Exhibit
4.1


 


NEITHER
THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A
LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.
THIS SECURITY AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.


 


	Original
    Issue Date: August 5, 2019	Principal
    Amount: [$2,777,777.78]


Original
Conversion Price (subject to adjustment herein):$1.40 Purchase Price: [$2,500,000] 


 


SENIOR
SECURED


CONVERTIBLE
PROMISSORY NOTE


DUE
AUGUST 4, 2020




 


THIS SENIOR SECURED CONVERTIBLE
PROMISSORY NOTE is one of a series of duly authorized and validly issued Senior Secured Convertible Notes of Digital Ally, Inc.,
a Nevada corporation, (the “Company”), having its principal place of business at 9705 Loiret Blvd, Lenexa,
KS 66219, designated as its Senior Secured Convertible Promissory Note due August 4, 2020 (this “Note”,
or the “Note” and collectively with the other Notes of such series, the “Notes”).


 


IN CONSIDERATION FOR THE
PAYMENT OF THE PURCHASE PRICE AND FOR OTHER VALUE RECEIVED, the Company promises to pay to [_________] or its registered assigns
(the “Holder”), or shall have paid pursuant to the terms hereunder, the principal sum of [$2,777,777.78] on
August 4, 2020 (the “Maturity Date”) or such earlier date as this Note is required or permitted to be
repaid as provided hereunder, and to pay interest to the Holder on the aggregate unconverted and then outstanding principal amount
of this Note in accordance with the provisions hereof. This Note is subject to the following additional provisions:







 


Section
1. Definitions. For the purposes hereof, in addition to the terms defined elsewhere in this Note, the following terms
shall have the following meanings:


 


“Affiliate”
means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common
control with a Person, as such terms are used in and construed under Rule 405 under the Securities Act.


 


“Alternate
Consideration” shall have the meaning set forth in Section 5(e).


 






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“Bankruptcy
Event” means any of the following events: (a) the Company or any Subsidiary (as such term is defined in Rule 1-02(w)
of Regulation S-X) thereof commences a case or other proceeding under any bankruptcy, reorganization, arrangement, adjustment
of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction relating to the Company
or any Subsidiary thereof, (b) there is commenced against the Company or any Subsidiary thereof any such case or proceeding that
is not dismissed within sixty (60) days after commencement, (c) the Company or any Subsidiary thereof is adjudicated insolvent
or bankrupt or any order of relief or other order approving any such case or proceeding is entered, (d) the Company or any Subsidiary
thereof suffers any appointment of any custodian or the like for it or any substantial part of its property that is not discharged
or stayed within sixty (60) calendar days after such appointment, (e) the Company or any Subsidiary thereof makes a general assignment
for the benefit of creditors, (f) the Company or any Subsidiary thereof calls a meeting of its creditors with a view to arranging
a composition, adjustment or restructuring of its debts or (g) the Company or any Subsidiary thereof, by any act or failure to
act, expressly indicates its consent to, approval of or acquiescence in any of the foregoing or takes any corporate or other action
for the purpose of effecting any of the foregoing.


 


“Beneficial
Ownership Limitation” shall have the meaning set forth in Section 4(d).


 


“Business
Day” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or
any day on which the Federal Reserve Bank of New York is not open for business.


 


“Buy-In”
shall have the meaning set forth in Section 4(c)(v).


 


“Change
of Control Transaction” means the occurrence after the date hereof of any of (a) an acquisition after the date hereof
by an individual or legal entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act)
of effective control (whether through legal or beneficial ownership of capital stock of the Company, by contract or otherwise)
of in excess of thirty-three percent (33%) of the voting securities of the Company (other than by means of conversion of the Notes
and the Conversion Shares issued together with the Notes); (b) the Company merges into or consolidates with any other Person,
or any Person merges into or consolidates with the Company and, after giving effect to such transaction, the stockholders of the
Company immediately prior to such transaction own less than sixty-six percent (66%) of the aggregate voting power of the Company
or the successor entity of such transaction; (c) the Company sells or transfers all or substantially all of its assets to another
Person and the stockholders of the Company immediately prior to such transaction own less than sixty-six percent (66%) of the
aggregate voting power of the acquiring entity immediately after the transaction; (d) a replacement at one time or within a one
(1) year period of more than one-half (1/2) of the members of the Board of Directors which is not approved by a majority of those
individuals who are members of the Board of Directors on the Original Issue Date (or by those individuals who are serving as members
of the Board of Directors on any date whose nomination to the Board of Directors was approved by a majority of the members of
the Board of Directors who are members on the date hereof); or (e) the execution by the Company of an agreement to which the Company
is a party or by which it is bound, providing for any of the events set forth in clauses (a) through (d) above.


 






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“Commission”
means the United States Securities and Exchange Commission.


 


“Commitment
Shares” shall have the meaning set forth in the Purchase Agreement.


 


“Common
Stock” means the common stock of the Company, par value $0.001 per share, and any other class of securities into which
such securities may hereafter be reclassified or changed.


 


“Conversion”
shall have the meaning ascribed to such term in Section 4.


 


“Conversion
Date” shall have the meaning set forth in Section 4(a).


 


“Conversion
Schedule” means the Conversion Schedule in the form of Schedule 1 attached hereto.


 


“Conversion
Shares” means, collectively, the shares of freely tradable Common Stock issuable upon conversion of this Note in accordance
with the terms hereof, including without limitation, shares of freely tradeable Common Stock issued upon conversion, redemption,
or amortization of this Note, and shares of freely tradeable Common Stock issued and issuable in lieu of the cash payment of interest
on this Note in accordance with the terms of this Note. The Conversion Shares shall be deemed “freely tradeable” for
the purposes of this Note so long as such shares are either eligible for resale pursuant to Rule 144 promulgated by the Commission
pursuant to the Securities Act (provided the Company is compliant with its current public information requirement(s)) or such
shares are the subject of a then effective registration statement.


 


“DTC”
means the Depository Trust Company.


 


“DTC/FAST
Program” means the DTC’s Fast Automated Securities Transfer Program.


 


“DWAC
Eligible” means that (a) the Common Stock is eligible at DTC for full services pursuant to DTC’s Operational Arrangements,
including without limitation transfer through DTC’s DWAC system, (b) the Company has been approved (without revocation)
by the DTC’s underwriting department, (c) the Transfer Agent is approved as an agent in the DTC/FAST Program, (d) the Conversion
Shares are otherwise eligible for delivery via DWAC, and (e) the Transfer Agent does not have a policy prohibiting or limiting
delivery of the Conversion Shares via DWAC.


 






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“Exchange
Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.


 


“Exempt
Issuance” means the issuance of (a) shares of Common Stock or options to employees, officers or directors of the Company
pursuant to any stock or option plan duly adopted for such purpose, by a majority of the non-employee members of the Board of
Directors or a majority of the members of a committee of non-employee directors established for such purpose for services rendered
to the Company, (b) securities upon the exercise or exchange of or conversion of the Notes issued hereunder and/or other securities
exercisable or exchangeable for or convertible into shares of Common Stock issued and outstanding on the date hereof, and (c)
securities issued pursuant to acquisitions or strategic transactions approved by a majority of the disinterested directors of
the Company, provided that any such issuance shall only be to a Person (or to the equityholders of a Person) which is, itself
or through its subsidiaries, an operating company or an owner of an asset in a business synergistic with the business of the Company
and shall provide to the Company additional benefits in addition to the investment of funds, but shall not include a transaction
in which the Company is issuing securities primarily for the purpose of raising capital or to an entity whose primary business
is investing in securities.


 


“Event
of Default” shall have the meaning set forth in Section 6(a).


 


“Fixed
Conversion Price” shall have the meaning set forth in Section 4(b).


 


“Fundamental
Transaction” shall have the meaning set forth in Section 5(e).


 


“Late
Fees” shall have the meaning set forth in Section 2(c).


 


“Mandatory
Default Amount” means the payment of one hundred thirty-five percent (135%) of the outstanding principal amount of this
Note and accrued and unpaid interest hereon, in addition to the payment of all other fees due in respect of this Note.


 


“New
York Courts” shall have the meaning set forth in Section 7(d).


 


“Note
Register” shall have the meaning set forth in Section 2(b).


 


“Notice
of Conversion” shall have the meaning set forth in Section 4(a).


 


“Original
Issue Date” means the date of the first issuance of this Note, regardless of any transfers of any Note and regardless
of the number of instruments which may be issued to evidence such Note.


 


“Person”
means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind. 


 






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“Purchase
Agreement” means that certain Securities Purchase Agreement, dated August 5, 2019 (the “Purchase Agreement”),
between the Company and the Holder.


 


“Required
Minimum” means, as of any date, the maximum aggregate number of shares of Common Stock then issued or potentially issuable
in the future pursuant to this Note, including any Conversion Shares issuable upon conversion in full of this Note (including
Conversion Shares issuable as payment of interest on this Note), ignoring any conversion limits set forth therein.


 


“Securities
Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.


 


“Share
Delivery Date” shall have the meaning set forth in Section 4(c)(ii).


 


“Subsidiary”
means any subsidiary of the Company as set forth on Schedule 3.1 to the Purchase Agreement and shall, where applicable,
also include any direct or indirect subsidiary of the Company formed or acquired after the date hereof.


 


“Successor
Entity” shall have the meaning set forth in Section 5(e).


 


“Trading
Day” means a day on which the principal Trading Market is open for trading. 


 


“Trading
Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on
the date in question: the NYSE American; the Nasdaq Capital Market; the Nasdaq Global Market; the Nasdaq Global Select Market;
the New York Stock Exchange; any level of the OTC Markets operated by OTC Markets Group, Inc. or the OTC Bulletin Board (or any
successors to any of the foregoing). 


 


“Transaction
Documents” shall have the meaning set forth in the Purchase Agreement.


 


“VWAP”
means, for or as of any date, the dollar volume-weighted average price for such security on the Trading Market (or, if the Trading
Market is not the principal trading market for such security, then on the principal securities exchange or securities market on
which such security is then traded) during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New
York time, as reported by Bloomberg through its “HP” function (set to weighted average) or, if the foregoing does
not apply, the dollar volume-weighted average price of such security in the over-the-counter market on the electronic bulletin
board for such security during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time,
as reported by Bloomberg, or, if no dollar volume-weighted average price is reported for such security by Bloomberg for such hours,
the average of the highest closing bid price and the lowest closing ask price of any of the market makers for such security as
reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC). If the VWAP cannot be calculated
for such security on such date on any of the foregoing bases, the VWAP of such security on such date shall be the fair market
value as mutually determined by the Company and the Holder. All such determinations shall be appropriately adjusted for any stock
dividend, stock split, stock combination, recapitalization or other similar transaction during such period.


 






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“Warrant”
shall have the meaning set forth in the Purchase Agreement.


 


“Warrant
Shares” shall have the meaning set forth in the Purchase Agreement.


 


Section
2. Interest.


 


a)
Payment of Interest. The Company shall pay interest to the Holder on a monthly basis as set forth below on the aggregate
unconverted and then outstanding principal amount of this Note at the rate of eight percent (8%) per annum, which twelve (12)
months’ interest amount shall be guaranteed. All interest payments hereunder will be payable in cash except for the payments
of interest as part of the Monthly Repayments or on any Conversion Date. Accrued and unpaid interest shall be due and payable
on each Monthly Repayment Date and on each Conversion Date, prepayment date, and on the Maturity Date, or as otherwise set forth
herein.


 


b)
Interest Calculations. Interest shall be calculated on the basis of a 360-day year, consisting of twelve (12) thirty (30)
calendar day periods, and shall accrue daily commencing on the Original Issue Date until payment in full of the outstanding principal,
together with all accrued and unpaid interest, liquidated damages and other amounts which may become due hereunder, has been made.
Interest hereunder will be paid to the Person in whose name this Note is registered on the records of the Company regarding registration
and transfers of this Note (the “Note Register”).


 


c)
Late Fee. All overdue accrued and unpaid interest to be paid hereunder shall entail a late fee at an interest rate equal
to the lesser of twelve and one-half percent (12.5%) per annum or the maximum rate permitted by applicable law (the “Late
Fees”) which shall accrue daily from the date such interest is due hereunder through and including the date of actual
payment in full.


 


d)
Intentionally Omitted.


 


e)
Voluntary Prepayment. So long as no Event of Default (as defined in Section 6(a)) exists, at any time, upon ten (10) days
written notice to the Holder, but subject to the Holder’s conversion rights set forth herein, the Company may prepay any
portion of the principal amount of this Note, any accrued and unpaid interest (including, without limitation, guaranteed interest
on any outstanding principal), and any other amounts due under this Note. If the Company exercises its right to prepay the Note,
the Company shall make payment to the Holder of (i) an amount in cash equal to the sum of the then outstanding principal amount
of this Note and guaranteed interest and otherwise without premium or penalty if such voluntary prepayment occurs on or prior
to January 31, 2020 or (ii) an amount in cash equal to the product of (x) the sum of the principal amount of this Note and any
accrued and unpaid interest and (y) 110%, if such voluntary prepayment occurs after January 31, 2020.


 






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The
Holder may continue to convert the Note from the date notice of the prepayment is given until the date of prepayment.


 


f)
Mandatory Prepayment. In the event that the Company (i) consummates any public or private offering or other financing or capital-raising
transaction of any kind (each a “Subsequent Offering”), in which the Company receives, in one or more transactions
during the term of this Note, gross proceeds of at least SEVEN AND ONE-HALF MILLION DOLLARS ($7,500,000), (ii) received cash,
in the aggregate, of at least SEVEN AND ONE-HALF MILLION DOLLARS ($7,500,000) from any Action (as defined in the Purchase Agreement),
upon ten (10) days written notice to the Holder, which mandatory prepayment, subject to the rights of any senior creditor, is
to take place within fifteen (15) days of the consummation of the Subsequent Offering, or, subject to the rights of any senior
creditor, is to take place within fifteen (15) days or receipt of such cash from any Action, but subject to the Holder’s
conversion rights set forth herein, the Company shall make payment to the Holder of (i) an amount in cash equal to the principal
amount of this Note, any accrued and unpaid interest (including, without limitation, guaranteed interest), and any other amounts
due under this Note and otherwise without premium or penalty if such mandatory prepayment occurs on or prior to January 31,2020
or (ii) an amount in cash equal to the product of (x) the sum of the principal amount of this Note and any accrued and unpaid
interest and (y) 110%, if such mandatory prepayment occurs after January 31, 2020.


 


The
Holder may continue to convert the Note from the date notice of the prepayment is given until the date of prepayment


 


g)
Monthly Repayments. The following provisions will govern the monthly repayments of the Note:


 


(i)
The Company hereby unconditionally promises to make repayments of the unpaid and unconverted amount of the Note plus accrued but
unpaid interest to the Holder in accordance with the Monthly Repayment Schedule attached hereto as Schedule II.


 


(ii)
Notwithstanding Section 2(g)(i), no monthly payment shall be due in any Month in which the Holder has effected conversions that
are equal to or greater than the amount that would have been due pursuant to the schedule in Section 2(g)(i).


 


(iii)
To the extent not previously paid or converted, the remaining balance shall be paid in full in cash by the Company on the Maturity
Date.


 






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(iv)
On each monthly repayment date (each, a “Monthly Repayment Date”), the Company shall make the indicated monthly
repayment (each, a “Monthly Repayment”). Provided the average daily dollar volume of the Common Stock for the
previous fifteen (15) trading days is greater than $100,000, the Monthly Repayment payable on each Monthly Repayment Date shall
be paid in Conversions Shares rather than cash, at rate equal to the Fixed Conversion Price (as defined in Section 4b). In the
event that the sale of the Conversion Shares issued in connection with a particular Monthly Repayment during the forty-five (45)
days (the “True-Up Date”) following the Holder’s receipt thereof does not at least equal the related
Monthly Repayment, immediately upon request of the Holder, then the Company shall pay an amount to the Holder in cash (the “True-Up
Cash”) equal to the dollar value of the stated Monthly Repayment less (i) the proceeds realized by the Holder, net of
brokerage commissions (“Net Proceeds”) and (ii) Unsold Share Value. For the purposes of the calculation contemplated
in the previous sentence, the Unsold Share Value shall be the product of (i) the number of Conversion Shares issued to the Holder
as payment for a Monthly Repayment that remain unsold and (ii) the number resulting from the difference between the Fixed Conversion
Price and the VWAP for the five (5) Trading Days prior to the True-Up Date. If the Holder, using its reasonable efforts, is unable
to sell all of the Conversion Shares related to a particular Monthly Repayment, then it may defer any and all future Monthly Repayments
until such time that it has sold all prior Conversion Shares. To the extent feasible, without undue expense to the Company, and
subject to compliance with applicable law, any cash payments made hereunder, which are allocable to the reduction of the outstanding
principal balance of the Note shall be allocated first to the unpaid balance of the Note for which Conversion Shares are not covered
by a registration statement. For the avoidance of doubt, unless the Monthly Repayments are made in Conversion Shares, then the
Company must make the applicable Monthly Repayment in cash.


 


(v)
For the avoidance of doubt, the Company covenants to use the net proceeds from the sale of any securities pursuant to the Company’s
registration statement file no.: 333-227664 (the
“Registration Statement”) to make any Mandatory Prepayments under Section 2(f).


 


Section
3.  Registration of Transfers and Exchanges.


 


a)
Different Denominations. This Note is exchangeable for an equal aggregate principal amount of Note of different authorized
denominations, as requested by the Holder surrendering the same. No service charge will be payable for such registration of transfer
or exchange.


 


b)
Investment Representations. This Note has been issued subject to certain investment representations of the original Holder
and may be transferred or exchanged only in compliance with applicable federal and state securities laws and regulations.


 


c)
Reliance on Note Register. Prior to due presentment for transfer to the Company of this Note, the Company and any agent
of the Company may treat the Person in whose name this Note is duly registered on the Note Register as the owner hereof for the
purpose of receiving payment as herein provided and for all other purposes, whether or not this Note is overdue, and neither the
Company nor any such agent shall be affected by notice to the contrary.


 






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Section
4.  Conversion.


 


a)
Voluntary Conversion. At any time after the Original Issue Date until this Note is no longer outstanding, this Note shall
be convertible, in whole or in part, into shares of Common Stock at the option of the Holder, at any time and from time to time
(subject to the conversion limitations set forth in Section 4(d) hereof). The Holder shall effect conversions by delivering to
the Company a Notice of Conversion, the form of which is attached hereto as Annex A (each, a “Notice of Conversion”),
specifying therein the principal amount of this Note to be converted and the date on which such conversion shall be effected (such
date, the “Conversion Date”). If no Conversion Date is specified in a Notice of Conversion, the Conversion
Date shall be the date that such Notice of Conversion is deemed delivered hereunder. No ink-original Notice of Conversion shall
be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Conversion form be
required. To effect conversions hereunder, the Holder shall not be required to physically surrender this Note to the Company unless
the entire principal amount of this Note, plus all accrued and unpaid interest thereon, has been so converted. Conversions hereunder
shall have the effect of lowering the outstanding principal amount of this Note in an amount equal to the applicable conversion.
The Holder and the Company shall maintain a Conversion Schedule showing the principal amount(s) converted and the date of such
conversion(s). The Company may deliver an objection to any Notice of Conversion within one (1) Business Day of delivery of such
Notice of Conversion. In the event of any dispute or discrepancy, the records of the Holder shall be controlling and determinative
in the absence of manifest error. 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 may be less than the amount stated on the face hereof.


 


b)
Conversion Price. The conversion price in effect on any Conversion Date shall be equal to $1.40 (the “Fixed Conversion
Price”). All such foregoing determinations will be appropriately adjusted for any stock dividend, stock split, stock
combination, reclassification or similar transaction that proportionately decreases or increases the Common Stock during such
measuring period. Nothing herein shall limit a Holder’s right to pursue actual damages or declare an Event of Default pursuant
to Section 6 hereof and the Holder shall have the right to pursue all remedies available to it hereunder, at law or in equity
including, without limitation, a decree of specific performance and/or injunctive relief. The exercise of any such rights shall
not prohibit the Holder from seeking to enforce damages pursuant to any other Section hereof or under applicable law.


 






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c)
Mechanics of Conversion.


 


i.
Conversion Shares Issuable Upon Conversion of Principal Amount. The number of Conversion Shares issuable upon a conversion
hereunder shall be determined by the quotient obtained by dividing (x) the outstanding principal amount of this Note to be converted
and any accrued and unpaid interest, including guaranteed interest, to be converted by (y) the Fixed Conversion Price.


 


ii.
Delivery of Certificate Upon Conversion. Not later than two (2) Trading Days after each Conversion Date (the “Share
Delivery Date”), the Company shall deliver, or cause to be delivered, to the Holder a certificate or certificates representing
the Conversion Shares which, on or after the date on which there is registration statement in effect covering the Conversion Shares
or such Conversion Shares are eligible to be sold under Rule 144 and the current public information requirement has been met and
the Company has received an opinion of counsel to such effect, which such opinion must be acceptable to the Holder in its sole
and absolute discretion (which opinion the Company shall be responsible for obtaining at its sole cost and expense) shall be free
of restrictive legends and trading restrictions, representing the number of Conversion Shares being acquired upon the conversion
of this Note. All certificate or certificates required to be delivered by the Company under this Section 4(c) shall be delivered
electronically through the Depository Trust Company or another established clearing corporation performing similar functions.
If and as applicable, if the Conversion Date is prior to the date on which such Conversion Shares are eligible to be sold under
Rule 144 without the need for current public information, or there is no registration statement in effect covering the Conversion
Shares, the Conversion Shares shall bear a restrictive legend 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
OR 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.”


 






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Notwithstanding
the foregoing, commencing on such date that the Conversion Shares are eligible for sale under Rule 144 subject to current public
information requirements, the Company, upon request and at the sole cost and expense of the Company, shall obtain a legal opinion
that is acceptable to the Holder in its sole and absolute discretion, to allow for such sales under Rule 144.


 


iii.
Failure to Deliver Certificates. If, in the case of any Notice of Conversion, such certificate or certificates are not
delivered to or as directed by the applicable Holder by the Share Delivery Date, the Holder shall be entitled to elect by written
notice to the Company at any time on or before its receipt of such certificate or certificates, to rescind such Conversion, in
which event the Company shall promptly return to the Holder any original Note delivered to the Company and the Holder shall promptly
return to the Company the Common Stock certificates issued to such Holder pursuant to the rescinded Conversion Notice.


 


iv.
Obligation Absolute; Partial Liquidated Damages. The Company’s obligations to issue and deliver the Conversion Shares
upon conversion of this Note in accordance with the terms hereof are absolute and unconditional, irrespective of any action or
inaction by the Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment
against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any
breach or alleged breach by the Holder or any other Person of any obligation to the Company or any violation or alleged violation
of law by the Holder or any other Person, and irrespective of any other circumstance which might otherwise limit such obligation
of the Company to the Holder in connection with the issuance of such Conversion Shares; provided, however, that
such delivery shall not operate as a waiver by the Company of any such action the Company may have against the Holder. In the
event the Holder of this Note shall elect to convert any or all of the outstanding principal or interest amount hereof, the Company
may not refuse conversion based on any claim that the Holder or anyone associated or affiliated with the Holder has been engaged
in any violation of law, agreement or for any other reason, unless an injunction from a court, on notice to Holder, restraining
and or enjoining conversion of all or part of this Note shall have been sought. If the injunction is not granted, the Company
shall promptly comply with all conversion obligations herein. If the injunction is obtained, the Company must post a surety bond
for the benefit of the Holder in the amount of one hundred fifty percent (150%) of the outstanding principal amount of this Note,
which is subject to the injunction, which bond shall remain in effect until the completion of arbitration/litigation of the underlying
dispute and the proceeds of which shall be payable to the Holder to the extent it obtains judgment. In the absence of seeking
such injunction, the Company shall issue Conversion Shares or, if applicable, cash, upon a properly noticed conversion. If the
Company fails for any reason to deliver to the Holder such certificate or certificates pursuant to Section 4(c)(ii) by the Share
Delivery Date, the Company shall pay to the Holder, in cash, as liquidated damages and not as a penalty, $1,000 per Trading Day
for each Trading Day after such Share Delivery Date until such certificates are delivered or Holder rescinds such conversion.
Nothing herein shall limit a Holder’s right to pursue actual damages or declare an Event of Default pursuant to Section
6 hereof for the Company’s failure to deliver Conversion Shares within the period specified herein and the Holder shall
have the right to pursue all remedies available to it hereunder, at law or in equity including, without limitation, a decree of
specific performance and/or injunctive relief. The exercise of any such rights shall not prohibit the Holder from seeking to enforce
damages pursuant to any other Section hereof or under applicable law.


 






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v.
Compensation for Buy-In on Failure to Timely Deliver Certificates Upon Conversion. In addition to any other rights available
to the Holder, if the Company fails for any reason to deliver to the Holder such certificate or certificates by the Share Delivery
Date pursuant to Section 4(c)(ii), and if after such Share Delivery Date the Holder is required by its brokerage firm to purchase
(in an open market transaction or otherwise), or the Holder’s brokerage firm otherwise purchases, shares of Common Stock
to deliver in satisfaction of a sale by the Holder of the Conversion Shares which the Holder was entitled to receive upon the
conversion relating to such Share Delivery Date (a “Buy-In”), then the Company shall (A) pay in cash to the
Holder (in addition to any other remedies available to or elected by the Holder) the amount, if any, by which (x) the Holder’s
total purchase price (including any brokerage commissions) for the Common Stock so purchased exceeds (y) the product of (1) the
aggregate number of shares of Common Stock that the Holder was entitled to receive from the conversion at issue multiplied by
(2) the actual sale price at which the sell order giving rise to such purchase obligation was executed (including any brokerage
commissions) and (B) at the option of the Holder, either reissue (if surrendered) this Note in a principal amount equal to the
principal amount of the attempted conversion (in which case such conversion shall be deemed rescinded) or deliver to the Holder
the number of shares of Common Stock that would have been issued if the Company had timely complied with its delivery requirements
under Section 4(c)(ii). For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a
Buy-In with respect to an attempted conversion of this Note with respect to which the actual sale price of the Conversion Shares
(including any brokerage commissions) giving rise to such purchase obligation was a total of $10,000 under clause (A) of the immediately
preceding sentence, the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice
indicating the amounts payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount
of such loss. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law
or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s
failure to timely deliver certificates representing shares of Common Stock upon conversion of this Note as required pursuant to
the terms hereof.


 






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vi.
Reservation of Shares Issuable Upon Conversion. The Company covenants that it will at all times reserve and keep available
out of its authorized and unissued shares of Common Stock a number of shares of Common Stock at least equal to one hundred percent
(100%) of the Required Minimum (the “Reserve Amount”) for the sole purpose of issuance upon conversion of this
Note and payment of interest on this Note, each as herein provided, free from preemptive rights or any other actual contingent
purchase rights of Persons other than the Holder (and the other holders of the Notes). The Company covenants that all shares of
Common Stock that shall be so issuable shall, upon issue, be duly authorized, validly issued, fully paid and nonassessable.


 


vii.
Fractional Shares. No fractional shares or scrip representing fractional shares shall be issued upon the conversion of
this Note. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such conversion, the Company
shall at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied
by the Fixed Conversion Price or round up to the next whole share.


 


viii.
Transfer Taxes and Expenses. The issuance of certificates for shares of the Common Stock on conversion of this Note shall
be made without charge to the Holder hereof for any documentary stamp or similar taxes that may be payable in respect of the issue
or delivery of such certificates, provided that, the Company shall not be required to pay any tax that may be payable in respect
of any transfer involved in the issuance and delivery of any such certificate upon conversion in a name other than that of the
Holder of this Note so converted and the Company shall not be required to issue or deliver such certificates unless or until the
Person or Persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established
to the satisfaction of the Company that such tax has been paid. The Company shall pay all Transfer Agent fees required for same-day
processing of any Notice of Conversion.


 






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d)
Holder’s Conversion Limitations. The Company shall not effect any conversion of this Note, and a Holder shall not
have the right to convert any portion of this Note, pursuant to this Section 4 or otherwise, to the extent that after giving effect
to such conversion, the Holder (together with the Holder’s Affiliates, and any other Persons acting as a group together
with the Holder or any of the Holder’s Affiliates (such Persons, “Attribution Parties”)), would beneficially
own in excess of the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of
shares of Common Stock beneficially owned by the Holder and its Affiliates and Attribution Parties shall include the number of
shares of Common Stock issuable upon conversion of this Note with respect to which such determination is being made, but shall
exclude the number of shares of Common Stock which would be issuable upon (i) exercise of the remaining, nonconverted portion
of this Note beneficially owned by the Holder or any of its Affiliates or Attribution Parties and (ii) exercise or conversion
of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other Common
Stock Equivalents) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially
owned by the Holder or any of its Affiliates or Attribution Parties. Except as set forth in the preceding sentence, for purposes
of this Section 4(d), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules
and regulations promulgated thereunder, it being acknowledged by the Holder that the Company is not representing to the Holder
that such calculation is in compliance with Section 13(d) of the Exchange Act and the Holder is solely responsible for any schedules
required to be filed in accordance therewith. To the extent that the limitation contained in this Section 4(d) applies, the determination
of whether this Note may be converted (in relation to other securities owned by the Holder together with any Affiliates and Attribution
Parties) and of which portion of this Note may be converted shall be in the sole discretion of the Holder, and the submission
of a conversion notice shall be deemed to be the Holder’s determination of whether this Note may be converted (in relation
to other securities owned by the Holder together with any Affiliates and Attribution Parties) and of which portion of this Note
is convertible, in each case subject to the Beneficial Ownership Limitation, and the Company shall have no obligation to verify
or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall
be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes
of this Section 4(d), in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding
shares of Common Stock as reflected in (A) the Company’s most recent periodic or annual report filed with the Commission,
as the case may be, (B) a more recent public announcement by the Company or (C) a more recent written notice by the Company or
the Transfer Agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request of a Holder,
the Company shall within two Trading Days confirm orally and in writing to the Holder the number of shares of Common Stock then
outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion
or exercise of securities of the Company, including this Note, by the Holder or its Affiliates or Attribution Parties since the
date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation”
shall be 4.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares
of Common Stock issuable upon conversion of this Note. The Holder, upon notice to the Company, may increase or decrease the Beneficial
Ownership Limitation provisions of this Section 4(d), provided that the Beneficial Ownership Limitation in no event exceeds 9.99%
of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock
upon conversion of this Note held by the Holder and the provisions of this Section 4(d) shall continue to apply. Any increase
in the Beneficial Ownership Limitation will not be effective until the 61st day after such notice is delivered to the
Company. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with
the terms of this Section 4(d) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the
intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly
give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Note.


 






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e)
Intentionally Omitted.


 


f)
Mandatory Conversion. 


 


(i)
General. If at any time (x) the VWAP of the Common Stock listed on the Trading Market exceeds $4.50 (as adjusted for stock splits,
stock dividends, stock combinations, recapitalizations and similar events)(the “Mandatory Conversion Minimum Price”)
for twenty (20) consecutive Trading Days (each, a “Mandatory Conversion Measuring Period”), and (y) no Event of Default
has occurred or is continuing, the Company shall have the right to require the Holder to convert all, or any part, of the Conversion
Amount of this Note (but in no event less than the lesser of (I) two (2) times the daily average trading volume for the prior
(20) consecutive Trading Date, and (II) all of the Conversion Amount then remaining under this Note), as designated in the Mandatory
Conversion Notice (as defined below) into fully paid, validly issued and nonassessable shares of Common Stock in accordance with
Section 4(c) hereof at the Fixed Conversion Price as of the Mandatory Conversion Date (as defined below) (a “Mandatory Conversion”).
The Company may exercise its right to require conversion under this Section 4(f) by delivering within two (2) Trading Days following
the end of such Mandatory Conversion Measuring Period a written notice thereof by electronic mail or facsimile and overnight courier
to the Holder and the Transfer Agent (the “Mandatory Conversion Notice” and the date the Holder received such notice
by electronic mail or facsimile is referred to as the “Mandatory Conversion Notice Date”). The Mandatory Conversion
Notice shall be irrevocable. The Mandatory Conversion Notice shall state (i) the Trading Day selected for the Mandatory Conversion
in accordance with this Section 4(f), which Trading Day shall be no less than five (5) Trading Days and no more than fifteen (15)
Trading Days following the Mandatory Conversion Notice Date (the “Mandatory Conversion Date”), (ii) the aggregate
Conversion Amount, of the Note subject to mandatory conversion from the Holder pursuant to this Section 4(f) (the “Mandatory
Conversion Amount”), (iii) the number of shares of Common Stock to be issued to the Holder on the Mandatory Conversion Date
and (iv) that there has been no Event of Default under the Note. Notwithstanding the foregoing, the Company may affect only one
(1) Mandatory Conversion during any thirty (30) Trading Day period. Notwithstanding anything herein to the contrary, (i) if any
trading price of the Common Stock listed on the Trading Market fails to exceed the Mandatory Conversion Minimum Price for each
Trading Day commencing on the Mandatory Conversion Notice Date and ending and including the Trading Day immediately prior to the
applicable Mandatory Conversion Date (a “Mandatory Conversion Price Failure”) or there has been an Event of
Default at any time prior to the Mandatory Conversion Date, (A) the Company shall provide the Holder a subsequent notice to that
effect and (B) unless the Holder waives the applicable Event of Default and/or Mandatory Conversion Price Failure, as applicable,
the Mandatory Conversion shall be cancelled and the applicable Mandatory Conversion Notice shall be null and void and (ii) at
any time prior to the date all of the shares of Common Stock to be delivered to the Holder (or its designee) in such Mandatory
Conversion have been delivered in full in compliance with Section 4(c) above, the Mandatory Conversion Amount may be converted,
in whole or in part, by the Holders into shares of Common Stock pursuant to Section 4; provided, however, that in no instance
may the Company effect a Mandatory Conversion that would result in the Holder exceeding the limitations of Sections 4(d) or 4(e).
Notwithstanding the foregoing, any Conversion Amount subject to a Mandatory Conversion may be converted by the Holder hereunder
prior to the applicable Mandatory Conversion Date and such aggregate Conversion Amount converted hereunder on or after the Mandatory
Conversion Notice Date and prior to such Mandatory Conversion Date shall reduce the Mandatory Conversion Amount to be converted
on such Mandatory Conversion Date. For the avoidance of doubt, the Company shall have no right to effect a Mandatory Conversion
if any Event of Default has occurred and continuing, but any Event of Default shall have no effect upon the Holder’s right
to convert this Note in its discretion.


 






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Section
5. Certain Adjustments.


 


a)
Stock Dividends and Stock Splits. If the Company, at any time while this Note is outstanding: (i) pays a stock dividend
or otherwise makes a distribution or distributions payable in shares of Common Stock on shares of Common Stock or any Common Stock
Equivalents (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon conversion
of, or payment of interest on, this Note), (ii) subdivides outstanding shares of Common Stock into a larger number of shares,
(iii) combines (including by way of a reverse stock split) outstanding shares of Common Stock into a smaller number of shares
or (iv) issues, in the event of a reclassification of shares of the Common Stock, any shares of capital stock of the Company,
then the Fixed Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common
Stock (excluding any treasury shares of the Company) outstanding immediately before such event, and of which the denominator shall
be the number of shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to this Section
shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend
or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.


 


b)
Intentionally Omitted.


 


c)
Intentionally Omitted.


 


d)
Pro Rata Distributions. While this Note is outstanding, the Company shall not declare or make any dividend or other distribution
of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return of capital or otherwise
(including, without limitation, any distribution of cash, stock or other securities, property or options by way of a dividend,
spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a “Distribution”).
In the event that the Note is repaid at the time of such Distribution, the Holder shall not be entitled to participate in such
Distribution. If the Holder and the Company mutually agree, and the Note is not repaid at the time of such Distribution, then
the Holder shall be entitled to participate in such Distribution to the same extent that the Holder would have participated therein
if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Note (without regard to
any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the
date of which a record is taken for such Distribution, or, if no such record is taken, the date as of which the record holders
of shares of Common Stock are to be determined for the participation in such Distribution (provided, however, to
the extent that the Holder’s right to participate in any such Distribution would result in the Holder exceeding the Beneficial
Ownership Limitation, then the Holder shall not be entitled to participate in such Distribution to such extent (or in the beneficial
ownership of any shares of Common Stock as a result of such Distribution to such extent) and the portion of such Distribution
shall be held in abeyance for the benefit of the Holder until such time, if ever, as its right thereto would not result in the
Holder exceeding the Beneficial Ownership Limitation).


 






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e)
Fundamental Transaction. If, at any time while this Note is outstanding, (i) the Company, directly or indirectly, in one
or more related transactions effects any merger or consolidation of the Company with or into another Person, (ii) the Company,
directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially
all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange
offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to sell,
tender or exchange their shares for other securities, cash or property and has been accepted by the holders of fifty percent (50%)
or more of the outstanding Common Stock, (iv) the Company, directly or indirectly, in one or more related transactions effects
any reclassification, reorganization or recapitalization of the Common Stock or any compulsory share exchange pursuant to which
the Common Stock is effectively converted into or exchanged for other securities, cash or property, (v) the Company, directly
or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination
(including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person whereby
such other Person acquires more than fifty percent (50%) of the outstanding shares of Common Stock (not including any shares of
Common Stock held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons
making or party to, such stock or share purchase agreement or other business combination) (each a “Fundamental Transaction”),
then, upon any subsequent conversion of this Note, the Holder shall have the right to receive, for each Conversion Share that
would have been issuable upon such conversion immediately prior to the occurrence of such Fundamental Transaction (without regard
to any limitation in Section 4(e) on the conversion of this Note), the number of shares of Common Stock of the successor or acquiring
corporation or of the Company, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”)
receivable as a result of such Fundamental Transaction by a holder of the number of shares of Common Stock for which this Note
is convertible immediately prior to such Fundamental Transaction (without regard to any limitation in Section 4(d) on the conversion
of this Note). For purposes of any such conversion, the determination of the Fixed Conversion Price shall be appropriately adjusted
to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one (1) share of
Common Stock in such Fundamental Transaction, and the Company shall apportion the Fixed Conversion Price among the Alternate Consideration
in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of
Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the
Holder shall be given the same choice as to the Alternate Consideration it receives upon any conversion of this Note following
such Fundamental Transaction. The Company shall cause any successor entity in a Fundamental Transaction in which the Company is
not the survivor (the “Successor Entity”) to assume in writing all of the obligations of the Company under
this Note and any document ancillary hereto, in accordance with the provisions of this Section 5(e) pursuant to written agreements
in form and substance reasonably satisfactory to the Holder and approved by the Holder (without unreasonable delay) prior to such
Fundamental Transaction and shall, at the option of the holder of this Note, deliver to the Holder in exchange for this Note a
security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Note which
is convertible for a corresponding number of shares of capital stock of such Successor Entity (or its parent entity) equivalent
to the shares of Common Stock acquirable and receivable upon conversion of this Note (without regard to any limitations on the
conversion of this Note) prior to such Fundamental Transaction, and with a conversion price which applies the conversion price
hereunder to such shares of capital stock (but taking into account the relative value of the shares of Common Stock pursuant to
such Fundamental Transaction and the value of such shares of capital stock, such number of shares of capital stock and such conversion
price being for the purpose of protecting the economic value of this Note immediately prior to the consummation of such Fundamental
Transaction), and which is reasonably satisfactory in form and substance to the Holder. Upon the occurrence of any such Fundamental
Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental
Transaction, the provisions of this Note and the other Transaction Documents referring to the “Company” shall refer
instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations
of the Company under this Note and the other Transaction Documents with the same effect as if such Successor Entity had been named
as the Company herein.


 






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f)
Calculations. All calculations under this Section 5 shall be made to the nearest cent or the nearest 1/100th of a share,
as the case may be. For purposes of this Section 5, the number of shares of Common Stock deemed to be issued and outstanding as
of a given date shall be the sum of the number of shares of Common Stock (excluding any treasury shares of the Company) issued
and outstanding.


 


g)
Notice to the Holder.


 


i.
Adjustment to Fixed Conversion Price. Whenever the Fixed Conversion Price is adjusted pursuant to any provision of Section
5(a), the Company shall promptly deliver to each Holder a notice setting forth the Fixed Conversion Price after such adjustment
and setting forth a brief statement of the facts requiring such adjustment.


 


ii.
Notice to Allow Conversion by Holder. If (A) the Company shall declare a dividend (or any other distribution in whatever
form) on the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common
Stock, (C) the Company shall authorize the granting to all holders of the Common Stock of rights or warrants to subscribe for
or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Company shall
be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company is a
party, any sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby
the Common Stock is converted into other securities, cash or property or (E) the Company shall authorize the voluntary or involuntary
dissolution, liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be filed
at each office or agency maintained for the purpose of conversion of this Note, and shall cause to be delivered to the Holder
at its last address as it shall appear upon the Note Register, at least twenty (20) calendar days prior to the applicable record
or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such
dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of
the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined
or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become
effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange
their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation,
merger, sale, transfer or share exchange, provided that the failure to deliver such notice or any defect therein or in the delivery
thereof shall not affect the validity of the corporate action required to be specified in such notice. To the extent that any
notice provided hereunder constitutes, or contains, material, non-public information regarding the Company or any of the Subsidiaries,
the Company shall simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K. The Holder shall
remain entitled to convert this Note during the 20-day period commencing on the date of such notice through the effective date
of the event triggering such notice except as may otherwise be expressly set forth herein.


 






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h)
Variable Rate Transaction. So long as this Note remains outstanding, the Company shall not directly or indirectly (i)(A)
consummate any exchange of any Indebtedness and/or securities of the Company for any other securities and/or Indebtedness of the
Company, (B) cooperate with any person to effect any exchange of securities and/or Indebtedness of the Company in connection with
a proposed sale of such securities from an existing holder of such securities to a third party), and/or (C) reduce and/or otherwise
change the exercise price, conversion price and/or exchange price of any Common Stock Equivalent of the Company and/or amend any
non-convertible Indebtedness of the Company to make it convertible into securities of the Company, (ii) issue or sell any of its
securities either (A) at a conversion, exercise or exchange rate or price that is based upon and/or varies with the trading prices
of, or quotations for, Common Stock, and/or (B) with a conversion, exercise or exchange rate and/or price that is subject to being
reset on one or more occasions either (1) at some future date after the initial issuance of such securities or (2) upon the occurrence
of specified or contingent events directly or indirectly related to the business of the Company or the market for the Common Stock,
and/or (iii) enter into any agreement (including, without limitation, an “equity line of credit” or an “at-the-market
offering”) whereby the Company may sell securities at a future determined price. Any transaction contemplated in this Section
5(h), shall be referred to as a “Variable Rate Transaction”. The Holder shall be entitled to obtain injunctive
relief against the Company to preclude any Variable Rate Transaction (without the need for the posting of any bond or similar
item, which the Company hereby expressly and irrevocably waives the requirement for), which remedy shall be in addition to any
right of the Holder to collect damages. A “Variable Rate Transaction” shall also include mean, collectively, an “Equity
Line of Credit” or similar agreement, or a Variable Priced Equity Linked Instrument. For purposes hereof, “Equity
Line of Credit” means any transaction involving a written agreement between the Company and an investor or underwriter
whereby the Company has the right to “put” its securities to the investor or underwriter over an agreed period of
time and at future determined price or price formula (other than customary “preemptive” or “participation”
rights or “weighted average” or “full-ratchet” anti-dilution provisions or in connection with fixed-price
rights offerings and similar transactions that are not Variable Priced Equity Linked Instruments), and “Variable Priced
Equity Linked Instruments” means: (A) any debt or equity securities which are convertible into, exercisable or exchangeable
for, or carry the right to receive additional shares of Common Stock either (1) at any conversion, exercise or exchange rate or
other price that is based upon and/or varies with the trading prices of or quotations for Common Stock at any time after the initial
issuance of such debt or equity security, or (2) with a conversion, exercise or exchange price that is subject to being reset
on more than one occasion at some future date at any time after the initial issuance of such debt or equity security due to a
change in the market price of the Company’s Common Stock since date of initial issuance (other than customary “preemptive”
or “participation” rights or “weighted average” or “full-ratchet” anti-dilution provisions
or in connection with fixed-price rights offerings and similar transactions), and (B) any amortizing convertible security which
amortizes prior to its maturity date, where the Company is required or has the option to (or any investor in such transaction
has the option to require the Company to) make such amortization payments in shares of Common Stock which are valued at a price
that is based upon and/or varies with the trading prices of or quotations for Common Stock at any time after the initial issuance
of such debt or equity security.


 






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i)
Lower Priced Transaction. So long as this Note remains outstanding, the Company shall not enter into any financing transaction
pursuant to which the Company sells its securities at a price lower than the Fixed Conversion Price (subject to adjustment in
accordance with Section 5(a) above) without the written consent of the Holder.


 


Section
6. Events of Default.


 


a)
“Event of Default” means, wherever used herein, any of the following events (whatever the reason for such event
and whether such event shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or
order of any court, or any order, rule or regulation of any administrative or governmental body):


 


i.
any default in the payment of (A) the principal amount of this Note or (B) interest, liquidated damages and other amounts owing
to a Holder on this Note, as and when the same shall become due and payable (whether on a Conversion Date or the Maturity Date
or by acceleration or otherwise) which default, solely in the case of an interest payment or other default under clause (B) above,
is not cured within three (3) Trading Days;


 


ii.
the Company shall fail to observe or perform any other covenant, provision, or agreement contained in this Note (and other than
a breach by the Company of its obligations to deliver shares of Common Stock to the Holder upon conversion, which breaches are
addressed in clauses (x) and (xvii) below, respectively) which failure is not cured, if possible to cure, within the earlier to
occur of (A) five (5) Trading Days after notice of such failure sent by the Holder or by any other Holder to the Company and (B)
ten (10) Trading Days after the Company has become or should have become aware of such failure;


 


iii.
a material default or material event of default (subject to any grace or cure period provided in the applicable agreement, document
or instrument) shall occur under (A) any of the Transaction Documents or (B) any other agreement, contract, lease, document or
instrument to which the Company or any Subsidiary is obligated (and not covered by clause (vi) below);


 


iv.
any representation or warranty made in this Note, any other Transaction Documents, any written statement pursuant hereto or thereto,
any other agreement, contract, lease, document or instrument to which the Company or any Subsidiary is obligated (including those
covered by clause (vi) below), or any other report, financial statement or certificate made or delivered to the Holder or any
other Holder shall be untrue or incorrect in any material respect as of the date when made or deemed made;


 






    	20



    	 



    

 


v.
the Company or any Subsidiary (as such term is defined in Rule 1-02(w) of Regulation S-X) shall be subject to a Bankruptcy Event;


 


vi.
the Company or any Subsidiary shall default on any of its obligations under any mortgage, credit agreement or other facility,
indenture agreement, factoring agreement or other instrument under which there may be issued, or by which there may be secured
or evidenced, any indebtedness for borrowed money or money due under any long term leasing or factoring arrangement that (a) involves
an obligation greater than One Hundred Fifty Thousand Dollars ($150,000) whether such indebtedness now exists or shall hereafter
be created, and (b) results in such indebtedness becoming or being declared due and payable prior to the date on which it would
otherwise become due and payable;


 


vii.
the Common Stock shall not be eligible for listing or quotation for trading on any Nasdaq Market and shall not be eligible to
resume listing or quotation for trading thereon within forty-five (45) days or the transfer of shares of Common Stock through
the Depository Trust Company System is no longer available or “chilled”;


 


viii.
the Company shall be a party to any Change of Control Transaction or Fundamental Transaction (A) without first giving the Holder
ten (10) calendar days’ prior written notice of the closing of such Change of Control Transaction or Fundamental Transaction
and (B) prior to or simultaneous with the closing of such Change of Control Transaction or Fundamental Transaction, the Holder
is not repaid in accordance with Section 2(e) herein;


 


ix.
the Company does not meet the current public information requirements under Rule 144, which failure is not cured, if possible
to cure, within two (2) Trading Days after the expiration of the applicable grace period permitted under Rule 12b-25 of the Exchange
Act, further provided that the Company files a Form 12b-25 for the relevant report required to meet the current public information
requirements under Rule 144;


 


x.
the Company shall fail for any reason to deliver certificates to a Holder prior to the third (3rd) Trading Day after
a Conversion Date pursuant to Section 4(c), or the Company shall provide at any time notice to the Holder, including by way of
public announcement, of the Company’s intention to not honor requests for conversions of this Note in accordance with the
terms hereof;


 


xi.
the Company fails to file with the Commission any required reports under Section 13 or 15(d) of the Exchange Act such that it
is not in compliance with Rule 144(c)(1) (or Rule 144(i)(2), if applicable), which failure is not cured, if possible to cure,
within two (2) Trading Days after the expiration of the applicable grace period permitted under Rule 12b-25 of the Exchange Act,
further provided that the Maker files a Form 12b-25 for such report;


 






    	21



    	 



    

 


xii.
the Company or any Subsidiary shall: (i) apply for or consent to the appointment of a receiver, trustee, custodian or liquidator
of it or any of its properties; (ii) admit in writing its inability to pay its debts as they mature; (iii) make a general assignment
for the benefit of creditors; (iv) be adjudicated a bankrupt or insolvent or be the subject of an order for relief under Title
11 of the United States Code or any bankruptcy, reorganization, insolvency, readjustment of debt, dissolution or liquidation law
or statute of any other jurisdiction or foreign country; or (v) file a voluntary petition in bankruptcy, or a petition or an answer
seeking reorganization or an arrangement with creditors or to take advantage or any bankruptcy, reorganization, insolvency, readjustment
of debt, dissolution or liquidation law or statute, or an answer admitting the material allegations of a petition filed against
it in any proceeding under any such law, or (vi) take or permit to be taken any action in furtherance of or for the purpose of
effecting any of the foregoing;


 


xiii.
if any order, judgment or decree shall be entered, without the application, approval or consent of the Company or any Subsidiary,
by any court of competent jurisdiction, approving a petition seeking liquidation or reorganization of the Company or any Subsidiary,
or appointing a receiver, trustee, custodian or liquidator of the Company or any Subsidiary, or of all or any substantial part
of its assets, and such order, judgment or decree shall continue unstayed and in effect for any period of sixty (60) days;


 


xiv.
the occurrence of any levy upon or seizure or attachment of, or any uninsured loss of or damage to, any property of the Company
or any Subsidiary having an aggregate fair value or repair cost (as the case may be) in excess of Two Hundred Fifty Thousand Dollars
($250,000) individually or in the aggregate, and any such levy, seizure or attachment shall not be set aside, bonded or discharged
within thirty (30) days after the date thereof;


 


xv.
the Company shall fail to maintain the Reserve Amount;


 


xvi.
any monetary judgment, writ or similar final process shall be entered or filed against the Company, any subsidiary or any of their
respective property or other assets for more than Two Hundred Fifty Thousand Dollars ($250,000), and such judgment, writ or similar
final process shall remain unvacated, unbonded or unstayed for a period of forty-five (45) calendar days;


 


xvii.
the Company shall fail to comply with the “use of proceeds” of this Note as set forth in Section 7(m);


 


xviii.
the Company shall fail to observe or perform any other covenant, provision, or agreement contained in any other agreement, contract,
lease, document or instrument to which the Company or any Subsidiary is obligated (including those covered by clause (vi) above);


 






    	22



    	 



    

 


b)
Remedies Upon Event of Default. Subject to the Beneficial Ownership Limitation as set forth in Section 4(d), if any Event
of Default occurs, then the outstanding principal amount of this Note, plus accrued but unpaid interest, liquidated damages and
other amounts owing in respect thereof through the date of acceleration, shall become, at the Holder’s election, immediately
due and payable at the Holder’s option, in cash or in shares of Common Stock at the greater of (i) the Mandatory Default
Amount, and (ii) (a) the outstanding principal amount of this Note and accrued and unpaid interest hereon, in addition to the
payment of all other amounts, costs, expenses and liquidated damages due in respect of this Note, divided by the Fixed Conversion
Price, multiplied by (b) the highest closing price for the Common Stock on the Trading Market (as defined in the Purchase Agreement)
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 as set forth in Section 2(f) herein. After the occurrence of any Event of Default that results in the eventual
acceleration of this Note, the interest rate on this Note shall accrue at an additional interest rate equal to the lesser of two
percent (1%) per month (twelve and one-half percent (12.5%) per annum) or the maximum rate permitted under applicable law. Upon
the payment in full of the Mandatory Default Amount in cash or in shares of Common Stock, the Holder shall promptly surrender
this Note to or as directed by the Company. In connection with such acceleration described herein, the Holder need not provide,
and the Company hereby waives, any presentment, demand, protest or other notice of any kind (other than the Holder’s election
to declare such acceleration), and the Holder may immediately and without expiration of any grace period enforce any and all of
its rights and remedies hereunder and all other remedies available to it under applicable law. Such acceleration may be rescinded
and annulled by Holder at any time prior to payment hereunder and the Holder shall have all rights as a holder of the Note until
such time, if any, as the Holder receives full payment pursuant to this Section 6(b). No such rescission or annulment shall affect
any subsequent Event of Default or impair any right consequent thereon.


 


Section
7. Miscellaneous.


 


a)
Notices. Any and all notices or other communications or deliveries to be provided by the Holder hereunder, including, without
limitation, any Notice of Conversion, shall be in writing and delivered personally, by email or facsimile, or sent by a nationally
recognized overnight courier service, addressed to the Company at 9705 Loiret Blvd, Lenexa, KS 66219, or such other address, facsimile
number, or email address as the Company may specify for such purposes by notice to the Holder delivered in accordance with this
Section 7(a). Any and all notices or other communications or deliveries to be provided by the Company hereunder shall be in writing
and delivered personally, by email or facsimile, or sent by a nationally recognized overnight courier service addressed to each
Holder at the email address, facsimile number, or address of the Holder appearing on the books of the Company, or if no such email
address, facsimile number, or address appears on the books of the Company, at the principal place of business of such Holder.
Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the date
of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth on the signature
pages attached hereto prior to 12:00 p.m. (New York City time) on any date, (ii) the next Trading Day after the date of transmission,
if such notice or communication is delivered via facsimile at the facsimile number set forth on the signature pages attached hereto
on a day that is not a Trading Day or later than 12:00 p.m. (New York City time) on any Trading Day, (iii) the second Trading
Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service or (iv) upon actual receipt
by the party to whom such notice is required to be given.


 






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b)
Absolute Obligation. Except as expressly provided herein, no provision of this Note shall alter or impair the obligation
of the Company, which is absolute and unconditional, to pay the principal of, liquidated damages and accrued interest, as applicable,
on this Note at the time, place, and rate, and in the coin or currency, herein prescribed. This Note is a direct debt obligation
of the Company. This Note ranks pari passu with all other Notes now or hereafter issued under the terms set forth herein.


 


c)
Lost or Mutilated Note. If this Note shall be mutilated, lost, stolen or destroyed, the Company shall execute and deliver,
in exchange and substitution for and upon cancellation of a mutilated Note, or in lieu of or in substitution for a lost, stolen
or destroyed Note, a new Note for the principal amount of this Note so mutilated, lost, stolen or destroyed, but only upon receipt
of evidence of such loss, theft or destruction of such Note, and of the ownership hereof, reasonably satisfactory to the Company.


 


d)
Governing Law. All questions concerning the construction, validity, enforcement and interpretation of this Note shall be
governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles
of conflict of laws thereof. Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense
of the transactions contemplated by any of the Transaction Documents (whether brought against a party hereto or its respective
Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the state and federal courts sitting
in the City of New York, Borough of Manhattan (the “New York Courts”). Each party hereto hereby irrevocably
submits to the exclusive jurisdiction of the New York Courts for the adjudication of any dispute hereunder or in connection herewith
or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction
Documents), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of such New York Courts, or such New York Courts are improper or inconvenient venue for
such proceeding. Each party hereby irrevocably waives personal service of process and consents to process being served in any
such suit, action or proceeding 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 Note 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 applicable law. Each party hereto hereby irrevocably waives, to the fullest
extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this
Note or the transactions contemplated hereby. If any party shall commence an action or proceeding to enforce any provisions of
this Note, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorneys’
fees and other costs and expenses incurred in the investigation, preparation and prosecution of such action or proceeding.


 






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e)
Waiver. Any waiver by the Company or the Holder of a breach of any provision of this Note shall not operate as or be construed
to be a waiver of any other breach of such provision or of any breach of any other provision of this Note. The failure of the
Company or the Holder to insist upon strict adherence to any term of this Note on one or more occasions shall not be considered
a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this
Note on any other occasion. Any waiver by the Company or the Holder must be in writing.


 


f)
Amending the Terms of this Note. The prior written consent of 50.1% in interest of the Holders, which shall be calculated
based on the principal amount of all Notes outstanding at the time of such consent, shall be required for any change or amendment
to the Notes; provided, however, that no such change or amendment, as applied to any of the Notes held by any particular holder
of Notes, shall, without the written consent of that particular holder, (i) reduce the amount of Principal, reduce the amount
of accrued and unpaid Interest, or extend the Maturity Date, of the Notes, or (ii) disproportionally and adversely affect any
rights under the Notes of any holder of Notes.


 


g)
Severability. If any provision of this Note is invalid, illegal or unenforceable, the balance of this Note shall remain
in effect, and if any provision is inapplicable to any Person or circumstance, it shall nevertheless remain applicable to all
other Persons and circumstances. If it shall be found that any interest or other amount deemed interest due hereunder violates
the applicable law governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the
maximum rate of interest permitted under applicable law. The Company covenants (to the extent that it may lawfully do so) that
it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay,
extension or usury law or other law which would prohibit or forgive the Company from paying all or any portion of the principal
of or interest on this Note as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect
the covenants or the performance of this Note, and the Company (to the extent it may lawfully do so) hereby expressly waives all
benefits or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impede the
execution of any power herein granted to the Holder, but will suffer and permit the execution of every such as though no such
law has been enacted.


 






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h)
Remedies, Characterizations, Other Obligations, Breaches and Injunctive Relief. The remedies provided in this Note shall
be cumulative and in addition to all other remedies available under this Note and any of the other Transaction Documents at law
or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the Holder’s
right to pursue actual and consequential damages for any failure by the Company to comply with the terms of this Note. The Company
covenants to the Holder that there shall be no characterization concerning this instrument other than as expressly provided herein.
Amounts set forth or provided for herein with respect to payments, conversion and the like (and the computation thereof) shall
be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to any other obligation
of the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees
that, in the event of any such breach or threatened breach, the Holder shall be entitled, in addition to all other available remedies,
to an injunction restraining any such breach or any such threatened breach, without the necessity of showing economic loss and
without any bond or other security being required. The Company shall provide all information and documentation to the Holder that
is requested by the Holder to enable the Holder to confirm the Company’s compliance with the terms and conditions of this
Note.


 


i)
Next Business Day. Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day,
such payment shall be made on the next succeeding Business Day.


 


j)
Payment of Collection, Enforcement and Other Costs. If (i) this Note is placed in the hands of an attorney for collection
or enforcement or is collected or enforced through any legal proceeding or the Holder otherwise takes action to collect amounts
due under this Note or to enforce the provisions of this Note or (ii) there occurs any bankruptcy, reorganization, receivership
of the Company or other proceedings affecting Company creditors’ rights and involving a claim under this Note, then the
Company shall pay the reasonable and documented out-of-pocket costs incurred by the Holder for such collection, enforcement or
action or in connection with such bankruptcy, reorganization, receivership or other proceeding, including, but not limited to,
attorneys’ fees and disbursements.


 


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


 


l)
Security Interest. The obligations of the Company under this Note shall be secured by that certain Subsidiary Guarantee,
Security Agreement and Intellectual Property Security Agreement, each of which is dated August 5, 2019, as amended and
assigned, by and among the Company, the Holder and if and as applicable, the other parties thereto.


 


m)
Use of Proceeds. The gross proceeds of the funding to the Company related to this Note shall be used for the Expenses of
Offering and Working Capital/General Corporate purposes.


 






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n)
Securities Laws Disclosure; Publicity. The Company shall (a) by 9:00 a.m. (New York City time) on the Trading Day immediately
following the date hereof, issue a press release disclosing the material terms of the transactions contemplated hereby, and (b)
file a Current Report on Form 8-K, including the Transaction Documents as exhibits thereto, with the Commission within the time
required by the Exchange Act. From and after the issuance of such press release, the Company represents to the Holder that it
shall have publicly disclosed all material, non-public information delivered to any of the Holder by the Company or any of its
Subsidiaries, or any of their respective officers, directors, employees or agents in connection with the transactions contemplated
by the Transaction Documents. In addition, effective upon the issuance of such press release, the Company acknowledges and agrees
that any and all confidentiality or similar obligations under any agreement, whether written or oral, between the Company, any
of its Subsidiaries or any of their respective officers, directors, agents, employees or Affiliates on the one hand, and the Holder
or any of its Affiliates on the other hand, shall terminate. Notwithstanding the foregoing, the Company shall not publicly disclose
the name of the Holder, or include the name of the Holder in any filing with the Commission or any regulatory agency or Trading
Market, without the prior written consent of the Holder, except (a) as required by federal securities law in connection with the
filing of final Transaction Documents with the Commission and (b) to the extent such disclosure is required by law or Trading
Market regulations, in which case the Company shall provide the Holder with prior notice of such disclosure permitted under this
clause (b).


 


o)
Non-Public Information. Except with respect to the material terms and conditions of the transactions contemplated by the
Transaction Documents, which shall be disclosed pursuant to Section 7(n), the Company covenants and agrees that neither it, nor
any other Person acting on its behalf has provided nor will provide the Holder or its agents or counsel with any information that
constitutes, or the Company reasonably believes constitutes, material non-public information, unless prior thereto the Holder
shall have consented to the receipt of such information and agreed with the Company to keep such information confidential. The
Company understands and confirms that the Holder shall be relying on the foregoing covenant in effecting transactions in securities
of the Company. To the extent that the Company delivers any material, non-public information to the Holder without the Holder’s
consent, the Company hereby covenants and agrees that the Holder shall not have any duty of confidentiality to the Company, any
of its Subsidiaries, or any of their respective officers, directors, agents, employees or Affiliates, or a duty to the Company,
any of its Subsidiaries or any of their respective officers, directors, agents, employees or Affiliates not to trade on the basis
of, such material, non-public information, provided that the Holder shall remain subject to applicable law. To the extent that
any notice provided pursuant to any Transaction Document constitutes, or contains, material, non-public information regarding
the Company or any Subsidiaries, the Company shall simultaneously file such notice with the Commission pursuant to a Current Report
on Form 8-K. The Company understands and confirms that the Holder shall be relying on the foregoing covenant in effecting transactions
in securities of the Company.


 


(Signature
Pages Follow)


 






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IN
WITNESS WHEREOF, the Company has caused this Note to be duly executed by a duly authorized officer as of the date first above
indicated.


 


	 	DIGITAL
    ALLY, INC.
	 	 
	 	By:
    	 
	 	Name:
    	Stanton
    Ross
	 	Title:
    	CEO,
    President, and Chairman
	 	Facsimile
    No. for delivery of Notices: 913-213-5762




 




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ANNEX
A


 


NOTICE
OF CONVERSION


 





The undersigned hereby
elects to convert principal under the Senior Secured Convertible Promissory Note, due August 4, 2020 of Digital Ally, Inc.,
a Nevada corporation (the “Company”), into shares of common stock (the “Common Stock”),
of the Company according to the conditions hereof, as of the date written below. If shares of Common Stock are to be issued in
the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto and
is delivering herewith such certificates and opinions as reasonably requested by the Company in accordance therewith. No fee will
be charged to the holder for any conversion, except for such transfer taxes, if any.







 


By
the delivery of this Notice of Conversion the undersigned represents and warrants to the Company that its ownership of the Common
Stock does not exceed the amounts specified under Section 4 of this Note, as determined in accordance with Section 13(d) of the
Exchange Act.


 


The
undersigned agrees to comply with the prospectus delivery requirements under the applicable securities laws in connection with
any transfer of the aforesaid shares of Common Stock.


 


Conversion
calculations:


 


Date
to Effect Conversion:


 


Principal
Amount of Note to be Converted:


 


Payment
of Interest in Common Stock __ yes __ no


If
yes, $_____ of Interest Accrued on Account of Conversion at Issue.


 


Number
of shares of Common Stock to be issued:


 


Signature:


 


Name:


 


Delivery
Instructions:


 






    	29



    	 



    

 


Schedule
1


 


CONVERSION
SCHEDULE


 





This Senior Secured Convertible Promissory
Note, due on August 4, 2020, in the original principal amount of $2,777,777.78 is issued by Digital Ally, Inc., a Nevada
corporation. This Conversion Schedule reflects conversions made under Section 4 of the above referenced Note.







 


Dated:


 


	Date
    of Conversion 

    (or for first entry,

    Original Issue Date)	 	Amount
    of 

    Conversion	 	Aggregate
    Principal 

    Amount Remaining 

    Subsequent to 

    Conversion (or original 

    Principal Amount)	 	Company
    

    Attest
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 


 




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Schedule
2


 


MONTHLY
REPAYMENT SCHEDULE


 


This Senior Secured Convertible Promissory
Note, due on August 4, 2020, in the original principal amount of $2,777,777.78 is issued by Digital Ally, Inc., a Nevada
corporation. This Monthly Repayment Schedule reflects monthly repayments made under Section 4 of the above referenced Note.







 


See
separate excel table.


 






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