Document:

Stock Purchase Agreement

    Exhibit
      10.14

     

    STOCK
      REPURCHASE AGREEMENT

     

    This
      Stock Repurchase Agreement (the “Agreement”),
      dated
      January 16, 2007, is by and between David C. McCourt (the “Stockholder”)
      and
      Granahan McCourt Acquisition Corporation (the “Company”).

    

    WHEREAS,
      pursuant to an Insider Letter Agreement by and between the Stockholder and
      the
      Company, dated October 18, 2006, the parties hereto agreed that, to the
      extent the underwriters of the Company’s initial public offering did not
      exercise the over-allotment option with respect to the offering, the Stockholder
      has agreed to sell to the Company, and the Company has agreed to repurchase
      from
      the Stockholder, 421,875 shares of common stock, par value $0.0001 per share,
      of
      the Company (the “Shares”).

    

    Accordingly,
      the parties hereto hereby agree as follows:

    

    1.  Purchase
      and Sale of Shares.
      The
      Stockholder hereby sells, assigns, transfers, and delivers to the Company and,
      subject to and in reliance upon the representations and warranties set forth
      in
      this Agreement, the Company hereby purchases and accepts from the Stockholder
      the Shares, together with all rights relating thereto. Simultaneously with
      the
      execution and delivery of this Agreement, the Stockholder will execute and
      deliver to the Company such other instruments of transfer as may be necessary
      or
      appropriate to vest in the Company good title to the Shares.

    

    2.  Purchase
      Price. The
      purchase price payable by the Company to the Stockholder for the Shares is
      $0.000618 per share, for a total purchase price of $260.72, and will be paid
      by
      the Company to the Stockholder in cash.

    

    3.  Representations
      and Warranties.
      The
      Stockholder hereby represents and warrants to the Company that the Stockholder
      is the sole record and beneficial owner of the Shares to be sold by him
      hereunder and has full power, right, and authority to sell and transfer the
      Shares to the Company, free and clear of all liens, security interests,
      encumbrances, and adverse claims.

    

    IN
      WITNESS WHEREOF, the Stockholder and the Company have executed this Agreement
      or
      caused this Agreement to be executed by their duly authorized respective
      officers, all as of the date first written above.

    

    

    
      	 	GRANAHAN MCCOURT ACQUISITION
              CORPORATION
	 	 
	 	
              By:
                /s/
                David C. McCourt

              Name:
                David C. McCourt

              Title:
                President and Chief Executive Officer

            
	 	 
	 	 
	 	STOCKHOLDER
	 	 
	 	
              /s/
                David C. McCourt

              David
                C. McCourt, individuallyRegistration Rights Agreement

    EXHIBIT
      10.2

    EXECUTION
      COPY

    

    REGISTRATION
      RIGHTS AGREEMENT

     

    This
      REGISTRATION
      RIGHTS AGREEMENT
      (this
      "Agreement")
      is
      dated as of March 9, 2007, by and between Telkonet, Inc., a Utah corporation,
      with headquarters located at 20374 Seneca Meadows Parkway, Germantown, MD 20876
      (the "Company"),
      and
      Smart Systems International, a Nevada corporation ("Buyer").

     

    WHEREAS:

     

    A.    In
      connection with the Asset Purchase Agreement by and between the parties hereto
      of even date herewith (the "Asset
      Purchase Agreement")
      the
      Company has agreed to issue to Buyer shares of the Company’s common stock, par
      value $0.001 per share (the “Common
      Stock”),
      as
      partial consideration for the acquisition by the Company of the Purchased Assets
      (as defined in the Asset Purchase Agreement).

     

    B.    To
      induce
      Buyer to execute and deliver the Asset Purchase Agreement, the Company has
      agreed to provide the 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 set forth in this Agreement.

    

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

     

    1.    Definitions.
      

     

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

     

    a.    "Business
      Day"
      means
      any day other than Saturday, Sunday or any other day on which commercial banks
      in the State of Maryland are authorized or required by law to remain
      closed.

     

    b.    "Closing
      Date"
      shall
      have the meaning set forth in the Asset Purchase Agreement.

     

    c.    "Effective
      Date"
      means
      the date the Registration Statement has been declared effective by the
      SEC.

     

    d.    "Effectiveness
      Deadline"
      means
      the date that is 60 days after the Filing Deadline, or if there is a full review
      of the Registration Statement by the SEC, 90 days after the Filing
      Deadline.

     

    
      
         

      

      
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    e.    "Filing
      Deadline"
      means
      the earlier to occur of (i) 120 days from the Closing Date, or (ii) May 15,
      2007.

     

    f.    "Investor"
      means
      Buyer or any transferee or assignee thereof to whom 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.

     

    g.    "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.

     

    h.    "register,"
      "registered,"
      and
      "registration"
      refer
      to a registration effected by preparing and filing a Registration Statement
      (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 by
      the
      SEC.

     

    i.    "Registrable
      Securities"
      means
      the Common Stock issued to Buyer pursuant to the Asset Purchase
      Agreement.

     

    j.    "Registration
      Statement"
      means a
      registration statement of the Company filed under the 1933 Act covering the
      Registrable Securities.

     

    k.    "Rule
      415"
      means
      Rule 415 under the 1933 Act or any successor rule providing for the offering
      of
      securities on a continuous or delayed basis.

     

    l.    "SEC"
      means
      the United States Securities and Exchange Commission.

     

    2.    Registration.

     

    a.    Registration.
      The
      Company shall prepare, and, as soon as practicable, but in no event later than
      the Filing Deadline, file with the SEC the Registration Statement on Form S-3
      covering the resale of all of the 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 Buyer, subject to the provisions of Section 2(c).
      The
      Registration Statement prepared pursuant hereto shall register for resale at
      least the number of shares of Common Stock issued to Buyer on the Closing Date
      pursuant to the Asset Purchase Agreement, provided that the Company further
      agrees to amend or supplement the Registration Statement, or to file a second
      Registration Statement (to which all provisions hereof will apply to the same
      extent as they apply to the initial Registration Statement), to the extent
      necessary to register any additional Registrable Securities issued or issuable
      to Buyer or its designees after Closing Date pursuant to the adjustment
      provisions of Sections 3.3 or 3.4 of the Asset Purchase Agreement. The
      Registration Statement shall contain (except if otherwise directed by Buyer)
      the
      "Selling
      Shareholder"
      and
      "Plan
      of Distribution"
      sections in substantially the form attached hereto as Exhibit
      B
      subject
      to any changes necessary to make such sections complete, accurate and not
      misleading in all material respects. The Company shall use its best efforts
      to
      have the Registration Statement declared effective by the SEC as soon as
      practicable, but in no event later than the Effectiveness Deadline.

     

    
      
         

      

      
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    b.    Legal
      Counsel.
      Subject
      to Section 5 hereof, the Investors shall have the right to select one legal
      counsel to review and oversee any registration pursuant to this Section 2
      ("Legal
      Counsel").
      The
      Company and Legal Counsel shall reasonably cooperate with each other in
      performing the Company's obligations under this Agreement.

     

    c.    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 another appropriate form reasonably acceptable
      to
      Buyer, and (ii) undertake to register the Registrable Securities on Form S-3
      as
      soon as either 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 or the Company is no longer obligated to
      maintain a registration statement for the Registrable Securities pursuant to
      the
      terms hereof.

     

    3.    Related
      Obligations.

     

    At
      such
      time as the Company is obligated to file a Registration Statement with the
      SEC
      pursuant to Section 2, 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 submit to the SEC, within two (2) Business Days after the Company
      learns that no review of the Registration Statement will be made by the staff
      of
      the SEC or that the staff has no further comments on the Registration Statement,
      as the case may be, a request for acceleration of effectiveness of such
      Registration Statement to a time and date not later than 48 hours after the
      submission of such request. 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 all Investors may sell all of the Registrable Securities covered by
      such Registration Statement without restriction pursuant to Rule 144(k) (or
      any
      successor thereto) promulgated under the 1933 Act, or (ii) the date on which
      Investors shall have sold all of the Registrable Securities covered by such
      Registration Statement (the "Registration
      Period").
      The
      Company shall ensure that the 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.

     

    b.    The
      Company shall prepare and file with the SEC such amendments (including
      post-effective amendments) and supplements to the 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 the
      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-Q, Form 10-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.

     

    
      
         

      

      
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    c.    The
      Company shall (A) permit Legal Counsel to review and comment upon (i) the
      Registration Statement at least five (5) Business Days prior to its filing
      with
      the SEC and (ii) all amendments and supplements to the Registration Statement
      (except for Annual Reports on Form 10-K, and Reports on Form 10-Q 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,
      conditioned or delayed. 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 the Registration Statement,
      (ii)
      promptly after the same is prepared and filed with the SEC, one copy of the
      Registration Statement and any amendment(s) thereto, including financial
      statements and schedules, all documents incorporated therein by reference,
      if
      requested by Buyer, and all exhibits, and (iii) upon the effectiveness of the
      Registration Statement, one copy of the prospectus included in such Registration
      Statement and all amendments and supplements thereto. The Company shall
      reasonably cooperate with Legal Counsel in performing the Company's obligations
      pursuant to this Section 3.

     

    d.    The
      Company shall furnish to each Investor, without charge, upon request (i) at
      least one copy of the Registration Statement and any amendment(s) thereto,
      including financial statements and schedules, all documents incorporated therein
      by reference, if requested by such Investor, all exhibits and each preliminary
      prospectus, (ii) upon the effectiveness of the Registration Statement, up to
      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 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.

     

    
      
         

      

      
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    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 the 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(q), promptly prepare
      a supplement or amendment to the Registration Statement to correct such untrue
      statement or omission, and deliver ten (10) copies of such supplement or
      amendment to Legal Counsel and Buyer (or such other number of copies as Legal
      Counsel or Buyer may reasonably request). The Company shall also promptly notify
      Legal Counsel and Buyer in writing (i) when a prospectus or any prospectus
      supplement or post-effective amendment has been filed, and when the Registration
      Statement or any post-effective amendment has become effective (notification
      of
      such effectiveness shall be delivered to Legal Counsel and Buyer by facsimile
      or
      e-mail on the same day of such effectiveness and by overnight mail), (ii) of
      any
      request by the SEC for amendments or supplements to the Registration Statement
      or related prospectus or related information, and (iii) of the Company's
      reasonable determination that a post-effective amendment to the Registration
      Statement would be appropriate.

     

    g.    The
      Company shall use its best efforts to prevent the issuance of any stop order
      or
      other suspension of effectiveness of the 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.    The
      Company shall make available for inspection by (i) the Investors, (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 Buyer)
      or
      use of any Record or other information which the Company determines in good
      faith to be confidential, and of which determination the Inspectors are so
      notified, unless (a) the disclosure of such Records is necessary to avoid or
      correct a misstatement or omission in the 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 governmental 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
      or any other agreement of which the Inspector has knowledge. Buyer 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.

     

    
      
         

      

      
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    i.    The
      Company shall hold in confidence and not make any disclosure of information
      concerning any Investor provided to the Company unless (i) disclosure of such
      information is necessary to comply with federal or state securities laws or
      applicable rules and regulations of any relevant market or exchange, (ii) the
      disclosure of such information is necessary to avoid or correct a misstatement
      or omission in the 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 such Investor’s expense, to undertake appropriate action to prevent
      disclosure of, or to obtain a protective order for, such
      information.

     

    j.    The
      Company shall use its best efforts to 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.

     

    k.    The
      Company shall cooperate with Buyer 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 and resold
      pursuant to the Registration Statement and enable such certificates to be in
      such denominations or amounts, as the case may be, as Buyer may reasonably
      request and registered in such names as Buyer may request.

     

    l.    If
      requested by Buyer, the Company shall (i) as soon as practicable incorporate
      in
      a prospectus supplement or post-effective amendment such information as Buyer
      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) as soon as practicable
      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) as soon as
      practicable, supplement or make amendments to the Registration Statement if
      reasonably requested by Buyer.

     

    m.    The
      Company shall use its best efforts to cause the Registrable Securities covered
      by the 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.

     

    n.    The
      Company shall make generally available to its security holders as soon as
      practicable, 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 effective date of a Registration
      Statement.

     

    
      
         

      

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

       

      p.    Within
        two (2) Business Days after the Registration Statement is declared 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 Buyer) confirmation that such Registration Statement has been declared
        effective by the SEC in the form attached hereto as Exhibit
        A
        or such
        other form as may be required by the transfer agent to permit the consummation
        of sales under such Registration Statement.

       

    

    4.    Obligations
      of Investors.

     

    a.    At
      least
      five (5) Business Days prior to the first anticipated filing date of the
      Registration Statement, the Company shall notify the Investors in writing of
      the
      information the Company requires from the Investors for inclusion of the
      Investors’ Registrable Securities in the Registration Statement. It shall be a
      condition precedent to the obligations of the Company to each Investor to
      complete the registration pursuant to this Agreement with respect to the
      Registrable Securities 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 the effectiveness of the registration of such
      Registrable Securities and shall execute such documents in connection with
      such
      registration as the Company may reasonably request.

     

    b.    Each
      Investor, by such Investor’s acceptance of the Registrable Securities, agrees to
      cooperate with the Company as reasonably requested by the Company in connection
      with the preparation and filing of the Registration Statement
      hereunder.

     

    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), Buyer will immediately discontinue disposition of Registrable
      Securities pursuant to the Registration Statement until Buyer's receipt of
      the
      copies of the supplemented or amended prospectus contemplated by Section 3(g)
      or
      the first sentence of 3(f) or receipt of notice that no supplement or amendment
      is required.

     

    
      
         

      

      
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    d.    Each
      Investor covenants and agrees that it will comply with the prospectus delivery
      requirements of the 1933 Act as applicable to it 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. Any costs and expenses
      of
      Legal Counsel incurred by the Investors in connection with the registration
      shall be the sole responsibility of the Investors.

     

    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, its directors, officers, members,
      partners, employees, agents, representatives of, and each Person, if any, who
      controls such 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 the 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 the 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 the 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

     

    
      
         

      

      
        8

        
          

        

      

      
         

      

       

      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); (ii) with respect to any preliminary
        prospectus, shall not inure to the benefit of any such Person from whom the
        Person asserting any such Claim purchased the Registrable Securities that
        are
        the subject thereof (or to the benefit of any Person controlling such Person)
        if
        the untrue statement or omission of material fact contained in the preliminary
        prospectus was corrected in the prospectus, as then amended or supplemented,
        if
        such prospectus was timely made available by the Company pursuant to Section
        3(d), and the Indemnified Person was promptly advised in writing not to use
        the
        incorrect prospectus prior to the use giving rise to a Violation and such
        Indemnified Person, notwithstanding such advice, used it or failed to deliver
        the correct prospectus as required by the 1933 Act and such correct prospectus
        was timely made available pursuant to Section 3(d); (iii) shall not be available
        to the extent such Claim is based on a failure of the Investor to deliver
        or to
        cause to be delivered the prospectus made available by the Company, including
        a
        corrected prospectus, if such prospectus or corrected prospectus was timely
        made
        available by the Company pursuant to Section 3(d); and (iv) 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, conditioned 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 Buyer pursuant to Section 9.

    

     

    b.    Each
      Investor severally and not jointly agrees to 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, each other Investor, its directors, officers, members,
      partners, employees, agents, representatives of and each Person, if any, who
      controls the Company or any such other Investor 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
      the
      indemnifying Investor expressly for use in connection with such Registration
      Statement or any post-effective amendment thereof or any prospectus contained
      therein; and, subject to Section 6(c), the indemnifying Investor will reimburse
      any legal or other expenses reasonably incurred by an Indemnified Party in
      connection with investigating or defending any such Claim as promptly as such
      expenses are incurred and are due and payable; 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 the indemnifying Investor, 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 such Indemnified
      Party and shall survive the transfer of the Registrable Securities by the
      indemnifying Investor pursuant to Section 9. Notwithstanding anything to the
      contrary contained herein, the indemnification agreement contained in this
      Section 6(b) with respect to any preliminary prospectus shall not inure to
      the
      benefit of any Indemnified Party if the untrue statement or omission of material
      fact contained in the preliminary prospectus was corrected on a timely basis
      in
      the prospectus, as then amended or supplemented.

     

    
      
         

      

      
        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 and reasonably 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 such Indemnified Person or Indemnified Party
      to
      be paid by the indemnifying party, if, in the reasonable opinion of counsel
      retained by the indemnifying party, 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. The Indemnified Party or Indemnified Person shall
      cooperate fully with the indemnifying party in connection with any negotiation
      or defense of any such action or Claim by the indemnifying party and shall
      furnish to the indemnifying party all information reasonably available to the
      Indemnified Party or Indemnified Person which relates to such action or Claim.
      The indemnifying party shall keep the Indemnified Party or Indemnified Person
      reasonably 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. 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.

     

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

     

    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 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.

     

    8.    Reports
      Under the 1934 Act.
      

     

    With
      a
      view to making available to Buyer 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 Buyer 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 Buyer so long as Buyer 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 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 Buyer 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 Buyer to any
      transferee of all or any portion of Buyer's Registrable Securities if: (i)
      Buyer
      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
      and applicable state securities laws; and (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.

     

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

     

    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 Buyer. Any
      amendment or waiver effected in accordance with this Section 10 shall be binding
      upon Buyer and the Company.

     

    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 the 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 (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 and facsimile numbers for such communications shall
      be:

     

    If
      to the
      Company: 

    

    Telkonet,
      Inc. 

    20374
      Seneca Meadows Parkway 

    Germantown,
      MD 20876

    Telephone:
       (240)
      912-1800

    Facsimile:
       (240)
      912-1839

    Attention:
      Chief Financial Officer 

    

    with
      a
      copy to:

     

    Baker
      & Hostetler LLP

    1050
      Connecticut Avenue

    Washington,
      D.C. 20036

    Telephone:
      (202) 861-1622

    e-mail:
      jpenman@bakerlaw.com

    Facsimile:
      (202) 861-1783

    Attention:
      Janis M. Penman, Esq.

     

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

     

    If
      to
      Buyer:

    

    Smart
      Systems International.

    c/o
      Andrew G. Osler

    GFI
      Energy Venture, LLC

    11611
      San
      Vicente Blvd., #710 

    Los
      Angeles, CA 90049 

    Telephone:
      (310) 442-0542

    e-mail:
      andrew@gfienergy.com

    Fax:
      (310) 442-0540

    

    with
      a
      copy to:

    

    David
      A.
      Garcia, Esq.

    Hale
      Lane

    5441
      Kietzke Lane, Second Floor

    Reno,
      NV
      89511

    Telephone:
      (775) 327-3000

    e-mail:
      dgarcia@halelane.com

    Fax:
      (775) 786-6179

    

    If
      to any
      other Investor, to the address or numbers provided to the Company in writing
      in
      connection with any assignment of Registrable Securities to such Investor,
      or
      such other address or number as may later be set forth in writing to the Company
      from such Investor. 

    

    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 containing the time, date, recipient facsimile
      number and an image of the first page of such transmission or (C) provided
      by a
      courier or overnight courier service shall be rebuttable evidence of personal
      service, receipt by facsimile or receipt from a nationally recognized overnight
      delivery service in accordance with clause (i), (ii) or (iii) above,
      respectively.

    

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

     

    d.    All
      questions concerning the construction, validity, enforcement and interpretation
      of this Agreement shall be governed by the internal laws of the State of
      Maryland, without giving effect to any choice of law or conflict of law
      provision or rule (whether of the State of Maryland or any other jurisdictions)
      that would cause the application of the laws of any jurisdictions other than
      the
      State of Maryland. If any provision of this Agreement shall be invalid or
      unenforceable in any jurisdiction, such invalidity or unenforceability shall
      not
      affect the validity or enforceability of the remainder of this Agreement in
      that
      jurisdiction or the validity or enforceability of any provision of this
      Agreement in any other jurisdiction. 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.

     

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

     

    e.    This
      Agreement, the Asset 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 Asset Purchase Agreement 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.

     

    f.    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.

     

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

     

    h.    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.

     

    i.    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.

     

    j.    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. 

     

    k.    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.

     

    [signatures
      on next page]

     

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

    IN
      WITNESS WHEREOF,
      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:

            
	 	 
	 	
              TELKONET,
                INC.

            
	 	 
	 	 
	 	 
	 	
              By:
                /s/ Ronald W.
                Pickett                                         

              Ronald
                W. Pickett

              Chief
                Executive Officer    

            
	 	 

    

    

    

    
      	 	
              BUYER:

            
	 	 
	 	
              SMART
                SYSTEMS INTERNATIONAL

            
	 	 
	 	 
	 	 
	 	
              By: __________________________________

              Name:  
                

              Title:    

            
	 	 

    

    

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

    
EXHIBIT
      A

    

    FORM
      OF NOTICE OF EFFECTIVENESS

    OF
      REGISTRATION STATEMENT

     

     

    [Transfer
      Agent]

    [Address]

    Attention:
      

    

    Re:    Telkonet,
      Inc.

     

    Ladies
      and Gentlemen:

     

    We
      are
      counsel to Telkonet, Inc., a Utah corporation (the "Company"),
      and
      have represented the Company in connection with that certain Asset Purchase
      Agreement (the "Asset
      Purchase Agreement")
      entered into by and among the Company and the seller named therein (the
      "Holder")
      pursuant to which the Company issued to the Holder shares of the Company's
      common stock, $0.001 par value (the "Common
      Stock").
      Pursuant to the Asset Purchase Agreement, the Company also has entered into
      a
      Registration Rights Agreement with the Holder (the "Registration
      Rights Agreement")
      pursuant to which the Company agreed, among other things, to register the
      Registrable Securities (as defined in the Registration Rights Agreement), under
      the Securities Act of 1933, as amended (the "1933
      Act").
      In
      connection with the Company's obligations under the Registration Rights
      Agreement, on ____________, 2007, 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 the Holder as a selling
      shareholder thereunder.

     

    In
      connection with the foregoing, we advise you that a member of the SEC's staff
      has advised us 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
      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.

     

    
      
         

      

      
        16

        
          

        

      

      
         

      

    

     

    This
      letter shall serve as our standing confirmation to you of the Company’s
      instruction that the shares of Common Stock are freely transferable by the
      Holder 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 Holder as contemplated by the Company’s
      Irrevocable Transfer.

     

    
      	 	
              Very
                truly yours,

               

              [ISSUER'S
                COUNSEL]

               

              By:_____________________

            

    

     

    
      
         

      

      
        17

        
          

        

      

      
         

      

       

      EXHIBIT
        B

    

    

    SELLING
      SHAREHOLDERS

     

    

    [INSERT
      SELLING STOCKHOLDER DISCLOSURE]

     

    
      
         

      

      
        1

        
          

        

      

      
         

      

    

     

    PLAN
      OF DISTRIBUTION

     

    We
      are
      registering the shares of common stock to permit the resale of these shares
      of
      common stock by the holder thereof from time to time after the date of this
      prospectus. We will not receive any of the proceeds from the sale by the selling
      shareholder 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 shareholder 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
      shareholder will be responsible for underwriting discounts or commissions or
      agent's commissions. The shares of common stock may be sold in one or more
      transactions at fixed prices, at prevailing market prices at the time of the
      sale, at varying prices determined at the time of sale, or at negotiated prices.
      These sales may be effected in transactions, which may involve crosses or block
      transactions, 

     

    	·   
              	
            on
              any national securities exchange or quotation service on which the
              securities may be listed or quoted at the time of
              sale;

          

     

    	·   
              	
            in
              the over-the-counter market;

          

     

    	·   
              	
            in
              transactions otherwise than on these exchanges or systems or in the
              over-the-counter market;

          

     

    	·   
              	
            through
              the writing of options, whether such options are listed on an options
              exchange or otherwise;

          

     

    	·   
              	
            ordinary
              brokerage transactions and transactions in which the broker-dealer
              solicits purchasers;

          

     

    	·   
              	
            block
              trades in which the broker-dealer will attempt to sell the shares as
              agent
              but may position and resell a portion of the block as principal to
              facilitate the transaction;

          

     

    	·   
              	
            purchases
              by a broker-dealer as principal and resale by the broker-dealer for
              its
              account;

          

     

    	·   
              	
            an
              exchange distribution in accordance with the rules of the applicable
              exchange;

          

     

    	·   
              	
            privately
              negotiated transactions;

          

     

    	·   
              	
            short
              sales;

          

      

    	·   
              	
            sales
              pursuant to Rule 144;

          

     

    	·   
              	
            broker-dealers
              may agree with the selling shareholder 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 shareholder effects 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 shareholder 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 shareholder 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 shareholder 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 shareholder may also loan or pledge shares of common stock to
      broker-dealers that in turn may sell such shares.

     

    The
      selling shareholder may pledge or grant a security interest in some or all
      of
      the shares of common stock owned by it and, if it defaults in the performance
      of
      its 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 shareholder
      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.

     

    Any
      broker-dealers 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 shareholder and any discounts, commissions or concessions
      allowed or reallowed or paid to broker-dealers.

     

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

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

     

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

     

    The
      selling shareholder 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
      shareholder 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 the selling
      shareholder will pay all underwriting discounts and selling commissions, if
      any.
      We will indemnify the selling shareholder against liabilities, including some
      liabilities under the Securities Act, in accordance with the registration rights
      agreement, or the selling shareholder will be entitled to contribution. We
      may
      be indemnified by the selling shareholder 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 agreements,
      or we may be entitled to contribution.

     

    Once
      sold
      under the shelf 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.

     

     

    3

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