Document:

Exhibit
10.4

 

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

 

	Principal
    Amount: $68,000.00	Issue
    Date: February 19, 2015

 

10%
CONVERTIBLE NOTE

 

FOR
VALUE RECEIVED, GLOBAL DIGITAL SOLUTIONS, INC., a New Jersey corporation (“Borrower” or “Company”),
hereby promises to pay to the order of EMA FINANCIAL, LLC, a Delaware limited liability company, or its registered assigns
(the “Holder”), on February 19, 2016 (subject to extension as set forth below, the “Maturity Date”), the
sum of $68,000.00 as set forth herein, and to pay interest on the unpaid principal balance hereof at the rate of ten percent (10%)
per annum (the “Interest Rate”) from the date of issuance hereof until this Note plus any and all accrued interest
is paid in full. Interest shall be computed on the basis of a 365-day year and the actual number of days elapsed. Any amount of
principal or interest on this Note which is not paid when due shall bear interest at the rate of twenty-four (24%) per annum from
the due date thereof until the same is paid (“Default Interest”). All payments due hereunder shall be made in lawful
money of the United States of America. All payments shall be made at such address as the Holder shall hereafter give to the Borrower
by written notice made in accordance with the provisions of this Note. Whenever any amount expressed to be due by the terms of
this Note is due on any day which is not a business day, the same shall instead be due on the next succeeding day which is a business
day and, in the case of any interest payment date which is not the date on which this Note is paid in full, the extension of the
due date thereof shall not be taken into account for purposes of determining the amount of interest due on such date. As used
in this Note, the term “business day” shall mean any day other than a Saturday, Sunday or a day on which commercial
banks in the city of New York, New York are authorized or required by law or executive order to remain closed. Each capitalized
term used herein, and not otherwise defined, shall have the meaning ascribed thereto in that certain Securities Purchase Agreement
entered into by and between the Company and Holder dated on or about the date hereof, pursuant to which this Note was originally
issued (the “Purchase Agreement”). The Holder may, by written notice to the Borrower at least five (5) days before
the Maturity Date (as may have been previously extended), extend the Maturity Date to up to one (1) year following the date of
the original Maturity Date hereunder.

 

    	 

    	 

    

 

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

 

The
following terms shall apply to this Note:

 

ARTICLE
I. CONVERSION RIGHTS

 

1.1.           Conversion
Right. The Holder shall have the right, in its sole and absolute discretion, at any time and from time to time to convert
all or any part of the outstanding amount due under this Note into fully paid and non-assessable shares of Common Stock, as such
Common Stock exists on the Issue Date, or any shares of capital stock or other securities of the Borrower into which such Common
Stock shall hereafter be changed or reclassified at the conversion price (the “Conversion Price”) determined as provided
herein (a “Conversion”); provided, however, that in no event shall the Holder be entitled
to convert any portion of this Note in excess of that portion of this Note upon conversion of which the sum of (1) the number
of shares of Common Stock beneficially owned by the Holder and its affiliates (other than shares of Common Stock which may be
deemed beneficially owned through the ownership of the unconverted portion of the Notes or the unexercised or unconverted portion
of any other security of the Borrower subject to a limitation on conversion or exercise analogous to the limitations contained
herein) and (2) the number of shares of Common Stock issuable upon the conversion of the portion of this Note with respect to
which the determination of this proviso is being made, would result in beneficial ownership by the Holder and its affiliates of
more than 4.9% of the outstanding shares of Common Stock. For purposes of the proviso to the immediately preceding sentence, beneficial
ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), and Regulation 13D-G thereunder, except as otherwise provided in clause (1) of such proviso, provided, further, however,
that the limitations on conversion may be waived by the Holder upon, at the election of the Holder, not less than 61 days’
prior notice to the Borrower, and the provisions of the conversion limitation shall continue to apply until such 61st day (or
such later date, as determined by the Holder, as may be specified in such notice of waiver). The number of shares of Common Stock
to be issued upon each conversion of this Note shall be determined by dividing the Conversion Amount (as defined below) by the
applicable Conversion Price then in effect on the date specified in the notice of conversion, in the form attached hereto as Exhibit
A (the “Notice of Conversion”), delivered to the Borrower by the Holder in accordance with Section 1.4 below; provided
that the Notice of Conversion is submitted by facsimile or e-mail (or by other means resulting in, or reasonably expected to result
in, notice) to the Borrower before 11:59 p.m., New York, New York time on such conversion date (the “Conversion Date”).
The term “Conversion Amount” means, with respect to any conversion of this Note, the sum of (1) the principal amount
of this Note to be converted in such conversion, plus (2) accrued and unpaid interest, if any, on such principal
amount being converted at the interest rates provided in this Note to the Conversion Date, plus (3) at the Holder’s
option, Default Interest, if any, on the amounts referred to in the immediately preceding clauses (1) and/or (2) plus (4)
at the Holder’s option, any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof.

 

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1.2.           Conversion
Price.

 

a)           Calculation
of Conversion Price. The conversion price hereunder (the “Conversion Price”) shall equal the lower of either
(i) the closing sale price of the Common Stock on the Principal Market on the Trading Day immediately preceding the Closing Date,
and (ii) 60% of the lowest trade price of Common Stock on the Principal Market during the twenty five (25) consecutive Trading
Days immediately preceding the Conversion Date. However, if Company’s share price at any time loses the bid (ex: 0.0001
on the ask with zero market makers on the bid on level 2), then the Conversion Price may, in the Holder’s sole and absolute
discretion, be reduced to a fixed conversion price of 0.00001 (if lower than the conversion price otherwise). If such Common Stock
is not traded on the OTCBB, OTCQB, Nasdaq or NYSE, then such sale price shall be the sale price of such security on the principal
securities exchange or trading market where such security is listed or traded or, if no sale price of such security is available
in any of the foregoing manners, the average of the closing bid prices of any market makers for such security that are listed
in the “pink sheets” by the National Quotation Bureau, Inc. If such sale price cannot be calculated for such security
on such date in the manner provided above, such price shall be the fair market value as mutually determined by the Borrower and
the Holder. If the Borrower’s Common stock is chilled for deposit at DTC, becomes chilled at any point while this Note remains
outstanding or deposit or other additional fees are payable due to a Yield Sign, Stop Sign or other trading restrictions, or if
the closing sale price at any time falls below 0.01, then such % figure specified in clause 1.2(a)(ii) above shall be reduced
to 50%. Additionally, the Borrower acknowledges that it will take all reasonable steps necessary or appropriate, including providing
a board of directors resolution authorizing the issuance of common stock and an opinion of counsel confirming the rights of Holder
to sell shares of Common Stock issuable or issued to Holder on conversion of this Note pursuant to Rule 144 as promulgated by
the SEC (“Rule 144"), as such Rule may be in effect from time to time. If the Borrower does not promptly provide a
board of directors’ resolution and an opinion from Company counsel, and so long as the requested sale may be made pursuant
to Rule 144, the Company agrees to accept an opinion of counsel to the Holder which opinion will be issued at the Company’s
expense and the conversion dollar amount will be reduced by $750.00 to cover the cost of such legal opinion. “Trading Day”
shall mean any day on which the Common Stock is tradable for any period on the OTCQB, or on the principal securities exchange
or other securities market on which the Common Stock is then being traded. Additionally, if the Company ceases to be a reporting
company pursuant to the 1934 Act or if the Note cannot be converted into free trading shares after 181 days from the issuance
date, an additional 15% discount will be attributed to the Conversion Price.

 

b)           Without
in any way limiting the Holder’s right to pursue other remedies, including actual damages and/or equitable relief, the parties
agree that if delivery of the Common Stock issuable upon conversion of this Note is not delivered by the Deadline (as defined
below) the Borrower shall pay to the Holder $1,000.00 per day in cash, for each day beyond the Deadline that the Borrower fails
to deliver such Common Stock. Such cash amount shall be paid to Holder by the fifth day of the month following the month in which
it has accrued or, at the option of the Holder, shall be added to the principal amount of this Note, in which event interest shall
accrue thereon in accordance with the terms of this Note and such additional principal amount shall be convertible into Common
Stock in accordance with the terms of this Note. The Borrower agrees that the right to convert this Note is a valuable right to
the Holder. The damages resulting from a failure, attempt to frustrate, or interference with such conversion right are difficult
if not impossible to quantify. Accordingly the parties acknowledge that the liquidated damages provision contained in this Section
are justified.

 

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1.3.           Authorized
Shares. The Borrower covenants that the Borrower will at all times while this Note is outstanding reserve from its authorized
and unissued Common Stock a sufficient number of shares, free from preemptive rights, to provide for the issuance of Common Stock
upon the full conversion of this Note. The Borrower is required at all times to have authorized and reserved five (5) times the
number of shares that is actually issuable upon full conversion of this Note (based on the Conversion Price of the Notes in effect
from time to time)(the “Reserved Amount”). Initially, the Company will instruct the Transfer Agent to reserve twelve
million (12,000,000) shares of common stock in the name of the Holder for issuance upon conversion hereof. The Borrower represents
that upon issuance, such shares will be duly and validly issued, fully paid and non-assessable. In addition, if the Borrower shall
issue any securities or make any change to its capital structure which would change the number of shares of Common Stock into
which this Note shall be convertible at the then current Conversion Price, the Borrower shall at the same time make proper provision
so that thereafter there shall be a sufficient number of shares of Common Stock authorized and reserved, free from preemptive
rights, for conversion of this Note in full. The Borrower (i) acknowledges that it has irrevocably instructed its transfer agent
to issue certificates for the Common Stock issuable upon conversion of this Note, and (ii) agrees that its issuance of this Note
shall constitute full authority to its officers and agents who are charged with the duty of executing stock certificates to execute
and issue the necessary certificates for shares of Common Stock in accordance with the terms and conditions of this Note.

 

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

 

1.4.           Method
of Conversion.

 

a)           Mechanics
of Conversion. Subject to Section 1.1, this Note may be converted by the Holder in whole or in part at any time and from time
to time after the Issue Date, by submitting to the Borrower a Notice of Conversion (by facsimile, e-mail or other reasonable means
of communication dispatched on the Conversion Date prior to 11:59 p.m., New York, New York time).

 

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

 

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

 

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

 

e)           Obligation
of Borrower to Deliver Common Stock. Upon receipt by the Borrower of a duly and properly executed Notice of Conversion, the
Holder shall be deemed to be the holder of record of the Common Stock issuable upon such conversion, the outstanding principal
amount and the amount of accrued and unpaid interest on this Note shall be reduced to reflect such conversion, and, unless the
Borrower defaults on its obligations under this Article I, all rights with respect to the portion of this Note being so converted
shall forthwith terminate except the right to receive the Common Stock or other securities, cash or other assets, as herein provided,
on such conversion. If the Holder shall have given a Notice of Conversion as provided herein, the Borrower’s obligation
to issue and deliver the certificates for Common Stock shall be absolute and unconditional, irrespective of the absence of any
action by the Holder to enforce the same, any waiver or consent with respect to any provision thereof, the recovery of any judgment
against any person or any action to enforce the same, any failure or delay in the enforcement of any other obligation of the Borrower
to the holder of record, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by
the Holder of any obligation to the Borrower, and irrespective of any other circumstance which might otherwise limit such obligation
of the Borrower to the Holder in connection with such conversion. The Conversion Date specified in the Notice of Conversion shall
be the Conversion Date so long as the Notice of Conversion is received by the Borrower before 11:59 p.m., New York, New York time,
on such date.

 

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

 

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g)           Failure
to Deliver Common Stock Prior to Deadline. Without in any way limiting the Holder’s right to pursue other remedies,
including actual damages and/or equitable relief, the parties agree that if delivery of the Common Stock issuable upon conversion
of this Note is not delivered by the Deadline, the Borrower shall pay to the Holder $1,000.00 per day in cash, for each day beyond
the Deadline that the Borrower fails to deliver such Common Stock to the Holder. Such cash amount shall be paid to Holder by the
fifth day of the month following the month in which it has accrued or, at the option of the Holder, shall be added to the principal
amount of this Note, in which event interest shall accrue thereon in accordance with the terms of this Note and such additional
principal amount shall be convertible into Common Stock in accordance with the terms of this Note. The Borrower agrees that the
right to convert is a valuable right to the Holder. The damages resulting from a failure, attempt to frustrate, or interference
with such conversion right are difficult if not impossible to qualify. Accordingly the parties acknowledge that the liquidated
damages provision contained in this Section 1.4(g) are justified.

 

h)           The
Borrower acknowledges that it will take all reasonable steps necessary or appropriate, including providing an opinion of counsel
confirming the rights of Holder to sell shares of Common Stock issued to Holder on conversion of the Note pursuant to Rule 144
as promulgated by the SEC (“Rule 144"), as such Rule may be in effect from time to time. If the Borrower does not promptly
provide an opinion from Borrower counsel, and so long as the requested sale may be made pursuant to Rule 144, the Borrower agrees
to accept an opinion of counsel to the Holder which opinion will be issued at the Borrower’s expense.

 

1.5.           Restricted
Securities. The shares of Common Stock issuable upon conversion of this Note may not be sold or transferred unless (i) such
shares are sold pursuant to an effective registration statement under the Act or (ii) the Borrower or its transfer agent shall
have been furnished with an opinion of counsel (which opinion shall be in form, substance and scope customary for opinions of
counsel in comparable transactions) to the effect that the shares to be sold or transferred may be sold or transferred pursuant
to an exemption from such registration or (iii) such shares are sold or transferred pursuant to Rule 144 under the Act (or a successor
rule) (“Rule 144”) or (iv) such shares are transferred to an “affiliate” (as defined in Rule 144) of the
Borrower who agrees to sell or otherwise transfer the shares only in accordance with this Section 1.5 and who is an Accredited
Investor (as defined in the Purchase Agreement). Any legend set forth on any stock certificate evidencing any Conversion Shares
shall be removed and the Borrower shall issue to the Holder a new certificate therefore free of any transfer legend if (i) the
Borrower or its transfer agent shall have received an opinion of counsel form, substance and scope customary for opinions of counsel
in comparable transactions, to the effect that a public sale or transfer of such Common Stock may be made without registration
under the Act, which opinion shall be reasonably acceptable to the Company, or (ii) in the case of the Common Stock issued or
issuable upon conversion of this Note, such security is registered for sale by the Holder under an effective registration statement
filed under the Act or otherwise may be sold pursuant to Rule 144 without any restriction as to the number of securities as of
a particular date that can then be immediately sold.

 

1.6.           Effect
of Certain Events.           

 

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

 

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

 

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

 

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

 

e)           Stock
Dividends and Stock Splits. If the Company, at any time while this Note is outstanding: (A) pays a stock dividend or otherwise
makes a distribution or distributions payable in shares of Common Stock on shares of Common Stock or any securities convertible
into or exercisable for Common Stock; (B) subdivides outstanding shares of Common Stock into a larger number of shares; (C) combines
(including by way of a reverse stock split) outstanding shares of Common Stock into a smaller number of shares; or (D) issues,
in the event of a reclassification of shares of the Common Stock, any shares of capital stock of the Company, then the Conversion
Price (and each sale or bid price used in determining the Conversion Price) shall be multiplied by a fraction, of which the numerator
shall be the number of shares of Common Stock 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.

 

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

 

1.7.           Revocation.
If any Conversion Shares are not received by the Deadline, the Holder may revoke the applicable Conversion pursuant to which such
Conversion Shares were issuable. This Note shall remain convertible after the Maturity Date hereof until this Note is repaid or
converted in full.

 

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1.8.           Prepayment.
Notwithstanding anything to the contrary contained in this Note, subject to the terms of this Section, at any time during the
period beginning on the Issue Date and ending on the date which is six (6) months following the Issue Date (“Prepayment
Termination Date”), Borrower shall have the right, exercisable on not less than five (5) Trading Days prior written notice
to the Holder of this Note, to prepay the outstanding balance on this Note (principal and accrued interest), in full, in accordance
with this Section. Any notice of prepayment hereunder (an “Optional Prepayment Notice”) shall be delivered to the
Holder of the Note at its registered addresses and shall state: (1) that the Borrower is exercising its right to prepay the Note,
and (2) the date of prepayment which shall be not more than ten (10) Trading Days from the date of the Optional Prepayment Notice.
On the date fixed for prepayment (the “Optional Prepayment Date”), the Borrower shall make payment of the Optional
Prepayment Amount (as defined below) to or upon the order of the Holder as specified by the Holder in writing to the Borrower
at least one (1) business day prior to the Optional Prepayment Date. If the Borrower exercises its right to prepay the Note, the
Borrower shall make payment to the Holder of an amount in cash (the “Optional Prepayment Amount”) equal to the Prepayment
Factor (as defined below), multiplied by the sum of: (w) the then outstanding principal amount of this Note plus (x)
accrued and unpaid interest on the unpaid principal amount of this Note to the Optional Prepayment Date plus (y)
Default Interest, if any, on the amounts referred to in clauses (w) and (x) plus (z) any amounts owed to the
Holder pursuant to Sections 1.3 and 1.4(g) hereof. If the Borrower delivers an Optional Prepayment Notice and fails to pay the
Optional Prepayment Amount due to the Holder of the Note within two (2) business days following the Optional Prepayment Date,
the Borrower shall forever forfeit its right to prepay the Note pursuant to this Section. After the Prepayment Termination Date,
the Borrower shall have no right to prepay this Note. For purposes hereof, the “Prepayment Factor” shall equal 150%.

 

ARTICLE
II. CERTAIN COVENANTS

 

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

 

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

 

2.3.           Borrowings;
Liens. Notwithstanding section 4(m) of the Purchase Agreement, so long as the Borrower shall have any obligation under
this Note, the Borrower shall not (i) create, incur, assume guarantee, endorse, contingently agree to purchase or otherwise become
liable upon the obligation of any person, firm, partnership, joint venture or corporation, except by the endorsement of negotiable
instruments for deposit or collection, or suffer to exist any liability for borrowed money, except (a) borrowings in existence
or committed on the date hereof and of which the Borrower has informed Holder in writing prior to the date hereof, or (b) indebtedness
to trade creditors or financial institutions incurred in the ordinary course of business, or (ii) enter into, create or incur
any liens, claims or encumbrances of any kind, on or with respect to any of its property or assets now owned or hereafter acquired
or any interest therein or any income or profits therefrom, securing any indebtedness occurring after the date hereof.

 

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

 

    	9

    	 

    

 

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

 

2.6.           Charter.
So long as the Borrower shall have any obligations under this Note, the Borrower shall not amend its charter documents, including
without limitation its certificate of incorporation and bylaws, in any manner that materially and adversely affects any rights
of the Holder.

 

ARTICLE
III. EVENTS OF DEFAULT

 

Any
one or more of the following events which shall occur and/or be continuing shall constitute an event of default (each, an “Event
of Default”):

 

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

 

3.2.           Conversion
and the Shares. The Borrower fails to issue shares of Common Stock to the Holder (or announces or threatens in writing
that it will not honor its obligation to do so at any time following the execution hereof or) upon exercise by the Holder of the
conversion rights of the Holder in accordance with the terms of this Note, fails to transfer or cause its transfer agent
to transfer (issue) (electronically or in certificated form) any certificate for shares of Common Stock issued to the Holder upon
conversion of or otherwise pursuant to this Note as and when required by this Note, the Borrower directs its transfer agent not
to transfer or delays, impairs, and/or hinders its transfer agent in transferring (or issuing) (electronically or in certificated
form) any certificate for shares of Common Stock to be issued to the Holder upon conversion of or otherwise pursuant to this Note
as and when required by this Note, or fails to remove (or directs its transfer agent not to remove or impairs, delays, and/or
hinders its transfer agent from removing) any restrictive legend (or to withdraw any stop transfer instructions in respect thereof)
on any certificate for any shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as
and when required by this Note (or makes any written announcement, statement or threat that it does not intend to honor the obligations
described in this paragraph) and any such failure shall continue uncured (or any written announcement, statement or threat not
to honor its obligations shall not be rescinded in writing) for five (5) business days after the Holder shall have delivered a
Notice of Conversion. It is an obligation of the Borrower to remain current in its obligations to its transfer agent. It shall
be an event of default of this Note, if a conversion of this Note is delayed, hindered or frustrated due to a balance owed by
the Borrower to its transfer agent. If at the option of the Holder, the Holder advances any funds to the Borrower’s transfer
agent in order to process a conversion, such advanced funds shall be paid by the Borrower to the Holder within forty eight (48)
hours of a demand from the Holder.

 

    	10

    	 

    

 

3.3.           Breach
of Covenants. The Borrower breaches any material covenant or other material term or condition contained in this Note and any
collateral documents including but not limited to the Purchase Agreement and such breach continues for a period of seven (7) days
after written notice thereof to the Borrower from the Holder.

 

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

 

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

 

3.6.           Judgments.
Any money judgment, writ or similar process shall be entered or filed against the Borrower or any subsidiary of the Borrower or
any of its property or other assets for more than $50,000.00, and shall remain unvacated, unbonded or unstayed for a period of
twenty (20) days unless otherwise consented to by the Holder, which consent will not be unreasonably withheld.

 

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

 

3.8.           Delisting
of Common Stock. The Borrower shall fail to maintain the listing of the Common Stock on at least one of the OTCQB or an equivalent
replacement exchange, Nasdaq, the NYSE or AMEX.

 

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

 

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

 

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

 

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

 

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

 

    	11

    	 

    

 

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

 

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

 

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

 

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

 

    	12

    	 

    

 

If
the Borrower fails to pay the Default Amount within five (5) business days of written notice that such amount is due and payable,
then the Holder shall have the right at any time, so long as the Borrower remains in default (and so long and to the extent that
there are sufficient authorized shares), to require the Borrower, upon written notice, to immediately issue, in lieu of the Default
Amount, the number of shares of Common Stock of the Borrower equal to the Default Amount divided by the Conversion Price then
in effect. The Holder may still convert any amounts due hereunder, including without limitation the Default Sum, until such time
as this Note has been repaid in full.

 

ARTICLE
IV. MISCELLANEOUS

 

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

 

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

 

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

 

    	13

    	 

    

 

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

 

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

 

4.6.           Governing
Law. This Note shall be governed by and construed in accordance with the laws of the
State of New York without regard to conflicts of laws principles that would result in the application of the substantive laws
of another jurisdiction.  Any action brought by either party against the other concerning the transactions contemplated
by this Agreement must be brought only in the civil or state courts of New York or in the federal courts located in the State
and county of New York.  Both parties and the individual signing this Agreement on behalf of the Borrower agree to submit
to the jurisdiction of such courts.  The prevailing party shall be entitled to recover from the other party its reasonable
attorney’s fees and costs.  In the event that any provision of this Note is invalid or unenforceable under any
applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith
and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable
under any law shall not affect the validity or unenforceability of any other provision of this Note. Nothing contained herein
shall be deemed or operate to preclude the Holder from bringing suit or taking other legal action against the Borrower in any
other jurisdiction to collect on the Borrower’s obligations to Holder, to realize on any collateral or any other security
for such obligations, or to enforce a judgment or other decision in favor of the Holder.  This Note shall be deemed
an unconditional obligation of Borrower for the payment of money and, without limitation to any other remedies of Holder, may
be enforced against Borrower by summary proceeding pursuant to New York Civil Procedure Law and Rules Section 3213 or any similar
rule or statute in the jurisdiction where enforcement is sought.  For purposes of such rule or statute, any other document
or agreement to which Holder and Borrower are parties or which Borrower delivered to Holder, which may be convenient or necessary
to determine Holder’s rights hereunder or Borrower’s obligations to Holder are deemed a part of this Note, whether
or not such other document or agreement was delivered together herewith or was executed apart from this Note.

 

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

 

    	14

    	 

    

 

4.8.           Disclosure.
Upon receipt or delivery by the Company of any notice in accordance with the terms of this Note, unless the Company has in good
faith determined that the matters relating to such notice do not constitute material, non-public information relating to the Company
or any of its Subsidiaries, the Company shall within one (1) Trading Day after any such receipt or delivery, publicly disclose
such material, non-public information on a Current Report on Form 8-K or otherwise. In the event that the Company believes that
a notice contains material, non-public information relating to the Company or any of its Subsidiaries, the Company so shall indicate
to such Holder contemporaneously with delivery of such notice, and in the absence of any such indication, the Holder shall be
allowed to presume that all matters relating to such notice do not constitute material, non-public information relating to the
Company or its Subsidiaries.

 

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

 

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

 

4.11.           Usury.
This Note shall be subject to the anti-usury limitations contained in the Purchase Agreement.

 

(Remainder
of Page intentionally left blank)

 

    	15

    	 

    

 

IN
WITNESS WHEREOF, Borrower has caused this Note to be signed in its name by its duly authorized officer as of the Issue Date first
set forth above.

 

GLOBAL
DIGITAL SOLUTIONS, INC.

 

	By:	/s/
David A. Loppert	 
	 	Name: David A.
    Loppert	 
	 	Title: Chief Financial
    Officer	 

 

    	16

    	 

    

 

EXHIBIT A

 

NOTICE OF CONVERSION

 

The
undersigned hereby elects to convert principal under the 10% Convertible Note of GLOBAL DIGITAL SOLUTIONS, INC., a New Jersey
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 1.1 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 pursuant to any prospectus.

 

Conversion
calculations:

 

Date
to Effect Conversion:                                                                                

 

Conversion
Price:                                                                                                

 

Principal
Amount of Note to be Converted:                                                   

 

Interest
Accrued on Account

of Conversion at Issue:                                                                                      

 

Number
of shares of Common Stock to be issued:                                        

 

                                                                                                                               

 

Signature:
                                                                                                            

 

Name:
                                                                                                                   

  

Address
for Delivery of Common Stock Certificates:                                   

 

                                                                                                                               

 

                                                                                                                               

 

Or

 

DWAC
Instructions:

Broker
No:                               

Account No:                           

 

 

17QEP-2014.12.31 -EX10.6

Exhibit 10.6

QEP RESOURCES, INC.

DEFERRED COMPENSATION WRAP PLAN

incorporating the:

Deferred Compensation Program
401(k) Supplemental Program

QEP RESOURCES, INC.
DEFERRED COMPENSATION WRAP PLAN

ARTICLE 1
INTRODUCTION

1.1    Purpose. QEP Resources, Inc. hereby amends this QEP Resources, Inc. Deferred Compensation Wrap Plan (the “Plan” or “Wrap Plan”). This Plan was created in order to provide specified benefits to a select group of management and highly compensated employees and to allow such employees to defer the receipt of compensation. The Plan consists of a common Deferred Compensation Wrap Plan containing definitions and other operative provisions and two separate component Programs - the Deferred Compensation Program and the 401(k) Supplemental Program. 

1.2    Status of Plan. This Plan and its component Programs are intended to constitute two unfunded, nonqualified deferred compensation arrangements for the purpose of providing deferred compensation to “a select group of management or highly-compensated employees” within the meaning of Sections 201(2), 301(a)(3), and 401(a)(1) of the Employee Retirement Income Security Act of 1974, as amended. The Plan and its component Programs are also intended to comply with Section 409A of the Internal Revenue Code of 1986, as amended, and the regulations and guidance promulgated thereunder. Finally, each of the component Programs is intended to qualify as a separate “plan, program, or arrangement” for purposes of 4 U.S.C. 114, thus making payments under the 401(k) Supplemental Program subject to state income tax solely of the state in which the recipient of the payment resides or is domiciled at the time payment is made. Notwithstanding any other provision herein, this Plan and its component Programs shall be interpreted, operated and administered in a manner consistent with these intentions.
    
ARTICLE 2
DEFINITIONS

For purposes of the Plan and each component Program established under the Plan, the following terms or phrases shall have the following indicated meanings, unless the context clearly requires otherwise:

2.1    “401(k) Supplemental Program” means the component benefit program of this Plan attached hereto as Exhibit B. 

2.2    “Account” or “Account Balance” means, for each Participant, the account or accounts established for his or her benefit under each Program, which records the credit on the records of the Employer equal to the amounts set aside under the Program and the deemed earnings, if any, credited to such account. The Account Balance shall be a bookkeeping entry only and shall be used solely as a device for the measurement and determination of the amounts to be paid to a Participant, or his or her designated Beneficiary, pursuant to this Plan and its component Programs.

2.3    “Affiliated Company” means any entity that is treated as the same employer as the Company under Sections 414(b), (c), (m), or (o) of the Code, any entity required to be aggregated with the Company pursuant to regulations adopted under Code Section 409A, or any entity otherwise designated as an Affiliated Company by the Company.

2.4    “Beneficiary” means that person or persons who become entitled to receive a distribution of benefits under the component Programs in the event of the death of a Participant prior to the distribution of all benefits to which he or she is entitled.

2.5    “Board” means the Board of Directors of the Company.

2.6    “Change in Control” shall be deemed to have occurred if: (i) any individual, entity, or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934 (the “Exchange Act”)) other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company, is or becomes the beneficial owner (as such term is used in Rule 13d-3 under the Exchange Act) of securities of the Company representing 30 percent or more of the combined voting power of the Company; or (ii) the following individuals cease for any reason to constitute a majority of the number of directors then serving:  individuals who, as of the Effective Date, constitute the Company’s Board of Directors and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of directors of the Company) whose appointment or election by the Board or nomination for election by the Company’s stockholders was approved or recommended by a vote of at least two-thirds of the directors then still in office who either were directors on the Effective Date, or whose appointment, election or nomination for election was previously so approved or recommended; or (iii) there is consummated a merger or consolidation of the Company or any direct or indirect subsidiary of the Company with any corporation, other than a merger or consolidation that would result in the voting securities of the Company outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof) at least 60 percent of the combined voting power of the securities of the Company or such surviving entity or its parent outstanding immediately after such merger or consolidation, or a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no person is or becomes the beneficial owner, directly or indirectly, of securities of the Company representing 30 percent or more of the combined voting power of the Company’s then outstanding securities; or (iv) the Company’s stockholders approve a plan of complete liquidation or dissolution of the Company or there is consummated the sale or disposition by the Company of all or substantially all of the Company’s assets, other than a sale or disposition by the Company of all or substantially all of the Company’s assets to an entity, at least 60 percent of the combined voting power of the voting securities of which are owned by the stockholders of the Company in substantially the same proportions as their ownership of the Company immediately prior to such sale. In addition, if a Change in Control constitutes a payment event with respect to any payment under the Plan which provides for the deferral of compensation and is subject to Section 409A of the Code, the transaction or event described in clauses (i), (ii), (iii) and (iv) with respect to such payment must also constitute a “change in control event,” as defined in Treasury Regulation Section 1.409A-3(i)(5) before any such payment can be made.

2.7    “Code” means the Internal Revenue Code of 1986, as amended.

2.8    “Committee” means the Compensation Committee of the Board or such other person or entity to which any responsibilities may be delegated by such Committee.

2.9    “Common Stock” means the no par value common stock of the Company.

2.10    “Company” means QEP Resources, Inc., a corporation organized and existing under the laws of the State of Delaware, or its successor or successors.

2.11    “Compensation” means:

(a)    Deferred Compensation Program. For purposes of the Deferred Compensation Program, the total earnings paid by an Employer to an Employee and properly reportable on IRS Form W-2 for an applicable Plan Year (including payments under annual incentive compensation plans) and all amounts that are not included in such Employee’s gross income for federal income tax purposes solely on account of 

his or her election to have compensation reduced pursuant to the Plan, a qualified cash or deferred arrangement described in Section 401(k) of the Code, a cafeteria plan as defined in Section 125 of the Code, or a qualified transportation fringe benefit plan as defined in Section 132(f)(4) of the Code, but excluding the following forms of compensation, unless otherwise determined by the Committee: the Employer’s cost for any public or private employee benefit plan, any income recognized by the Employee as a result of exercising stock options, moving expenses, loan forgiveness, welfare benefits, and severance payments.

(b)    401(k) Supplemental Program. For purposes of the 401(k) Supplemental Program, the same meaning as Benefit Compensation as defined in the Investment Plan, but (i) without regard to the Compensation Limit and (ii) including all amounts that are not included in such Employee’s gross income for federal income tax purposes solely on account of his or her election to make Deferral Contributions to the 401(k) Supplemental Program.

2.12    “Compensation Limit” means the annual limit of compensation that may be taken into account for purposes of providing benefits under a tax-qualified retirement plan pursuant to Section 401(a)(17) of the Code, as adjusted from time to time.

2.13    “Deferral Contributions” means that portion of a Participant’s Compensation that is deferred by a Participant pursuant to the Programs.

2.14    “Deferred Compensation Program” means the component benefit program of this Plan attached hereto as Exhibit A. 

2.15    “Deferred Compensation Sub-Account” means the sub-account described in Section 5.1 of the Deferred Compensation Program.

2.16    “Disability” means a condition that renders a Participant unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, as described in Treas. Reg. Section 1.409A-3(i)(4)(i)(A). A Participant shall not be considered to be disabled unless the Participant furnishes proof of the existence of such disability in such form and manner as may be required by regulations promulgated under, or applicable to, Code Section 409A.

2.17    “Eligible Employee” means any Employee who meets the eligibility requirements set forth in the applicable Program.

2.18    “Employee” means any individual who is among a select group of management or highly compensated employees (as determined in accordance with Section 3401(c) of the Code and the Treasury Regulations thereunder) of an Employer.

2.19    “Employer” means the Company and each Affiliated Company that consents to the adoption of the Plan.

2.20    “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended.

2.21    “Fair Market Value” means the closing benchmark price of the Company’s Common Stock as reported on the composite tape of the New York Stock Exchange for any given valuation date, or if the Common Stock shall not have been traded on such date, the closing price on the next preceding day on which a sale occurred.

2.22    “Investment Plan” means the QEP Resources, Inc. Employee Investment Plan, as amended from time to time, or any successor plan.

2.23    “Matching Contributions” means Employer contribution amounts credited to Participants under the Deferred Compensation Program and 401(k) Supplemental Program in addition to (and made on account of) the Participants’ Deferral Contributions under such Programs.

2.24    “Matching Contribution Sub-Account” means the sub-account described in Section 5.1 of the Deferred Compensation Program.

2.25    “Participant” means any individual who has commenced participation in the Plan and any of its component Programs in accordance with Article 3.

2.26    “Plan” or “Wrap Plan” means this QEP Resources, Inc. Deferred Compensation Wrap Plan, as amended or restated from time to time.

2.27    “Plan Year” means the calendar year.

2.28    “Program” means the Deferred Compensation Program and the 401(k) Supplemental Program, or either of them, as the context may require.

2.29    “Separation from Service” means a Participant’s termination or deemed termination from employment with the Employer. For purposes of determining whether a Separation from Service has occurred, the employment relationship is treated as continuing intact while the Participant is on military leave, sick leave or other bona fide leave of absence if the period of such leave does not exceed six months, or if longer, so long as the Participant retains a right to reemployment with his Employer under an applicable statute or by contract. For this purpose, a leave of absence constitutes a bona fide leave of absence only if there is a reasonable expectation that the Participant will return to perform services for the Employer. If the period of leave exceeds six months and the Participant does not retain a right to reemployment under an applicable statute or by contract, the employment relationship will be deemed to terminate on the first date immediately following such six-month period. For purposes of this Plan, a Separation from Service occurs at the date as of which the facts and circumstances indicate either that, after such date: (i) the Participant and Employer reasonably anticipate the Participant will perform no further services for the Company or an Affiliate (whether as an employee or an independent contractor), or (ii) that the level of bona fide services the Participant will perform for the Company or any Affiliate (whether as an employee or independent contractor) will permanently decrease to no more than 20 percent of the average level of bona fide services performed over the immediately preceding 36-month period or, if the Participant has been providing services to the Company or an Affiliate for less than 36 months, the full period over which the Participant has rendered services, whether as an employee or independent contractor. The determination of whether a Separation from Service has occurred shall be governed by the provisions of Treasury Regulation section 1.409A-1, as amended, taking into account the objective facts and circumstances with respect to the level of bona fide services performed by the Participant after a certain date.

2.30    “Unforeseeable Emergency” means a severe financial hardship to a Participant resulting from (a) an illness or accident of the Participant, the Participant’s spouse, Beneficiary or dependent (within the meaning of section 152 of the Code, without regard to section 152(b)(1), (b)(2) and (d)(1)(B)); (b) the loss of the Participant’s property due to casualty; or (c) other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant.

ARTICLE 3

ELIGIBILITY; PARTICIPATION

3.1    Eligibility. Eligibility to participate in the Plan shall be determined for each program as provided in Article 2 thereof.

3.2    Enrollment and Commencement of Deferrals. Except as provided below with regard to automatic enrollment in the 401(k) Supplemental Program, each Eligible Employee who wishes to participate in the Plan for a Plan Year must make an irrevocable election to make Deferral Contributions for the Plan Year by timely completing, executing, and returning to the Committee such election forms or other enrollment materials, including electronic enrollment, as the Committee requires on or prior to December 31st of the prior Plan Year, or such other earlier date as the Committee establishes in its sole and absolute discretion.

If an Eligible Employee fails to timely complete, execute and return such election forms or other enrollment materials, the Eligible Employee shall be automatically enrolled in the 401(k) Supplemental Program as provided in Section 4.1(a), but shall not participate in the Deferred Compensation Program until the first day of the first Plan Year beginning after the date on which he or she timely completes, executes and returns such election forms or other enrollment materials to the Committee.

3.3    Failure of Eligibility. If the Committee determines, in its sole and absolute discretion, that any Participant should no longer qualify to participate, the Participant shall cease to be an active Participant in the Plan and future contributions to the Plan made by or on behalf of the Participant shall cease as of the date of such determination by the Committee. The Committee’s determination hereunder shall be final and binding on all persons. 

ARTICLE 4
ELECTIONS

4.1    Deferral Elections.    Any deferral election under the Plan and its component Programs shall be made in accordance with Section 409A(a)(4)(B) of the Code and the regulations thereunder.

(a)    First Year of Plan Participation. In connection with a Participant’s enrollment in the Plan pursuant to Section 3.2, the Participant shall make an irrevocable election to defer Compensation in accordance with the terms of the component Programs for which he or she is eligible, which election shall apply to the Plan Year in which the Participant commences participation. A Participant may elect to defer Compensation only with respect to services performed for periods following the date of such election. The Participant’s initial deferral election under this Section 4.1(a) shall continue to apply for all succeeding Plan Years unless and until revoked or modified pursuant to Section 4.1(b), below. If the Participant fails to timely complete, execute and return such forms or other enrollment materials as required by the Committee in accordance with Section 3.2, then the Participant shall be deemed to have elected to make the Deferral Contributions permitted under the 401(k) Supplemental Program for the Plan Year in which the Participant commences participation and shall not be permitted to make any Deferral Contributions under the Deferred Compensation Program for such Plan Year.
(b)    Subsequent Plan Years. For each succeeding Plan Year, the Participant may, prior to December 31st of the immediately preceding Plan Year (or such earlier deadline as is established by the Committee in its sole discretion) make an irrevocable election to initially defer Compensation under the Deferred Compensation Program for succeeding Plan Years, or to modify or revoke his or her existing elections to defer Compensation under either or both of the Programs for succeeding Plan Years. All such elections shall be made in accordance with the terms of the Programs and shall remain in effect for all succeeding Plan Years unless timely revoked or modified by the Participant in accordance with this Section.  

Any such modification shall apply prospectively only and shall not apply to Compensation previously deferred under either or both of the Programs.
(c)    Performance-Based Compensation. The Committee may, in its sole discretion, determine that an irrevocable deferral election pertaining to Compensation that constitutes “performance-based compensation” (as defined in Treas. Reg. Section 1.409A-1(e)) may be made no later than six (6) months before the end of the performance service period, provided that the Participant performs services continuously from the later of the beginning of the performance period or the date upon which the performance criteria are established through the date upon which the Participant makes a deferral election for such compensation; provided, further that in no event shall an election to defer performance-based compensation be permitted after such compensation has become readily ascertainable. Any deferral election under this Section 4.1(c) shall be made in accordance with Treas. Reg. Section 1.409A-2(a)(8).
        
(d)    Compensation Subject to Risk of Forfeiture. With respect to Compensation (i) to which a Participant has a legally binding right to payment in a subsequent year, and (ii) that is subject to a forfeiture condition requiring the Participant’s continued services for a period of at least twelve (12) months from the date the Participant obtains the legally binding right to such payment, the Committee may, in its sole discretion, determine that an irrevocable election to defer such Compensation may be made no later than the 30th day after the Participant obtains the legally binding right to the Compensation, provided that the election is made at least twelve (12) months in advance of the earliest date at which the forfeiture condition could lapse. Any deferral election under this Section 4.1(d) shall be made in accordance with Treas. Reg. Section 1.409A-2(a)(5).

Any election(s) made in accordance with this Section shall be irrevocable; provided, however, that if the Committee permits Participants to make a deferral election for “performance-based compensation” or “compensation subject to a substantial risk of forfeiture” by the deadline(s) described above, it may, in its sole discretion, and in accordance with Code Section 409A and related Treasury guidance or regulations, permit a Participant to subsequently change his or her elections for such Compensation no later than the deadlines established by the Committee pursuant to Section 4.1(c) or 4.1(d), above.

4.2    Elections as to Time and Form of Payment.    In connection with a Participant’s enrollment in the Plan pursuant to Section 3.2, the Participant shall also make the following elections with respect to each Program under the Plan:
(a)    Deferred Compensation Program. If eligible to participate in the Deferred Compensation Program for the Plan Year in which the Participant commences participation under the Plan, the Participant shall make an irrevocable election (from the options available under Article 6 below) as to the time and form of payment of all deferrals (in the form of Deferral and/or Matching Contributions) credited to his or her Account under the Deferred Compensation Program for such Plan Year (including earnings thereon). If the Participant fails to make such election, or such election does not meet the requirements of Code Section 409A and related Treasury guidance or regulations, the Participant shall be deemed to have elected to receive a lump sum distribution as soon as legally and administratively practicable following the earliest to occur of the Participant’s (i) Separation from Service, (ii) Disability, or (iii) death. Except in the case of an election to receive an in-service distribution pursuant to Section 6.1(b)(iii), the Participant’s election (or deemed election) shall continue to apply for succeeding Plan Years unless and until the election is modified pursuant to Section 4.2(c), below. 
(b)    401(k) Supplemental Program. The Participant shall make an irrevocable election as to the time and form of payment of all deferrals (in the form of Deferral and/or Matching Contributions) credited to his or her Account Balance under the 401(k) Supplemental Program from the options available under Section 6 below. If the Participant fails to make such election, or if such election does not meet the 

requirements of Code Section 409A and related Treasury guidance or regulations, the Participant shall be deemed to have elected to receive a lump-sum distribution as soon as legally and administratively practicable following the earliest to occur of the Participant’s (i) Separation From Service, (ii) Disability, or (iii) death.

(c)    A Participant may make an irrevocable election to modify his or her existing elections as to the time and form of payment of any future Deferral or Matching Contributions credited to his or her Account Balance (and related earnings) under either or both of the Programs for succeeding Plan Years. Such election shall be made in accordance with the terms of the Deferred Compensation Program and 401(k) Supplemental Program and Article 6 below, and except in the case of an election to receive an in-service distribution pursuant to Section 6.1(b)(iii), which election must be made separately for each Plan Year, the election shall remain in effect for all succeeding Plan Years unless and until timely modified by the Participant in accordance with this Section. Any such modification shall apply prospectively only and shall not apply to Deferral or Matching Contributions previously credited under the Program (or any earnings thereon).
        
4.3    Election Forms. All elections shall be made on forms, including electronic forms, provided by the Committee and must be filed with the Company’s Vice President of Human Resources in order to be valid.
ARTICLE 5
ACCOUNT STATEMENTS

At least once a year within 60 days after the end of each Plan Year, a statement shall be sent to each Participant showing his or her Account Balance for each Program as of the last day of the Plan Year. The statement shall also include the Deferral Contributions made by the Participant to each Program for the Plan Year, along with any Matching Contributions credited to the Participant’s Account Balances and the investment gains or losses (including reinvested dividends) credited during the Plan Year. 

ARTICLE 6
DISTRIBUTIONS

6.1    Permissible Times and Forms of Payments. A Participant may elect to receive his or her Account under the Deferred Compensation Program or his or her Account under the 401(k) Supplemental Program pursuant to an election form filed in accordance with Article 4 at the following times and in the following forms:

(a)    Time of Distribution. A Participant may elect to receive a distribution as of the date of, or at a designated anniversary date following, the first to occur of the Participant’s Disability, Separation from Service, death or in the case of a distribution from the Participant’s Deferred Compensation Sub-Account, at a designated time or times specified by the Participant in his or her election forms, which shall not be earlier than 24 months from the date of deferral of the amount to be distributed. 

(b)    Form of Distribution. A Participant may elect to receive a distribution of his or her Account in any of the following forms:

		
	(i)
	a single lump sum; 

		
	(ii)
	up to ten (10) annual installments; or

(iii)    in the case of an in-service distribution from a Participant’s Deferred Compensation Sub-Account a single lump sum of the entire Account Balance attributable to the Participant’s Deferral Contributions made in one or more Plan Years, as designated by the Participant. 

(c)    Subsequent Deferrals. Notwithstanding an actual or deemed election as to the timing of the distribution of a Participant’s Account, at such times and in such manner as the Committee may determine, a Participant may make an irrevocable election to delay the payment, or the commencement of payment, of his or her Account, but only if such election (i) is made not less than 12 months before the date the payment or commencement of installment payments is scheduled to be paid or to begin; (ii) shall not take effect until at least 12 months after the date the election is made; and (iii) relating to a payment not being made on account of death, Disability or an Unforeseeable Emergency, delays the payment or commencement of payments for a period of at least five years from the date the payment or series of payments was scheduled to be paid or begin.

(d)    Unforeseeable Emergency Distributions. A participant may request that a distribution of amounts credited to his Account may be made due to an Unforeseeable Emergency.

(i)In no event shall a distribution due to an Unforeseeable Emergency exceed the balance of the Participant’s Account, determined as of the end of the month immediately preceding the date of the distribution, less any amounts distributed from or charged to the Participant Account since such date. The Committee may promulgate uniform rules regarding the effective date of any distribution, minimum amounts to be distributed and the frequency of distributions. 
(ii)A distribution may be made pursuant to this Section 6.1(d) due to an Unforeseeable Emergency only if the Participant satisfies the Committee that the Participant has an Unforeseeable Emergency and that the distribution is reasonably necessary in order to satisfy the Unforeseeable Emergency.
(iii)A distribution because of an Unforeseeable Emergency may be made for one of the reasons listed in subparagraphs (A) through (C) of this paragraph (iii):
(A)Medical expenses, including non-refundable deductibles and the cost of prescription drugs; or
(B)The need to pay for funeral expenses of a spouse, Beneficiary or a dependent as defined; or 
(C)The need to prevent the imminent eviction of the Participant from his principal residence or foreclosure on the mortgage on the Participant’s principal residence.
(iv)A distribution will be considered to be reasonably necessary to satisfy an emergency need of a Participant only if the need may not be satisfied from other resources that are reasonably available to the Participant and the distribution does not exceed the amount needed to satisfy the need. The Committee shall consider all relevant facts and circumstances in determining whether a distribution is necessary in order to satisfy an emergency need. Generally, a distribution shall be deemed necessary if the Participant demonstrates to the Committee that the need cannot be relieved through reimbursement or compensation from insurance or otherwise, by the liquidation of the Participant’s assets (to the extent that such liquidation would not itself cause severe financial hardship) or by cessation of Deferral Contributions under the Plan. A distribution will be deemed to be reasonably necessary to satisfy the emergency need of a Participant only if the distribution is not in excess of the amount reasonable necessary to satisfy the emergency need of the Participant (which may include amounts necessary to pay any federal, state, local or foreign income taxes or penalties reasonably anticipated to result from the distribution).
6.2    Change in Control. Notwithstanding any election made by the Participant under Section 6.1, in the event of a Change in Control, all amounts then credited to the Participant’s Account shall be distributed to the Participant in a single lump sum within 60 days following the date of such Change in Control.

6.3    Calculation of Distributions.

(a)    Lump Sum. All lump sum distributions shall be based on the value of the Participant’s Account as of a valuation date as soon as administratively feasible preceding the date distribution is made, in accordance with rules established by the administrator. 

(b)    Installment Distributions. Under an installment payout, the amount to be distributed in each installment payment shall be determined by dividing the value of the Participant’s Accounts being paid in installments as of a valuation date preceding the date of each distribution by the number of installment payments remaining to be made, in accordance with rules established by the administrator. In the event of the death of the Participant prior to the full payment of his Accounts being paid in installments, payments will continue to be made to his Beneficiary in the same manner as would have been payable to the Participant.  

6.4    Six-Month Delay. Notwithstanding anything to the contrary in the Plan, no distribution shall be made to a Participant under the Plan on account of the Participant’s Separation from Service during the 6-month period following such Separation from Service to the extent that the Company determines that the Participant is a “specified employee” (as defined in Section 409A(a)(2)(B)(i) of the Code and the Treasury Regulations thereunder) at the time of such Separation from Service and that paying such amounts at the time or times indicated in the Plan would be a prohibited distribution under Section 409A(a)(2)(B)(i) of the Code. If the payment of any such amounts is delayed as a result of the previous sentence, then on the first business day following the end of such 6-month period (or such earlier date upon which such amount can be paid under Section 409A of the Code without being subject to such additional taxes, including as a result of the Participant’s death), a lump-sum distribution shall be made to the Participant under the Plan equal to the cumulative amount that would have otherwise been payable to the Participant during such 6-month period.

6.5    Method of Payment. All payments under the Plan shall be made in cash. 

ARTICLE 7
ADMINISTRATION

7.1    Committee to Administer and Interpret Plan and Component Programs. The Committee or its designee shall administer the Plan and its component Programs and shall have all discretion and power necessary for that purpose. The Committee shall have the discretion, authority, and power to (i) make, amend, interpret, and enforce all appropriate rules and regulations for the administration of the Plan and its component Programs and (ii) decide or resolve any and all questions that may arise in connection with this Plan and its component Programs, including interpretations of the Plan and its component Programs and determinations of eligibility to participate and to receive distributions under the Plan and its component Programs. Any individual serving on the Committee, or anyone delegated responsibilities by the Committee, shall not vote or act on any matter relating solely to himself. When making a determination or calculation, the Committee shall be entitled to rely on information supplied by a Participant, Beneficiary, or the Employer, as the case may be. The Committee shall maintain all records of the Plan and its component Programs.
7.2    Agents. In the administration of this Plan and its component Programs, the Committee may, from time to time, employ agents (including officers and other employees of the Company) and delegate to them such administrative duties as it sees fit (including acting through a duly appointed representative) and may from time to time consult with counsel who may be counsel to the Company.
7.3    Binding Effect of Decisions. The decision or action of the Committee with respect to any question arising out of or in connection with the administration, interpretation and application of the Plan and its component Programs and the rules and regulations promulgated hereunder shall be final and conclusive and binding upon all persons having any interest in the Plan and its component Programs.

7.4    Indemnity of Committee. The Company shall indemnify and hold harmless the members of the Committee and any employee to whom duties of the Committee may be delegated against any and all claims, losses, damages, expenses or liabilities arising from any action or failure to act with respect to this Plan and its component Programs, except in the case of willful misconduct by the Committee, any of its members, or any such employee.
7.5    Agent for Legal Process. The Committee shall be agent of the Plan and its component Programs for service of all legal process.

ARTICLE 8
CLAIMS PROCEDURE

8.1    Filing a Claim. All claims under this Plan and its component Programs shall be filed in writing or electronically by the Participant, his or her Beneficiary, or the authorized representative of either, by completing the procedures that the Committee requires. The procedures shall be reasonable and may include the completion of forms and the submission of documents and additional information. All claims shall be filed in writing or electronically with the Committee according to the Committee’s procedures no later than one year after the occurrence of the event that gives rise to the claim. If the claim is not filed within the time described in the preceding sentence, the claim shall be barred.
8.2    Review of Initial Claim.
(a)    Initial Period for Review of the Claim. The Committee shall review all materials and shall decide whether to approve or deny the claim. If a claim is denied in whole or in part, written notice of denial shall be furnished by the Committee to the claimant within a reasonable time after the claim is filed but not later than ninety (90) days after the Committee receives the claim. The notice shall set forth the specific reason(s) for the denial, reference to the specific Plan or Program provisions on which the denial is based, a description of any additional material or information necessary for the claimant to perfect his or her claim and an explanation of why such material or information is necessary, and a description of the Plan’s review procedures, including the applicable time limits and a statement of the claimant’s right to bring a civil action under ERISA section 502(a) following a denial of the appeal.
(b)    Extension. If the Committee determines that special circumstances require an extension of time for processing the claim, it shall give written notice to the claimant and the extension shall not exceed ninety (90) days. The notice shall be given before the expiration of the ninety (90) day period described in Section 8.2(a) above and shall indicate the special circumstances requiring the extension and the date by which the Committee expects to render its decision.
8.3    Appeal of Denial of Initial Claim. The claimant may request a review upon written application, may review pertinent documents, and may submit issues or comments in writing. The claimant must request a review within a reasonable period of time prescribed by the Committee. In no event shall such a period of time be less than sixty (60) days.
8.4    Review of Appeal.
(a)    Initial Period for Review of the Appeal. The Committee shall conduct all reviews of denied claims and shall render its decision within a reasonable time, but not to exceed sixty (60) days from the receipt of the appeal by the Committee. The claimant shall be notified of the Committee’s decision in a notice, which shall set forth the specific reason(s) for the denial, reference to the specific Plan or Program provisions on which the denial is based, a statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to and copies of all documents, records, and other information relevant to the claimant’s claim, and a statement of the claimant’s right to bring a civil action under ERISA section 502(a) following a denial of the appeal.

(b)    Extension. If the Committee determines that special circumstances require an extension of time for reviewing the appeal, it shall give written notice to the claimant and the extension shall not exceed sixty (60) days. The notice shall be given before the expiration of the sixty (60) day period described in Section 8.4(a) above and shall indicate the special circumstances requiring the extension and the date by which the Committee expects to render its decision.
8.5    Form of Notice to Claimant. The notice to the claimant shall be given in writing or electronically and shall be written in a manner calculated to be understood by the claimant. If the notice is given electronically, it shall comply with the requirements of Department of Labor Regulation Section 2520.104b-1(c)(1)(i), (iii), and (iv).
8.6    Discretionary Authority of Committee. The Committee shall have full discretionary authority to determine eligibility, status, and the rights of all individuals under the Plan and its component Programs, to construe any and all terms of the Plan and its component Programs, and to find and construe all facts. 
ARTICLE 9
AMENDMENT AND TERMINATION OF PLAN

The Board may at any time amend, modify, or terminate this Plan and its component Programs; provided, however, that no such amendment may reduce any Participant’s Account Balances under the Plan or any component Program as it existed prior to the date of such amendment or termination. 

ARTICLE 10
MISCELLANEOUS

10.1    Source of Payments. Each participating Employer will pay all benefits for its Employees arising under this Plan and its component Programs, and all costs, charges and expenses relating to such benefits, out of its general assets.

10.2    No Assignment or Alienation.

(a)    General. Except as provided in subsection (b) below, the benefits provided for in this Plan and its component Programs shall not be anticipated, assigned (either at law or in equity), alienated, or be subject to attachment, garnishment, levy, execution or other legal or equitable process. Any attempt by any Participant or any Beneficiary to anticipate, assign or alienate any portion of the benefits provided for in this Plan or its component Programs shall be null and void.

(b)    Exception: DRO. The restrictions of subsection (a) shall not apply to a distribution to an “alternate payee” (as defined in Code Section 414(p)) pursuant to a “domestic relations order” (“DRO”) within the meaning of Code Section 414(p)(1)(B). The Committee shall have the discretion, power, and authority to determine whether an order is a DRO. Upon a determination that an order is a DRO, the Committee shall direct the Employer to distribute to the alternate payee or payees named in the DRO, as directed by the DRO.
10.3    Beneficiaries. A Participant shall have the right, in accordance with forms and procedures established by the Committee, to designate one or more beneficiaries to receive some or all amounts payable under each of the component Programs after the Participant’s death. The Participant need not designate the same Beneficiary for each Program under the Plan. In the absence of an effective beneficiary designation, all payments shall be made to the beneficiary designated by the Participant (or deemed by law to be designated) under the terms of the Investment Plan.

10.4    No Creation of Rights. Nothing in this Plan or its component Programs shall confer upon any Participant the right to continue as an Employee of an Employer. The right of a Participant to receive a cash distribution shall be an unsecured claim against the general assets of his or her Employer. Nothing contained in this Plan or its component Programs nor any action taken hereunder shall create, or be construed to create, a trust of any kind, or a fiduciary relationship between the Company and the Participants, Beneficiaries, or any other persons. All Accounts under the Plan and its component Programs shall be maintained for bookkeeping purposes only and shall not represent a claim against specific assets of any Employer. 

10.5    Furnishing Information. A Participant or his or her Beneficiary shall cooperate with the Committee by furnishing any and all information requested by the Committee and take such other actions as may be requested in order to facilitate the administration of the Plan and its component Programs and the payment of benefits thereunder.

10.6    Payments to Incompetents. If the Committee determines in its discretion that a benefit under this Plan or any of its component Programs is to be paid to a minor, a person declared incompetent or to a person incapable of handling the disposition of his or her property, the Committee may direct payment of such benefit to the guardian, legal representative or person having the care and custody of such minor, incompetent or incapable person. The Committee may require proof of minority, incompetence, incapacity or guardianship, as it may deem appropriate prior to distribution of the benefit. Any payment of a benefit shall be a payment for the account of the Participant and the Participant’s Beneficiary, as the case may be, and shall be a complete discharge of any liability under the Plan and its component Programs for such payment amount.

10.7    Court Order. The Committee is authorized to make any payments directed by court order in any action in which the Plan or the Committee has been named as a party. 

10.8    Code Section 409A Savings Clause. The payments and benefits provided under the Plan and its component Programs are intended to be compliant with the requirements of Section 409A of the Code.  Notwithstanding any provision of this Plan to the contrary, including, without limitation, Article 9 hereof, in the event that the Company reasonably determines that any payments or benefits hereunder are not either exempt from or compliant with the requirements of Section 409A of the Code, the Company shall have the right adopt such amendments to this Plan and its component Programs or adopt such other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, that are necessary or appropriate (i) to preserve the intended tax treatment of the payments and benefits provided hereunder, to preserve the economic benefits with respect to such payments and benefits, and/or (ii) to exempt such payments and benefits from Section 409A of the Code or to comply with the requirements of Section 409A of the Code and thereby avoid the application of penalty taxes thereunder; provided, however, that this Section 10.8 does not, and shall not be construed so as to, create any obligation on the part of the Company to adopt any such amendments, policies or procedures or to take any other such actions or to indemnify any Participant for any failure to do so.

10.9    Attorney Fees; Interest. The Company agrees to pay as incurred, to the full extent permitted by law all legal fees and expenses which a Participant may reasonably incur as a result of any contest (regardless of the outcome thereof) by the Company, the Participant, or others following a Change in Control regarding the validity or enforceability of, or liability under, any provision of this Plan or any guarantee of performance thereof (including as a result of any contest by the Participant about the amount of any payment pursuant to this Plan), plus in each case interest on any delayed payment at the applicable Federal rate provided for in Section 7872(f)(2)(A) of the Code. The foregoing right to legal fees and expenses shall not apply to any contest brought by a Participant (or other party seeking payment under the Plan) that is found by a court of competent jurisdiction to be frivolous or vexatious. To the extent that any payments or reimbursements 

provided to the Participant under this Section are deemed to constitute compensation to the Participant, such amounts shall be paid or reimbursed reasonably promptly, but not later than December 31 of the year following the year in which the expense was incurred. The amount of any payments or expense reimbursements that constitute compensation in one year shall not affect the amount of payments or expense reimbursements constituting compensation that are eligible for payment or reimbursement in any subsequent year, and the Participant’s right to such payments or reimbursement of any such expenses shall not be subject to liquidation or exchange for any other benefit.

10.10    Distribution in the Event of Taxation. If, for any reason, all or any portion of a Participant’s benefits under this Plan or any of its component Programs becomes subject to federal income tax with respect to the Participant prior to receipt, a Participant may petition the Committee for a distribution of that portion of his or her benefit that has become taxable, or such lesser amount as may be permitted by Code Section 409A. Upon the grant of such a petition, which grant shall not be unreasonably withheld, the Employer shall distribute to the Participant immediately available funds in an amount equal to the taxable portion of his or her benefit or such lesser amount as may be permitted by Code Section 409A (which amount shall not exceed a Participant’s unpaid Account Balances). If the petition is granted, the tax liability distribution shall be made within 90 days of the date when the Participant’s petition is granted. Such a distribution shall affect and reduce the benefits to be paid under this Plan and its component Programs. Any distribution under this Section 10.10 must meet the requirements of Code Section 409A and related Treasury guidance or Regulations.

10.11    Governing Law. To the extent not preempted by federal law, this Plan and its component Programs shall be governed by the laws of the State of Colorado without regard to conflicts of law principles.

I hereby certify that this revised QEP Resources, Inc. Deferred Compensation Wrap Plan was duly adopted by the Board of Directors of QEP Resources, Inc. on _____________, 201_.    

Executed on this 23 day of February, 2015.

By:          /s/ Richard J. Doleshek
Richard J. Doleshek
Executive Vice President and Chief Financial Officer

Exhibit A

DEFERRED COMPENSATION PROGRAM

a component Program of the
QEP Resources, Inc. Deferred Compensation Wrap Plan

QEP RESOURCES, INC.
DEFERRED COMPENSATION PROGRAM

ARTICLE 1
INTRODUCTION

1.1    Establishment of Program. The Company hereby establishes this revised Deferred Compensation Program under the Wrap Plan, as of January 1, 2012. Unless otherwise defined herein, all capitalized terms herein shall the meanings set forth in the QEP Resources, Inc. Deferred Compensation Wrap Plan.

1.2    Purpose. The purposes of the Deferred Compensation Program are (i) to provide Participants with the opportunity to defer receipt of specified portions of their annual Compensation including Bonuses in order to reduce current taxable income and to provide for future financial needs, and (ii) to provide a benefit to each Participant approximately equal to the benefit the Participant would have received under the Investment Plan if the Participant did not elect to defer Compensation under the Deferred Compensation Program but instead contributed an applicable portion of such amount to the Investment Plan.

ARTICLE 2
PARTICIPATION; ELECTIONS

2.1    Participation. An Employee shall be an Eligible Employee for purposes of this Program if he or she is in a salary classification designated by the Committee as eligible to participate in the Program for a Plan Year or is otherwise designated as an Eligible Employee by the Committee.

2.2    Elections. Each Participant shall make elections with regard to the deferral of Compensation and the time and form of payments under the Deferred Compensation Program in accordance with Articles 4 and 6 of the Wrap Plan.

ARTICLE 3
DEFERRAL CONTRIBUTIONS

Each Plan Year, a Participant, electing to defer Compensation under the Deferred Compensation Program for such Plan Year may defer up to a maximum of 50% of his or her Compensation for such Plan Year, or such larger percentage of Compensation or a component thereof as may be designated by the Committee for a Plan Year. For the avoidance of doubt, to the extent permitted by the Committee for a Plan Year, a Participant may make separate deferral elections with respect to separate components of Compensation, in each case within the time periods required under the Wrap Plan and Section 409A of the Code and the Treasury Regulations thereunder.

ARTICLE 4
MATCHING CONTRIBUTIONS

4.1    Determination of Matching Contributions. A Participant who makes Deferral Contributions to the Deferred Compensation Program for a Plan Year may receive a Matching Contribution. The Committee will determine annually the amount, if any, of the Matching Contribution, which, for the avoidance of doubt, may be determined separately for separate components of Deferral Contributions in the discretion of the Committee.

4.2    Vesting. Except with respect to any Deferral Contributions that relate to unvested Compensation, a Participant shall be fully vested at all times in the portion of his or her Account attributable to Deferral Contributions. Any Deferral Contributions that relate to unvested Compensation shall be subject to the same vesting terms, conditions and provisions as applied to the underlying Compensation (or component thereof) to which the Deferral Contributions relate. A Participant shall be vested in the portion of his or her Account attributable to Matching Contributions to the same extent as such Participant is vested in any matching contributions under the Investment Plan, unless otherwise determined by the Committee at the time of making any applicable Matching Contribution.

ARTICLE 5
ACCOUNTS; DEEMED INVESTMENTS

5.1    Accounts. The Committee shall establish an Account for each Participant with at least two sub-accounts as follows:

(a)    a Deferred Compensation Sub-Account which shall reflect all Deferral Contributions made by the Participant for each Plan Year, together with any adjustments for income, gain or loss and any payments from such sub-account as provided herein;

(b)    a Matching Contribution Sub-Account which shall reflect all Company Matching Contributions made under the Deferred Compensation Program for each Plan Year, together with any adjustments for income, gain or loss and any payments from such sub-account as provided herein.

The Committee shall establish such other sub-accounts as it deems necessary or desirable for the proper administration of the Deferred Compensation Program. Amounts deferred by a Participant under the Deferred Compensation Program shall be credited to the Participant’s Account as soon as administratively practicable after the amounts would have otherwise been paid to the Participant.
5.2    Status of Accounts. Accounts and sub-accounts established hereunder shall be record-keeping devices utilized for the sole purpose of determining benefits payable under the Deferred Compensation Program, and will not constitute a separate fund of assets but shall continue for all purposes to be part of the general, unrestricted assets of the Employer, subject to the claims of its general creditors.

5.3    Deemed Investment of Amounts Deferred. 

(a)    Deferred Compensation Program. In connection with his or her enrollment in the Deferred Compensation Program, a Participant may elect to have earnings, gains, or losses with respect to his or her Matching Contribution Sub-Account and Deferred Compensation Sub-Account calculated based on the deemed investment alternatives below, in increments of 1%. In the event the Participant fails to make an election regarding the deemed investment of his or her Matching Contribution Sub-Account and Deferred Compensation Sub-Account, the Participant shall be deemed to have elected to invest 100% of his or her Matching Contribution Sub-Account and Deferred Compensation Sub-Account in the Money Market Fund within Investment Option (as described below). The Participant’s investment election shall continue in effect unless and until modified by the Participant. Any such modification shall apply prospectively and may apply to amounts previously deferred under the Deferred Compensation Program (and related earnings). 

(b)    Common Stock Option. Any portion of the Matching Contribution Sub-Account and Deferred Compensation Sub-Account deemed invested under this option (the “Common Stock Option”) shall be accounted for as if invested in shares of Common Stock purchased at Fair Market Value on the date on which a Deferral Contribution is credited to the Participant’s Account. The Participant’s Matching 

Contribution Sub-Account and Deferred Compensation Sub-Account shall be credited on a quarterly basis with an amount equal to the dividends that would have become payable during the deferral period if actual purchases of Common Stock had been made, with such dividends accounted for as if invested in Common Stock as of the payable date for such dividends. Any credited shares treated as if they were purchased with dividends shall be deemed to have been purchased at Fair Market Value on the dividend payment date. The Committee may prescribe such limitations as it deems advisable in its sole discretion on a Participant’s deemed investment in the Common Stock Option.

(c)    Investment Options. Any portion of the Matching Contribution Sub-Account and Deferred Compensation Sub-Account deemed invested under this option (the “Investment Option”) shall be deemed invested in one or more of the investment options made available from time to time for Participants under the Plan. Each such deemed investment shall be credited or debited with earnings or losses as if the amount invested had been invested in the applicable investment fund made available by the Committee.

ARTICLE 6
DISTRIBUTIONS

All distributions of a Participant’s Account under the Deferred Compensation Program shall be made in accordance with the Participant’s election(s) (or deemed election(s)) under Articles 4 and 6 of the Wrap Plan.

B-4

Exhibit B

401(k) SUPPLEMENTAL PROGRAM

a component Program of the
QEP Resources, Inc. Deferred Compensation Wrap Plan

QEP RESOURCES, INC.
401(k) SUPPLEMENTAL PROGRAM

ARTICLE 1
INTRODUCTION

1.1    Establishment of Program. The Company hereby establishes this revised 401(k) Supplemental Program under the Wrap Plan, as of January 1, 2012. Unless otherwise defined herein, all capitalized terms herein shall the meanings set forth in the QEP Resources, Inc. Deferred Compensation Wrap Plan.

1.2    Purpose. The purpose of the 401(k) Supplemental Program is to provide a benefit to a Participant approximately equal to the benefit that the Participant would have received under the Investment Plan if the Compensation Limit were inapplicable.

ARTICLE 2
PARTICIPATION; ELECTIONS

2.1    Participation. An Employee shall be an Eligible Employee for purposes of this Program if he or she is in a salary classification designated by the Committee as eligible to participate in the Program for a Plan Year or is otherwise designated as an Eligible Employee by the Committee and will receive Compensation in excess of a threshold established by the Committee. An Employee shall begin participation in the 401(k) Supplemental Program on the date in any Plan Year that the Employee first receives Compensation in excess of the Compensation Limit or on a date in any Plan Year as otherwise determined by the Compensation Committee.

2.2    Elections. Each Participant shall make elections with regard to the deferral of Compensation and the time and form of payments under the 401(k) Supplemental Program in accordance with Articles 4 and 6 of the Wrap Plan.

ARTICLE 3
DEFERRAL CONTRIBUTIONS

Each Plan Year, a Participant electing to defer Compensation under the 401(k) Supplemental Program must defer a percentage of his or her compensation equal to the company matching contributions as determined for the Investment Plan commencing on the date the Participant is deemed eligible to begin participation in the Program. 

ARTICLE 4
MATCHING CONTRIBUTIONS

4.1    Amount of Matching Contributions. A Participant who makes Deferral Contributions to the 401(k) Supplemental Program for a Plan Year shall be entitled to a Matching Contribution for such Plan Year in an amount equal to the amount deferred by the Participant.

4.2    Vesting. A Participant shall be fully vested at all times in the portion of his or her Account attributable to Deferral Contributions and shall be vested in the portion of his or her Account attributable to Matching Contributions to the same extent as such Participant is vested in any matching contributions under the Investment Plan.

ARTICLE 5
ACCOUNTS; DEEMED INVESTMENTS

5.1    Accounts. The Committee shall establish an Account and sub-accounts for each Participant as are necessary for the proper administration of the 401(k) Supplemental Program. Such Accounts shall reflect Deferral Contributions and Matching Contributions made by or on behalf of the Participant, together with any adjustments for income, gain or loss and any payments from the Account as provided herein. Deferral Contributions and related Matching Contributions shall be credited to the Participant’s Account as soon as administratively practicable after the Deferral Contribution would have otherwise been paid to the Participant.  

5.2    Status of Accounts. Accounts and sub-accounts established hereunder shall be record-keeping devices utilized for the sole purpose of determining benefits payable under the 401(k) Supplemental Program, and will not constitute a separate fund of assets but shall continue for all purposes to be part of the general, unrestricted assets of the Employer, subject to the claims of its general creditors. 

5.3    Deemed Investment of Accounts in 401(k) Supplemental Program. 

(a)    401(k) Supplemental Program. In connection with his or her enrollment in the 401(k) Supplemental Program, a Participant may elect to have earnings, gains, or losses with respect to his or her Matching Contributions and Deferral Contributions Accounts calculated based on the deemed investment alternatives below, in increments of 1%. In the event the Participant fails to make an election regarding the deemed investment of his or her Matching Contributions and Deferral Contributions, the Participant shall be deemed to have elected to invest 100% of his or her Matching Contributions and Deferral Contributions in the Money Market Fund within Investment Option (as described below). The Participant’s investment election shall continue in effect unless and until modified by the Participant. Any such modification shall apply prospectively and may apply to amounts previously deferred under the 401(k) Supplemental Program (and related earnings). 

(b)    Common Stock Option. Any portion of the Matching Contributions Account and Deferral Contributions Account deemed invested under this option (the “Common Stock Option”) shall be accounted for as if invested in shares of Common Stock purchased at Fair Market Value on the date on which a Matching Contribution or a Deferral Contribution is credited to the Participant’s Account. The Participant’s Matching Contributions Account and Deferral Contributions Account shall be credited on a quarterly basis with an amount equal to the dividends that would have become payable during the deferral period if actual purchases of Common Stock had been made, with such dividends accounted for as if invested in Common Stock as of the payable date for such dividends. Any credited shares treated as if they were purchased with dividends shall be deemed to have been purchased at Fair Market Value on the dividend payment date. The Committee may prescribe such limitations as it deems advisable in its sole discretion on a Participant’s deemed investment in the Common Stock Option.

(c)    Investment Plan Options. Any portion of the Matching Contributions Account or Deferral Contributions Account deemed invested under this option (the “Investment Plan Option”) shall be deemed invested in one or more of the investment options made available from time to time for Participants under the Plan. Each such deemed investment shall be credited or debited with earnings or losses as if the amount invested had been invested in the underlying fund in the Investment Plan.
    
ARTICLE 6
DISTRIBUTIONS

All distributions of a Participant’s Account under the 401(k) Supplemental Program shall be made in accordance with the Participant’s election(s) (or deemed election(s)) under Articles 4 and 6 of the Wrap Plan.

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