Document:

Exhibit 10.2

 

SECURITIES ESCROW AGREEMENT

 

SECURITIES
ESCROW AGREEMENT, dated as of [                ],
2008 (the “Agreement”) by and among Wattles Acquisition Corp., a Delaware
corporation (the “Company”), the undersigned party listed as the Initial Stockholder
on the signature page hereto (collectively, the “Initial Stockholder”) and
American Stock Transfer & Trust Company, a New York corporation (the “Escrow
Agent”).

 

WHEREAS,
the Company has entered into an Underwriting Agreement, dated [               ],
2008 (“Underwriting Agreement”) with UBS Securities LLC (“UBS) and Ladenburg
Thalmann & Co. Inc. (“Ladenburg” and together with UBS, the “Representatives”)
acting as representatives of the several underwriters (collectively, the “Underwriters”),
pursuant to which, among other matters, the Underwriters have agreed to
purchase 20,000,000 units (not including the underwriters’ over-allotment
option) (“Units”) of the Company. Each Unit consists of one share of the
Company’s common stock, par value $.0001 per share (the “Common Stock”), and
one warrant (“Warrant”), each Warrant to purchase one share of Common Stock,
all as more fully described in the Company’s definitive Prospectus, dated [                   ],
2008 (“Prospectus”) comprising part of the Company’s Registration Statement on Form S-1
(File No. 333-                )
under the Securities Act of 1933, as amended (the “Registration Statement”),
declared effective on [              ],
2008 (the “Effective Date”);

 

WHEREAS,
the Initial Stockholder have agreed, as a condition of the Underwriters’
obligation to purchase the Units pursuant to the Underwriting Agreement and to
offer them to the public, to deposit all its shares of Common Stock, as set
forth opposite its name in Exhibit A attached hereto (collectively the “Escrow
Shares”), in escrow as hereinafter provided;

 

WHEREAS,
the Company has entered into a Subscription Agreement with the Initial
Stockholder (the “Initial Warrantholder,” and together with status as Initial
Stockholder, the “Initial Holder”), dated                   ,
2007 (the “Subscription Agreement”), pursuant to which the Initial
Warrantholder has agreed to purchase 5,750,000 of the Company’s warrants (the “Private
Warrants”) in a private placement transaction;

 

WHEREAS,
the Initial Warrantholder has agreed as a condition of the sale of the Private
Warrants to deposit the Private Warrants (together with the Escrow Shares, the “Escrow
Securities”), with the Escrow Agent as hereinafter provided; and

 

WHEREAS,
the Company and the Initial Holder desire that the Escrow Agent accept the
Escrow Securities, in escrow, to be held and disbursed as hereinafter provided.

 

IT
IS AGREED:

 

1.             Appointment of Escrow Agent.
The Company and the Initial Holders hereby appoint the Escrow Agent to act in
accordance with and subject to the terms of this Agreement

 

 

and
the Escrow Agent hereby accepts such appointment and agrees to act in
accordance with and subject to such terms.

 

2.             Deposit of Escrow Securities.
On or before the Effective Date, the Initial Holder shall deliver to the Escrow
Agent certificates representing its Escrow Securities, to be held and disbursed
subject to the terms and conditions of this Agreement. The Initial Holder
acknowledges and agrees that the certificates representing the Escrow
Securities will bear a legend to reflect the deposit of such Escrow Securities
under this Agreement.

 

3.             Disbursement of the Escrow
Securities.

 

3.1.          The Escrow Agent shall hold the Escrow
Shares and the Private Warrants until the termination of their respective
Escrow Period (as defined below). The “Escrow Period” for the Escrow Shares shall
be the period beginning on the date the certificates representing the Shares
are deposited with the Escrow Agent and ending on the date that is the earlier
of twelve (12) months following the consummation of the initial Business
Combination (as such term is defined in the Registration Statement) or two (2) years
from the Effective Date, except that if the
over-allotment option is not exercised in full or in part, up to 750,000 shares
of common stock may be released from escrow for cancellation. For the Private
Warrants, the “Escrow Period” shall be the period beginning on the date the
certificates representing the Private Warrants are deposited with the Escrow
Agent and ending 30 days after the date of the consummation of the initial
Business Combination. On the termination date of the applicable Escrow Period,
the Escrow Agent shall, upon written instructions from the Initial Holder,
disburse the Initial Holder’s applicable Escrow Securities to such Initial
Holder; provided, however, that if the Escrow Agent is notified by the Company
pursuant to Section 6.7 hereof that the Company is being liquidated at any
time during the Escrow Period, then the Escrow Agent shall promptly destroy the
certificates representing the Escrow Securities; provided further, that if,
after the Company consummates a Business Combination (as such term is defined
in the Registration Statement), it (or the surviving entity) subsequently
consummates a liquidation, merger, stock exchange or other similar transaction
which results in all of its stockholders of such entity having the right to
exchange their shares of Common Stock for cash, securities or other property,
then the Escrow Agent will, upon receipt of a notice, executed by the Chairman,
Chief Executive Officer or Chief Financial Officer of the Company, in form
reasonably acceptable to the Escrow Agent, certifying that such transaction is
then being consummated, release the Escrow Securities to the Initial Holder so
that they can similarly participate. The Escrow Agent shall have no further
duties hereunder after the disbursement or destruction of the Escrow Securities
in accordance with this Section 3.

 

4.             Rights of Initial Holders in
Escrow Securities.

 

4.1.          Voting Rights as a Stockholder.
Subject to the terms of the Insider Letter described in Section 4.4 hereof
and except as herein provided, the Initial Stockholder shall retain all of its
rights as a stockholder of the Company during the Escrow Period, including,
without limitation, the right to vote the Escrow Shares.

 

2

 

 

4.2.          Dividends and Other Distributions
in Respect of the Escrow Securities. During the Escrow Period, all
dividends payable in cash with respect to the Escrow Securities shall be paid
to the Initial Stockholder, but all dividends payable in stock or other
non-cash property (“Non-Cash Dividends”) shall be delivered to the Escrow Agent
to hold in accordance with the terms hereof. As used herein, the term “Escrow
Securities” shall be deemed to include the Non-Cash Dividends distributed
thereon, if any.

 

4.3.          Restrictions on Transfer.
During the Escrow Period, no sale, transfer or other disposition may be made of
any or all of the Escrow Securities except (i) to an entity’s members upon
liquidation (ii) by gift to a member of Initial Holder’s immediate family
or to a trust or other entity, the beneficiary of which is an Initial Holder or
a member of an Initial Holder’s immediate family, (iii) by virtue of the
laws of descent and distribution upon the death of any Initial Holder, (iv) pursuant
to a qualified domestic relations order, (v) to an entity that is an
Initial Holder, (vi) to any person or entity controlling, controlled by,
or under common control with, an Initial Holder or (vii) with respect to
an Initial Holder who is an individual, to an entity controlled by such Initial
Holder; provided, however, that such permitted transfers may be implemented
only upon the respective transferee’s written agreement to be bound by the
terms and conditions of this Agreement and of the Insider Letter signed by the
Initial Holder transferring the Escrow Securities. During the Escrow Period,
the Initial Holder shall not pledge or grant a security interest in the Escrow
Securities or grant a security interest in their rights under this Agreement.

 

4.4.          Insider Letters. The Initial
Holder has executed a letter agreement with the Representatives and the
Company, dated as of the Effective Date, and which is filed as an exhibit to
the Registration Statement (“Insider Letter”), respecting the rights and
obligations of such Initial Holder in certain events, including, but not
limited to, the liquidation of the Company.

 

5.             Concerning the Escrow Agent.

 

5.1.          Good Faith Reliance. The Escrow
Agent shall not be liable for any action taken or omitted by it in good faith
and in the exercise of its own best judgment, and may rely conclusively and
shall be protected in acting upon any order, notice, demand, certificate,
opinion or advice of counsel (including counsel chosen by the Escrow Agent),
statement, instrument, report or other paper or document (not only as to its
due execution and the validity and effectiveness of its provisions, but also as
to the truth and acceptability of any information therein contained) which is
believed by the Escrow Agent to be genuine and to be signed or presented by the
proper person or persons. The Escrow Agent shall not be bound by any notice or
demand, or any waiver, modification, termination or rescission of this
Agreement unless evidenced by a writing delivered to the Escrow Agent signed by
the proper party or parties and, if the duties or rights of the Escrow Agent
are affected, unless it shall have given its prior written consent thereto.

 

5.2.          Indemnification. The Escrow
Agent shall be indemnified and held harmless by the Company from and against
any expenses, including reasonable counsel fees and disbursements, or loss
suffered by the Escrow Agent in connection with any action, suit or other
proceeding involving any claim which in any way, directly or indirectly, arises
out of or relates

 

3

 

to
this Agreement, the services of the Escrow Agent hereunder, or the Escrow Securities
held by it hereunder, other than expenses or losses arising from the gross
negligence or willful misconduct of the Escrow Agent. Promptly after the
receipt by the Escrow Agent of notice of any demand or claim or the
commencement of any action, suit or proceeding, the Escrow Agent shall notify
the other parties hereto in writing. In the event of the receipt of such
notice, the Escrow Agent, in its sole discretion, may commence an action in the
nature of interpleader in an appropriate court to determine ownership or
disposition of the Escrow Securities or it may deposit the Escrow Securities
with the clerk of any appropriate court or it may retain the Escrow Securities
pending receipt of a final, non appealable order of a court having jurisdiction
over all of the parties hereto directing to whom and under what circumstances
the Escrow Securities are to be disbursed and delivered. The provisions of this
Section 5.2 shall survive in the event the Escrow Agent resigns or is
discharged pursuant to Sections 5.5 or 5.6 below.

 

5.3.          Compensation. The Escrow Agent
shall be entitled to reasonable compensation from the Company for all services
rendered by it hereunder, as set forth on Exhibit B hereto. The Escrow
Agent shall also be entitled to reimbursement from the Company for all expenses
paid or incurred by it in the administration of its duties hereunder including,
but not limited to, all counsel, advisors’ and agents’ fees and disbursements
and all taxes or other governmental charges.

 

5.4.          Further Assurances. From time
to time on and after the date hereof, the Company and the Initial Holder shall
deliver or cause to be delivered to the Escrow Agent such further documents and
instruments and shall do or cause to be done such further acts as the Escrow
Agent shall reasonably request to carry out more effectively the provisions and
purposes of this Agreement, to evidence compliance herewith or to assure itself
that it is protected in acting hereunder.

 

5.5.          Resignation. The Escrow Agent
may resign at any time and be discharged from its duties as escrow agent
hereunder by its giving the other parties hereto written notice and such
resignation shall become effective as hereinafter provided. Such resignation
shall become effective at such time that the Escrow Agent shall turn over to a
successor escrow agent appointed by the Company and approved by the
Representatives, the Escrow Securities held hereunder. If no new escrow agent
is so appointed within the 60 day period following the giving of such notice of
resignation, the Escrow Agent may deposit the Escrow Securities with any court
it deems appropriate.

 

5.6.          Discharge of Escrow Agent. The
Escrow Agent shall resign and be discharged from its duties as escrow agent
hereunder if so requested in writing at any time by the other parties hereto,
jointly, provided, however, that such resignation shall become effective only
upon acceptance of appointment by a successor escrow agent as provided in Section 5.5.

 

5.7.          Liability. Notwithstanding
anything herein to the contrary, the Escrow Agent shall not be relieved from
liability hereunder for its own gross negligence or its own willful misconduct.

 

6.             Miscellaneous.

 

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6.1.          Governing Law. This Agreement
shall for all purposes be deemed to be made under and shall be construed in
accordance with the laws of the State of New York. Each of the parties hereby
agrees that any action, proceeding or claim against it arising out of or
relating in any way to this Agreement shall be brought and enforced in the
courts of the State of New York or the United States District Court for the
Southern District of New York, and irrevocably submits to such jurisdiction,
which jurisdiction shall be exclusive. Each of the parties hereby waives any
objection to such exclusive jurisdiction and that such courts represent an
inconvenient forum.

 

6.2.          Third Party Beneficiaries. The
Initial Holder hereby acknowledges that the Underwriters, including, without
limitation, the Representatives, are third party beneficiaries of this
Agreement and this Agreement may not be modified or changed without the prior
written consent of the Representatives.

 

6.3.          Entire Agreement. This
Agreement contains the entire agreement of the parties hereto with respect to
the subject matter hereof and, except as expressly provided herein, may not be
changed or modified except by an instrument in writing signed by the party to
the charged.

 

6.4.          Headings. The headings
contained in this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation thereof.

 

6.5.          Binding Effect. This Agreement
shall be binding upon and inure to the benefit of the respective parties hereto
and their legal representatives, successors and assigns.

 

6.6.          Notices. Any notice or other
communication required or which may be given hereunder shall be in writing and
either be delivered personally or by private national courier service, or be
mailed, certified or registered mail, return receipt requested, postage
prepaid, and shall be deemed given when so delivered personally or, if sent by
private national courier service, on the next business day after delivery to
the courier, or, if mailed, two business days after the date of mailing, as
follows:

 

If
to the Company, to:

 

Wattles
Acquisition Corp.

321 West 84th Ave., Suite A

Thornton, CO 80260

Attn: Mark Wattles, Chairman and Chief Executive Officer

 

If
to a Stockholder, to his address set forth in Exhibit A.

 

and
if to the Escrow Agent, to:

 

American
Stock Transfer & Trust Company

59 Maiden Lane

 

5

 

Plaza
Level

New York, NY 10038

Attn: [                       ]

Fax No.: [                       ]

 

A
copy of any notice sent hereunder shall be sent to:

 

UBS
Securities LLC

299 Park Avenue

New York, New York 10171-0026

Attn: [                       ]

Fax: [                       ]

 

and

 

Ladenburg
Thalmann

153 East 53rd Street, 49th Floor

New York, NY 10022

Attn: [                       ]

Fax No.: [                       ]

 

and

 

Ellenoff,
Grossman & Schole LLP

370 Lexington Avenue

New York, New York 10017

Attn: Douglas S. Ellenoff, Esq.

Fax No.: (212) 370-7889

 

and

 

Clifford
Chance LLP

31 West 52nd Street

New York, NY 10019

Attn: Alejandro E. Camacho

Fax: (212) 878-8375

 

The
parties may change the persons and addresses to which the notices or other
communications are to be sent by giving written notice to any such change in
the manner provided herein for giving notice.

 

6.7.          Liquidation of Company. The
Company shall give the Escrow Agent written notification of the liquidation and
dissolution of the Company in the event that the Company fails to consummate a
Business Combination within the time period(s) specified in the
Prospectus.

 

6

 

6.8.          Waiver. Notwithstanding
anything herein to the contrary, the Escrow Agent hereby waives any and all
right, title, interest or claim of any kind (“Claim”) in or to any distribution
of the Trust Account, and hereby agrees not to seek recourse, reimbursement, payment
or satisfaction for any Claim against the Trust Account for any reason
whatsoever.

 

6.9.          Counterparts. This Agreement
may be executed in several counterparts each one of which shall constitute an
original and may be delivered by facsimile transmission and together shall
constitute one instrument.

 

[remainder of page intentionally left blank]

 

7

 

WITNESS
the execution of this Agreement as of the date first above written.

 

 

	
  WATTLES
  ACQUISITION CORP.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Name:
  

  	
  Mark
  Wattles

  
	
   

  	
  Title:

  	
  Chairman &
  Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
  AMERICAN
  STOCK TRANSER & TRUST COMPANY

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  INITIAL
  STOCKHOLDER

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  WATTLES
  CAPITAL, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  	
  Mark
  Wattles

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Managing
  Member

  
						

 

8

EXHIBIT A

 

 

	
  Investor

  	
   

  	
  Investors Address and Facsimile
  Number

  	
   

  
	
  Name: WATTLES CAPITAL, LLC

  

  Number of Shares: 5,750,000

  Number of Warrants: 5,750,000

  	
   

  	
  321 West 84th Ave.,
  Suite A

  Thornton, CO 80260

  Attn: Mark Wattles

  Facsimile Number: [                           ]

  	
   

  

 

9

 

EXHIBIT B

 

Escrow Agent Fees

 

$[1,800
annually] for acting agent escrow fee.

 

[First
year agent fee to be paid at closing.]

 

10Exhibit 10.3

 

REGISTRATION
RIGHTS AGREEMENT

 

THIS REGISTRATION RIGHTS AGREEMENT (this “Agreement”)
is entered into as of the [             ]
day of [                   ], 2008, by
and among Wattles Acquisition Corp., a Delaware corporation (the “Company”),
and the undersigned listed under Investor on the signature page hereto (“Investor”).

 

WHEREAS, the Investor currently holds all of the
issued and outstanding securities of the Company;

 

WHEREAS, the Investor currently holds an aggregate of
5,750,000 warrants (“Warrants”), exercisable into an aggregate of 5,750,000
shares of the Common Stock (as defined below) (“Warrant Shares”), each of the
Warrants and the Warrant Shares shall be referred to herein as the “Warrant
Securities”;

 

WHEREAS, the Investor and the Company desire to enter
into this Agreement to provide the Investor with certain rights relating to the
registration of shares of Common Stock and Warrant Securities held by them;

 

NOW, THEREFORE, in consideration of the mutual
covenants and agreements set forth herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows:

 

1.             DEFINITIONS. The following
capitalized terms used herein have the following meanings:

 

“Agreement” means this Agreement, as amended,
restated, supplemented, or otherwise modified from time to time.

 

“Business Combination” means the initial
acquisition of one or more operating businesses or assets with a fair market
value of at least 80.0% of the Company’s net assets at the time of the
acquisition through a merger, capital stock exchange, asset or stock
acquisition, exchangeable share transaction, joint venture or other similar
business combination..

 

“Commission” means the Securities and Exchange
Commission, or any other federal agency then administering the Securities Act
or the Exchange Act.

 

“Common Stock” means the Company’s common stock,
par value $0.0001 per share.

 

“Company” is defined in the preamble to this
Agreement.

 

 “Demand Registration” is defined in Section 2.1.1.

 

 “Demanding Holder” is defined in Section 2.1.1.

 

 

 

 

 “Exchange Act” means the Securities
Exchange Act of 1934, as amended, and the rules and regulations of the
Commission promulgated thereunder, all as the same shall be in effect at the
time.

 

 “Form S-3” is defined in Section 2.2.4.

 

 “Indemnified Party” is defined in Section 4.3.

 

 “Indemnifying Party” is defined in Section 4.3.

 

 “Investor” is defined in the preamble to
this Agreement.

 

 “Investor Indemnified Party” is defined
in Section 4.1.

 

 “Maximum Number of Shares” is defined in Section 2.1.4.

 

 “Notices” is defined in Section 6.3.

 

 “Piggyback Registration” is defined in Section 2.2.1.

 

 “Register,”
“registered” and “registration” mean a registration with respect
to the Registrable Securities effected by preparing and filing a registration
statement or similar document in compliance with the requirements of the
Securities Act, and the applicable rules and regulations promulgated
thereunder, and such registration statement becoming effective.

 

 “Registrable Securities” mean the 5,750,000
shares of Common Stock, 5,750,000 Warrants and 5,750,000 Warrant Shares owned
or held by Investor prior to the consummation of the Company’s initial public
offering of securities, in each case that are eligible for registration under
the Securities Act and the terms of the Securities Escrow Agreement.  Registrable Securities include any warrants,
shares of capital stock or other securities of the Company issued as a dividend
or other distribution with respect to or in exchange for or in replacement of
such shares of Common Stock. As to any particular Registrable Securities, such
securities shall cease to be Registrable Securities when: (a) a
Registration Statement with respect to the sale of such securities shall have
become effective under the Securities Act and such securities shall have been
sold, transferred, disposed of or exchanged in accordance with such
Registration Statement; (b) such securities shall have been otherwise transferred,
new certificates for them not bearing a legend restricting further transfer
shall have been delivered by the Company and subsequent public distribution of
them shall not require registration under the Securities Act; (c) such
securities shall have ceased to be outstanding, or (d) the Securities and
Exchange Commission makes a definitive determination to the Company that the
Registrable Securities are saleable under Rule 144(k).

 

 “Registration Statement” means a
registration statement filed by the Company with the Commission in compliance
with the Securities Act and the rules and regulations promulgated
thereunder for a public offering and sale of Common Stock (other than a
registration statement on Form S-4 or Form S-8, or their successors,
or any registration statement covering only securities proposed to be issued in
exchange for securities or assets of another entity).

 

 

2

 

 

“Release Date I” means the date on which shares
of Common Stock are disbursed from escrow pursuant to Section 3 of the
Securities Escrow Agreement.

 

“Release Date II” means the date on which the
Warrants are disbursed from escrow pursuant to Section 3 of the Securities
Escrow Agreement.

 

“Securities Act” means the Securities Act of
1933, as amended, and the rules and regulations of the Commission
promulgated thereunder, all as the same shall be in effect at the time.

 

“Securities Escrow Agreement” means that
certain Securities Escrow Agreement dated as of [               ], 2008 by and among the parties
hereto and American Stock Transfer & Trust Company.

 

“Underwriter” means a securities dealer who
purchases any Registrable Securities as principal in an underwritten offering
and not as part of such dealer’s market-making activities.

 

2.             REGISTRATION RIGHTS.

 

2.1                           Demand
Registration.

 

2.1.1.       Request for Registration. At any
time and from time to time on or after each of Release Date I as it relates to
the 5,750,000 shares of Common Stock and Release Date II as it relates to the
Warrant Securities, as applicable, the holders of a majority-in-interest of the
5,750,000 shares of Common Stock or the 5,750,000 Warrant Securities, as the
case may be, held by the Investor or the permitted transferees of the Investor,
may make a written demand for registration under the Securities Act of all or
part of their Registrable Securities (a “Demand Registration”). Any
demand for a Demand Registration shall specify the number and type of
Registrable Securities proposed to be sold and the intended method(s) of
distribution thereof. The Company will notify all holders of Registrable
Securities of the demand within ten (10) days from the receipt of the
Demand Registration, and each holder of Registrable Securities who wishes to
include all or a portion of such holder’s Registrable Securities in the Demand
Registration (each such holder including shares of Registrable Securities in
such registration, a “Demanding Holder”) shall so notify the Company
within fifteen (15) days after the receipt by the holder of the notice from the
Company. Upon any such request, the Demanding Holders shall be entitled to have
their Registrable Securities included in the Demand Registration, subject to Section 2.1.4
and the provisos set forth in Section 3.1.1.  The Company shall not be obligated to effect
more than an aggregate of two (2) Demand Registrations with respect to the
5,750,000 shares of Common Stock and two (2) Demand Registrations with
respect to the Warrant Securities under this Section 2.1.1 in respect of
Registrable Securities.

 

2.1.2.       Effective Registration. A
registration will not count as a Demand Registration until the Registration
Statement filed with the Commission with respect to such Demand Registration
has been declared effective and the Company has complied with all of its
obligations under this Agreement or otherwise with respect thereto; provided,
however, if, after such Registration Statement has been declared
effective, the offering of Registrable Securities pursuant to a Demand
Registration is interfered with by any stop order or injunction of the
Commission or any other governmental agency or court, the Registration
Statement with respect 

 

 

3

 

to such Demand
Registration will be deemed not to have been declared effective, unless and
until, (i) such stop order or injunction is removed, rescinded or
otherwise terminated, and (ii) a majority-in-interest of the Demanding
Holders thereafter elect to continue the offering; provided, further,
the Company shall not be obligated to file a second Registration Statement
until a Registration Statement that has been filed is counted as a Demand
Registration or is terminated.

 

2.1.3.       Underwritten Offering. If a
majority-in-interest of the Demanding Holders so elect and such holders so
advise the Company as part of their written demand for a Demand Registration,
the offering of such Registrable Securities pursuant to such Demand
Registration shall be in the form of an underwritten offering. In such event,
the right of any holder to include its Registrable Securities in such
registration shall be conditioned upon such holder’s participation in such
underwriting and the inclusion of such holder’s Registrable Securities in the
underwriting to the extent provided herein. All Demanding Holders proposing to
distribute their securities through such underwriting shall enter into an
underwriting agreement in customary form with the Underwriter or Underwriters
selected for such underwriting by a majority-in-interest of the holders
initiating the Demand Registration.

 

2.1.4.       Reduction of Offering. If the
managing Underwriter or Underwriters for a Demand Registration that is to be an
underwritten offering advises the Company and the Demanding Holders in writing
that the dollar amount or number of shares of Registrable Securities which the
Demanding Holders desire to sell, taken together with all other shares of
Common Stock or other securities which the Company desires to sell and the
shares of Common Stock, if any, as to which registration has been requested
pursuant to written contractual piggyback registration rights held by other
shareholders of the Company who desire to sell, exceeds the maximum dollar
amount or maximum number of shares that can be sold in such offering without
adversely affecting the proposed offering price, the timing, the distribution
method, or the probability of success of such offering (such maximum dollar
amount or maximum number of shares, as applicable, the “Maximum Number of
Shares”), then the Company shall include in such registration: (i) first,
the Registrable Securities as to which Demand Registration has been requested
by the Demanding Holders (pro rata in accordance with the number of
shares of Registrable Securities which such Demanding Holders have requested be
included in such registration, regardless of the number of shares of
Registrable Securities held by each Demanding Holder) that can be sold without
exceeding the Maximum Number of Shares; (ii) second, to the extent that
the Maximum Number of Shares has not been reached under the foregoing clause
(i), the shares of Common Stock or other securities that the Company desires to
sell that can be sold without exceeding the Maximum Number of Shares; (iii) third,
to the extent that the Maximum Number of Shares has not been reached under the
foregoing clauses (i) and (ii), the shares of Common Stock for the account
of other persons that the Company is obligated to register pursuant to written
contractual arrangements with such persons and that can be sold without
exceeding the Maximum Number of Shares; and (iv) fourth, to the extent
that the Maximum Number of Shares have not been reached under the foregoing
clauses (i), (ii), and (iii), the shares of Common Stock that other
shareholders desire to sell that can be sold without exceeding the Maximum
Number of Shares.

 

2.1.5.       Withdrawal. If a
majority-in-interest of the Demanding Holders disapprove of the terms of any
underwriting or are not entitled to include all of their Registrable Securities
in any offering, such majority-in-interest of the Demanding Holders may elect
to 

 

4

 

withdraw from such
offering by giving written notice to the Company and the Underwriter or
Underwriters of their request to withdraw prior to the effectiveness of the
Registration Statement filed with the Commission with respect to such Demand
Registration.  In such event, the Company
need not seek effectiveness of such Registration Statement for the benefit of
other investors.  If the
majority-in-interest of the Demanding Holders withdraws from a proposed
offering relating to a Demand Registration, then such registration shall not
count as a Demand Registration provided for in Section 2.1.1, provided
that the majority-in-interest of the Demanding Holders electing to so withdraw
from the offering pays all costs and expenses incurred by the Company in
connection with such withdrawn Demand Registration.  If the majority-in-interest of the Demanding
Holders does not pay all costs and expenses incurred by the Company in
connection with such withdrawn Demand Registration, then it shall count as a
Demand Registration provided for in Section 2.1.1.

 

2.1.6.       Permitted
Delays. The Company shall be entitled to postpone, for up to sixty (60)
days, the filing of any Registration Statement under this Section 2.1, if (a) at
any time prior to the filing of such Registration Statement the Company’s Board
of Directors determines, in its good faith business judgment, that such
registration and offering would materially and adversely affect any financing,
acquisition, corporate reorganization, or other material transaction involving
the Company, and (b) the Company delivers to the Demanding Holders written
notice thereof within five (5) business days of the date of receipt of
such request for Demand Registration.

 

2.2                           Piggyback
Registration.

 

2.2.1.       Piggyback Rights. If at any time
on or after Release Date I as it relates to the 5,750,000 shares of Common
Stock and Release Date II as it relates to the Warrant Securities, the Company
proposes to file a Registration Statement under the Securities Act with respect
to an offering of equity securities, or securities or other obligations
exercisable or exchangeable for, or convertible into, equity securities, by the
Company for its own account or for shareholders of the Company for their
account (or by the Company and by shareholders of the Company including,
without limitation, pursuant to Section 2.1), other than a Registration
Statement (i) filed in connection with any employee stock option or other
benefit plan, (ii) for an exchange offer or offering of securities solely
to the Company’s existing shareholders, (iii) for an offering of debt that
is convertible into equity securities of the Company or (iv) for a dividend
reinvestment plan, then the Company shall (x) give written notice of such
proposed filing to the holders of Registrable Securities as soon as practicable
but in no event less than ten (10) days before the anticipated filing
date, which notice shall describe the amount and type of securities to be
included in such offering, the intended method(s) of distribution, and the
name of the proposed managing Underwriter or Underwriters, if any, of the
offering, and (y) offer to the holders of Registrable Securities in such
notice the opportunity to register the sale of such number of shares of
Registrable Securities as such holders may request in writing within five (5) days
following receipt of such notice (a “Piggyback Registration”). The
Company shall cause such Registrable Securities to be included in such
registration and shall use its best efforts to cause the managing Underwriter
or Underwriters of a proposed underwritten offering to permit the Registrable
Securities requested to be included in a Piggyback Registration to be included
on the same terms and conditions as any similar securities of the Company and
to permit the sale or 

 

5

 

other disposition of such
Registrable Securities in accordance with the intended method(s) of
distribution thereof. All holders of Registrable Securities proposing to
distribute their securities through a Piggyback Registration that involves an
Underwriter or Underwriters shall enter into an underwriting agreement in
customary form with the Underwriter or Underwriters selected for such Piggyback
Registration.

 

2.2.2.       Reduction of Offering. If the
managing Underwriter or Underwriters for a Piggyback Registration that is to be
an underwritten offering advises the Company and the holders of Registrable
Securities in writing that the dollar amount or number of shares of Common
Stock which the Company desires to sell, taken together with shares of Common
Stock, if any, as to which registration has been demanded pursuant to written contractual
arrangements with persons other than the holders of Registrable Securities
hereunder, the Registrable Securities as to which registration has been
requested under this Section 2.2, and the shares of Common Stock, if any,
as to which registration has been requested pursuant to the written contractual
piggyback registration rights of other shareholders of the Company, exceeds the
Maximum Number of Shares, then the Company shall include in any such
registration:

 

(i)            If the registration is undertaken
for the Company’s account: (A) first, the shares of Common Stock or other
securities that the Company desires to sell that can be sold without exceeding
the Maximum Number of Shares; (B) second, to the extent that the Maximum
Number of Shares has not been reached under the foregoing clause (A), the
shares of Common Stock or other securities, if any, including the Registrable
Securities as to which registration has been requested pursuant to the
applicable written contractual piggyback registration rights of such security
holders (pro rata in accordance with the number of shares of Common
Stock which each such person has actually requested to be included in such
registration, regardless of the number of shares of Common Stock with respect
to which such persons have the right to request such inclusion) that can be
sold without exceeding the Maximum Number of Shares; and (C) third, to the
extent that the Maximum Number of shares has not been reached under the
foregoing clauses (A) and (B), the shares of Common Stock or other
securities for the account of other persons that the Company is obligated to
register pursuant to written contractual piggyback registration rights with
such persons (pro rata in accordance with the number of shares of Common
Stock which each such person has actually requested to be included in such
registration, regardless of the number of shares of Common Stock with respect
to which such persons have the right to request such inclusion) that can be
sold without exceeding the Maximum Number of Shares; and

 

(ii)           If the registration is a “demand”
registration undertaken at the demand of persons other than the holders of
Registrable Securities or pursuant to contractual arrangements with such
persons, (A) first, the shares of Common Stock for the account of the
demanding persons that can be sold without exceeding the Maximum Number of
Shares; (B) second, to the extent that the Maximum Number of Shares has
not been reached under the foregoing clause (A), the shares of Common Stock or
other securities that the Company desires to sell that can be sold without
exceeding the Maximum Number of Shares; (C) third, to the extent that the
Maximum Number of Shares has not been reached under the foregoing clauses (A) and
(B), the Registrable Securities as to which registration has been requested
under this Section 2.2 (pro rata in accordance with the number of
shares of Registrable Securities held by each such holder); and (D) fourth,
to the extent that the Maximum Number of Shares has not 

 

 

6

 

been reached under the
foregoing clauses (A), (B) and (C), the shares of Common Stock or other
securities for the account of other persons that the Company is obligated to
register, if any, as to which registration has been requested pursuant to
written contractual arrangements with such persons that can be sold without
exceeding the Maximum Number of Shares.

 

2.2.3.       Withdrawal. Any holder of
Registrable Securities may elect to withdraw such holder’s request for
inclusion of Registrable Securities in any Piggyback Registration by giving
written notice to the Company of such request to withdraw prior to the
effectiveness of the Registration Statement. The Company (whether on its own
determination or as the result of a withdrawal by persons making a demand
pursuant to written contractual obligations) may also elect to withdraw a
registration statement at any time prior to the effectiveness of the
Registration Statement. Notwithstanding any such withdrawal, the Company shall
pay all expenses incurred by the holders of Registrable Securities in
connection with such Piggyack Registration as provided in Section 3.3.

 

2.2.4.       Registrations on Form S-3.
The holders of Registrable Securities may at any time and from time to time,
request in writing that the Company register the resale of any or all of such
Registrable Securities on Form S-3 or any similar short-form registration
which may be available at such time (“Form S-3”); provided, however,
that the Company shall not be obligated to effect such request through an
underwritten offering. Upon receipt of such written request, the Company will
promptly give written notice of the proposed registration to all other holders
of Registrable Securities, and, as soon as practicable thereafter, effect the
registration of all or such portion of such holder’s or holders’ Registrable
Securities as are specified in such request, together with all or such portion
of the Registrable Securities of any other holder or holders joining in such
request as are specified in a written request given within fifteen (15) days
after receipt of such written notice from the Company; provided, however,
that the Company shall not be obligated to effect any such registration
pursuant to this Section 2.2: (i) if Form S-3 is not available
for such offering; or (ii) if the holders of the Registrable Securities,
together with the holders of any other securities of the Company entitled to
inclusion in such registration, propose to sell Registrable Securities and such
other securities (if any) at any aggregate price to the public of less than
$500,000. Registrations effected pursuant to this Section 2.2 shall not be
counted as Demand Registrations effected pursuant to Section 2.1.

 

2.2.5. Permitted Delays. The Company shall be
entitled to postpone, for up to sixty (60) days, the filing of any Registration
Statement under this Section 2.2, if (a) at any time prior to the
filing of such Registration Statement the Company’s Board of Directors
determines, in its good faith business judgment, that such registration and
offering would materially and adversely affect any financing, acquisition,
corporate reorganization, or other material transaction involving the Company,
and (b) the Company delivers to the holder of the Registrable Securities
requesting a Piggyback Registration, written notice thereof within five (5) business
days of the date of receipt of such request for Piggyback Registration.

 

2.3           No Net Cash Settlement Value.  In connection with the exercise of the
Warrants, the Company will not be obligated to deliver securities, and there
are no contractual penalties for failure to deliver securities, if a
registration statement is not effective at the time of exercise; however, the
Company may satisfy its obligation by delivering unregistered shares of Common
Stock.  In no event will the Company be required to net cash settle an
exercise of a Warrant.

 

 

7

 

3.             REGISTRATION PROCEDURES.

 

3.1                           Filings;
Information. Whenever the Company is required to effect the registration of
any Registrable Securities pursuant to Section 2, the Company shall use
its best efforts to effect the registration and sale of such Registrable
Securities in accordance with the intended method(s) of distribution thereof
as expeditiously as practicable; provided that, under no circumstances
shall the Company effect registration of the Warrants or the Warrant Shares
pursuant to Section 2 unless at the time of such registration, a
registration statement relating to the shares of Common Stock issuable upon
exercise of the Public Warrants sold in the IPO is effective and a prospectus
relating to such shares is available for use by the Public Warrant
holders.  In connection with any such
request:

 

3.1.1.       Filing Registration Statement. The
Company shall, as expeditiously as possible and in any event within sixty (60)
days after receipt of a request for a Demand Registration pursuant to Section 2.1,
prepare and file with the Commission a Registration Statement on any form for
which the Company then qualifies or which counsel for the Company shall deem
appropriate and which form shall be available for the sale of all Registrable
Securities to be registered thereunder in accordance with the intended method(s) of
distribution thereof, and shall use its best efforts to cause such Registration
Statement to become and remain effective for the period required by Section 3.1.3;
provided, however , that the Company shall have the right to
defer any Demand Registration for up to thirty (30) days, and any Piggyback
Registration for such period as may be applicable to deferment of any demand
registration to which such Piggyback Registration relates, in each case if the
Company shall furnish to the holders a certificate signed by the Chief Executive
Officer of the Company stating that, in the good faith judgment of the Board of
Directors of the Company, it would be materially detrimental to the Company and
its shareholders for such Registration Statement to be effected at such time; provided further, however ,
that the Company shall not have the right to exercise the right set forth in
the immediately preceding proviso more than once in any 365-day period in
respect of a Demand Registration hereunder.

 

3.1.2.       Copies. The Company shall, prior to
filing a Registration Statement or prospectus, or any amendment or supplement
thereto, furnish without charge to the holders of Registrable Securities
included in such registration, and such holders’ legal counsel, copies of such
Registration Statement as proposed to be filed, each amendment and supplement
to such Registration Statement (in each case including all exhibits thereto and
documents incorporated by reference therein), the prospectus included in such
Registration Statement (including each preliminary prospectus), and such other
documents as the holders of Registrable Securities included in such
registration or legal counsel for any such holders may request in order to
facilitate the disposition of the Registrable Securities owned by such holders.

 

3.1.3.       Amendments and Supplements. The
Company shall prepare and file with the Commission such amendments, including
post-effective amendments, and supplements to such Registration Statement and
the prospectus used in connection therewith as may be necessary to keep such
Registration Statement effective and in compliance with the provisions of the
Securities Act until all Registrable Securities and other securities covered by
such Registration Statement have been disposed of in accordance with the intended
method(s) of distribution set forth in such Registration Statement (which
period shall not exceed the sum of 

 

 

8

 

one hundred eighty (180)
days plus any period during which any such disposition is interfered with by
any stop order or injunction of the Commission or any governmental agency or
court) or such securities have been withdrawn.

 

3.1.4.       Notification. After the filing of
a Registration Statement, the Company shall promptly, and in no event more than
two (2) business days after such filing, notify the holders of Registrable
Securities included in such Registration Statement of such filing, and shall
further notify such holders promptly and confirm such advice in writing in all
events within two (2) business days of the occurrence of any of the
following: (i) when such Registration Statement becomes effective; (ii) when
any post-effective amendment to such Registration Statement becomes effective; (iii) the
issuance or threatened issuance by the Commission of any stop order (and the
Company shall take all actions required to prevent the entry of such stop order
or to remove it if entered); and (iv) any request by the Commission for
any amendment or supplement to such Registration Statement or any prospectus
relating thereto or for additional information or of the occurrence of an event
requiring the preparation of a supplement or amendment to such prospectus so
that, as thereafter delivered to the purchasers of the securities covered by
such Registration Statement, such prospectus will not contain an untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, and
promptly make available to the holders of Registrable Securities included in
such Registration Statement any such supplement or amendment; except that
before filing with the Commission a Registration Statement or prospectus or any
amendment or supplement thereto, including documents incorporated by reference,
the Company shall furnish to the holders of Registrable Securities included in
such Registration Statement and to the legal counsel for any such holders,
copies of all such documents proposed to be filed sufficiently in advance of
filing to provide such holders and legal counsel with a reasonable opportunity
to review such documents and comment thereon, and the Company shall not file
any Registration Statement or prospectus or amendment or supplement thereto,
including documents incorporated by reference, to which such holders or their
legal counsel shall object.

 

3.1.5.       State Securities Laws Compliance.
The Company shall use its best efforts to (i) register or qualify the
Registrable Securities covered by the Registration Statement under such securities
or “blue sky” laws of such jurisdictions in the United States as the holders of
Registrable Securities included in such Registration Statement (in light of
their intended plan of distribution) may request and (ii) take such action
necessary to cause such Registrable Securities covered by the Registration
Statement to be registered with or approved by such other Governmental
Authorities as may be necessary by virtue of the business and operations of the
Company and do any and all other acts and things that may be necessary or
advisable to enable the holders of Registrable Securities included in such
Registration Statement to consummate the disposition of such Registrable
Securities in such jurisdictions; provided, however, the Company
shall not be required to qualify generally to do business in any jurisdiction
where it would not otherwise be required to qualify but for this Section 3.1.5
or subject itself to taxation in any such jurisdiction.

 

3.1.6.       Agreements for Disposition. The
Company shall enter into customary agreements (including, if applicable, an
underwriting agreement in customary form) and take such other actions as are
reasonably required in order to expedite or facilitate the disposition of such
Registrable Securities. The representations, warranties and covenants of the
Company in 

 

9

 

any underwriting
agreement which are made to or for the benefit of any Underwriters, to the
extent applicable, shall also be made to and for the benefit of the holders of
Registrable Securities included in such registration statement. No holder of
Registrable Securities included in such registration statement shall be
required to make any representations or warranties in the underwriting
agreement except, if applicable, with respect to such holder’s organization,
good standing, authority, title to Registrable Securities, lack of conflict of
such sale with such holder’s material agreements and organizational documents,
and with respect to written information relating to such holder that such
holder has furnished in writing expressly for inclusion in such Registration
Statement.  Holders of Registrable
Securities shall agree to such covenants and indemnification and contribution
obligations for selling stockholders as are customarily contained in agreements
of that type. Further, such holders shall cooperate fully in the preparation of
the registration statement and other documents relating to any offering in
which they include securities pursuant to Section 2 hereof. Each holder
shall also furnish to the Company such information regarding itself, the
Registrable Securities held by such holder and the intended method of
disposition of such securities as shall be reasonably required to effect the
registration of the Registrable Securities.

 

3.1.7.       Cooperation. The principal
executive officer of the Company, the principal financial officer of the
Company, the principal accounting officer of the Company and all other officers
and members of the management of the Company shall cooperate fully in any
offering of Registrable Securities hereunder, which cooperation shall include,
without limitation, the preparation of the Registration Statement with respect
to such offering and all other offering materials and related documents, and
participation in meetings with Underwriters, attorneys, accountants and
potential investors.

 

3.1.8.       Records. The Company shall make
available for inspection by the holders of Registrable Securities included in
such Registration Statement, any Underwriter participating in any disposition
pursuant to such registration statement and any attorney, accountant or other
professional retained by any holder of Registrable Securities included in such
Registration Statement or any Underwriter, all financial and other records,
pertinent corporate documents and properties of the Company, as shall be
necessary to enable them to exercise their due diligence responsibility, and
cause the Company’s officers, directors and employees to supply all information
requested by any of them in connection with such Registration Statement.

 

3.1.9.       Opinions and Comfort Letters. The
Company shall furnish to each holder of Registrable Securities included in any
Registration Statement a signed counterpart, addressed to such holder, of (i) any
opinion of counsel to the Company delivered to any Underwriter and (ii) any
comfort letter from the Company’s independent public accountants delivered to
any Underwriter. In the event no legal opinion is delivered to any Underwriter,
the Company shall furnish to each holder of Registrable Securities included in
such Registration Statement, at any time that such holder elects to use a
prospectus, an opinion of counsel to the Company to the effect that the
Registration Statement containing such prospectus has been declared effective
and that no stop order is in effect.

 

3.1.10.     Earnings Statement. The Company
shall comply with all applicable rules and regulations of the Commission
and the Securities Act, and make available to its shareholders, as soon as
practicable, an earnings statement covering a period of twelve (12) 

 

 

10

 

months, beginning within
three (3) months after the effective date of the registration statement,
which earnings statement shall satisfy the provisions of Section 11(a) of
the Securities Act and Rule 158 thereunder.

 

3.1.11.     Listing. The Company shall use its
best efforts to cause all Registrable Securities included in any registration
to be listed on such exchanges or otherwise designated for trading in the same
manner as similar securities issued by the Company are then listed or
designated or, if no such similar securities are then listed or designated, in
a manner satisfactory to the holders of a majority of the Registrable Securities
included in such registration.

 

3.2                           Obligation
to Suspend Distribution. Upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 3.1.4(iv), or, in
the case of a resale registration on Form S-3 pursuant to Section 2.3
hereof, upon any suspension by the Company, pursuant to a written insider
trading compliance program adopted by the Company’s Board of Directors, of the
ability of all “insiders” covered by such program to transact in the Company’s
securities because of the existence of material non-public information, each
holder of Registrable Securities included in any registration shall immediately
discontinue disposition of such Registrable Securities pursuant to the
Registration Statement covering such Registrable Securities until such holder
receives the supplemented or amended prospectus contemplated by Section 3.1.4(iv) or
the restriction on the ability of “insiders” to transact in the Company’s
securities is removed, as applicable, and, if so directed by the Company, each
such holder will deliver to the Company all copies, other than permanent file
copies then in such holder’s possession, of the most recent prospectus covering
such Registrable Securities at the time of receipt of such notice.

 

3.3                           Registration
Expenses. The Company shall bear all costs and expenses incurred in
connection with any Demand Registration pursuant to Section 2.1, any
Piggyback Registration pursuant to Section 2.2, and any registration on Form S-3
effected pursuant to Section 2.3, and all expenses incurred in performing
or complying with its other obligations under this Agreement, whether or not
the Registration Statement becomes effective or whether any or all Holders of
Registrable Securities withdraw from any Registration Statement, including,
without limitation: (i) all registration and filing fees; (ii) fees
and expenses of compliance with securities or “blue sky” laws (including fees
and disbursements of counsel in connection with blue sky qualifications of the
Registrable Securities); (iii) printing expenses; (iv) the Company’s
internal expenses (including, without limitation, all salaries and expenses of
its officers and employees); (v) the fees and expenses incurred in
connection with the listing of the Registrable Securities as required by Section 3.1.11;
(vi) National Association of Securities Dealers, Inc. fees; (vii) fees
and disbursements of counsel for the Company and fees and expenses for
independent certified public accountants retained by the Company (including the
expenses or costs associated with the delivery of any opinions or comfort
letters requested pursuant to Section 3.1.9); (viii) the fees and
expenses of any special experts retained by the Company in connection with such
registration and (ix) the fees and expenses of one legal counsel selected
by the holders of a majority-in-interest of the Registrable Securities included
in such registration. The Company shall have no obligation to pay any
underwriting discounts or selling commissions attributable to the Registrable
Securities being sold by the holders thereof, which underwriting discounts or
selling commissions shall be borne by such holders. Additionally, in an
underwritten offering, all selling shareholders and the Company shall bear the 

 

 

11

 

expenses
of the underwriter pro rata in proportion to the respective amount of
shares each is selling in such offering.

 

3.4                           Information.
The holders of Registrable Securities shall provide such information as may
reasonably be requested by the Company, or the managing Underwriter, if any, in
connection with the preparation of any Registration Statement, including
amendments and supplements thereto, in order to effect the registration of any
Registrable Securities under the Securities Act pursuant to Section 2 and
in connection with the Company’s obligation to comply with federal and
applicable state securities laws.

 

3.5                           Holder
Obligations. No holder of Registrable Securities may participate in any
underwritten offering pursuant to this Section 3 unless such holder (i) agrees
to sell only such holder’s Registrable Securities on the basis reasonably
provided in any underwriting agreement, and (ii) completes, executes and
delivers any and all questionnaires, powers of attorney, custody agreements,
indemnities, underwriting agreements and other documents reasonably required by
or under the terms of any underwriting agreement or as reasonably requested by
the Company.

 

4.             INDEMNIFICATION AND CONTRIBUTION.

 

4.1                           Indemnification
by the Company. The Company agrees to indemnify and hold harmless each
Investor and each other holder of Registrable Securities, and each of their
respective officers, employees, affiliates, directors, partners, members,
attorneys and agents, and each person, if any, who controls an Investor and
each other holder of Registrable Securities (within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act) (each, an “Investor
Indemnified Party”), from and against any expenses, losses, judgments,
claims, damages or liabilities, whether joint or several, arising out of or
based upon any untrue statement (or allegedly untrue statement) of a material
fact contained in any Registration Statement under which the sale of such Registrable
Securities was registered under the Securities Act, any preliminary prospectus,
final prospectus or summary prospectus contained in the Registration Statement,
or any amendment or supplement to such Registration Statement, or arising out
of or based upon any omission (or alleged omission) to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or any violation by the Company of the Securities Act or any rule or
regulation promulgated thereunder applicable to the Company and relating to
action or inaction required of the Company in connection with any such
registration; and the Company shall promptly reimburse the Investor Indemnified
Party for any legal and any other expenses reasonably incurred by such Investor
Indemnified Party in connection with investigating and defending any such
expense, loss, judgment, claim, damage, liability or action; provided, however,
that (a) the Company will not be liable in any such case to the extent
that any such expense, loss, claim, damage or liability arises out of or is
based upon (i) any untrue statement or allegedly untrue statement or
omission or alleged omission made in such Registration Statement, preliminary
prospectus, final prospectus, or summary prospectus, or any such amendment or
supplement, in reliance upon and in conformity with information furnished to
the Company, in writing, by such selling holder expressly for use therein or (ii) for
the use by any selling holder of a prospectus in violation of any stop order or
other suspension of the Registration Statement of which the Company made the
selling holder aware; and (b) the foregoing indemnity shall not inure to
the benefit of any 

 

 

12

 

Investor
Indemnified Party if a copy of the Prospectus (as then amended or supplemented
if the Company shall have furnished any amendments or supplements thereto) was
not sent or given by or on behalf of the applicable selling holder to the
person asserting such expense, loss, claim, damage or liability who purchased
the Registrable Securities from such selling holder, if required by law so to
have been delivered at or prior to the written confirmation of the sale of the
Registrable Securities to such person, and if the Prospectus (as so amended or
supplemented) would have cured the defect giving rise to such expense, loss,
claim, damage or liability, unless such failure is the result of noncompliance
by the Company with Section 3.1.3 hereof. The Company also shall indemnify
any Underwriter of the Registrable Securities, their officers, employees,
affiliates, directors, partners, members and agents and each person who
controls such Underwriter on substantially the same basis as that of the
indemnification provided above in this Section 4.1.

 

4.2                           Indemnification
by Holders of Registrable Securities. Each selling holder of Registrable
Securities will, in the event that any registration is being effected under the
Securities Act pursuant to this Agreement of any Registrable Securities held by
such selling holder, indemnify and hold harmless the Company, each of its
directors and officers and each Underwriter (if any), and each other person, if
any, who controls another selling holder or such Underwriter or the Company
within the meaning of the Securities Act or Section 20 of the Exchange
Act, against any losses, claims, judgments, damages or liabilities, whether
joint or several, insofar as such losses, claims, judgments, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or allegedly untrue statement of a material fact contained in
any Registration Statement under which the sale of such Registrable Securities
was registered under the Securities Act, any preliminary prospectus, final
prospectus or summary prospectus contained in the Registration Statement, or
any amendment or supplement to the Registration Statement, or arise out of or
are based upon any omission or the alleged omission to state a material fact
required to be stated therein or necessary to make the statement therein not
misleading, if the statement or omission was made in reliance upon and in
conformity with information furnished in writing to the Company by such selling
holder expressly for use therein or for the use by any Investor Indemnified
Party of a prospectus in violation of any stop order or other suspension of the
Registration Statement, and shall reimburse the Company, its directors and
officers, and each other selling holder or such controlling person for any
legal or other expenses reasonably incurred by any of them in connection with
investigation or defending any such loss, claim, damage, liability or action.
Each selling holder’s indemnification obligations hereunder shall be several
and not joint and shall be limited to the amount of any net proceeds actually
received by such selling holder in connection with the sale of the Registrable
Securities by such selling holder pursuant to the Registration Statement
containing such untrue statement.

 

4.3                           Conduct
of Indemnification Proceedings. Promptly after receipt by any person of any
notice of any loss, claim, damage or liability or any action in respect of
which indemnity may be sought pursuant to Section 4.1 or 4.2, such person
(the “Indemnified Party”) shall, if a claim in respect thereof is to be
made against any other person for indemnification hereunder, notify such other
person (the “Indemnifying Party”) in writing of the loss, claim,
judgment, damage, liability or action; provided, however, that the failure by the Indemnified
Party to notify the Indemnifying Party shall not relieve the Indemnifying Party
from any liability which the Indemnifying Party may have to such Indemnified
Party hereunder, except and solely 

 

 

13

 

to
the extent the Indemnifying Party is actually prejudiced by such failure. If
the Indemnified Party is seeking indemnification with respect to any claim or
action brought against the Indemnified Party, then the Indemnifying Party shall
be entitled to participate in such claim or action, and, to the extent that it
wishes, jointly with all other Indemnifying Parties, to assume control of the
defense thereof with counsel satisfactory to the Indemnified Party. After
notice from the Indemnifying Party to the Indemnified Party of its election to
assume control of the defense of such claim or action, the Indemnifying Party
shall not be liable to the Indemnified Party for any legal or other expenses
subsequently incurred by the Indemnified Party in connection with the defense
thereof other than reasonable costs of investigation; provided, however, that
in any action in which both the Indemnified Party and the Indemnifying Party
are named as defendants, the Indemnified Party shall have the right to employ
separate counsel (but no more than one such separate counsel) to represent the
Indemnified Party and its controlling persons who may be subject to liability
arising out of any claim in respect of which indemnity may be sought by the
Indemnified Party against the Indemnifying Party, with the fees and expenses of
such counsel to be paid by such Indemnifying Party if, based upon the written
opinion of counsel of such Indemnified Party, representation of both parties by
the same counsel would be inappropriate due to actual or potential differing
interests between them. No Indemnifying Party shall, without the prior written
consent of the Indemnified Party, consent to entry of judgment or effect any
settlement of any claim or pending or threatened proceeding in respect of which
the Indemnified Party is or could have been a party and indemnity could have
been sought hereunder by such Indemnified Party, unless such judgment or
settlement includes an unconditional release of such Indemnified Party from all
liability arising out of such claim or proceeding.

 

4.4                           Contribution.

 

4.4.1.       If the indemnification provided for in
the foregoing Sections 4.1, 4.2 and 4.3 is unavailable to any Indemnified Party
in respect of any loss, claim, damage, liability or action referred to herein,
then each such Indemnifying Party, in lieu of indemnifying such Indemnified
Party, shall contribute to the amount paid or payable by such Indemnified Party
as a result of such loss, claim, damage, liability or action in such proportion
as is appropriate to reflect the relative fault of the Indemnified Parties and
the Indemnifying Parties in connection with the actions or omissions which
resulted in such loss, claim, damage, liability or action, as well as any other
relevant equitable considerations. The relative fault of any Indemnified Party
and any Indemnifying Party shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or
the omission or alleged omission to state a material fact relates to
information supplied by such Indemnified Party or such Indemnifying Party and
the parties’ relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission.

 

4.4.2.       The parties hereto agree that it would
not be just and equitable if contribution pursuant to this Section 4.4
were determined by pro rata allocation or by any other method of
allocation which does not take account of the equitable considerations referred
to in the immediately preceding Section 4.4.1. The amount paid or payable
by an Indemnified Party as a result of any loss, claim, damage, liability or
action referred to in the immediately preceding paragraph shall be deemed to
include, subject to the limitations set forth above, any legal or other
expenses incurred by such Indemnified Party in connection with investigating or
defending any 

 

 

14

 

such action or claim.
Notwithstanding the provisions of this Section 4.4, no holder of
Registrable Securities shall be required to contribute any amount in excess of
the dollar amount of the net proceeds (after payment of any underwriting fees,
discounts, commissions or taxes) actually received by such holder from the sale
of Registrable Securities which gave rise to such contribution obligation. No
person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.

 

5.             UNDERWRITING AND DISTRIBUTION.

 

5.1                           Rule 144.
The Company covenants that it shall file any reports required to be filed by it
under the Securities Act and the Exchange Act and shall take such further
action as the holders of Registrable Securities may reasonably request, all to
the extent required from time to time to enable such holders to sell
Registrable Securities without registration under the Securities Act within the
limitation of the exemptions provided by Rule 144 under the Securities
Act, as such Rules may be amended from time to time, or any similar Rule or
regulation hereafter adopted by the Commission.

 

6.             MISCELLANEOUS.

 

6.1                           Other
Registration Rights. The Company represents and warrants that no person,
other than a holder of the Registrable Securities has any right to require the
Company to register any shares of the Company’s capital stock for sale or to
include shares of the Company’s capital stock in any registration filed by the
Company for the sale of shares of capital stock for its own account or for the
account of any other person.

 

6.2                           Assignment;
No Third Party Beneficiaries. This Agreement and the rights, duties and
obligations of the Company hereunder may not be assigned or delegated by the
Company in whole or in part. This Agreement and the rights, duties and
obligations of the holders of Registrable Securities hereunder may be freely
assigned or delegated by such holder of Registrable Securities in conjunction
with and to the extent of any transfer of Registrable Securities by any such
holder in accordance with applicable law. This Agreement and the provisions
hereof shall be binding upon and shall inure to the benefit of each of the
parties, and their respective successors and the permitted assigns of the
Investor or holder of Registrable Securities or of any assignee of the Investor
or holder of Registrable Securities. This Agreement is not intended to confer
any rights or benefits on any persons that are not party hereto other than as
expressly set forth in Article 4 and this Section 6.2.

 

6.3                           Notices.
All notices, demands, requests, consents, approvals or other communications
(collectively, “Notices”) required or permitted to be given hereunder or
which are given with respect to this Agreement shall be in writing and shall be
personally served, delivered by reputable air courier service with charges
prepaid, or transmitted by hand delivery, telegram, telex or facsimile,
addressed as set forth below, or to such other address as such party shall have
specified most recently by written notice. Notice shall be deemed given on the
date of service or transmission if personally served or transmitted by
telegram, telex or facsimile; provided, that if such service or transmission is
not on a business day or is after normal business hours, then such notice shall
be deemed given on the next business day. Notice otherwise sent as 

 

 

15

 

provided
herein shall be deemed given on the next business day following timely delivery
of such notice to a reputable air courier service with an order for next-day
delivery.

 

	
    To the
  Company:

  	
   

  	
  Wattles
  Acquisition Corp.

  321 West 84th Ave., Suite A

  Thornton, CO 80260

  Attn: Mark Wattles, Chairman & CEO

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  ; or

  
	
   with a copy to:

  	
   

  	
  Ellenoff
  Grossman & Schole LLP

  370 Lexington Avenue

  New York, New York 10017

  Attn: Douglas S. Ellenoff, Esq.

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  ; or

  
	
  To the Investor, to:

  	
   

  	
  Wattles Capital, LLC

  321 West 84th Ave., Suite A

  Thornton, CO 80260

  Attn: Mark Wattles

  	
   

  	
   

  

 

6.4                           Severability.
This Agreement shall be deemed severable, and the invalidity or
unenforceability of any term or provision hereof shall not affect the validity
or enforceability of this Agreement or of any other term or provision hereof.
Furthermore, in lieu of any such invalid or unenforceable term or provision,
the parties hereto intend that there shall be added as a part of this Agreement
a provision as similar in terms to such invalid or unenforceable provision as
may be possible and be valid and enforceable.

 

6.5                           Counterparts;
Facsimile Signatures. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, and all of which taken
together shall constitute one and the same instrument.  Facsimile signatures shall be deemed to be
original signatures for all purposes of this Agreement.

 

6.6                           Entire
Agreement. This Agreement (including all agreements entered into pursuant
hereto and all certificates and instruments delivered pursuant hereto and
thereto) constitutes the entire agreement of the parties with respect to the
subject matter hereof and supersede all prior and contemporaneous agreements,
representations, understandings, negotiations and discussions between the
parties, whether oral or written.

 

6.7                           Modifications
and Amendments. No amendment, modification or termination of this Agreement
shall be binding upon any party unless executed in writing by such party.

 

6.8                           Titles
and Headings. Titles and headings of sections of this Agreement are for
convenience only and shall not affect the construction of any provision of this
Agreement.

 

6.9                           Waivers
and Extensions. Any party to this Agreement may waive any right, breach or
default which such party has the right to waive, provided that such waiver will
not be effective against the waiving party unless it is in writing, is signed
by such party, and specifically refers to this Agreement. Waivers may be made
in advance or after the right waived 

 

 

16

 

has
arisen or the breach or default waived has occurred. Any waiver may be
conditional. No waiver of any breach of any agreement or provision herein
contained shall be deemed a waiver of any preceding or succeeding breach
thereof nor of any other agreement or provision herein contained. No waiver or
extension of time for performance of any obligations or acts shall be deemed a
waiver or extension of the time for performance of any other obligations or
acts.

 

6.10                         Remedies
Cumulative. In the event that the Company fails to observe or perform any
covenant or agreement to be observed or performed under this Agreement, the
Investor or any other holder of Registrable Securities may proceed to protect
and enforce its rights by suit in equity or action at law, whether for specific
performance of any term contained in this Agreement or for an injunction
against the breach of any such term or in aid of the exercise of any power
granted in this Agreement or to enforce any other legal or equitable right, or
to take any one or more of such actions, without being required to post a bond.
None of the rights, powers or remedies conferred under this Agreement shall be
mutually exclusive, and each such right, power or remedy shall be cumulative
and in addition to any other right, power or remedy, whether conferred by this
Agreement or now or hereafter available at law, in equity, by statute or
otherwise.

 

6.11                         Governing
Law. This Agreement shall be governed by, interpreted under, and construed
in accordance with the internal laws of the State of New York applicable to
agreements made and to be performed within the State of New York, without
giving effect to any choice-of-law provisions thereof that would compel the
application of the substantive laws of any other jurisdiction.  Each of the parties hereby agrees that any
action, proceeding or claim against it arising out of or relating in any way to
this Agreement shall be brought and enforced in the courts of the State of New
York or the United States District Court for the Southern District of New York
(each, a “New York Court”), and irrevocably submits to such jurisdiction, which
jurisdiction shall be exclusive. Each of the parties hereby waives any
objection to such exclusive jurisdiction and that such courts represent an
inconvenient forum.

 

6.12                         Waiver
of Trial by Jury. Each party hereby irrevocably and unconditionally waives
the right to a trial by jury in any action, suit, counterclaim or other
proceeding (whether based on contract, tort or otherwise) arising out of,
connected with or relating to this Agreement, the transactions contemplated
hereby, or the actions of the Investor in the negotiation, administration,
performance or enforcement hereof.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

 

17

 

 

IN WITNESS WHEREOF, the parties have caused this
Registration Rights Agreement to be executed and delivered by their duly
authorized representatives as of the date first written above.

 

 

	
   

  	
   

  
	
   

  	
  WATTLES ACQUISITION CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name: Mark Wattles

  	
   

  
	
   

  	
   

  	
  Title: Chairman &
  Chief Executive Officer

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  INVESTOR:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  WATTLES CAPITAL, LLC

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
  321 West 84th Ave., Suite A

  	
   

  
	
   

  	
   

  	
  Thornton, CO 80260

  	
   

  
					

 

 

 

18

 

 

SCHEDULE
OF BUYERS

 

	
  

  Investor

  	
   

  	
  Investor’s Address

  and Facsimile Number

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  WATTLES
  CAPITAL, LLC

  	
   

  	
  321 West 84th Ave.,
  Suite A

  	
   

  
	
   

  	
   

  	
  Thornton, CO 80260

  	
   

  
	
  Number of Shares:
  5,750,000

  	
   

  	
  Facsimile (     )

  	
   

  
	
  Number of Warrants:
  5,750,000

  	
   

  	
   

  	
   

  

 

 

19

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