section 1.2(b) has been made, the date upon which the Borrower (in the case of clause (i)
above) or the person, group or entity (in the case of clause (ii) above) consummates or publicly announces the termination or abandonment
of the proposed transaction or tender offer (or takeover scheme) which caused this Section 1.2(b) to become operative.

 

    	3

    	 

    

 

1.3  Authorized
Shares. The Borrower covenants that during the period the conversion right exists, the Borrower will reserve from its authorized
and unissued Common Stock a sufficient number of shares, free from preemptive rights, to provide for the issuance of Common Stock
upon the full conversion of this Note issued pursuant to the Purchase Agreement. The Borrower is required at all times to have
authorized and reserved four times the number of shares that is actually issuable upon full conversion of the Note (based on the
Conversion Price of the Notes in effect from time to time)(the “Reserved Amount”). The Reserved Amount shall be increased
from time to time in accordance with the Borrower’s obligations pursuant to Section 4(g) of the Purchase Agreement. The Borrower
represents that upon issuance, such shares will be duly and validly issued, fully paid and non-assessable. In addition, if the
Borrower shall issue any securities or make any change to its capital structure which would change the number of shares of Common
Stock into which the Notes shall be convertible at the then current Conversion Price, the Borrower shall at the same time make
proper provision so that thereafter there shall be a sufficient number of shares of Common Stock authorized and reserved, free
from preemptive rights, for conversion of the outstanding Notes. The Borrower (i) acknowledges that it has irrevocably instructed
its transfer agent to issue certificates for the Common Stock issuable upon conversion of this Note, and (ii)agrees that its issuance
of this Note shall constitute full authority to its officers and agents who are charged with the duty of executing stock certificates
to execute and issue the necessary certificates for shares of Common Stock in accordance with the terms and conditions of this
Note.

 

If, at any time the Borrower does not maintain
the Reserved Amount it will be considered an Event of Default under Section 3.2 of the Note.

 

1.4  
Method of Conversion. 

 

(a)  Mechanics
of Conversion. Subject to Section 1.1, this Note may be converted by the Holder in whole or in part at any time from time to
time after the Issue Date, by (A) submitting to the Borrower a Notice of Conversion (by facsimile, e-mail or other reasonable means
of communication dispatched on the Conversion Date prior to 6:00 p.m., New York, New York time) and (B)subject to Section 1.4(b),
surrendering this Note at the principal office of the Borrower.

 

    	4

    	 

    

 

(b)  Surrender
of Note Upon Conversion. Notwithstanding anything to the contrary set forth herein, upon conversion of this Note in accordance
with the terms hereof, the Holder shall not be required to physically surrender this Note to the Borrower unless the entire unpaid
principal amount of this Note is so converted. The Holder and the Borrower shall maintain records showing the principal amount
so converted and the dates of such conversions or shall use such other method, reasonably satisfactory to the Holder and the Borrower,
so as not to require physical surrender of this Note upon each such conversion. In the event of any dispute or discrepancy, such
records of the Borrower shall, prima facie, be controlling and determinative in the absence of manifest error. Notwithstanding
the foregoing, if any portion of this Note is converted as aforesaid, the Holder may not transfer this Note unless the Holder
first physically surrenders this Note to the Borrower, whereupon the Borrower will forthwith issue and deliver upon the order
of the Holder a new Note of like tenor, registered as the Holder (upon payment by the Holder of any applicable transfer taxes)
may request, representing in the aggregate the remaining unpaid principal amount of this Note. The Holder and any assignee, by
acceptance of this Note, acknowledge and agree that, by reason of the provisions of this paragraph, following conversion of a
portion of this Note, the unpaid and unconverted principal amount of this Note represented by this Note may be less than the amount
stated on the face hereof.

 

(c)  Payment
of Taxes. The Borrower shall not be required to pay any tax which may be payable in respect of any transfer involved in the
issue and delivery of shares of Common Stock or other securities or property on conversion of this Note in a name other than that
of the Holder (or in street name), and the Borrower shall not be required to issue or deliver any such shares or other securities
or property unless and until the person or persons (other than the Holder or the custodian in whose street name such shares are
to be held for the Holder’s account) requesting the issuance thereof shall have paid to the Borrower the amount of any such
tax or shall have established to the satisfaction of the Borrower that such tax has been paid.

 

(d)  Delivery
of Common Stock Upon Conversion. Upon receipt by the Borrower from the Holder of a facsimile transmission or e-mail (or other
reasonable means of communication) of a Notice of Conversion meeting the requirements for conversion as provided in this Section
1.4, the Borrower shall issue and deliver or cause to be issued and delivered to or upon the order of the Holder certificates for
the Common Stock issuable upon such conversion within three (3) business days after such receipt (the “Deadline”) (and,
solely in the case of conversion of the entire unpaid principal amount hereof, surrender of this Note) in accordance with the terms
hereof and the Purchase Agreement.

 

    	5

    	 

    

 

(e)  Obligation
of Borrower to Deliver Common Stock. Upon receipt by the Borrower of a Notice of Conversion, the Holder shall be deemed to
be the holder of record of the Common Stock issuable upon such conversion, the outstanding principal amount and the amount of accrued
and unpaid interest on this Note shall be reduced to reflect such conversion, and, unless the Borrower defaults on its obligations
under this Article I, all rights with respect to the portion of this Note being so converted shall forthwith terminate except the
right to receive the Common Stock or other securities, cash or other assets, as herein provided, on such conversion. If the Holder
shall have given a Notice of Conversion as provided herein, the Borrower’s obligation to issue and deliver the certificates
for Common Stock shall be absolute and unconditional, irrespective of the absence of any action by the Holder to enforce the same,
any waiver or consent with respect to any provision thereof, the recovery of any judgment against any person or any action to enforce
the same, any failure or delay in the enforcement of any other obligation of the Borrower to the holder of record, or any setoff,
counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder of any obligation to the Borrower,
and irrespective of any other circumstance which might otherwise limit such obligation of the Borrower to the Holder in connection
with such conversion. The Conversion Date specified in the Notice of Conversion shall be the Conversion Date so long as the Notice
of Conversion is received by the Borrower before 6:00 p.m., New York, New York time, on such date.

 

(f)  Delivery
of Common Stock by Electronic Transfer. In lieu of delivering physical certificates representing the Common Stock issuable
upon conversion, provided the Borrower is participating in the Depository Trust Company (“DTC”) Fast Automated Securities
Transfer (“FAST”) program, upon request of the Holder and its compliance with the provisions contained in Section 1.1
and in this Section 1.4, the Borrower shall use its best efforts to cause its transfer agent to electronically transmit the Common
Stock issuable upon conversion to the Holder by crediting the account of Holder’s Prime Broker with DTC through its Deposit
Withdrawal Agent Commission (“DWAC”) system.

 

(g)  Failure
to Deliver Common Stock Prior to Deadline. Without in any way limiting the Holder’s right to pursue other remedies, including
actual damages and/or equitable relief, the parties agree that if delivery of the Common Stock issuable upon conversion of this
Note is not delivered by the Deadline (other than a failure due to the circumstances described in Section 1.3 above, which failure
shall be governed by such Section) the Borrower shall pay to the Holder $1,000 per day in cash, for each day beyond the Deadline
that the Borrower fails to deliver such Common Stock. Such cash amount shall be paid to Holder by the fifth day of the month following
the month in which it has accrued or, at the option of the Holder (by written notice to the Borrower by the first day of the month
following the month in which it has accrued), shall be added to the principal amount of this Note, in which event interest shall
accrue thereon in accordance with the terms of this Note and such additional principal amount shall be convertible into Common
Stock in accordance with the terms of this Note. The Borrower agrees that the right to convert is a valuable right to the Holder.
The damages resulting from a failure, attempt to frustrate, interference with such conversion right are difficult if not impossible
to qualify. Accordingly the parties acknowledge that the liquidated damages provision contained in this Section 1.4(g) are justified.

 

    	6

    	 

    

 

1.5  Concerning
the Shares. The shares of Common Stock issuable upon conversion of this Note may not be sold or transferred unless (i) such
shares are sold pursuant to an effective registration statement under the Act or (ii) the Borrower or its transfer agent shall
have been furnished with an opinion of counsel (which opinion shall be in form, substance and scope customary for opinions of counsel
in comparable transactions) to the effect that the shares to be sold or transferred may be sold or transferred pursuant to an exemption
from such registration or (iii)such shares are sold or transferred pursuant to Rule 144 under the Act (or a successor rule) (“Rule
144”) or (iv) such shares are transferred to an “affiliate” (as defined in Rule 144) of the Borrower who agrees
to sell or otherwise transfer the shares only in accordance with this Section 1.5 and who is an Accredited Investor (as defined
in the Purchase Agreement). Except as otherwise provided in the Purchase Agreement (and subject to the removal provisions set forth
below), until such time as the shares of Common Stock issuable upon conversion of this Note have been registered under the Act
or otherwise may be sold pursuant to Rule 144 without any restriction as to the number of securities as of a particular date that
can then be immediately sold, each certificate for shares of Common Stock issuable upon conversion of this Note that has not been
so included in an effective registration statement or that has not been sold pursuant to an effective registration statement or
an exemption that permits removal of the legend, shall bear a legend substantially in the following form, as appropriate:

 

“NEITHER THE ISSUANCE
AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED
FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY
ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID
ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR
FINANCING ARRANGEMENT SECURED BY THE SECURITIES.”

 

The legend set forth
above shall be removed and the Borrower shall issue to the Holder a new certificate therefore free of any transfer legend if (i)
the Borrower or its transfer agent shall have received an opinion of counsel, in form, substance and scope customary for opinions
of counsel in comparable transactions, to the effect that a public sale or transfer of such Common Stock may be made without registration
under the Act, which opinion shall be accepted by the Company so that the sale or transfer is effected or (ii) in the case of the
Common Stock issuable upon conversion of this Note, such security is registered for sale by the Holder under an effective registration
statement filed under the Act or otherwise may be sold pursuant to Rule 144 without any restriction as to the number of securities
as of a particular date that can then be immediately sold. In the event that the Company does not accept the opinion of counsel
provided by the Buyer with respect to the transfer of Securities pursuant to an exemption from registration, such as Rule 144 or
Regulation S, at the Deadline, it will be considered an Event of Default pursuant to Section 3.2 of the Note.

 

    	7

    	 

    

 

1.6
Effect of Certain Events. 

 

(a)  Effect
of Merger, Consolidation, Etc. At the option of the Holder, the sale, conveyance or disposition of all or substantially all
of the assets of the Borrower, the effectuation by the Borrower of a transaction or series of related transactions in which more
than 50% of the voting power of the Borrower is disposed of, or the consolidation, merger or other business combination of the
Borrower with or into any other Person (as defined below) or Persons when the Borrower is not the survivor shall either: (i) be
deemed to be an Event of Default (as defined in Article III) pursuant to which the Borrower shall be required to pay to the Holder
upon the consummation of and as a condition to such transaction an amount equal to the Default Amount (as defined in Article III)
or (ii) be treated pursuant to Section 1.6(b) hereof. “Person” shall mean any individual, corporation, limited liability
company, partnership, association, trust or other entity or organization.

 

(b)  Adjustment
Due to Merger, Consolidation, Etc. If, at any time when this Note is issued and outstanding and prior to conversion of all
of the Notes, there shall be any merger, consolidation, exchange of shares, recapitalization, reorganization, or other similar
event, as a result of which shares of Common Stock of the Borrower shall be changed into the same or a different number of shares
of another class or classes of stock or securities of the Borrower or another entity, or in case of any sale or conveyance of all
or substantially all of the assets of the Borrower other than in connection with a plan of complete liquidation of the Borrower,
then the Holder of this Note shall thereafter have the right to receive upon conversion of this Note, upon the basis and upon the
terms and conditions specified herein and in lieu of the shares of Common Stock immediately theretofore issuable upon conversion,
such stock, securities or assets which the Holder would have been entitled to receive in such transaction had this Note been converted
in full immediately prior to such transaction (without regard to any limitations on conversion set forth herein), and in any such
case appropriate provisions shall be made with respect to the rights and interests of the Holder of this Note to the end that the
provisions hereof (including, without limitation, provisions for adjustment of the Conversion Price and of the number of shares
issuable upon conversion of the Note) shall thereafter be applicable, as nearly as may be practicable in relation to any securities
or assets thereafter deliverable upon the conversion hereof. The Borrower shall not affect any transaction described in this Section
1.6(b) unless (a) it first gives, to the extent practicable, thirty (30) days prior written notice (but in any event at least fifteen
(15) days prior written notice) of the record date of the special meeting of shareholders to approve, or if there is no such record
date, the consummation of, such merger, consolidation, exchange of shares, recapitalization, reorganization or other similar event
or sale of assets (during which time the Holder shall be entitled to convert this Note) and (b) the resulting successor or acquiring
entity (if not the Borrower) assumes by written instrument the obligations of this Section 1.6(b). The above provisions shall similarly
apply to successive consolidations, mergers, sales, transfers or share exchanges.

 

    	8

    	 

    

 

(c)  Adjustment
Due to Distribution. If the Borrower shall declare or make any distribution of its assets (or rights to acquire its assets)
to holders of Common Stock as a dividend, stock repurchase, by way of return of capital or otherwise (including any dividend or
distribution to the Borrower’s shareholders in cash or shares (or rights to acquire shares) of capital stock of a subsidiary
(i.e., a spin-off)) (a “Distribution”), then the Holder of this Note shall be entitled, upon any conversion of this
Note after the date of record for determining shareholders entitled to such Distribution, to receive the amount of such assets
which would have been payable to the Holder with respect to the shares of Common Stock issuable upon such conversion had such Holder
been the holder of such shares of Common Stock on the record date for the determination of shareholders entitled to such Distribution.

 

(d)  Adjustment
Due to Dilutive Issuance. If, at any time when any Notes are issued and outstanding, the Borrower issues or sells, or in accordance
with this Section 1.6(d) hereof is deemed to have issued or sold, any shares of Common Stock for no consideration or for a consideration
per share (before deduction of reasonable expenses or commissions or underwriting discounts or allowances in connection therewith)
less than the Conversion Price in effect on the date of such issuance (or deemed issuance) of such shares of Common Stock (a “Dilutive
Issuance”), then immediately upon the Dilutive Issuance, the Conversion Price will be reduced to the amount of the consideration
per share received by the Borrower in such Dilutive Issuance.

 

The Borrower shall
be deemed to have issued or sold shares of Common Stock if the Borrower in any manner issues or grants any warrants, rights or
options (not including employee stock option plans), whether or not immediately exercisable, to subscribe for or to purchase Common
Stock or other securities convertible into or exchangeable for Common Stock (“Convertible Securities”) (such warrants,
rights and options to purchase Common Stock or Convertible Securities are hereinafter referred to as “Options”) and
the price per share for which Common Stock is issuable upon the exercise of such Options is less than the Conversion Price then
in effect, then the Conversion Price shall be equal to such price per share. For purposes of the preceding sentence, the “price
per share for which Common Stock is issuable upon the exercise of such Options” is determined by dividing (i) the total amount,
if any, received or receivable by the Borrower as consideration for the issuance or granting of all such Options, plus the minimum
aggregate amount of additional consideration, if any, payable to the Borrower upon the exercise of all such Options, plus, in the
case of Convertible Securities issuable upon the exercise of such Options, the minimum aggregate amount of additional consideration
payable upon the conversion or exchange thereof at the time such Convertible Securities first become convertible or exchangeable,
by (ii) the maximum total number of shares of Common Stock issuable upon the exercise of all such Options (assuming full conversion
of Convertible Securities, if applicable). No further adjustment to the Conversion Price will be made upon the actual issuance
of such Common Stock upon the exercise of such Options or upon the conversion or exchange of Convertible Securities issuable upon
exercise of such Options.

 

    	9

    	 

    

 

Additionally, the Borrower
shall be deemed to have issued or sold shares of Common Stock if the Borrower in any manner issues or sells any Convertible Securities,
whether or not immediately convertible (other than where the same are issuable upon the exercise of Options), and the price per
share for which Common Stock is issuable upon such conversion or exchange is less than the Conversion Price then in effect, then
the Conversion Price shall be equal to such price per share. For the purposes of the preceding sentence, the “price per share
for which Common Stock is issuable upon such conversion or exchange” is determined by dividing (i) the total amount, if any,
received or receivable by the Borrower as consideration for the issuance or sale of all such Convertible Securities, plus the minimum
aggregate amount of additional consideration, if any, payable to the Borrower upon the conversion or exchange thereof at the time
such Convertible Securities first become convertible or exchangeable, by (ii) the maximum total number of shares of Common Stock
issuable upon the conversion or exchange of all such Convertible Securities. No further adjustment to the Conversion Price will
be made upon the actual issuance of such Common Stock upon conversion or exchange of such Convertible Securities.

 

(e)  Purchase
Rights. If, at any time when any Notes are issued and outstanding, the Borrower issues any convertible securities or rights
to purchase stock, warrants, securities or other property (the “Purchase Rights”) pro rata to the record holders of
any class of Common Stock, then the Holder of this Note will be entitled to acquire, upon the terms applicable to such Purchase
Rights, the aggregate Purchase Rights which such Holder could have acquired if such Holder had held the number of shares of Common
Stock acquirable upon complete conversion of this Note (without regard to any limitations on conversion contained herein) immediately
before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights or, if no such record is taken,
the date as of which the record holders of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights.

 

(f)  Notice
of Adjustments. Upon the occurrence of each adjustment or readjustment of the Conversion Price as a result of the events described
in this Section 1.6, the Borrower, at its expense, shall promptly compute such adjustment or readjustment and prepare and furnish
to the Holder a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment
or readjustment is based. The Borrower shall, upon the written request at any time of the Holder, furnish to such Holder a like
certificate setting forth (i) such adjustment or readjustment, (ii) the Conversion Price at the time in effect and (iii) the number
of shares of Common Stock and the amount, if any, of other securities or property which at the time would be received upon conversion
of the Note.

 

1.7  Trading
Market Limitations. Unless permitted by the applicable rules and regulations of the principal securities market on which the
Common Stock is then listed or traded, in no event shall the Borrower issue upon conversion of or otherwise pursuant to this Note
and the other Notes issued pursuant to the Purchase Agreement more than the maximum number of shares of Common Stock that the Borrower
can issue pursuant to any rule of the principal United States securities market on which the Common Stock is then traded (the “Maximum
Share Amount”), which shall be 4.99% of the total shares outstanding on the Closing Date (as defined in the Purchase Agreement),
subject to equitable adjustment from time to time for stock splits, stock dividends, combinations, capital reorganizations and
similar events relating to the Common Stock occurring after the date hereof. Once the Maximum Share Amount has been issued, if
the Borrower fails to eliminate any prohibitions under applicable law or the rules or regulations of any stock exchange, interdealer
quotation system or other self-regulatory organization with jurisdiction over the Borrower or any of its securities on the Borrower’s
ability to issue shares of Common Stock in excess of the Maximum Share Amount, in lieu of any further right to convert this Note,
this will be considered an Event of Default under Section 3.3 of the Note.

 

    	10

    	 

    

 

1.8  Status
as Shareholder. Upon submission of a Notice of Conversion by a Holder, (i) the shares covered thereby (other than the shares,
if any, which cannot be issued because their issuance would exceed such Holder’s allocated portion of the Reserved Amount
or Maximum Share Amount) shall be deemed converted into shares of Common Stock and (ii) the Holder’s rights as a Holder of
such converted portion of this Note shall cease and terminate, excepting only the right to receive certificates for such shares
of Common Stock and to any remedies provided herein or otherwise available at law or in equity to such Holder because of a failure
by the Borrower to comply with the terms of this Note. Notwithstanding the foregoing, if a Holder has not received certificates
for all shares of Common Stock prior to the tenth (10th) business day after the expiration of the Deadline with respect to a conversion
of any portion of this Note for any reason, then (unless the Holder otherwise elects to retain its status as a holder of Common
Stock by so notifying the Borrower) the Holder shall regain the rights of a Holder of this Note with respect to such unconverted
portions of this Note and the Borrower shall, as soon as practicable, return such unconverted Note to the Holder or, if the Note
has not been surrendered, adjust its records to reflect that such portion of this Note has not been converted. In all cases, the
Holder shall retain all of its rights and remedies (including, without limitation, (i) the right to receive Conversion Default
Payments pursuant to Section 1.3 to the extent required thereby for such Conversion Default and any subsequent Conversion Default
and (ii) the right to have the Conversion Price with respect to subsequent conversions determined in accordance with Section 1.3)
for the Borrower’s failure to convert this Note.

 

1.9  Prepayment.
Notwithstanding anything to the contrary contained in this Note, at any time during the period beginning on the Issue Date and
ending on the date which is thiry (30) days following the issue date, the Borrower shall have the right, exercisable on not less
than three (3) Trading Days prior written notice to the Holder of the Note to prepay the outstanding Note (principal and accrued
interest), in full, in accordance with this Section 1.9. Any notice of prepayment hereunder (an “Optional Prepayment Notice”)
shall be delivered to the Holder of the Note at its registered addresses and shall state: (1) that the Borrower is exercising
its right to prepay the Note, and (2) the date of prepayment which shall be not more than three (3) Trading Days from the date
of the Optional Prepayment Notice. On the date fixed for prepayment (the “Optional Prepayment Date”), the Borrower
shall make payment of the Optional Prepayment Amount (as defined below) to or upon the order of the Holder as specified by the
Holder in writing to the Borrower at least one (1) business day prior to the Optional Prepayment Date. If the Borrower exercises
its right to prepay the Note, the Borrower shall make payment to the Holder of an amount in cash (the “Optional Prepayment
Amount”) equal to 125%, multiplied by the sum of: (w) the then outstanding principal amount of this Note plus (x)
accrued and unpaid interest on the unpaid principal amount of this Note to the Optional Prepayment Date plus (y) Default
Interest, if any, on the amounts referred to in clauses (w) and (x) plus (z) any amounts owed to the Holder pursuant to
Sections 1.3 and 1.4(g) hereof. If the Borrower delivers an Optional Prepayment Notice and fails to pay the Optional Prepayment
Amount due to the Holder of the Note within three (3) business days following the Optional Prepayment Date, the Borrower shall
forever forfeit its right to prepay the Note pursuant to this Section 1.9.

 

    	11

    	 

    

 

Notwithstanding
anything to the contrary contained in this Note, at any time during the period beginning on the date which is thirty-one (31)
days following the issue date and ending on the date which is sixty (60) days following the issue date, the Borrower shall
have the right, exercisable on not less than three (3) Trading Days prior written notice to the Holder of the Note to prepay
the outstanding Note (principal and accrued interest), in full, in accordance with this Section 1.9. Any Optional Prepayment
Notice shall be delivered to the Holder of the Note at its registered addresses and shall state: (1) that the Borrower is
exercising its right to prepay the Note, and (2) the date of prepayment which shall be not more than three (3) Trading Days
from the date of the Optional Prepayment Notice. On the Optional Prepayment Date, the Borrower shall make payment of the
Second Optional Prepayment Amount (as defined below) to or upon the order of the Holder as specified by the Holder in writing
to the Borrower at least one (1) business day prior to the Optional Prepayment Date. If the Borrower exercises its right to
prepay the Note, the Borrower shall make payment to the Holder of an amount in cash (the “Second Optional Prepayment
Amount”) equal to 130%, multiplied by the sum of: (w) the then outstanding principal amount of this Note plus
(x) accrued and unpaid interest on the unpaid principal amount of this Note to the Optional Prepayment Date plus (y)
Default Interest, if any, on the amounts referred to in clauses (w) and (x) plus (z) any amounts owed to the
Holder pursuant to Sections 1.3 and 1.4(g) hereof. If the Borrower delivers an Optional Prepayment Notice and fails to pay
the Second Optional Prepayment Amount due to the Holder of the Note within three (3) business days following the Optional
Prepayment Date, the Borrower shall forever forfeit its right to prepay the Note pursuant to this Section 1.9.

 

Notwithstanding
anything to the contrary contained in this Note, at any time during the period beginning on the date which is sixty-one (61)
days following the issue date and ending on the date which is ninety (90) days following the issue date, the Borrower shall
have the right, exercisable on not less than three (3) Trading Days prior written notice to the Holder of the Note to prepay
the outstanding Note (principal and accrued interest), in full, in accordance with this Section 1.9. Any Optional Prepayment
Notice shall be delivered to the Holder of the Note at its registered addresses and shall state: (1) that the Borrower is
exercising its right to prepay the Note, and (2) the date of prepayment which shall be not more than three (3) Trading Days
from the date of the Optional Prepayment Notice. On the Optional Prepayment Date, the Borrower shall make payment of the
Third Optional Prepayment Amount (as defined below) to or upon the order of the Holder as specified by the Holder in writing
to the Borrower at least one (1) business day prior to the Optional Prepayment Date. If the Borrower exercises its right to
prepay the Note, the Borrower shall make payment to the Holder of an amount in cash (the “Third Optional Prepayment
Amount”) equal to 135%, multiplied by the sum of: (w) the then outstanding principal amount of this Note plus
(x) accrued and unpaid interest on the unpaid principal amount of this Note to the Optional Prepayment Date plus (y)
Default Interest, if any, on the amounts referred to in clauses (w) and (x) plus (z) any amounts owed to the
Holder pursuant to Sections 1.3 and 1.4(g) hereof. If the Borrower delivers an Optional Prepayment Notice and fails to pay
the Third Optional Prepayment Amount due to the Holder of the Note within three (3) business days following the Optional
Prepayment Date, the Borrower shall forever forfeit its right to prepay the Note pursuant to this Section 1.9.

 

    	12

    	 

    

 

Notwithstanding
any to the contrary stated elsewhere herein, at any time during the period beginning on the date that is ninety-one (91) day
from the issue date and ending one hundred twenty (120) days following the issue date, the Borrower shall have the right,
exercisable on not less than three (3) Trading Days prior written notice to the Holder of the Note to prepay the outstanding
Note (principal and accrued interest), in full, in accordance with this Section 1.9. Any Optional Prepayment Notice shall be
delivered to the Holder of the Note at its registered addresses and shall state: (1) that the Borrower is exercising its
right to prepay the Note, and (2) the date of prepayment which shall be not more than three (3) Trading Days from the date of
the Optional Prepayment Notice. On the Optional Prepayment Date, the Borrower shall make payment of the Fourth Optional
Prepayment Amount (as defined below) to or upon the order of the Holder as specified by the Holder in writing to the Borrower
at least one (1) business day prior to the Optional Prepayment Date. If the Borrower exercises its right to prepay the Note,
the Borrower shall make payment to the Holder of an amount in cash (the “Fourth Optional Prepayment Amount”)
equal to 140%, multiplied by the sum of: (w) the then outstanding principal amount of this Note plus (x) accrued and
unpaid interest on the unpaid principal amount of this Note to the Optional Prepayment Date plus (y) Default Interest,
if any, on the amounts referred to in clauses (w) and (x) plus (z) any amounts owed to the Holder pursuant to Sections
1.3 and 1.4(g) hereof. If the Borrower delivers an Optional Prepayment Notice and fails to pay the Fourth Optional Prepayment
Amount due to the Holder of the Note within three (3) business days following the Optional Prepayment Date, the Borrower
shall forever forfeit its right to prepay the Note pursuant to this Section 1.9.

 

Notwithstanding any
to the contrary stated elsewhere herein, at any time during the period beginning on the date that is one hundred twenty-one (121)
day from the issue date and ending one hundred eighty (180) days following the issue date, the Borrower shall have the right,
exercisable on not less than three (3) Trading Days prior written notice to the Holder of the Note to prepay the outstanding Note
(principal and accrued interest), in full, in accordance with this Section 1.9. Any Optional Prepayment Notice shall be delivered
to the Holder of the Note at its registered addresses and shall state: (1) that the Borrower is exercising its right to prepay
the Note, and (2) the date of prepayment which shall be not more than three (3) Trading Days from the date of the Optional Prepayment
Notice. On the Optional Prepayment Date, the Borrower shall make payment of the Fifth Optional Prepayment Amount (as defined below)
to or upon the order of the Holder as specified by the Holder in writing to the Borrower at least one (1) business day prior to
the Optional Prepayment Date. If the Borrower exercises its right to prepay the Note, the Borrower shall make payment to the Holder
of an amount in cash (the “Fifth Optional Prepayment Amount”) equal to 150%, multiplied by the sum of: (w) the then
outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note
to the Optional Prepayment Date plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and (x) plus (z)
any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof. If the Borrower delivers an Optional Prepayment Notice
and fails to pay the Fifth Optional Prepayment Amount due to the Holder of the Note within three (3) business days following the
Optional Prepayment Date, the Borrower shall forever forfeit its right to prepay the Note pursuant to this Section 1.9.

 

    	13

    	 

    

 

After the
expiration of one hundred eighty (180) following the date of the Note, the Borrower shall have no right of prepayment.

 

ARTICLE II.
CERTAIN COVENANTS

 

2.1  Distributions
on Capital Stock. So long as the Borrower shall have any obligation under this Note, the Borrower shall not without the Holder’s
written consent (a) pay, declare or set apart for such payment, any dividend or other distribution (whether in cash, property or
other securities) on shares of capital stock other than dividends on shares of Common Stock solely in the form of additional shares
of Common Stock or (b) directly or indirectly or through any subsidiary make any other payment or distribution in respect of its
capital stock except for distributions pursuant to any shareholders’ rights plan which is approved by a majority of the Borrower’s
disinterested directors.

 

2.2  Restriction
on Stock Repurchases. So long as the Borrower shall have any obligation under this Note, the Borrower shall not without the
Holder’s written consent redeem, repurchase or otherwise acquire (whether for cash or in exchange for property or other securities
or otherwise) in any one transaction or series of related transactions any shares of capital stock of the Borrower or any warrants,
rights or options to purchase or acquire any such shares.

 

2.3  Borrowings.
So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent,
create, incur, assume guarantee, endorse, contingently agree to purchase or otherwise become liable upon the obligation of any
person, firm, partnership, joint venture or corporation, except by the endorsement of negotiable instruments for deposit or collection,
or suffer to exist any liability for borrowed money, except (a) borrowings in existence or committed on the date hereof and of
which the Borrower has informed Holder in writing prior to the date hereof, (b) indebtedness to trade creditors or financial institutions
incurred in the ordinary course of business or (c) borrowings, the proceeds of which shall be used to repay this Note.

 

2.4  Sale
of Assets. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s
written consent, sell, lease or otherwise dispose of any significant portion of its assets outside the ordinary course of business.
Any consent to the disposition of any assets may be conditioned on a specified use of the proceeds of disposition.

 

2.5  Advances
and Loans. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s
written consent, lend money, give credit or make advances to any person, firm, joint venture or corporation, including, without
limitation, officers, directors, employees, subsidiaries and affiliates of the Borrower, except loans, credits or advances (a)
in existence or committed on the date hereof and which the Borrower has informed Holder in writing prior to the date hereof, (b)
made in the ordinary course of business or (c) not in excess of $100,000.

 

    	14

    	 

    

 

ARTICLE III.
EVENTS OF DEFAULT

 

If any of the following events of default (each, an
“Event of Default”) shall occur:

 

3.1  Failure
to Pay Principal or Interest. The Borrower fails to pay the principal hereof or interest thereon when due on this Note, whether
at maturity, upon acceleration or otherwise.

 

3.2  Conversion
and the Shares. The Borrower fails to issue shares of Common Stock to the Holder (or announces or threatens in writing that
it will not honor its obligation to do so) upon exercise by the Holder of the conversion rights of the Holder in accordance with
the terms of this Note, fails to transfer or cause its transfer agent to transfer (issue) (electronically or in certificated form)
any certificate for shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when
required by this Note, the Borrower directs its transfer agent not to transfer or delays, impairs, and/or hinders its transfer
agent in transferring (or issuing) (electronically or in certificated form) any certificate for shares of Common Stock to be issued
to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, or fails to remove (or directs
its transfer agent not to remove or impairs, delays, and/or hinders its transfer agent from removing) any restrictive legend (or
to withdraw any stop transfer instructions in respect thereof) on any certificate for any shares of Common Stock issued to the
Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note (or makes any written announcement,
statement or threat that it does not intend to honor the obligations described in this paragraph) and any such failure shall continue
uncured (or any written announcement, statement or threat not to honor its obligations shall not be rescinded in writing) for three
(3) business days after the Holder shall have delivered a Notice of Conversion. It is an obligation of the Borrower to remain current
in its obligations to its transfer agent. It shall be an event of default of this Note, if a conversion of this Note is delayed,
hindered or frustrated due to a balance owed by the Borrower to its transfer agent. If at the option of the Holder, the Holder
advances any funds to the Borrower’s transfer agent in order to process a conversion, such advanced funds shall be paid by
the Borrower to the Holder within forty eight (48) hours of a demand from the Holder.

 

3.3  Breach
of Covenants. The Borrower breaches any material covenant or other material term or condition contained in this Note and any
collateral documents including but not limited to the Purchase Agreement and such breach continues for a period of ten (10) days
after written notice thereof to the Borrower from the Holder.

 

    	15

    	 

    

 

3.4  Breach
of Representations and Warranties. Any representation or warranty of the Borrower made herein or in any agreement, statement
or certificate given in writing pursuant hereto or in connection herewith (including, without limitation, the Purchase Agreement),
shall be false or misleading in any material respect when made and the breach of which has (or with the passage of time will have)
a material adverse effect on the rights of the Holder with respect to this Noteor the Purchase Agreement.

 

3.5  Receiver
or Trustee. The Borrower or any subsidiary of the Borrower shall make an assignment for the benefit of creditors, or apply
for or consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business, or such
a receiver or trustee shall otherwise be appointed.

 

3.6  Judgments.
Any money judgment, writ or similar process shall be entered or filed against the Borrower or any subsidiary of the Borrower or
any of its property or other assets for more than $50,000, and shall remain unvacated, unbonded or unstayed for a period of twenty
(20) days unless otherwise consented to by the Holder, which consent will not be unreasonably withheld.

 

3.7  Bankruptcy.
Bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings, voluntary or involuntary, for relief under
any bankruptcy law or any law for the relief of debtors shall be instituted by or against the Borrower or any subsidiary of the
Borrower.

 

3.8  Delisting
of Common Stock. The Borrower shall fail to maintain the listing of the Common Stock on at least one of the OTCBB or an equivalent
replacement exchange, the Nasdaq National Market, the Nasdaq SmallCap Market, the New York Stock Exchange, or the American Stock
Exchange.

 

3.9  Failure
to Comply with the Exchange Act. The Borrower shall fail to comply with the reporting requirements of the Exchange Act; and/or
the Borrower shall cease to be subject to the reporting requirements of the Exchange Act.

 

3.10  Liquidation. Any dissolution,
liquidation, or winding up of Borrower or any substantial portion of its business.

 

3.11  Cessation
of Operations. Any cessation of operations by Borrower or Borrower admits it is otherwise generally unable to pay its debts
as such debts become due, provided, however, that any disclosure of the Borrower’s ability to continue as a “going
concern” shall not be an admission that the Borrower cannot pay its debts as they become due.

 

3.12  Maintenance
of Assets. The failure by Borrower to maintain any material intellectual property rights, personal, real property or other
assets which are necessary to conduct its business (whether now or in the future).

 

    	16

    	 

    

 

3.13  Financial
Statement Restatement. The restatement of any financial statements filed by the Borrower with the SEC for any date or period
from two years prior to the Issue Date of this Note and until this Note is no longer outstanding, if the result of such restatement
would, by comparison to the unrestated financial statement, have constituted a material adverse effect on the rights of the Holder
with respect to this Note or the Purchase Agreement.

 

3.14  Reverse Splits. The
Borrower effectuates a reverse split of its Common Stock without twenty (20) days prior written notice to the Holder.

 

3.15  Replacement of Transfer
Agent. In the event that the Borrower proposes to replace its transfer agent, the Borrower fails to provide, prior to the effective
date of such replacement, a fully executed Irrevocable Transfer Agent Instructions in a form as initially delivered pursuant to
the Purchase Agreement (including but not limited to the provision to irrevocably reserve shares of Common Stock in the Reserved
Amount) signed by the successor transfer agent to Borrower and the Borrower.

 

3.16  Cross-Default.
Notwithstanding anything to the contrary contained in this Note or the other related or companion documents, a breach or default
by the Borrower of any covenant or other term or condition contained in any of the Other Agreements, after the passage of all applicable
notice and cure or grace periods, shall, at the option of the Holder, be considered a default under this Note and the Other Agreements,
in which event the Holder shall be entitled (but in no event required) to apply all rights and remedies of the Holder under the
terms of this Note and the Other Agreements by reason of a default under said Other Agreement or hereunder.
“Other Agreements” means, collectively, all agreements and instruments between, among or by: (1) the Borrower,
and, or for the benefit of, (2)the Holder and any affiliate of the Holder, including, without limitation, promissory notes; provided,
however, the term “Other Agreements” shall not include the related or companion documents to this Note. Each of the
loan transactions will be cross-defaulted with each other loan transaction and with all other existing and future debt of Borrower
to the Holder.

 

    	17

    	 

    

 

Upon the
occurrence and during the continuation of any Event of Default specified in Section 3.1 (solely with respect to failure to
pay the principal hereof or interest thereon when due at the Maturity Date), the Note shall become immediately due and
payable and the Borrower shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal to the
Default Sum (as defined herein). UPON THE OCCURRENCE AND DURING THE CONTINUATION OF ANY EVENT OF DEFAULT SPECIFIED IN SECTION
3.2, THE NOTE SHALL BECOME IMMEDIATELY DUE AND PAYABLE AND THE BORROWER SHALL PAY TO THE HOLDER, IN FULL SATISFACTION OF ITS
OBLIGATIONS HEREUNDER, AN AMOUNT EQUAL TO: (Y) THE DEFAULT SUM (AS DEFINED HEREIN); MULTIPLIED BY (Z) 175% (2). Upon the
occurrence and during the continuation of any Event of Default specified in Sections 3.1 (solely with respect to failure to
pay the principal hereof or interest thereon when due on this Note upon a Trading Market Prepayment Event pursuant to Section
1.7 or upon acceleration), 3.3, 3.4, 3.6, 3.8, 3.9, 3.11, 3.12, 3.13, 3.14, and/or 3.15 exercisable through the delivery of
written notice to the Borrower by such Holders (the “Default Notice”), and upon the occurrence of an Event of
Default specified the remaining sections of Articles III (other than failure to pay the principal hereof or interest thereon
at the Maturity Date specified in Section 3,1 hereof), the Note shall become immediately due and payable and the Borrower
shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal to the greater of (i) 150% times
the sum of (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the
unpaid principal amount of this Note to the date of payment (the “Mandatory Prepayment Date”) plus (y)
Default Interest, if any, on the amounts referred to in clauses (w) and/or (x) plus (z) any amounts owed to the Holder
pursuant to Sections 1.3 and 1.4(g) hereof (the then outstanding principal amount of this Note to the date of payment plus
the amounts referred to in clauses (x), (y) and (z) shall collectively be known as the “Default Sum”) or (ii) the
“parity value” of the Default Sum to be prepaid, where parity value means (a) the highest number of shares of
Common Stock issuable upon conversion of or otherwise pursuant to such Default Sum in accordance with Article I, treating the
Trading Day immediately preceding the Mandatory Prepayment Date as the “Conversion Date” for purposes of
determining the lowest applicable Conversion Price, unless the Default Event arises as a result of a breach in respect of
a specific Conversion Date in which case such Conversion Date shall be the Conversion Date), multiplied by (b) the
highest Closing Price for the Common Stock during the period beginning on the date of first occurrence of the Event of
Default and ending one day prior to the Mandatory Prepayment Date (the “Default Amount”) and all other amounts
payable hereunder shall immediately become due and payable, all without demand, presentment or notice, all of which hereby
are expressly waived, together with all costs, including, without limitation, legal fees and expenses, of collection, and the
Holder shall be entitled to exercise all other rights and remedies available at law or in equity. 

 

If the Borrower fails
to pay the Default Amount within five (5) business days of written notice that such amount is due and payable, then the Holder
shall have the right at any time, so long as the Borrower remains in default (and so long and to the extent that there are sufficient
authorized shares), to require the Borrower, upon written notice, to immediately issue, in lieu of the Default Amount, the number
of shares of Common Stock of the Borrower equal to the Default Amount divided by the Conversion Price then in effect.

 

ARTICLE IV.
MISCELLANEOUS

 

4.1  Failure
or Indulgence Not Waiver. No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other
or further exercise thereof or of any other right, power or privileges. All rights and remedies existing hereunder are cumulative
to, and not exclusive of, any rights or remedies otherwise available.

 

    	18

    	 

    

 

4.2  Notices.
All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing
and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return
receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted
by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified
most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed
effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine,
at the address or number designated below (if delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered other than on a business day during normal business
hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service,
fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be:

 

If to the Borrower, to:

 

BLUE SPHERE CORP.

35 Asuta Street

Even Yehuda, Israel 40500

Attn: SHLOMO PALAS, Chief Executive Officer

facsimile:

 

With a copy by fax only to (which copy
shall not constitute notice):

 

[enter name of law firm]

Attn: [attorney name]

[enter address line 1]

[enter city, state, zip]

facsimile: [enter fax number]

 

If to the Holder:

 

ASHER ENTERPRISES, INC.

1 Linden Pl., Suite 207

Great Neck, NY. 11021

Attn: Curt Kramer, President

facsimile: 516-498-9894

 

    	19

    	 

    

 

With a copy by fax only to (which copy
shall not constitute notice):

 

Naidich Wurman Birnbaum & Maday, LLP

80 Cuttermill Road, Suite 410

Great Neck, NY 11021

facsimile: 516-466-3555

 

4.3  Amendments.
This Note and any provision hereof may only be amended by an instrument in writing signed by the Borrower and the Holder. The term
“Note” and all reference thereto, as used throughout this instrument, shall mean this instrument (and the other Notes
issued pursuant to the Purchase Agreement) as originally executed, or if later amended or supplemented, then as so amended or supplemented.

 

4.4  Assignability.
This Note shall be binding upon the Borrower and its successors and assigns, and shall inure to be the benefit of the Holder and
its successors and assigns. Each transferee of this Note must be an “accredited investor” (as defined in Rule 501(a)
of the 1933 Act). Notwithstanding anything in this Note to the contrary, this Note may be pledged as collateral in connection
with a bona fide margin account or other lending arrangement.

 

4.5  Cost of Collection.
If default is made in the payment of this Note, the Borrower shall pay the Holder hereof costs of collection, including reasonable
attorneys’ fees.

 

4.6  Governing
Law. This Note shall be governed by and construed in accordance with the laws of the State of New York without regard to principles
of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Note
shall be brought only in the state courts of New York or in the federal courts located in the state and county of Nassau. The parties
to this Note hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not
assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. The Borrower and Holder waive
trial by jury. The prevailing party shall be entitled to recover from the other party its reasonable attorney's fees and costs.
In the event that any provision of this Note 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. Each party
hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in
connection with this Agreement or any other Transaction Document by mailing a copy thereof via registered or certified mail or
overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and
agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall
be deemed to limit in any way any right to serve process in any other manner permitted by law.

 

    	20

    	 

    

 

4.7  Certain
Amounts. Whenever pursuant to this Note the Borrower is required to pay an amount in excess of the outstanding principal amount
(or the portion thereof required to be paid at that time) plus accrued and unpaid interest plus Default Interest on such interest,
the Borrower and the Holder agree that the actual damages to the Holder from the receipt of cash payment on this Note may be difficult
to determine and the amount to be so paid by the Borrower represents stipulated damages and not a penalty and is intended to compensate
the Holder in part for loss of the opportunity to convert this Note and to earn a return from the sale of shares of Common Stock
acquired upon conversion of this Note at a price in excess of the price paid for such shares pursuant to this Note. The Borrower
and the Holder hereby agree that such amount of stipulated damages is not plainly disproportionate to the possible loss to the
Holder from the receipt of a cash payment without the opportunity to convert this Note into shares of Common Stock.

 

4.8  Purchase Agreement.
By its acceptance of this Note, each party agrees to be bound by the applicable terms of the Purchase Agreement.

 

4.9  Notice
of Corporate Events. Except as otherwise provided below, the Holder of this Note shall have no rights as a Holder of Common
Stock unless and only to the extent that it converts this Note into Common Stock. The Borrower shall provide the Holder with prior
notification of any meeting of the Borrower’s shareholders (and copies of proxy materials and other information sent to shareholders).
In the event of any taking by the Borrower of a record of its shareholders for the purpose of determining shareholders who are
entitled to receive payment of any dividend or other distribution, any right to subscribe for, purchase or otherwise acquire (including
by way of merger, consolidation, reclassification or recapitalization) any share of any class or any other securities or property,
or to receive any other right, or for the purpose of determining shareholders who are entitled to vote in connection with any proposed
sale, lease or conveyance of all or substantially all of the assets of the Borrower or any proposed liquidation, dissolution or
winding up of the Borrower, the Borrower shall mail a notice to the Holder, at least twenty (20) days prior to the record date
specified therein (or thirty (30) days prior to the consummation of the transaction or event, whichever is earlier), of the date
on which any such record is to be taken for the purpose of such dividend, distribution, right or other event, and a brief statement
regarding the amount and character of such dividend, distribution, right or other event to the extent known at such time. The Borrower
shall make a public announcement of any event requiring notification to the Holder hereunder substantially simultaneously with
the notification to the Holder in accordance with the terms of this Section 4.9.

 

    	21

    	 

    

 

4.10  Remedies.
The Borrower acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder, by vitiating
the intent and purpose of the transaction contemplated hereby. Accordingly, the Borrower acknowledges that the remedy at law for
a breach of its obligations under this Note will be inadequate and agrees, in the event of a breach or threatened breach by the
Borrower of the provisions of this Note, that the Holder shall be entitled, in addition to all other available remedies at law
or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing
any breach of this Note and to enforce specifically the terms and provisions thereof, without the necessity of showing economic
loss and without any bond or other security being required.

 

IN WITNESS WHEREOF, Borrower has caused
this Note to be signed in its name by its duly authorized officer this March 26, 2012.

 

	 	BLUE SPHERE CORP.
	 	 
	 	By:	 
	 	 	SHLOMO PALAS
	 	 	Chief Executive Officer

 

    	22

    	 

    

 

EXHIBIT A 

NOTICE OF CONVERSION

 

The undersigned hereby
elects to convert $_________________ principal amount of the Note (defined below) into that number of shares of Common Stock
to be issued pursuant to the conversion of the Note (“Common Stock”) as set forth below, of BLUE SPHERE CORP., a Nevada
corporation (the “Borrower”) according to the conditions of the convertible note of the Borrower dated as of March
26, 2012 (the “Note”), as of the date written below. No fee will be charged to the Holder for any conversion, except
for transfer taxes, if any.

 

Box Checked as to applicable instructions:

 

	 ̈	The Borrower shall electronically transmit the Common Stock issuable pursuant to this Notice of
    Conversion to the account of the undersigned or its nominee with DTC through its Deposit Withdrawal Agent Commission system
    (“DWAC Transfer”).
	 	 
	 	Name of DTC Prime Broker:
	 	Account Number:
	 	 
	 ̈	The undersigned hereby requests that the Borrower issue a certificate or certificates for the number of shares of Common
    Stock set forth below (which numbers are based on the Holder’s calculation attached hereto) in the name(s) specified
    immediately below or, if additional space is necessary, on an attachment hereto:
	 	 
	 	ASHER ENTERPRISES, INC.
	 	1 Linden Pl., Suite 207
	 	Great Neck, NY. 11021
	 	Attention: Certificate Delivery
	 	(516) 498-9890

 

	 	Date of Conversion:	 	 	 
	 	Applicable Conversion Price: 	$	 	 
	 	Number of Shares of Common Stock to be Issued	 	 	 
	 	Pursuant to Conversion of the Notes:	 	 	 
	 	Amount of Principal Balance Due remaining	 	 	 
	 	Under the Note after this conversion:	 	 	 

 

	 	ASHER ENTERPRISES, INC.	 
	 	 	 
	 	By:	 	 
	 	Name: Curt Kramer	 
	 	Title:   President	 
	 	Date:	 	 	 
	 	1 Linden Pl., Suite 207
	 	Great Neck, NY. 11021

 

    	 

    	 

    

 

NEITHER THE ISSUANCE AND SALE OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE
FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING
THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT
SECURED BY THE SECURITIES. 

 

	Principal Amount: $32,500.00	Issue Date: May 7, 2012
	Purchase Price: $32,500.00	 

 

CONVERTIBLE PROMISSORY NOTE

 

FOR VALUE RECEIVED,
BLUE SPHERE CORP., a Nevada corporation (hereinafter called the “Borrower”), hereby promises to pay to the order
of ASHER ENTERPRISES, INC., a Delaware corporation, or registered assigns (the “Holder”) the sum of $32,500.00
together with any interest as set forth herein, on February 11, 2013 (the “Maturity Date”), and to pay interest on
the unpaid principal balance hereof at the rate of eight percent (8%) (the “Interest Rate”) per annum from the date
hereof (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment
or otherwise. This Note may not be prepaid in whole or in part except as otherwise explicitly set forth herein. Any amount of principal
or interest on this Note which is not paid when due shall bear interest at the rate of twenty two percent (22%) per annum from
the due date thereof until the same is paid (“Default Interest”). Interest shall commence accruing on the date that
the Note is fully paid and shall be computed on the basis of a 365-day year and the actual number of days elapsed. All payments
due hereunder (to the extent not converted into common stock, $0.001 par value per share (the “Common Stock”) in accordance
with the terms hereof) shall be made in lawful money of the United States of America. All payments shall be made at such address
as the Holder shall hereafter give to the Borrower by written notice made in accordance with the provisions of this Note. Whenever
any amount expressed to be due by the terms of this Note is due on any day which is not a business day, the same shall instead
be due on the next succeeding day which is a business day and, in the case of any interest payment date which is not the date on
which this Note is paid in full, the extension of the due date thereof shall not be taken into account for purposes of determining
the amount of interest due on such date. As used in this Note, the term “business day” shall mean any day other than
a Saturday, Sunday or a day on which commercial banks in the city of New York, New York are authorized or required by law or executive
order to remain closed. Each capitalized term used herein, and not otherwise defined, shall have the meaning ascribed thereto in
that certain Securities Purchase Agreement dated the date hereof, pursuant to which this Note was originally issued (the “Purchase
Agreement”).

 

    	 

    	 

    

 

This Note is free from
all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other
similar rights of shareholders of the Borrower and will not impose personal liability upon the holder thereof.

 

The following terms shall apply to this Note:

 

ARTICLE I.
CONVERSION RIGHTS

 

1.1  Conversion
Right. The Holder shall have the right from time to time, and at any time during the period beginning on the date which is
one hundred eighty (180) days following the date of this Note and ending on the later of: (i) the Maturity Date and (ii) the date
of payment of the Default Amount (as defined in Article III) pursuant to Section 1.6(a) or Article III, each in respect of the
remaining outstanding principal amount of this Note to convert all or any part of the outstanding and unpaid principal amount
of this Note into fully paid and non- assessable shares of Common Stock, as such Common Stock exists on the Issue Date, or any
shares of capital stock or other securities of the Borrower into which such Common Stock shall hereafter be changed or reclassified
at the conversion price (the “Conversion Price”) determined as provided herein (a “Conversion”); provided,
however, that in no event shall the Holder be entitled to convert any portion of this Note in excess of that portion of
this Note 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 Borrower subject to a limitation on
conversion or exercise analogous to the limitations contained herein) 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 purposes
of the proviso 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 (the “Exchange Act”), and Regulations 13D-G thereunder, except
as otherwise provided in clause (1) of such proviso. The number of shares of Common Stock to be issued upon each conversion of
this Note shall be determined by dividing the Conversion Amount (as defined below) by the applicable Conversion Price then in
effect on the date specified in the notice of conversion, in the form attached hereto as Exhibit A (the “Notice of Conversion”),
delivered to the Borrower by the Holder in accordance with Section 1.4 below; provided that the Notice of Conversion is submitted
by facsimile or e-mail (or by other means resulting in, or reasonably expected to result in, notice) to the Borrower before 6:00
p.m., New York, New York time on such conversion date (the “Conversion Date”). The term “Conversion Amount”
means, with respect to any conversion of this Note, the sum of (1) the principal amount of this Note to be converted in such conversion
plus (2) at the Holder’s option, accrued and unpaid interest, if any, on such principal amount at the interest rates
provided in this Note to the Conversion Date, plus (3) at the Holder’s option, Default Interest, if any, on the amounts
referred to in the immediately preceding clauses (1) and/or (2) plus (4) at the Holder’s option, any amounts owed
to the Holder pursuant to Sections 1.3 and 1.4(g) hereof.

 

    	2

    	 

    

 

1.2
Conversion Price.

 

(a)
Calculation of Conversion Price. The conversion price (the “Conversion Price”) shall equal the Variable
Conversion Price (as defined herein) (subject to equitable adjustments for stock splits, stock dividends or rights offerings 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 58% multiplied
by the Market Price (as defined herein) (representing a discount rate of 42%). “Market Price” means the average of
the lowest three (3) Trading Prices (as defined below) for the Common Stock during the ten (10) 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 Over-the-Counter Bulletin Board, or applicable trading market (the “OTCBB”) as reported by
a reliable reporting service (“Reporting Service”) designated by the Holder (i.e. Bloomberg) or, if the OTCBB 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” by the National Quotation Bureau, Inc. 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 mutually determined by the Borrower and the holders
of a majority in interest of the Notes being converted for which the calculation of the Trading Price is required in order to determine
the Conversion Price of such Notes. “Trading Day” shall mean any day on which the Common Stock is tradable for any
period on the OTCBB, or on the principal securities exchange or other securities market on which the Common Stock is then being
traded.

 

(b)
Conversion Price During Major Announcements. Notwithstanding anything contained in Section 1.2(a) to the contrary,
in the event the Borrower (i) makes a public announcement that it intends to consolidate or merge with any other corporation (other
than a merger in which the Borrower is the surviving or continuing corporation and its capital stock is unchanged) or sell or transfer
all or substantially all of the assets of the Borrower or (ii) any person, group or entity (including the Borrower) publicly announces
a tender offer to purchase 50% or more of the Borrower’s Common Stock (or any other takeover scheme) (the date of the announcement
referred to in clause (i) or (ii) is hereinafter referred to as the “Announcement Date”), then the Conversion Price
shall, effective upon the Announcement Date and continuing through the Adjusted Conversion Price Termination Date (as defined below),
be equal to the lower of (x) the Conversion Price which would have been applicable for a Conversion occurring on the Announcement
Date and (y) the Conversion Price that would otherwise be in effect. From and after the Adjusted Conversion Price Termination Date,
the Conversion Price shall be determined as set forth in this Section 1.2(a). For purposes hereof, “Adjusted Conversion Price
Termination Date” shall mean, with respect to any proposed transaction or tender offer (or takeover scheme) for which a public
announcement as contemplated by this Section 1.2(b) has been made, the date upon which the Borrower (in the case of clause (i)
above) or the person, group or entity (in the case of clause (ii) above) consummates or publicly announces the termination or abandonment
of the proposed transaction or tender offer (or takeover scheme) which caused this Section 1.2(b) to become operative.

 

    	3

    	 

    

 

1.3
Authorized Shares. The Borrower covenants that during the period the conversion right exists, the Borrower will reserve
from its authorized and unissued Common Stock a sufficient number of shares, free from preemptive rights, to provide for the issuance
of Common Stock upon the full conversion of this Note issued pursuant to the Purchase Agreement. The Borrower is required at all
times to have authorized and reserved four times the number of shares that is actually issuable upon full conversion of the Note
(based on the Conversion Price of the Notes in effect from time to time)(the “Reserved Amount”). The Reserved Amount
shall be increased from time to time in accordance with the Borrower’s obligations pursuant to Section 4(g) of the Purchase
Agreement. The Borrower represents that upon issuance, such shares will be duly and validly issued, fully paid and non-assessable.
In addition, if the Borrower shall issue any securities or make any change to its capital structure which would change the number
of shares of Common Stock into which the Notes shall be convertible at the then current Conversion Price, the Borrower shall at
the same time make proper provision so that thereafter there shall be a sufficient number of shares of Common Stock authorized
and reserved, free from preemptive rights, for conversion of the outstanding Notes. The Borrower (i) acknowledges that it has irrevocably
instructed its transfer agent to issue certificates for the Common Stock issuable upon conversion of this Note, and (ii)agrees
that its issuance of this Note shall constitute full authority to its officers and agents who are charged with the duty of executing
stock certificates to execute and issue the necessary certificates for shares of Common Stock in accordance with the terms and
conditions of this Note.

 

If, at any time the Borrower does not maintain
the Reserved Amount it will be considered an Event of Default under Section 3.2 of the Note.

 

1.4
Method of Conversion.

 

(a)
Mechanics of Conversion. Subject to Section 1.1, this Note may be converted by the Holder in whole or in part at
any time from time to time after the Issue Date, by (A) submitting to the Borrower a Notice of Conversion (by facsimile, e-mail
or other reasonable means of communication dispatched on the Conversion Date prior to 6:00 p.m., New York, New York time) and (B)subject
to Section 1.4(b), surrendering this Note at the principal office of the Borrower.

 

    	4

    	 

    

 

(b)
Surrender of Note Upon Conversion. Notwithstanding anything to the contrary set forth herein, upon conversion of
this Note in accordance with the terms hereof, the Holder shall not be required to physically surrender this Note to the Borrower
unless the entire unpaid principal amount of this Note is so converted. The Holder and the Borrower shall maintain records showing
the principal amount so converted and the dates of such conversions or shall use such other method, reasonably satisfactory to
the Holder and the Borrower, so as not to require physical surrender of this Note upon each such conversion. In the event of any
dispute or discrepancy, such records of the Borrower shall, prima facie, be controlling and determinative in the
absence of manifest error. Notwithstanding the foregoing, if any portion of this Note is converted as aforesaid, the Holder may
not transfer this Note unless the Holder first physically surrenders this Note to the Borrower, whereupon the Borrower will forthwith
issue and deliver upon the order of the Holder a new Note of like tenor, registered as the Holder (upon payment by the Holder of
any applicable transfer taxes) may request, representing in the aggregate the remaining unpaid principal amount of this Note. The
Holder and any assignee, by acceptance of this Note, acknowledge and agree that, by reason of the provisions of this paragraph,
following conversion of a portion of this Note, the unpaid and unconverted principal amount of this Note represented by this Note
may be less than the amount stated on the face hereof.

 

(c)
Payment of Taxes. The Borrower shall not be required to pay any tax which may be payable in respect of any transfer
involved in the issue and delivery of shares of Common Stock or other securities or property on conversion of this Note in a name
other than that of the Holder (or in street name), and the Borrower shall not be required to issue or deliver any such shares or
other securities or property unless and until the person or persons (other than the Holder or the custodian in whose street name
such shares are to be held for the Holder’s account) requesting the issuance thereof shall have paid to the Borrower the
amount of any such tax or shall have established to the satisfaction of the Borrower that such tax has been paid.

 

(d)
Delivery of Common Stock Upon Conversion. Upon receipt by the Borrower from the Holder of a facsimile transmission
or e-mail (or other reasonable means of communication) of a Notice of Conversion meeting the requirements for conversion as provided
in this Section 1.4, the Borrower shall issue and deliver or cause to be issued and delivered to or upon the order of the Holder
certificates for the Common Stock issuable upon such conversion within three (3) business days after such receipt (the “Deadline”)
(and, solely in the case of conversion of the entire unpaid principal amount hereof, surrender of this Note) in accordance with
the terms hereof and the Purchase Agreement.

 

    	5

    	 

    

 

(e)
Obligation of Borrower to Deliver Common Stock. Upon receipt by the Borrower of a Notice of Conversion, the Holder
shall be deemed to be the holder of record of the Common Stock issuable upon such conversion, the outstanding principal amount
and the amount of accrued and unpaid interest on this Note shall be reduced to reflect such conversion, and, unless the Borrower
defaults on its obligations under this Article I, all rights with respect to the portion of this Note being so converted shall
forthwith terminate except the right to receive the Common Stock or other securities, cash or other assets, as herein provided,
on such conversion. If the Holder shall have given a Notice of Conversion as provided herein, the Borrower’s obligation to
issue and deliver the certificates for Common Stock shall be absolute and unconditional, irrespective of the absence of any action
by the Holder to enforce the same, any waiver or consent with respect to any provision thereof, the recovery of any judgment against
any person or any action to enforce the same, any failure or delay in the enforcement of any other obligation of the Borrower to
the holder of record, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the
Holder of any obligation to the Borrower, and irrespective of any other circumstance which might otherwise limit such obligation
of the Borrower to the Holder in connection with such conversion. The Conversion Date specified in the Notice of Conversion shall
be the Conversion Date so long as the Notice of Conversion is received by the Borrower before 6:00 p.m., New York, New York time,
on such date.

 

(f)
Delivery of Common Stock by Electronic Transfer. In lieu of delivering physical certificates representing the Common
Stock issuable upon conversion, provided the Borrower is participating in the Depository Trust Company (“DTC”) Fast
Automated Securities Transfer (“FAST”) program, upon request of the Holder and its compliance with the provisions contained
in Section 1.1 and in this Section 1.4, the Borrower shall use its best efforts to cause its transfer agent to electronically transmit
the Common Stock issuable upon conversion to the Holder by crediting the account of Holder’s Prime Broker with DTC through
its Deposit Withdrawal Agent Commission (“DWAC”) system.

 

(g)
Failure to Deliver Common Stock Prior to Deadline. Without in any way limiting the Holder’s right to pursue
other remedies, including actual damages and/or equitable relief, the parties agree that if delivery of the Common Stock issuable
upon conversion of this Note is not delivered by the Deadline (other than a failure due to the circumstances described in Section
1.3 above, which failure shall be governed by such Section) the Borrower shall pay to the Holder $1,000 per day in cash, for each
day beyond the Deadline that the Borrower fails to deliver such Common Stock. Such cash amount shall be paid to Holder by the fifth
day of the month following the month in which it has accrued or, at the option of the Holder (by written notice to the Borrower
by the first day of the month following the month in which it has accrued), shall be added to the principal amount of this Note,
in which event interest shall accrue thereon in accordance with the terms of this Note and such additional principal amount shall
be convertible into Common Stock in accordance with the terms of this Note. The Borrower agrees that the right to convert is a
valuable right to the Holder. The damages resulting from a failure, attempt to frustrate, interference with such conversion right
are difficult if not impossible to qualify. Accordingly the parties acknowledge that the liquidated damages provision contained
in this Section 1.4(g) are justified.

 

    	6

    	 

    

 

1.5
Concerning the Shares. The shares of Common Stock issuable upon conversion of this Note may not be sold or transferred
unless (i) such shares are sold pursuant to an effective registration statement under the Act or (ii) the Borrower or its transfer
agent shall have been furnished with an opinion of counsel (which opinion shall be in form, substance and scope customary for opinions
of counsel in comparable transactions) to the effect that the shares to be sold or transferred may be sold or transferred pursuant
to an exemption from such registration or (iii)such shares are sold or transferred pursuant to Rule 144 under the Act (or a successor
rule) (“Rule 144”) or (iv) such shares are transferred to an “affiliate” (as defined in Rule 144) of the
Borrower who agrees to sell or otherwise transfer the shares only in accordance with this Section 1.5 and who is an Accredited
Investor (as defined in the Purchase Agreement). Except as otherwise provided in the Purchase Agreement (and subject to the removal
provisions set forth below), until such time as the shares of Common Stock issuable upon conversion of this Note have been registered
under the Act or otherwise may be sold pursuant to Rule 144 without any restriction as to the number of securities as of a particular
date that can then be immediately sold, each certificate for shares of Common Stock issuable upon conversion of this Note that
has not been so included in an effective registration statement or that has not been sold pursuant to an effective registration
statement or an exemption that permits removal of the legend, shall bear a legend substantially in the following form, as appropriate:

 

“NEITHER
THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT
BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN
A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE
144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT
OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.”

 

The legend set forth
above shall be removed and the Borrower shall issue to the Holder a new certificate therefore free of any transfer legend if (i)
the Borrower or its transfer agent shall have received an opinion of counsel, in form, substance and scope customary for opinions
of counsel in comparable transactions, to the effect that a public sale or transfer of such Common Stock may be made without registration
under the Act, which opinion shall be accepted by the Company so that the sale or transfer is effected or (ii) in the case of the
Common Stock issuable upon conversion of this Note, such security is registered for sale by the Holder under an effective registration
statement filed under the Act or otherwise may be sold pursuant to Rule 144 without any restriction as to the number of securities
as of a particular date that can then be immediately sold. In the event that the Company does not accept the opinion of counsel
provided by the Buyer with respect to the transfer of Securities pursuant to an exemption from registration, such as Rule 144 or
Regulation S, at the Deadline, it will be considered an Event of Default pursuant to Section 3.2 of the Note.

 

    	7

    	 

    

 

1.6
Effect of Certain Events.

 

(a)
Effect of Merger, Consolidation, Etc. At the option of the Holder, the sale, conveyance or disposition of all or
substantially all of the assets of the Borrower, the effectuation by the Borrower of a transaction or series of related transactions
in which more than 50% of the voting power of the Borrower is disposed of, or the consolidation, merger or other business combination
of the Borrower with or into any other Person (as defined below) or Persons when the Borrower is not the survivor shall either:
(i) be deemed to be an Event of Default (as defined in Article III) pursuant to which the Borrower shall be required to pay to
the Holder upon the consummation of and as a condition to such transaction an amount equal to the Default Amount (as defined in
Article III) or (ii) be treated pursuant to Section 1.6(b) hereof. “Person” shall mean any individual, corporation,
limited liability company, partnership, association, trust or other entity or organization.

 

(b)
Adjustment Due to Merger, Consolidation, Etc. If, at any time when this Note is issued and outstanding and prior
to conversion of all of the Notes, there shall be any merger, consolidation, exchange of shares, recapitalization, reorganization,
or other similar event, as a result of which shares of Common Stock of the Borrower shall be changed into the same or a different
number of shares of another class or classes of stock or securities of the Borrower or another entity, or in case of any sale or
conveyance of all or substantially all of the assets of the Borrower other than in connection with a plan of complete liquidation
of the Borrower, then the Holder of this Note shall thereafter have the right to receive upon conversion of this Note, upon the
basis and upon the terms and conditions specified herein and in lieu of the shares of Common Stock immediately theretofore issuable
upon conversion, such stock, securities or assets which the Holder would have been entitled to receive in such transaction had
this Note been converted in full immediately prior to such transaction (without regard to any limitations on conversion set forth
herein), and in any such case appropriate provisions shall be made with respect to the rights and interests of the Holder of this
Note to the end that the provisions hereof (including, without limitation, provisions for adjustment of the Conversion Price and
of the number of shares issuable upon conversion of the Note) shall thereafter be applicable, as nearly as may be practicable in
relation to any securities or assets thereafter deliverable upon the conversion hereof. The Borrower shall not affect any transaction
described in this Section 1.6(b) unless (a) it first gives, to the extent practicable, thirty (30) days prior written notice (but
in any event at least fifteen (15) days prior written notice) of the record date of the special meeting of shareholders to approve,
or if there is no such record date, the consummation of, such merger, consolidation, exchange of shares, recapitalization, reorganization
or other similar event or sale of assets (during which time the Holder shall be entitled to convert this Note) and (b) the resulting
successor or acquiring entity (if not the Borrower) assumes by written instrument the obligations of this Section 1.6(b). The above
provisions shall similarly apply to successive consolidations, mergers, sales, transfers or share exchanges.

 

    	8

    	 

    

 

(c)
Adjustment Due to Distribution. If the Borrower shall declare or make any distribution of its assets (or rights to
acquire its assets) to holders of Common Stock as a dividend, stock repurchase, by way of return of capital or otherwise (including
any dividend or distribution to the Borrower’s shareholders in cash or shares (or rights to acquire shares) of capital stock
of a subsidiary (i.e., a spin-off)) (a “Distribution”), then the Holder of this Note shall be entitled, upon any conversion
of this Note after the date of record for determining shareholders entitled to such Distribution, to receive the amount of such
assets which would have been payable to the Holder with respect to the shares of Common Stock issuable upon such conversion had
such Holder been the holder of such shares of Common Stock on the record date for the determination of shareholders entitled to
such Distribution.

 

(d)
Adjustment Due to Dilutive Issuance. If, at any time when any Notes are issued and outstanding, the Borrower issues
or sells, or in accordance with this Section 1.6(d) hereof is deemed to have issued or sold, any shares of Common Stock for no
consideration or for a consideration per share (before deduction of reasonable expenses or commissions or underwriting discounts
or allowances in connection therewith) less than the Conversion Price in effect on the date of such issuance (or deemed issuance)
of such shares of Common Stock (a “Dilutive Issuance”), then immediately upon the Dilutive Issuance, the Conversion
Price will be reduced to the amount of the consideration per share received by the Borrower in such Dilutive Issuance.

 

The Borrower shall
be deemed to have issued or sold shares of Common Stock if the Borrower in any manner issues or grants any warrants, rights or
options (not including employee stock option plans), whether or not immediately exercisable, to subscribe for or to purchase Common
Stock or other securities convertible into or exchangeable for Common Stock (“Convertible Securities”) (such warrants,
rights and options to purchase Common Stock or Convertible Securities are hereinafter referred to as “Options”) and
the price per share for which Common Stock is issuable upon the exercise of such Options is less than the Conversion Price then
in effect, then the Conversion Price shall be equal to such price per share. For purposes of the preceding sentence, the “price
per share for which Common Stock is issuable upon the exercise of such Options” is determined by dividing (i) the total amount,
if any, received or receivable by the Borrower as consideration for the issuance or granting of all such Options, plus the minimum
aggregate amount of additional consideration, if any, payable to the Borrower upon the exercise of all such Options, plus, in the
case of Convertible Securities issuable upon the exercise of such Options, the minimum aggregate amount of additional consideration
payable upon the conversion or exchange thereof at the time such Convertible Securities first become convertible or exchangeable,
by (ii) the maximum total number of shares of Common Stock issuable upon the exercise of all such Options (assuming full conversion
of Convertible Securities, if applicable). No further adjustment to the Conversion Price will be made upon the actual issuance
of such Common Stock upon the exercise of such Options or upon the conversion or exchange of Convertible Securities issuable upon
exercise of such Options.

 

    	9

    	 

    

 

Additionally, the Borrower
shall be deemed to have issued or sold shares of Common Stock if the Borrower in any manner issues or sells any Convertible Securities,
whether or not immediately convertible (other than where the same are issuable upon the exercise of Options), and the price per
share for which Common Stock is issuable upon such conversion or exchange is less than the Conversion Price then in effect, then
the Conversion Price shall be equal to such price per share. For the purposes of the preceding sentence, the “price per share
for which Common Stock is issuable upon such conversion or exchange” is determined by dividing (i) the total amount, if any,
received or receivable by the Borrower as consideration for the issuance or sale of all such Convertible Securities, plus the minimum
aggregate amount of additional consideration, if any, payable to the Borrower upon the conversion or exchange thereof at the time
such Convertible Securities first become convertible or exchangeable, by (ii) the maximum total number of shares of Common Stock
issuable upon the conversion or exchange of all such Convertible Securities. No further adjustment to the Conversion Price will
be made upon the actual issuance of such Common Stock upon conversion or exchange of such Convertible Securities.

 

(e)
Purchase Rights. If, at any time when any Notes are issued and outstanding, the Borrower issues any convertible securities
or rights to purchase stock, warrants, securities or other property (the “Purchase Rights”) pro rata to the record
holders of any class of Common Stock, then the Holder of this Note will be entitled to acquire, upon the terms applicable to such
Purchase Rights, the aggregate Purchase Rights which such Holder could have acquired if such Holder had held the number of shares
of Common Stock acquirable upon complete conversion of this Note (without regard to any limitations on conversion contained herein)
immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights or, if no such record
is taken, the date as of which the record holders of Common Stock are to be determined for the grant, issue or sale of such Purchase
Rights.

 

(f)
Notice of Adjustments. Upon the occurrence of each adjustment or readjustment of the Conversion Price as a result
of the events described in this Section 1.6, the Borrower, at its expense, shall promptly compute such adjustment or readjustment
and prepare and furnish to the Holder a certificate setting forth such adjustment or readjustment and showing in detail the facts
upon which such adjustment or readjustment is based. The Borrower shall, upon the written request at any time of the Holder, furnish
to such Holder a like certificate setting forth (i) such adjustment or readjustment, (ii) the Conversion Price at the time in effect
and (iii) the number of shares of Common Stock and the amount, if any, of other securities or property which at the time would
be received upon conversion of the Note.

 

1.7
Trading Market Limitations. Unless permitted by the applicable rules and regulations of the principal securities
market on which the Common Stock is then listed or traded, in no event shall the Borrower issue upon conversion of or otherwise
pursuant to this Note and the other Notes issued pursuant to the Purchase Agreement more than the maximum number of shares of Common
Stock that the Borrower can issue pursuant to any rule of the principal United States securities market on which the Common Stock
is then traded (the “Maximum Share Amount”), which shall be 4.99% of the total shares outstanding on the Closing Date
(as defined in the Purchase Agreement), subject to equitable adjustment from time to time for stock splits, stock dividends, combinations,
capital reorganizations and similar events relating to the Common Stock occurring after the date hereof. Once the Maximum Share
Amount has been issued, if the Borrower fails to eliminate any prohibitions under applicable law or the rules or regulations of
any stock exchange, interdealer quotation system or other self-regulatory organization with jurisdiction over the Borrower or any
of its securities on the Borrower’s ability to issue shares of Common Stock in excess of the Maximum Share Amount, in lieu
of any further right to convert this Note, this will be considered an Event of Default under Section 3.3 of the Note.

 

    	10

    	 

    

 

1.8
Status as Shareholder. Upon submission of a Notice of Conversion by a Holder, (i) the shares covered thereby (other
than the shares, if any, which cannot be issued because their issuance would exceed such Holder’s allocated portion of the
Reserved Amount or Maximum Share Amount) shall be deemed converted into shares of Common Stock and (ii) the Holder’s rights
as a Holder of such converted portion of this Note shall cease and terminate, excepting only the right to receive certificates
for such shares of Common Stock and to any remedies provided herein or otherwise available at law or in equity to such Holder because
of a failure by the Borrower to comply with the terms of this Note. Notwithstanding the foregoing, if a Holder has not received
certificates for all shares of Common Stock prior to the tenth (10th) business day after the expiration of the Deadline with respect
to a conversion of any portion of this Note for any reason, then (unless the Holder otherwise elects to retain its status as a
holder of Common Stock by so notifying the Borrower) the Holder shall regain the rights of a Holder of this Note with respect to
such unconverted portions of this Note and the Borrower shall, as soon as practicable, return such unconverted Note to the Holder
or, if the Note has not been surrendered, adjust its records to reflect that such portion of this Note has not been converted.
In all cases, the Holder shall retain all of its rights and remedies (including, without limitation, (i) the right to receive Conversion
Default Payments pursuant to Section 1.3 to the extent required thereby for such Conversion Default and any subsequent Conversion
Default and (ii) the right to have the Conversion Price with respect to subsequent conversions determined in accordance with Section
1.3) for the Borrower’s failure to convert this Note.

 

1.9
Prepayment. Notwithstanding anything to the contrary contained in this Note, at any time during the period beginning
on the Issue Date and ending on the date which is thiry (30) days following the issue date, the Borrower shall have the right,
exercisable on not less than three (3) Trading Days prior written notice to the Holder of the Note to prepay the outstanding Note
(principal and accrued interest), in full, in accordance with this Section 1.9. Any notice of prepayment hereunder (an “Optional
Prepayment Notice”) shall be delivered to the Holder of the Note at its registered addresses and shall state: (1) that the
Borrower is exercising its right to prepay the Note, and (2) the date of prepayment which shall be not more than three (3) Trading
Days from the date of the Optional Prepayment Notice. On the date fixed for prepayment (the “Optional Prepayment Date”),
the Borrower shall make payment of the Optional Prepayment Amount (as defined below) to or upon the order of the Holder as specified
by the Holder in writing to the Borrower at least one (1) business day prior to the Optional Prepayment Date. If the Borrower exercises
its right to prepay the Note, the Borrower shall make payment to the Holder of an amount in cash (the “Optional Prepayment
Amount”) equal to 125%, multiplied by the sum of: (w) the then outstanding principal amount of this Note plus (x)
accrued and unpaid interest on the unpaid principal amount of this Note to the Optional Prepayment Date plus (y) Default
Interest, if any, on the amounts referred to in clauses (w) and (x) plus (z) any amounts owed to the Holder pursuant to
Sections 1.3 and 1.4(g) hereof. If the Borrower delivers an Optional Prepayment Notice and fails to pay the Optional Prepayment
Amount due to the Holder of the Note within three (3) business days following the Optional Prepayment Date, the Borrower shall
forever forfeit its right to prepay the Note pursuant to this Section 1.9.

 

    	11

    	 

    

 

Notwithstanding
anything to the contrary contained in this Note, at any time during the period beginning on the date which is thirty-one (31)
days following the issue date and ending on the date which is sixty (60) days following the issue date, the Borrower shall
have the right, exercisable on not less than three (3) Trading Days prior written notice to the Holder of the Note to prepay
the outstanding Note (principal and accrued interest), in full, in accordance with this Section 1.9. Any Optional Prepayment
Notice shall be delivered to the Holder of the Note at its registered addresses and shall state: (1) that the Borrower is
exercising its right to prepay the Note, and (2) the date of prepayment which shall be not more than three (3) Trading Days
from the date of the Optional Prepayment Notice. On the Optional Prepayment Date, the Borrower shall make payment of the
Second Optional Prepayment Amount (as defined below) to or upon the order of the Holder as specified by the Holder in writing
to the Borrower at least one (1) business day prior to the Optional Prepayment Date. If the Borrower exercises its right to
prepay the Note, the Borrower shall make payment to the Holder of an amount in cash (the “Second Optional Prepayment
Amount”) equal to 130%, multiplied by the sum of: (w) the then outstanding principal amount of this Note plus
(x) accrued and unpaid interest on the unpaid principal amount of this Note to the Optional Prepayment Date plus (y)
Default Interest, if any, on the amounts referred to in clauses (w) and (x) plus (z) any amounts owed to the Holder
pursuant to Sections 1.3 and 1.4(g) hereof. If the Borrower delivers an Optional Prepayment Notice and fails to pay the
Second Optional Prepayment Amount due to the Holder of the Note within three (3) business days following the Optional
Prepayment Date, the Borrower shall forever forfeit its right to prepay the Note pursuant to this Section 1.9.

 

Notwithstanding
anything to the contrary contained in this Note, at any time during the period beginning on the date which is sixty-one (61)
days following the issue date and ending on the date which is ninety (90) days following the issue date, the Borrower shall
have the right, exercisable on not less than three (3) Trading Days prior written notice to the Holder of the Note to prepay
the outstanding Note (principal and accrued interest), in full, in accordance with this Section 1.9. Any Optional Prepayment
Notice shall be delivered to the Holder of the Note at its registered addresses and shall state: (1) that the Borrower is
exercising its right to prepay the Note, and (2) the date of prepayment which shall be not more than three (3) Trading Days
from the date of the Optional Prepayment Notice. On the Optional Prepayment Date, the Borrower shall make payment of the
Third Optional Prepayment Amount (as defined below) to or upon the order of the Holder as specified by the Holder in writing
to the Borrower at least one (1) business day prior to the Optional Prepayment Date. If the Borrower exercises its right to
prepay the Note, the Borrower shall make payment to the Holder of an amount in cash (the “Third Optional Prepayment
Amount”) equal to 135%, multiplied by the sum of: (w) the then outstanding principal amount of this Note plus
(x) accrued and unpaid interest on the unpaid principal amount of this Note to the Optional Prepayment Date plus (y)
Default Interest, if any, on the amounts referred to in clauses (w) and (x) plus (z) any amounts owed to the Holder
pursuant to Sections 1.3 and 1.4(g) hereof. If the Borrower delivers an Optional Prepayment Notice and fails to pay the Third
Optional Prepayment Amount due to the Holder of the Note within three (3) business days following the Optional Prepayment
Date, the Borrower shall forever forfeit its right to prepay the Note pursuant to this Section 1.9.

 

    	12

    	 

    

 

Notwithstanding any
to the contrary stated elsewhere herein, at any time during the period beginning on the date that is ninety-one (91) day from
the issue date and ending one hundred twenty (120) days following the issue date, the Borrower shall have the right,
exercisable on not less than three (3) Trading Days prior written notice to the Holder of the Note to prepay the outstanding
Note (principal and accrued interest), in full, in accordance with this Section 1.9. Any Optional Prepayment Notice shall be
delivered to the Holder of the Note at its registered addresses and shall state: (1) that the Borrower is exercising its
right to prepay the Note, and (2) the date of prepayment which shall be not more than three (3) Trading Days from the date of
the Optional Prepayment Notice. On the Optional Prepayment Date, the Borrower shall make payment of the Fourth Optional
Prepayment Amount (as defined below) to or upon the order of the Holder as specified by the Holder in writing to the Borrower
at least one (1) business day prior to the Optional Prepayment Date. If the Borrower exercises its right to prepay the Note,
the Borrower shall make payment to the Holder of an amount in cash (the “Fourth Optional Prepayment Amount”)
equal to 140%, multiplied by the sum of: (w) the then outstanding principal amount of this Note plus (x) accrued and
unpaid interest on the unpaid principal amount of this Note to the Optional Prepayment Date plus (y) Default Interest,
if any, on the amounts referred to in clauses (w) and (x) plus (z) any amounts owed to the Holder pursuant to Sections
1.3 and 1.4(g) hereof. If the Borrower delivers an Optional Prepayment Notice and fails to pay the Fourth Optional Prepayment
Amount due to the Holder of the Note within three (3) business days following the Optional Prepayment Date, the Borrower
shall forever forfeit its right to prepay the Note pursuant to this Section 1.9.

 

Notwithstanding any
to the contrary stated elsewhere herein, at any time during the period beginning on the date that is one hundred twenty-one
(121) day from the issue date and ending one hundred eighty (180) days following the issue date, the Borrower shall have the
right, exercisable on not less than three (3) Trading Days prior written notice to the Holder of the Note to prepay the
outstanding Note (principal and accrued interest), in full, in accordance with this Section 1.9. Any Optional Prepayment
Notice shall be delivered to the Holder of the Note at its registered addresses and shall state: (1) that the Borrower is
exercising its right to prepay the Note, and (2) the date of prepayment which shall be not more than three (3) Trading Days
from the date of the Optional Prepayment Notice. On the Optional Prepayment Date, the Borrower shall make payment of the
Fifth Optional Prepayment Amount (as defined below) to or upon the order of the Holder as specified by the Holder in writing
to the Borrower at least one (1) business day prior to the Optional Prepayment Date. If the Borrower exercises its right to
prepay the Note, the Borrower shall make payment to the Holder of an amount in cash (the “Fifth Optional Prepayment
Amount”) equal to 150%, multiplied by the sum of: (w) the then outstanding principal amount of this Note plus
(x) accrued and unpaid interest on the unpaid principal amount of this Note to the Optional Prepayment Date plus (y)
Default Interest, if any, on the amounts referred to in clauses (w) and (x) plus (z) any amounts owed to the Holder
pursuant to Sections 1.3 and 1.4(g) hereof. If the Borrower delivers an Optional Prepayment Notice and fails to pay the Fifth
Optional Prepayment Amount due to the Holder of the Note within three (3) business days following the Optional Prepayment
Date, the Borrower shall forever forfeit its right to prepay the Note pursuant to this Section 1.9.

 

    	13

    	 

    

 

After the expiration of
one hundred eighty (180) following the date of the Note, the Borrower shall have no right of prepayment.

 

ARTICLE II.
CERTAIN COVENANTS

 

2.1
Distributions on Capital Stock. So long as the Borrower shall have any obligation under this Note, the Borrower shall
not without the Holder’s written consent (a) pay, declare or set apart for such payment, any dividend or other distribution
(whether in cash, property or other securities) on shares of capital stock other than dividends on shares of Common Stock solely
in the form of additional shares of Common Stock or (b) directly or indirectly or through any subsidiary make any other payment
or distribution in respect of its capital stock except for distributions pursuant to any shareholders’ rights plan which
is approved by a majority of the Borrower’s disinterested directors.

 

2.2
Restriction on Stock Repurchases. So long as the Borrower shall have any obligation under this Note, the Borrower
shall not without the Holder’s written consent redeem, repurchase or otherwise acquire (whether for cash or in exchange for
property or other securities or otherwise) in any one transaction or series of related transactions any shares of capital stock
of the Borrower or any warrants, rights or options to purchase or acquire any such shares.

 

2.3
Borrowings. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the
Holder’s written consent, create, incur, assume guarantee, endorse, contingently agree to purchase or otherwise become liable
upon the obligation of any person, firm, partnership, joint venture or corporation, except by the endorsement of negotiable instruments
for deposit or collection, or suffer to exist any liability for borrowed money, except (a) borrowings in existence or committed
on the date hereof and of which the Borrower has informed Holder in writing prior to the date hereof, (b) indebtedness to trade
creditors or financial institutions incurred in the ordinary course of business or (c) borrowings, the proceeds of which shall
be used to repay this Note.

 

2.4
Sale of Assets. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without
the Holder’s written consent, sell, lease or otherwise dispose of any significant portion of its assets outside the ordinary
course of business. Any consent to the disposition of any assets may be conditioned on a specified use of the proceeds of disposition.

 

    	14

    	 

    

 

2.5
Advances and Loans. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without
the Holder’s written consent, lend money, give credit or make advances to any person, firm, joint venture or corporation,
including, without limitation, officers, directors, employees, subsidiaries and affiliates of the Borrower, except loans, credits
or advances (a) in existence or committed on the date hereof and which the Borrower has informed Holder in writing prior to the
date hereof, (b) made in the ordinary course of business or (c) not in excess of $100,000.

 

ARTICLE III.
EVENTS OF DEFAULT

 

If any of the following events of default (each, an
“Event of Default”) shall occur:

 

3.1
Failure to Pay Principal or Interest. The Borrower fails to pay the principal hereof or interest thereon when due
on this Note, whether at maturity, upon acceleration or otherwise.

 

3.2
Conversion and the Shares. The Borrower fails to issue shares of Common Stock to the Holder (or announces or threatens
in writing that it will not honor its obligation to do so) upon exercise by the Holder of the conversion rights of the Holder in
accordance with the terms of this Note, fails to transfer or cause its transfer agent to transfer (issue) (electronically or in
certificated form) any certificate for shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to
this Note as and when required by this Note, the Borrower directs its transfer agent not to transfer or delays, impairs, and/or
hinders its transfer agent in transferring (or issuing) (electronically or in certificated form) any certificate for shares of
Common Stock to be issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note,
or fails to remove (or directs its transfer agent not to remove or impairs, delays, and/or hinders its transfer agent from removing)
any restrictive legend (or to withdraw any stop transfer instructions in respect thereof) on any certificate for any shares of
Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note (or makes
any written announcement, statement or threat that it does not intend to honor the obligations described in this paragraph) and
any such failure shall continue uncured (or any written announcement, statement or threat not to honor its obligations shall not
be rescinded in writing) for three (3) business days after the Holder shall have delivered a Notice of Conversion. It is an obligation
of the Borrower to remain current in its obligations to its transfer agent. It shall be an event of default of this Note, if a
conversion of this Note is delayed, hindered or frustrated due to a balance owed by the Borrower to its transfer agent. If at the
option of the Holder, the Holder advances any funds to the Borrower’s transfer agent in order to process a conversion, such
advanced funds shall be paid by the Borrower to the Holder within forty eight (48) hours of a demand from the Holder.

 

3.3
Breach of Covenants. The Borrower breaches any material covenant or other material term or condition contained in
this Note and any collateral documents including but not limited to the Purchase Agreement and such breach continues for a period
of ten (10) days after written notice thereof to the Borrower from the Holder.

 

    	15

    	 

    

 

3.4
Breach of Representations and Warranties. Any representation or warranty of the Borrower made herein or in any agreement,
statement or certificate given in writing pursuant hereto or in connection herewith (including, without limitation, the Purchase
Agreement), shall be false or misleading in any material respect when made and the breach of which has (or with the passage of
time will have) a material adverse effect on the rights of the Holder with respect to this Noteor the Purchase Agreement.

 

3.5
Receiver or Trustee. The Borrower or any subsidiary of the Borrower shall make an assignment for the benefit of creditors,
or apply for or consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business,
or such a receiver or trustee shall otherwise be appointed.

 

3.6
Judgments. Any money judgment, writ or similar process shall be entered or filed against the Borrower or any subsidiary
of the Borrower or any of its property or other assets for more than $50,000, and shall remain unvacated, unbonded or unstayed
for a period of twenty (20) days unless otherwise consented to by the Holder, which consent will not be unreasonably withheld.

 

3.7
Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings, voluntary or
involuntary, for relief under any bankruptcy law or any law for the relief of debtors shall be instituted by or against the Borrower
or any subsidiary of the Borrower.

 

3.8
Delisting of Common Stock. The Borrower shall fail to maintain the listing of the Common Stock on at least one of
the OTCBB or an equivalent replacement exchange, the Nasdaq National Market, the Nasdaq SmallCap Market, the New York Stock Exchange,
or the American Stock Exchange.

 

3.9
Failure to Comply with the Exchange Act. The Borrower shall fail to comply with the reporting requirements of the
Exchange Act; and/or the Borrower shall cease to be subject to the reporting requirements of the Exchange Act.

 

3.10
Liquidation. Any dissolution, liquidation, or winding up of Borrower or any substantial portion of its business.

 

3.11
Cessation of Operations. Any cessation of operations by Borrower or Borrower admits
it is otherwise generally unable to pay its debts as such debts become due, provided, however, that any disclosure of the Borrower’s
ability to continue as a “going concern” shall not be an admission that the Borrower cannot pay its debts as they become
due.

 

3.12
Maintenance of Assets. The failure by Borrower to maintain any material intellectual
property rights, personal, real property or other assets which are necessary to conduct its business (whether now or in the future).

 

    	16

    	 

    

 

3.13
Financial Statement Restatement. The restatement of any financial statements filed by the Borrower with the SEC for
any date or period from two years prior to the Issue Date of this Note and until this Note is no longer outstanding, if the result
of such restatement would, by comparison to the unrestated financial statement, have constituted a material adverse effect on the
rights of the Holder with respect to this Note or the Purchase Agreement.

 

3.14
Reverse Splits.  The Borrower effectuates a reverse split of its Common Stock without
twenty (20) days prior written notice to the Holder.

 

3.15 Replacement of
Transfer Agent. In the event that the Borrower proposes to replace its transfer agent, the Borrower fails to provide, prior
to the effective date of such replacement, a fully executed Irrevocable Transfer Agent Instructions in a form as initially delivered
pursuant to the Purchase Agreement (including but not limited to the provision to irrevocably reserve shares of Common Stock in
the Reserved Amount) signed by the successor transfer agent to Borrower and the Borrower.

 

3.16 Cross-Default.
Notwithstanding anything to the contrary contained in this Note or the other related or companion documents, a breach or
default by the Borrower of any covenant or other term or condition contained in any of the Other Agreements, after the
passage of all applicable notice and cure or grace periods, shall, at the option of the Holder, be considered a default under
this Note and the Other Agreements, in which event the Holder shall be entitled (but in no event required) to apply all
rights and remedies of the Holder under the terms of this Note and the Other Agreements by reason of a default under said
Other Agreement or hereunder. “Other Agreements”
means, collectively, all agreements and instruments between, among or by: (1) the Borrower, and, or for the benefit of, (2)
the Holder and any affiliate of the Holder, including, without limitation, promissory notes; provided, however, the term
“Other Agreements” shall not include the related or companion documents to this Note. Each of the loan
transactions will be cross-defaulted with each other loan transaction and with all other existing and future debt of
Borrower to the Holder.

 

    	17

    	 

    

 

Upon the occurrence
and during the continuation of any Event of Default specified in Section 3.1 (solely with respect to failure to pay the principal
hereof or interest thereon when due at the Maturity Date), the Note shall become immediately due and payable and the Borrower
shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal to the Default Sum (as defined herein).
UPON THE OCCURRENCE AND DURING THE CONTINUATION OF ANY EVENT OF DEFAULT SPECIFIED IN SECTION 3.2, THE NOTE SHALL BECOME IMMEDIATELY
DUE AND PAYABLE AND THE BORROWER SHALL PAY TO THE HOLDER, IN FULL SATISFACTION OF ITS OBLIGATIONS HEREUNDER, AN AMOUNT EQUAL TO:
(Y) THE DEFAULT SUM (AS DEFINED HEREIN); MULTIPLIED BY (Z) 175% (2). Upon the occurrence and during the continuation of any Event
of Default specified in Sections 3.1 (solely with respect to failure to pay the principal hereof or interest thereon when due
on this Note upon a Trading Market Prepayment Event pursuant to Section 1.7 or upon acceleration), 3.3, 3.4, 3.6, 3.8, 3.9, 3.11,
3.12, 3.13, 3.14, and/or 3. 15 exercisable through the delivery of written notice to the Borrower by such Holders (the “Default
Notice”), and upon the occurrence of an Event of Default specified the remaining sections of Articles III (other than failure
to pay the principal hereof or interest thereon at the Maturity Date specified in Section 3,1 hereof), the Note shall become immediately
due and payable and the Borrower shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal to
the greater of (i) 150% times the sum of (w) the then outstanding principal amount of this Note plus (x)
accrued and unpaid interest on the unpaid principal amount of this Note to the date of payment (the “Mandatory Prepayment
Date”) plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and/or (x) plus (z) any
amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof (the then outstanding principal amount of this Note to the
date of payment plus the amounts referred to in clauses (x), (y) and (z) shall collectively be known as the “Default
Sum”) or (ii) the “parity value” of the Default Sum to be prepaid, where parity value means (a) the highest
number of shares of Common Stock issuable upon conversion of or otherwise pursuant to such Default Sum in accordance with Article
I, treating the Trading Day immediately preceding the Mandatory Prepayment Date as the “Conversion Date” for purposes
of determining the lowest applicable Conversion Price, unless the Default Event arises as a result of a breach in respect of a
specific Conversion Date in which case such Conversion Date shall be the Conversion Date), multiplied by (b) the highest
Closing Price for the Common Stock during the period beginning on the date of first occurrence of the Event of Default and ending
one day prior to the Mandatory Prepayment Date (the “Default Amount”) and all other amounts payable hereunder shall
immediately become due and payable, all without demand, presentment or notice, all of which hereby are expressly waived, together
with all costs, including, without limitation, legal fees and expenses, of collection, and the Holder shall be entitled to exercise
all other rights and remedies available at law or in equity. 

 

If the Borrower fails
to pay the Default Amount within five (5) business days of written notice that such amount is due and payable, then the Holder
shall have the right at any time, so long as the Borrower remains in default (and so long and to the extent that there are sufficient
authorized shares), to require the Borrower, upon written notice, to immediately issue, in lieu of the Default Amount, the number
of shares of Common Stock of the Borrower equal to the Default Amount divided by the Conversion Price then in effect.

 

ARTICLE IV.
MISCELLANEOUS

 

4.1
Failure or Indulgence Not Waiver. No failure or delay on the part of the Holder in the exercise of any power, right
or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or
privilege preclude other or further exercise thereof or of any other right, power or privileges. All rights and remedies existing
hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available.

 

    	18

    	 

    

 

 

4.2
Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder
shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered
or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid,
or (iv) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party
shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder
shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting
facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where
such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during
normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express
courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur.
The addresses for such communications shall be:

 

If to the Borrower, to:

 

BLUE SPHERE CORP.

35 Asuta Street

Even Yehuda, Israel 40500

Attn: SHLOMO PALAS, Chief Executive Officer

facsimile:

 

With a copy by fax only to (which copy shall not
constitute notice):

 

[enter name of law firm] 

Attn: [attorney name]

[enter address line 1]

[enter city, state, zip]

facsimile: [enter fax number]

 

If to the Holder:

 

ASHER ENTERPRISES, INC.

1 Linden Pl., Suite 207

Great Neck, NY. 11021

Attn: Curt Kramer, President

facsimile: 516-498-9894

 

    	19

    	 

    

 

With a copy by fax only to (which copy shall
not constitute notice):

 

Naidich Wurman Birnbaum & Maday, LLP 

80 Cuttermill Road, Suite 410

Great Neck, NY 11021

facsimile: 516-466-3555

 

4.3
Amendments. This Note and any provision hereof may only be amended by an instrument in writing signed by the Borrower
and the Holder. The term “Note” and all reference thereto, as used throughout this instrument, shall mean this instrument
(and the other Notes issued pursuant to the Purchase Agreement) as originally executed, or if later amended or supplemented, then
as so amended or supplemented.

 

4.4
Assignability. This Note shall be binding upon the Borrower and its successors and assigns, and shall inure to be
the benefit of the Holder and its successors and assigns. Each transferee of this Note must be an “accredited investor”
(as defined in Rule 501(a) of the 1933 Act). Notwithstanding anything in this Note to the contrary, this Note may be pledged as
collateral in connection with a bona fide margin account or other lending arrangement.

 

4.5
Cost of Collection. If default is made in the payment of this Note, the Borrower shall pay the Holder hereof costs
of collection, including reasonable attorneys’ fees.

 

4.6 Governing
Law. This Note shall be governed by and construed in accordance with the laws of the State of New York without regard to
principles of conflicts of laws. Any action brought by either party against the other concerning the
transactions contemplated by this Note shall be brought only in the state courts of New York or in the federal courts located
in the state and county of Nassau. The parties to this Note hereby irrevocably waive any objection to jurisdiction and venue
of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum
non conveniens. The Borrower and Holder waive trial by jury. The prevailing party shall be entitled to recover from the
other party its reasonable attorney's fees and costs. In the event that any provision of this Note 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. Each party hereby irrevocably waives personal service of
process and consents to process being served in any suit, action or proceeding in connection with this Agreement or any other
Transaction Document by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of
delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall
constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in
any way any right to serve process in any other manner permitted by law.

 

    	20

    	 

    

 

4.7
Certain Amounts. Whenever pursuant to this Note the Borrower is required to pay an amount in excess of the outstanding
principal amount (or the portion thereof required to be paid at that time) plus accrued and unpaid interest plus Default Interest
on such interest, the Borrower and the Holder agree that the actual damages to the Holder from the receipt of cash payment on this
Note may be difficult to determine and the amount to be so paid by the Borrower represents stipulated damages and not a penalty
and is intended to compensate the Holder in part for loss of the opportunity to convert this Note and to earn a return from the
sale of shares of Common Stock acquired upon conversion of this Note at a price in excess of the price paid for such shares pursuant
to this Note. The Borrower and the Holder hereby agree that such amount of stipulated damages is not plainly disproportionate to
the possible loss to the Holder from the receipt of a cash payment without the opportunity to convert this Note into shares of
Common Stock.

 

4.8
Purchase Agreement. By its acceptance of this Note, each party agrees to be bound by the applicable terms of the
Purchase Agreement.

 

4.9
Notice of Corporate Events. Except as otherwise provided below, the Holder of this Note shall have no rights as a
Holder of Common Stock unless and only to the extent that it converts this Note into Common Stock. The Borrower shall provide the
Holder with prior notification of any meeting of the Borrower’s shareholders (and copies of proxy materials and other information
sent to shareholders). In the event of any taking by the Borrower of a record of its shareholders for the purpose of determining
shareholders who are entitled to receive payment of any dividend or other distribution, any right to subscribe for, purchase or
otherwise acquire (including by way of merger, consolidation, reclassification or recapitalization) any share of any class or any
other securities or property, or to receive any other right, or for the purpose of determining shareholders who are entitled to
vote in connection with any proposed sale, lease or conveyance of all or substantially all of the assets of the Borrower or any
proposed liquidation, dissolution or winding up of the Borrower, the Borrower shall mail a notice to the Holder, at least twenty
(20) days prior to the record date specified therein (or thirty (30) days prior to the consummation of the transaction or event,
whichever is earlier), of the date on which any such record is to be taken for the purpose of such dividend, distribution, right
or other event, and a brief statement regarding the amount and character of such dividend, distribution, right or other event to
the extent known at such time. The Borrower shall make a public announcement of any event requiring notification to the Holder
hereunder substantially simultaneously with the notification to the Holder in accordance with the terms of this Section 4.9.

 

4.10
Remedies. The Borrower acknowledges that a breach by it of its obligations hereunder will cause irreparable harm
to the Holder, by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Borrower acknowledges
that the remedy at law for a breach of its obligations under this Note will be inadequate and agrees, in the event of a breach
or threatened breach by the Borrower of the provisions of this Note, that the Holder shall be entitled, in addition to all other
available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining,
preventing or curing any breach of this Note and to enforce specifically the terms and provisions thereof, without the necessity
of showing economic loss and without any bond or other security being required.

 

    	21

    	 

    

 

IN WITNESS WHEREOF, Borrower has caused
this Note to be signed in its name by its duly authorized officer this May 7, 2012.

 

	 	BLUE SPHERE CORP.
	 	 
	 	By:	 
	 	 	SHLOMO PALAS
	 	 	Chief Executive Officer

 

 

    	22

    	 

    

 

EXHIBIT A

NOTICE OF CONVERSION

 

The undersigned hereby
elects to convert $_________________ principal amount of the Note (defined below) into that number of shares of Common Stock
to be issued pursuant to the conversion of the Note (“Common Stock”) as set forth below, of BLUE SPHERE CORP., a Nevada
corporation (the “Borrower”) according to the conditions of the convertible note of the Borrower dated as of May 7,
2012 (the “Note”), as of the date written below. No fee will be charged to the Holder for any conversion, except for
transfer taxes, if any.

 

Box Checked as to applicable instructions:

 

	 ̈	The Borrower shall electronically transmit the Common Stock issuable pursuant to this Notice of
    Conversion to the account of the undersigned or its nominee with DTC through its Deposit Withdrawal Agent Commission system
    (“DWAC Transfer”).
	 	 
	 	Name of DTC Prime Broker:
	 	Account Number:
	 	 
	 ̈	The undersigned hereby requests that the Borrower issue a certificate or certificates for the number of shares of Common
    Stock set forth below (which numbers are based on the Holder’s calculation attached hereto) in the name(s) specified
    immediately below or, if additional space is necessary, on an attachment hereto:
	 	 
	 	ASHER ENTERPRISES, INC.
	 	1 Linden Pl., Suite 207
	 	Great Neck, NY. 11021
	 	Attention: Certificate Delivery
	 	(516) 498-9890

 

	 	Date of Conversion:	 	 	 
	 	Applicable Conversion Price: 	$	 	 
	 	Number of Shares of Common Stock to be Issued	 	 	 
	 	Pursuant to Conversion of the Notes:	 	 	 
	 	Amount of Principal Balance Due remaining	 	 	 
	 	Under the Note after this conversion:	 	 	 

 

	 	ASHER ENTERPRISES, INC.	 
	 	 	 
	 	By:	 	 
	 	Name: Curt Kramer	 
	 	Title:   President	 
	 	Date:	 	 	 
	 	1 Linden Pl., Suite 207
	 	Great Neck, NY. 11021

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