Document:

Exhibit 10.49

 

SECURITIES
PURCHASE AGREEMENT

 

SECURITIES
PURCHASE AGREEMENT (the “Agreement”), dated as of August 25, 2014, by and among Digital Ally, Inc., a Nevada
corporation, with headquarters located at 9705 Loiret Boulevard, Lenexa, Kansas 66219 (the “Company”), and
the investors listed on the Schedule of Buyers attached hereto (individually, a “Buyer” and collectively, the
“Buyers”).

 

WHEREAS:

 

A.
The Company and each Buyer is executing and delivering this Agreement in reliance upon the exemption from securities registration
afforded by Section 4(a)(2) of the Securities Act of 1933, as amended (the “1933 Act”), and Rule 506(b) of
Regulation D (“Regulation D”) as promulgated by the United States Securities and Exchange Commission (the “SEC”)
under the 1933 Act.

 

B.
The Company has authorized a new series of senior secured convertible notes of the Company, in substantially the form attached
hereto as Exhibit A (the “Notes”), which Notes shall be convertible into the Company’s common
stock, par value $0.001 per share (the ”Common Stock”) (the shares of Common Stock issuable pursuant to the
terms of the Notes, including, without limitation, upon conversion or otherwise, collectively, the “Conversion Shares”),
in accordance with the terms of the Notes.

 

C.
Each Buyer wishes to purchase, and the Company wishes to sell, upon the terms and conditions stated in this Agreement, (i) that
aggregate principal amount of Notes set forth opposite such Buyer’s name in column (3) on the Schedule of Buyers attached
hereto (which aggregate principal amount of Notes for all Buyers shall be $4,000,000), and (ii) Warrants, in substantially the
form attached hereto as Exhibit B (the “ Warrants”), representing the right to acquire that number of
shares of Common Stock set forth opposite such Buyer’s name in column (4) on the Schedule of Buyers (as exercised, collectively,
the “Warrant Shares”).

 

D.
Contemporaneously with the execution and delivery of this Agreement, the parties hereto are executing and delivering a Registration
Rights Agreement, substantially in the form attached hereto as Exhibit C (the “Registration Rights Agreement”),
pursuant to which the Company has agreed to provide certain registration rights with respect to the Registrable Securities (as
defined in the Registration Rights Agreement) under the 1933 Act and the rules and regulations promulgated thereunder, and applicable
state securities laws.

 

E.
The Notes and those certain Senior Secured Convertible Notes (the “March 2014 Notes”), issued on March 24,
2014, pursuant to that certain Securities Purchase Agreement, dated as of March 21, 2014, by and between the Company and the investor
listed on the signature page attached thereto (the “March 2014 SPA” and the private placement effected pursuant
to the March 2014 SPA, the “March 2014 Private Placement”) (i) will rank senior to all outstanding and future
indebtedness of the Company, and its Subsidiaries (as defined below), (ii) will be guaranteed by all direct and indirect Subsidiaries
(as defined in Section 3(a)) of the Company, currently formed or formed in the future, as evidenced by a guarantee agreement,
in the form attached hereto as Exhibit D (as amended or modified from time to time in accordance with its terms, the “Guarantee
Agreement”), (iii) will be secured by a first priority perfected security interest (subject to Permitted Liens under
and as defined in the Notes) in all of the current and future assets of the Company and all direct and indirect Subsidiaries of
the Company, currently formed or formed in the future, as evidenced by a pledge and security agreement, substantially in the form
attached hereto as Exhibit E, (as amended or modified from time to time in accordance with its terms, the “Security
Agreement”) and (iv) will rank pari passu with one another.

 

    	 

    	 

    

 

F.
The Notes, the Conversion Shares, the Warrants and the Warrant Shares collectively are referred to herein as the “Securities”.

 

NOW,
THEREFORE, the Company and each Buyer hereby agree as follows:

 

1.
PURCHASE AND SALE OF NOTES AND WARRANTS.

 

(a)
Purchase of Notes and Warrants. Subject to the satisfaction (or waiver) of the conditions set forth in Sections 6 and 7
below, the Company shall issue and sell to each Buyer, and each Buyer severally, but not jointly, agrees to purchase from the
Company on the Closing Date (as defined below), (x) a principal amount of Notes as is set forth opposite such Buyer’s name
in column (3) on the Schedule of Buyers and (y) Warrants to acquire up to that number of Warrant Shares as is set forth opposite
such Buyer’s name in column (4) on the Schedule of Buyers (the “Closing”).

 

(b)
Closing. The date and time of the Closing (the “Closing Date”) shall be 10:00 a.m., New York City time,
on the date hereof (or such other date and time as is mutually agreed to by the Company and each Buyer) after notification of
satisfaction (or waiver) of the conditions to the Closing set forth in Sections 6 and 7 below, at the offices of Schulte Roth
& Zabel LLP, 919 Third Avenue, New York, New York 10022.

 

(c)
Purchase Price. The aggregate purchase price for the Notes and the Warrants to be purchased by each Buyer at the Closing
(the “Purchase Price”) shall be the amount set forth opposite each Buyer’s name in column (5) of the
Schedule of Buyers. Each Buyer shall pay $1,000 for each $1,000 of principal amount of Notes and related Warrants to be purchased
by such Buyer at the Closing. The Buyers and the Company agree that the Notes and the Warrants constitute an “investment
unit” for purposes of Section 1273(c)(2) of the Internal Revenue Code of 1986, as amended (the “Code”).
The Buyers and the Company mutually agree that the allocation of the issue price of such investment unit between the Notes and
the Warrants in accordance with Section 1273(c)(2) of the Code and Treasury Regulation Section 1.1273-2(h) shall be an aggregate
amount of $10,000 allocated to the Warrants and the balance of the Purchase Price allocated to the Notes, and neither the Buyers
nor the Company shall take any position inconsistent with such allocation in any tax return or in any judicial or administrative
proceeding in respect of taxes.

 

(d)
Form of Payment. On the Closing Date, (i) each Buyer shall pay its applicable purchase price to the Company for the Notes
and the Warrants to be issued and sold to such Buyer at the Closing (less, in the case of Hudson Bay Master Fund Ltd. (“Hudson
Bay”), the amounts withheld pursuant to Section 4(g)), by wire transfer of immediately available funds in accordance
with the Company’s written wire instructions and (ii) the Company shall deliver to each Buyer the Notes (allocated in the
principal amounts as such Buyer shall request) which such Buyer is then purchasing hereunder along with the Warrants (allocated
in the amounts as such Buyer shall request) which such Buyer is purchasing hereunder, in each case duly executed on behalf of
the Company and registered in the name of such Buyer or its designee.

 

    	- 2 -

    	 

    

 

2.
BUYER’S REPRESENTATIONS AND WARRANTIES. Each Buyer, severally and not jointly, represents and warrants with respect
to only itself that:

 

(a)
No Public Sale or Distribution. Such Buyer is (i) acquiring the Notes and the Warrants and (ii) upon conversion of the
Notes and exercise of the Warrants will acquire the Conversion Shares issuable pursuant to the Notes and the Warrant Shares issuable
upon exercise of the Warrants, for its own account and not with a view towards, or for resale in connection with, the public sale
or distribution thereof, except pursuant to sales registered or exempted under the 1933 Act; provided, however,
that by making the representations herein, such Buyer does not agree to hold any of the Securities for any minimum or other specific
term and reserves the right to dispose of the Securities at any time in accordance with or pursuant to a registration statement
or an exemption under the 1933 Act. Such Buyer is acquiring the Securities hereunder in the ordinary course of its business. Such
Buyer does not presently have any agreement or understanding, directly or indirectly, with any Person (as defined below) to distribute
any of the Securities. For purposes of this Agreement, “Person” means an individual, a limited liability company,
a partnership, a joint venture, a corporation, a trust, an unincorporated organization and a government or any department or agency
thereof.

 

(b)
Accredited Investor Status. Such Buyer is an “accredited investor” as that term is defined in Rule 501(a) of
Regulation D.

 

(c)
Reliance on Exemptions. Such Buyer understands that the Securities are being offered and sold to it in reliance on specific
exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying
in part upon the truth and accuracy of, and such Buyer’s compliance with, the representations, warranties, agreements, acknowledgments
and understandings of such Buyer set forth herein in order to determine the availability of such exemptions and the eligibility
of such Buyer to acquire the Securities.

 

(d)
Information. Such Buyer and its advisors, if any, have been furnished with all materials relating to the business, finances
and operations of the Company and materials relating to the offer and sale of the Securities that have been requested by such
Buyer. Such Buyer and its advisors, if any, have been afforded the opportunity to ask questions of the Company. Neither such inquiries
nor any other due diligence investigations conducted by such Buyer or its advisors, if any, or its representatives shall modify,
amend or affect such Buyer’s right to rely on the Company’s representations and warranties contained herein. Such
Buyer understands that its investment in the Securities involves a high degree of risk. Such Buyer has sought such accounting,
legal and tax advice as it has considered necessary to make an informed investment decision with respect to its acquisition of
the Securities.

 

    	- 3 -

    	 

    

 

(e)
No Governmental Review. Such Buyer understands that no United States federal or state agency or any other government or
governmental agency has passed on or made any recommendation or endorsement of the Securities or the fairness or suitability of
the investment in the Securities nor have such authorities passed upon or endorsed the merits of the offering of the Securities.
Such Buyer acknowledges and agrees that neither the Placement Agent (as defined below) nor any Affiliate of the Placement Agent
has provided such Buyer with any information or advice with respect to the Securities nor is such information or advice necessary
or desired. Neither the Placement Agent nor any Affiliate has made or makes any representation as to the Company or the quality
of the Securities and the Placement Agent and any Affiliate may have acquired non-public information with respect to the Company
which such Buyer agrees need not be provided to it. In connection with the issuance of the Securities to such Buyer, neither the
Placement Agent nor any of its Affiliates has acted as a financial advisor or fiduciary to such Buyer.

 

(f)
Transfer or Resale. Such Buyer understands that except as provided in the Registration Rights Agreement: (i) the Securities
have not been and are not being registered under the 1933 Act or any state securities laws, and may not be offered for sale, sold,
assigned or transferred unless (A) subsequently registered thereunder, (B) such Buyer shall have delivered to the Company an opinion
of counsel, in a generally acceptable form, to the effect that such Securities to be sold, assigned or transferred may be sold,
assigned or transferred pursuant to an exemption from such registration, or (C) such Buyer provides the Company with reasonable
assurance that such Securities can be sold, assigned or transferred pursuant to Rule 144 or Rule 144A promulgated under the 1933
Act, as amended, (or a successor rule thereto) (collectively, “Rule 144”); (ii) any sale of the Securities
made in reliance on Rule 144 may be made only in accordance with the terms of Rule 144 and further, if Rule 144 is not applicable,
any resale of the Securities under circumstances in which the seller (or the Person) through whom the sale is made) may be deemed
to be an underwriter (as that term is defined in the 1933 Act) may require compliance with some other exemption under the 1933
Act or the rules and regulations of the SEC thereunder; and (iii) neither the Company nor any other Person is under any obligation
to register the Securities under the 1933 Act or any state securities laws or to comply with the terms and conditions of any exemption
thereunder. Notwithstanding the foregoing, the Securities may be pledged in connection with a bona fide margin account or other
loan or financing arrangement secured by the Securities and such pledge of Securities shall not be deemed to be a transfer, sale
or assignment of the Securities hereunder, and no Buyer effecting a pledge of Securities shall be required to provide the Company
with any notice thereof or otherwise make any delivery to the Company pursuant to this Agreement or any other Transaction Document
(as defined in Section 3(b)), including, without limitation, this Section 2(f).

 

(g)
Legends. Such Buyer understands that the certificates or other instruments representing the Notes and the Warrants and,
until such time as the resale of the Conversion Shares and the Warrant Shares have been registered under the 1933 Act as contemplated
by the Registration Rights Agreement, the stock certificates representing the Conversion Shares and the Warrant Shares, except
as set forth below, shall bear any legend as required by the “blue sky” laws of any state and a restrictive legend
in substantially the following form (and a stop-transfer order may be placed against transfer of such stock certificates):

 

    	- 4 -

    	 

    

 

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

 

The
legend set forth above shall be removed and the Company shall issue a certificate without such legend to the holder of the Securities
upon which it is stamped or issue to such holder by electronic delivery at the applicable balance account at The Depository Trust
Company (“DTC”), if, unless otherwise required by state securities laws, (i) such Securities are registered
for resale under the 1933 Act, (ii) in connection with a sale, assignment or other transfer, such holder provides the Company
with an opinion of counsel, in a generally acceptable form, to the effect that such sale, assignment or transfer of the Securities
may be made without registration under the applicable requirements of the 1933 Act, or (iii) the Securities can be sold, assigned
or transferred pursuant to Rule 144 or Rule 144A. The Company shall be responsible for the fees of its transfer agent and all
DTC fees associated with such issuance.

 

(h)
Validity; Enforcement. This Agreement and the Registration Rights Agreement have been duly and validly authorized, executed
and delivered on behalf of such Buyer and shall constitute the legal, valid and binding obligations of such Buyer enforceable
against such Buyer in accordance with their respective terms, except as such enforceability may be limited by general principles
of equity or to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and other similar laws relating to,
or affecting generally, the enforcement of applicable creditors’ rights and remedies.

 

(i)
No Conflicts. The execution, delivery and performance by such Buyer of this Agreement and the Registration Rights Agreement
and the consummation by such Buyer of the transactions contemplated hereby and thereby will not (i) result in a violation of the
organizational documents of such Buyer or (ii) conflict with, or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation
of, any agreement, indenture or instrument to which such Buyer is a party, or (iii) result in a violation of any law, rule, regulation,
order, judgment or decree (including federal and state securities laws) applicable to such Buyer, except in the case of clauses
(ii) and (iii) above, for such conflicts, defaults, rights or violations which would not, individually or in the aggregate, reasonably
be expected to have a material adverse effect on the ability of such Buyer to perform its obligations hereunder.

 

    	- 5 -

    	 

    

 

(j)
Residency. Such Buyer is a resident of that jurisdiction specified below its address on the Schedule of Buyers.

 

3.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

 

The
Company represents and warrants to each of the Buyers that:

 

(a)
Organization and Qualification. Each of the Company and its “Subsidiaries” (which for purposes of this
Agreement means any entity in which the Company, directly or indirectly, owns any of the capital stock or holds an equity or similar
interest) are entities duly organized and validly existing in good standing under the laws of the jurisdiction in which they are
formed, and have the requisite power and authorization to own their properties and to carry on their business as now being conducted.
Each of the Company and its Subsidiaries is duly qualified as a foreign entity to do business and is in good standing in every
jurisdiction in which its ownership of property or the nature of the business conducted by it makes such qualification necessary,
except to the extent that the failure to be so qualified or be in good standing would not reasonably be expected to have a Material
Adverse Effect. As used in this Agreement, “Material Adverse Effect” means any material adverse effect on the
business, properties, assets, operations, results of operations, condition (financial or otherwise) or prospects of the Company
and its Subsidiaries, individually or taken as a whole, or on the transactions contemplated hereby or on the other Transaction
Documents or by the agreements and instruments to be entered into in connection herewith or therewith, or on the authority or
ability of the Company to perform its obligations under the Transaction Documents. The Company has no Subsidiaries except as set
forth on Schedule 3(a).

 

(b)
Authorization; Enforcement; Validity. The Company has the requisite power and authority to enter into and perform its obligations
under this Agreement, the Notes, the Warrants, the Registration Rights Agreement, the Lock-up Agreements (as defined in Section7(x)),
the Irrevocable Transfer Agent Instructions (as defined in Section 5(b)), the Security Documents (as defined below), the Voting
Agreements (as defined in Section 4(s)) and each of the other agreements entered into by the parties hereto in connection with
the transactions contemplated by this Agreement (collectively, the “Transaction Documents”) and to issue the
Securities in accordance with the terms hereof and thereof. The execution and delivery of the Transaction Documents by the Company
and the consummation by the Company of the transactions contemplated hereby and thereby, including, without limitation, the issuance
of the Notes and the Warrants, and the reservation for issuance and the issuance of the Conversion Shares and the reservation
for issuance and issuance of Warrant Shares issuable upon exercise of the Warrants have been duly authorized by the Company’s
Board of Directors and (other than the filing with the SEC of one or more Registration Statements (as defined in the Registration
Rights Agreement) in accordance with the requirements of the Registration Rights Agreement and (other filings as may be required
by state securities agencies) no further filing, consent, or authorization is required by the Company, its Board of Directors
or its stockholders. This Agreement and the other Transaction Documents have been duly executed and delivered by the Company,
and constitute the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their
respective terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement of applicable creditors’
rights and remedies. Each of the Subsidiaries party to any of the Transaction Documents has the requisite power and authority
to enter into and perform its obligations under such Transaction Documents. The execution and delivery by the Subsidiaries party
to any of the Transaction Documents of such Transaction Documents and the consummation by such Subsidiaries of the transactions
contemplated thereby have been duly authorized by such Subsidiaries’ respective boards of directors (or other applicable
governing body) and (other than filings as may be required by state securities agencies) no further filing, consent, or authorization
is required by such Subsidiaries, their respective boards of directors (or other applicable governing body) or stockholders (or
other applicable owners of equity of such Subsidiaries). The Transaction Documents to which any of the Subsidiaries are parties
have been duly executed and delivered by such Subsidiaries, and constitute the legal, valid and binding obligations of such Subsidiaries,
enforceable against them in accordance with their respective terms, except as such enforceability may be limited by general principles
of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting
generally, the enforcement of applicable creditors’ rights and remedies. For purposes of this Agreement, the term “Security
Documents” means Guarantee Agreement, the Security Agreement, that certain Reaffirmation Agreement in the form attached
hereto as Exhibit F (as amended or modified from time to time in accordance with its terms, the “Reaffirmation
Agreement”), any account control agreement, any and all financing statements, fixture filings, security agreements,
pledges, assignments, mortgages, deeds of trust, opinions of counsel, and all other documents requested by the Collateral Agent
to create, perfect, and continue perfected or to better perfect the Collateral Agent’s security interest in and liens on
all of the assets of the Company and each of its Subsidiaries (whether now owned or hereafter arising or acquired, tangible or
intangible, real or personal), and in order to fully consummate all of the transactions contemplated hereby and under the other
Transaction Documents. 

 

    	- 6 -

    	 

    

 

(c)
Issuance of Securities. The issuance of the Notes and the Warrants are duly authorized and, upon issuance, shall be validly
issued and free from all taxes, liens and charges with respect to the issue thereof. As of the Closing, a number of shares of
Common Stock shall have been duly authorized and reserved for issuance which equals or exceeds (the “Required Reserved
Amount”) 130% of the sum of (i) the maximum number of Conversion Shares issued and issuable pursuant to the Notes based
on the Conversion Price (as defined in the Notes) (without taking into account any limitations on the issuance thereof pursuant
to the terms of the Notes) and (ii) the maximum number of Warrant Shares issued and issuable pursuant to the Warrants, each as
of the Trading Day (as defined in the Warrants) immediately preceding the applicable date of determination (without taking into
account any limitations on the exercise of the Warrants set forth in the Warrants). As of the date hereof, there are 6,604,691
shares of Common Stock authorized and unissued. Upon conversion of the Notes in accordance with the Notes or exercise of the Warrants
in accordance with the Warrants, as the case may be, the Conversion Shares and the Warrant Shares, respectively, will be validly
issued, fully paid and nonassessable and free from all preemptive or similar rights, taxes, liens and charges with respect to
the issue thereof, with the holders being entitled to all rights accorded to a holder of Common Stock. Assuming the accuracy of
each of the representations and warranties set forth in Section 2 of this Agreement, the offer and issuance by the Company of
the Securities is exempt from registration under the 1933 Act.

 

(d)
No Conflicts. The execution, delivery and performance of the Transaction Documents by the Company and any of its Subsidiaries
parties to any of the Transaction Documents and the consummation by the Company and any of its Subsidiaries of the transactions
contemplated hereby and thereby (including, without limitation, the issuance of the Notes and the Warrants and reservation for
issuance and issuance of the Conversion Shares and the Warrant Shares) will not (i) result in a violation of the Articles of Incorporation
(as defined in Section (3(r)) or ByLaws (as defined in Section (3(r)), any memorandum of association, certificate of incorporation,
certificate of formation, bylaws, any certificate of designations or other constituent documents of the Company or any of its
Subsidiaries, any capital stock of the Company or any of its Subsidiaries or the articles of association or bylaws of the Company
or any of its Subsidiaries or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both
would become a default) in any respect under, or give to others any rights of termination, amendment, acceleration or cancellation
of, any material agreement, indenture or instrument to which the Company or any of its Subsidiaries is a party, or (iii) result
in a violation of any law, rule, regulation, order, judgment or decree (including foreign, federal and state securities laws and
regulations and the rules and regulations of The NASDAQ Capital Market (the “Principal Market”) and including
all applicable foreign, federal and state laws, rules and regulations) applicable to the Company or any of its Subsidiaries or
by which any property or asset of the Company or any of its Subsidiaries is bound or affected.

 

    	- 7 -

    	 

    

 

(e)
Consents. Neither the Company nor any of its Subsidiaries is required to obtain any consent, authorization or order of,
or make any filing or registration with, any court, governmental agency or any regulatory or self-regulatory agency or any other
Person in order for it to execute, deliver or perform any of its obligations under or contemplated by the Transaction Documents,
in each case in accordance with the terms hereof or thereof. All consents, authorizations, orders, filings and registrations which
the Company or any of its Subsidiaries is required to obtain pursuant to the preceding sentence have been obtained or effected
on or prior to the Closing Date, and the Company and its Subsidiaries are unaware of any facts or circumstances that might prevent
the Company or any of its Subsidiaries from obtaining or effecting any of the registration, application or filings pursuant to
the preceding sentence. The Company is not in violation of the listing requirements of the Principal Market and has no knowledge
of any facts that would reasonably lead to delisting or suspension of the Common Stock in the foreseeable future. The issuance
by the Company of the Securities shall not have the effect of delisting or suspending the Common Stock from the Principal Market.

 

(f)
Acknowledgment Regarding Buyer’s Purchase of Securities. The Company acknowledges and agrees that each Buyer is acting
solely in the capacity of an arm’s length purchaser with respect to the Transaction Documents and the transactions contemplated
hereby and thereby and that no Buyer is (i) an officer or director of the Company or any of its Subsidiaries, (ii) an “affiliate”
of the Company or any of its Subsidiaries (as defined in Rule 144) or (iii) to the knowledge of the Company, a “beneficial
owner” of more than 10% of the shares of Common Stock (as defined for purposes of Rule 13d-3 of the Securities Exchange
Act of 1934, as amended (the “1934 Act”)). The Company further acknowledges that no Buyer is acting as a financial
advisor or fiduciary of the Company or any of its Subsidiaries (or in any similar capacity) with respect to the Transaction Documents
and the transactions contemplated hereby and thereby, and any advice given by a Buyer or any of its representatives or agents
in connection with the Transaction Documents and the transactions contemplated hereby and thereby is merely incidental to such
Buyer’s purchase of the Securities. The Company further represents to each Buyer that the Company’s decision to enter
into the Transaction Documents has been based solely on the independent evaluation by the Company and its representatives.

 

    	- 8 -

    	 

    

 

(g)
No General Solicitation; Placement Agent’s Fees. Neither the Company, nor any of its Subsidiaries or affiliates,
nor any Person acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the
meaning of Regulation D) in connection with the offer or sale of the Securities. The Company shall be responsible for the payment
of any placement agent’s fees, financial advisory fees, or brokers’ commissions (other than for persons engaged by
any Buyer or its investment advisor) relating to or arising out of the transactions contemplated hereby, including, without limitation,
placement agent fees payable to WestPark Capital, Inc., as placement agent (the “Placement Agent”) in connection
with the sale of the Securities. The fees and expenses of the Placement Agent to be paid by the Company are as set forth on Schedule
3(g) attached hereto. The Company shall pay, and hold each Buyer harmless against, any liability, loss or expense (including,
without limitation, attorney’s fees and out-of-pocket expenses) arising in connection with any such claim. The Company acknowledges
that it has engaged the Placement Agent in connection with the sale of the Securities. Other than the Placement Agent, neither
the Company nor any of its Subsidiaries has engaged any placement agent or other agent in connection with the sale of the Securities.

 

(h)
No Integrated Offering. None of the Company, its Subsidiaries, any of their affiliates, and any Person acting on their
behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under
circumstances that would require registration of any of the Securities under the 1933 Act, whether through integration with prior
offerings or otherwise, or cause this offering of the Securities to require approval of stockholders of the Company for purposes
of the 1933 Act or any applicable stockholder approval provisions, including, without limitation, under the rules and regulations
of any exchange or automated quotation system on which any of the securities of the Company are listed or designated. None of
the Company, its Subsidiaries, their affiliates and any Person acting on their behalf will take any action or steps referred to
in the preceding sentence that would require registration of any of the Securities under the 1933 Act or cause the offering of
the Securities to be integrated with other offerings for purposes of any such applicable stockholder approval provisions.

 

(i)
Dilutive Effect. The Company understands and acknowledges that the number of Conversion Shares issuable pursuant to terms
of the Notes will increase in certain circumstances. The Company further acknowledges that its obligation to issue Conversion
Shares pursuant to the terms of the Notes in accordance with this Agreement and the Notes is absolute and unconditional regardless
of the dilutive effect that such issuance may have on the ownership interests of other stockholders of the Company.

 

    	- 9 -

    	 

    

 

(j)
Application of Takeover Protections; Rights Agreement. The Company and its board of directors have taken all necessary
action, if any, in order to render inapplicable any control share acquisition, business combination, poison pill (including any
distribution under a rights agreement) or other similar anti-takeover provision under the Articles of Incorporation or the laws
of the jurisdiction of its formation which is or could become applicable to any Buyer as a result of the transactions contemplated
by this Agreement, including, without limitation, the Company’s issuance of the Securities and any Buyer’s ownership
of the Securities. The Company has not adopted a stockholder rights plan or similar arrangement relating to accumulations of beneficial
ownership of Common Stock or a change in control of the Company.

 

(k)
SEC Documents; Financial Statements. Except as disclosed in Schedule 3(k), during the two (2) years prior to the
date hereof, the Company has timely filed all reports, schedules, forms, statements and other documents required to be filed by
it with the SEC pursuant to the reporting requirements of the 1934 Act (all of the foregoing filed prior to the date hereof, and
all exhibits included therein and financial statements, notes and schedules thereto and documents incorporated by reference therein
being hereinafter referred to as the “SEC Documents”). The Company has delivered to the Buyers or their respective
representatives true, correct and complete copies of the SEC Documents not available on the EDGAR system. As of their respective
filing dates, the SEC Documents complied in all material respects with the requirements of the 1934 Act and the rules and regulations
of the SEC promulgated thereunder applicable to the SEC Documents, and none of the SEC Documents, at the time they were filed
with the SEC, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.
As of their respective filing dates, the financial statements of the Company included in the SEC Documents complied as to form
in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect
thereto. Such financial statements have been prepared in accordance with United States generally accepted accounting principles,
consistently applied (“GAAP”), during the periods involved (except (i) as may be otherwise indicated in such
financial statements or the notes thereto, or (ii) in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in all material respects the financial position of the
Company as of the dates thereof and the results of its operations and cash flows for the periods then ended (subject, in the case
of unaudited statements, to normal year-end audit adjustments). No other information provided by or on behalf of the Company to
the Buyers which is not included in the SEC Documents, including, without limitation, information referred to in Section 2(d)
of this Agreement or in the disclosure schedules to this Agreement, contains any untrue statement of a material fact or omits
to state any material fact necessary in order to make the statements therein, in the light of the circumstance under which they
are or were made, not misleading.

 

    	- 10 -

    	 

    

 

(l)
Absence of Certain Changes. Except as disclosed in Schedule 3(l), since December 31, 2013, there has been no material
adverse change and no material adverse development in the business, assets, properties, operations, condition (financial or otherwise),
results of operations or prospects of the Company or its Subsidiaries. Except as disclosed in Schedule 3(l), since December
31, 2013, neither the Company nor any of its Subsidiaries has (i) declared or paid any dividends, (ii) sold any assets, individually
or in the aggregate, in excess of $100,000 outside of the ordinary course of business or (iii) had capital expenditures, individually
or in the aggregate, in excess of $100,000. Neither the Company nor any of its Subsidiaries has taken any steps to seek protection
pursuant to any bankruptcy law nor does the Company have any knowledge or reason to believe that its creditors intend to initiate
involuntary bankruptcy proceedings or any actual knowledge of any fact that would reasonably lead a creditor to do so. The Company
and its Subsidiaries, individually and on a consolidated basis, are not as of the date hereof, and after giving effect to the
transactions contemplated hereby to occur at the Closing, will not be Insolvent (as defined below). For purposes of this Section
3(l), “Insolvent” means, with respect to any Person, (i) the present fair saleable value of such Person’s
assets is less than the amount required to pay such Person’s total Indebtedness (as defined in Section 3(s)), (ii) such
Person is unable to pay its debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become
absolute and matured, (iii) such Person intends to incur or believes that it will incur debts that would be beyond its ability
to pay as such debts mature or (iv) such Person has unreasonably small capital with which to conduct the business in which it
is engaged as such business is now conducted and is proposed to be conducted.

 

(m)
No Undisclosed Events, Liabilities, Developments or Circumstances. Except as disclosed in Schedule 3(m), no event,
liability, development or circumstance has occurred or exists, or is contemplated to occur with respect to the Company, its Subsidiaries
or their respective business, properties, prospects, operations or financial condition, that would be required to be disclosed
by the Company under applicable securities laws on a registration statement on Form S-1 filed with the SEC relating to an issuance
and sale by the Company of its Common Stock and which has not been publicly announced.

 

(n)
Conduct of Business; Regulatory Permits. Neither the Company nor any of its Subsidiaries is in violation of any term of
or in default under any certificate of designations of any outstanding series of preferred stock of the Company (if any), its
Articles of Incorporation or Bylaws or their organizational charter or memorandum of association or certificate of incorporation
or articles of association or bylaws, respectively. Neither the Company nor any of its Subsidiaries is in violation of any judgment,
decree or order or any statute, ordinance, rule or regulation applicable to the Company or any of its Subsidiaries, and neither
the Company nor any of its Subsidiaries will conduct its business in violation of any of the foregoing, except for possible violations
which could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Without limiting
the generality of the foregoing, the Company is not in violation of any of the rules, regulations or requirements of the Principal
Market and has no knowledge of any facts or circumstances that would reasonably lead to delisting or suspension of the Common
Stock by the Principal Market in the foreseeable future. Except as set forth in Schedule 3(n), during the two (2) years
prior to the date hereof, the Common Stock has been designated for quotation on the Principal Market. Except as set forth in Schedule
3(n), during the two (2) years prior to the date hereof, (i) trading in the Common Stock has not been suspended by the SEC
or the Principal Market and (ii) the Company has received no communication, written or oral, from the SEC or the Principal Market
regarding the suspension or delisting of the Common Stock from the Principal Market. The Company and its Subsidiaries possess
all certificates, authorizations and permits issued by the appropriate federal, state or foreign regulatory authorities necessary
to conduct their respective businesses, except where the failure to possess such certificates, authorizations or permits would
not have, individually or in the aggregate, a Material Adverse Effect, and neither the Company nor any such Subsidiary has received
any notice of proceedings relating to the revocation or modification of any such certificate, authorization or permit.

 

    	- 11 -

    	 

    

 

(o)
Foreign Corrupt Practices. Neither the Company, nor any of its Subsidiaries, nor any director, officer, agent, employee
or other Person acting on behalf of the Company or any of its Subsidiaries has, in the course of its actions for, or on behalf
of, the Company or any of its Subsidiaries (i) used any corporate funds for any unlawful contribution, gift, entertainment or
other unlawful expenses relating to political activity; (ii) made any direct or indirect unlawful payment to any foreign or domestic
government official or employee from corporate funds; (iii) violated or is in violation of any provision of the U.S. Foreign Corrupt
Practices Act of 1977, as amended; or (iv) made any unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful
payment to any foreign or domestic government official or employee.

 

(p)
Sarbanes-Oxley Act. The Company is in compliance with any and all applicable requirements of the Sarbanes-Oxley Act of
2002, as amended, that are effective as of the date hereof, and any and all applicable rules and regulations promulgated by the
SEC thereunder that are effective as of the date hereof.

 

(q)
Transactions With Affiliates. Except as set forth on Schedule 3(q), none of the officers, directors or employees
of the Company or any of its Subsidiaries is presently a party to any transaction with the Company or any of its Subsidiaries
(other than for ordinary course services as employees, officers or directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any such officer, director or employee or, to the knowledge of the Company or any of its Subsidiaries,
any corporation, partnership, trust or other entity in which any such officer, director, or employee has a substantial interest
or is an officer, director, trustee or partner.

 

(r)
Equity Capitalization. As of the date hereof, the authorized capital stock of the Company consists of 9,375,000 shares
of Common Stock, of which as of the date hereof, 2,706,791 shares are issued and outstanding, 468,952 shares are reserved for
issuance pursuant to the Company’s stock option and purchase plans and 228,438 shares are reserved for issuance pursuant
to securities (other than the aforementioned options, the Notes and the Warrants) exercisable or exchangeable for, or convertible
into, Common Stock. All of such outstanding shares have been, or upon issuance will be, validly issued and are fully paid and
nonassessable. Except as disclosed in Schedule 3(r): (i) none of the Company’s capital stock is subject to preemptive
rights or any other similar rights or any liens or encumbrances suffered or permitted by the Company; (ii) there are no outstanding
options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities
or rights convertible into, or exercisable or exchangeable for, any shares of capital stock of the Company or any of its Subsidiaries,
or contracts, commitments, understandings or arrangements by which the Company or any of its Subsidiaries is or may become bound
to issue additional shares or capital stock of the Company or any of its Subsidiaries or options, warrants, scrip, rights to subscribe
to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, or exercisable or
exchangeable for, any shares of capital stock of the Company or any of its Subsidiaries; (iii) there are no outstanding debt securities,
notes, credit agreements, credit facilities or other agreements, documents or instruments evidencing Indebtedness of the Company
or any of its Subsidiaries or by which the Company or any of its Subsidiaries is or may become bound; (iv) there are no financing
statements securing obligations in any material amounts, either singly or in the aggregate, filed in connection with the Company
or any of its Subsidiaries; (v) there are no agreements or arrangements under which the Company or any of its Subsidiaries is
obligated to register the sale of any of their securities under the 1933 Act (except pursuant to the Registration Rights Agreement);
(vi) there are no outstanding securities or instruments of the Company or any of its Subsidiaries which contain any redemption
or similar provisions, and there are no contracts, commitments, understandings or arrangements by which the Company or any of
its Subsidiaries is or may become bound to redeem a security of the Company or any of its Subsidiaries; (vii) there are no securities
or instruments containing anti-dilution or similar provisions that will be triggered by the issuance of the Securities; (viii)
the Company does not have any stock appreciation rights or “phantom stock” plans or agreements or any similar plan
or agreement; and (ix) the Company and its Subsidiaries have no liabilities or obligations required to be disclosed in the SEC
Documents but not so disclosed in the SEC Documents, other than those incurred in the ordinary course of the Company’s or
any of its Subsidiary’s’ respective businesses and which, individually or in the aggregate, do not or would not have
a Material Adverse Effect. The Company has furnished or made available to the Buyers true, correct and complete copies of the
Company’s Articles of Incorporation, as amended and as in effect on the date hereof (the “Articles of Incorporation”),
and the Company’s ByLaws, as amended and as in effect on the date hereof (the “ByLaws”), and the terms
of all securities convertible into, or exercisable or exchangeable for shares of Common Stock and the material rights of the holders
thereof in respect thereto.

 

    	- 12 -

    	 

    

 

(s)
Indebtedness and Other Contracts. Except as disclosed in Schedule 3(s), neither the Company nor any of its Subsidiaries
(i) has any outstanding Indebtedness (as defined below), (ii) is a party to any contract, agreement or instrument, the violation
of which, or default under which, by the other party(ies) to such contract, agreement or instrument could reasonably be expected
to result in a Material Adverse Effect, (iii) is in violation of any term of or in default under any contract, agreement or instrument
relating to any Indebtedness, except where such violations and defaults would not result, individually or in the aggregate, in
a Material Adverse Effect, or (iv) is a party to any contract, agreement or instrument relating to any Indebtedness, the performance
of which, in the judgment of the Company’s officers, has or is expected to have a Material Adverse Effect. Schedule 3(s)
provides a detailed description of the material terms of any such outstanding Indebtedness. For purposes of this Agreement:
(x) “Indebtedness” of any Person means, without duplication (A) all indebtedness for borrowed money, (B) all
obligations issued, undertaken or assumed as the deferred purchase price of property or services, including, without limitation,
“capital leases” in accordance with GAAP (other than trade payables entered into in the ordinary course of business
consistent with past practice), (C) all reimbursement or payment obligations with respect to letters of credit, surety bonds and
other similar instruments, (D) all obligations evidenced by notes, bonds, debentures or similar instruments, including obligations
so evidenced incurred in connection with the acquisition of property, assets or businesses, (E) all indebtedness created or arising
under any conditional sale or other title retention agreement, or incurred as financing, in either case with respect to any property
or assets acquired with the proceeds of such indebtedness (even though the rights and remedies of the seller or bank under such
agreement in the event of default are limited to repossession or sale of such property), (F) all monetary obligations under any
leasing or similar arrangement which, in connection with GAAP, consistently applied for the periods covered thereby, is classified
as a capital lease, (G) all indebtedness referred to in clauses (A) through (F) above secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by) any mortgage, lien, pledge, charge, security interest
or other encumbrance upon or in any property or assets (including accounts and contract rights) owned by any Person, even though
the Person which owns such assets or property has not assumed or become liable for the payment of such indebtedness, and (H) all
Contingent Obligations in respect of indebtedness or obligations of others of the kinds referred to in clauses (A) through (G)
above; and (y) “Contingent Obligation” means, as to any Person, any direct or indirect liability, contingent
or otherwise, of that Person with respect to any Indebtedness, lease, dividend or other obligation of another Person if the primary
purpose or intent of the Person incurring such liability, or the primary effect thereof, is to provide assurance to the obligee
of such liability that such liability will be paid or discharged, or that any agreements relating thereto will be complied with,
or that the holders of such liability will be protected (in whole or in part) against loss with respect thereto.

 

    	- 13 -

    	 

    

 

(t)
Absence of Litigation. There is no action, suit, proceeding, inquiry or investigation before or by the Principal Market,
any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the Company,
threatened against or affecting the Company or any of its Subsidiaries, the Common Stock or any of the Company’s Subsidiaries
or any of the Company’s or its Subsidiaries’ officers or directors, whether of a civil or criminal nature or otherwise,
in their capacities as such, except as set forth in Schedule 3(t). The matters set forth in Schedule 3(t) would
not reasonably be expected to have a Material Adverse Effect.

 

(u)
Insurance. The Company and each of its Subsidiaries are insured by insurers of recognized financial responsibility against
such losses and risks and in such amounts as management of the Company believes to be prudent and customary in the businesses
in which the Company and its Subsidiaries are engaged. Neither the Company nor any such Subsidiary has been refused any insurance
coverage sought or applied for and neither the Company nor any such Subsidiary has any reason to believe that it will not be able
to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers
as may be necessary to continue its business at a cost that would not have a Material Adverse Effect.

 

(v)
Employee Relations. 

 

(i)
Neither the Company nor any of its Subsidiaries is a party to any collective bargaining agreement or employs any member of a union.
The Company and its Subsidiaries believe that their relations with their employees are good. No executive officer of the Company
or any of its Subsidiaries (as defined in Rule 501(f) of the 1933 Act) has notified the Company or any such Subsidiary that such
officer intends to leave the Company or any such Subsidiary or otherwise terminate such officer’s employment with the Company
or any such Subsidiary. No executive officer of the Company or any of its Subsidiaries, to the knowledge of the Company or any
of its Subsidiaries, is, or is now expected to be, in violation of any material term of any employment contract, confidentiality,
disclosure or proprietary information agreement, non-competition agreement, or any other contract or agreement or any restrictive
covenant, and the continued employment of each such executive officer does not subject the Company or any of its Subsidiaries
to any liability with respect to any of the foregoing matters.

 

    	- 14 -

    	 

    

 

(ii)
The Company and its Subsidiaries are in compliance with all federal, state, local and foreign laws and regulations respecting
labor, employment and employment practices and benefits, terms and conditions of employment and wages and hours, except where
failure to be in compliance would not, either individually or in the aggregate, reasonably be expected to result in a Material
Adverse Effect.

 

(w)
Title. The Company and its Subsidiaries have good and marketable title in fee simple to all real property and good and
marketable title to all personal property owned by them which is material to the business of the Company and its Subsidiaries,
in each case free and clear of all liens, encumbrances and defects except for Permitted Liens. Any real property and facilities
held under lease by the Company and any of its Subsidiaries are held by them under valid, subsisting and enforceable leases with
such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings
by the Company and its Subsidiaries.

 

(x)
Intellectual Property Rights. The Company and its Subsidiaries own or possess adequate rights or licenses to use all trademarks,
trade names, service marks, service mark registrations, service names, original works of authorship, patents, patent rights, copyrights,
inventions, licenses, approvals, governmental authorizations, trade secrets and other intellectual property rights and all applications
and registrations therefor (“Intellectual Property Rights”) necessary to conduct their respective businesses
as now conducted. Each of patents owned by the Company or any of its Subsidiaries is listed on Schedule 3(x)(i). Except
as set forth in Schedule 3(x)(ii), none of the Company’s Intellectual Property Rights have expired or terminated
or have been abandoned or are expected to expire or terminate or are expected to be abandoned, within three years from the date
of this Agreement. The Company does not have any knowledge of any infringement by the Company or its Subsidiaries of Intellectual
Property Rights of others. There is no claim, action or proceeding being made or brought, or to the knowledge of the Company or
any of its Subsidiaries, being threatened, against the Company or any of its Subsidiaries regarding its Intellectual Property
Rights. Neither the Company nor any of its Subsidiaries is aware of any facts or circumstances which might give rise to any of
the foregoing infringements or claims, actions or proceedings. The Company and its Subsidiaries have taken reasonable security
measures to protect the secrecy, confidentiality and value of all of their Intellectual Property Rights.

 

(y)
Environmental Laws. The Company and its Subsidiaries (i) are in compliance with any and all Environmental Laws (as hereinafter
defined), (ii) have received all permits, licenses or other approvals required of them under applicable Environmental Laws to
conduct their respective businesses and (iii) are in compliance with all terms and conditions of any such permit, license or approval
where, in each of the foregoing clauses (i), (ii) and (iii), the failure to so comply could be reasonably expected to have, individually
or in the aggregate, a Material Adverse Effect. The term “Environmental Laws” means all federal, state, local
or foreign laws relating to pollution or protection of human health or the environment (including, without limitation, ambient
air, surface water, groundwater, land surface or subsurface strata), including, without limitation, laws relating to emissions,
discharges, releases or threatened releases of chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes
(collectively, “Hazardous Materials”) into the environment, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials, as well as all authorizations,
codes, decrees, demands or demand letters, injunctions, judgments, licenses, notices or notice letters, orders, permits, plans
or regulations issued, entered, promulgated or approved thereunder.

 

    	- 15 -

    	 

    

 

(z)
Subsidiary Rights. The Company or one of its Subsidiaries has the unrestricted right to vote, and (subject to limitations
imposed by applicable law) to receive dividends and distributions on, all capital securities of its Subsidiaries as owned by the
Company or such Subsidiary.

 

(aa)
Investment Company Status. The Company is not, and upon consummation of the sale of the Securities, and for so long any
Buyer holds any Securities, will not be, an “investment company,” a company controlled by an “investment company”
or an “affiliated person” of, or “promoter” or “principal underwriter” for, an “investment
company” as such terms are defined in the Investment Company Act of 1940, as amended.

 

(bb)
Tax Status. The Company and each of its Subsidiaries (i) has made or filed all U.S. federal, state and foreign income and
all other tax returns, reports and declarations required by any jurisdiction to which it is subject, (ii) has paid all taxes and
other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports
and declarations, except those being contested in good faith and (iii) has set aside on its books provision reasonably adequate
for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There
are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of
the Company know of no basis for any such claim.

 

(cc)
Internal Accounting and Disclosure Controls. The Company and each of its Subsidiaries maintain a system of internal accounting
controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general
or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity
with GAAP and to maintain asset and liability accountability, (iii) access to assets or incurrence of liabilities is permitted
only in accordance with management’s general or specific authorization and (iv) the recorded accountability for assets and
liabilities is compared with the existing assets and liabilities at reasonable intervals and appropriate action is taken with
respect to any difference. The Company maintains disclosure controls and procedures (as such term is defined in Rule 13a-15 under
the 1934 Act) that are effective in ensuring that information required to be disclosed by the Company in the reports that it files
or submits under the 1934 Act is recorded, processed, summarized and reported, within the time periods specified in the rules
and forms of the SEC, including, without limitation, controls and procedures designed to ensure that information required to be
disclosed by the Company in the reports that it files or submits under the 1934 Act is accumulated and communicated to the Company’s
management, including its principal executive officer or officers and its principal financial officer or officers, as appropriate,
to allow timely decisions regarding required disclosure. During the twelve months prior to the date hereof neither the Company
nor any of its Subsidiaries has received any notice or correspondence from any accountant relating to any material weakness in
any part of the system of internal accounting controls of the Company or any of its Subsidiaries.

 

    	- 16 -

    	 

    

 

(dd)
Off Balance Sheet Arrangements. There is no transaction, arrangement, or other relationship between the Company and an
unconsolidated or other off balance sheet entity that is required to be disclosed by the Company in its 1934 Act filings and is
not so disclosed or that otherwise would be reasonably likely to have a Material Adverse Effect. 

 

(ee)
Ranking of Notes. Except as set forth in Schedule 3(ee), no Indebtedness of the Company or any of its Subsidiaries
is senior to or ranks pari passu with the Notes in right of payment, whether with respect of payment of redemptions, interest,
damages or upon liquidation or dissolution or otherwise.

 

(ff)
Eligibility for Registration. The Company is eligible to register the Conversion Shares and the Warrant Shares for resale
by the Buyers using Form S-3 promulgated under the 1933 Act.

 

(gg)
Transfer Taxes. On the Closing Date, all stock transfer or other taxes (other than income or similar taxes) which are required
to be paid in connection with the sale and transfer of the Securities to be sold to each Buyer hereunder will be, or will have
been, fully paid or provided for by the Company, and all laws imposing such taxes will be or will have been complied with.

 

(hh)
Manipulation of Price. The Company has not, and to its knowledge no one acting on its behalf has, (i) taken, directly or
indirectly, any action designed to cause or to result, or that could reasonably be expected to cause or result, in the stabilization
or manipulation of the price of any security of the Company to facilitate the sale or resale of any of the Securities, (ii) other
than the Placement Agent, sold, bid for, purchased, or paid any compensation for soliciting purchases of, any of the Securities,
or (iii) other than the Placement Agent, paid or agreed to pay to any person any compensation for soliciting another to purchase
any other securities of the Company.

 

(ii)
Acknowledgement Regarding Buyers’ Trading Activity. The Company acknowledges and agrees that (i) none of the Buyers
has been asked to agree, nor has any Buyer agreed, to desist from purchasing or selling, long and/or short, securities of the
Company, or “derivative” securities based on securities issued by the Company or to hold the Securities for any specified
term; (ii) any Buyer, and counter-parties in “derivative” transactions to which any such Buyer is a party, directly
or indirectly, presently may have a “short” position in the Common Stock, and (iii) each Buyer shall not be deemed
to have any affiliation with or control over any arm’s length counter-party in any “derivative” transaction.
The Company further understands and acknowledges that one or more Buyers may engage in hedging and/or trading activities at various
times during the period that the Securities are outstanding, including, without limitation, during the periods that the value
of the Conversion Shares and/or the Warrant Shares are being determined and (b) such hedging and/or trading activities, if any,
can reduce the value of the existing stockholders’ equity interest in the Company both at and after the time the hedging
and/or trading activities are being conducted. The Company acknowledges that such aforementioned hedging and/or trading activities
do not constitute a breach of this Agreement, the Notes, the Warrants or any of the documents executed in connection herewith.

 

    	- 17 -

    	 

    

 

(jj)
U.S. Real Property Holding Corporation. The Company is not, has never been, and so long as any Securities remain outstanding,
shall not become, a U.S. real property holding corporation within the meaning of Section 897 of the Code and the Company shall
so certify upon any Buyer’s request.

 

(kk)
Bank Holding Company Act. Neither the Company nor any of its Subsidiaries or affiliates is subject to the Bank Holding
Company Act of 1956, as amended (the “BHCA”) and to regulation by the Board of Governors of the Federal Reserve
System (the “Federal Reserve”). Neither the Company nor any of its Subsidiaries or affiliates owns or controls,
directly or indirectly, five percent (5%) or more of the outstanding shares of any class of voting securities or twenty-five percent
(25%) or more of the total equity of a bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve.
Neither the Company nor any of its Subsidiaries or affiliates exercises a controlling influence over the management or policies
of a bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve.

 

(ll)
No Additional Agreements. Neither the Company nor any of its Subsidiaries has any agreement or understanding with any Buyer
with respect to the transactions contemplated by the Transaction Documents other than as specified in the Transaction Documents.

 

(mm)
Disclosure. The Company confirms that neither it nor any other Person acting on its behalf has provided any of the Buyers
or their agents or counsel with any information that constitutes or could reasonably be expected to constitute material, nonpublic
information. The Company understands and confirms that each of the Buyers will rely on the foregoing representations in effecting
transactions in securities of the Company. All disclosure provided to the Buyers regarding the Company, or any of its Subsidiaries,
their business and the transactions contemplated hereby, including the disclosure schedules to this Agreement, furnished by or
on behalf of the Company is true and correct and does not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were
made, not misleading. Each press release issued by the Company or any of its Subsidiaries during the twelve (12) months preceding
the date of this Agreement did not at the time of release contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under
which they were made, not misleading. No event or circumstance has occurred or information exists with respect to the Company
or any of its Subsidiaries or its or their business, properties, prospects, operations or financial conditions, which, under applicable
law, rule or regulation, requires public disclosure or announcement by the Company but which has not been so publicly announced
or disclosed. The Company acknowledges and agrees that no Buyer makes or has made any representations or warranties with respect
to the transactions contemplated hereby other than those specifically set forth in Section 2.

 

    	- 18 -

    	 

    

 

(nn)
Shell Company Status. The Company is not an issuer identified in Rule 144(i)(1) of the 1933 Act. The Company was such an
issuer prior to November 30, 2004. On such date it entered into a Plan of Merger through which it acquired a privately held corporation
known as Digital Ally, Inc., a Nevada corporation.

 

(oo)
Stock Option Plans. Each stock option granted by the Company was granted (i) in accordance with the terms of the applicable
stock option plan of the Company (except for 1,250 shares subject to options granted outside any such plan) and (ii) with an exercise
price at least equal to the fair market value of the Common Stock on the date such stock option would be considered granted under
GAAP and applicable law. No stock option granted under the Company’s stock option plan has been backdated. The Company has
not knowingly granted, and there is no and has been no policy or practice of the Company to knowingly grant, stock options prior
to, or otherwise knowingly coordinate the grant of stock options with, the release or other public announcement of material information
regarding the Company or its Subsidiaries or their financial results or prospects.

 

(pp)
No Disagreements with Accountants and Lawyers. There are no material disagreements of any kind presently existing, or reasonably
anticipated by the Company to arise, between the Company and the accountants and lawyers formerly or presently employed by the
Company and the Company is current with respect to any fees owed to its accountants and lawyers which could affect the Company’s
ability to perform any of its obligations under any of the Transaction Documents. In addition, on or prior to the date hereof,
the Company had discussions with its accountants about its financial statements previously filed with the SEC. Based on those
discussions, the Company has no reason to believe that it will need to restate any such financial statements or any part thereof.

 

(qq)
No Disqualification Events. With respect to Securities to be offered and sold hereunder in reliance on Rule 506(b) under
the 1933 Act (“Regulation D Securities”), none of the Company, any of its predecessors, any affiliated issuer,
any director, executive officer, other officer of the Company participating in the offering hereunder, any beneficial owner of
20% or more of the Company’s outstanding voting equity securities, calculated on the basis of voting power, nor any promoter
(as that term is defined in Rule 405 under the 1933 Act) connected with the Company in any capacity at the time of sale (each,
an “Issuer Covered Person” and, together, “Issuer Covered Persons”) is subject to any of
the “Bad Actor” disqualifications described in Rule 506(d)(1)(i) to (viii) under the 1933 Act (a “Disqualification
Event”), except for a Disqualification Event covered by Rule 506(d)(2) or (d)(3). The Company has exercised reasonable
care to determine whether any Issuer Covered Person is subject to a Disqualification Event. The Company has complied, to the extent
applicable, with its disclosure obligations under Rule 506(e), and has furnished to the Buyers a copy of any disclosures provided
thereunder.

 

(rr)
Other Covered Persons. The Company is not aware of any Person (other than the Placement Agent) that has been or will be
paid (directly or indirectly) remuneration for solicitation of Buyers or potential purchasers in connection with the sale of any
Regulation D Securities.

 

    	- 19 -

    	 

    

 

(ss)
Exchange Cap. In the event the Principal Market determines that the March 2014 Private Placement and the transactions contemplated
by the Transaction Documents shall be integrated for purposes of any applicable stockholder approval provisions, as of the date
hereof, out of the 465,815 shares of Common Stock (as adjusted for any share dividend, share split, share combination, reclassification
or similar transaction occurring after the date hereof) issuable without obtaining shareholder approval, (i) 410,919 shares of
Common Stock were issued pursuant to the terms of the March 2014 Notes, (ii) 100,000 shares of Common Stock are reserved for issuance
of shares upon exercise of the March 2014 Warrant and (iii) 25,991 shares of Common Stock are reserved for issuance of shares
upon conversion of the March 2014 Notes, in each case as such number of shares may be adjusted for any share dividend, share split,
share combination, reclassification or similar transaction occurring after the date hereof. 

 

4.
COVENANTS.

 

(a)
Best Efforts. Each party shall use its best efforts timely to satisfy each of the covenants and the conditions to be satisfied
by it as provided in Sections 6 and 7 of this Agreement.

 

(b)
Form D and Blue Sky. The Company agrees to file a Form D with respect to the Securities as required under Regulation D
and to provide a copy thereof to each Buyer promptly after such filing. The Company shall, on or before the Closing Date, take
such action as the Company shall reasonably determine is necessary in order to obtain an exemption for or to qualify the Securities
for sale to the Buyers at the Closing pursuant to this Agreement under applicable securities or “Blue Sky” laws of
the states of the United States (or to obtain an exemption from such qualification), and shall provide evidence of any such action
so taken to the Buyers on or prior to the Closing Date. The Company shall make all filings and reports relating to the offer and
sale of the Securities required under applicable securities or “Blue Sky” laws of the states of the United States
following the Closing Date. 

 

(c)
Reporting Status. Until the date on which the Investors (as defined in the Registration Rights Agreement) shall have sold
all of the Conversion Shares and Warrant Shares and none of the Notes or Warrants are outstanding (the “Reporting
Period”), the Company shall timely file all reports required to be filed with the SEC pursuant to the 1934 Act, and
the Company shall not terminate its status as an issuer required to file reports under the 1934 Act even if the 1934 Act or the
rules and regulations thereunder would no longer require or otherwise permit such termination, and the Company shall take all
actions necessary to maintain its eligibility to register the Conversion Shares and Warrant Shares for resale by the Investors
on Form S-3.

 

(d)
Use of Proceeds. The Company will use the proceeds from the sale of the Securities solely for research and development
expenses for new and enhanced products, capital expenditures, acquisitions and general working capital purposes but not for (i)
the repayment of any outstanding Indebtedness of the Company or any of its Subsidiaries, except for the repayment of the March
2014 Notes and the Notes, or (ii) the redemption or repurchase of any of its or its Subsidiaries’ equity securities. Notwithstanding
the forgoing, the Company may use the proceeds from the sale of the Securities to repay up to $500,000 of the Subordinated Notes
(as defined in the Notes) at any time after the Closing Date and up to another $500,000 of the Subordinated Notes after the date
that the Company first satisfies all of the Equity Conditions (as defined in the Notes) and no Equity Conditions Failure (as defined
in the Notes) exists.

 

    	- 20 -

    	 

    

 

(e)
Financial Information. The Company agrees to send the following to each Investor during the Reporting Period (i) unless
the following are filed with the SEC through EDGAR and are available to the public through the EDGAR system, within one (1) Business
Day after the filing thereof with the SEC, a copy of its Annual Reports on Form 10-K, any Quarterly Reports on Form 10-Q, any
Current Reports on Form 8-K (or any analogous reports under the 1934 Act) and any registration statements (other than on Form
S-8) or amendments filed pursuant to the 1933 Act, (ii) on the same day as the release thereof, facsimile or e-mailed copies of
all press releases issued by the Company or any of its Subsidiaries, and (iii) copies of any notices and other information made
available or given to the stockholders of the Company generally, contemporaneously with the making available or giving thereof
to the stockholders. As used herein, “Business Day” means any day other than Saturday, Sunday or other day
on which commercial banks in The City of New York are authorized or required by law to remain closed.

 

(f)
Listing. The Company shall promptly secure the listing of all of the Registrable Securities (as defined in the Registration
Rights Agreement) upon each national securities exchange and automated quotation system, if any, upon which the Common Stock then
listed (subject to official notice of issuance) and shall maintain such listing of all Registrable Securities from time to time
issuable under the terms of the Transaction Documents. The Company shall maintain the authorization for quotation of the Common
Stock on the Principal Market or any other Eligible Market (as defined in the Warrants). Neither the Company nor any of its Subsidiaries
shall take any action which would be reasonably expected to result in the delisting or suspension of the Common Stock on the Principal
Market. The Company shall pay all fees and expenses in connection with satisfying its obligations under this Section 4(f).

 

(g)
Fees. The Company shall reimburse Hudson Bay (a Buyer) or its designee(s) (in addition to any other expense amounts paid
to any Buyer or its counsel prior to the date of this Agreement) for all costs and expenses incurred in connection with the transactions
contemplated by the Transaction Documents (including all legal fees and disbursements in connection therewith, documentation and
implementation of the transactions contemplated by the Transaction Documents and due diligence in connection therewith), which
amount may be withheld by such Buyer from its purchase price for any Notes purchased at the Closing to the extent not previously
reimbursed by the Company. Notwithstanding the foregoing, in no event will the fees of counsel of Hudson Bay reimbursed by the
Company pursuant to this Section 4(g) exceed $15,000 without the prior approval from the Company. The Company shall be responsible
for the payment of any placement agent’s fees, financial advisory fees, or broker’s commissions (other than for Persons
engaged by any Buyer) relating to or arising out of the transactions contemplated hereby, including, without limitation, any fees
or commissions payable to the Placement Agent as well as any fees relating to the Collection Account. The Company shall pay, and
hold each Buyer harmless against, any liability, loss or expense (including, without limitation, reasonable attorney’s fees
and out-of-pocket expenses) arising in connection with any claim relating to any such payment. Except as otherwise set forth in
the Transaction Documents, each party to this Agreement shall bear its own expenses in connection with the sale of the Securities
to the Buyers.

 

    	- 21 -

    	 

    

 

(h)
Pledge of Securities. The Company acknowledges and agrees that the Securities may be pledged by an Investor in connection
with a bona fide margin agreement or other loan or financing arrangement that is secured by the Securities. The pledge of Securities
shall not be deemed to be a transfer, sale or assignment of the Securities hereunder, and no Investor effecting a pledge of Securities
shall be required to provide the Company with any notice thereof or otherwise make any delivery to the Company pursuant to this
Agreement or any other Transaction Document, including, without limitation, Section 2(f) hereof; provided that an Investor
and its pledgee shall be required to comply with the provisions of Section 2(f) hereof in order to effect a sale, transfer or
assignment of Securities to such pledgee. The Company hereby agrees to execute and deliver such documentation as a pledgee of
the Securities may reasonably request in connection with a pledge of the Securities to such pledgee by an Investor.

 

(i)
Disclosure of Transactions and Other Material Information. On or before 8:30 a.m., New York City time, on August 26, 2014,
the Company shall file a Current Report on Form 8-K describing the terms of the transactions contemplated by the Transaction Documents
in the form required by the 1934 Act and attaching the material Transaction Documents (including, without limitation, this Agreement
(and all schedules and exhibits to this Agreement), the form of Warrant, the form of Note, the form of Lock-Up Agreement, the
Registration Rights Agreement, the form of Voting Agreement and the Security Documents as exhibits to such filing (including all
attachments), the “8-K Filing”). From and after the filing of the 8-K Filing, no Buyer shall be in possession
of any material, nonpublic information received from the Company, any of its Subsidiaries or any of their respective officers,
directors, employees or agents, that is not disclosed in the 8-K Filing. In addition, immediately following the 8-K Filing, the
Company acknowledges and agrees that any and all confidentiality or similar obligations under any agreement, whether written or
oral, between the Company, any of its Subsidiaries or any of their respective officers, directors, affiliates, employees or agents,
on the one hand, and any of the Buyers or any of their affiliates, on the other hand, shall terminate. The Company shall not,
and shall cause each of its Subsidiaries and its and each of their respective officers, directors, employees and agents, not to,
provide any Buyer with any material, nonpublic information regarding the Company or any of its Subsidiaries from and after the
filing of the 8-K Filing with the SEC without the express prior written consent of such Buyer. If a Buyer has, or believes it
has, received any such material, nonpublic information regarding the Company or any of its Subsidiaries from the Company, any
of its Subsidiaries or any of their respective officers, directors, affiliates or agents, it may provide the Company with written
notice thereof. The Company shall, within two (2) Trading Days of receipt of such notice, make public disclosure of such material,
nonpublic information. In the event of a breach of the foregoing covenant by the Company, any of its Subsidiaries, or any of its
or their respective officers, directors, employees and agents, in addition to any other remedy provided herein or in the Transaction
Documents, a Buyer shall have the right to make a public disclosure, in the form of a press release, public advertisement or otherwise,
of such material, nonpublic information without the prior approval by the Company, its Subsidiaries, or any of its or their respective
officers, directors, employees or agents. No Buyer shall have any liability to the Company, its Subsidiaries, or any of its or
their respective officers, directors, employees, stockholders or agents for any such disclosure. To the extent that the Company
delivers any material, non-public information to a Buyer without such Buyer’s consent, the Company hereby covenants and
agrees that such Buyer shall not have any duty of confidentiality with respect to, or a duty not to trade on the basis of, such
material, non-public information. Subject to the foregoing, neither the Company, its Subsidiaries nor any Buyer shall issue any
press releases or any other public statements with respect to the transactions contemplated hereby; provided, however, that the
Company shall be entitled, without the prior approval of any Buyer, to make any press release or other public disclosure with
respect to such transactions (i) in substantial conformity with the 8-K Filing and contemporaneously therewith and (ii) as is
required by applicable law and regulations (provided that in the case of clause (i) each Buyer shall be consulted by the Company
in connection with any such press release or other public disclosure prior to its release). Except for the Registration Statement
required to be filed pursuant to the Registration Rights Agreement, without the prior written consent of any applicable Buyer,
neither the Company nor any of its Subsidiaries or affiliates shall disclose the name of such Buyer in any filing, announcement,
release or otherwise.

 

    	- 22 -

    	 

    

 

(j)
Additional Notes; Variable Securities. So long as any Buyer beneficially owns any Securities, the Company will not issue
any Notes other than to the Buyers as contemplated hereby and the Company shall not issue any other securities that would cause
a breach or default under the Notes. For so long as any Notes remain outstanding, the Company shall not, in any manner, issue
or sell any rights, warrants or options to subscribe for or purchase Common Stock or directly or indirectly convertible into or
exchangeable or exercisable for Common Stock at a price which varies or may vary with the market price of the Common Stock, including
by way of one or more reset(s) to any fixed price unless the conversion, exchange or exercise price of any such security cannot
be less than the then applicable Conversion Price (as defined in the Notes) with respect to the Common Stock into which any Note
is convertible or the then applicable Exercise Price (as defined in the Warrants) with respect to the Common Stock into which
any Warrant is exercisable. 

 

(k)
Corporate Existence. So long as any Buyer beneficially owns any Securities, the Company shall (i) maintain its corporate
existence and (ii) not be party to any Fundamental Transaction (as defined in the Notes) unless the Company is in compliance with
the applicable provisions governing Fundamental Transactions set forth in the Notes and the Warrants.

 

(l)
Reservation of Shares. So long as any Buyer owns any Securities, the Company shall take all action necessary to at all
times have authorized, and reserved for the purpose of issuance, no less than the Required Reserve Amount. If at any time the
number of shares of Common Stock authorized and reserved for issuance is not sufficient to meet the Required Reserved Amount,
the Company will promptly take all corporate action necessary to authorize and reserve a sufficient number of shares, including,
without limitation, calling a special meeting of stockholders to authorize additional shares to meet the Company’s obligations
under Section 3(c), in the case of an insufficient number of authorized shares, obtain stockholder approval of an increase in
such authorized number of shares, and voting the management shares of the Company in favor of an increase in the authorized shares
of the Company to ensure that the number of authorized shares is sufficient to meet the Required Reserved Amount. 

 

    	- 23 -

    	 

    

 

(m)
Conduct of Business. The business of the Company and its Subsidiaries shall not be conducted in violation of any law, ordinance
or regulation of any governmental entity, except where such violations would not result, either individually or in the aggregate,
in a Material Adverse Effect.

 

(n)
Additional Issuances of Securities.

 

(i)
For purposes of this Section 4(n), the following definitions shall apply.

 

(1)
“Convertible Securities” means any stock or securities (other than Options) convertible into or exercisable
or exchangeable for shares of Common Stock.

 

(2)
“Options” means any rights, warrants or options to subscribe for or purchase Common Stock or Convertible Securities.

 

(3)
“Common Stock Equivalents” means, collectively, Options and Convertible Securities.

 

(ii)
From the date hereof until the earlier of (x) the time of the registration of all of the Registrable Securities (as defined in
the Registration Rights Agreement) pursuant to and in accordance with the Registration Rights Agreement, which registration remains
in effect or (y) such time as all of the Registrable Securities, if a registration statement is not available for the resale of
all of the Registrable Securities, may be sold without restriction or limitation pursuant to Rule 144 and without the requirement
to be in compliance with Rule 144(c)(1), the Company shall not, directly or indirectly, file any registration statement with the
SEC, or file any amendment or supplement thereto, or grant any registration rights to any Person that can be exercised prior to
the earlier of such time as set forth above, other than pursuant to the Registration Rights Agreement and any registration statement
for the issuance of securities pursuant to an employee benefit plan or securities award, as registered on Form S-8.

 

(iii)
From the date hereof until the date that the Company obtains the Stockholder Approval (as defined below) (the “Trigger
Date”), the Company will not, (i) directly or indirectly, enter into any transaction or series of transactions that
constitutes a Dilutive Issuance (as defined in the Notes) or (ii) be party to any solicitations, negotiations or discussions with
regard to the foregoing.

 

(iv)
From the date hereof until the two (2) year anniversary of the Closing Date, the Company shall not, (i) directly or indirectly,
offer, sell, grant any option to purchase, or otherwise dispose of (or announce any offer, sale, grant or any option to purchase
or other disposition of) any of its or its Subsidiaries’ equity or equity equivalent securities, including without limitation
any debt, preferred stock or other instrument or security that is, at any time during its life and under any circumstances, convertible
into or exchangeable or exercisable for Common Stock or Common Stock Equivalents (any such offer, sale, grant, disposition or
announcement being referred to as a “Subsequent Placement”) unless the Company shall have first complied with
this Section 4(n)(iv).

 

    	- 24 -

    	 

    

 

(1)
The Company shall deliver to each Buyer an irrevocable written notice (the “Offer Notice”) of any proposed
or intended issuance or sale or exchange (the “Offer”) of the securities being offered (the “Offered
Securities”) in a Subsequent Placement, which Offer Notice shall (w) identify and describe the Offered Securities, (x)
describe the price and other terms upon which they are to be issued, sold or exchanged, and the number or amount of the Offered
Securities to be issued, sold or exchanged, (y) identify the persons or entities (if known) to which or with which the Offered
Securities are to be offered, issued, sold or exchanged and (z) offer to issue and sell to or exchange with such Buyers at least
fifty percent (50%) of the Offered Securities, allocated among such Buyers (a) based on such Buyer’s pro rata portion of
the aggregate principal amount of Notes purchased hereunder (the “Basic Amount”), and (b) with respect to each
Buyer that elects to purchase its Basic Amount, any additional portion of the Offered Securities attributable to the Basic Amounts
of other Buyers as such Buyer shall indicate it will purchase or acquire should the other Buyers subscribe for less than their
Basic Amounts (the “Undersubscription Amount”), which process shall be repeated until the Buyers shall have
an opportunity to subscribe for any remaining Undersubscription Amount.

 

(2)
To accept an Offer, in whole or in part, such Buyer must deliver a written notice to the Company prior to the end of the tenth
(10th) Business Day after such Buyer’s receipt of the Offer Notice (the “Offer Period”), setting forth
the portion of such Buyer’s Basic Amount that such Buyer elects to purchase and, if such Buyer shall elect to purchase all
of its Basic Amount, the Undersubscription Amount, if any, that such Buyer elects to purchase (in either case, the “Notice
of Acceptance”). If the Basic Amounts subscribed for by all Buyers are less than the total of all of the Basic Amounts,
then each Buyer who has set forth an Undersubscription Amount in its Notice of Acceptance shall be entitled to purchase, in addition
to the Basic Amounts subscribed for, the Undersubscription Amount it has subscribed for; provided, however, that
if the Undersubscription Amounts subscribed for exceed the difference between the total of all the Basic Amounts and the Basic
Amounts subscribed for (the “Available Undersubscription Amount”), each Buyer who has subscribed for any Undersubscription
Amount shall be entitled to purchase only that portion of the Available Undersubscription Amount as the Basic Amount of such Buyer
bears to the total Basic Amounts of all Buyers that have subscribed for Undersubscription Amounts, subject to rounding by the
Company to the extent its deems reasonably necessary. Notwithstanding anything to the contrary contained herein, if the Company
desires to modify or amend the terms and conditions of the Offer prior to the expiration of the Offer Period, the Company may
deliver to the Buyers a new Offer Notice and the Offer Period shall expire on the tenth (10th) Business Day after such Buyer’s
receipt of such new Offer Notice.

 

(3)
The Company shall have five (5) Business Days from the expiration of the Offer Period above to offer, issue, sell or exchange
all or any part of such Offered Securities as to which a Notice of Acceptance has not been given by the Buyers (the “Refused
Securities”) pursuant to a definitive agreement (the “Subsequent Placement Agreement”) but only to
the offerees described in the Offer Notice (if so described therein) and only upon terms and conditions (including, without limitation,
unit prices and interest rates) that are not more favorable to the acquiring Person or Persons or less favorable to the Company
than those set forth in the Offer Notice and (ii) to publicly announce (a) the execution of such Subsequent Placement Agreement,
and (b) either (x) the consummation of the transactions contemplated by such Subsequent Placement Agreement or (y) the termination
of such Subsequent Placement Agreement, which shall be filed with the SEC on a Current Report on Form 8-K with such Subsequent
Placement Agreement and any documents contemplated therein filed as exhibits thereto.

 

    	- 25 -

    	 

    

 

(4)
In the event the Company shall propose to sell less than all the Refused Securities (any such sale to be in the manner and on
the terms specified in Section 4(n)(iii)(3) above), then each Buyer may, at its sole option and in its sole discretion, reduce
the number or amount of the Offered Securities specified in its Notice of Acceptance to an amount that shall be not less than
the number or amount of the Offered Securities that such Buyer elected to purchase pursuant to Section 4(n)(iii)(2) above multiplied
by a fraction, (i) the numerator of which shall be the number or amount of Offered Securities the Company actually proposes to
issue, sell or exchange (including Offered Securities to be issued or sold to Buyers pursuant to Section 4(n)(iii)(3) above prior
to such reduction) and (ii) the denominator of which shall be the original amount of the Offered Securities. In the event that
any Buyer so elects to reduce the number or amount of Offered Securities specified in its Notice of Acceptance, the Company may
not issue, sell or exchange more than the reduced number or amount of the Offered Securities unless and until such securities
have again been offered to the Buyers in accordance with Section 4(n)(iii)(1) above.

 

(5)
Upon the closing of the issuance, sale or exchange of all or less than all of the Refused Securities, the Buyers shall acquire
from the Company, and the Company shall issue to the Buyers, the number or amount of Offered Securities specified in the Notices
of Acceptance, as reduced pursuant to Section 4(n)(iii)(3) above if the Buyers have so elected, upon the terms and conditions
specified in the Offer. The purchase by the Buyers of any Offered Securities is subject in all cases to the preparation, execution
and delivery by the Company and the Buyers of a purchase agreement relating to such Offered Securities reasonably satisfactory
in form and substance to the Buyers and their respective counsel.

 

(6)
Any Offered Securities not acquired by the Buyers or other persons in accordance with Section 4(n)(iii)(3) above may not be issued,
sold or exchanged until they are again offered to the Buyers under the procedures specified in this Agreement.

 

(7)
The Company and the Buyers agree that if any Buyer elects to participate in the Offer, (x) neither the Subsequent Placement Agreement
with respect to such Offer nor any other transaction documents related thereto (collectively, the “Subsequent Placement
Documents”) shall include any term or provisions whereby any Buyer shall be required to agree to any restrictions in
trading as to any securities of the Company owned by such Buyer prior to such Subsequent Placement, and (y) any registration rights
set forth in such Subsequent Placement Documents shall be similar in all material respects to the registration rights contained
in the Registration Rights Agreement.

 

    	- 26 -

    	 

    

 

(8)
Notwithstanding anything to the contrary in this Section 4(n) and unless otherwise agreed to by the Buyers, the Company shall
either confirm in writing to the Buyers that the transaction with respect to the Subsequent Placement has been abandoned or shall
publicly disclose its intention to issue the Offered Securities, in either case in such a manner such that the Buyers will not
be in possession of material non-public information, by the fifteenth (15th) Business Day following delivery of the Offer Notice.
If by the fifteenth (15th) Business Day following delivery of the Offer Notice no public disclosure regarding a transaction with
respect to the Offered Securities has been made, and no notice regarding the abandonment of such transaction has been received
by the Buyers, such transaction shall be deemed to have been abandoned and the Buyers shall not be deemed to be in possession
of any material, non-public information with respect to the Company. Should the Company decide to pursue such transaction with
respect to the Offered Securities, the Company shall provide each Buyer with another Offer Notice and each Buyer will again have
the right of participation set forth in this Section 4(n)(iii). The Company shall not be permitted to deliver more than one such
Offer Notice to the Buyers in any 60 day period.

 

(v)
The restrictions contained in subsection (iii) of this Section 4(n) shall not apply in connection with the issuance of any Excluded
Securities (as defined in the Notes). 

 

(o)
Public Information. At any time during the period commencing from the six (6) month anniversary of the Closing Date and
ending at such time that all of the Securities, if a registration statement is not available for the resale of all of the Securities,
may be sold without restriction or limitation pursuant to Rule 144 and without the requirement to be in compliance with Rule 144(c)(1),
if the Company shall (i) fail for any reason to satisfy the requirements of Rule 144(c)(1), including, without limitation, the
failure to satisfy the current public information requirement under Rule 144(c) or (ii) if the Company has ever been an issuer
described in Rule 144(i)(1)(i) or becomes such an issuer in the future, and the Company shall fail to satisfy any condition set
forth in Rule 144(i)(2) (a “Public Information Failure”) then, as partial relief for the damages to any holder
of Securities by reason of any such delay in or reduction of its ability to sell the Securities (which remedy shall not be exclusive
of any other remedies available at law or in equity), the Company shall pay to each such holder an amount in cash equal to two
percent (2.0%) of the aggregate purchase price of such holder’s Securities on the day of a Public Information Failure and
on every thirtieth day (pro rated for periods totaling less than thirty days) thereafter until the earlier of (i) the date such
Public Information Failure is cured and (ii) such time that such public information is no longer required pursuant to Rule 144.
The payments to which a holder shall be entitled pursuant to this Section 4(o) are referred to herein as “Public Information
Failure Payments.” Public Information Failure Payments shall be paid on the earlier of (I) the last day of the
calendar month during which such Public Information Failure Payments are incurred and (II) the third Business Day after
the event or failure giving rise to the Public Information Failure Payments is cured. In the event the Company fails to
make Public Information Failure Payments in a timely manner, such Public Information Failure Payments shall bear
interest at the rate of 1.5% per month (prorated for partial months) until paid in full.

 

    	- 27 -

    	 

    

 

(p)
Stockholder Approval.

 

(i)
The Company shall provide each stockholder entitled to vote at the next special or annual meeting of stockholders of the Company
(the “First Stockholder Meeting”), which shall be promptly called and held not later than January 15, 2015
(the “First Stockholder Meeting Deadline”), a proxy statement, substantially in the form which has been previously
reviewed by the Buyers and Schulte Roth & Zabel LLP, at the expense of the Company, soliciting each such stockholder’s
affirmative vote at the First Stockholder Meeting for approval of resolutions (the “Resolutions”) providing
for the Company’s issuance of all of the Securities as described in the Transaction Documents in accordance with applicable
law and the rules and regulations of the Principal Market (such affirmative approval being referred to herein as the “Stockholder
Approval”), The Company shall file a definitive proxy statement relating to the First Stockholder Meeting no later than
45 calendar days after the date hereof. The Company shall be obligated to use its reasonable best efforts to obtain the Stockholder
Approval by the First Stockholder Meeting Deadline. 

 

(ii)
If, despite the Company’s reasonable best efforts the Stockholder Approval is not obtained on or prior to the First Stockholder
Meeting Deadline, the Company shall (i) cause an additional stockholder meeting to be called and held not later than May 15, 2015
(the “Second Stockholder Meeting Deadline”) and (ii) be obligated to use its reasonable best efforts to obtain
the Stockholder Approval by the Second Stockholder Meeting Deadline. The Company shall provide each stockholder entitled to vote
at the stockholders’ meeting contemplated by this Section 4(p)(ii) a proxy statement, substantially in the form which has
been previously reviewed by the Buyers and Schulte Roth & Zabel LLP, at the expense of the Company, soliciting the Stockholder
Approval. 

 

(iii)
If, despite the Company’s reasonable best efforts the Stockholder Approval is not obtained on or prior to the Second Stockholder
Meeting Deadline, the Company shall (i) cause an additional stockholder meeting to be called and held not later than October 15,
2015 (the “Third Stockholder Meeting Deadline”) and (ii) be obligated to use its reasonable best efforts to
obtain the Stockholder Approval by the Third Stockholder Meeting Deadline. The Company shall provide each stockholder entitled
to vote at the stockholders’ meeting contemplated by this Section 4(p)(iii) a proxy statement, substantially in the form
which has been previously reviewed by the Buyers and Schulte Roth & Zabel LLP, at the expense of the Company, soliciting the
Stockholder Approval. 

 

(iv)
If, despite the Company’s reasonable best efforts the Stockholder Approval is not obtained on or prior to the Third Stockholder
Meeting Deadline, the Company shall (i) solicit the Stockholder Approval in connection with each annual meeting of the stockholders
following the meeting of the stockholders contemplated by Section 4(p)(iii) (each such meeting, a “Subsequent Annual
Meeting”) and (ii) be obligated to use its reasonable best efforts to obtain the Stockholder Approval in connection
with each Subsequent Annual Meeting, in each case until the earlier to occur of (x) the receipt of Stockholder Approval or (y)
such time as no Securities are outstanding. The Company shall provide each stockholder entitled to vote at each Subsequent Annual
Meeting a proxy statement, substantially in the form which has been previously reviewed by the Buyers and Schulte Roth & Zabel
LLP, at the expense of the Company, soliciting the Stockholder Approval. 

 

    	- 28 -

    	 

    

 

(v)
In connection with each stockholders’ meeting contemplated by this Section 4(p), the Company shall (i) use its reasonable
best efforts to solicit its stockholders’ approval of the Resolutions, (ii) engage a proxy solicitation firm reasonably
acceptable to the Required Holders, which proxy solicitation firm shall undertake a scope of work with respect to such Meeting
which is reasonably acceptable to the Required Holders, and (iii) cause at least a majority of the Board of Directors of the Company
to recommend to the stockholders that they approve the Resolutions.

 

(q)
Voting Agreement. The Company shall use its reasonable best efforts to effectuate the transactions contemplated by the
Voting Agreement substantially in the form attached hereto as Exhibit D (the “Voting Agreement”), executed
on or prior to the Closing by the Company and the stockholders set forth on Schedule 4(q) (collectively, the “Principal
Stockholders”). The Company shall not amend, except as contemplated in the immediately preceding sentence, or waive
any provision of the Voting Agreements and shall enforce the provisions of the Voting Agreements in accordance with its terms.
If any of the Principal Stockholders breach any provisions of either of the Voting Agreements, the Company shall promptly use
its best efforts to seek specific performance of the terms of such Voting Agreement in accordance with Section 4.02 thereof. In
addition, if the Company receives any notice from any of the Principal Stockholders pursuant to the Voting Agreement, the Company
shall promptly, but in no event later than two (2) Business Days, deliver a copy of such notice to each Buyer.

 

(r)
Lock-Up. The Company shall not amend, modify, waive or terminate any provision of any of the Lock-Up Agreements except
to extend the term of the lock-up period and shall enforce the provisions of each Lock-Up Agreement in accordance with its terms.
If any officer or director that is a party to a Lock-Up Agreement breaches any provision of a Lock-Up Agreement, the Company shall
promptly use its reasonable best efforts to seek specific performance of the terms of such Lock-Up Agreement.

 

(s)
Notice of Disqualification Events. The Company will notify the Buyers in writing, prior to the Closing Date of (i) any
Disqualification Event relating to any Issuer Covered Person and (ii) any event that would, with the passage of time, become a
Disqualification Event relating to any Issuer Covered Person.

 

(t)
Collateral Agent. 

 

(i)
Each Buyer hereby (a) appoints Hudson Bay as the collateral agent hereunder and under the Security Documents (in such capacity,
the “Collateral Agent”), and (b) authorizes the Collateral Agent (and its officers, directors, employees and
agents) to take such action on such Buyer’s behalf in accordance with the terms hereof and thereof. The Collateral Agent
shall not have, by reason hereof or pursuant to any Security Documents, a fiduciary relationship in respect of any Buyer. Neither
the Collateral Agent nor any of its officers, directors, employees and agents shall have any liability to any Buyer for any action
taken or omitted to be taken in connection hereof or the Security Documents except to the extent caused by its own gross negligence
or willful misconduct, and each Buyer agrees to defend, protect, indemnify and hold harmless the Collateral Agent and all of its
officers, directors, employees and agents (collectively, the “Collateral Agent Indemnitees”) from and
against any losses, damages, liabilities, obligations, penalties, actions, judgments, suits, fees, costs and expenses (including,
without limitation, reasonable attorneys’ fees, costs and expenses) incurred by such Collateral Agent Indemnitee, whether
direct, indirect or consequential, arising from or in connection with the performance by such Collateral Agent Indemnitee of the
duties and obligations of Collateral Agent pursuant hereto or any of the Security Documents.

 

    	- 29 -

    	 

    

 

(ii)
The Collateral Agent shall be entitled to rely upon any written notices, statements, certificates, orders or other documents or
any telephone message believed by it in good faith to be genuine and correct and to have been signed, sent or made by the proper
Person, and with respect to all matters pertaining to this Agreement or any of the other Transaction Documents and its duties
hereunder or thereunder, upon advice of counsel selected by it.

 

(iii)
The Collateral Agent may resign from the performance of all its functions and duties hereunder and under the Notes and the Security
Documents at any time by giving at least ten (10) Business Days prior written notice to the Company and each holder of the Notes.
Such resignation shall take effect upon the acceptance by a successor Collateral Agent of appointment as provided below. Upon
any such notice of resignation, the holders of a majority of the outstanding principal amount of Notes shall appoint a successor
Collateral Agent. Upon the acceptance of the appointment as Collateral Agent, such successor Collateral Agent shall succeed to
and become vested with all the rights, powers, privileges and duties of the retiring Collateral Agent, and the retiring Collateral
Agent shall be discharged from its duties and obligations under this Agreement, the Notes and the Security Agreement. After any
Collateral Agent’s resignation hereunder, the provisions of this Section 4(u) shall inure to its benefit. If a successor
Collateral Agent shall not have been so appointed within said ten (10) Business Day period, the retiring Collateral Agent shall
then appoint a successor Collateral Agent who shall serve until such time, if any, as the holders of a majority of the outstanding
principal amount of Notes appoints a successor Collateral Agent as provided above.

 

(iv)
The Company hereby covenants and agrees to take all actions as promptly as practicable reasonably requested by either the holders
of a majority of the outstanding principal amount of Notes or the Collateral Agent (or its successor), from time to time pursuant
to the terms of this Section 4(u), to secure a successor Collateral Agent satisfactory to such requesting part(y)(ies), in their
sole discretion, including, without limitation, by paying all fees of such successor Collateral Agent, by having the Company agree
to indemnify any successor Collateral Agent and by each of the Company executing a collateral agency agreement or similar agreement
and/or any amendment to the Security Documents reasonably requested or required by the successor Collateral Agent.

 

(v)
The Collateral Agent shall terminate the Security Documents promptly following the date that the Investors may sell all of the
Registrable Securities without restriction or limitation pursuant to Rule 144 (or any successor thereto) promulgated under the
1933 Act continuously for forty-five (45) consecutive days.

 

    	- 30 -

    	 

    

 

(u)
Collection Account. The Company and its Subsidiaries shall deposit or cause to be deposited promptly (and in any event
no later than the next Business Day after the date of receipt thereof) into the account listed below (the “Collection
Account”) (or to such other account as agreed to in writing or directed by the Collateral Agent, or after the occurrence
and during the continuance of an event of default under the Notes as specified by the Collateral Agent), (i) all proceeds in respect
of any Collateral (under and as defined in the Security Agreement), (ii) all cash, checks, notes, instruments, and other items
of payment (including insurance proceeds, proceeds of cash sales, rental proceeds, and tax refunds) received by the Company and
its Subsidiaries and (iii) all other amounts received by the Company and its Subsidiaries, including payments made by any debtor,
customer or obligor in any way obligated on or in connection with any account receivable, directly to the Company or any of its
Subsidiaries:

 

	Borrower
    or Guarantor:	 	Name
    and Address of 

    Institution

    Maintaining Account:	 	Account
    Number:	 	Type
    of Account:
	Digital
    Ally, Inc.	 	Citizens
    Bank & Trust

    7280 NW 87th Terrace

    Suite 300

    Kansas City, No. 64153	 	8754888	 	DDA

 

The
Company may withdraw funds from the Collection Account at any time or from time to time, and the Collateral Agent shall permit
such withdrawals, so long as at the time of such withdrawal or disbursement and after giving effect thereto, no default or event
of default under the Notes has occurred and is continuing.

 

(v)
Assignment of Patents. From the date of this Agreement until the second anniversary of the Closing Date, neither the Company
nor any of its Subsidiaries shall, directly or indirectly, sell, assign, pledge, hypothecate, dispose of, transfer or license
any of the patents listed on Schedule 3(x)(i) or any patent of which the Company or any of its Subsidiaries becomes the
owner following the date of this Agreement. 

 

(w)
Amendment to Subordinated Notes. The Company shall use its best efforts to amend its Subordinated Notes (as defined in
the Notes) as soon as practicable following the Closing, which amendment shall include (i) the extension of the maturity date
of the Subordinated Notes to a date not less than 91 calendar days after the Maturity Date (as defined in the Notes) and (ii)
the subordination of the Subordinated Notes to the Notes on terms reasonably acceptable to the Required Holders. 

 

    	- 31 -

    	 

    

 

(x)
Closing Documents. On or prior to fourteen (14) calendar days after the Closing Date, the Company agrees to deliver, or
cause to be delivered, to each Buyer and Schulte Roth & Zabel LLP a complete closing set of the executed Transaction Documents,
Securities and any other documents required to be delivered to any party pursuant to Section 7 hereof or otherwise.

 

(y)
Anti-Dilution Adjustments. The Company hereby agrees and acknowledges that upon the consummation of the Closing contemplated
hereby, (i) the Exercise Price of those certain Warrants (the “March 2014 Warrants”) issued by the Company
on March 24, 2014 pursuant to the March 2014 SPA shall automatically and without any action by any Person be adjusted to $7.32
(as adjusted for any share dividend, share split, share combination, reclassification or similar transaction occurring after the
date hereof) and (ii) the number of shares of Common Stock issuable upon exercise of the March 2014 Warrants shall automatically
and without any action by any Person be increased to 136,612 shares of Common Stock (as adjusted for any share dividend, share
split, share combination, reclassification or similar transaction occurring after the date hereof); provided, however,
that the Company acknowledges that any future Dilutive Issuance (as defined in the March 2014 Warrants) shall adjust the Exercise
Price of the March 2014 Warrants and the number of shares of Common Stock issuable upon exercise of the of the March 2014 Warrants
pursuant to the terms set forth in Section 2(a) of the March 2014 Warrants. Each Buyer hereby waives the adjustment to the Conversion
Price pursuant to Section 7(a) of the March 2014 Note that would otherwise occur upon the consummation of the Closing contemplated
hereby. For the avoidance of doubt, except to the extent of the waiver specifically provided in the immediately preceding sentence,
the March 2014 Notes are and shall continue to be in full force and effect and are hereby ratified and confirmed in all respects.
Such waiver shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of the Buyers as
a holder of the March 2014 Notes, nor constitute a waiver of any provision thereof, including with respect to any future Dilutive
Issuances (as defined in the March 2014 Notes).

 

(z)
Amendment of the March 2014 Notes. The Company and the Buyers, representing the Required Holders under the March 2014 Notes,
hereby agree that (i) the definition of “Permitted Indebtedness” in the March 2014 Notes shall be amended to include
the Notes and (ii) the definition of “Permitted Liens” in the March 2014 Notes shall be amended to include the Liens
securing the Notes. For the avoidance of doubt, except to the extent of the amendments specifically provided in the immediately
preceding sentence, the March 2014 Notes is and shall continue to be in full force and effect and is hereby in all respects ratified
and confirmed.

 

(aa)
Post-Closing Deliverables. To the extent the closing deliverables set forth in clauses (y) and/or (z) of Section 7(iii)
hereof (collectively, the “Missing Legal Opinions”) shall not have been delivered by the Company at Closing
and such Buyer shall have waived the delivery of such Missing Legal Opinions at Closing, the Company shall promptly but in no
event later than fifteen (15) days after Closing deliver such Missing Legal Opinions. 

 

5.
REGISTER; TRANSFER AGENT INSTRUCTIONS.

 

(a)
Register. The Company shall maintain at its principal executive offices (or such other office or agency of the Company
as it may designate by notice to each holder of Securities), a register for the Notes and the Warrants in which the Company shall
record the name and address of the Person in whose name the Notes and the Warrants have been issued (including the name
and address of each transferee), the principal amount of Notes held by such Person, the number of Conversion Shares issuable pursuant
to the terms of the Notes and the number of Warrant Shares issuable upon exercise of the Warrants held by such Person. The Company
shall keep the register open and available at all times during business hours for inspection of any Buyer or its legal representatives.

 

    	- 32 -

    	 

    

 

(b)
Transfer Agent Instructions. The Company shall issue irrevocable instructions to its transfer agent, and any subsequent
transfer agent, in the form of Exhibit G attached hereto (the “Irrevocable Transfer Agent Instructions”)
to issue certificates or credit shares to the applicable balance accounts at DTC, registered in the name of each Buyer or its
respective nominee(s), for the Conversion Shares and the Warrant Shares issued at the Closing or upon conversion of the Notes
or exercise of the Warrants in such amounts as specified from time to time by each Buyer to the Company upon conversion of the
Notes or exercise of the Warrants. The Company warrants that no instruction other than the Irrevocable Transfer Agent Instructions
referred to in this Section 5(b), and stop transfer instructions to give effect to Section 2(f) hereof, will be given by the Company
to its transfer agent, and that the Securities shall otherwise be freely transferable on the books and records of the Company
as and to the extent provided in this Agreement and the other Transaction Documents. If a Buyer effects a sale, assignment or
transfer of the Securities in accordance with Section 2(f), the Company shall permit the transfer and shall promptly instruct
its transfer agent to issue one or more certificates or credit shares to the applicable balance accounts at DTC in such name and
in such denominations as specified by such Buyer to effect such sale, transfer or assignment. In the event that such sale, assignment
or transfer involves the Conversion Shares or the Warrant Shares sold, assigned or transferred pursuant to an effective registration
statement or pursuant to Rule 144, the transfer agent shall issue such Securities to the Buyer, assignee or transferee, as the
case may be, without any restrictive legend. The Company acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to a Buyer. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under
this Section 5(b) will be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions
of this Section 5(b), that a Buyer shall be entitled, in addition to all other available remedies, to an order and/or injunction
restraining any breach and requiring immediate issuance and transfer, without the necessity of showing economic loss and without
any bond or other security being required.

 

6.
CONDITIONS TO THE COMPANY’S OBLIGATION TO SELL.

 

The
obligation of the Company hereunder to issue and sell the Notes and the related Warrants to each Buyer at the Closing is subject
to the satisfaction, at or before the Closing Date, of each of the following conditions, provided that these conditions are for
the Company’s sole benefit and may be waived by the Company at any time in its sole discretion by providing each Buyer with
prior written notice thereof:

 

(i)
Such Buyer shall have executed each of the Transaction Documents to which it is a party and delivered the same to the Company.

 

(ii)
Such Buyer shall have delivered the purchase price contemplated by Section 1(c) hereof (less, in the case of Hudson Bay, the amounts
withheld pursuant to Section 4(g)) for the Notes and the related Warrants being purchased by such Buyer at the Closing pursuant
to Section 1(d) hereof by wire transfer of immediately available funds pursuant to the wire instructions provided by the Company.

 

    	- 33 -

    	 

    

 

(iii)
The representations and warranties of such Buyer shall be true and correct as of the date when made and as of the Closing Date
as though made at that time (except for representations and warranties that speak as of a specific date which shall be true and
correct as of such specified date), and such Buyer shall have performed, satisfied and complied in all material respects with
the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by such Buyer
at or prior to the Closing Date.

 

7.
CONDITIONS TO EACH BUYER’S OBLIGATION TO PURCHASE.

 

The
obligation of each Buyer hereunder to purchase the Notes and the related Warrants at the Closing is subject to the satisfaction,
at or before the Closing Date, of each of the following conditions, provided that these conditions are for each Buyer’s
sole benefit and may be waived by such Buyer at any time in its sole discretion by providing the Company with prior written notice
thereof:

 

(i)
The Company and each of its Subsidiaries shall have duly executed and delivered to such Buyer each of the following documents
to which it is a party: (A) each of the Transaction Documents, (B) the Notes (allocated in such principal amounts as such Buyer
shall request), being purchased by such Buyer at the Closing pursuant to this Agreement and (C) the related Warrants (allocated
in such amounts as such Buyer shall request) being purchased by such Buyer at the Closing pursuant to this Agreement.

 

(ii)
The Company shall have delivered to such Buyer the Voting Agreement duly executed and delivered by the Principal Stockholders.

 

(iii)
Such Buyer shall have received the opinion of (w) Christian J. Hoffmann, III, the Company’s Securities Counsel, dated as
of the Closing Date, in a form satisfactory to such Buyer, (x) Ashcraft & Barr LLP, the Company’s outside Nevada counsel,
dated as of the Closing Date, in a form satisfactory to such Buyer, (y) the Company’s outside New York counsel in a form
satisfactory to such Buyer and (z) the Company’s outside Kansas counsel in a form satisfactory to such Buyer.

 

(iv)
The Company shall have delivered to such Buyer a copy of the Irrevocable Transfer Agent Instructions, in the form of Exhibit
G attached hereto, which instructions shall have been delivered to and acknowledged in writing by the Company’s transfer
agent.

 

(v)
The Company shall have delivered to such Buyer a certificate evidencing the formation and good standing of the Company and each
of its Subsidiaries in such entity’s jurisdiction of formation issued by the Secretary of State (or comparable office) of
such jurisdiction, as of a date within ten (10) days of the Closing Date.

 

    	- 34 -

    	 

    

 

(vi)
The Company shall have delivered to such Buyer a certificate evidencing the Company’s and each of its Subsidiaries’
qualification as a foreign corporation and good standing issued by the Secretary of State (or comparable office) of each jurisdiction
in which the Company and its Subsidiaries conduct business, as of a date within ten (10) days of the Closing Date.

 

(vii)
The Company shall have delivered to such Buyer a certified copy of the Articles of Incorporation of the Company and each of its
Subsidiaries as certified by the Secretary of State (or comparable office) of the jurisdiction of formation of the Company and
each of its Subsidiaries within ten (10) days of the Closing Date.

 

(viii)
The Company shall have delivered to such Buyer a certificate, executed by the Secretary of the Company and dated as of the Closing
Date, as to (i) the resolutions consistent with Section 3(b) as adopted by the Company’s and each of its Subsidiaries’
Board of Directors in a form reasonably acceptable to such Buyer, (ii) the Articles of Incorporation of the Company and each of
its Subsidiaries and (iii) the Bylaws of the Company and each of its Subsidiaries, each as in effect at the Closing, in the form
attached hereto as Exhibit H.

 

(ix)
The representations and warranties of the Company shall be true and correct as of the date when made and as of the Closing Date
as though made at that time (except for representations and warranties that speak as of a specific date which shall be true and
correct as of such specified date) and the Company shall have performed, satisfied and complied in all respects with the covenants,
agreements and conditions required by the Transaction Documents to be performed, satisfied or complied with by the Company at
or prior to the Closing Date. Such Buyer shall have received a certificate, executed by the Chief Executive Officer of the Company,
dated as of the Closing Date, to the foregoing effect and as to such other matters as may be reasonably requested by such Buyer
in the form attached hereto as Exhibit I.

 

(x)
The Company shall have delivered to such Buyer a letter from the Company’s transfer agent certifying the number of shares
of Common Stock outstanding as of a date within five (5) days of the Closing Date.

 

(xi)
The Company shall have delivered to each Buyer a lock-up agreement in the form attached hereto as Exhibit J executed and
delivered by each of the Persons listed on Schedule 7(xi) (collectively, the “Lock Up Agreements”).

 

(xii)
The Common Stock (I) shall be designated for quotation or listed on the Principal Market and (II) shall not have been suspended,
as of the Closing Date, by the SEC or the Principal Market from trading on the Principal Market nor shall suspension by the SEC
or the Principal Market have been threatened, as of the Closing Date, either (A) in writing by the SEC or the Principal Market
or (B) by falling below the minimum listing maintenance requirements of the Principal Market.

 

(xiii)
The Company shall have obtained all governmental, regulatory or third party consents and approvals, if any, necessary for the
sale of the Securities.

 

    	- 35 -

    	 

    

 

(xiv)
Each of the Company’s Subsidiaries shall have executed and delivered to such Buyer the Guarantee Agreement.

 

(xv)
The Collateral Agent shall have received certified copies of request for copies of information on Form UCC-11, listing all effective
financing statements which name as debtor the Company or any of its Subsidiaries and which are filed in such office or offices
as may be necessary or, in the opinion of the Collateral Agent, desirable to perfect the security interests purported to be created
by the Security Agreement, together with copies of such financing statements, none of which, except as otherwise agreed in writing
by the Collateral Agent, shall cover any of the Collateral, and the results of searches for any tax lien and judgment lien filed
against such person or its property, which results, except as otherwise agreed to in writing by the Collateral Agent, shall not
show any such liens, except for the liens with respect to the March 2014 Notes.

 

(xvi)
The Collateral Agent shall have received the Security Agreement, duly executed by the Company and each of its Subsidiaries, together
with (A) the original stock certificates representing all of the equity interests and all promissory notes required to be pledged
thereunder, accompanied by undated stock powers and allonges executed in blank and other proper instruments of transfer and (B)
any copyright, patent and trademark agreements required by the terms of the Security Agreement. 

 

(xvii)
The Collateral Agent shall have received an account control agreement, in form and substance satisfactory to the Collateral Agent,
duly executed by the Company and/or its Subsidiaries (as applicable) and such bank or financial institution (as applicable), or
enter into other arrangements in form and substance satisfactory to the Collateral Agent, with respect to the Collection Account
and each other account required under Section 5(i) of the Security Agreement, and each such agreement shall be in full force and
effect.

 

(xviii)
The Company and each of the Company’s Subsidiaries shall have duly executed and delivered to such Buyer the Reaffirmation
Agreement.

 

(xix)
The Operating Agreement of Medical Devices Ally, Inc., shall have duly been amended to permit the Company to pledge its interest
or Ownership Units (as defined therein) as security for the Notes and the March 2014 Notes pursuant to the Security Documents.

 

(xx)
The Company shall have delivered to such Buyer such other documents relating to the transactions contemplated by this Agreement
as such Buyer or its counsel may reasonably request. 

 

8.
TERMINATION. In the event that the Closing shall not have occurred with respect to a Buyer on or before five (5) Business
Days from the date hereof due to the Company’s or such Buyer’s failure to satisfy the conditions set forth in Sections
6 and 7 above (and the nonbreaching party’s failure to waive such unsatisfied condition(s)), the nonbreaching party shall
have the option to terminate this Agreement with respect to such breaching party at the close of business on such date by delivering
a written notice to that effect to each other party to this Agreement and without liability of any party to any other party; provided,
however, that if this Agreement is terminated pursuant to this Section 8, the Company shall remain obligated to reimburse
Hudson Bay or its designee(s), as applicable, for the expenses described in Section 4(g) above.

 

    	- 36 -

    	 

    

 

9.
MISCELLANEOUS.

 

(a)
Governing Law; Jurisdiction; Jury Trial. All questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by the internal laws of the State of New York, without giving effect to any choice of law
or conflict of law provision or rule (whether of the State of New York or any other jurisdictions) that would cause the application
of the laws of any jurisdictions other than the State of New York. Each party hereby irrevocably submits to the exclusive jurisdiction
of the state and federal courts sitting in The City of New York, Borough of Manhattan, for the adjudication of any dispute hereunder
or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and
agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any
such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or
proceeding is improper. Each party hereby irrevocably waives personal service of process and consents to process being served
in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such notices to it under this
Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY
WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION
WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY. 

 

(b)
Counterparts. This Agreement may be executed in two or more identical counterparts, all of which shall be considered one
and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other
party; provided that a facsimile signature shall be considered due execution and shall be binding upon the signatory thereto with
the same force and effect as if the signature were an original, not a facsimile signature.

 

(c)
Headings. The headings of this Agreement are for convenience of reference and shall not form part of, or affect the interpretation
of, this Agreement.

 

(d)
Severability. If any provision of this Agreement is prohibited by law or otherwise determined to be invalid or unenforceable
by a court of competent jurisdiction, the provision that would otherwise be prohibited, invalid or unenforceable shall be deemed
amended to apply to the broadest extent that it would be valid and enforceable, and the invalidity or unenforceability of such
provision shall not affect the validity of the remaining provisions of this Agreement so long as this Agreement as so modified
continues to express, without material change, the original intentions of the parties as to the subject matter hereof and the
prohibited nature, invalidity or unenforceability of the provision(s) in question does not substantially impair the respective
expectations or reciprocal obligations of the parties or the practical realization of the benefits that would otherwise be conferred
upon the parties. The parties will endeavor in good faith negotiations to replace the prohibited, invalid or unenforceable provision(s)
with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceable
provision(s).

 

    	- 37 -

    	 

    

 

(e)
Entire Agreement; Amendments. This Agreement and the other Transaction Documents supersede all other prior oral or written
agreements between the Buyers, the Company, their affiliates and Persons acting on their behalf with respect to the matters discussed
herein, and this Agreement, the other Transaction Documents and the instruments referenced herein and therein contain the entire
understanding of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein
or therein, neither the Company nor any Buyer makes any representation, warranty, covenant or undertaking with respect to such
matters. Provisions of this Agreement may be amended and the observance thereof may be waived (either generally or in a particular
instance and either retroactively or prospectively), only with the written consent of the Company and the holders of at least
a majority of the aggregate number of Registrable Securities issued or issuable under the Notes and Warrants and shall include
Hudson Bay so long as Hudson Bay or any of its affiliates holds any Registrable Securities (the “Required Holders”);
provided that any such amendment or waiver that complies with the foregoing but that disproportionately, materially and adversely
affects the rights and obligations of any Buyer relative to the comparable rights and obligations of the other Buyers shall require
the prior written consent of such adversely affected Buyer; provided, further, that the provisions of Section 4(t)
cannot be amended without the additional prior written approval of the Collateral Agent or its successor. Any amendment or waiver
effected in accordance with this Section 9(e) shall be binding upon each Buyer and holder of Securities and the Company. No such
amendment shall be effective to the extent that it applies to less than all of the Buyers or holders of Securities. No consideration
shall be offered or paid to any Person to amend or consent to a waiver or modification of any provision of any of the Transaction
Documents unless the same consideration (other than the reimbursement of legal fees) also is offered to all of the parties to
the Transaction Documents, holders of Notes or holders of the Warrants, as the case may be. The Company has not, directly or indirectly,
made any agreements with any Buyers relating to the terms or conditions of the transactions contemplated by the Transaction Documents
except as set forth in the Transaction Documents. Without limiting the foregoing, the Company confirms that, except as set forth
in this Agreement, no Buyer has made any commitment or promise or has any other obligation to provide any financing to the Company
or otherwise.

 

(f)
Notices. Any notices, consents, waivers or other communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered: (i) upon receipt, when delivered personally; (ii) upon
receipt, when sent by facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on
file by the sending party) or by electronic mail; or (iii) one Business Day after deposit with an overnight courier service, in
each case properly addressed to the party to receive the same. The addresses, facsimile numbers and e-mail addresses for such
communications shall be:

 

    	- 38 -

    	 

    

 

	 	If
    to the Company:	 
	 	 	 
	 	Digital Ally,
    Inc.	 
	 	9705 Loiret Blvd.
    

    Lenexa, Kansas 66219	 
	 	Telephone: 913-814-7774	 
	 	Facsimile: 913-213-5762

    Attention: Stanton Ross	 
	 	 	 
	 	With a copy to:	 
	 	 	 
	 	Christian J. Hoffmann,
    III	 
	 	[Address]	 
	 	Telephone: 602-370-0150

    Facsimile:  [           ]	 
	 	Attention: [           ]	 
	 	E-mail: CJHOFF3@gmail.com	 
	 	 	 
	 	If to the Transfer
    Agent:	 
	 	 	 
	 	First American
    Stock Transfer, Inc.	 
	 	4747
    N. 7th Street

    Suite 17C

    Phoenix, AZ 85014

    Telephone: 602-485-1346	 
	 	Facsimile: 602-788-0423	 
	 	Attention: Erica
    Holt	 
	 	E-mail: Erica@FirstAmericanStock.com	 

 

If
to a Buyer, to its address, facsimile number and e-mail address set forth on the Schedule of Buyers, with copies to such Buyer’s
representatives as set forth on the Schedule of Buyers,

 

with a copy
(for informational purposes only) to:

 

	 	Schulte
    Roth & Zabel LLP

    919 Third Avenue

    New York, New York 10022

    Telephone: (212) 756-2000

    Facsimile: (212) 593-5955

    Attention: Eleazer N. Klein, Esq.

    E-mail: eleazer.klein@srz.com	 

 

or
to such other address, facsimile number and/or e-mail address and/or to the attention of such other Person as the recipient party
has specified by written notice given to each other party five (5) days prior to the effectiveness of such change. Written confirmation
of receipt (A) given by the recipient of such notice, consent, waiver or other communication, (B) mechanically or electronically
generated by the sender’s facsimile machine or e-mail containing the time, date, recipient facsimile number and an image
of the first page of such transmission or (C) provided by an overnight courier service shall be rebuttable evidence of personal
service, receipt by facsimile or receipt from an overnight courier service in accordance with clause (i), (ii) or (iii) above,
respectively.

 

    	- 39 -

    	 

    

 

(g)
Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their respective
successors and assigns, including any purchasers of the Notes or the Warrants. The Company shall not assign this Agreement or
any rights or obligations hereunder without the prior written consent of the Required Holders, including by way of a Fundamental
Transaction (unless the Company is in compliance with the applicable provisions governing Fundamental Transactions set forth in
the Notes and the Warrants). A Buyer may assign some or all of its rights hereunder without the consent of the Company, in which
event such assignee shall be deemed to be a Buyer hereunder with respect to such assigned rights.

 

(h)
No Third Party Beneficiaries. Except for the Placement Agent who shall be a third party beneficiary of the representations
and warranties of the Company in Section 3 and the representation and warranty of the Buyers in Section 2(e), this Agreement is
intended for the benefit of the parties hereto and their respective permitted successors and assigns, and is not for the benefit
of, nor may any provision hereof be enforced by, any other Person, except that each Indemnitee shall have the right to enforce
the obligations of the Company with respect to Section 9(k).

 

(i)
Survival. Unless this Agreement is terminated under Section 8, the representations and warranties of the Company and the
Buyers contained in Sections 2 and 3, and the agreements and covenants set forth in Sections 4, 5 and 9 shall survive the Closing.
Each Buyer shall be responsible only for its own representations, warranties, agreements and covenants hereunder.

 

(j)
Further Assurances. Each party shall do and perform, or cause to be done and performed, all such further acts and things,
and shall execute and deliver all such other agreements, certificates, instruments and documents, as any other party may reasonably
request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions
contemplated hereby.

 

(k)
Indemnification. (i) In consideration of each Buyer’s execution and delivery of the Transaction Documents and acquiring
the Securities thereunder and in addition to all of the Company’s other obligations under the Transaction Documents, the
Company shall defend, protect, indemnify and hold harmless each Buyer and each other holder of the Securities and all of their
stockholders, partners, members, officers, directors, employees and direct or indirect investors and any of the foregoing Persons’
agents or other representatives (including, without limitation, those retained in connection with the transactions contemplated
by this Agreement) (collectively, the “Indemnitees”) from and against any and all actions, causes of action,
suits, claims, losses, costs, penalties, fees, liabilities and damages, and expenses in connection therewith (irrespective of
whether any such Indemnitee is a party to the action for which indemnification hereunder is sought), and including reasonable
attorneys’ fees and disbursements (the “Indemnified Liabilities”), incurred by any Indemnitee as a result
of, or arising out of, or relating to (a) any misrepresentation or breach of any representation or warranty made by the Company
in the Transaction Documents or any other certificate, instrument or document contemplated hereby or thereby, (b) any breach of
any covenant, agreement or obligation of the Company contained in the Transaction Documents or any other certificate, instrument
or document contemplated hereby or thereby or (c) any cause of action, suit or claim brought or made against such Indemnitee by
a third party (including for these purposes a derivative action brought on behalf of the Company) and arising out of or resulting
from (i) the execution, delivery, performance or enforcement of the Transaction Documents or any other certificate, instrument
or document contemplated hereby or thereby, (ii) any transaction financed or to be financed in whole or in part, directly or indirectly,
with the proceeds of the issuance of the Securities, (iii) any disclosure made by such Buyer pursuant to Section 4(i), or (iv)
the status of such Buyer or holder of the Securities as an investor in the Company pursuant to the transactions contemplated by
the Transaction Documents. To the extent that the foregoing undertaking by the Company may be unenforceable for any reason, the
Company shall make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities that is permissible
under applicable law. 

 

    	- 40 -

    	 

    

 

(i)
Promptly after receipt by an Indemnitee under this Section 9(k) of notice of the commencement of any action or proceeding (including
any governmental action or proceeding) involving an Indemnified Liability, such Indemnitee shall, if a claim for indemnification
in respect thereof is to be made against any indemnifying party under this Section 9(k), deliver to the indemnifying party a written
notice of the commencement thereof, and the indemnifying party shall have the right to participate in, and, to the extent the
indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume control of the defense thereof
with counsel mutually satisfactory to the indemnifying party and the Indemnitee; provided, however, that an Indemnitee
shall have the right to retain its own counsel with the fees and expenses of not more than one counsel for such Indemnitee to
be paid by the indemnifying party, if, in the reasonable opinion of the Indemnitee, the representation by such counsel of the
Indemnitee and the indemnifying party would be inappropriate due to actual or potential differing interests between such Indemnitee
and any other party represented by such counsel in such proceeding. Legal counsel referred to in the immediately preceding sentence
shall be selected by the Buyers holding at least a majority of the Securities issued and issuable hereunder. The Indemnitee shall
cooperate fully with the indemnifying party in connection with any negotiation or defense of any such action or Indemnified Liabilities
by the indemnifying party and shall furnish to the indemnifying party all information reasonably available to the Indemnitee that
relates to such action or Indemnified Liabilities. The indemnifying party shall keep the Indemnitee fully apprised at all times
as to the status of the defense or any settlement negotiations with respect thereto. No indemnifying party shall be liable for
any settlement of any action, claim or proceeding effected without its prior written consent, provided, however,
that the indemnifying party shall not unreasonably withhold, delay or condition its consent. No indemnifying party shall, without
the prior written consent of the Indemnitee, which consent shall not be unreasonably withheld conditioned or delayed, consent
to entry of any judgment or enter into any settlement or other compromise which (i) does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such Indemnitee of a release from all liability in respect to such Indemnified
Liabilities or litigation, (ii) requires any admission of wrongdoing by such Indemnitee, or (iii) obligates or requires an Indemnitee
to take, or refrain from taking, any action. Following indemnification as provided for hereunder, the indemnifying party shall
be subrogated to all rights of the Indemnitee with respect to all third parties, firms or corporations relating to the matter
for which indemnification has been made. The failure to deliver written notice to the indemnifying party within a reasonable time
of the commencement of any such action shall not relieve such indemnifying party of any liability to the Indemnitee under this
Section 9(k), except to the extent that the indemnifying party is prejudiced in its ability to defend such action.

 

    	- 41 -

    	 

    

 

(ii)
The indemnification required by this Section 9(k) shall be made by periodic payments of the amount thereof during the course of
the investigation or defense, as and when bills are received or Indemnified Liabilities are incurred.

 

(iii)
The indemnity agreements contained herein shall be in addition to (x) any cause of action or similar right of the Indemnitee against
the indemnifying party or others, and (y) any liabilities the indemnifying party may be subject to pursuant to the law.

 

(l)
No Strict Construction. The language used in this Agreement will be deemed to be the language chosen by the parties to
express their mutual intent, and no rules of strict construction will be applied against any party.

 

(m)
Remedies. Each Buyer and each holder of the Securities shall have all rights and remedies set forth in the Transaction
Documents and all rights and remedies which such holders have been granted at any time under any other agreement or contract and
all of the rights which such holders have under any law. Any Person having any rights under any provision of this Agreement shall
be entitled to enforce such rights specifically (without posting a bond or other security), to recover damages by reason of any
breach of any provision of this Agreement and to exercise all other rights granted by law. Furthermore, the Company recognizes
that in the event that it fails to perform, observe, or discharge any or all of its obligations under the Transaction Documents,
any remedy at law may prove to be inadequate relief to the Buyers. The Company therefore agrees that the Buyers shall be entitled
to seek temporary and permanent injunctive relief in any such case without the necessity of proving actual damages and without
posting a bond or other security.

 

(n)
Rescission and Withdrawal Right. Notwithstanding anything to the contrary contained in (and without limiting any similar
provisions of) the Transaction Documents, whenever any Buyer exercises a right, election, demand or option under a Transaction
Document and the Company does not timely perform its related obligations within the periods therein provided, then such Buyer
may rescind or withdraw, in its sole discretion from time to time upon written notice to the Company, any relevant notice, demand
or election in whole or in part without prejudice to its future actions and rights.

 

(o)
Payment Set Aside. To the extent that the Company makes a payment or payments to the Buyers hereunder or pursuant to any
of the other Transaction Documents or the Buyers enforce or exercise their rights hereunder or thereunder, and such payment or
payments or the proceeds of such enforcement or exercise or any part thereof are subsequently invalidated, declared to be fraudulent
or preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the Company,
a trustee, receiver or any other Person under any law (including, without limitation, any bankruptcy law, foreign, state or federal
law, common law or equitable cause of action), then to the extent of any such restoration the obligation or part thereof originally
intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such
enforcement or setoff had not occurred.

 

    	- 42 -

    	 

    

 

(p)
Independent Nature of Buyers’ Obligations and Rights. The obligations of each Buyer under any Transaction Document
are several and not joint with the obligations of any other Buyer, and no Buyer shall be responsible in any way for the performance
of the obligations of any other Buyer under any Transaction Document. Nothing contained herein or in any other Transaction Document,
and no action taken by any Buyer pursuant hereto or thereto, shall be deemed to constitute the Buyers as, and the Company acknowledges
that the Buyers do not so constitute, a partnership, an association, a joint venture or any other kind of entity, or create a
presumption that the Buyers are in any way acting in concert or as a group, and the Company shall not assert any such claim with
respect to such obligations or the transactions contemplated by the Transaction Documents and the Company acknowledges that the
Buyers are not acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction
Documents. The Company acknowledges and each Buyer confirms that it has independently participated in the negotiation of the transaction
contemplated hereby with the advice of its own counsel and advisors. Each Buyer shall be entitled to independently protect and
enforce its rights, including, without limitation, the rights arising out of this Agreement or out of any other Transaction Documents,
and it shall not be necessary for any other Buyer to be joined as an additional party in any proceeding for such purpose.

 

[Signature
Page Follows]

 

    	- 43 -

    	 

    

 

IN
WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to this Securities Purchase Agreement
to be duly executed as of the date first written above.

 

	 	COMPANY:
	 	 
	 	DIGITAL
ALLY, INC.
	 	 	 
	 	By:	 
	 	Name:	 
	 	Title:	 

 

[Signature
Page to Securities Purchase Agreement]

 

    	 

    	 

    

 

IN
WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to this Securities Purchase Agreement
to be duly executed as of the date first written above.

 

	 	BUYERS:
	 	 	 
	 	HUDSON
    BAY MASTER FUND LTD.
	 	 
	 	By:	Hudson
    Bay Capital Management LP, as its Investment Manager
	 	 	 
	 	By:	 
	 	Name:	George
    Antonopoulos
	 	Title:	Authorized
    Signatory

 

    	 

    	 

    

 

SCHEDULE
OF BUYERS

 

	(1)		(2)	 	 	(3)		 	 	(4)		 	 	(5)		 	(6)
	Buyer	 	Address and Facsimile Number	 	 	Aggregate
                                         Principal Amount of Notes	 	 	 	Number
                                         of Warrant Shares	 	 	 	Purchase
                                         Price	 	 	Legal Representative’s Address and Facsimile Number
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Hudson Bay Master Fund Ltd.	 	777 Third Avenue, 30th Floor New York, NY 10017 Attention: Yoav Roth George Antonopolous Facsimile: 646-214-7946 Telephone: 212-571-1244 
Residence: Cayman Islands E-mail: investments@hudsonbaycapital.com operations@hudsonbaycapital.com	 	$	4,000,000	 	 	 	262,295	 	 	$	4,000,000	 	 	Schulte Roth & Zabel LLP 919 Third Avenue New York, New York 10022 Attention: Eleazer Klein, Esq. Facsimile: (212) 593-5955 Telephone: (212) 756-2376

 

    	 

    	 

    

 

EXHIBITS

 

	Exhibit
    A	Form
    of Notes
	Exhibit B	Form of Warrants
	Exhibit C	Form of Registration
    Rights Agreement
	Exhibit D	Form of Guarantee
    Agreement
	Exhibit E	Form of Security
    Agreement
	Exhibit F	Form of Reaffirmation
    Agreement
	Exhibit G	Form of Irrevocable
    Transfer Agent Instructions
	Exhibit H	Form of Secretary’s
    Certificate
	Exhibit I	Form of Officer’s
    Certificate
	Exhibit J	Form of Lock-Up
    Agreement

 

SCHEDULES

 

	Schedule
    3(a)	Subsidiaries
	Schedule 3(g)	Placement Agent
Fees
	Schedule 3(k)	SEC Documents
	Schedule 3(l)	Absence of Certain
Changes
	Schedule 3(m)	No Undisclosed
Events, Liabilities, Developments or Circumstances
	Schedule 3(n)	Regulatory Permits
	Schedule 3(q)	Transactions with
Affiliates 
	Schedule 3(r)	Equity Capitalization
	Schedule 3(s)	Indebtedness and
Other Contracts
	Schedule 3(t)	Absence of Litigation
	Schedule 3(x)	Intellectual Property
Rights
	Schedule 3(ee)	Ranking of Notes
	Schedule 4(q)	Voting Agreement
Parties
	Schedule 7(xi)	Lock-Up PartiesExhibit 10.50

 

REGISTRATION
RIGHTS AGREEMENT

 

REGISTRATION
RIGHTS AGREEMENT (this “Agreement”), dated as of August 25, 2014, by and among Digital Ally, Inc., a Nevada
corporation, with headquarters located at 9705 Loiret Blvd., Lenexa, KS 66219 (the “Company”), and the investors
listed on the Schedule of Buyers attached hereto (each, a “Buyer” and collectively, the “Buyers”).

 

WHEREAS:

 

A.In
connection with the Securities Purchase Agreement by and among the parties hereto of even date herewith (the “Securities
Purchase Agreement”), the Company has agreed, upon the terms and subject to the conditions of the Securities Purchase
Agreement, to issue and sell to each Buyer (i) senior secured convertible notes of the Company (the “Notes”),
which will, among other things, be convertible (upon conversion, amortization, interest or otherwise) into the Company’s
common stock, par value $0.001 per share (the “Common Stock”) (the shares of Common Stock issuable pursuant
to the terms of the Notes, collectively, the “Conversion Shares”) and (ii) warrants (the “Warrants”)
which will be exercisable to purchase shares of Common Stock (as exercised, collectively, the “Warrant Shares”)
in accordance with the terms of the Warrants.

 

B.In
accordance with the terms of the Securities Purchase Agreement, the Company has agreed to provide certain registration rights
under the Securities Act of 1933, as amended, and the rules and regulations thereunder, or any similar successor statute (collectively,
the “1933 Act”), and applicable state securities laws.

 

NOW,
THEREFORE, in consideration of the premises and the mutual covenants contained herein and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the Company and each of the Buyers hereby agree as follows:

 

1.Definitions.

 

Capitalized
terms used herein and not otherwise defined herein shall have the respective meanings set forth in the Securities Purchase Agreement.
As used in this Agreement, the following terms shall have the following meanings:

 

(a)“Additional
Effective Date” means the date the Additional Registration Statement is declared effective by the SEC.

 

(b)“Additional
Effectiveness Deadline” means the date which is the earlier of (x) (i) in the event that the Additional Registration
Statement is not subject to a full review by the SEC, thirty (30) calendar days after the earlier of the Additional Filing Date
and the Additional Filing Deadline or (ii) in the event that the Additional Registration Statement is subject to a full review
by the SEC, sixty (60) calendar days after the earlier of the Additional Filing Date and the Additional Filing Deadline and (y)
the fifth (5th) Business Day after the date the Company is notified (orally or in writing, whichever is earlier) by
the SEC that such Additional Registration Statement will not be reviewed or will not be subject to further review; provided, however,
that if the Additional Effectiveness Deadline falls on a Saturday, Sunday or other day that the SEC is closed for business, the
Additional Effectiveness Deadline shall be extended to the next Business Day on which the SEC is open for business.

 

    	 

    	 

    

 

(c)“Additional
Filing Date” means the date on which the Additional Registration Statement is filed with the SEC.

 

(d)“Additional
Filing Deadline” means if Cutback Shares are required to be included in any Additional Registration Statement, the later
of (i) the date sixty (60) days after the date substantially all of the Registrable Securities registered under the immediately
preceding Registration Statement are sold and (ii) the date six (6) months from the Initial Effective Date or the most recent
Additional Effective Date, as applicable.

 

(e)“Additional
Registrable Securities” means, (i) any Cutback Shares not previously included on a Registration Statement and (ii) any
capital stock of the Company issued or issuable with respect to the Notes, the Conversion Shares, the Warrants, the Warrant Shares,
or the Cutback Shares, as applicable, as a result of any stock split, stock dividend, recapitalization, exchange or similar event
or otherwise, without regard to any limitations on conversion, amortization and/or redemption of the Notes or exercise of the
Warrants.

 

(f)“Additional
Registration Statement” means a registration statement or registration statements of the Company filed under the 1933
Act covering the resale of any Additional Registrable Securities.

 

(g)“Additional
Required Registration Amount” means any Cutback Shares not previously included on a Registration Statement, all subject
to adjustment as provided in Section 2(f), without regard to any limitations on conversion, amortization and/or redemption of
the Notes or exercise of the Warrants.

 

(h)“Business
Day” means any day other than Saturday, Sunday or any other day on which commercial banks in the City of New York are
authorized or required by law to remain closed.

 

(i)“Closing
Date” shall have the meaning set forth in the Securities Purchase Agreement.

 

(j)“Cutback
Shares” means any of the Initial Required Registration Amount or the Additional Required Registration Amount of Registrable
Securities not included in all Registration Statements previously declared effective hereunder as a result of a limitation on
the maximum number of shares of Common Stock of the Company permitted to be registered by the staff of the SEC pursuant to Rule
415. For the purpose of determining the Cutback Shares, in order to determine any applicable Required Registration Amount, unless
an Investor gives written notice to the Company to the contrary with respect to the allocation of its Cutback Shares, first the
Warrant Shares shall be excluded on a pro rata basis among the Investors until all of the Warrant Shares have been excluded, and
second the Conversion Shares shall be excluded on a pro rata basis among the Investors until all of the Conversion Shares have
been excluded.

 

    	2

    	 

    

 

(k)“Effective
Date” means the Initial Effective Date and the Additional Effective Date, as applicable.

 

(l)“Effectiveness
Deadline” means the Initial Effectiveness Deadline and the Additional Effectiveness Deadline, as applicable.

 

(m)“Eligible
Market” means the Principal Market, The New York Stock Exchange, Inc., the NYSE MKT LLC, The NASDAQ Global Select Market
or The Nasdaq Global Market.

 

(n)“Filing
Deadline” means the Initial Filing Deadline and the Additional Filing Deadline, as applicable.

 

(o)“Initial
Effective Date” means the date that the Initial Registration Statement has been declared effective by the SEC.

 

(p)“Initial
Effectiveness Deadline” means the date which is the earlier of (x) (i) in the event that the Initial Registration Statement
is not subject to a full review by the SEC, ninety (90) calendar days after the Closing Date or (ii) in the event that the Initial
Registration Statement is subject to a full review by the SEC, one hundred twenty (120) calendar days after the Closing Date and
(y) the fifth (5th) Business Day after the date the Company is notified (orally or in writing, whichever is earlier)
by the SEC that such Initial Registration Statement will not be reviewed or will not be subject to further review; provided, however,
that if the Initial Effectiveness Deadline falls on a Saturday, Sunday or other day that the SEC is closed for business, the Initial
Effectiveness Deadline shall be extended to the next Business Day on which the SEC is open for business.

 

(q)“Initial
Filing Date” means the date on which the Initial Registration Statement is filed with the SEC.

 

(r)“Initial
Filing Deadline” means the date which is forty-five (45) calendar days after the Closing Date.

 

(s)“Initial
Registrable Securities” means (i) the Conversion Shares issued or issuable pursuant to the terms of the Notes, (ii)
the Warrant Shares issued or issuable upon exercise of the Warrants and (iii) any capital stock of the Company issued or issuable
with respect to the Notes, the Conversion Shares, the Warrant Shares or the Warrants as a result of any stock split, stock dividend,
recapitalization, exchange or similar event or otherwise, in each case without regard to any limitations on conversion, amortization
and/or redemption of the Notes or exercise of the Warrants.

 

(t)“Initial
Registration Statement” means a registration statement or registration statements of the Company filed under the 1933
Act covering the resale of the Initial Registrable Securities.

 

    	3

    	 

    

 

(u)“Initial
Required Registration Amount” means 130% of the sum of (i) the maximum number of Conversion Shares issued and issuable
pursuant to the Notes and (ii) the maximum number of Warrant Shares issued and issuable pursuant to the Warrants, each as of the
Trading Day immediately preceding the applicable date of determination and all subject to adjustment as provided in Section 2(f),
without regard to any limitations on conversion, amortization and/or redemption of the Notes or exercise of the Warrants.

 

(v)“Investor”
means a Buyer or any transferee or assignee thereof to whom a Buyer assigns its rights under this Agreement and who agrees to
become bound by the provisions of this Agreement in accordance with Section 9 and any transferee or assignee thereof to whom a
transferee or assignee assigns its rights under this Agreement and who agrees to become bound by the provisions of this Agreement
in accordance with Section 9.

 

(w)“Lead
Investor” means Hudson Bay Master Fund Ltd.

 

(x)“Person”
means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization
and a government or any department or agency thereof.

 

(y)“Principal
Market” means The NASDAQ Capital Market.

 

(z)“register,”
“registered,” and “registration” refer to a registration effected by preparing and filing
one or more Registration Statements (as defined below) in compliance with the 1933 Act and pursuant to Rule 415, and the declaration
or ordering of effectiveness of such Registration Statement(s) by the SEC.

 

(aa)“Registrable
Securities” means the Initial Registrable Securities and the Additional Registrable Securities.

 

(bb)“Registration
Statement” means the Initial Registration Statement and the Additional Registration Statement, as applicable.

 

(cc)“Required
Holders” means the holders of at least a majority of the Registrable Securities and shall include the Lead Investor
so long as the Lead Investor or any of its Affiliates holds any Registrable Securities.

 

(dd)“Required
Registration Amount” means either the Initial Required Registration
Amount or the Additional Required Registration Amount, as applicable.

 

(ee)“Rule
415” means Rule 415 promulgated under the 1933 Act or any successor rule providing for offering securities on a continuous
or delayed basis.

 

(ff)“SEC”
means the United States Securities and Exchange Commission.

 

(gg)“Trading
Day” means any day on which the Common Stock is traded on the Principal Market, or, if the Principal Market is not the
principal trading market for the Common Stock, then on the principal securities exchange or securities market on which the Common
Stock is then traded; provided that “Trading Day” shall not include any day on which the Common Stock is scheduled
to trade on such exchange or market for less than 4.5 hours or any day that the Common Stock is suspended from trading during
the final hour of trading on such exchange or market (or if such exchange or market does not designate in advance the closing
time of trading on such exchange or market, then during the hour ending at 4:00:00 p.m., New York time).

 

    	4

    	 

    

 

2.Registration.

 

(a)Initial
Mandatory Registration. The Company shall prepare, and, as soon as practicable but in no event later than the Initial Filing
Deadline, file with the SEC the Initial Registration Statement on Form S-3 covering the resale of all of the Initial Registrable
Securities. In the event that Form S-3 is unavailable for such a registration, the Company shall use such other form as is available
for such a registration on another appropriate form reasonably acceptable to the Required Holders, subject to the provisions of
Section 2(e). The Initial Registration Statement prepared pursuant hereto shall register for resale at least the number of shares
of Common Stock equal to the Initial Required Registration Amount determined as of the date the Initial Registration Statement
is initially filed with the SEC, subject to adjustment as provided in Section 2(f). The Initial Registration Statement shall contain
(except if otherwise directed by the Required Holders) the “Plan of Distribution” and “Selling Shareholders”
sections in substantially the form attached hereto as Exhibit B. The Company shall use its best efforts to have the Initial
Registration Statement declared effective by the SEC as soon as practicable, but in no event later than the Initial Effectiveness
Deadline. By 9:30 a.m. New York time on the Business Day following the Initial Effective Date, the Company shall file with the
SEC in accordance with Rule 424 under the 1933 Act the final prospectus to be used in connection with sales pursuant to such Initial
Registration Statement.

 

(b)Additional
Mandatory Registrations. The Company shall prepare, and, as soon as practicable but in no event later than the Additional
Filing Deadline, file with the SEC an Additional Registration Statement on Form S-3 covering the resale of all of the Additional
Registrable Securities not previously registered on an Additional Registration Statement hereunder. To the extent the staff of
the SEC does not permit the Additional Required Registration Amount to be registered on an Additional Registration Statement,
the Company shall file Additional Registration Statements successively trying to register on each such Additional Registration
Statement the maximum number of remaining Additional Registrable Securities until the Additional Required Registration Amount
has been registered with the SEC. In the event that Form S-3 is unavailable for such a registration, the Company shall use such
other form as is available for such a registration on another appropriate form reasonably acceptable to the Required Holders,
subject to the provisions of Section 2(e). Each Additional Registration Statement prepared pursuant hereto shall register for
resale at least that number of shares of Common Stock equal to the Additional Required Registration Amount determined as of the
date such Additional Registration Statement is initially filed with the SEC, subject to adjustment as provided in
Section 2(f). Each Additional Registration Statement shall contain (except if otherwise directed by the Required Holders) the
“Plan of Distribution” and “Selling Shareholders” sections in substantially the form attached
hereto as Exhibit B. The Company shall use its best efforts to have each Additional Registration Statement declared effective
by the SEC as soon as practicable, but in no event later than the Additional Effectiveness Deadline. By 9:30 a.m. New York time
on the Business Day following the Additional Effective Date, the Company shall file with the SEC in accordance with Rule 424 under
the 1933 Act the final prospectus to be used in connection with sales pursuant to such Additional Registration Statement.

 

    	5

    	 

    

 

(c)Allocation
of Registrable Securities. The initial number of Registrable Securities included in any Registration Statement and any increase
or decrease in the number of Registrable Securities included therein shall be allocated pro rata among the Investors based on
the number of Registrable Securities held by each Investor at the time the Registration Statement covering such initial number
of Registrable Securities or increase or decrease thereof is declared effective by the SEC. In the event that an Investor sells
or otherwise transfers any of such Investor’s Registrable Securities, each transferee shall be allocated a pro rata portion
of the then remaining number of Registrable Securities included in such Registration Statement for such transferor. Any shares
of Common Stock included in a Registration Statement and which remain allocated to any Person which ceases to hold any Registrable
Securities covered by such Registration Statement shall be allocated to the remaining Investors, pro rata based on the number
of Registrable Securities then held by such Investors which are covered by such Registration Statement. In no event shall the
Company include any securities other than Registrable Securities on any Registration Statement without the prior written consent
of the Required Holders.

 

(d)Legal
Counsel. Subject to Section 5 hereof, the Required Holders shall have the right to select one legal counsel to review and
oversee any registration pursuant to this Section 2 (“Legal Counsel”), which shall be Schulte Roth & Zabel
LLP or such other counsel as thereafter designated by the Required Holders. The Company and Legal Counsel shall reasonably cooperate
with each other in performing the Company’s obligations under this Agreement.

 

(e)Ineligibility
for Form S-3. In the event that Form S-3 is not available for the registration of the resale of Registrable Securities hereunder,
the Company shall (i) register the resale of the Registrable Securities on Form S-1 or another appropriate form reasonably acceptable
to the Required Holders and (ii) undertake to register the Registrable Securities on Form S-3 as soon as such form is available,
provided that the Company shall maintain the effectiveness of the Registration Statement then in effect until such time as a Registration
Statement on Form S-3 covering the Registrable Securities has been declared effective by the SEC.

 

(f)Sufficient
Number of Shares Registered. In the event the number of shares available under a Registration Statement filed pursuant to
Section 2(a) or Section 2(b) is insufficient to cover the Required Registration Amount of Registrable Securities required to be
covered by such Registration Statement or an Investor’s allocated portion of the Registrable Securities pursuant to Section
2(c), the Company shall amend the applicable Registration Statement, or file a new Registration Statement (on the short form available
therefor, if applicable), or both, so as to cover at least the Required Registration Amount as of the Trading Day immediately
preceding the date of the filing of such amendment or new Registration Statement, in each case, as soon as practicable, but in
any event not later than fifteen (15) days after the necessity therefor arises. The Company shall use its best efforts to cause
such amendment and/or new Registration Statement to become effective as soon as practicable following the filing thereof. For
purposes of the foregoing provision, the number of shares available under a Registration Statement shall be deemed “insufficient
to cover all of the Registrable Securities” if at any time the number of shares of Common Stock available for resale under
the Registration Statement is less than the Required Registration Amount. The calculation set forth in the foregoing sentence
shall be made without regard to any limitations on the conversion, amortization and/or redemption of the Notes or exercise of
the Warrants and such calculation shall assume (i) that the Notes are then convertible in full into shares of Common Stock at
the then prevailing Conversion Rate (as defined in the Notes), (ii) the initial outstanding principal amount of the Notes remains
outstanding through the scheduled Maturity Date (as defined in the Notes) and no redemptions of the Notes occur prior to the scheduled
Maturity Date and (iii) the Warrants are then exercisable in full into shares of Common Stock at the then prevailing Exercise
Price (as defined in the Warrants).

 

    	6

    	 

    

 

(g)Effect
of Failure to File and Obtain and Maintain Effectiveness of Registration Statement. If (i) the Initial Registration Statement
when declared effective fails to register the Initial Required Registration Amount of Initial Registrable Securities (a “Registration
Failure”), (ii) a Registration Statement covering all of the Registrable Securities
required to be covered thereby and required to be filed by the Company pursuant to this Agreement is (A) not filed with the SEC
on or before the applicable Filing Deadline (a “Filing Failure”) or
(B) not declared effective by the SEC on or before the applicable Effectiveness Deadline, (an “Effectiveness Failure”)
or (iii) on any day after the applicable Effective Date, sales of all of the Registrable Securities required to be included on
such Registration Statement cannot be made (other than during an Allowable Grace Period (as defined in Section 3(r)) pursuant
to such Registration Statement or otherwise (including, without limitation, because of the suspension of trading or any other
limitation imposed by an Eligible Market, a failure to keep such Registration Statement effective, a failure to disclose such
information as is necessary for sales to be made pursuant to such Registration Statement, a failure to register a sufficient number
of shares of Common Stock or a failure to maintain the listing of the Common Stock) (a “Maintenance Failure”)
then, as partial relief for the damages to any holder by reason of any such delay in or reduction of its ability to sell the underlying
shares of Common Stock (which remedy shall not be exclusive of any other remedies available at law or in equity, including, without
limitation, specific performance or the additional obligation of the Company to register any Cutback Shares), the Company shall
pay to each holder of Registrable Securities relating to such Registration Statement an amount in cash equal to two percent (2.0%)
of the aggregate Purchase Price (as such term is defined in the Securities Purchase Agreement) of such Investor’s Registrable
Securities, whether or not included in such Registration Statement, on each of the following dates: (i) the day of a Registration
Failure, (ii) the day of a Filing Failure; (iii) the day of an Effectiveness Failure; (iv) the initial day of a Maintenance Failure;
(v) on the thirtieth day after the date of a Registration Failure and every thirtieth day thereafter (pro rated for periods totaling
less than thirty days) until such Registration Failure is cured; (vi) on the thirtieth day after the date of a Filing Failure
and every thirtieth day thereafter (pro rated for periods totaling less than thirty days) until such Filing Failure is cured;
(vii) on the thirtieth day after the date of an Effectiveness Failure and every thirtieth day thereafter (pro rated for periods
totaling less than thirty days) until such Effectiveness Failure is cured; and (viii) on the thirtieth day after the initial date
of a Maintenance Failure and every thirtieth day thereafter (pro rated for periods totaling less than thirty days) until such
Maintenance Failure is cured. The payments to which a holder shall be entitled pursuant to this Section 2(g) are referred to herein
as “Registration Delay Payments.”
Registration Delay Payments shall be paid on the earlier of (I) the dates set forth above and (II) the third Business Day after
the event or failure giving rise to the Registration Delay Payments is cured. In the event the Company fails to make Registration
Delay Payments in a timely manner, such Registration Delay Payments shall bear interest at the rate of one and one-half percent
(1.5%) per month (prorated for partial months) until paid in full. 

 

    	7

    	 

    

 

3.Related
Obligations.

 

At
such time as the Company is obligated to file a Registration Statement with the SEC pursuant to Section 2(a), 2(b), 2(e) or 2(f),
the Company will use its best efforts to effect the registration of the Registrable Securities in accordance with the intended
method of disposition thereof and, pursuant thereto, the Company shall have the following obligations:

 

(a)The
Company shall promptly prepare and file with the SEC a Registration Statement with respect to the Registrable Securities and use
its best efforts to cause such Registration Statement relating to the Registrable Securities to become effective as soon as practicable
after such filing (but in no event later than the Effectiveness Deadline). The Company shall keep each Registration Statement
effective pursuant to Rule 415 at all times until the earlier of (i) the date as of which the Investors may sell all of the Registrable
Securities covered by such Registration Statement without restriction or limitation pursuant to Rule 144 and without the requirement
to be in compliance with Rule 144(c)(1) (or any successor thereto) promulgated under the 1933 Act or (ii) the date on which the
Investors shall have sold all of the Registrable Securities covered by such Registration Statement (the “Registration
Period”). The Company shall ensure that each Registration Statement (including any amendments or supplements thereto
and prospectuses contained therein) shall not contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein, or necessary to make the statements therein (in the case of prospectuses, in the light of the circumstances
in which they were made) not misleading. The term “best efforts” shall mean, among other things, that the Company
shall submit to the SEC, within two (2) Business Days after the later of the date that (i) the Company learns that no review of
a particular Registration Statement will be made by the staff of the SEC or that the staff has no further comments on a particular
Registration Statement, as the case may be, and (ii) the approval of Legal Counsel pursuant to Section 3(c) (which approval is
immediately sought), a request for acceleration of effectiveness of such Registration Statement to a time and date not later than
two (2) Business Days after the submission of such request. The Company shall respond in writing to comments made by the SEC in
respect of a Registration Statement as soon as practicable, but in no event later than fifteen (15) days after the receipt of
comments by or notice from the SEC that an amendment is required in order for a Registration Statement to be declared effective.

 

(b)The
Company shall prepare and file with the SEC such amendments (including post-effective amendments) and supplements to a Registration
Statement and the prospectus used in connection with such Registration Statement, which prospectus is to be filed pursuant to
Rule 424 promulgated under the 1933 Act, as may be necessary to keep such Registration Statement effective at all times during
the Registration Period, and, during such period, comply with the provisions of the 1933 Act with respect to the disposition of
all Registrable Securities of the Company covered by such Registration Statement until such time as all of such Registrable Securities
shall have been disposed of in accordance with the intended methods of disposition by the seller or sellers thereof as set forth
in such Registration Statement. In the case of amendments and supplements to a Registration Statement which are required to be
filed pursuant to this Agreement (including pursuant to this Section 3(b)) by reason of the Company filing a report on Form 10-K,
Form 10-Q, Form 8-K or any analogous report under the Securities Exchange Act of 1934, as amended (the “1934 Act”),
the Company shall have incorporated such report by reference into such Registration Statement, if applicable, or shall file such
amendments or supplements with the SEC on the same day on which the 1934 Act report is filed which created the requirement for
the Company to amend or supplement such Registration Statement.

 

    	8

    	 

    

 

(c)The
Company shall (A) permit Legal Counsel to review and comment upon (i) a Registration Statement at least five (5) Business Days
prior to its filing with the SEC and (ii) all amendments and supplements to all Registration Statements (except for Annual Reports
on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and any similar or successor reports) within a reasonable
number of days prior to their filing with the SEC, and (B) not file any Registration Statement or amendment or supplement thereto
in a form to which Legal Counsel reasonably objects. The Company shall not submit a request for acceleration of the effectiveness
of a Registration Statement or any amendment or supplement thereto without the prior approval of Legal Counsel, which consent
shall not be unreasonably withheld. The Company shall furnish to Legal Counsel, without charge, (i) copies of any correspondence
from the SEC or the staff of the SEC to the Company or its representatives relating to any Registration Statement, (ii) promptly
after the same is prepared and filed with the SEC, one copy of any Registration Statement and any amendment(s) thereto, including
financial statements and schedules, all documents incorporated therein by reference, if requested by an Investor, and all exhibits
and (iii) upon the effectiveness of any Registration Statement, one copy of the prospectus included in such Registration Statement
and all amendments and supplements thereto. The Company shall reasonably cooperate with Legal Counsel in performing the Company’s
obligations pursuant to this Section 3.

 

(d)The
Company shall furnish to each Investor whose Registrable Securities are included in any Registration Statement, without charge,
(i) promptly after the same is prepared and filed with the SEC, at least one copy of such Registration Statement and any amendment(s)
thereto, including financial statements and schedules, all documents incorporated therein by reference, if requested by an Investor,
all exhibits and each preliminary prospectus, (ii) upon the effectiveness of any Registration Statement, ten (10) copies of the
prospectus included in such Registration Statement and all amendments and supplements thereto (or such other number of copies
as such Investor may reasonably request) and (iii) such other documents, including copies of any preliminary or final prospectus,
as such Investor may reasonably request from time to time in order to facilitate the disposition of the Registrable Securities
owned by such Investor.

 

(e)The
Company shall use its best efforts to (i) register and qualify, unless an exemption from registration and qualification applies,
the resale by Investors of the Registrable Securities covered by a Registration Statement under such other securities or “blue
sky” laws of all applicable jurisdictions in the United States, (ii) prepare and file in those jurisdictions such amendments
(including post-effective amendments) and supplements to such registrations and qualifications as may be necessary to maintain
the effectiveness thereof during the Registration Period, (iii) take such other actions as may be necessary to maintain such registrations
and qualifications in effect at all times during the Registration Period, and (iv) take all other actions reasonably necessary
or advisable to qualify the Registrable Securities for sale in such jurisdictions; provided, however, that the Company shall not
be required in connection therewith or as a condition thereto to (x) qualify to do business in any jurisdiction where it would
not otherwise be required to qualify but for this Section 3(e), (y) subject itself to general taxation in any such jurisdiction,
or (z) file a general consent to service of process in any such jurisdiction. The Company shall promptly notify Legal Counsel
and each Investor who holds Registrable Securities of the receipt by the Company of any notification with respect to the suspension
of the registration or qualification of any of the Registrable Securities for sale under the securities or “blue sky”
laws of any jurisdiction in the United States or its receipt of actual notice of the initiation or threatening of any proceeding
for such purpose.

 

    	9

    	 

    

 

(f)The
Company shall notify Legal Counsel and each Investor in writing of the happening of any event, as promptly as practicable after
becoming aware of such event, as a result of which the prospectus included in a Registration Statement, as then in effect, includes
an untrue statement of a material fact or omission to state a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they were made, not misleading (provided that in no event
shall such notice contain any material, nonpublic information), and, subject to Section 3(r), promptly prepare a supplement or
amendment to such Registration Statement to correct such untrue statement or omission, and deliver ten (10) copies of such supplement
or amendment to Legal Counsel and each Investor (or such other number of copies as Legal Counsel or such Investor may reasonably
request). The Company shall also promptly notify Legal Counsel and each Investor in writing (i) when a prospectus or any prospectus
supplement or post-effective amendment has been filed, and when a Registration Statement or any post-effective amendment has become
effective (notification of such effectiveness shall be delivered to Legal Counsel and each Investor by facsimile or email on the
same day of such effectiveness and by overnight mail), (ii) of any request by the SEC for amendments or supplements to a Registration
Statement or related prospectus or related information, and (iii) of the Company’s reasonable determination that a post-effective
amendment to a Registration Statement would be appropriate. By 9:30 a.m. New York City time on the date following the date any
post-effective amendment has become effective, the Company shall file with the SEC in accordance with Rule 424 under the 1933
Act the final prospectus to be used in connection with sales pursuant to such Registration Statement.

 

(g)The
Company shall use its best efforts to prevent the issuance of any stop order or other suspension of effectiveness of a Registration
Statement, or the suspension of the qualification of any of the Registrable Securities for sale in any jurisdiction and, if such
an order or suspension is issued, to obtain the withdrawal of such order or suspension at the earliest possible moment and to
notify Legal Counsel and each Investor who holds Registrable Securities being sold of the issuance of such order and the resolution
thereof or its receipt of actual notice of the initiation or threat of any proceeding for such purpose.

 

(h)If
any Investor is required under applicable securities laws to be described in the Registration Statement as an underwriter or an
Investor believes that it could reasonably be deemed to be an underwriter of Registrable Securities, at the reasonable request
of such Investor, the Company shall furnish to such Investor, on the date of the effectiveness of the Registration Statement and
thereafter from time to time on such dates as an Investor may reasonably request (i) a letter, dated such date, from the Company’s
independent certified public accountants in form and substance as is customarily given by independent certified public accountants
to underwriters in an underwritten public offering, addressed to the Investors, and (ii) an opinion, dated as of such date, of
counsel representing the Company for purposes of such Registration Statement, in form, scope and substance as is customarily given
in an underwritten public offering, addressed to the Investors.

 

    	10

    	 

    

 

(i)If
any Investor is required under applicable securities laws to be described in the Registration Statement as an underwriter or an
Investor believes that it could reasonably be deemed to be an underwriter of Registrable Securities, the Company shall make available
for inspection by (i) such Investor, (ii) Legal Counsel and (iii) one firm of accountants or other agents retained by the Investors
(collectively, the “Inspectors”), all pertinent financial and other records, and pertinent corporate documents
and properties of the Company (collectively, the “Records”), as shall be reasonably deemed necessary by each
Inspector, and cause the Company’s officers, directors and employees to supply all information which any Inspector may reasonably
request; provided, however, that each Inspector shall agree to hold in strict confidence and shall not make any disclosure (except
to an Investor) or use of any Record or other information which the Company determines in good faith to be confidential, and of
which determination the Inspectors are so notified, unless (a) the disclosure of such Records is necessary to avoid or correct
a misstatement or omission in any Registration Statement or is otherwise required under the 1933 Act, (b) the release of such
Records is ordered pursuant to a final, non-appealable subpoena or order from a court or government body of competent jurisdiction,
or (c) the information in such Records has been made generally available to the public other than by disclosure in violation of
this Agreement. Each Investor agrees that it shall, upon learning that disclosure of such Records is sought in or by a court or
governmental body of competent jurisdiction or through other means, give prompt notice to the Company and allow the Company, at
its expense, to undertake appropriate action to prevent disclosure of, or to obtain a protective order for, the Records deemed
confidential. Nothing herein (or in any other confidentiality agreement between the Company and any Investor) shall be deemed
to limit the Investors’ ability to sell Registrable Securities in a manner which is otherwise consistent with applicable
laws and regulations.

 

(j)The
Company shall hold in confidence and not make any disclosure of information concerning an Investor provided to the Company unless
(i) disclosure of such information is necessary to comply with federal or state securities laws, (ii) the disclosure of such information
is necessary to avoid or correct a misstatement or omission in any Registration Statement, (iii) the release of such information
is ordered pursuant to a subpoena or other final, non-appealable order from a court or governmental body of competent jurisdiction,
or (iv) such information has been made generally available to the public other than by disclosure in violation of this Agreement
or any other agreement. The Company agrees that it shall, upon learning that disclosure of such information concerning an Investor
is sought in or by a court or governmental body of competent jurisdiction or through other means, give prompt written notice to
such Investor and allow such Investor, at the Investor’s expense, to undertake appropriate action to prevent disclosure
of, or to obtain a protective order for, such information.

 

    	11

    	 

    

 

(k)The
Company shall use its best efforts either to (i) cause all of the Registrable Securities covered by a Registration Statement to
be listed on each securities exchange on which securities of the same class or series issued by the Company are then listed, if
any, if the listing of such Registrable Securities is then permitted under the rules of such exchange or (ii) secure the inclusion
for quotation of all of the Registrable Securities on The NASDAQ Capital Market or (iii) if, despite the Company’s best
efforts, the Company is unsuccessful in satisfying the preceding clauses (i) and (ii), to secure the inclusion for quotation on
another Eligible Market for such Registrable Securities and, without limiting the generality of the foregoing, to use its best
efforts to arrange for at least two market makers to register with the Financial Industry Regulatory Authority, Inc. (“FINRA”)
as such with respect to such Registrable Securities. The Company shall pay all fees and expenses in connection with satisfying
its obligation under this Section 3(k).

 

(l)The
Company shall cooperate with the Investors who hold Registrable Securities being offered and, to the extent applicable, facilitate
the timely preparation and delivery of certificates (not bearing any restrictive legend) representing the Registrable Securities
to be offered pursuant to a Registration Statement and enable such certificates to be in such denominations or amounts, as the
case may be, as the Investors may reasonably request and registered in such names as the Investors may request.

 

(m)If
requested by an Investor, the Company shall as soon as practicable (i) incorporate in a prospectus supplement or post-effective
amendment such information as an Investor reasonably requests to be included therein relating to the sale and distribution of
Registrable Securities, including, without limitation, information with respect to the number of Registrable Securities being
offered or sold, the purchase price being paid therefor and any other terms of the offering of the Registrable Securities to be
sold in such offering; (ii) make all required filings of such prospectus supplement or post-effective amendment after being notified
of the matters to be incorporated in such prospectus supplement or post-effective amendment; and (iii) supplement or make amendments
to any Registration Statement if reasonably requested by an Investor holding any Registrable Securities.

 

(n)The
Company shall use its best efforts to cause the Registrable Securities covered by a Registration Statement to be registered with
or approved by such other governmental agencies or authorities as may be necessary to consummate the disposition of such Registrable
Securities.

 

(o)The
Company shall make generally available to its security holders as soon as practical, but not later than ninety (90) days after
the close of the period covered thereby, an earnings statement (in form complying with, and in the manner provided by, the provisions
of Rule 158 under the 1933 Act) covering a twelve-month period beginning not later than the first day of the Company’s fiscal
quarter next following the applicable Effective Date of a Registration Statement.

 

(p)The
Company shall otherwise use its best efforts to comply with all applicable rules and regulations of the SEC in connection with
any registration hereunder.

 

    	12

    	 

    

 

(q)Within
two (2) Business Days after a Registration Statement which covers Registrable Securities is ordered effective by the SEC, the
Company shall deliver, and shall cause legal counsel for the Company to deliver, to the transfer agent for such Registrable Securities
(with copies to the Investors whose Registrable Securities are included in such Registration Statement) confirmation that such
Registration Statement has been declared effective by the SEC in the form attached hereto as Exhibit A.

 

(r)Notwithstanding
anything to the contrary herein, at any time after the Effective Date, the Company may delay the disclosure of material, non-public
information concerning the Company the disclosure of which at the time is not, in the good faith opinion of the Board of Directors
of the Company and its counsel, in the best interest of the Company and, in the opinion of counsel to the Company, otherwise required
(a “Grace Period”); provided, that the Company shall promptly (i) notify the Investors in writing of the existence
of material, non-public information giving rise to a Grace Period (provided that in each notice the Company will not disclose
the content of such material, non-public information to the Investors) and the date on which the Grace Period will begin, and
(ii) notify the Investors in writing of the date on which the Grace Period ends; and, provided further, that no Grace Period shall
exceed ten (10) consecutive Trading Days and during any three hundred sixty five (365) day period such Grace Periods shall not
exceed an aggregate of twenty (20) Trading Days and the first day of any Grace Period must be at least five (5) Trading Days after
the last day of any prior Grace Period (each, an “Allowable Grace Period”). For purposes of determining the
length of a Grace Period above, the Grace Period shall begin on and include the date the Investors receive the notice referred
to in clause (i) and shall end on and include the later of the date the Investors receive the notice referred to in clause (ii)
and the date referred to in such notice. The provisions of Section 3(g) hereof shall not be applicable during the period of any
Allowable Grace Period. Upon expiration of the Grace Period, the Company shall again be bound by the first sentence of Section
3(f) with respect to the information giving rise thereto unless such material, non-public information is no longer applicable.
Notwithstanding anything to the contrary, the Company shall cause its transfer agent to deliver unlegended shares of Common Stock
to a transferee of an Investor in accordance with the terms of the Securities Purchase Agreement in connection with any sale of
Registrable Securities with respect to which an Investor has entered into a contract for sale, prior to the Investor’s receipt
of the notice of a Grace Period and for which the Investor has not yet settled.

 

(s)Neither
the Company nor any Subsidiary or affiliate thereof shall identify any Investor as an underwriter in any public disclosure or
filing with the SEC, the Principal Market or any Eligible Market and any Buyer being deemed an underwriter by the SEC shall not
relieve the Company of any obligations it has under this Agreement or any other Transaction Document (as defined in the Securities
Purchase Agreement); provided, however, that the foregoing shall not prohibit the Company from including the disclosure
found in the “Plan of Distribution” section attached hereto as Exhibit B in the Registration Statement.

 

(t)Neither
the Company nor any of its Subsidiaries has entered, as of the date hereof, nor shall the Company or any of its Subsidiaries,
on or after the date of this Agreement, enter into any agreement with respect to its securities, that would have the effect of
impairing the rights granted to the Buyers in this Agreement or otherwise conflicts with the provisions hereof.

 

    	13

    	 

    

 

4.Obligations
of the Investors.

 

(a)At
least five (5) Business Days prior to the first anticipated Filing Date of a Registration Statement, the Company shall notify
each Investor in writing of the information the Company requires from each such Investor if such Investor elects to have any of
such Investor’s Registrable Securities included in such Registration Statement. It shall be a condition precedent to the
obligations of the Company to complete any registration pursuant to this Agreement with respect to the Registrable Securities
of a particular Investor that such Investor shall furnish to the Company such information regarding itself, the Registrable Securities
held by it and the intended method of disposition of the Registrable Securities held by it as shall be reasonably required to
effect and maintain the effectiveness of the registration of such Registrable Securities and shall execute such documents in connection
with such registration as the Company may reasonably request.

 

(b)Each
Investor, by such Investor’s acceptance of the Registrable Securities, agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of any Registration Statement hereunder, unless such Investor
has notified the Company in writing of such Investor’s election to exclude all of such Investor’s Registrable Securities
from such Registration Statement.

 

(c)Each
Investor agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section
3(g) or the first sentence of 3(f), such Investor will immediately discontinue disposition of Registrable Securities pursuant
to any Registration Statement(s) covering such Registrable Securities until such Investor’s receipt of copies of the supplemented
or amended prospectus as contemplated by Section 3(g) or the first sentence of 3(f) or receipt of notice that no supplement or
amendment is required. Notwithstanding anything to the contrary, the Company shall cause its transfer agent to deliver unlegended
shares of Common Stock to a transferee of an Investor in accordance with the terms of the Securities Purchase Agreement in connection
with any sale of Registrable Securities with respect to which an Investor has entered into a contract for sale prior to the Investor’s
receipt of a notice from the Company of the happening of any event of the kind described in Section 3(g) or the first sentence
of 3(f) and for which the Investor has not yet settled.

 

(d)Each
Investor covenants and agrees that it will comply with the prospectus delivery requirements of the 1933 Act as applicable to it
or an exemption therefrom in connection with sales of Registrable Securities pursuant to the Registration Statement.

 

5.Expenses
of Registration.

 

All
reasonable expenses, other than underwriting discounts and commissions, incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without limitation, all registration, listing and qualifications fees,
printers and accounting fees, and fees and disbursements of counsel for the Company shall be paid by the Company. The Company
shall also reimburse the Investors for the fees and disbursements of Legal Counsel in connection with registration, filing or
qualification pursuant to Sections 2 and 3 of this Agreement which amount shall be limited to $15,000 for each such registration,
filing or qualification.

 

    	14

    	 

    

 

6.Indemnification.

 

In
the event any Registrable Securities are included in a Registration Statement under this Agreement:

 

(a)To
the fullest extent permitted by law, the Company will, and hereby does, indemnify, hold harmless and defend each Investor, the
directors, officers, partners, members, employees, agents, representatives of, and each Person, if any, who controls any Investor
within the meaning of the 1933 Act or the 1934 Act (each, an “Indemnified Person”), against any losses, claims,
damages, liabilities, judgments, fines, penalties, charges, costs, reasonable attorneys’ fees, amounts paid in settlement
or expenses, joint or several (collectively, “Claims”), incurred in investigating, preparing or defending any
action, claim, suit, inquiry, proceeding, investigation or appeal taken from the foregoing by or before any court or governmental,
administrative or other regulatory agency, body or the SEC, whether pending or threatened, whether or not an indemnified party
is or may be a party thereto (“Indemnified Damages”), to which any of them may become subject insofar as such
Claims (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon: (i) any
untrue statement or alleged untrue statement of a material fact in a Registration Statement or any post-effective amendment thereto
or in any filing made in connection with the qualification of the offering under the securities or other “blue sky”
laws of any jurisdiction in which Registrable Securities are offered (“Blue Sky Filing”), or the omission or
alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading,
(ii) any untrue statement or alleged untrue statement of a material fact contained in any preliminary prospectus if used prior
to the effective date of such Registration Statement, or contained in the final prospectus (as amended or supplemented, if the
Company files any amendment thereof or supplement thereto with the SEC) or the omission or alleged omission to state therein any
material fact necessary to make the statements made therein, in light of the circumstances under which the statements therein
were made, not misleading, (iii) any violation or alleged violation by the Company of the 1933 Act, the 1934 Act, any other law,
including, without limitation, any state securities law, or any rule or regulation thereunder relating to the offer or sale of
the Registrable Securities pursuant to a Registration Statement or (iv) any violation of this Agreement (the matters in the foregoing
clauses (i) through (iv) being, collectively, “Violations”). Subject to Section 6(c), the Company shall reimburse
the Indemnified Persons, promptly as such expenses are incurred and are due and payable, for any legal fees or other reasonable
expenses incurred by them in connection with investigating or defending any such Claim. Notwithstanding anything to the contrary
contained herein, the indemnification agreement contained in this Section 6(a): (i) shall not apply to a Claim by an Indemnified
Person arising out of or based upon a Violation which occurs in reliance upon and in conformity with information furnished in
writing to the Company by such Indemnified Person for such Indemnified Person expressly for use in connection with the preparation
of the Registration Statement or any such amendment thereof or supplement thereto, if such prospectus was timely made available
by the Company pursuant to Section 3(d); and (ii) shall not apply to amounts paid in settlement of any Claim if such settlement
is effected without the prior written consent of the Company, which consent shall not be unreasonably withheld or delayed. Such
indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Indemnified Person
and shall survive the transfer of the Registrable Securities by the Investors pursuant to Section 9.

 

    	15

    	 

    

 

(b)In
connection with any Registration Statement in which an Investor is participating, each such Investor agrees to severally and not
jointly indemnify, hold harmless and defend, to the same extent and in the same manner as is set forth in Section 6(a), the Company,
each of its directors, each of its officers who signs the Registration Statement and each Person, if any, who controls the Company
within the meaning of the 1933 Act or the 1934 Act (each, an “Indemnified Party”), against any Claim or Indemnified
Damages to which any of them may become subject, under the 1933 Act, the 1934 Act or otherwise, insofar as such Claim or Indemnified
Damages arise out of or are based upon any Violation, in each case to the extent, and only to the extent, that such Violation
occurs in reliance upon and in conformity with written information furnished to the Company by such Investor expressly for use
in connection with such Registration Statement; and, subject to Section 6(c), such Investor shall reimburse the Indemnified Party
for any legal or other expenses reasonably incurred by an Indemnified Party in connection with investigating or defending any
such Claim; provided, however, that the indemnity agreement contained in this Section 6(b) and the agreement with respect to contribution
contained in Section 7 shall not apply to amounts paid in settlement of any Claim if such settlement is effected without the prior
written consent of such Investor, which consent shall not be unreasonably withheld or delayed; provided, further, however, that
the Investor shall be liable under this Section 6(b) for only that amount of a Claim or Indemnified Damages as does not exceed
the net proceeds to such Investor as a result of the sale of Registrable Securities pursuant to such Registration Statement. Such
indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Indemnified Party
and shall survive the transfer of the Registrable Securities by the Investors pursuant to Section 9.

 

(c)Promptly
after receipt by an Indemnified Person or Indemnified Party under this Section 6 of notice of the commencement of any action or
proceeding (including any governmental action or proceeding) involving a Claim, such Indemnified Person or Indemnified Party shall,
if a Claim in respect thereof is to be made against any indemnifying party under this Section 6, deliver to the indemnifying party
a written notice of the commencement thereof, and the indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume control of the defense
thereof with counsel mutually satisfactory to the indemnifying party and the Indemnified Person or the Indemnified Party, as the
case may be; provided, however, that an Indemnified Person or Indemnified Party shall have the right to retain its own counsel
with the fees and expenses of not more than one counsel for all such Indemnified Person or Indemnified Party to be paid by the
indemnifying party, if, in the reasonable opinion of counsel retained by the Indemnified Person or Indemnified Party, as applicable,
the representation by such counsel of the Indemnified Person or Indemnified Party and the indemnifying party would be inappropriate
due to actual or potential differing interests between such Indemnified Person or Indemnified Party and any other party represented
by such counsel in such proceeding. In the case of an Indemnified Person, legal counsel referred to in the immediately preceding
sentence shall be selected by the Investors holding at least a majority in interest of the Registrable Securities included in
the Registration Statement to which the Claim relates. The Indemnified Party or Indemnified Person shall reasonably cooperate
with the indemnifying party in connection with any negotiation or defense of any such action or Claim by the indemnifying party
and shall furnish to the indemnifying party all information reasonably available to the Indemnified Party or Indemnified Person
which relates to such action or Claim. The indemnifying party shall keep the Indemnified Party or Indemnified Person fully apprised
at all times as to the status of the defense or any settlement negotiations with respect thereto. No indemnifying party shall
be liable for any settlement of any action, claim or proceeding effected without its prior written consent, provided, however,
that the indemnifying party shall not unreasonably withhold, delay or condition its consent. No indemnifying party shall, without
the prior written consent of the Indemnified Party or Indemnified Person, consent to entry of any judgment or enter into any settlement
or other compromise which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified
Party or Indemnified Person of a release from all liability in respect to such Claim or litigation and such settlement shall not
include any admission as to fault on the part of the Indemnified Party. Following indemnification as provided for hereunder, the
indemnifying party shall be subrogated to all rights of the Indemnified Party or Indemnified Person with respect to all third
parties, firms or corporations relating to the matter for which indemnification has been made. The failure to deliver written
notice to the indemnifying party within a reasonable time of the commencement of any such action shall not relieve such indemnifying
party of any liability to the Indemnified Person or Indemnified Party under this Section 6, except to the extent that the indemnifying
party is prejudiced in its ability to defend such action.

 

    	16

    	 

    

 

(d)The
indemnification required by this Section 6 shall be made by periodic payments of the amount thereof during the course of the investigation
or defense, as and when bills are received or Indemnified Damages are incurred.

 

(e)The
indemnity agreements contained herein shall be in addition to (i) any cause of action or similar right of the Indemnified Party
or Indemnified Person against the indemnifying party or others, and (ii) any liabilities the indemnifying party may be subject
to pursuant to the law.

 

7.Contribution.

 

To
the extent any indemnification by an indemnifying party is prohibited or limited by law, the indemnifying party agrees to make
the maximum contribution with respect to any amounts for which it would otherwise be liable under Section 6 to the fullest extent
permitted by law; provided, however, that: (i) no Person involved in the sale of Registrable Securities which Person is guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) in connection with such sale shall be entitled
to contribution from any Person involved in such sale of Registrable Securities who was not guilty of fraudulent misrepresentation;
and (ii) contribution by any seller of Registrable Securities shall be limited in amount to the amount of net proceeds received
by such seller from the sale of such Registrable Securities pursuant to such Registration Statement.

 

8.Reports
Under the 1934 Act.

 

With
a view to making available to the Investors the benefits of Rule 144 promulgated under the 1933 Act or any other similar rule
or regulation of the SEC that may at any time permit the Investors to sell securities of the Company to the public without registration
(“Rule 144”), the Company agrees to:

 

(a)make
and keep public information available, as those terms are understood and defined in Rule 144;

 

    	17

    	 

    

  

(b)file
with the SEC in a timely manner all reports and other documents required of the Company under the 1933 Act and the 1934 Act so
long as the Company remains subject to such requirements and the filing of such reports and other documents is required for the
applicable provisions of Rule 144; and

 

(c)furnish
to each Investor so long as such Investor owns Registrable Securities, promptly upon request, (i) a written statement by the Company,
if true, that it has complied with the reporting requirements of Rule 144, the 1933 Act and the 1934 Act, (ii) a copy of the most
recent annual or quarterly report of the Company and such other reports and documents so filed by the Company, and (iii) such
other information as may be reasonably requested to permit the Investors to sell such securities pursuant to Rule 144 without
registration.

 

9.Assignment
of Registration Rights.

 

The
rights under this Agreement shall be automatically assignable by the Investors to any transferee of all or any portion of such
Investor’s Registrable Securities if: (i) the Investor agrees in writing with the transferee or assignee to assign such
rights, and a copy of such agreement is furnished to the Company within a reasonable time after such assignment; (ii) the Company
is, within a reasonable time after such transfer or assignment, furnished with written notice of (a) the name and address of such
transferee or assignee, and (b) the securities with respect to which such registration rights are being transferred or assigned;
(iii) immediately following such transfer or assignment the further disposition of such securities by the transferee or assignee
is restricted under the 1933 Act or applicable state securities laws; (iv) at or before the time the Company receives the written
notice contemplated by clause (ii) of this sentence the transferee or assignee agrees in writing with the Company to be bound
by all of the provisions contained herein; and (v) such transfer shall have been made in accordance with the applicable requirements
of the Securities Purchase Agreement.

 

10.Amendment
of Registration Rights.

 

Provisions
of this Agreement may be amended and the observance thereof may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company and the Required Holders; provided that any such
amendment or waiver that complies with the foregoing but that disproportionately, materially and adversely affects the rights
and obligations of any Investor relative to the comparable rights and obligations of the other Investors shall require the prior
written consent of such adversely affected Investor. Any amendment or waiver effected in accordance with this Section 10 shall
be binding upon each Investor and the Company. No such amendment shall be effective to the extent that it applies to less than
all of the holders of the Registrable Securities. No consideration shall be offered or paid to any Person to amend or consent
to a waiver or modification of any provision of this Agreement unless the same consideration (other than the reimbursement of
legal fees) also is offered to all of the parties to this Agreement.

 

    	18

    	 

    

 

11.Miscellaneous.

 

(a)A
Person is deemed to be a holder of Registrable Securities whenever such Person owns or is deemed to own of record such Registrable
Securities. If the Company receives conflicting instructions, notices or elections from two or more Persons with respect to the
same Registrable Securities, the Company shall act upon the basis of instructions, notice or election received from such record
owner of such Registrable Securities.

 

(b)Any
notices, consents, waivers or other communications required or permitted to be given under the terms of this Agreement must be
in writing and will be deemed to have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent
by facsimile or electronic mail (provided confirmation of transmission is mechanically or electronically generated and kept on
file by the sending party); or (iii) one Business Day after deposit with a nationally recognized overnight delivery service, in
each case properly addressed to the party to receive the same. The addresses, facsimile numbers and email addresses for such communications
shall be:

 

If to the Company:     

     

Digital
Ally, Inc.   

9705
Loiret Blvd.  

Lenexa,
KS 66219  

	Telephone:	(913) 814-7774
	Facsimile:	(913) 213-5762
	Attention:	Stanton E. Ross

Email:
Stan.Ross@digitalallyinc.com

     

With a copy (for informational purposes only) to:    

 

Christian
J. Hoffmann  

Securities
Counsel  

[_________]
 

[_________]
 

[_________]
 

	Telephone:	(602) 370-0150
	Facsimile:	[             ]
	Attention:	[             ]
	Email:	cjhoff3@gmail.com

     

If to the Transfer Agent:  

 

First
American Stock Transfer   

4747
North 7th Street, Suite 170  

Phoenix,
AZ 85014  

	Telephone:	(602) 485-1346
	Facsimile:	(602) 788-0423
	Attention:	Erica Holt
	E-mail:	erica@firstamericanstock.com

 

If to Legal Counsel:    

 

Schulte
Roth & Zabel LLP  

919
Third Avenue  

New
York, New York 10022  

	Telephone:	(212) 756-2000
	Facsimile:	(212) 593-5955
	Attention:	Eleazer Klein, Esq.
	Email:	eleazer.klein@srz.com

 

    	19

    	 

    

 

If
to a Buyer, to its address, facsimile number and/or email address set forth on the Schedule of Buyers attached hereto, with copies
to such Buyer’s representatives as set forth on the Schedule of Buyers, or to such other address, facsimile number and/or
email address to the attention of such other Person as the recipient party has specified by written notice given to each other
party five (5) days prior to the effectiveness of such change. Written confirmation of receipt (A) given by the recipient of such
notice, consent, waiver or other communication, (B) mechanically or electronically generated by the sender’s facsimile machine
or email containing the time, date, recipient facsimile number and an image of the first page of such transmission or (C) provided
by a courier or overnight courier service shall be rebuttable evidence of personal service, receipt by facsimile or receipt from
a nationally recognized overnight delivery service in accordance with clause (i), (ii) or (iii) above, respectively.

 

(c)Failure
of any party to exercise any right or remedy under this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.

 

(d)All
questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by the internal
laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the
State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the
State of New York. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting
in The City of New York, Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with
any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action
or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Each party
hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding
by mailing a copy thereof to such party at the address for such notices to it under this Agreement and agrees that such service
shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit
in any way any right to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY
HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING
OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

 

    	20

    	 

    

 

(e)If
any provision of this Agreement is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent
jurisdiction, the provision that would otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the
broadest extent that it would be valid and enforceable, and the invalidity or unenforceability of such provision shall not affect
the validity of the remaining provisions of this Agreement so long as this Agreement as so modified continues to express, without
material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity
or unenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations
of the parties or the practical realization of the benefits that would otherwise be conferred upon the parties. The parties will
endeavor in good faith negotiations to replace the prohibited, invalid or unenforceable provision(s) with a valid provision(s),
the effect of which comes as close as possible to that of the prohibited, invalid or unenforceable provision(s).

 

(f)This
Agreement, the other Transaction Documents (as defined in the Securities Purchase Agreement) and the instruments referenced herein
and therein constitute the entire agreement among the parties hereto with respect to the subject matter hereof and thereof. There
are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein and therein. This
Agreement, the other Transaction Documents and the instruments referenced herein and therein supersede all prior agreements and
understandings among the parties hereto with respect to the subject matter hereof and thereof.

 

(g)Subject
to the requirements of Section 9, this Agreement shall inure to the benefit of and be binding upon the permitted successors and
assigns of each of the parties hereto.

 

(h)The
headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.

 

(i)This
Agreement may be executed in identical counterparts, each of which shall be deemed an original but all of which shall constitute
one and the same agreement. This Agreement, once executed by a party, may be delivered to the other party hereto by facsimile
transmission of a copy of this Agreement bearing the signature of the party so delivering this Agreement.

 

(j)Each
party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver
all such other agreements, certificates, instruments and documents, as any other party may reasonably request in order to carry
out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.

 

    	21

    	 

    

 

(k)All
consents and other determinations required to be made by the Investors pursuant to this Agreement shall be made, unless otherwise
specified in this Agreement, by the Required Holders, determined as if all of the outstanding Notes then held by the Investors
have been converted for Registrable Securities without regard to any limitations on redemption, amortization and/or conversion
of the Notes and the outstanding Warrants then held by Investors have been exercised for Registrable Securities without regard
to any limitations on exercise of the Warrants.

 

(l)The
language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent and no
rules of strict construction will be applied against any party.

 

(m)This
Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and is not
for the benefit of, nor may any provision hereof be enforced by, any other Person.

 

(n)The
obligations of each Investor hereunder are several and not joint with the obligations of any other Investor, and no provision
of this Agreement is intended to confer any obligations on any Investor vis-à-vis any other Investor. Nothing contained
herein, and no action taken by any Investor pursuant hereto, shall be deemed to constitute the Investors as a partnership, an
association, a joint venture or any other kind of entity, or create a presumption that the Investors are in any way acting in
concert or as a group with respect to such obligations or the transactions contemplated herein.

 

*
* * * * *

 

[Signature
Page Follows]

 

    	22

    	 

    

 

IN
WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to this Registration Rights Agreement
to be duly executed as of the date first written above.

 

	 	COMPANY:
	 	 	 
	 	DIGITAL ALLY, INC. 

 

	 	By:	 
	 	Name:	 
	 	Title:  	 

  

    	 

    	 

    

 

IN
WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to this Registration Rights Agreement
to be duly executed as of the date first written above.

 

	 	BUYERS:
	 	 	 
	 	Hudson Bay Master Fund Ltd.
	 	 	 
	 	By:	Hudson Bay Capital
    Management LP, as its Investment Manager
	 	 	 
	 	By:	 
	 	Name:	Yoav Roth
	 	Title:	Authorized
    Signatory

 

    	 

    	 

    

 

SCHEDULE
OF BUYERS

 

	Buyer
	 	Buyer
    Address

    and Facsimile Number	 	Buyer’s
    Representative’s Address 

    and Facsimile Number
	 	 	 	 	 
	Hudson Bay
    Master Fund Ltd.	 	c/o
                                         Hudson Bay Capital Management LP

        777
Third Avenue, 30th Floor

New York, New York 10017

Attention: Yoav Roth

George Antonopoulos

Facsimile: 646-214-7946

Telephone: 212-571-1244

E-mail: investments@hudsonbaycapital.com

        operations@hudsonbaycapital.com

        

	 	Schulte
                                         Roth & Zabel LLP

        919
        Third Avenue

        New
        York, NY 10022

        Attn:
        Eleazer Klein, Esq.

        Facsimile:
        (212) 593-5955

        Telephone:
        (212) 756-2000

        Email:
        eleazer.klein@srz.com

         

 

    	 

    	 

    

 

EXHIBIT
A

 

FORM
OF NOTICE OF EFFECTIVENESS

OF REGISTRATION STATEMENT

 

First American
Stock Transfer

4747 North
7th Street, Suite 170

Phoenix, AZ 85014

Attention: Erica Holt

 

Re:        Digital
Ally, Inc.

 

Ladies and
Gentlemen:

 

[We
are][I am] counsel to Digital Ally, Inc., a Nevada corporation (the “Company”), and have represented the Company
in connection with that certain Securities Purchase Agreement, dated as of August 25, 2014 (the “Securities Purchase
Agreement”), entered into by and among the Company and the buyers named therein (collectively, the “Holders”)
pursuant to which the Company issued to the Holders senior secured convertible notes (the “Notes”) pursuant
to which shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”) are issuable
thereunder and warrants exercisable for shares of Common Stock (the “Warrants”). Pursuant to the Securities
Purchase Agreement, the Company also has entered into a Registration Rights Agreement with the Holders (the “Registration
Rights Agreement”) pursuant to which the Company agreed, among other things, to register the resale of the Registrable
Securities (as defined in the Registration Rights Agreement), including the shares of Common Stock issuable upon conversion of
the Notes and upon exercise of the Warrants under the Securities Act of 1933, as amended (the “1933 Act”).
In connection with the Company’s obligations under the Registration Rights Agreement, on ____________ ___, 2014, the Company
filed a Registration Statement on Form S-3 (File No. 333-_____________) (the “Registration Statement”) with
the Securities and Exchange Commission (the “SEC”) relating to the Registrable Securities which names each
of the Holders as a selling shareholder thereunder.

 

In
connection with the foregoing, [we][I] advise you that a member of the SEC’s staff has advised [us][me] by telephone that
the SEC has entered an order declaring the Registration Statement effective under the 1933 Act at [ENTER TIME OF EFFECTIVENESS]
on [ENTER DATE OF EFFECTIVENESS] and [we][I] have no knowledge, after telephonic inquiry of a member of the
SEC’s staff, that any stop order suspending its effectiveness has been issued or that any proceedings for that purpose are
pending before, or threatened by, the SEC and the Registrable Securities are available for resale under the 1933 Act pursuant
to the Registration Statement.

 

This
letter shall serve as our standing instruction to you that the shares of Common Stock are freely transferable by the Holders pursuant
to the Registration Statement. You need not require further letters from us to effect any future legend-free issuance or reissuance
of shares of Common Stock to the Holders as contemplated by the Company’s Irrevocable Transfer Agent Instructions dated
August [__], 2014.

 

	 	Very truly yours,
	 	 	 
	 	[ISSUER’S COUNSEL]
	 	 	 
	 	By:	 
	 	 	 
	CC: [LIST NAMES OF HOLDERS]	 	 

 

    	A-1

    	 

    

 

EXHIBIT
B

 

SELLING
SHAREHOLDERS

 

The
shares of common stock being offered by the selling shareholders are those issuable to the selling shareholders pursuant to the
terms of the convertible notes and upon exercise of the warrants. For additional information regarding the issuance of those convertible
notes and warrants, see “Private Placement of Convertible Notes and Warrants” above. We are registering the shares
of common stock in order to permit the selling shareholders to offer the shares for resale from time to time. Except for the ownership
of the convertible notes and the warrants issued pursuant to the Securities Purchase Agreement, the selling shareholders have
not had any material relationship with us within the past three years.

 

The
table below lists the selling shareholders and other information regarding the beneficial ownership of the shares of common stock
by each of the selling shareholders. The second column lists the number of shares of common stock beneficially owned by each selling
shareholder, based on its ownership of the convertible notes and warrants, as of ________, 2014, assuming conversion of all convertible
notes and exercise of all warrants held by the selling shareholders on that date, without regard to any limitations on conversion,
amortization, redemption or exercise.

 

The
third column lists the shares of common stock being offered by this prospectus by the selling shareholders.

 

In
accordance with the terms of a registration rights agreement with the selling shareholders, this prospectus generally covers the
resale of at least 130% of the sum of (i) the maximum number of shares of common stock issued and issuable pursuant to the convertible
notes as of the Trading Day immediately preceding the date the registration statement is initially filed with the SEC, and (ii)
the maximum number of shares of common stock issued and issuable upon exercise of the related warrants as of the Trading Day immediately
preceding the date the registration statement is initially filed with the SEC. Because the conversion price of the convertible
notes and the exercise price of the warrants may be adjusted, the number of shares that will actually be issued may be more or
less than the number of shares being offered by this prospectus. The fourth column assumes the sale of all of the shares offered
by the selling shareholders pursuant to this prospectus.

 

Under
the terms of the convertible notes and the warrants, a selling shareholder may not convert the convertible notes or exercise the
warrants to the extent such conversion or exercise would cause such selling shareholder, together with its affiliates, to beneficially
own a number of shares of common stock which would exceed 4.99% of our then outstanding shares of common stock following such
conversion or exercise, excluding for purposes of such determination shares of common stock issuable upon conversion of the convertible
notes which have not been converted and upon exercise of the warrants which have not been exercised. The number of shares in the
second column does not reflect this limitation. The selling shareholders may sell all, some or none of their shares in this offering.
See “Plan of Distribution.”

 

    	Annex I-1

    	 

    

 

	

    Name of Selling Shareholder	 	Number
    of Shares of Common Stock Owned Prior to Offering	 	Maximum
    Number of Shares of Common Stock to be Sold Pursuant to this Prospectus	 	Number
    of Shares of Common Stock Owned After Offering
	 	 	 	 	 	 	 
	Hudson
    Bay Master Fund Ltd. (1)	 	 	 	 	 	0

 

(1)
Hudson Bay Capital Management, L.P., the investment manager of Hudson Bay Master Fund Ltd., has voting and investment power over
these securities. Sander Gerber is the managing member of Hudson Bay Capital GP LLC, which is the general partner of Hudson Bay
Capital Management, L.P. Each of Hudson Bay Master Fund Ltd. and Sander Gerber disclaims beneficial ownership over these securities.

 

    	Annex I-2

    	 

    

 

PLAN
OF DISTRIBUTION

 

We
are registering the shares of common stock issuable pursuant to the terms of the convertible notes and upon exercise of the warrants
to permit the resale of these shares of common stock by the holders of the convertible notes and warrants from time to time after
the date of this prospectus. We will not receive any of the proceeds from the sale by the selling shareholders of the shares of
common stock. We will bear all fees and expenses incident to our obligation to register the shares of common stock.

 

The
selling shareholders may sell all or a portion of the shares of common stock beneficially owned by them and offered hereby from
time to time directly or through one or more underwriters, broker-dealers or agents. If the shares of common stock are sold through
underwriters or broker-dealers, the selling shareholders will be responsible for underwriting discounts or commissions or agent’s
commissions. The shares of common stock may be sold in one or more transactions at fixed prices, at prevailing market prices at
the time of the sale, at varying prices determined at the time of sale, or at negotiated prices. These sales may be effected in
transactions, which may involve crosses or block transactions,

 

	 	● 	on
    any national securities exchange or quotation service on which the securities may be listed or quoted at the time of sale;
	 	 	 
	 	●	in
    the over-the-counter market;
	 	 	 
	 	●	in
    transactions otherwise than on these exchanges or systems or in the over-the-counter market;
	 	 	 
	 	●	through
    the writing of options, whether such options are listed on an options exchange or otherwise;
	 	 	 
	 	●	ordinary
    brokerage transactions and transactions in which the broker-dealer solicits purchasers;
	 	 	 
	 	●	block
    trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block
    as principal to facilitate the transaction;
	 	 	 
	 	●	purchases
    by a broker-dealer as principal and resale by the broker-dealer for its account;
	 	 	 
	 	●	an
    exchange distribution in accordance with the rules of the applicable exchange;
	 	 	 
	 	●	privately
    negotiated transactions;
	 	 	 
	 	●	short
    sales;
	 	 	 
	 	●	sales
    pursuant to Rule 144;
	 	 	 
	 	●	broker-dealers
    may agree with the selling securityholders to sell a specified number of such shares at a stipulated price per share;
	 	 	 
	 	●	a
    combination of any such methods of sale; and
	 	 	 
	 	●	any
    other method permitted pursuant to applicable law.

 

    	Annex I-3

    	 

    

 

If
the selling shareholders effect such transactions by selling shares of common stock to or through underwriters, broker-dealers
or agents, such underwriters, broker-dealers or agents may receive commissions in the form of discounts, concessions or commissions
from the selling shareholders or commissions from purchasers of the shares of common stock for whom they may act as agent or to
whom they may sell as principal (which discounts, concessions or commissions as to particular underwriters, broker-dealers or
agents may be in excess of those customary in the types of transactions involved). In connection with sales of the shares of common
stock or otherwise, the selling shareholders may enter into hedging transactions with broker-dealers, which may in turn engage
in short sales of the shares of common stock in the course of hedging in positions they assume. The selling shareholders may also
sell shares of common stock short and deliver shares of common stock covered by this prospectus to close out short positions and
to return borrowed shares in connection with such short sales. The selling shareholders may also loan or pledge shares of common
stock to broker-dealers that in turn may sell such shares.

 

The
selling shareholders may pledge or grant a security interest in some or all of the convertible notes, warrants or shares of common
stock owned by them and, if they default in the performance of their secured obligations, the pledgees or secured parties may
offer and sell the shares of common stock from time to time pursuant to this prospectus or any amendment to this prospectus under
Rule 424(b)(3) or other applicable provision of the Securities Act of 1933, as amended, amending, if necessary, the list of selling
shareholders to include the pledgee, transferee or other successors in interest as selling shareholders under this prospectus.
The selling shareholders also may transfer and donate the shares of common stock in other circumstances in which case the transferees,
donees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this prospectus.

 

The
selling shareholders and any broker-dealer participating in the distribution of the shares of common stock may be deemed to be
“underwriters” within the meaning of the Securities Act, and any commission paid, or any discounts or concessions
allowed to, any such broker-dealer may be deemed to be underwriting commissions or discounts under the Securities Act. At the
time a particular offering of the shares of common stock is made, a prospectus supplement, if required, will be distributed which
will set forth the aggregate amount of shares of common stock being offered and the terms of the offering, including the name
or names of any broker-dealers or agents, any discounts, commissions and other terms constituting compensation from the selling
shareholders and any discounts, commissions or concessions allowed or reallowed or paid to broker-dealers.

 

Under
the securities laws of some states, the shares of common stock may be sold in such states only through registered or licensed
brokers or dealers. In addition, in some states the shares of common stock may not be sold unless such shares have been registered
or qualified for sale in such state or an exemption from registration or qualification is available and is complied with.

 

    	Annex I-4

    	 

    

 

There
can be no assurance that any selling shareholder will sell any or all of the shares of common stock registered pursuant to the
registration statement, of which this prospectus forms a part.

 

The
selling shareholders and any other person participating in such distribution will be subject to applicable provisions of the Securities
Exchange Act of 1934, as amended, and the rules and regulations thereunder, including, without limitation, Regulation M of the
Exchange Act, which may limit the timing of purchases and sales of any of the shares of common stock by the selling shareholders
and any other participating person. Regulation M may also restrict the ability of any person engaged in the distribution of the
shares of common stock to engage in market-making activities with respect to the shares of common stock. All of the foregoing
may affect the marketability of the shares of common stock and the ability of any person or entity to engage in market-making
activities with respect to the shares of common stock.

 

We
will pay all expenses of the registration of the shares of common stock pursuant to the registration rights agreement, estimated
to be $[ ] in total, including, without limitation, Securities and Exchange Commission filing fees and expenses of compliance
with state securities or “blue sky” laws; provided, however, that a selling shareholder will pay all underwriting
discounts and selling commissions, if any. We will indemnify the selling shareholders against liabilities, including some liabilities
under the Securities Act, in accordance with the registration rights agreements, or the selling shareholders will be entitled
to contribution. We may be indemnified by the selling shareholders against civil liabilities, including liabilities under the
Securities Act, that may arise from any written information furnished to us by the selling shareholder specifically for use in
this prospectus, in accordance with the related registration rights agreement, or we may be entitled to contribution.

 

Once
sold under the registration statement, of which this prospectus forms a part, the shares of common stock will be freely tradable
in the hands of persons other than our affiliates.

 

    	Annex I-5

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00234-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00234-of-00352.parquet"}]]