1

 
**3. ****Interest**. This Note shall bear interest on the outstanding principal amount at the rateof 12% per annum simple interest (or if this rate exceeds the maximum rate permissible by law, themaximum rate premissible) until the Note is paid in full. Interest on this Note may be prepaid atany time, wihtout penalty.**4. ****Security Interest****.**Except as set forth in Section 5 or for Permitted Indebtedness (asdefined in the Purchase Agreement), this Note is secured by all of the assets of the Companypursuant to the terms of the Security Agreement. The payment of this Note shall rank equal inright of payment to each of the other Notes.**5. ****Subordination**. The Holder hereby agrees and acknowledges that the security interestgranted to the Holder securing repayment of this Note is expressly subordinate to the Vault Loan(as such term is defined in the Purchase Agreement). Additionally, the Holder shall, from time totime, at the request of the Company, subordinate the portion of the security interest securingrepayment of this Note (and all Notes) covering accounts receivable only to any accounts receivableor equipment based financing obtained by the Company from any bank or other lender.**6. ****Prepayment**. Upon notice of prepayment, the Holder shall have ten business days toelect, in the Holder’s sole discretion, to either (i) convert the Note pursuant to Section 7(a) or(ii) be repaid the Outstanding Balance. Any cash payments made by the Company with regard to anyof the Notes will be made simultaneously with regard to all of the Notes, other than Notesconverted at the request of the Holder thereof, in an amount prorated among the Notes in proportionto the outstanding principal balances of each of the Notes.**7.****Conversion****.**(a) The Holder shall have the right at any time to convert the Outstanding Balance into thatnumber of shares of Common Stock found by dividing the Outstanding Balance by the Conversion Price.(b) If the closing price of the Company’s Common Stock is $1.00 or higher for 20 consecutivetrading days, the Company may in its sole discretion, convert all outstanding Notes (and not lessthan all Notes). If the Company elects to convert the Notes into Common Stock pursuant to thisSection 7(b) and the Holder does not elect to have all amounts due hereunder paid in cash withinforty-five business days of the notice of conversion: (i) this Note shall convert into that numberof shares of Common Stock found by dividing the applicable Outstanding Balance by the ConversionPrice, and (ii) if the shares are not then freely tradeable under Rule 144, the Company shall usereasonable efforts to register the underlying shares with the Commission as soon as reasonablypracticable.(c) Upon any conversion of this Note described in Section 7(a) or (b), the Holder shallimmediately surrender this Note (or a portion of this Note, as applicable) in exchange for stockcertificates representing the appropriate number of shares of Common Stock, the number of whichshall be rounded up to the nearest whole number, such that no fractional shares shall be issued.
 
2

 
**8. ****Events of Default and Acceleration**. Any part or all of the then Outstanding Balanceshall become immediately due and payable upon the occurrence of an Event of Default unless suchEvent of Default is cured within 30 days of written notice from the Majority Holders or an agentthereof the occurrence of any of the following events of default (each an “**Event of Default**”):(a) the Company fails to make the payment of principal or interest of the Note when the samebecomes due and payable; or(b) the Company materially breaches any term of this Note or any term of the other TransactionDocuments (as defined in the Purchase Agreement); or(c) the Company shall generally fail to pay, or admit in writing its inability to pay, itsdebts as they become due; or(d) the Company shall cease or materially diminish its operation, or apply for, consent to, oracquiesce in the appointment of a trustee, receiver or other custodian for itself or any of itsproperty, or make a general assignment composition, or similar device for the benefit of itscreditors; or a trustee, receiver or other custodian shall otherwise be appointed for the Companyor any of its assets; an attachment or receivership of assets or any bankruptcy, reorganization,debt arrangement, or other case or proceeding under any bankruptcy or insolvency law, or anydissolution or liquidation proceeding shall be commenced by or against the Company; or the Companyshall take any corporate action to authorize, or in furtherance of, any of the foregoing.**9. ****Attorneys’ Fees**. If the principal and interest on this Note is not paid when due,whether or not collection is initiated by the prosecution of any suit, or by any other judicialproceeding, or this Note is placed in the hands of an attorney for collection, the Company shallpay, in addition to all other amounts owing hereunder, all costs expenses and fees, includingreasonable hourly attorneys’ fees, incurred by the Holder in connection therewith.**10. ****Waiver and Consent**. The Company hereby waives presentment for payment, notice ofnonpayment, protest, notice of protest and all other notices, filing of suit and diligence incollecting the amounts due under this Note and agrees that the Holder shall not be required firstto initiate any suit or exhaust its remedies against any other person or parties in order toenforce payment of this Note.**11. ****Governing Law**. This Note shall be governed by and construed in accordance with thelaws of the State of Minnesota, without regard to conflict of laws provisions.**12. ****Miscellaneous Provisions**. This Note shall be binding on the successors and assigns ofthe Company and inure to the benefit of the Holder, its successors, endorsees and assigns.Wherever possible, each provision of this Note shall be interpreted in such manner as to beeffective and valid under applicable law, but if any provision of this Note shall be prohibited byor invalid under applicable law, such provision shall be ineffective only to the extent of suchprohibition or invalidity, without invalidating the remainder of such provision or the remainingprovisions of this Note. This Note may be changed only by an agreement in writing signed by theCompany and the Holder.
 
3

 
**IN WITNESS WHEREOF**the undersigned have executed this Note effective as of the date firstabove written.         **COMPANY**:           **DIGITILITI, INC.**           By:             Name:             Its:                    **INDIVIDUAL HOLDER:**           Signature:      Name:                    **ENTITY HOLDER:**           By:             Name:             Its:           [Signature Page to Secured Convertible Promissory Note]
 
4