Document:

2006 Stock Option and Restricted Stock Plan

 Exhibit 10.2 
 DIGITAL ALLY, INC. 
 2006 STOCK OPTION AND RESTRICTED STOCK PLAN 
 1. PURPOSES. 
 (a) Background. This 2006 Stock
Option and Restricted Stock Plan was adopted on January 17, 2006 by the Board of Directors, subject to the approval of the Company’s stockholders. Options granted under the Plan prior to the stockholders’ approval will be effective
upon approval of the stockholders as of their respective dates of grant. 
 (b) Eligible Award Recipients. The persons eligible to
receive Awards are the Employees and Directors of the Company and its Affiliates. 
 (c) Available Awards. The purpose of the Plan is
to provide a means by which eligible recipients may be given an opportunity to benefit from increases in value of the Common Stock through the granting of the following: (i) Incentive Stock Options, (ii) Nonqualified Stock Options,
(iii) rights to acquire restricted stock, and (iv) stock appreciation rights. 
 (d) General Purpose. The Company, by means
of the Plan, seeks to retain the services of the group of persons eligible to receive Awards, to secure and retain the services of new members of this group and to provide incentives for such persons to exert maximum efforts for the success of the
Company and its Affiliates. 
 2. DEFINITIONS. 
 (a) “Affiliate” means any entity that controls, is controlled by, or is under common control with the Company. 
 (b) “Award” means any right granted under the Plan, including an Option, a right to acquire restricted Common Stock, and a stock appreciation right. 
 (c) “Award Agreement” means a written agreement between the Company and a holder of an Award (other than an Option)
evidencing the terms and conditions of an individual Award grant. 
 (d) “Board” means the board of
directors of the Company. 
 (e) “Code” means the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder. 
 (f) “Committee” means a pre-existing or newly formed
committee of members of the Board appointed by the Board in accordance with subsection 3(c). 
  

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 (g) “Common Stock” means the shares of the Company’s common
stock par value $0.001 and other rights with respect to such shares. 
 (h) “Company” means Digital
Ally, Inc., a Nevada corporation. 
 (i) “Continuous Service” means that the Participant’s service
with the Company or an Affiliate, whether as an Employee or Director is not interrupted or terminated. Unless otherwise provided in an Award Agreement or Option Agreement, as applicable, the Participant’s Continuous Service shall not be deemed
to have terminated merely because of a change in the capacity in which the Participant renders service to the Company or an Affiliate as an Employee or Director or a change in the entity for which the Participant renders such service, provided that
there is no interruption or termination of the Participant’s service to the Company or an Affiliate as an Employee or Director. The Board, in its sole discretion, may determine whether Continuous Service shall be considered interrupted in the
case of any leave of absence, including sick leave, military leave or any other personal leave. 
 (j) “Covered
Employee” means the Company’s chief executive officer and the four (4) other highest compensated officers of the Company for whom total compensation is required to be reported to stockholders under the Exchange Act, as
determined for purposes of Section 162(m) of the Code. 
 (k) “Director” means a member of the
Board of the Company. 
 (l) “Disability” means the Participant’s inability, due to illness,
accident, injury, physical or mental incapacity or other disability, to carry out effectively the duties and obligations to the Company and its Affiliates performed by such person immediately prior to such disability for a period of at least six
(6) months, as determined in the good faith judgment of the Board. 
 (m) “Dollars” or
“$” means United States dollars. 
 (n) “Employee” means any
person employed by the Company or an Affiliate. Service as a Director or payment of a director’s fee by the Company or an Affiliate alone shall not be sufficient to constitute “employment” by the Company or an Affiliate. 

(o) “Exchange Act” means the Securities Exchange Act of 1934, as amended. 
 (p) “Fair Market Value” means, as of any date, the value of the Common Stock determined as follows: 
 (i) If the Common Stock is listed on any established stock exchange, or traded on the Nasdaq National Market, the Nasdaq SmallCap
Market or the Nasdaq OTC Bulletin Board, the Fair Market Value of the Common Stock shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or market (or the exchange or market with
the greatest volume of trading in Common Stock if such stock is traded on more than one such exchange or market) on the last market trading day prior to the day of determination, as reported by such exchange or market or such other source as the
Board reasonably deems reliable. 
  

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 (ii) In the absence of such markets for the Common Stock, the Fair Market Value
shall be determined in good faith by the Board. 
 (q) “Incentive Stock Option” means an option
designated as an incentive stock option in an Option Agreement and that is granted in accordance with the requirements of, and that conforms to the applicable provisions of, Section 422 of the Code. 
 (r) “Independent Director” means (i) a Director who satisfies the definition of Independent Director or
similar definition under the applicable stock exchange or Nasdaq rules and regulations upon which the Common Stock is traded from time to time and (ii) a Director who either (A) is not a current employee of the Company or an
“affiliated corporation” (within the meaning of Treasury Regulations promulgated under Section 162(m) of the Code), is not a former employee of the Company or an “affiliated corporation” receiving compensation for prior
services (other than benefits under a tax qualified pension plan), was not an officer of the Company or an “affiliated corporation” at any time and is not currently receiving direct or indirect remuneration from the Company or an
“affiliated corporation” for services in any capacity other than as a Director or (B) is otherwise considered an “outside director” for purposes of Section 162(m) of the Code. 
 (s) “Nonqualified Stock Option” means an option that is not designated in an Option Agreement as an Incentive Stock
Option or was not granted in accordance with the requirements of, and does not conform to the applicable provisions of, Section 422 of the Code. 
 (t) “Officer” means a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder.

 (u) “Option” means an Incentive Stock Option or a Nonqualified Stock Option granted pursuant to the
Plan. 
 (v) “Option Agreement” means a written agreement between the Company and an Optionholder
evidencing the terms and conditions of an individual Option grant. 
 (w) “Optionholder” means a person
to whom an Option is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Option. 
 (x)
“Participant” means a person to whom an Award is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Award. 
 (y) “Plan” means this Digital Ally, Inc. 2006 Stock Option and Restricted Stock Plan. 
 (z) “Rule 16b-3” means Rule 16b-3 promulgated under the Exchange Act or any successor to Rule 16b-3, as in effect
from time to time. 
 (aa) “Securities Act” means the Securities Act of 1933, as amended. 

(bb) “Ten Percent Stockholder” means a person who owns (or is deemed to own pursuant to Section 424(d) of
the Code) stock possessing more than ten percent (10%) of the 

  

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total combined voting power of all classes of stock of the Company or any parent corporation or any subsidiary corporation, both as defined in
Section 424 of the Code. 
 3. ADMINISTRATION. 
 (a) Administration by Board. The Board shall administer the Plan unless and until the Board delegates administration to a Committee, as provided in subsection 3(c). The Board may, at any time and for any reason
in its sole discretion, rescind some or all of such delegation. 
 (b) Powers of Board. The Board shall have the power, subject to,
and within the limitations of, the express provisions of the Plan: 
 (i) To determine from time to time which of the
persons eligible under the Plan shall be granted Awards; when and how each Award shall be granted; what type or combination of types of Award shall be granted; the provisions of each Award granted (which need not be identical), including the time or
times when a person shall be permitted to receive Common Stock pursuant to an Award; and the number of shares of Common Stock with respect to which an Award shall be granted to each such person. 
 (ii) To construe and interpret the Plan, Awards granted under it, Option Agreements and Award Agreements, and to establish, amend
and revoke rules and regulations for their administration. The Board, in the exercise of this power, may correct any defect, omission or inconsistency in the Plan or in any Option Agreement or Award Agreement, in a manner and to the extent it shall
deem necessary or expedient to make the Plan fully effective. 
 (iii) To amend the Plan, an Award, an Award Agreement
or an Option Agreement as provided in Section 12, provided that the Board shall not amend the exercise price of an option, the Fair Market Value of an Award or extend the term of an Option or Award without obtaining the approval of the
stockholders if required by the rules of any stock exchange upon which the Common Stock is listed. 
 (iv) Generally,
to exercise such powers and to perform such acts as the Board deems necessary or expedient to promote the best interests of the Company which are not in conflict with the provisions of the Plan. 
 (c) Delegation to Committee. 
 (i) General. The Board may delegate administration of the Plan and its powers and duties thereunder to a Committee or Committees, and the term “Committee” shall apply to any person or persons to whom such authority has been
delegated. Upon such delegation, the Committee shall have the powers theretofore possessed by the Board, including the power to delegate to a subcommittee any of the administrative powers the Committee is authorized to exercise (and references in
this Plan to the Board shall thereafter be deemed to include the Committee or subcommittee), subject, however, to such resolutions, not inconsistent with the provisions of the Plan, as may be adopted from time to time by the Board. In its absolute
discretion, the Board may at any time and from time to time exercise any and all rights and duties of the Committee under this Plan, except respecting matters under Rule 16b-3 of the 

  

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Exchange Act or Section 162(m) of the Code, or any rules or regulations issued thereunder, which are required to be determined in the sole discretion of
the Committee. 
 (ii) Committee Composition. A Committee shall consist solely of two or more Independent Directors.
Within the scope of its authority, the Board or the Committee may (1) delegate to a committee of one or more members of the Board who are not Independent Directors the authority to grant Awards to eligible persons who are either (a) not
then Covered Employees and are not expected to be Covered Employees at the time of recognition of income resulting from such Award or (b) not persons with respect to whom the Company wishes to comply with Section 162(m) of the Code, and/or
(2) delegate to a committee of one or more members of the Board who are not Independent Directors or to the Company’s Chief Executive Officer the authority to grant Awards to eligible persons who are not then subject to Section 16 of
the Exchange Act. 
 (d) Effect of Board’s Decision; No Liability. All determinations, interpretations and constructions made by
the Board in good faith shall not be subject to review by any person and shall be final, binding and conclusive on all persons. No member of the Board or the Committee or any person to whom duties hereunder have been delegated shall be liable for
any action, interpretation or determination made in good faith, and such persons shall be entitled to full indemnification and reimbursement consistent with applicable law and in the manner provided in the Company’s Articles of Incorporation
and Bylaws, as the same may be amended from time to time, or as otherwise provided in any agreement between any such member and the Company. 
 4. STOCK
SUBJECT TO THE PLAN. 
 (a) Stock Reserve. Subject to the provisions of Section 11 relating to adjustments upon changes in
Common Stock, the shares of Common Stock that may be issued pursuant to Awards shall not exceed in the aggregate one million five hundred thousand (1,500,000) shares of Common Stock. 
 (b) Reversion of Stock to the Stock Reserve. If any Award shall for any reason expire or otherwise terminate, in whole or in part, without having
been exercised in full, the shares of Common Stock not acquired under such Award shall revert to and again become available for issuance under the Plan. 
 (c) Source of Stock. The Common Stock subject to the Plan may be unissued stock or reacquired stock, bought on the market or otherwise. 
 5. ELIGIBILITY. 
 (a) Eligibility for Specific Awards. Incentive Stock Options may be granted
only to Employees. Awards other than Incentive Stock Options may be granted to Employees and Directors. 
 (b) Ten Percent
Stockholders. A Ten Percent Stockholder shall not be granted an Incentive Stock Option unless the exercise price of such Option is at least one hundred ten percent (110%) of the Fair Market Value of the Common Stock at the date of grant and
the Option is not exercisable after the expiration of five (5) years from the date of grant. 
  

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 6. OPTION PROVISIONS. 
 Each Option Agreement shall be subject to the terms and conditions of this Plan. Each Option and Option Agreement shall be in such form and shall contain such terms and conditions as the Board shall deem appropriate. All Options shall be
separately designated Incentive Stock Options or Nonqualified Stock Options at the time of grant, and, if certificates are issued, a separate certificate or certificates will be issued for the shares of Common Stock purchased on exercise of each
type of Option. The provisions of separate Options need not be identical. 
 (a) Provisions Applicable to All Options. 
 (i) Consideration. The purchase price of the shares of Common Stock acquired pursuant to an Option shall be paid in cash in Dollars
at the time the Option is exercised. 
 (ii) Vesting Generally. An Option may (A) vest, and therefore become
exercisable, in periodic installments that may, but need not, be equal, or (B) be fully vested at the time of grant. The Option may be subject to such other terms and conditions on the time or times when it may be exercised (which may be based
on performance or other criteria) as the Board may deem appropriate. The vesting provisions, if any, of individual Options may vary. The provisions of this subsection 6(a)(ii) are subject to any Option Agreement provisions governing the minimum
number of Common Stock as to which an Option may be exercised. 
 (iii) Termination of Continuous Service. Unless
otherwise provided in the Option Agreement, in the event an Optionholder’s Continuous Service terminates (other than upon the Optionholder’s death, Disability, retirement or as a result of a Change of Control), all Options held by the
Optionholder shall immediately terminate; provided, however, that an Option Agreement may provide that if an Optionholder’s Continuous Service is terminated for reasons other than for cause, all vested Options held by such person
shall continue to be exercisable until the earlier of the expiration date of such Option or ninety (90) days after the date of such termination. All such vested Options not exercised within the period described in the preceding sentence shall
terminate. 
 (iv) Disability or Death of Optionholder. Unless otherwise provided in the Option Agreement, in the event
of an Optionholder’s Disability or death, all unvested Options shall immediately terminate, and all vested Options held by such person shall continue to be exercisable for twelve months after the date of such Disability or death. All such
vested Options not exercised within such twelve-month period shall terminate. 
 (v) Retirement. Unless otherwise
provided in the Option Agreement, in the event of the Optionholder’s retirement, all unvested Options shall automatically vest on the date of such retirement and all Options shall be exercisable for the earlier of twelve (12) months after
such retirement date or the expiration date of such Options. All such Options not exercised within the period described in the preceding sentence shall terminate. 
  

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 (b) Provisions Applicable to Incentive Stock Options. 
 (i) Term. Subject to the provisions of subsection 5(b) regarding Ten Percent Stockholders, no Incentive Stock Option shall be
exercisable after the expiration of ten (10) years from the date it was granted. Further, no grant of an Incentive Stock Option shall be made under this Plan more than ten (10) years after the date the Plan is approved by the stockholders
of the Company. 
 (ii) Exercise Price of an Incentive Stock Option. Subject to the provisions of subsection 5(b)
regarding Ten Percent Stockholders, the exercise price of each Incentive Stock Option shall be not less than one hundred percent (100%) of the Fair Market Value of the Common Stock subject to the Option on the date the Option is granted.

 (iii) Transferability of an Incentive Stock Option. An Incentive Stock Option shall not be transferable except by
will or by the laws of descent and distribution and shall be exercisable during the lifetime of the Optionholder only by the Optionholder. 
 (iv) Incentive Stock Option $100,000 Limitation. Notwithstanding any other provision of the Plan or an Option Agreement, the aggregate Fair Market Value of the Common Stock with respect to which Incentive Stock
Options are exercisable for the first time by an Optionholder in any calendar year, under the Plan or any other option plan of the Company or its Affiliates, shall not exceed One Hundred Thousand Dollars ($100,000). For this purpose, the Fair Market
Value of the Common Stock shall be determined as of the time an Option is granted. The Options or portions thereof which exceed such limit (according to the order in which they were granted) shall be treated as Nonqualified Stock Options.

 (c) Provisions Applicable to Nonqualified Stock Options. 
 (i) Exercise Price of a Nonqualified Stock Option. The exercise price of each Nonqualified Stock Option shall be not less than one
hundred percent (100%) of the Fair Market Value of the Common Stock subject to the Option on the date the Option is granted. 
 (ii) Transferability of a Nonqualified Stock Option. A Nonqualified Stock Option shall be transferable, if at all, to the extent provided in the Option Agreement. If the Option Agreement does not provide for transferability, then the
Nonqualified Stock Option shall not be transferable except by will or by the laws of descent and distribution and shall be exercisable during the lifetime of the Optionholder only by the Optionholder. 
 7. PROVISIONS OF AWARDS OTHER THAN OPTIONS. 
 (a)
Restricted Stock Awards. Each restricted stock Award agreement shall be in such form and shall contain such restrictions, terms and conditions, if any, as the Board shall deem appropriate and shall be subject to the terms and conditions of this
Plan. The terms and conditions of restricted stock Award Agreements may change from time to time, and the terms and conditions of separate restricted stock Award Agreements need not be identical, but each restricted stock Award Agreement shall
include (through incorporation of provisions hereof by reference in the agreement or otherwise) the substance of each of the following provisions: 
 (i) Consideration. A restricted stock Award may be awarded in consideration for past services actually rendered, or for future services to be rendered, to the Company or an Affiliate for its
benefit. 
  

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 (ii) Vesting. Common Stock awarded under the restricted stock Award Agreement may
(A) be subject to a vesting schedule to be determined by the Board or (B) be fully vested at the time of grant. 
 (iii) Termination of Participant’s Continuous Service. Unless otherwise provided in the restricted stock Award Agreement, in the event a Participant’s Continuous Service terminates prior to a vesting date set forth in the
restricted stock Award Agreement, any unvested restricted stock Award shall be forfeited and automatically transferred to and reacquired by the Company at no cost to the Company, and neither the Participant nor his or her heirs, executors,
administrators or successors shall have any right or interest in the restricted stock Award. Notwithstanding the foregoing, unless otherwise provided in the restricted stock Award agreement, in the event a Participant’s Continuous Service
terminates as a result of (A) being terminated by the Company for reasons other than for cause, (B) death, (C) Disability, (D) retirement, or (E) a Change of Control (subject to the provisions of Section 11(c) hereof),
then any unvested restricted stock Award shall vest immediately upon such date. 
 (iv) Transferability. Rights to
acquire Common Stock under the restricted stock Award Agreement shall be transferable by the Participant only upon such terms and conditions as are set forth in the restricted stock Award Agreement, as the Board shall determine in its discretion, so
long as Common Stock awarded under the restricted stock Award Agreement remain subject to the terms of the restricted stock Award Agreement. 
 (b) Grant of Stock Appreciation Rights. Stock appreciation rights to receive in shares of Common Stock the excess of the Fair Market Value of Common Stock on the date the rights are surrendered over the Fair Market Value of Common
Stock on the date of grant may be granted to any Employee or Director selected by the Board. A stock appreciation right may be granted (i) in connection and simultaneously with the grant of another Award, (ii) with respect to a previously
granted Award, or (iii) independent of another Award. A stock appreciation right shall be subject to such terms and conditions not inconsistent with this Plan as the Board shall impose and shall be evidenced by a written stock appreciation
right agreement, which shall be executed by the Participant and an authorized officer of the Company. The Board, in its discretion, may determine whether a stock appreciation right is to qualify as performance-based compensation as described in
Section 162(m)(4)(C) of the Code and stock appreciation right agreements evidencing stock appreciation rights intended to so qualify shall contain such terms and conditions as may be necessary to meet the applicable provisions of
Section 162(m) of the Code. The Board may, in its discretion and on such terms as it deems appropriate, require as a condition of the grant of a stock appreciation right that the Participant surrender for cancellation some or all of the Awards
previously granted to such person under this Plan or otherwise. A stock appreciation right, the grant of which is conditioned upon such surrender, may have an exercise price lower (or higher) than the exercise price of the surrendered Award, may
contain such other terms as the Board deems appropriate, and shall be exercisable in accordance with its terms, without regard to the number of shares, price, exercise period or any other term or condition of such surrendered Award. 
  

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 8. AVAILABILITY OF STOCK. Subject to the restrictions set forth in Section 4(a), during the terms of the
Awards, the Company shall keep available at all times the number of shares of Common Stock required to satisfy such Awards. 
 9. USE OF PROCEEDS FROM
STOCK. 
 Proceeds from the sale of Common Stock pursuant to Awards shall constitute general funds of the Company. 
 10. MISCELLANEOUS. 
 (a) Exercise of Awards.
Awards shall be exercisable at such times, or upon the occurrence of such event or events as the Board shall determine at or subsequent to grant. Awards may be exercised in whole or in part. Common Stock purchased upon the exercise of an Award shall
be paid for in full at the time of such purchase. 
 (b) Acceleration of Exercisability and Vesting. The Board shall have the power to
accelerate the time at which an Award may first be exercised or the time during which an Award or any part thereof will vest in accordance with the Plan, notwithstanding the provisions in the Award stating the time at which it may first be exercised
or the time during which it will vest. 
 (c) Stockholder Rights. 
 (i) Options. Unless otherwise provided in and upon the terms and conditions in the Option Agreement, no Participant shall be deemed
to be the holder of, or to have any of the rights of a holder with respect to, any Common Stock subject to an Option unless and until such Participant has satisfied all requirements for exercise of, and has exercised, the Option pursuant to its
terms. 
 (ii) Restricted Stock. Unless otherwise provided in and upon the terms and conditions in the restricted stock
Award Agreement, a Participant shall have the right to receive all dividends and other distributions paid or made respecting such restricted stock, provided, however, no unvested restricted stock shall have any voting rights of a stockholder
respecting such unvested restricted stock unless and until such unvested restricted stock become vested. 
 (d) No Employment or other
Service Rights. Nothing in the Plan or any instrument executed or Award granted pursuant thereto shall confer upon any Participant any right to continue to serve the Company or an Affiliate in the capacity in effect at the time the Award was
granted, or any other capacity, or shall affect the right of the Company or an Affiliate to terminate with or without notice and with or without cause (i) the employment of an Employee or an Affiliate or (ii) the service of a Director of
the Company or an Affiliate. 
 (e) Withholding Obligations. If the Company has or will have a legal obligation to withhold the taxes
related to the grant, vesting or exercise of the Award, such Award may not be granted, vested or exercised in whole or in part, unless such tax obligation is first satisfied in a manner satisfactory to the Company. To the extent provided by the
terms of an Award Agreement or Option Agreement, the Participant may satisfy any federal, state or local tax withholding obligation relating to the exercise or acquisition of Common Stock under an Award 

  

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by any of the following means (in addition to the Company’s right to withhold from any compensation paid to the Participant by the Company) or by a
combination of such means: (i) tendering a cash payment in Dollars; (ii) authorizing the Company to withhold Common Stock from the Common Stock otherwise issuable to the Participant as a result of the exercise or acquisition of Common
Stock under the Award, provided, however, that no shares of Common Stock are withheld with a value exceeding the minimum amount of tax required to be withheld by law; or (iii) delivering to the Company owned and unencumbered Common Stock.

 (f) Listing and Qualification of Stock. This Plan and the grant and exercise of Awards hereunder, and the obligation of the Company
to sell and deliver Common Stock under such Awards, shall be subject to all applicable United States federal and state laws, rules and regulations, and any other laws applicable to the Company, and to such approvals by any government or regulatory
agency as may be required. The Company, in its discretion, may postpone the issuance or delivery of Common Stock upon any exercise of an Award until completion of any stock exchange listing, or the receipt of any required approval from any stock
exchange or other qualification of such Common Stock under any United States federal or state law rule or regulation as the Company may consider appropriate, and may require any individual to whom an Award is granted, such individual’s
beneficiary or legal representative, as applicable, to make such representations and furnish such information as the Board may consider necessary, desirable or advisable in connection with the issuance or delivery of the Common Stock in compliance
with applicable laws, rules and regulations. 
 (g) Non-Uniform Determinations. The Board’s determinations under this Plan
(including, without limitation, determinations of the persons to receive Awards, the form, term, provisions, amount and timing of the grant of such Awards and of the agreements evidencing the same) need not be uniform and may be made by it
selectively among persons who receive, or are eligible to receive, Awards under this Plan, whether or not such persons are similarly situated. 
 11.
ADJUSTMENTS UPON CHANGES IN STOCK. 
 (a) Capitalization Adjustments. If any change is made in the Common Stock subject to the
Plan, or subject to any Award, without the receipt of consideration by the Company (through merger, consolidation, reorganization, recapitalization, reincorporation, stock dividend, dividend in property other than cash, stock split, liquidating
dividend, combination of stock, exchange of stock, change in corporate structure or other transaction), the Plan will be appropriately adjusted in the class(es) and maximum number of securities subject to the Plan pursuant to subsection 4(a) and the
maximum number of securities subject to award to any person pursuant to subsection 5(c), and the outstanding Awards will be appropriately adjusted in the class(es) and number of securities and price per stock of Common Stock subject to such
outstanding Awards. The Board shall make such adjustments, and its determination shall be final, binding and conclusive. (The conversion of any convertible securities of the Company shall not be treated as a transaction “without receipt of
consideration” by the Company.) 
 (b) Dissolution or Liquidation. In the event of a dissolution or liquidation of the Company,
then all outstanding Awards shall terminate immediately prior to such event. 
  

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 (c) Asset Sale, Merger, Consolidation or Reverse Merger. In the event of a Change of Control (as
defined below), any unvested Awards shall vest immediately prior to the closing of the Change of Control, and the Board shall have the power and discretion to provide for the Participant’s election alternatives regarding the terms and
conditions for the exercise of, or modification of, any outstanding Awards granted hereunder, provided, however, such alternatives shall not affect the then current exercise provisions without such Participant’s consent. The Board may provide
that Awards granted hereunder must be exercised in connection with the closing of such transaction, and that if not so exercised such Awards will expire. Any such determinations by the Board may be made generally with respect to all Participants, or
may be made on a case-by-case basis with respect to particular Participants. For the purpose of this Plan, a “Change of Control” shall have occurred in the event one or more persons acting individually or as a group (i) acquires
sufficient additional stock to constitute more than fifty percent (50%) of (A) the total Fair Market Value of all Common Stock issued and outstanding or (B) the total voting power of all shares of capital stock authorized to vote for
the election of directors; (ii) acquires, in a twelve (12) month period, thirty-five percent (35%) or more of the voting power of all shares of capital stock authorized to vote for the election of directors, or alternatively a
majority of the members of the board is replaced during any twelve (12) month period by directors whose appointment was not endorsed by a majority of the members of the board; or (iii) acquires, during a twelve (12) month period, more
than forty percent (40%) of the total gross fair market value of all of the Company’s assets. Notwithstanding the foregoing, the provisions of this Section 11(c) shall not apply to (i) any transaction involving any stockholder
that individually or as a group owns more than fifty percent (50%) of the outstanding Common Stock on the date this Plan is approved by the Company’s stockholders, until such time as such stockholder first owns less than forty percent
(40%) of the total outstanding Common Stock, or (ii) any transaction undertaken for the purpose of reincorporating the Company under the laws of another jurisdiction, if such transaction does not materially affect the beneficial ownership
of the Company’s capital stock. 
 12. AMENDMENT OF THE PLAN AND AWARDS. 
 (a) Amendment of Plan. The Board at any time, and from time to time, may amend the Plan. However, except as provided in Section 11 relating
to adjustments upon changes in Common Stock, no amendment shall be effective unless approved by the stockholders of the Company to the extent stockholder approval is necessary to satisfy the requirements of Section 422 of the Code, Rule 16b-3
or any applicable Nasdaq or securities exchange listing requirements. 
 (b) Stockholder Approval. The Board may, in its sole
discretion, submit any other amendment to the Plan for stockholder approval, including, but not limited to, amendments to the Plan intended to satisfy the requirements of Section 162(m) of the Code and the regulations thereunder regarding the
exclusion of performance-based compensation from the limit on corporate deductibility of compensation paid to certain executive officers. 
 (c) Contemplated Amendments. It is expressly contemplated that the Board may amend the Plan in any respect the Board deems necessary or advisable to provide eligible Employees with the maximum benefits provided or to be provided
under the provisions of the 

  

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Code and the regulations promulgated thereunder relating to Incentive Stock Options and/or to bring the Plan and/or Incentive Stock Options granted under it
into compliance therewith. 
 (d) No Impairment of Rights. Rights under any Award granted before amendment of the Plan shall not be
impaired by any amendment of the Plan unless the Participant consents in writing. 
 (e) Amendment of Awards. Subject to
Section 3(b)(iii), the Board at any time, and from time to time, may amend the terms of any one or more Awards; provided, however, that the rights under any Award shall not be impaired by any such amendment unless the applicable Participant
consents in writing. 
 13. TERMINATION OR SUSPENSION OF THE PLAN. 
 (a) Plan Term. The Board may suspend or terminate the Plan at any time. Unless sooner terminated, the Plan shall terminate on the day before the tenth (10th) anniversary of the date the Plan is adopted by
the stockholders of the Company. No Awards may be granted under the Plan while the Plan is suspended or after it is terminated. 
 (b) No
Impairment of Rights. Suspension or termination of the Plan shall not impair rights and obligations under any Award granted while the Plan is in effect except with the written consent of the Participant. 
 (c) Savings Clause. This Plan is intended to comply in all aspects with applicable laws and regulations. In case any one or more of the provisions
of this Plan shall be held invalid, illegal or unenforceable in any respect under applicable law or regulation, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby and the
invalid, illegal or unenforceable provision shall be deemed null and void; however, to the extent permissible by law, any provision which could be deemed null and void shall first be construed, interpreted or revised retroactively to permit this
Plan to be construed in compliance with all applicable laws so as to foster the intent of this Plan. 
 14. EFFECTIVE DATE OF PLAN. 
 The Plan shall become effective as determined by the Board, but no Award shall be exercised (or, in the case of a restricted stock Award, shall be granted) unless and
until the Plan has been approved by the stockholders of the Company, which approval shall be within twelve (12) months before or after the date the Plan is adopted by the Board. 
 15. CHOICE OF LAW. 
 The law of the state of Nevada shall govern all questions concerning the construction, validity
and interpretation of this Plan, without regard to such state’s conflict of laws rules. 
  

 -12-Form of Stock Option Agreement (ISO and Non-Qualified) 2005 Stock Option Plan

 Exhibit 10.3 
 DIGITAL ALLY, INC. 
 2005 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 

  

 -1- 

 
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. 
  

 -2- 

 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, 

  

 -3- 

 
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] 
  

 -4- 

 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
	 		 		 	

			
	  	  	e

 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

  

 -5- 

 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-

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