Exhibit 10.42



 


Exhibit
10.42


 


PLEDGE
AND SECURITY AGREEMENT


 


PLEDGE
AND SECURITY AGREEMENT, dated as of March 21, 2014 (this “Agreement”), made by Digital Ally, Inc.,
a Nevada corporation (the “Company”), Digital Ally International, Inc. (“DAII”), a Nevada
corporation, and each other Subsidiary of the Company and DAII hereafter becoming party hereto (together with the Company and
DAII, each a “Grantor” and, collectively, the “Grantors”), in favor of Hudson Bay Master
Fund Ltd., in its capacity as collateral agent (in such capacity, the “Collateral Agent”) for the Buyers
(as defined below) party to the Securities Purchase Agreement, dated as of even date herewith (as amended, restated or otherwise
modified from time to time, the “Securities Purchase Agreement”).


 


















W I T N E S S E T H:










 


WHEREAS,
the Company and each party listed as a “Buyer” on the Schedule of Buyers (as such schedule may be amended, restated
or otherwise modified from time to time) attached thereto, each a “Buyer”, and collectively, the “Buyers”)
are parties to the Securities Purchase Agreement, pursuant to which the Company shall be required to sell, and the Buyers shall
purchase or have the right to purchase, the “Notes” (as defined in the Securities Purchase Agreement);


 


WHEREAS,
it is a condition precedent to the Buyers consummating the transactions contemplated by the Securities Purchase Agreement that
the Grantors execute and deliver to the Collateral Agent this Agreement providing for the grant to the Collateral Agent for the
benefit of the Buyers of a security interest in all personal property of the Grantors to secure all of the Company’s obligations
under the Securities Purchase Agreement and the “Notes” (as defined therein) issued pursuant thereto (as such Notes
may be amended, restated, replaced or otherwise modified from time to time in accordance with the terms thereof, collectively,
the “Notes”) and the other Transaction Documents (as defined in the Securities Purchase Agreement);


 


WHEREAS,
the Grantors (i) are mutually dependent on each other in the conduct of their respective businesses as an integrated operation,
with the credit needed from time to time by one often being provided through financing obtained by the other Grantors and the
ability to obtain such financing being dependent on the successful operations of the Grantors and (ii) will receive a mutual benefit
from the proceeds received by the Company in respect of the issuance of the Notes; and


 


WHEREAS,
each Grantor has determined that the execution, delivery and performance of this Agreement directly benefits, and are in the best
interest of the Company and such Grantor.


 


NOW,
THEREFORE, in consideration of the premises and the agreements herein and in order to induce the Buyers to perform under the Securities
Purchase Agreement, each Grantor agrees with the Collateral Agent, for the benefit of the Buyers, as follows:


 



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Section
1. Definitions.


 


(a)
Reference is hereby made to the Securities Purchase Agreement and the Notes for a statement of the terms thereof. All terms used
in this Agreement and the recitals hereto which are defined in the Securities Purchase Agreement, the Notes or in Articles 8 or
9 of the Uniform Commercial Code (the “Code”) as in effect from time to time in the State of New York, and
which are not otherwise defined herein shall have the same meanings herein as set forth therein; provided that terms used
herein which are defined in the Code as in effect in the State of New York on the date hereof shall continue to have the same
meaning notwithstanding any replacement or amendment of such statute except as the Collateral Agent may otherwise determine.


 


(b)
The following terms shall have the respective meanings provided for in the Code: “Accounts”, “Cash Proceeds”,
“Chattel Paper”, “Commercial Tort Claim”, “Commodity Account”, “Commodity Contracts”,
“Deposit Account”, “Documents”, “Equipment”, “Fixtures”, “General Intangibles”,
“Goods”, “Instruments”, “Inventory”, “Investment Property”, “Letter-of-Credit
Rights”, “Noncash Proceeds”, “Payment Intangibles”, “Proceeds”, “Promissory Notes”,
“Security”, “Record”, “Security Account”, “Software”, and “Supporting Obligations”.


 


(c)
As used in this Agreement, the following terms shall have the respective meanings indicated below, such meanings to be applicable
equally to both the singular and plural forms of such terms:


 


“Collateral”
shall have the meaning set forth in Section 2 hereof.


 


“Copyright
Licenses” means all licenses, contracts or other agreements, whether written or oral, naming any Grantor as licensee
or licensor and providing for the grant of any right to use or sell any works covered by any copyright (including, without limitation,
all Copyright Licenses set forth in Schedule II hereto).


 


“Copyrights”
means all domestic and foreign copyrights, whether registered or not, including, without limitation, all copyright rights throughout
the universe (whether now or hereafter arising) in any and all media (whether now or hereafter developed), in and to all original
works of authorship fixed in any tangible medium of expression, acquired or used by any Grantor (including, without limitation,
all copyrights described in Schedule II hereto), all applications, registrations and recordings thereof (including, without
limitation, applications, registrations and recordings in the United States Copyright Office or in any similar office or agency
of the United States or any other country or any political subdivision thereof), and all reissues, divisions, continuations, continuations
in part and extensions or renewals thereof.


 


“Event
of Default” means (i) any defined event of default under any one or more of the Transaction Documents, in each
instance, after giving effect to any notice, grace, or cure periods provided for in the applicable Transaction Document, (ii)
the failure by the Company to pay any amounts when due under the Notes or any other Transaction Document, or (iii) the breach
of any representation, warranty or covenant by any Grantor under this Agreement.


 






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“Existing
Issuer” has the meaning specified therefor in the definition of the term “Pledged Shares”.


 


“Guaranty”
means the Guaranty, dated as of the date hereof, by DAII in favor of the Buyers and the Collateral Agent.


 


“Insolvency
Proceeding” means any proceeding commenced by or against any Person under any provision of the Bankruptcy Code (Chapter
11 of Title 11 of the United States Code) or under any other bankruptcy or insolvency law, assignments for the benefit of creditors,
formal or informal moratoria, compositions, or extensions generally with creditors, or proceedings seeking reorganization, arrangement,
or other similar relief.


 


“Intellectual
Property” means the Copyrights, Trademarks and Patents.


 


“Licenses”
means the Copyright Licenses, the Trademark Licenses and the Patent Licenses.


 


“Lien”
means any mortgage, deed of trust, pledge, lien (statutory or otherwise), security interest, charge or other encumbrance or security
or preferential arrangement of any nature, including, without limitation, any conditional sale or title retention arrangement,
any capitalized lease and any assignment, deposit arrangement or financing lease intended as, or having the effect of, security.


 


“Obligations”
shall have the meaning set forth in Section 3 hereof.


 


“Patent
Licenses” means all licenses, contracts or other agreements, whether written or oral, naming any Grantor as licensee
or licensor and providing for the grant of any right to manufacture, use or sell any invention covered by any Patent (including,
without limitation, all Patent Licenses set forth in Schedule II hereto).


 


“Patents”
means all domestic and foreign letters patent, design patents, utility patents, industrial designs, inventions, trade secrets,
ideas, concepts, methods, techniques, processes, proprietary information, technology, know-how, formulae, rights of publicity
and other general intangibles of like nature, of any Grantor, now existing or hereafter acquired (including, without limitation,
all domestic and foreign letters patent, design patents, utility patents, industrial designs, inventions, trade secrets, ideas,
concepts, methods, techniques, processes, proprietary information, technology, know-how and formulae described in Schedule
II hereto), all applications, registrations and recordings thereof (including, without limitation, applications, registrations
and recordings in the United States Patent and Trademark Office, or in any similar office or agency of the United States or any
other country or any political subdivision thereof), and all reissues, divisions, continuations, continuations in part and extensions
or renewals thereof.


 


“Permitted
Liens” shall have the meaning set forth in the Notes.


 


“Pledged
Debt” means the indebtedness described in Schedule VII hereto and all indebtedness from time to time owned or acquired
by a Grantor, the promissory notes and other Instruments evidencing any or all of such indebtedness, and all interest, cash, Instruments,
Investment Property, financial assets, securities, capital stock, other equity interests, stock options and commodity contracts,
notes, debentures, bonds, promissory notes or other evidences of indebtedness and all other property from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or all of such indebtedness.


 




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“Pledged
Interests” means, collectively, (a) the Pledged Debt, (b) the Pledged Shares and (c) all security entitlements in any
and all of the foregoing.


 


“Pledged
Issuer” has the meaning specified therefor in the definition of the term “Pledged Shares”.


 


“Pledged
Shares” means (a) the shares of capital stock or other equity interests described in Schedule VIII hereto (other than
the 83,758 common shares of Studio One Media, LLC owned by the Company as of the date hereof, unless and until such time that
the Collateral Agent has requested that such shares constitute Pledged Shares and be included as Collateral for all purposes of
this Agreement), whether or not evidenced or represented by any stock certificate, certificated security or other Instrument,
issued by the Persons described in such Schedule VIII (the “Existing Issuers”), (b) the shares of capital stock
or other equity interests at any time and from time to time acquired by a Grantor of any and all Persons now or hereafter existing
(such Persons, together with the Existing Issuers, being hereinafter referred to collectively as the “Pledged Issuers”
and each individually as a “Pledged Issuer”), whether or not evidenced or represented by any stock certificate,
certificated security or other Instrument, and (c) the certificates representing such shares of capital stock, all options and
other rights, contractual or otherwise, in respect thereof and all dividends, distributions, cash, Instruments, Investment Property,
financial assets, securities, capital stock, other equity interests, stock options and commodity contracts, notes, debentures,
bonds, promissory notes or other evidences of indebtedness and all other property (including, without limitation, any stock dividend
and any distribution in connection with a stock split) from time to time received, receivable or otherwise distributed in respect
of or in exchange for any or all of such capital stock.


 


“Trademark
Licenses” means all licenses, contracts or other agreements, whether written or oral, naming any Grantor as licensor
or licensee and providing for the grant of any right concerning any Trademark, together with any goodwill connected with and symbolized
by any such trademark licenses, contracts or agreements and the right to prepare for sale or lease and sell or lease any and all
Inventory now or hereafter owned by any Grantor and now or hereafter covered by such licenses (including, without limitation,
all Trademark Licenses described in Schedule II hereto).


 


“Trademarks”
means all domestic and foreign trademarks, service marks, collective marks, certification marks, trade names, business names,
d/b/a’s, Internet domain names, trade styles, designs, logos and other source or business identifiers and all general intangibles
of like nature, now or hereafter owned, adopted, acquired or used by any Grantor (including, without limitation, all domestic
and foreign trademarks, service marks, collective marks, certification marks, trade names, business names, d/b/a’s, Internet
domain names, trade styles, designs, logos and other source or business identifiers described in Schedule II hereto), all
applications, registrations and recordings thereof (including, without limitation, applications, registrations and recordings
in the United States Patent and Trademark Office or in any similar office or agency of the United States, any state thereof or
any other country or any political subdivision thereof), and all reissues, extensions or renewals thereof, together with all goodwill
of the business symbolized by such marks and all customer lists, formulae and other Records of any Grantor relating to the distribution
of products and services in connection with which any of such marks are used.


 




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Section
2. Grant of Security Interest. As collateral security for
all of the Obligations, each Grantor hereby pledges and assigns to the Collateral Agent for the benefit of the Buyers, and grants
to the Collateral Agent for the benefit of the Buyers a continuing security interest in, all personal property of such Grantor,
wherever located and whether now or hereafter existing and whether now owned or hereafter acquired, of every kind and description,
tangible or intangible (collectively, the “Collateral”), including, without limitation, the following:


 


(a)
all Accounts;


 


(b)
all Chattel Paper (whether tangible or electronic);


 


(c)
the Commercial Tort Claims specified on Schedule VI hereto;


 


(d)
all Deposit Accounts (including, without limitation, all cash, and all other property from time to time deposited therein and
the monies and property in the possession or under the control of the Collateral Agent or a Buyer or any affiliate, representative,
agent or correspondent of the Collateral Agent or a Buyer;


 


(e)
all Documents;


 


(f)
all Equipment;


 


(g)
all Fixtures;


 


(h)
all General Intangibles (including, without limitation, all Payment Intangibles);


 


(i)
all Goods;


 


(j)
all Instruments (including, without limitation, Promissory Notes and each certificated Security);


 


(k)
all Inventory;


 


(l)
all Investment Property;


 


(m)
all Copyrights, Patents and Trademarks, and all Licenses;


 


(n)
all Letter-of-Credit Rights;


 


(o)
all Supporting Obligations;


 


(p)
all Pledged Interests;


 




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(q)
all other tangible and intangible personal property of such Grantor (whether or not subject to the Code), including, without limitation,
all bank and other accounts and all cash and all investments therein, all proceeds, products, offspring, accessions, rents, profits,
income, benefits, substitutions and replacements of and to any of the property of such Grantor described in the preceding clauses
of this Section 2 (including, without limitation, any proceeds of insurance thereon and all causes of action, claims and
warranties now or hereafter held by such Grantor in respect of any of the items listed above), and all books, correspondence,
files and other Records, including, without limitation, all tapes, desks, cards, Software, data and computer programs in the possession
or under the control of such Grantor or any other Person from time to time acting for such Grantor that at any time evidence or
contain information relating to any of the property described in the preceding clauses of this Section 2 or are otherwise
necessary or helpful in the collection or realization thereof; and


 


(r)
all Proceeds, including all Cash Proceeds and Noncash Proceeds, and products of any and all of the foregoing Collateral;


 


in
each case, howsoever such Grantor’s interest therein may arise or appear (whether by ownership, security interest, claim
or otherwise).


 


Section
3. Security for Obligations. The security interest created
hereby in the Collateral constitutes continuing collateral security for all of the following obligations, whether now existing
or hereafter incurred (collectively, the “Obligations”):


 


(a)
the prompt payment by each Grantor, as and when due and payable (by scheduled maturity, required prepayment, acceleration, demand
or otherwise), of all amounts from time to time owing by it in respect of the Securities Purchase Agreement, the Notes, the Guaranty
and the other Transaction Documents, including, without limitation, (A) all principal of and interest on the Notes (including,
without limitation, all interest that accrues after the commencement of any Insolvency Proceeding of any Grantor, whether or not
the payment of such interest is unenforceable or is not allowable due to the existence of such Insolvency Proceeding), (B) all
amounts from time to time owing by such Grantor under the Guaranty, and (C) all fees, commissions, expense reimbursements, indemnifications
and all other amounts due or to become due under any of the Transaction Documents; and


 


(b)
the due performance and observance by each Grantor of all of its other obligations from time to time existing in respect of any
of the Transaction Documents for so long as the Notes are outstanding.


 


Section
4. Representations and Warranties. Each Grantor represents
and warrants as follows:


 


(a)
Schedule I hereto sets forth (i) the exact legal name of such Grantor, and (ii) the organizational identification number
of such Grantor or states that no such organizational identification number exists.


 


(b)
There is no pending or written notice threatening any action, suit, proceeding or claim affecting such Grantor before any governmental
authority or any arbitrator, or any order, judgment or award by any governmental authority or arbitrator, that may adversely affect
the grant by such Grantor, or the perfection, of the security interest purported to be created hereby in the Collateral, or the
exercise by the Collateral Agent of any of its rights or remedies hereunder.


 




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(c)
All Federal, state and local tax returns and other reports required by applicable law to be filed by such Grantor have been filed,
or extensions have been obtained, and all taxes, assessments and other governmental charges imposed upon such Grantor or any property
of such Grantor (including, without limitation, all federal income and social security taxes on employees’ wages) and which
have become due and payable on or prior to the date hereof have been paid, except to the extent contested in good faith by proper
proceedings which stay the imposition of any penalty, fine or Lien resulting from the non-payment thereof and with respect to
which adequate reserves have been set aside for the payment thereof in accordance with United States generally accepted accounting
principles consistently applied (“GAAP”).


 


(d)
All Equipment, Fixtures, Goods and Inventory of such Grantor now existing are, and all Equipment, Fixtures, Goods and Inventory
of such Grantor hereafter existing will be, located and/or based at the addresses specified therefor in Schedule III hereto,
except that such Grantor will give the Collateral Agent not less than 30 days’ prior written notice of any change of the
location of any such Collateral, other than to locations set forth on Schedule III and with respect to which the Collateral
Agent has filed financing statements and otherwise fully perfected its Liens thereon. Such Grantor’s chief place of business
and chief executive office, the place where such Grantor keeps its Records concerning Accounts and all originals of all Chattel
Paper are located at the addresses specified therefor in Schedule III hereto. None of the Accounts is evidenced by Promissory
Notes or other Instruments. Set forth in Schedule IV hereto is a complete and accurate list, as of the date of this Agreement,
of (i) each Promissory Note, Security and other Instrument owned by each Grantor and (ii) each Deposit Account, Securities Account
and Commodities Account of each Grantor, together with the name and address of each institution at which each such Account is
maintained, the account number for each such Account and a description of the purpose of each such Account. Set forth in Schedule
II hereto is a complete and correct list of each trade name used by each Grantor and the name of, and each trade name used
by, each person from which such Grantor has acquired any substantial part of the Collateral.


 


(e)
Such Grantor has delivered or made available to the Collateral Agent complete and correct copies of each License described in
Schedule II hereto, including all schedules and exhibits thereto, which represents all of the Licenses existing on the
date of this Agreement. Each such License sets forth the entire agreement and understanding of the parties thereto relating to
the subject matter thereof, and there are no other agreements, arrangements or understandings, written or oral, relating to the
matters covered thereby or the rights of such Grantor or any of its affiliates in respect thereof. Each material License now existing
is, and any material License entered into in the future will be, the legal, valid and binding obligation of the parties thereto,
enforceable against such parties in accordance with its terms, except as may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance, suretyship or other similar laws and equitable principles (regardless of whether
enforcement is sought in equity or in law). No default under any material License by any such party has occurred, nor does any
defense, offset, deduction or counterclaim exist thereunder in favor of any such party.


 




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(f)
Such Grantor owns and controls, or otherwise possesses adequate rights to use, all Trademarks, Patents and Copyrights, which are
the only trademarks, patents, copyrights, inventions, trade secrets, proprietary information and technology, know-how, formulae,
rights of publicity necessary to conduct its business in substantially the same manner as conducted as of the date hereof. Schedule
II hereto sets forth a true and complete list of all registered copyrights, issued patents, Trademarks (including, without
limitation, any Internet domain names and the registrar of each such Internet domain name), and Licenses annually owned or used
by such Grantor as of the date hereof. To the best knowledge of each Grantor, all such Intellectual Property of such Grantor is
subsisting and in full force and effect, has not been adjudged invalid or unenforceable, is valid and enforceable and has not
been abandoned in whole or in part. Except as set forth in Schedule II, no such Intellectual Property is the subject of
any licensing or franchising agreement. Such Grantor has no knowledge of any conflict with the rights of others to any Intellectual
Property and, to the best knowledge of such Grantor, such Grantor is not now infringing or in conflict with any such rights of
others in any material respect, and to the best knowledge of such Grantor, no other Person is now infringing or in conflict in
any material respect with any such properties, assets and rights owned or used by such Grantor. Except as set forth in Schedule
II, such Grantor has not received any notice that it is violating or has violated the trademarks, patents, copyrights, inventions,
trade secrets, proprietary information and technology, know-how, formulae, rights of publicity or other intellectual property
rights of any third party.


 


(g)
Such Grantor is and will be at all times the sole and exclusive owner of, or otherwise has and will have adequate rights in, the
Collateral free and clear of any Liens, except for Permitted Liens on any Collateral. No effective financing statement or other
instrument similar in effect covering all or any part of the Collateral is on file in any recording or filing office except (A)
such as may have been filed in favor of the Collateral Agent relating to this Agreement, and (B) such as may have been filed to
perfect any Permitted Liens.


 


(h)
The exercise by the Collateral Agent of any of its rights and remedies hereunder will not contravene any law or any contractual
restriction binding on or otherwise affecting such Grantor or any of its properties and will not result in or require the creation
of any Lien, upon or with respect to any of its properties.


 


(i)
No authorization or approval or other action by, and no notice to or filing with, any governmental authority or other regulatory
body, or any other Person, is required for (i) the grant by such Grantor, or the perfection, of the security interest purported
to be created hereby in the Collateral, or (ii) the exercise by the Collateral Agent of any of its rights and remedies hereunder,
except (A) for the filing under the Uniform Commercial Code as in effect in the applicable jurisdiction of the financing statements,
all of which financing statements, have been duly filed and are in full force and effect, (B) with respect to the perfection of
the security interest created hereby in the Intellectual Property, for the recording of the appropriate Assignment for Security,
substantially in the form of Exhibit A hereto, as applicable, in the United States Patent and Trademark Office or the United
States Copyright Office, as applicable, and (C) with respect to the perfection of the security interest created hereby in foreign
Intellectual Property and Licenses, for registrations and filings in jurisdictions located outside of the United States and covering
rights in such jurisdictions relating to the Intellectual Property and Licenses.


 




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(j)
This Agreement creates in favor of the Collateral Agent a legal, valid and enforceable security interest in the Collateral, as
security for the Obligations. The Collateral Agent’s having possession of all Instruments and cash constituting Collateral
from time to time, the recording of the appropriate Assignment for Security executed pursuant hereto in the United States Patent
and Trademark Office and the United States Copyright Office, as applicable, and the filing of the financing statements and the
other filings and recordings, as applicable, described in Schedule V hereto and, with respect to the Intellectual Property
hereafter existing and not covered by an appropriate Assignment for Security, the recording in the United States Patent and Trademark
Office or the United States Copyright Office, as applicable, of appropriate instruments of assignment, result in the perfection
of such security interests. Such security interests are, or in the case of Collateral in which such Grantor obtains rights after
the date hereof, will be, perfected, first priority security interests, subject only to Permitted Liens and the recording of such
instruments of assignment. Such recordings and filings and all other action necessary or desirable to perfect and protect such
security interest have been duly taken, except for the Collateral Agent’s having possession of Instruments and cash constituting
Collateral after the date hereof and the other filings and recordations described in Section 4(l) hereof.


 


(k)
As of the date hereof, such Grantor does not hold any Commercial Tort Claims nor is such Grantor aware of any such pending claims,
except for such claims described in Schedule VI.


 


(l)
Each of the Grantors (other than the Company) is a wholly-owned Subsidiary of the Company and are the only Subsidiaries of the
Company, as of the date hereof.


 


Section
5. Covenants as to the Collateral. So long as any of the
Obligations shall remain outstanding, unless the Collateral Agent shall otherwise consent in writing:


 


(a)
Further Assurances. Each Grantor will at its expense, at any time and from time to time, promptly execute and deliver all
further instruments and documents and take all further action that the Collateral Agent may reasonably request in order to: (i)
perfect and protect the security interest purported to be created hereby; (ii) enable the Collateral Agent to exercise and enforce
its rights and remedies hereunder in respect of the Collateral; or (iii) otherwise effect the purposes of this Agreement, including,
without limitation: (A) marking conspicuously all Chattel Paper and each License and, at the request of the Collateral Agent,
each of its Records pertaining to the Collateral with a legend, in form and substance satisfactory to the Collateral Agent, indicating
that such Chattel Paper, License or Collateral is subject to the security interest created hereby, (B) delivering and pledging
to the Collateral Agent hereunder each Promissory Note, Security, Chattel Paper or other Instrument, now or hereafter owned by
such Grantor, duly endorsed and accompanied by executed instruments of transfer or assignment, all in form and substance satisfactory
to the Collateral Agent, (C) executing and filing (to the extent, if any, that such Grantor’s signature is required thereon)
or authenticating the filing of, such financing or continuation statements, or amendments thereto, as may be necessary or desirable
or that the Collateral Agent may request in order to perfect and preserve the security interest purported to be created hereby,
(D) furnishing to the Collateral Agent from time to time statements and schedules further identifying and describing the Collateral
and such other reports in connection with the Collateral in each case as the Collateral Agent may reasonably request, all in reasonable
detail, (E) if any Collateral shall be in the possession of a third party, notifying


 




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such
Person of the Collateral Agent’s security interest created hereby and obtaining a written acknowledgment from such Person
that such Person holds possession of the Collateral for the benefit of the Collateral Agent, which such written acknowledgement
shall be in form and substance satisfactory to the Collateral Agent, (F) if at any time after the date hereof, such Grantor acquires
or holds any Commercial Tort Claim, promptly notifying the Collateral Agent in a writing signed by such Grantor setting forth
a brief description of such Commercial Tort Claim and granting to the Collateral Agent a security interest therein and in the
proceeds thereof, which writing shall incorporate the provisions hereof and shall be in form and substance satisfactory to the
Collateral Agent, (G) if requested by the Collateral Agent, upon the acquisition after the date hereof by such Grantor of any
motor vehicle or other Equipment subject to a certificate of title or ownership (other than a Motor Vehicle or Equipment that
is subject to a purchase money security interest), causing the Collateral Agent to be listed as the lienholder on such certificate
of title or ownership and delivering evidence of the same to the Collateral Agent in accordance with the Securities Purchase Agreement;
and (H) taking all actions required by any earlier versions of the Uniform Commercial Code or by other law, as applicable, in
any relevant Uniform Commercial Code jurisdiction, or by other law as applicable in any foreign jurisdiction.


 


(b)
Location of Equipment and Inventory. Each Grantor will keep the Equipment and Inventory at the locations specified therefor
in Section 4(g) hereof or, upon not less than thirty (30) days’ prior written notice to the Collateral Agent accompanied
by a new Schedule V hereto indicating each new location of the Equipment and Inventory, at such other locations in the
United States.


 


(c)
Condition of Equipment. Each Grantor will maintain or cause the Equipment (necessary or useful to its business) to be maintained
and preserved in good condition, repair and working order, ordinary wear and tear excepted, and will forthwith, or in the case
of any loss or damage to any material Equipment of such Grantor within a commercially reasonable time after the occurrence thereof,
make or cause to be made all repairs, replacements and other improvements in connection therewith which are necessary or desirable,
consistent with past practice, or which the Collateral Agent may reasonably request to such end. Such Grantor will promptly furnish
to the Collateral Agent a statement describing in reasonable detail any such loss or damage to any such Equipment.


 


(d)
Taxes, Etc. Each Grantor agrees to pay promptly when due all property and other taxes, assessments and governmental charges
or levies imposed upon, and all claims (including claims for labor, materials and supplies) against, the Equipment and Inventory,
except to the extent the validity thereof is being contested in good faith by proper proceedings which stay the imposition of
any penalty, fine or Lien resulting from the non-payment thereof and with respect to which adequate reserves in accordance with
GAAP have been set aside for the payment thereof.


 


(e)
Insurance.


 


(i)
Each Grantor will, at its own expense, maintain insurance (including, without limitation, commercial general liability and property
insurance) with respect to the Equipment and Inventory in such amounts, against such risks, in such form and with


 




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responsible
and reputable insurance companies or associations as is required by any governmental authority having jurisdiction with respect
thereto or as is carried by such Grantor as of the date hereof and in any event, in amount, adequacy and scope reasonably satisfactory
to the Collateral Agent. Unless otherwise agreed to by the Collateral Agent, each such policy for liability insurance shall provide
for all losses to be paid on behalf of the Collateral Agent and such Grantor as their respective interests may appear, and each
policy for property damage insurance shall provide for all losses to be adjusted with, and paid directly to, the Collateral Agent.
Unless otherwise agreed to by the Collateral Agent, each such policy shall in addition (A) name the Collateral Agent as an additional
insured party thereunder (without any representation or warranty by or obligation upon the Collateral Agent) as their interests
may appear, (B) contain an agreement by the insurer that any loss thereunder shall be payable to the Collateral Agent on its own
account notwithstanding any action, inaction or breach of representation or warranty by such Grantor, (C) provide that there shall
be no recourse against the Collateral Agent for payment of premiums or other amounts with respect thereto, and (D) provide that
at least 30 days’ prior written notice of cancellation, lapse, expiration or other adverse change shall be given to the
Collateral Agent by the insurer. Such Grantor will, if so requested by the Collateral Agent, deliver to the Collateral Agent original
or duplicate policies of such insurance and, as often as the Collateral Agent may reasonably request, a report of a reputable
insurance broker with respect to such insurance. Such Grantor will also, at the request of the Collateral Agent, execute and deliver
instruments of assignment of such insurance policies and cause the respective insurers to acknowledge notice of such assignment.


 


(ii)
Reimbursement under any liability insurance maintained by a Grantor pursuant to this Section 5(e) may be paid directly
to the Person who shall have incurred liability covered by such insurance. In the case of any loss involving damage to Equipment
or Inventory, any proceeds of insurance maintained by a Grantor pursuant to this Section 5(e) shall be paid to the Collateral
Agent (except as to which paragraph (iii) of this Section 5(e) is not applicable), such Grantor will make or cause to be
made the necessary repairs to or replacements of such Equipment or Inventory, and any proceeds of insurance maintained by such
Grantor pursuant to this Section 5(e) shall be paid by the Collateral Agent to such Grantor as reimbursement for the costs
of such repairs or replacements.


 


(iii)
All insurance payments in respect of such Equipment or Inventory shall be paid to the Collateral Agent and applied as specified
in Section 7(b) hereof.


 


(f)
Provisions Concerning the Accounts and the Licenses.


 


(i)
Each Grantor will (A) give the Collateral Agent at least 30 days’ prior written notice of any change in such Grantor’s
name, identity or organizational structure, (B) maintain its jurisdiction of incorporation as set forth in Section 4(b)
hereto, (C) immediately notify the Collateral Agent upon obtaining an organizational identification number, if on the date hereof
such Grantor did not have such identification number, and (D) keep adequate records concerning the Accounts and Chattel Paper
and permit representatives of the Collateral Agent during normal business hours on reasonable notice to such Grantor, to inspect
and make abstracts from such Records and Chattel Paper.


 




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(ii)
Each Grantor will, except as otherwise provided in this subsection (f), continue to collect, at its own expense, all amounts due
or to become due under the Accounts. In connection with such collections, such Grantor may (and, at the Collateral Agent’s
direction, will) take such action as such Grantor or the Collateral Agent may deem necessary or advisable to enforce collection
or performance of the Accounts; provided, however, that the Collateral Agent shall have the right at any time, upon
the occurrence and during the continuance of an Event of Default, to notify the account debtors or obligors under any Accounts
of the assignment of such Accounts to the Collateral Agent and to direct such account debtors or obligors to make payment of all
amounts due or to become due to such Grantor thereunder directly to the Collateral Agent or its designated agent and, upon such
notification and at the expense of such Grantor and to the extent permitted by law, to enforce collection of any such Accounts
and to adjust, settle or compromise the amount or payment thereof, in the same manner and to the same extent as such Grantor might
have done. After receipt by a Grantor of a notice from the Collateral Agent that the Collateral Agent has notified, intends to
notify, or has enforced or intends to enforce a Grantor’s rights against the account debtors or obligors under any Accounts
as referred to in the proviso to the immediately preceding sentence, (A) all amounts and proceeds (including Instruments) received
by such Grantor in respect of the Accounts shall be received in trust for the benefit of the Collateral Agent hereunder, shall
be segregated from other funds of such Grantor and shall be forthwith paid over to the Collateral Agent in the same form as so
received (with any necessary endorsement) to be held as cash collateral and applied as specified in Section 7(b) hereof,
and (B) such Grantor will not adjust, settle or compromise the amount or payment of any Account or release wholly or partly any
account debtor or obligor thereof or allow any credit or discount thereon. In addition, upon the occurrence and during the continuance
of an Event of Default, the Collateral Agent may (in its sole and absolute discretion) direct any or all of the banks and financial
institutions with which such Grantor either maintains a Deposit Account or a lockbox or deposits the proceeds of any Accounts
to send immediately to the Collateral Agent by wire transfer (to such account as the Collateral Agent shall specify, or in such
other manner as the Collateral Agent shall direct) all or a portion of such securities, cash, investments and other items held
by such institution. Any such securities, cash, investments and other items so received by the Collateral Agent shall (in the
sole and absolute discretion of the Collateral Agent) be held as additional Collateral for the Obligations or distributed in accordance
with Section 7 hereof.


 


(iii)
Upon the occurrence and during the continuance of any breach or default under any material License referred to in Schedule
II hereto by any party thereto other than a Grantor, the Grantor party thereto will, promptly after obtaining knowledge thereof,
give the Collateral Agent written notice of the nature and duration thereof, specifying what action, if any, it has taken and
proposes to take with respect thereto and thereafter will take reasonable steps to protect and preserve its rights and remedies
in respect of such breach or default, or will obtain or acquire an appropriate substitute License.


 


(iv)
Each Grantor will, at its expense, promptly deliver to the Collateral Agent a copy of each notice or other communication received
by it by which any other party to any material License referred to in Schedule II hereto purports to exercise any of its
rights or affect any of its obligations thereunder, together with a copy of any reply by such Grantor thereto.


 




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(v)
Each Grantor will exercise promptly and diligently each and every right which it may have under each material License (other than
any right of termination) and will duly perform and observe in all respects all of its obligations under each material License
and will take all action reasonably necessary to maintain such Licenses in full force and effect. No Grantor will, without the
prior written consent of the Collateral Agent, cancel, terminate, amend or otherwise modify in any respect, or waive any provision
of, any material License referred to in Schedule II hereto.


 


(g)
Transfers and Other Liens.


 


(i)
No Grantor will sell, assign (by operation of law or otherwise), lease, license, exchange or otherwise transfer or dispose of
any of the Collateral, except (A) Inventory in the ordinary course of business and (B) worn-out or obsolete assets not necessary
to the business.


 


(ii)
No Grantor will create, suffer to exist or grant any Lien upon or with respect to any Collateral other than a Permitted Lien.


 


(h)
Intellectual Property.


 


(i)
If applicable, each Grantor shall, upon the Collateral Agent’s written request, duly execute and deliver the applicable
Assignment for Security in the form attached hereto as Exhibit A. Each Grantor (either itself or through licensees) will,
and will cause each licensee thereof to, take all action necessary to maintain all of the Intellectual Property in full force
and effect, including, without limitation, using the proper statutory notices and markings and using the Trademarks on each applicable
trademark class of goods in order to so maintain the Trademarks in full force and free from any claim of abandonment for non-use,
and such Grantor will not (nor permit any licensee thereof to) do any act or knowingly omit to do any act whereby any Intellectual
Property may become invalidated; provided, however, that so long as no Event of Default has occurred and is continuing,
such Grantor shall not have an obligation to use or to maintain any Intellectual Property (A) that relates solely to any product
or work, that has been, or is in the process of being, discontinued, abandoned or terminated, (B) that is being replaced with
Intellectual Property substantially similar to the Intellectual Property that may be abandoned or otherwise become invalid, so
long as the failure to use or maintain such Intellectual Property does not materially adversely affect the validity of such replacement
Intellectual Property and so long as such replacement Intellectual Property is subject to the Lien created by this Agreement or
(C) that is substantially the same as another Intellectual Property that is in full force, so long the failure to use or maintain
such Intellectual Property does not materially adversely affect the validity of such replacement Intellectual Property and so
long as such other Intellectual Property is subject to the Lien and security interest created by this Agreement. Each Grantor
will cause to be taken all necessary steps in any proceeding before the United States Patent and Trademark Office and the United
States Copyright Office or any similar office or agency in any other country or political subdivision thereof to maintain each
registration of the Intellectual Property (other than the Intellectual Property described in the proviso to the immediately preceding
sentence), including, without limitation, filing of renewals, affidavits of use, affidavits of incontestability and opposition,
interference and cancellation proceedings and payment of maintenance fees, filing fees, taxes or other governmental fees in the
ordinary course of business. If any Intellectual Property


 




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(other
than Intellectual Property described in the proviso to the first sentence of subsection (i) of this clause (h)) is infringed,
misappropriated, diluted or otherwise violated in any material respect by a third party, such Grantor shall (x) upon learning
of such infringement, misappropriation, dilution or other violation, promptly notify the Collateral Agent and (y) to the extent
such Grantor shall deem appropriate under the circumstances, promptly sue for infringement, misappropriation, dilution or other
violation, seek injunctive relief where appropriate and recover any and all damages for such infringement, misappropriation, dilution
or other violation, or take such other actions as such Grantor shall deem appropriate under the circumstances to protect such
Intellectual Property. Each Grantor shall furnish to the Collateral Agent from time to time upon its request statements and schedules
further identifying and describing the Intellectual Property and Licenses and such other reports in connection with the Intellectual
Property and Licenses as the Collateral Agent may reasonably request, all in reasonable detail and promptly upon request of the
Collateral Agent, following receipt by the Collateral Agent of any such statements, schedules or reports, such Grantor shall modify
this Agreement by amending Schedule II hereto, as the case may be, to include any Intellectual Property and License, as
the case may be, which becomes part of the Collateral under this Agreement and shall execute and authenticate such documents and
do such acts as shall be necessary or, in the judgment of the Collateral Agent, desirable to subject such Intellectual Property
and Licenses to the Lien and security interest created by this Agreement. Notwithstanding anything herein to the contrary, upon
the occurrence and during the continuance of an Event of Default, such Grantor may not abandon or otherwise permit any Intellectual
Property to become invalid without the prior written consent of the Collateral Agent, and if any Intellectual Property is infringed,
misappropriated, diluted or otherwise violated in any material respect by a third party, such Grantor will take such action as
the Collateral Agent shall deem appropriate under the circumstances to protect such Intellectual Property.


 


(ii)
In no event shall a Grantor, either itself or through any agent, employee, licensee or designee, file an application for the registration
of any Trademark or Copyright or the issuance of any Patent with the United States Patent and Trademark Office or the United States
Copyright Office, as applicable, or in any similar office or agency of the United States or any country or any political subdivision
thereof unless it gives the Collateral Agent prior written notice thereof. Upon request of the Collateral Agent, each Grantor
shall execute, authenticate and deliver any and all assignments, agreements, instruments, documents and papers as the Collateral
Agent may reasonably request to evidence the Collateral Agent’s security interest hereunder in such Intellectual Property
and the General Intangibles of such Grantor relating thereto or represented thereby, and such Grantor hereby appoints the Collateral
Agent its attorney-in-fact to execute and/or authenticate and file all such writings for the foregoing purposes, all acts of such
attorney being hereby ratified and confirmed, and such power (being coupled with an interest) shall be irrevocable until the complete
conversion of all of the Company’s obligations under the Notes to equity securities of the Company and/or indefeasible payment
in full in cash of all obligations under the Notes (together with any matured indemnification obligations as of the date of such
conversion and/or payment, but excluding any inchoate or unmatured contingent indemnification obligations).


 


(iii)
Upon the Collateral Agent’s request, each Grantor shall cause each domain registrar where any of such Grantor’s Internet
domain names are registered, whether as of the date of this Agreement or at any time hereafter, to execute and deliver to the
Collateral Agent a domain name control agreement, in form and substance reasonably satisfactory to the


 




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Collateral
Agent, duly executed by such Grantor and such domain registrar, or enter into other arrangements in form and substance satisfactory
to the Collateral Agent, pursuant to which such domain registrar shall irrevocably agree, inter alia, that (i) it
will comply at any time with the instructions originated by the Collateral Agent to such domain registrar directing substitution
of the Collateral Agent or its designee as the registered owner of such Internet domain names, without further consent of such
Grantor, which instructions the Collateral Agent will not give to such domain registrar in the absence of a continuing Event of
Default.


 


(i)
Deposit, Commodities and Securities Accounts. Upon the Collateral Agent’s request and unless otherwise agreed by
Agent, each Grantor shall cause each bank and other financial institution with an account referred to in Schedule IV hereto
to execute and deliver to the Collateral Agent a control agreement, in form and substance reasonably satisfactory to the Collateral
Agent, duly executed by such Grantor and such bank or financial institution, or enter into other arrangements in form and substance
satisfactory to the Collateral Agent, pursuant to which such institution shall irrevocably agree, inter alia, that
(i) it will comply at any time with the instructions originated by the Collateral Agent to such bank or financial institution
directing the disposition of cash, Commodity Contracts, securities, Investment Property and other items from time to time credited
to such account, without further consent of such Grantor, which instructions the Collateral Agent will not give to such bank or
other financial institution in the absence of a continuing Event of Default, (ii) all cash, Commodity Contracts, securities, Investment
Property and other items of such Grantor deposited with such institution shall be subject to a perfected, first priority security
interest in favor of the Collateral Agent, (iii) any right of set off, banker’s Lien or other similar Lien, security interest
or encumbrance shall be fully waived as against the Collateral Agent, and (iv) upon receipt of written notice from the Collateral
Agent during the continuance of an Event of Default, such bank or financial institution shall immediately send to the Collateral
Agent by wire transfer (to such account as the Collateral Agent shall specify, or in such other manner as the Collateral Agent
shall direct) all such cash, the value of any Commodity Contracts, securities, Investment Property and other items held by it.
Without the prior written consent of the Collateral Agent, such Grantor shall not make or maintain any Deposit Account, Commodity
Account or Securities Account except for the accounts set forth in Schedule IV hereto. The provisions of this paragraph
5(i) shall not apply to (i) Deposit Accounts for which the Collateral Agent is the depositary, (ii) Deposit Accounts specially
and exclusively used for payroll, payroll taxes and other employee wage and benefit payments to or for the benefit of a Grantor’s
salaried employees and (iii) Securities Accounts in which the fair market value of the securities held therein does not exceed
$20,000 at any time.


 


(j)
Motor Vehicles.


 


(i)
Upon the Collateral Agent’s written request, each Grantor shall deliver to the Collateral Agent originals of the certificates
of title or ownership for all motor vehicles owned by it with the Collateral Agent listed as lienholder, for the benefit of the
Buyers.


 


(ii)
Each Grantor hereby appoints the Collateral Agent as its attorney-in-fact, effective the date hereof and terminating upon the
termination of this Agreement, for the purpose of (A) executing on behalf of such Grantor title or ownership applications for
filing with appropriate state agencies to enable motor vehicles now owned or hereafter acquired by such


 




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Grantor
to be retitled and the Collateral Agent listed as lienholder thereof, (B) filing such applications with such state agencies, and
(C) executing such other documents and instruments on behalf of, and taking such other action in the name of, such Grantor as
the Collateral Agent may deem necessary or advisable to accomplish the purposes hereof (including, without limitation, for the
purpose of creating in favor of the Collateral Agent a perfected Lien on the motor vehicles and exercising the rights and remedies
of the Collateral Agent hereunder). This appointment as attorney-in-fact is coupled with an interest and is irrevocable until
the complete conversion of all of the Company’s obligations under the Notes to equity securities of the Company and/or indefeasible
payment in full in cash of all obligations under the Notes (together with any matured indemnification obligations as of the date
of such conversion and/or payment, but excluding any inchoate or unmatured contingent indemnification obligations).


 


(iii)
Any certificates of title or ownership delivered pursuant to the terms hereof shall be accompanied by odometer statements for
each motor vehicle covered thereby.


 


(iv)
So long as no Event of Default shall have occurred and be continuing, upon the request of such Grantor, the Collateral Agent shall
execute and deliver to such Grantor such instruments as such Grantor shall reasonably request to remove the notation of the Collateral
Agent as lienholder on any certificate of title for any motor vehicle; provided, however, that any such instruments
shall be delivered, and the release effective, only upon receipt by the Collateral Agent of a certificate from such Grantor stating
that such motor vehicle is to be sold or has suffered a casualty loss (with title thereto passing to the casualty insurance company
therefor in settlement of the claim for such loss) and the amount that such Grantor will receive as sale proceeds or insurance
proceeds. Any proceeds of such sale or casualty loss shall be paid to the Collateral Agent hereunder immediately upon receipt,
to be applied to the Obligations then outstanding.


 


(k)
Control. Each Grantor hereby agrees to take any or all action that may be necessary or desirable or that the Collateral
Agent may request in order for the Collateral Agent to obtain control in accordance with Sections 9-105 – 9-107 of the Code
with respect to the following Collateral: (i) Electronic Chattel Paper, (ii) Investment Property, (iii) Pledged Interests and
(iv) Letter-of-Credit Rights.


 


(l)
Inspection and Reporting. Each Grantor shall permit the Collateral Agent, or any agent or representatives thereof or such
professionals or other Persons as the Collateral Agent may designate, not more than once a year in the absence of an Event of
Default, (i) to examine and make copies of and abstracts from such Grantor’s records and books of account, (ii) to visit
and inspect its properties, (iii) to verify materials, leases, Instruments, Accounts, Inventory and other assets of such Grantor
from time to time, (iii) to conduct audits, physical counts, appraisals and/or valuations, examinations at the locations of such
Grantor. Each Grantor shall also permit the Collateral Agent, or any agent or representatives thereof or such professionals or
other Persons as the Collateral Agent may designate to discuss such Grantor’s affairs, finances and accounts with any of
its officers subject to the execution by the Collateral Agent or its designee(s) of a mutually agreeable confidentiality agreement.


 




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(m)
Future Subsidiaries. If any Grantor shall hereafter create or acquire any Subsidiary, simultaneously with the creation
of acquisition of such Subsidiary, such Grantor shall cause such Subsidiary to become a party to this Agreement as an additional
“Grantor” hereunder and to become a party to the Guaranty as an additional “Guarantor” thereunder, and
to duly execute and/or deliver such opinions of counsel and other documents, in form and substance acceptable to the Collateral
Agent, as the Collateral Agent shall reasonably request with respect thereto.


 


Section
6. Additional Provisions Concerning the Collateral.


 


(a)
Each Grantor hereby (i) authorizes the Collateral Agent to file one or more Uniform Commercial Code financing or continuation
statements, and amendments thereto, relating to the Collateral (including, without limitation, financing statements describing
the Collateral as “all assets” or “all personal property” or words of similar effect) and (ii) ratifies
such authorization to the extent that the Collateral Agent has filed any such financing or continuation statements, or amendments
thereto, prior to the date hereof. A photocopy or other reproduction of this Agreement or any financing statement covering the
Collateral or any part thereof shall be sufficient as a financing statement where permitted by law.


 


(b)
Each Grantor hereby irrevocably appoints the Collateral Agent as its attorney-in-fact and proxy, with full authority in the place
and stead of such Grantor and in the name of such Grantor or otherwise, from time to time in the Collateral Agent’s discretion,
so long as an Event of Default shall have occurred and is continuing, to take any action and to execute any instrument which the
Collateral Agent may deem necessary or advisable to accomplish the purposes of this Agreement (subject to the rights of such Grantor
under Section 5 hereof), including, without limitation, (i) to obtain and adjust insurance required to be paid to the Collateral
Agent pursuant to Section 5(e) hereof, (ii) to ask, demand, collect, sue for, recover, compound, receive and give acquittance
and receipts for moneys due and to become due under or in respect of any Collateral, (iii) to receive, endorse, and collect any
drafts or other instruments, documents and chattel paper in connection with clause (i) or (ii) above, (iv) to file any claims
or take any action or institute any proceedings which the Collateral Agent may deem necessary or desirable for the collection
of any Collateral or otherwise to enforce the rights of the Collateral Agent and the Buyers with respect to any Collateral, and
(v) to execute assignments, licenses and other documents to enforce the rights of the Collateral Agent and the Buyers with respect
to any Collateral. This power is coupled with an interest and is irrevocable until the complete conversion of all of the Company’s
obligations under the Notes to equity securities of the Company and/or indefeasible payment in full in cash of all obligations
under the Notes (together with any matured indemnification obligations as of the date of such conversion and/or payment, but excluding
any inchoate or unmatured contingent indemnification obligations).


 


(c)
For the purpose of enabling the Collateral Agent to exercise rights and remedies hereunder, at such time as the Collateral Agent
shall be lawfully entitled to exercise such rights and remedies upon and during an Event of Default, and for no other purpose,
each Grantor hereby grants to the Collateral Agent, to the extent assignable, an irrevocable, non-exclusive license (exercisable
without payment of royalty or other compensation to such Grantor) to use, assign, license or sublicense any Intellectual Property
now owned or hereafter acquired by such Grantor, wherever the same may be located, including in such license


 




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reasonable
access to all media in which any of the licensed items may be recorded or stored and to all computer programs used for the compilation
or printout thereof. Notwithstanding anything contained herein to the contrary, but subject to the provisions of the Securities
Purchase Agreement that limit the right of such Grantor to dispose of its property and Section 5(h) hereof, so long as
no Event of Default shall have occurred and be continuing, such Grantor may exploit, use, enjoy, protect, license, sublicense,
assign, sell, dispose of or take other actions with respect to the Intellectual Property in the ordinary course of its business.
In furtherance of the foregoing, unless an Event of Default shall have occurred and be continuing, the Collateral Agent shall
from time to time, upon the request of a Grantor, execute and deliver any instruments, certificates or other documents, in the
form so requested, which such Grantor shall have certified are appropriate (in such Grantor’s judgment) to allow it to take
any action permitted above (including relinquishment of the license provided pursuant to this clause (c) as to any Intellectual
Property). Further, upon the complete conversion of all of the Company’s obligations under the Notes to equity securities
of the Company and/or indefeasible payment in full in cash of all obligations under the Notes (together with any matured indemnification
obligations as of the date of such conversion and/or payment, but excluding any inchoate or unmatured contingent indemnification
obligations), the Collateral Agent (subject to Section 10(e) hereof) shall release and reassign to such Grantor all of
the Collateral Agent’s right, title and interest in and to the Intellectual Property, and the Licenses, all without recourse,
representation or warranty whatsoever. The exercise of rights and remedies hereunder by the Collateral Agent shall not terminate
the rights of the holders of any licenses or sublicenses theretofore granted by such Grantor in accordance with the second sentence
of this clause (c). Each Grantor hereby releases the Collateral Agent from any claims, causes of action and demands at any time
arising out of or with respect to any actions taken or omitted to be taken by the Collateral Agent under the powers of attorney
granted herein other than actions taken or omitted to be taken through the Collateral Agent’s gross negligence or willful
misconduct, as determined by a final determination of a court of competent jurisdiction.


 


(d)
If a Grantor fails to perform any agreement contained herein, the Collateral Agent may itself perform, or cause performance of,
such agreement or obligation, in the name of such Grantor or the Collateral Agent, and the expenses of the Collateral Agent incurred
in connection therewith shall be payable by such Grantor pursuant to Section 8 hereof and shall be secured by the Collateral.


 


(e)
The powers conferred on the Collateral Agent hereunder are solely to protect its interest in the Collateral and shall not impose
any duty upon it to exercise any such powers. Except for the safe custody of any Collateral in its possession and the accounting
for moneys actually received by it hereunder, the Collateral Agent shall have no duty as to any Collateral or as to the taking
of any necessary steps to preserve rights against prior parties or any other rights pertaining to any Collateral.


 


(f)
Anything herein to the contrary notwithstanding (i) each Grantor shall remain liable under the Licenses and otherwise with respect
to any of the Collateral to the extent set forth therein to perform all of its obligations thereunder to the same extent as if
this Agreement had not been executed, (ii) the exercise by the Collateral Agent of any of its rights hereunder shall not release
such Grantor from any of its obligations under the Licenses or otherwise in respect of the Collateral, and (iii) the Collateral
Agent shall not have any obligation or liability by reason of this Agreement under the Licenses or with respect to any of the
other Collateral, nor shall the Collateral Agent be obligated to perform any of the obligations or duties of such Grantor thereunder
or to take any action to collect or enforce any claim for payment assigned hereunder.


 




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Section
7. Remedies Upon Event of Default. If any Event of Default
shall have occurred and be continuing:


 


(a).
The Collateral Agent may exercise in respect of the Collateral, in addition to any other rights and remedies provided for herein
or otherwise available to it, all of the rights and remedies of a secured party upon default under the Code (whether or not the
Code applies to the affected Collateral), and also may (i) take absolute control of the Collateral, including, without limitation,
transfer into the Collateral Agent’s name or into the name of its nominee or nominees (to the extent the Collateral Agent
has not theretofore done so) and thereafter receive, for the benefit of the Collateral Agent, all payments made thereon, give
all consents, waivers and ratifications in respect thereof and otherwise act with respect thereto as though it were the outright
owner thereof, (ii) require each Grantor to, and each Grantor hereby agrees that it will at its expense and upon request of the
Collateral Agent forthwith, assemble all or part of its respective Collateral as directed by the Collateral Agent and make it
available to the Collateral Agent at a place or places to be designated by the Collateral Agent that is reasonably convenient
to both parties, and the Collateral Agent may enter into and occupy any premises owned or leased by such Grantor where the Collateral
or any part thereof is located or assembled for a reasonable period in order to effectuate the Collateral Agent’s rights
and remedies hereunder or under law, without obligation to such Grantor in respect of such occupation, and (iii) without notice
except as specified below and without any obligation to prepare or process the Collateral for sale, (A) sell the Collateral or
any part thereof in one or more parcels at public or private sale, at any of the Collateral Agent’s offices or elsewhere,
for cash, on credit or for future delivery, and at such price or prices and upon such other terms as the Collateral Agent may
deem commercially reasonable and/or (B) lease, license or dispose of the Collateral or any part thereof upon such terms as the
Collateral Agent may deem commercially reasonable. Each Grantor agrees that, to the extent notice of sale or any other disposition
of its respective Collateral shall be required by law, at least ten (10) days’ notice to such Grantor of the time and place
of any public sale or the time after which any private sale or other disposition of its respective Collateral is to be made shall
constitute reasonable notification. The Collateral Agent shall not be obligated to make any sale or other disposition of any Collateral
regardless of notice of sale having been given. The Collateral Agent may adjourn any public or private sale from time to time
by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place
to which it was so adjourned. Each Grantor hereby waives any claims against the Collateral Agent and the Buyers arising by reason
of the fact that the price at which its respective Collateral may have been sold at a private sale was less than the price which
might have been obtained at a public sale or was less than the aggregate amount of the Obligations, even if the Collateral Agent
accepts the first offer received and does not offer such Collateral to more than one offeree, and waives all rights that such
Grantor may have to require that all or any part of such Collateral be marshalled upon any sale (public or private) thereof. Each
Grantor hereby acknowledges that (i) any such sale of its respective Collateral by the Collateral Agent shall be made without
warranty, (ii) the Collateral Agent may specifically disclaim any warranties of title, possession, quiet enjoyment or the like,
and (iii) such actions set forth in clauses (i) and (ii) above shall not adversely affect the commercial reasonableness of any
such sale of Collateral. In addition to the foregoing, (1) upon written notice to any Grantor from the Collateral Agent, such
Grantor shall cease any use of the Intellectual Property or any trademark, patent or copyright similar thereto for any purpose
described in such notice; (2) the Collateral Agent may, at any time and from time to time, upon 10 days’ prior notice to
such Grantor, license, whether general, special or otherwise, and whether on an exclusive or non-exclusive basis, any of the Intellectual
Property, throughout the universe for such term or terms, on such conditions, and in such manner, as the Collateral Agent shall
in its sole discretion determine to the extent consistent with any restrictions or conditions imposed upon such Grantor with respect
to such Intellectual Property by license or other contractual arrangement; and (2) the Collateral Agent may, at any time, pursuant
to the authority granted in Section 6 hereof (such authority being effective upon the occurrence and during the continuance
of an Event of Default), execute and deliver on behalf of such Grantor, one or more instruments of assignment of the Intellectual
Property (or any application or registration thereof), in form suitable for filing, recording or registration in any country.


 



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(b)
Any cash held by the Collateral Agent as Collateral and all Cash Proceeds received by the Collateral Agent in respect of any sale
of or collection from, or other realization upon, all or any part of the Collateral may, in the discretion of the Collateral Agent,
be held by the Collateral Agent as collateral for, and/or then or at any time thereafter applied (after payment of any amounts
payable to the Collateral Agent pursuant to Section 8 hereof) in whole or in part by the Collateral Agent against, all
or any part of the Obligations in such order as the Collateral Agent shall elect, consistent with the provisions of the Securities
Purchase Agreement. Any surplus of such cash or Cash Proceeds held by the Collateral Agent and remaining after the complete conversion
of all of the Company’s obligations under the Notes to equity securities of the Company and/or indefeasible payment in full
in cash of all obligations under the Notes (together with any matured indemnification obligations as of the date of such conversion
and/or payment, but excluding any inchoate or unmatured contingent indemnification obligations) shall be paid over to whomsoever
shall be lawfully entitled to receive the same or as a court of competent jurisdiction shall direct.


 


(c)
In the event that the proceeds of any such sale, collection or realization are insufficient to pay all amounts to which the Collateral
Agent and the Buyers are legally entitled, each Grantor shall be liable for the deficiency, together with interest thereon at
the highest rate specified in any of the applicable Transaction Documents for interest on overdue principal thereof or such other
rate as shall be fixed by applicable law, together with the costs of collection and the reasonable fees, costs, expenses and other
client charges of any attorneys employed by the Collateral Agent to collect such deficiency.


 


(d)
Each Grantor hereby acknowledges that if the Collateral Agent complies with any applicable state, provincial, or federal law requirements
in connection with a disposition of the Collateral, such compliance will not adversely affect the commercial reasonableness of
any sale or other disposition of the Collateral.


 


(e)
The Collateral Agent shall not be required to marshal any present or future collateral security (including, but not limited to,
this Agreement and the Collateral) for, or other assurances of payment of, the Obligations or any of them or to resort to such
collateral security


 




    	- 20 -



    	 



    


 


or
other assurances of payment in any particular order, and all of the Collateral Agent’s rights hereunder and in respect of
such collateral security and other assurances of payment shall be cumulative and in addition to all other rights, however existing
or arising. To the extent that each Grantor lawfully may, such Grantor hereby agrees that it will not invoke any law relating
to the marshalling of collateral which might cause delay in or impede the enforcement of the Collateral Agent’s rights under
this Agreement or under any other instrument creating or evidencing any of the Obligations or under which any of the Obligations
is outstanding or by which any of the Obligations is secured or payment thereof is otherwise assured, and, to the extent that
it lawfully may, such Grantor hereby irrevocably waives the benefits of all such laws.


 


Section
8. Indemnity and Expenses.


 


(a)
Each Grantor agrees, jointly and severally, to defend, protect, indemnify and hold the Collateral Agent and each of the Buyers,
jointly and severally, harmless from and against any and all claims, damages, losses, liabilities, obligations, penalties, fees,
costs and expenses (including, without limitation, reasonable legal fees, costs, expenses, and disbursements of such Person’s
counsel) to the extent that they arise out of or otherwise result from this Agreement (including, without limitation, enforcement
of this Agreement), except claims, losses or liabilities resulting solely and directly from such Person’s gross negligence
or willful misconduct, as determined by a final judgment of a court of competent jurisdiction.


 


(b)
Each Grantor agrees, jointly and severally, to, upon demand, pay to the Collateral Agent the amount of any and all costs and expenses,
including the reasonable fees, costs, expenses and disbursements of counsel for the Collateral Agent and of any experts and agents
(including, without limitation, any collateral trustee which may act as agent of the Collateral Agent), which the Collateral Agent
may incur in connection with (i) the preparation, negotiation, execution, delivery, recordation, administration, amendment, waiver
or other modification or termination of this Agreement, (ii) the custody, preservation, use or operation of, or the sale of, collection
from, or other realization upon, any Collateral, (iii) the exercise or enforcement of any of the rights of the Collateral Agent
hereunder, or (iv) the failure by any Grantor to perform or observe any of the provisions hereof.


 


Section
9. Notices, Etc. All notices and other communications provided
for hereunder shall be in writing and shall be mailed (by certified mail, postage prepaid and return receipt requested), telecopied
or delivered, if to a Grantor at its address specified below and if to the Collateral Agent to it, at its address specified below;
or as to any such Person, at such other address as shall be designated by such Person in a written notice to such other Person
complying as to delivery with the terms of this Section 9. All such notices and other communications shall be effective
(a) if sent by certified mail, return receipt requested, when received or five days after deposited in the mails, whichever occurs
first, (b) if telecopied or sent by electronic mail, when transmitted (during normal business hours), or (c) if delivered, upon
delivery.


 


Section
10. Miscellaneous.


 


(a)
No amendment of any provision of this Agreement shall be effective unless it is in writing and signed by each Grantor and the
Collateral Agent, and no waiver of any provision of this Agreement, and no consent to any departure by a Grantor therefrom, shall
be effective unless it is in writing and signed by the Collateral Agent, and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given.


 




    	- 21 -



    	 



    


 


(b)
No failure on the part of the Collateral Agent to exercise, and no delay in exercising, any right hereunder or under any of the
other Transaction Documents shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude
any other or further exercise thereof or the exercise of any other right. The rights and remedies of the Collateral Agent or any
Buyer provided herein and in the other Transaction Documents are cumulative and are in addition to, and not exclusive of, any
rights or remedies provided by law. The rights of the Collateral Agent or any Buyer under any of the other Transaction Documents
against any party thereto are not conditional or contingent on any attempt by such Person to exercise any of its rights under
any of the other Transaction Documents against such party or against any other Person, including but not limited to, any Grantor.


 


(c)
To the extent permitted by applicable law, each Grantor hereby waives promptness, diligence, notice of acceptance and any other
notice with respect to any of the Obligations and this Agreement and any requirement that the Collateral Agent exhaust any right
or take any action against any other Person or any Collateral. Each Grantor acknowledges that it will receive direct and indirect
benefits from the financing arrangements contemplated herein and that the waiver set forth in this Section 10(c) is knowingly
made in contemplation of such benefits. The Grantors hereby waive any right to revoke this Agreement, and acknowledge that this
Agreement is continuing in nature and applies to all Obligations, whether existing now or in the future.


 


(d)
No Grantor may exercise any rights that it may now or hereafter acquire against any other Grantor that arise from the existence,
payment, performance or enforcement of any Grantor’s obligations under this Agreement, including, without limitation, any
right of subrogation, reimbursement, exoneration, contribution or indemnification and any right to participate in any claim or
remedy of the Collateral Agent against any Grantor or any Collateral, whether or not such claim, remedy or right arises in equity
or under contract, statute or common law, including, without limitation, the right to take or receive from any Grantor, directly
or indirectly, in cash or other property or by set-off or in any other manner, payment or security solely on account of such claim,
remedy or right, unless and until the complete conversion of all of the Company’s obligations under the Notes to equity
securities of the Company and/or indefeasible payment in full in cash of all obligations under the Notes (together with any matured
indemnification obligations as of the date of such conversion and/or payment, but excluding any inchoate or unmatured contingent
indemnification obligations). If any amount shall be paid to a Grantor in violation of the immediately preceding sentence at any
time prior to the complete conversion of all of the Company’s obligations under the Notes to equity securities of the Company
and/or indefeasible payment in full in cash of all obligations under the Notes (together with any matured indemnification obligations
as of the date of such conversion and/or payment, but excluding any inchoate or unmatured contingent indemnification obligations),
such amount shall be held in trust for the benefit of the Collateral Agent and shall forthwith be paid to the Collateral Agent
to be credited and applied to the Obligations and all other amounts payable under the Transaction Documents, whether matured or
unmatured, in accordance with the terms of the Transaction Documents, or to be held as Collateral for any Obligations or other
amounts payable under the Transaction Documents thereafter arising.


 




    	- 22 -



    	 



    


 


(e)
Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the remaining portions hereof or thereof or affecting
the validity or enforceability of such provision in any other jurisdiction.


 


(f)
This Agreement shall create a continuing security interest in the Collateral and shall (i) remain in full force and effect until
the complete conversion of all of the Company’s obligations under the Notes to equity securities of the Company and/or indefeasible
payment in full in cash of all obligations under the Notes (together with any matured indemnification obligations as of the date
of such conversion and/or payment, but excluding any inchoate or unmatured contingent indemnification obligations), and (ii) be
binding on each Grantor and all other Persons who become bound as debtor to this Agreement in accordance with Section 9-203(d)
of the Code and shall inure, together with all rights and remedies of the Collateral Agent and the Buyers hereunder, to the benefit
of the Collateral Agent and the Buyers and their respective permitted successors, transferees and assigns. Without limiting the
generality of clause (ii) of the immediately preceding sentence, without notice to any Grantor, the Collateral Agent and the Buyers
may assign or otherwise transfer their rights and obligations under this Agreement and any of the other Transaction Documents,
to any other Person and such other Person shall thereupon become vested with all of the benefits in respect thereof granted to
the Collateral Agent and the Buyers herein or otherwise. Upon any such assignment or transfer, all references in this Agreement
to the Collateral Agent or any such Buyer shall mean the assignee of the Collateral Agent or such Buyer. None of the rights or
obligations of any Grantor hereunder may be assigned or otherwise transferred without the prior written consent of the Collateral
Agent, and any such assignment or transfer without the consent of the Collateral Agent shall be null and void.


 


(g)
Upon the complete conversion of all of the Company’s obligations under the Notes to equity securities of the Company and/or
indefeasible payment in full in cash of all obligations under the Notes (together with any matured indemnification obligations
as of the date of such conversion and/or payment, but excluding any inchoate or unmatured contingent indemnification obligations),
(i) this Agreement and the security interests created hereby shall terminate and all rights to the Collateral shall revert to
the respective Grantor that granted such security interests hereunder, and (ii) the Collateral Agent will, upon such Grantor’s
request and at such Grantor’s expense, (A) return to such Grantor such of the Collateral as shall not have been sold or
otherwise disposed of or applied pursuant to the terms hereof, and (B) execute and deliver to such Grantor such documents as such
Grantor shall reasonably request to evidence such termination, all without any representation, warranty or recourse whatsoever.


 


(h)
THIS AGREEMENT SHALL BE GOVERNED BY, CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, EXCEPT AS
REQUIRED BY MANDATORY PROVISIONS OF LAW AND EXCEPT TO THE EXTENT THAT THE VALIDITY AND PERFECTION OR THE PERFECTION AND THE EFFECT
OF PERFECTION OR NON-PERFECTION OF THE SECURITY INTEREST CREATED HEREBY, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL
ARE GOVERNED BY THE LAW OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK.


 




    	- 23 -



    	 



    


 


(i)
ANY LEGAL ACTION, SUIT OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY DOCUMENT RELATED THERETO MAY BE BROUGHT IN THE COURTS
OF THE STATE OF NEW YORK IN THE COUNTY OF NEW YORK OR THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND
APPELLATE COURTS THEREOF, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH GRANTOR HEREBY ACCEPTS FOR ITSELF AND IN RESPECT
OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. EACH GRANTOR HEREBY EXPRESSLY AND IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE
OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY
SUCH ACTION, SUIT OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS AND CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF
AS IS DEEMED APPROPRIATE BY THE COURT.


 


(j)
EACH GRANTOR AND (BY ITS ACCEPTANCE OF THE BENEFITS OF THIS AGREEMENT) THE COLLATERAL AGENT WAIVES ANY RIGHT IT MAY HAVE TO TRIAL
BY JURY IN RESPECT OF ANY LITIGATION BASED ON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER
TRANSACTION DOCUMENTS, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, VERBAL OR WRITTEN STATEMENT OR OTHER ACTION OF THE PARTIES
HERETO.


 


(k)
Nothing contained herein shall affect the right of the Collateral Agent to serve process in any other manner permitted by law
or commence legal proceedings or otherwise proceed against any Grantor or any property of such Grantor in any other jurisdiction.


 


(l)
Each Grantor irrevocably and unconditionally waives any right it may have to claim or recover in any legal action, suit or proceeding
referred to in this Section any special, exemplary, punitive or consequential damages.


 


(m)
Section headings herein are included for convenience of reference only and shall not constitute a part of this Agreement for any
other purpose.


 


(n)
This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of
which shall be deemed to be an original, but all of which taken together constitute one in the same Agreement.


 


[REMAINDER
OF THIS PAGE INTENTIONALLY LEFT BLANK]


 




    	- 24 -



    	 



    


 


IN
WITNESS WHEREOF, each Grantor has caused this Agreement to be executed and delivered by its officer thereunto duly authorized,
as of the date first above written.


 











	 	DIGITAL ALLY, INC., a Nevada corporation
	 	 	 
	 	By:	/s/ Stanton E. Ross
	 	Name:	Stanton E. Ross
	 	Title:	Chairman, President & CEO



 


	 	 
	 	Address for Notices:
	 	 
	 	 
	 	 
	 	 
	 	Facsimile:	 



 





	 	Digital
    Ally International, Inc.,
    a Nevada corporation



 







	 	By:	/s/ Stanton E. Ross
	 	Name:	Stanton E. Ross
	 	Title:	President




 


	 	Address for Notices:
	 	 
	 	 
	 	 
	 	 
	 	Facsimile:	 




 










    	 



    	 



    


 


ACCEPTED
BY:


 


Hudson
Bay Master Fund Ltd.,


as
Collateral Agent


 







	By:	 	 
	Name:	 	 
	Title: 	 	 











Address:


 



    	Sched. I-1



    	 



    












 


SCHEDULE
I


 


LEGAL
NAMES; ORGANIZATIONAL IDENTIFICATION NUMBERS; STATES OR

JURISDICTION OF ORGANIZATION


 


	Legal
    Name:	 	State
    of

    Organization:	 	Type
    of

    Organization:	 	Organizational
    Identification

    Number:
	 	 	 	 	 	 	 
	Digital
    Ally, Inc.	 	Nevada	 	Corporation	 	NV20001502048
	 	 	 	 	 	 	 
	Digital
    Ally International, Inc.	 	Nevada	 	Corporation	 	NV20091423731


 



    	 



    	 



    

 


SCHEDULE
II


 


INTELLECTUAL
PROPERTY AND LICENSES; TRADE NAMES


 


	A.	 	COPYRIGHTS
	 	 	 
	 	 	None.
	 	 	 
	B.	 	PATENTS
	 	 	 
	 	 	See
    Schedule II-A.
	 	 	 
	 	 	With
    regard to Section 4(f)of this Agreement, the Company has the following disclosure:
	 	 	 
	 	 	On
    October 25, 2013, the Company filed a complaint in the United States District Court for the District of Kansas to eliminate
    threats by a competitor, Utility Associates, Inc. (“Utility”), of alleged patent infringement regarding U.S. Patent
    No. 6,831,556 (the “556 Patent”). The lawsuit seeks a declaration that the Company’s mobile video surveillance
    systems do not infringe any claim of the 556 Patent. In addition, the Company will take steps to invalidate the 556 Patent
    through appropriate procedures at the United States Patent and Trademark Office. The Company became aware that Utility had
    recently mailed letters to current and prospective purchasers of the Company’s mobile video surveillance systems threatening
    that the use of such systems purchased from third parties not licensed to the 556 Patent would create liability for Utility
    for patent infringement. The Company rejects Utility’s assertion and will vigorously defend the right of end-users to
    purchase such systems from providers other than Utility.
	 	 	 
	C.	 	TRADEMARKS
	 	 	 
	 	 	See
    Schedule II-B.
	 	 	 
	D.	 	LICENSE
    AGREEMENTS
	 	 	 
	 	 	1.	 	Development, Licensing and Manufacturing Agreement, dated as of July12,
2011, among Weldex Corporation, Vision Blue-Weldex and Digital Ally, Inc.
	 	 	 	 
	 	 	2.	 	Dragon Eye, LLC Supply Agreement, dated as of May 1, 2010, between DragonEye,
Technology, LLC and Digital Ally, Inc.
	 	 	 	 
	 	 	3.	 	Amendment to Supply Agreement, dated as of January 31, 2012, between DragonEye,
Technology, LLC and Digital Ally, Inc.
	 	 	 	 
	E.	 	OTHER
    PROPRIETARY RIGHTS
	 	 	 
	 	 	None.
	 	 	 
	F.	 	TRADE
    NAMES
	 	 	 
	 	 	None.
	 	 	 
	G.	 	NAME
    OF, AND EACH TRADE NAME USED BY, EACH PERSON FROM WHICH A GRANTOR HAS ACQUIRED ANY SUBSTANTIAL PART OF THE COLLATERAL WITHIN
    THE PRECEDING FIVE YEARS
	 	 	None.
    








 



    	Sched. II-2



    	 



    

 


Schedule
II-A


 


PATENTS


 


[See
Attached]








 



    	Sched. II-A



    	 



    




 


Schedule
II-B


 


TRADEMARKS


 


[See
Attached]








 



    	Sched. II-B



    	 



    

 


SCHEDULE
III


 


LOCATIONS


 


	Grantor:	 	Location:	 	Description:
	 	 	 	 	 
	Digital
    Ally, Inc.	 	9705
    Loiret Blvd.	 	Chief
    Executive Office
	 	Lenexa,
    KS 66219	 
	 	 	 
	Digital
    Ally International, Inc.	 	9705
    Loiret Blvd.	 	Chief
    Executive Office
	 	Lenexa,
    KS 66219	 


 



    	Sched. III-1



    	 



    

 


SCHEDULE
IV


 


PROMISSORY
NOTES, SECURITIES, DEPOSIT ACCOUNTS, SECURITIES ACCOUNTS

AND COMMODITIES ACCOUNTS


 


A.
Promissory Notes:


 


None.


 


B.
Securities and Other Instruments:


 


Studio
One Media, LLC (83,758 common shares)


 


C.
Deposit Accounts, Securities Accounts and Commodities Accounts:


 


	Grantor:	 	Name
    and Address of Institution Maintaining Account:	 	Account
    Number:	 	Type
    of Account:
	Digital
    Ally, Inc.	 	Citizens
                                         Bank

        and
        Trust

        7288
        NW 87th Terrace, Suite 300

        Kansas
        City, MO 64153
	 	 	 	Demand
    Deposit Account
	 	 	 	 	 	 	 
	Digital
    Ally, Inc.	 	Citizens
                                         Bank

        and
        Trust

        7288
        NW 87th Terrace, Suite 300

        Kansas
        City, MO 64153
	 	 	 	Zero
    Balance Account
	 	 	 	 	 	 	 
	Digital
    Ally, Inc.	 	TD
                                         Ameritrade, Inc.

        P.O.
        Box 2209

        Omaha,
        NE 68103-2209
	 	 	 	Brokerage
    Account


 






    	Sched. IV-1



    	 



    

 


SCHEDULE
V


 


UCC-1
FINANCING STATEMENTS


 


	Name
    of Grantor:	 	Secretary
    of State:
	 	 	 
	Digital
    Ally, Inc.	 	Nevada
	 	 	 
	Digital
    Ally International, Inc.	 	Nevada


 


SCHEDULE
VI


 


COMMERCIAL
TORT CLAIMS


 


None.


 


SCHEDULE
VII


 


PLEDGED
DEBT


 


None.


 


SCHEDULE
VIII


 


PLEDGED
SHARES


 


	Grantor:	 	Name
    of Pledged Issuer:	 	Number
    of Shares/Units:	 	Percentage
    of Outstanding Shares/Units:	 	Class:	 	Certificate
    Number:
	 	 	 	 	 	 	 	 	 	 	 
	Digital
    Ally, Inc.	 	Digital
    Ally International, Inc.	 	10	 	100%	 	Common Stock	 	001
	 	 	 	 	 	 	 	 	 	 	 
	Digital
    Ally, Inc.	 	Studio
    One Media, LLC	 	83,758	 	_______	 	Common
    Shares	 	_______