Document:

Form of Stock Option Agreement (ISO and Non-Qualified) 2006 Stock Option Plan

 Exhibit 10.4 
 DIGITAL ALLY, INC. 
 2006 STOCK OPTION AND RESTRICTED STOCK PLAN 
 STOCK OPTION AGREEMENT 
 Unless otherwise defined
herein, the terms defined in the Plan shall have the same defined meanings in this Option Agreement. 
  

	I.	NOTICE OF STOCK OPTION GRANT 

  

			
	Optionee’s Name and Address:	  	____________________________________
		  	 ____________________________________
 ____________________________________

 You have been granted an option to purchase Common Stock of the Company, subject to the terms and conditions of
the Plan and this Option Agreement, as follows: 
  

			
	Date of Grant:	  	______________________
		
	Exercise Price per Share:	  	______________________
		
	Total Number of Shares Granted:	  	______________________
		
	Total Exercise Price:	  	$_____________________
		
	Type of Option:	  	 _______ Incentive Stock Option
  
 _______ Nonstatutory Stock Option

		
	Term/Expiration Date:	  	______________________
		
	Vesting Schedule:	  	____________________________________________________
		
		  	____________________________________________________
		
	Termination Period:	  	This Option may be exercised for ninety (90) days after termination of the Optionee’s employment with the Company. Upon the death or Disability of the Optionee, this Option may be exercised
for such longer period as provided in the Plan. If the Optionee status changes from Employee to Consultant, this Option Agreement shall remain in effect. In no event shall this Option be exercised later than the Term/Expiration Date as provided
above.

  

	II.	AGREEMENT 

 1. Grant of Option. The Board of
Directors of the Company hereby grants to the Optionee named in the Notice of Grant attached as Part I of this Agreement (the “Optionee”), an option (the “Option”) to purchase the number of Shares, as set forth in the Notice of
Grant, at the exercise price per share set forth in the Notice of Grant (the “Exercise Price”), subject to the 

  

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terms and conditions of the Plan, which are incorporated herein by reference. In the event of a conflict between the terms and conditions of the Plan and the
terms and conditions of this Option Agreement, the terms and conditions of the Plan shall prevail. If designated in the Notice of Grant as an Incentive Stock Option (“ISO”), this Option is intended to qualify as an Incentive Stock Option
under Section 422 of the Code. However, if this Option is intended to be an Incentive Stock Option, to the extent that it exceeds the $100,000 rule of Code Section 422(d) it shall be treated as a Nonstatutory Stock Option
(“NSO”). 
 2. Exercise of Option. 
 2.1 Right to Exercise. 
 2.1.1. This Option is exercisable during its term in accordance with the Vesting Schedule set out in the Notice of Grant and the applicable provisions of the Plan and this Option Agreement. In the event of
Optionee’s death, Disability or other termination of Optionee’s employment or consulting relationship, the exercisability of the Option is governed by the applicable provisions of the Plan and this Option Agreement. 
 2.1.2. Should (i) Optionee’s Continuous Status as an Employee be terminated for misconduct (which includes, but is not limited
to, any act of dishonesty, moral turpitude, fraud or embezzlement); (ii) Optionee make any unauthorized use or disclosure of confidential information or trade secrets of the Company, or any Subsidiary; or (iii) Optionee otherwise act in
such a manner not in the best interests of the Company (as reasonably determined by the Company’s Board of Directors), then, notwithstanding any other provision in this Agreement or the Plan to the contrary, in any such event this Option shall
terminate immediately and cease to be outstanding. 
 2.2 Method of Exercise. 
 2.2.1. This Option is exercisable by delivery of an exercise notice, in the form attached as Exhibit A (the “Exercise Notice”),
which shall state the election to exercise the Option, the number of Shares in respect of which the Option is being exercised (the “Exercised Shares”), and such other representations and agreements as may be required by the Company
pursuant to the provisions of the Plan. The Exercise Notice shall be signed by the Optionee and shall be delivered in person or by certified mail to the Secretary of the Company. The Exercise Notice shall be accompanied by payment of the aggregate
Exercise Price as to all Exercised Shares. This Option shall be deemed to be exercised upon receipt by the Company of such fully executed Exercise Notice accompanied by such aggregate Exercise Price. 
 2.2.2. No Shares shall be issued pursuant to the exercise of this Option unless such issuance and exercise complies with all relevant
provisions of law and the requirements of any stock exchange or quotation service upon which the Shares are then listed. Assuming such compliance, for income tax purposes the Exercised Shares shall be considered transferred to the Optionee on the
date the Option is exercised with respect to such Exercised Shares. 
  

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 3. Method of Payment. Payment of the aggregate Exercise Price shall be by any of the following, or
a combination thereof, at the election of the Optionee: 
 3.1. cash; 
 3.2. check; or 
 3.3. delivery of a properly executed exercise notice together with such other documentation as the Administrator and the broker, if applicable, shall require to effect an exercise of the Option and delivery to the Company of the sale or
loan proceeds required to pay the exercise price. 
 4. Non-Transferability of Option. This Option may not be transferred in any
manner otherwise than by will or by the laws of descent or distribution and may be exercised during the lifetime of Optionee only by the Optionee. The terms of the Plan and this Option Agreement shall be binding upon the executors, administrators,
heirs, successors and assigns of the Optionee. 
 5. Term of Option. This Option may be exercised only within the term set out in the
Notice of Grant, and may be exercised during such term only in accordance with the Plan and the terms of this Option Agreement. 
 6.
Registration under the Securities Act of 1933. 
 6.1. Registration and Legends. The Optionee understands that
(i) the Company has not registered the Option or the Shares under the Securities Act of 1933, as amended (the “Act”), or the applicable securities laws of any state in reliance on exemptions from registration and (ii) such
exemptions depend upon the Optionee’s investment intent at the time the Optionee acquires the Option or the Shares. The Optionee therefore represents and warrants that Optionee is acquiring the Option, and will acquire the Shares, for the
Optionee=s own account for investment and not with a view to distribution, assignment, resale or other transfer of the Option or the Shares. Because the Option and the Shares are not registered, the Optionee is aware that the Optionee must hold
them indefinitely unless they are registered under the Act and any applicable securities laws or the Optionee must obtain exemptions from such registration. Upon exercise, in part or in whole, of this Option, the Shares shall bear the following
legend: 
 The shares of Common Stock represented by this certificate have not been registered under the Securities Act of 1933, as amended,
or any applicable state securities laws, and they may not be offered for sale, sold, transferred, pledged or hypothecated without an effective registration statement under the Act and under any applicable state securities laws, or an opinion of
counsel, satisfactory to the Company, that an exemption from such registration is available. 
 6.2. No-Action Letter.
The Company agrees that it will be satisfied that no post-effective amendment or new registration is required for the public sale of the Shares if it shall be presented with a letter from the Staff of the Securities and Exchange Commission (the
“Commission”), stating in effect that, based upon stated facts which the Company shall have no reason to believe are not true in any material respect, the Staff will not recommend any action to the Commission if such Shares are offered and
sold without delivery of a prospectus, and that, 

  

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therefore, no Registration Statement under which such Shares are to be registered is required to be filed. 
 7. Entire Agreement; Governing Law. The Plan is incorporated herein by reference. The Plan and this Option Agreement constitute the entire
agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Optionee with respect to the subject matter hereof, and may not be modified adversely to the
Optionee’s interest except by means of a writing signed by the Company and Optionee. This Option Agreement is governed by Nevada law except for that body of law pertaining to conflict of laws. 
 8. No Guarantee of Employment. OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY
BY CONTINUING SERVICE AS AN EMPLOYEE AT THE WILL OF THE COMPANY (AND NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED AN OPTION OR PURCHASING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS
CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS AN EMPLOYEE FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE WITH OPTIONEE’S
RIGHT OR THE COMPANY’S RIGHT TO TERMINATE OPTIONEE’S EMPLOYMENT AT ANY TIME, WITH OR WITHOUT CAUSE. 
 [THE REMAINDER OF THIS PAGE
INTENTIONALLY LEFT BLANK] 
  

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 By your signature and the signature of the Company’s representative below, you and the Company agree that this
Option is granted under and governed by the terms and conditions of the Plan and this Option Agreement. Optionee has reviewed the Plan and this Option Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to
executing this Option Agreement and fully understands all provisions of the Plan and Option Agreement. Optionee hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Board of Directors upon any questions
relating to the Plan and Option Agreement. Optionee further agrees to notify the Company upon any change in the residence address indicated below. 
  

							
	OPTIONEE:	 		 	DIGITAL ALLY, INC.
				
	   	 		 	 By:
	 	   
	Signature	 		 		 	 Signature

			
	   	 		 	  
		 		 	Print Name
	  	 		 	
				
	   	 		 	 Title:
	 	   
	Residence Address	 		 		 	

 CONSENT OF SPOUSE 
 The undersigned spouse of Optionee has read and hereby approves the terms and conditions of the Plan and this Option Agreement. In consideration of the Company’s granting his or her spouse the right to purchase
Shares as set forth in the Plan and this Option Agreement, the undersigned hereby agrees to be irrevocably bound by the terms and conditions of the Plan and this Option Agreement and further agrees that any community property interest shall be
similarly bound. The undersigned hereby appoints the undersigned’s spouse as attorney-in-fact for the undersigned with respect to any amendment or exercise of rights under the Plan or this Option Agreement. 
  

	
	
	   
	Spouse of Optionee

  

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 Exhibit A 
 Exercise Notice 
 Digital Ally, Inc. 
 4831 W. 136th Street 
 Suite 300 
 Leawood, KS 66224 
 The undersigned hereby irrevocably
subscribes for the purchase of
                                (     
           ) Shares pursuant to and in accordance with the terms and conditions of this Option, and herewith makes payment, covering the purchase of the Shares, which should be delivered to
the undersigned at the address stated below, and, if such number of Shares shall not be all of the Shares purchasable hereunder, then a new Option of like tenor for the balance of the remaining Shares purchasable under this Option be delivered to
the undersigned at the address stated below. 
 The undersigned agrees that: (1) the undersigned will not offer, sell, transfer or otherwise dispose of
any such Shares, unless either (a) a registration statement, or post-effective amendment thereto, covering such Shares have been filed with the Securities and Exchange Commission pursuant to the Securities Act of 1933, as amended (the
“Act”), and such sale, transfer or other disposition is accompanied by a prospectus meeting the requirements of Section 10 of the Act forming a part of such registration statement, or post-effective amendment thereto, which is in
effect under the Act covering the Shares to be so sold, transferred or otherwise disposed of, or (b) counsel to the Company satisfactory to the undersigned has rendered an opinion in writing and addressed to the Company that such proposed
offer, sale, transfer or other disposition of the Shares is exempt from the provisions of Section 5 of the Act in view of the circumstances of such proposed offer, sale, transfer or other disposition; (2) the Company may notify the
transfer agent for its Common Stock that the certificates for the Common Stock acquired by the undersigned are not to be transferred unless the transfer agent receives advice from the Company that one or both of the conditions referred to in
(1)(a) and (1)(b) above have been satisfied; and (3) the Company may affix the legend set forth in Section 6.1 of this Option to the certificates for Shares hereby subscribed for, if such legend is applicable. 
  

							
	Dated:	 	 _________________
	  	Signed:	  	  

  

			
		
	Address:	 	  
		 	  
		 	  

  

	 	

  

 -A-Promissory Note Extension between Registrant and Acme Resources, LLC

 Exhibit 10.5 
 PROMISSORY NOTE EXTENSION 
 May 4, 2006 
 BE IT ACKNOWLEDGED that: 
 TROPHY
TECH, INC. today called DIGITAL ALLY, INC. and one in the same; (borrower) executed a promissory note on September 1, 2004 in favor of ACME RESOURCES, LLC (lender). 
 FURTHER ACKNOWLEDGED that: 
 DIGITAL
ALLY, INC. (borrower) and ACME RESOURCES, LLC. (lender) executed a FORTY-FIVE (45) day Promissory Note Extension on February 28, 2005. 
 FURTHER ACKNOWLEDGED that: 
 DIGITAL
ALLY, INC. (borrower) executed a revised promissory note on April 25, 2005 in favor of ACME RESOURCES, LCC (lender). This executed promissory note is successor to original promissory note dated September 1, 2004. The maturity
date on this promissory note is May 15, 2005. Additionally, this promissory note granted unto lender the right to extend the maturity date for a period of SIX (6) months or November 15, 2005. 
 FURTHER ACKNOWLEDGED that: 
 On
May 13,2005, ACME RESOURCES, LLC. (lender) notified DIGITAL ALLY, INC. (borrower) that lender would exercise lender’s right to extend promissory note maturity date until November 15, 2005. 
 FURTHER ACKNOWLEDGED that: 
 On
September 8th, 2005, Digital Ally, Inc. (borrower) executed a 6 (SIX) month Promissory Note Extension in
favor of ACME RESOURCES, LLC (lender). Thus extending the maturity date to May 15, 2006. 
 Whereas, the executed promissory note has a
maturity date of May 15, 2006 with all outstanding balances of principle and interest due and payable to lender by borrower. 
 Now
therefore, both parties agree that the outstanding principal balance as of April 27,2006 to be $500,000.00 (FIVE HUNDRED THOUSAND DOLLARS AND 00/100) and the outstanding interest balance as of April 30, 2006 to be $2,876.71 due and
payable by May 5, 2006. 
 Furthermore, both parties agree to this Promissory Note Extension with a principal balance of $500,000.00 (FIVE
HUNDRED THOUSAND DOLLARS AND 00/100) with all other terms and conditions of Promissory Note and extensions thereof remaining the same. This Promissory Note Extension shall be for a period of SIX (6) months from the maturity date of the
Promissory Note Extension, as executed on September 8, 2005 with all outstanding balances of principal and interest due and payable to lender by borrower on November 15, 2006. 
  

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 ADDITIONALLY, both parties agree to waive the use of and requirement of 666,667 personal shares of restricted
common stock in Digital Ally, Inc. owned by Charles A. “Andy” Ross pledged as additional collateral to the loan as per the revised promissory noted dated April 25, 2005. 
 Executed this the 22nd day of May, 2006. 
  

			
	WITNESS OUR SIGNATURES:
	
	BORROWER:
	DIGITAL ALLY, INC.
		
		 	/s/ Stanton E. Ross
	BY:	 	Stanton E. Ross,
		 	Chairman and Chief Executive Officer

 STATE OF KANSAS, 
 COUNTY OF
                     
 This day,
personally appeared before me, the undersigned authority, in and for the State and County aforesaid, the within named              who severally acknowledged that
             signed and delivered the above and foregoing promissory note extension on the day and year therein mentioned. 
 Given under my hand and official seal, this, the              day of
            , 2006. 
  

					
	 (SEAL)
	 		 	
			
	 My commission Expires:
	 		 	   
		 		 	 Notary Public

  

			
	LENDER:
	Acme Resources, Inc.
		
		 	/s/ P. Brooks Warren
	BY:	 	P. Brooks Warren, Partner

  

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 STATE OF MISSISSIPPI 
 COUNTY OF LINCOLN 
 This
day, personally appeared before me, the undersigned authority, in and for the State and County aforesaid, the within named P. Brooks Warren who severally acknowledged that he signed and delivered the above and foregoing promissory note extension on
the day and year therein mentioned. 
 Given under my hand and official seal, this, the 24th day of May, 2006. 
  

					
	 (SEAL)
	 		 	
			
	 My commission Expires:
	 		 	   
		 		 	 Notary Public

  

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