Exhibit 10.39



 


Exhibit
10.39


 


REGISTRATION
RIGHTS AGREEMENT


 


REGISTRATION
RIGHTS AGREEMENT (this “Agreement”), dated as of March 21, 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


 




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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


 




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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.


 


(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.


 




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(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.


 


(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.


 




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(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).


 


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.


 




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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.


 


(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.


 




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(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).


 


(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,


 




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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.


 


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


 




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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.


 


(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.


 




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(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.


 


(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


 




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(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.


 


(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


 




    	11



    	 



    

 


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.


 


(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.


 




    	12



    	 



    

 


(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.


 


(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


 




    	13



    	 



    

 


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.


 


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.


 




    	14



    	 



    

 


(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.


 




    	15



    	 



    

 


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.


 




    	16



    	 



    

 


(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.


 




    	17



    	 



    

 


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.


 


(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.


 




    	18



    	 



    

 


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;


 


(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.


 




    	19



    	 



    

 


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


 




    	20



    	 



    

 


	 	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


 


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.


 




    	21



    	 



    

 


(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.


 


(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.


 




    	22



    	 



    

 


(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.


 


(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]


 




    	23



    	 



    

  


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:	/s/
    Stanton E. Ross
	 	Name:	Stanton
    E. Ross
	 	Title:	Chairman,
    President & CEO


 




    	 



    	 



    


 


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:	/s/
    Yoav Roth
	 	Name:	Yoav
    Roth
	 	Title:	Authorized
    Signatory


 




    	 



    	 



    

 


SCHEDULE
OF BUYERS


 


	10.
    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 March 21, 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.


 






    	A-1



    	 



    

 


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
March [●], 2014.


 


	 	Very
    truly yours,
	 	 
	 	[ISSUER’S
    COUNSEL]
	 	 	 
	 	By:	 


 


CC:
     [LIST NAMES OF HOLDERS]


 




    	A-2



    	 



    

  


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.”


 




    	- 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.


 




    	- 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;



 




    	- 3 -



    	 



    

 


		●	broker-dealers
                                         may agree with the selling security holders 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.



 


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.


 






    	- 4 -



    	 



    

 


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.


 


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.


 




    	- 5 -