Exhibit 10.1

SECURITIES PURCHASE AGREEMENT

THIS SECURITIES PURCHASE AGREEMENT (this “Agreement”), dated as of July 25,
2013, by and among dELiA*s, Inc., a Delaware corporation with headquarters
located at 50 West 23rd Street, New York, New York 10010 (the “Company”), and
each investor identified on the signature pages hereto (individually, an
“Investor” and collectively, the “Investors”).

BACKGROUND

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

B. Each Investor, severally and not jointly, wishes to purchase, and the Company
wishes to sell, upon the terms and conditions stated in this Agreement, that
aggregate principal amount of convertible notes (“Notes”), in substantially the
form attached as Annex A hereto, set forth on such Investor’s signature page to
this Agreement (which aggregate amount for all Investors together shall be
$21,775,000 in aggregate principal amount under the Notes). The Notes may become
convertible into shares of the common stock, par value $0.001 per share (the
“Common Stock”), of the Company (collectively, the “Conversion Shares” and
together with the Notes, the “Securities”).

C. The offering of the Notes is to be consummated simultaneously with the
closing of and at a Conversion Price (as defined below) equal to the public
offering price per share that the Common Stock is being offered to the public in
the Company’s follow-on offering of Common Stock (“Follow-On Offering”) pursuant
to the underwriting agreement (the “Underwriting Agreement”) to be entered into
by and between the Company and Janney Montgomery Scott LLC, as representative of
the several underwriters named therein (the “Underwriters”).

NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and the Investors agree
as follows:

ARTICLE I

DEFINITIONS

1.1 Definitions. In addition to the terms defined elsewhere in this Agreement,
the following terms have the meanings indicated:

“Affiliate” means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with a
Person, as such terms are used in and construed under Rule 144 under the
Securities Act.

“8-K Filing” has the meaning set forth in Section 4.4.

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“Agent” has the meaning set forth in Section 3.1(i).

“Agreement” has the meaning set forth in the Preamble.

“Business Day” means any day other than Saturday, Sunday, any day which shall be
a federal legal holiday in the United States or any day on which banking
institutions in The State of New York are authorized or required by law or other
governmental action to close.

“Closing” means the closing of the purchase and sale of the Notes pursuant to
Section 2.1.

“Closing Date” means the date of the closing of the Follow-On Offering, subject
to satisfaction (or, if applicable, waiver) of the conditions to Closing
specified herein.

“Company” has the meaning set forth in the Preamble.

“Company Counsel” means Troutman Sanders LLP, counsel to the Company.

“Common Stock” has the meaning set forth in the Preamble.

“Contingent Obligation” means, as to any Person, any direct or indirect
liability, contingent or otherwise, of that Person with respect to any
indebtedness, lease, dividend or other obligation of another Person if the
primary purpose or intent of the Person incurring such liability, or the primary
effect thereof, is to provide assurance to the obligee of such liability that
such liability will be paid or discharged, or that any agreements relating
thereto will be complied with, or that the holders of such liability will be
protected (in whole or in part) against loss with respect thereto.

“Conversion Price” has the meaning set forth in the Notes.

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

“Conversion Shares” has the meaning set forth in the Preamble.

“Credit Agreement” means that certain credit agreement, dated as of June 14,
2013, by, among others, the Company, certain wholly-owned subsidiaries of the
Company, and Salus, as amended and in effect from time to time.

“Demanding Investors” has the meaning set forth in Section 6.2(a).

“Deposit Account” means the deposit account of the Company established by the
Company for the purpose of holding the proceeds of the Notes during the period
provided for in the Purchase Agreement.

“Disclosure Materials” has the meaning set forth in Section 3.1(g).

 

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“Effective Date” means the date that a Registration Statement is first declared
effective by the SEC.

“Effectiveness Period” has the meaning set forth in Section 6.1(b).

“Eligible Market” means any of the New York Stock Exchange, the NYSE MKT, the
NASDAQ Global Select Market, the NASDAQ Global Market, the NASDAQ Capital Market
or OTC Bulletin Board.

“Environmental Laws” has the meaning set forth in Section 3.1(u).

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Event” has the meaning set forth in Section 6.1(e).

“Event Payments” has the meaning set forth in Section 6.1(e).

“Excluded Investors” means the officers, directors, each of their Affiliates,
and other Affiliates of the Company.

“Follow-On Offering” has the meaning set forth in the Preamble.

“Filing Date” means the date that is forty-five (45) days after the Closing Date
or, if such date is not a Business Day, the next date that is a Business Day.

“GAAP” has the meaning set forth in Section 3.1(g).

“Hazardous Materials” has the meaning set forth in Section 3.1(u).

“Indebtedness” of any Person means, without duplication (A) all indebtedness for
borrowed money, (B) all obligations issued, undertaken or assumed as the
deferred purchase price of property or services (other than trade payables
entered into in the ordinary course of business), (C) all reimbursement or
payment obligations with respect to letters of credit, surety bonds and other
similar instruments, (D) all obligations evidenced by notes, bonds, debentures
or similar instruments, including obligations so evidenced incurred in
connection with the acquisition of property, assets or businesses, (E) all
indebtedness created or arising under any conditional sale or other title
retention agreement, or incurred as financing, in either case with respect to
any property or assets acquired with the proceeds of such indebtedness (even
though the rights and remedies of the seller or bank under such agreement in the
event of default are limited to repossession or sale of such property), (F) all
monetary obligations under any leasing or similar arrangement which, in
connection with generally accepted accounting principles, consistently applied
for the periods covered thereby, is classified as a capital lease, (G) all
indebtedness referred to in clauses (A) through (F) above secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any mortgage, lien, pledge, charge, security
interest or other encumbrance upon or in any property or assets (including
accounts and contract rights) owned by any Person, even though the Person which
owns such assets or property has not assumed or become liable for the payment of
such indebtedness, and (H) all Contingent Obligations in respect of indebtedness
or obligations of others of the kinds referred to in clauses (A) through
(G) above.

 

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“Indemnified Party” has the meaning set forth in Section 6.7(c).

“Indemnifying Party” has the meaning set forth in Section 6.7(c).

“Intellectual Property Rights” has the meaning set forth in Section 3.1(q).

“Insolvent” has the meaning set forth in Section 3.1(h).

“Investor” has the meaning set forth in the Preamble.

“Knowledge” of the Company means with respect to any statement made to the
knowledge of the Company, that the statement is based upon the actual knowledge
of any executive officer of the Company as of the date of this Agreement.

“Lead Investor” means Prendel LLC, an entity affiliated with Prentice Capital
Management, LP.

“Lien” means any lien, charge, claim, security interest, encumbrance, right of
first refusal or other restriction.

“Losses” means any and all losses, claims, damages, liabilities, settlement
costs and expenses, including, without limitation, reasonable attorneys’ fees.

“Material Adverse Effect” means any of (i) a material adverse effect on the
results of operations, assets, business, prospects or financial condition of the
Company and the Subsidiaries taken as a whole on a consolidated basis, (ii) an
adverse impairment of the Company’s ability to perform its obligations under any
of the Transaction Documents or (iii) an adverse effect on the legality,
validity or enforceability of any of the Transaction Documents, provided, that
none of the following alone shall be deemed, in and of itself, to constitute a
Material Adverse Effect: (y) a change in the market price or trading volume of
the Common Stock or (z) changes in general economic conditions or changes
affecting the industry in which the Company operates generally (as opposed to
Company-specific changes) so long as such changes do not have a disproportionate
effect on the Company and its Subsidiaries taken as a whole.

“Money Laundering Laws” has the meaning set forth in Section 3.1(y).

“Notes” has the meaning set forth in the Preamble.

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

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

“Proceeding” means an action, claim, suit, investigation or proceeding
(including, without limitation, a partial proceeding, such as a deposition),
whether commenced or threatened in writing.

 

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“Prospectus” means the prospectus included in the Registration Statement
(including, without limitation, a prospectus that includes any information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A, as amended or supplemented by any
prospectus supplement, with respect to the terms of the offering of any portion
of the Registrable Securities covered by the Registration Statement, and all
other amendments and supplements to the Prospectus including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such Prospectus.

“Registrable Securities” means the Conversion Shares issued or issuable pursuant
to the Notes, together with any securities issued or issuable upon any stock
split, dividend or other distribution, recapitalization or similar event with
respect to the foregoing.

“Registration Statement” means each registration statement required to be filed
under Article VI, including (in each case) the Prospectus, amendments and
supplements to such registration statement or Prospectus, including pre- and
post-effective amendments, all exhibits thereto, and all material incorporated
by reference or deemed to be incorporated by reference in such registration
statement.

“Regulation D” has the meaning set forth in the Preamble.

“Required Effectiveness Date” means the date which is one hundred and twenty
(120) days after the Closing Date or, if such date is not a Business Day, the
next date that is a Business Day.

“Rule 144,” “Rule 415,” “Rule 424,” and “Rule 430A” means Rule 144, Rule 415,
Rule 424 and Rule 430A respectively, promulgated by the SEC pursuant to the
Securities Act, as such Rules may be amended from time to time, or any similar
rule or regulation hereafter adopted by the SEC having substantially the same
effect as such Rule.

“Sale Number” has the meaning set forth in Section 6.2(b).

“Salus” means Salus Capital Partners, LLC.

“Salus Amendment” has the meaning set forth in Section 2.2(a)(vii).

“Salus Liens” means liens securing the Company’s and certain of its
Subsidiaries’ obligations under the Credit Agreement.

“SEC” has the meaning set forth in the Preamble.

“SEC Comments” means written comments pertaining solely to Rule 415 which are
received by the Company from the SEC, and a copy of which shall have been
provided by the Company to the Investors, to a filed Registration Statement
which require the Company to limit the amount of Registrable Securities which
may be included therein to a number of Registrable Securities, which is less
than such amount sought to be included thereon as filed with the SEC.

“SEC Reports” has the meaning set forth in Section 3.1(g).

 

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“Securities Act” has the meaning set forth in the Preamble.

“Short Sales” has the meaning set forth in Section 3.2(i).

“Subsidiary” means any direct or indirect subsidiary of the Company.

“Trading Day” means (i) a day on which the Common Stock is traded on a Trading
Market (other than the OTC Bulletin Board), or (ii) if the Common Stock is not
listed or quoted on a Trading Market (other than the OTC Bulletin Board), a day
on which the Common Stock is traded in the over-the-counter market, as reported
by the OTC Bulletin Board, or (iii) if the Common Stock is not listed or quoted
on any Trading Market, a day on which the Common Stock is quoted in the
over-the-counter market as reported by the Pink OTC Markets (or any similar
organization or agency succeeding to its functions of reporting prices);
provided, that in the event that the Common Stock is not listed or quoted as set
forth in (i), (ii) and (iii) hereof, then Trading Day shall mean a Business Day.

“Trading Market” means whichever of the New York Stock Exchange, the NYSE MKT,
the NASDAQ Global Select Market, the NASDAQ Global Market, the NASDAQ Capital
Market or OTC Bulletin Board on which the Common Stock is listed or quoted for
trading on the date in question.

“Transaction” has the meaning set forth in Section 3.2(i).

“Transaction Documents” means this Agreement, the schedules and exhibits
attached hereto, the Notes, and the Transfer Agent Instructions.

“Transfer Agent” means American Stock Transfer & Trust Company, or any successor
transfer agent for the Company.

“Transfer Agent Instructions” means, with respect to the Company, the
Irrevocable Transfer Agent Instructions, in the form of Exhibit D, executed by
the Company and delivered to and acknowledged in writing by the Transfer Agent.

“Underwritten Demand Registration Request” has the meaning set forth in
Section 6.2(a).

“Underwriting Agreement” has the meaning set forth in the Preamble.

“Underwriters” has the meaning set forth in the Preamble.

ARTICLE II

PURCHASE AND SALE

2.1 Closing. Subject to the terms and conditions set forth in this Agreement, at
the Closing the Company shall issue and sell to each Investor, and each Investor
shall, severally and not jointly, purchase from the Company, a Note in the
original principal amount set forth on such Investor’s signature page to this
Agreement. The date and time of the Closing shall be 11:00 a.m., New York City
Time, on the Closing Date. The Closing shall take place at the offices of the
Company’s Counsel.

 

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2.2 Closing Deliveries.

(a) At the Closing, the Company shall deliver or cause to be delivered to each
Investor the following:

(i) a Note, duly executed by the Company, in the original principal amount set
forth on such Investor’s signature page to this Agreement;

(ii) duly executed Transfer Agent Instructions, acknowledged by the Company’s
Transfer Agent;

(iii) a legal opinion of Company Counsel, in the form of Exhibit B, executed by
such counsel;

(v) a certificate of the Secretary or an Assistant Secretary of the Company,
dated as of the Closing Date, (a) certifying the resolutions adopted by the
Board of Directors of the Company approving the transactions contemplated by
this Agreement and the other Transaction Documents and the issuance of the
Notes, (b) certifying the current versions of the certificate of incorporation
and by-laws of the Company, as amended through the Closing Date, and
(c) certifying as to the signatures and authority of persons signing the
Transaction Documents and related documents on behalf of the Company;

(vi) a certificate of the Chief Executive Officer or Chief Financial Officer of
the Company, dated as of the Closing Date, certifying to the fulfillment of the
conditions applicable to the Company specified in Section 5.1(a) and (b); and

(vii) the consent of Salus to the Transaction Documents to the extent required
by the Credit Agreement and the acknowledgement by Salus that the Deposit
Account and the proceeds thereof do not constitute “Collateral” (as defined in
the Credit Agreement) under the Credit Agreement (the “Salus Amendment”).

(b) At the Closing, each Investor shall deliver or cause to be delivered to the
Company (i) the aggregate purchase price set forth on such Investor’s signature
page to this Agreement in United States dollars and in immediately available
funds, by wire transfer to an account designated in writing to such Investor by
the Company for such purpose and (ii) fully completed and executed copy of
Exhibit A to this Agreement.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

3.1 Representations and Warranties of the Company. The Company hereby represents
and warrants to the Investors and the Agent as follows:

(a) Subsidiaries. Except as disclosed in Schedule 3.1(a) hereto and other than
the Salus Liens, (1) the Company owns or controls, directly or indirectly, all
of the capital stock or comparable equity interests of each Subsidiary free and
clear of any Lien and all issued and outstanding shares of capital stock or
comparable equity interest of each Subsidiary are validly issued and are fully
paid, non-assessable and free of preemptive and similar rights, and (2) the
Company owns or controls, directly or indirectly, only the following
corporations, partnerships, limited liability partnerships, limited liability
companies, associations or other entities: (i) A Merchandise, LLC, a Delaware
limited liability company, (ii) dELiA*s Assets Corp., a Delaware corporation,
(iii) DACCS, Inc., an Ohio corporation, (iv) dELiA*s Group Inc., a Delaware
corporation, (v) dELiA*s Brand LLC, a Delaware limited liability company,
(vi) dELiA*s Operating Company, a Delaware corporation, (vii) AMG Direct, LLC, a
Delaware limited liability company, (viii) dELiA*s Distribution Company, Inc., a
Delaware corporation, and (ix) dELiA*s Retail Company, a Delaware corporation.

 

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(b) Organization and Qualification. Each of the Company and the Subsidiaries is
an entity duly organized, validly existing and in good standing under the laws
of the jurisdiction of its organization, with the requisite legal authority to
own and use its properties and assets and to carry on its business as currently
conducted. Neither the Company nor any Subsidiary is in violation of any of the
provisions of its respective certificate or articles of incorporation, bylaws or
other organizational or charter documents. The Company and each Subsidiary is
duly qualified to do business and is in good standing as a foreign corporation
or other entity in each jurisdiction in which the nature of the business
conducted or property owned by it makes such qualification necessary, except
where the failure to be so qualified or in good standing, as the case may be,
would not, individually or in the aggregate, have or reasonably be expected to
result in a Material Adverse Effect.

(c) Authorization; Enforcement. The Company has the requisite corporate
authority to enter into and to consummate the transactions contemplated by each
of the Transaction Documents and otherwise to carry out its obligations
hereunder and thereunder. The execution and delivery of each of the Transaction
Documents by the Company and the consummation by it of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action on the part of the Company and no further consent or action is
required to be obtained or taken, as the case may be, by the Company, its Board
of Directors or its stockholders. Each of the Transaction Documents has been (or
upon delivery will be) duly executed by the Company and is, or when delivered in
accordance with the terms hereof, will constitute, the valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms, except (i) as limited by general equitable principles and applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors’ rights generally, (ii) as
limited by laws relating to the availability of specific performance, injunctive
relief or other equitable remedies and (iii) insofar as indemnification and
contribution provisions may be limited by applicable law.

(d) No Conflicts. The execution, delivery and performance of the Transaction
Documents by the Company and the consummation by the Company of the transactions
contemplated hereby and thereby do not, and will not, (i) conflict with or
violate any provision of

 

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the Company’s or any Subsidiary’s certificate or articles of incorporation,
bylaws or other organizational or charter documents, (ii) conflict with, or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation (with or without notice, lapse of time
or both) of, any agreement, credit facility, debt or other instrument
(evidencing a Company or Subsidiary debt or otherwise) or other understanding to
which the Company or any Subsidiary is a party or by which any property or asset
of the Company or any Subsidiary is bound, or affected, except to the extent
that such conflict, default, termination, amendment, acceleration or
cancellation right would not reasonably be expected to have a Material Adverse
Effect, or (iii) result in a violation of any law, rule, regulation, order,
judgment, injunction, decree or other restriction of any court or governmental
authority to which the Company or any Subsidiary is subject (including, assuming
the accuracy of the representations and warranties of the Investors set forth in
Section 3.2 hereof, federal and state securities laws and regulations and the
rules and regulations of any self-regulatory organization to which the Company
or its securities are subject, including all applicable Trading Markets), or by
which any property or asset of the Company or any Subsidiary are bound or
affected, except to the extent that such violation would not reasonably be
expected to have a Material Adverse Effect.

(e) The Securities. The Securities are duly authorized and, when issued and paid
for in accordance with the applicable Transaction Documents, will be duly and
validly issued, fully paid and nonassessable, free and clear of all Liens and
will not be subject to preemptive or similar rights of stockholders (other than
those imposed by the Investors). The Notes, when duly executed and delivered by
the Company, will constitute the legal, valid and binding obligations of the
Company, enforceable against the Company in accordance with their terms.

(f) Capitalization. The aggregate number of shares and type of all authorized,
issued and outstanding classes of capital stock, options and other securities of
the Company (whether or not presently convertible into or exercisable or
exchangeable for shares of capital stock of the Company) is set forth in
Schedule 3.1(f) hereto. All outstanding shares of capital stock are duly
authorized, validly issued, fully paid and nonassessable and have been issued in
compliance in all material respects with all applicable securities laws. Except
as disclosed in Schedule 3.1(f) hereto, the Company did not have outstanding at
July 25, 2013 any other Options, script rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities, rights or
obligations convertible into or exercisable or exchangeable for, or entered into
any agreement giving any Person any right to subscribe for or acquire, any
shares of Common Stock, or securities or rights convertible or exchangeable into
shares of Common Stock. Except as set forth on Schedule 3.1(f) hereto, and
except for customary adjustments as a result of stock dividends, stock splits,
combinations of shares, reorganizations, recapitalizations, reclassifications or
other similar events, there are no anti-dilution or price adjustment provisions
contained in any security issued by the Company (or in any agreement providing
rights to security holders) and the issuance and sale of the Securities will not
obligate the Company to issue shares of Common Stock or other securities to any
Person (other than the Investors upon conversion of the Notes) and will not
result in a right of any holder of securities to adjust the exercise,
conversion, exchange or reset price under such securities. To the Knowledge of
the Company, except as disclosed in the SEC Reports and any Schedules 13D or 13G
filed with the SEC

 

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pursuant to Rule 13d-1 of the Exchange Act by reporting persons or in Schedule
3.1(f) hereto, no Person or group of related Persons beneficially owns (as
determined pursuant to Rule 13d-3 under the Exchange Act), or has the right to
acquire, by agreement with or by obligation binding upon the Company, beneficial
ownership in excess of 5% of the outstanding Common Stock.

(g) SEC Reports; Financial Statements. The Company has filed all reports
required to be filed by it under the Exchange Act, including pursuant to
Section 13(a) or 15(d) thereof, for the 12 months preceding the date hereof on a
timely basis or has received a valid extension of such time of filing and has
filed any such SEC Reports prior to the expiration of any such extension and has
filed all reports required to be filed by it under the Exchange Act, including
pursuant to Section 13(a) or 15(d) thereof, for the two years preceding the date
hereof. Such reports required to be filed by the Company under the Exchange Act,
including pursuant to Section 13(a) or 15(d) thereof, together with any
materials filed or furnished by the Company under the Exchange Act, whether or
not any such reports were required being collectively referred to herein as the
“SEC Reports” and, together with this Agreement and the Schedules to this
Agreement, the “Disclosure Materials”. As of their respective dates (or, if
amended or superseded by a filing prior to the Closing Date, then on the date of
such filing), the SEC Reports filed by the Company complied in all material
respects with the requirements of the Securities Act and the Exchange Act and
the rules and regulations of the SEC promulgated thereunder, and none of the SEC
Reports, when filed (or, if amended or superseded by a filing prior to the
Closing Date, then on the date of such filing) by the Company, contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading. The
financial statements of the Company included in the SEC Reports comply in all
material respects with applicable accounting requirements and the rules and
regulations of the SEC with respect thereto as in effect at the time of filing
(or, if amended or superseded by a filing prior to the Closing Date, then on the
date of such filing). Such financial statements have been prepared in accordance
with United States generally accepted accounting principles applied on a
consistent basis during the periods involved (“GAAP”), except as may be
otherwise specified in such financial statements, the notes thereto and except
that unaudited financial statements may not contain all footnotes required by
GAAP or may be condensed or summary statements, and fairly present in all
material respects the consolidated financial position of the Company and its
consolidated Subsidiaries as of and for the dates thereof and the results of
operations and cash flows for the periods then ended, subject, in the case of
unaudited statements, to normal, year-end audit adjustments. All material
agreements to which the Company or any Subsidiary is a party or to which the
property or assets of the Company or any Subsidiary are subject are included as
part of or identified in the SEC Reports, to the extent such agreements are
required to be included or identified pursuant to the rules and regulations of
the SEC.

(h) Material Changes; Undisclosed Events, Liabilities or Developments; Solvency.
Since the date of the latest audited financial statements included within the
SEC Reports, except as disclosed in the SEC Reports or in Schedule 3.1(h)
hereto, (i) there has been no event, occurrence or development that,
individually or in the aggregate, has had or that would result in a Material
Adverse Effect, (ii) the Company has not incurred any material liabilities other
than (A) trade payables and accrued expenses incurred in the ordinary course of
business consistent

 

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with past practice and (B) liabilities not required to be reflected in the
Company’s financial statements pursuant to GAAP or required to be disclosed in
filings made with the SEC, (iii) the Company has not altered its method of
accounting or changed its auditors, except as disclosed in its SEC Reports,
(iv) the Company has not declared or made any dividend or distribution of cash
or other property to its stockholders, in their capacities as such, or
purchased, redeemed or made any agreements to purchase or redeem any shares of
its capital stock, and (v) the Company has not issued any equity securities to
any officer, director or Affiliate, except pursuant to existing Company
stock-based plans. The Company has not taken any steps to seek protection
pursuant to any bankruptcy law nor does the Company have any Knowledge or reason
to believe that its creditors intend to initiate involuntary bankruptcy
proceedings or any Knowledge of any fact which would reasonably lead a creditor
to do so. The Company is not as of the date hereof, and after giving effect to
the transactions contemplated hereby to occur at the applicable Closing, will
not be Insolvent (as defined below). For purposes of this Section 3.1(h),
“Insolvent” means (i) the present fair saleable value of the Company’s assets is
less than the amount required to pay the Company’s total Indebtedness, (ii) the
Company is unable to pay its debts and liabilities, subordinated, contingent or
otherwise, as such debts and liabilities become absolute and matured, (iii) the
Company intends to incur or believes that it will incur debts that would be
beyond its ability to pay as such debts mature or (iv) the Company has
unreasonably small capital with which to conduct the business in which it is
engaged as such business is now conducted and is proposed to be conducted.

(i) No General Solicitation; Placement Agent’s Fees. Neither the Company, nor
any of its Affiliates, nor any Person acting on its or their behalf, has engaged
in any form of general solicitation or general advertising (within the meaning
of Regulation D) in connection with the offer or sale of the Securities. The
Company shall be responsible for the payment of any placement agent’s fees,
financial advisory fees, or brokers’ commission (other than for persons engaged
by any Investor or its investment advisor) relating to or arising out of the
issuance of the Securities pursuant to this Agreement. The Company shall pay,
and hold each Investor harmless against, any liability, loss or expense
(including, without limitation, reasonable attorney’s fees and out-of-pocket
expenses) arising in connection with any such claim for fees arising out of the
issuance of the Securities pursuant to this Agreement. The Company acknowledges
that is has engaged Janney Montgomery Scott LLC as its exclusive placement agent
(the “Agent”) in connection with the sale of the Securities. Other than the
Agent, the Company has not engaged any placement agent or other agent in
connection with the sale of the Securities.

(j) Private Placement; Investment Company; U.S. Real Property Holding
Corporation. Neither the Company nor any of its Affiliates nor, to our
Knowledge, any Person acting on the Company’s behalf has, directly or
indirectly, at any time within the past six months, made any offer or sale of
any security or solicitation of any offer to buy any security under
circumstances that would (i) eliminate the availability of the exemption from
registration under Regulation D under the Securities Act in connection with the
offer and sale by the Company of the Securities as contemplated hereby or
(ii) cause the offering of the Securities pursuant to the Transaction Documents
to be integrated with prior offerings by the Company for purposes of any
applicable law, regulation or stockholder approval provisions, including,
without limitation, under the rules and regulations of any Trading Market.
Assuming the accuracy of the representations

 

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and warranties of the Investors set forth in Section 3.2, no registration under
the Securities Act is required for the offer and sale of the Securities by the
Company to the Investors as contemplated hereby. The sale and issuance of the
Securities hereunder does not contravene the rules and regulations of any
Trading Market on which the Common Stock is listed or quoted. The Company is not
required to be registered as, and is not an Affiliate of, an “investment
company” within the meaning of the Investment Company Act of 1940, as amended.
The Company is not required to be registered as a United States real property
holding corporation within the meaning of the Foreign Investment in Real
Property Tax Act of 1980.

(k) Form S-3 Eligibility. The Company is eligible to register the Conversion
Shares for resale by the Investors using Form S-3 promulgated under the
Securities Act.

(l) Listing and Maintenance Requirements. The Company has not, in the twelve
months preceding the date hereof, received notice (written or oral) from any
Trading Market on which the Common Stock is or has been listed or quoted to the
effect that the Company is not in compliance with the listing or maintenance
requirements of such Trading Market. The Company is in compliance with all such
listing and maintenance requirements.

(m) Registration Rights. The Company has not granted or agreed to grant to any
Person any rights (including “piggy-back” registration rights) to have any
securities of the Company registered with the SEC or any other governmental
authority that have not expired or been satisfied or waived.

(n) Application of Takeover Protections. The Company and its Board of Directors
have taken all necessary action, if any, to render inapplicable any control
share acquisition, business combination, poison pill (including any distribution
under a rights agreement) or other similar anti-takeover provision under the
Company’s charter documents or the laws of its state of incorporation that is or
could become applicable to any of the Investors as a result of the Investors and
the Company fulfilling their obligations or exercising their rights under the
Transaction Documents, including, without limitation, as a result of the
Company’s issuance of the Securities and the Investors’ ownership of the
Securities.

(o) Disclosure. The Company confirms that neither it nor any of its officers or
directors has provided any of the Investors (other than Excluded Investors or
investors who signed a confidentiality agreement with the Company) or their
agents or counsel with any information that constitutes or might constitute
material, nonpublic information (other than the existence and terms of the
issuance of Securities, as contemplated by this Agreement and the existence and
terms of the offering of Common Stock in the Follow-On Offering). The Company
understands and confirms that each of the Investors (other than Excluded
Investors or investors who signed a confidentiality agreement with the Company)
will rely on the foregoing representations in effecting transactions in
securities of the Company. All disclosure provided by the Company to the
Investors regarding the Company and the Subsidiaries, their businesses and the
transactions contemplated hereby, including the Schedules to this Agreement
furnished by or on behalf of the Company, are true and correct in all material
respects and do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements made therein,
in the light of the circumstances under which they were made, not

 

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misleading. To the Company’s Knowledge, except for the transactions contemplated
by this Agreement, no event or circumstance has occurred or information exists
with respect to the Company or any Subsidiary or their businesses, properties,
operations or financial condition, which, under applicable law, rule or
regulation, requires public disclosure or announcement by the Company but which
has not been so publicly announced or disclosed. The Company acknowledges and
agrees that no Investor (other than Excluded Investors) makes or has made any
representations or warranties with respect to the transactions contemplated
hereby other than those set forth in the Transaction Documents.

(p) Acknowledgment Regarding Investors’ Purchase of Securities. The Company
acknowledges and agrees that each of the Investors, in their capacity as such,
is acting solely in the capacity of an arm’s length purchaser with respect to
the Transaction Documents and the transactions contemplated hereby and thereby.
The Company further acknowledges that no Investor, in its capacity as such, is
acting as a financial advisor or fiduciary of the Company with respect to this
Agreement and the transactions contemplated hereby and any advice given by any
Investor (other than Excluded Investors) or any of their respective
representatives or agents in connection with the Transaction Documents and the
transactions contemplated hereby and thereby is merely incidental to the
Investors’ purchase of the Securities. The Company further represents to each
Investor that the Company’s decision to enter into this Agreement has been based
solely on the independent evaluation of the transactions contemplated hereby by
the Company and its advisors and representatives.

(q) Patents and Trademarks. The Company and each Subsidiary owns, or possesses
adequate rights or licenses to use, all material trademarks, trade names,
service marks, service mark registrations, service names, patents, patent
rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and other intellectual property rights necessary
to conduct their respective businesses as now conducted (“Intellectual Property
Rights”). None of the Company’s or any Subsidiary’s Intellectual Property Rights
have expired or terminated, except as disclosed in the SEC Reports. Except as
set forth in the SEC Reports, and except where such violations or infringements
would not have, either individually or in the aggregate, a Material Adverse
Effect, (a) there are no rights of third parties to any such Intellectual
Property Rights; (b) to the Company’s Knowledge, there is no infringement by
third parties of any such Intellectual Property Rights; (c) there is no pending
or, to the Company’s Knowledge, threatened action, suit, proceeding or claim by
others challenging the Company’s and/or its Subsidiaries’ rights in or to any
such Intellectual Property Rights; (d) there is no pending or, to the Company’s
Knowledge, threatened action, suit, proceeding or claim by others challenging
the validity or scope of any such Intellectual Property Rights; and (e) there is
no pending or, to the Company’s Knowledge, threatened action, suit, proceeding
or claim by others that the Company and/or any Subsidiary infringes or otherwise
violates any patent, trademark, copyright, trade secret or other proprietary
rights of others, and the Company is unaware of any other fact which would form
a reasonable basis for any such claim.

(r) Absence of Litigation. There is no action, suit or proceeding by or before
any court or any governmental body or authority (y) which adversely affects or
challenges the legality, validity or enforceability of any of the Transaction
Documents or the Securities or (z) against the Company or any Subsidiary, which
action, suit or proceeding would, if determined adversely, individually or in
the aggregate, have a Material Adverse Effect.

 

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(s) Employee Relations. Neither the Company nor any Subsidiary is a party to any
collective bargaining agreement or employs any member of a union. The Company’s
relations with its employees are as disclosed in the SEC Reports, to the extent
required. Except as disclosed in the SEC Reports, no current executive officer
of the Company or any Subsidiary has notified the Company or any Subsidiary that
such officer intends to leave the Company or a Subsidiary, as applicable, or
otherwise terminate such officer’s employment with the Company or a Subsidiary,
as applicable. To the Knowledge of the Company, no executive officer of the
Company or any Subsidiary is in violation of any material term of any employment
contract, confidentiality, disclosure or proprietary information agreement,
non-competition agreement, or any other contract or agreement or any restrictive
covenant, and the continued employment of each such executive officer does not
subject the Company or any Subsidiary to any liability with respect to any of
the foregoing matters.

(t) Labor Matters. The Company and each Subsidiary is in compliance in all
material respects with all federal, state, local and foreign laws and
regulations respecting labor, employment and employment practices and benefits,
terms and conditions of employment and wages and hours, except where failure to
be in compliance would not, either individually or in the aggregate, reasonably
be expected to result in a Material Adverse Effect.

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

(v) Title to Assets. Except as set forth on Schedule 3.1(v) and the Salus Liens,
neither the Company nor any Subsidiary owns real property. The Company and each
Subsidiary has good and marketable title in all personal property owned by them
that is material to the business of the Company and each Subsidiary, in each
case free and clear of all Liens, except for the Salus Liens and Liens that do
not, individually or in the aggregate, have or result in a Material Adverse
Effect. Any real property and facilities held under lease by the Company or any
Subsidiary is held by it under valid, subsisting and enforceable leases of which
the Company and each Subsidiary is in material compliance

 

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(w) Sarbanes-Oxley Act. The Company is in compliance in all material respects
with applicable requirements of the Sarbanes-Oxley Act of 2002 and applicable
rules and regulations promulgated by the SEC thereunder, except where such
noncompliance would not have, individually or in the aggregate, a Material
Adverse Effect. The Company maintains disclosure controls and procedures (as
such term is defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act).

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

(y) Money Laundering Laws. The operations of the Company and its Subsidiaries
are and have been conducted at all times in compliance with the money laundering
statutes of applicable jurisdictions, the rules and regulations thereunder and
any related or similar rules, regulations or guidelines, issued, administered or
enforced by any applicable governmental agency (collectively, the “Money
Laundering Laws”) and no action, suit or proceeding by or before any court or
governmental agency, authority or body or any arbitrator involving the Company
and/or any Subsidiary with respect to the Money Laundering Laws is pending or,
to the Company’s Knowledge, threatened.

(z) Internal Accounting Control. Each of the Company and the Subsidiaries
maintain effective internal control over financial reporting, as such term is
defined in Rule 13a-15(f) under the Exchange Act.

(aa) Compliance. Neither the Company nor any of its Subsidiaries (i) is in
default under or in violation of (and no event has occurred that has not been
waived that, with notice or lapse of time or both, would result in a default by
the Company or any of its Subsidiaries under), nor has the Company or any of its
Subsidiaries received written notice of a claim that it is in default under or
that it is in violation of, any indenture, loan or credit agreement or any other
agreement or instrument to which it is a party or by which it or any of its
properties is bound (whether or not such default or violation has been waived),
(ii) is in violation of any order of any court, arbitrator or governmental body
having jurisdiction over the Company or its properties or assets, or (iii) is in
violation of, or in receipt of written notice that it is in violation of, any
statute, rule or regulation of any governmental authority applicable to the
Company, except in each case as would not, individually or in the aggregate,
have a Material Adverse Effect.

 

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3.2 Representations and Warranties of the Investors. Each Investor hereby, as to
itself only and for no other Investor, represents and warrants to the Company as
follows:

(a) Organization; Authority. Such Investor that is an entity is duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization with the requisite corporate, partnership or other power and
authority to enter into and to consummate the transactions contemplated by the
Transaction Documents and otherwise to carry out its obligations hereunder and
thereunder. The purchase by such Investor that is an entity of the Securities
hereunder has been duly authorized by all necessary corporate, partnership or
other action on the part of such Investor. Such Investor that is an individual
has the capacity to enter into this Agreement and to consummate the transactions
contemplated hereby. This Agreement has been duly executed and delivered by such
Investor and constitutes the valid and binding obligation of such Investor,
enforceable against it in accordance with its terms, except (i) as limited by
general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors’ rights generally, (ii) as limited by laws relating to
the availability of specific performance, injunctive relief or other equitable
remedies and (iii) insofar as indemnification and contribution provisions may be
limited by applicable law.

(b) No Public Sale or Distribution. Such Investor is acquiring the Securities in
the ordinary course of business for its own account and not with a view towards,
or for resale in connection with, the public sale or distribution thereof,
except pursuant to sales registered under the Securities Act or under an
exemption from such registration and in compliance with applicable federal and
state securities laws, and such Investor does not have a present arrangement to
effect any distribution of the Securities to or through any person or entity;
provided, however, that by making the representations herein, such Investor does
not agree to hold any of the Securities for any minimum or other specific term
and reserves the right to dispose of the Securities at any time in accordance
with or pursuant to a registration statement or an exemption under the
Securities Act.

(c) Investor Status. At the time such Investor was offered the Securities, it
was, and at the date hereof it is an “accredited investor” as defined in Rule
501(a) under the Securities Act or a “qualified institutional buyer” as defined
in Rule 144A(a) under the Securities Act. Such Investor is not a registered
broker dealer registered under Section 15(a) of the Exchange Act, or a member of
the Financial Industry Regulatory Authority, Inc. or an entity engaged in the
business of being a broker dealer. Except as otherwise disclosed in writing to
the Company on Exhibit A-2 (attached hereto) on or prior to the date of this
Agreement, such Investor is not affiliated with any broker dealer registered
under Section 15(a) of the Exchange Act, or a member of the Financial Industry
Regulatory Authority, Inc. or an entity engaged in the business of being a
broker dealer.

(d) General Solicitation. Such Investor is not purchasing the Securities as a
result of any advertisement, article, notice or other communication regarding
the Securities published in any newspaper, magazine or similar media, broadcast
over television or radio, disseminated over the Internet or presented at any
seminar or any other general solicitation or general advertisement.

 

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(e) Experience of Such Investor. Such Investor, either alone or together with
its representatives has such knowledge, sophistication and experience in
business and financial matters so as to be capable of evaluating the merits and
risks of the prospective investment in the Securities, and has so evaluated the
merits and risks of such investment. Such Investor understands that it must bear
the economic risk of this investment in the Securities indefinitely, and is able
to bear such risk and is able to afford a complete loss of such investment.

(f) Access to Information. Such Investor acknowledges that it has reviewed the
Disclosure Materials and has been afforded: (i) the opportunity to ask such
questions as it has deemed necessary of, and to receive answers from,
representatives of the Company concerning the terms and conditions of the
offering of the Securities and the merits and risks of investing in the
Securities; (ii) access to information about the Company and each Subsidiary and
their respective financial condition, results of operations, business,
properties, management and prospects sufficient to enable it to evaluate its
investment; and (iii) the opportunity to obtain such additional information that
the Company possesses or can acquire without unreasonable effort or expense that
is necessary to make an informed investment decision with respect to the
investment. Neither such inquiries nor any other investigation conducted by or
on behalf of such Investor or its representatives or counsel shall modify, amend
or affect such Investor’s right to rely on the truth, accuracy and completeness
of the Disclosure Materials and the Company’s representations and warranties
contained in the Transaction Documents. Such Investor acknowledges receipt of
copies of the SEC Reports.

(g) No Governmental Review. Such Investor understands that no United States
federal or state agency or any other government or governmental agency has
passed on or made any recommendation or endorsement of the Securities or the
fairness or suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.

(h) No Conflicts. The execution, delivery and performance by such Investor of
this Agreement and the consummation by such Investor of the transactions
contemplated hereby will not (i) result in a violation of the organizational
documents of such Investor that is an entity or (ii) conflict with, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which such Investor is a party, or (iii) result in a violation of
any law, rule, regulation, order, judgment or decree (including federal and
state securities laws) applicable to such Investor, except in the case of
clauses (ii) and (iii) above, for such that are not material and do not
otherwise affect the ability of such Investor to consummate the transactions
contemplated hereby.

(i) Prohibited Transactions; Confidentiality. No Investor, directly or
indirectly, and no Person acting on behalf of or pursuant to any understanding
with any Investor, has engaged in any purchases or sales in the securities,
including derivatives, of the Company (including, without limitation, any Short
Sales (a “Transaction”) involving any of the Company’s securities) since the
time that such Investor was first contacted by the Company, the Agent or any
other Person regarding an investment in the Company contemplated by the
Transaction Documents. Such Investor covenants that neither it nor any Person
acting on its behalf or pursuant to any understanding with such Investor

 

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will engage, directly or indirectly, in any Transactions in the securities of
the Company (including Short Sales) prior to the time the transactions
contemplated by this Agreement are publicly disclosed. “Short Sales” include,
without limitation, all “short sales” as defined in Rule 200 promulgated under
Regulation SHO under the Exchange Act and all types of direct and indirect stock
pledges, forward sale contracts, options, puts, calls, short sales, swaps,
derivatives and similar arrangements (including on a total return basis), and
sales and other transactions through non-U.S. broker-dealers or foreign
regulated brokers.

(j) Restricted Securities. The Investors understand that the Securities are
characterized as “restricted securities” under the U.S. federal securities laws
inasmuch as they are being acquired from the Company in a transaction not
involving a public offering and that under such laws and applicable regulations
such securities may be resold without registration under the Securities Act only
in certain limited circumstances.

(k) Legends. It is understood that, except as provided in Section 4.1(b) of this
Agreement, certificates evidencing the Securities will bear the legend set forth
in Section 4.1(b).

(l) No Legal, Tax or Investment Advice. Such Investor understands that nothing
in this Agreement or any other materials presented by or on behalf of the
Company to the Investor in connection with the purchase of the Securities
constitutes legal, tax or investment advice. Such Investor has consulted such
legal, tax and investment advisors as it, in its sole discretion, has deemed
necessary or appropriate in connection with its purchase of the Securities. Such
Investor understands that the Agent has acted solely as the agent of the Company
in this placement of the Securities, and that the Agent makes no representation
or warranty with regard to the merits of this transaction or as to the accuracy
of any information such Investor may have received in connection therewith. Such
Investor acknowledges that he has not relied on any information or advice
furnished by or on behalf of the Agent.

ARTICLE IV

OTHER AGREEMENTS OF THE PARTIES

4.1 Transfer Restrictions.

(a) Each of the Investors covenant that the Securities will only be disposed of
pursuant to an effective registration statement under, and in compliance with
the requirements of, the Securities Act or pursuant to an available exemption
from the registration requirements of the Securities Act, and in compliance with
any applicable state securities laws. In connection with any transfer of
Securities other than pursuant to an effective registration statement or to the
Company, the Company may require the transferor to provide to the Company an
opinion of counsel selected by the transferor, the form and substance of which
opinion shall be reasonably satisfactory to the Company, to the effect that such
transfer does not require registration under the Securities Act. Notwithstanding
the foregoing, the Company hereby consents to and agrees to register on the
books of the Company and with its Transfer Agent, without any such legal
opinion, except to the extent that the transfer agent requests such legal
opinion, any transfer of Securities by an Investor to an Affiliate of such
Investor, provided that the transferee certifies to

 

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the Company that it is an “accredited investor” as defined in Rule 501(a) under
the Securities Act and provided that such Affiliate does not request any removal
of any existing legends on any certificate evidencing the Securities.

(b) The Investors agree to the imprinting, until no longer required by this
Section 4.1(b), of the following legend on any certificate evidencing any of the
Securities:

THESE SECURITIES [(AND THE SECURITIES ISSUABLE UPON CONVERSION OF THESE
SECURITIES)] HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), OR ANY APPLICABLE STATE SECURITIES LAWS AND, ACCORDINGLY, MAY
NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
AND IN COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS. THESE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A
REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN
“ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT OR
OTHER LOAN SECURED BY SUCH SECURITIES.

Certificates evidencing the Securities shall not be required to contain such
legend or any other legend (i) following any sale of such Securities pursuant to
a registration statement (including the Registration Statement) covering the
resale of such Securities that is effective under the Securities Act,
(ii) following any sale of such Securities pursuant to Rule 144 if the holder
provides the Company with a legal opinion (and the documents upon which the
legal opinion is based) reasonably acceptable to the Company to the effect that
the Securities can be sold under Rule 144, (iii) if the Securities are eligible
for sale under Rule 144(b) without the requirement that adequate current public
information exists with respect to the Company, or (iv) if the holder provides
the Company with a legal opinion (and the documents upon which the legal opinion
is based) reasonably acceptable to the Company to the effect that the legend is
not required under applicable requirements of the Securities Act (including
controlling judicial interpretations and pronouncements issued by the Staff of
the SEC). Following the date that a legend is no longer required for certain
Securities, the Company will no later than three Trading Days following the
delivery by an Investor to the Company or the Transfer Agent (if delivery is
made to the Transfer Agent a copy shall be contemporaneously delivered to the
Company) of (a) a legended certificate representing such Securities (and, in the
case of a requested transfer, endorsed or with stock powers attached, signatures
guaranteed, and otherwise in form necessary to affect transfer), and (b) an
opinion of counsel to the extent required by Section 4.1(a), deliver or cause to
be delivered to such Investor a certificate representing such Securities that is
free from all restrictive and other legends. The Company may not make any
notation on its records or give instructions to the Transfer Agent that enlarge
the restrictions on transfer set forth in this Section.

 

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If within three Trading Days after receipt by the Company or its Transfer Agent
of a legended certificate and the other documents as specified in clauses
(a) and (b) of the paragraph immediately above, the Company shall fail to cause
to be issued and delivered to such Investor a certificate representing such
Securities that is free from all restrictive and other legends, and if on or
after such Trading Day the Investor purchases (in an open market transaction or
otherwise) shares of Common Stock to deliver in satisfaction of a sale by the
Investor of shares of Common Stock that the Investor anticipated receiving from
the Company without any restrictive legend (the “Covering Shares”), then the
Company shall, within three Trading Days after the Investor’s request, pay cash
to the Investor in an amount equal to the excess (if any) of the Investor’s
total purchase price (including brokerage commissions, if any) for the Covering
Shares, over the product of (A) the number of Covering Shares, times (B) the
closing bid price on the date of delivery of such certificate and the other
documents as specified in Clauses (a) and (b) of the paragraph immediately
above.

(c) The Company will not object to and shall permit (except as prohibited by
law) an Investor to pledge or grant a security interest in some or all of the
Securities in connection with a bona fide margin agreement with a registered
broker-dealer or grant a security interest in some or all of the Securities to a
financial institution that is an “accredited investor” as defined in Rule 501(a)
under the Securities Act and who agrees to be bound by the provisions of this
Agreement, and if required under the terms of such arrangement, the Company will
not object to and shall permit (except as prohibited by law) such Investor to
transfer pledged or secured Securities to the pledgees or secured parties.
Except as required by law, such a pledge or transfer would not be subject to
approval of the Company, no legal opinion of the pledgee, secured party or
pledgor shall be required in connection therewith (but such legal opinion shall
be required in connection with a subsequent transfer or foreclosure following
default by the purchaser transferee of the pledge), and no notice shall be
required of such pledge. Each Investor acknowledges that the Company shall not
be responsible for any pledges relating to, or the grant of any security
interest in, any of the Securities or for any agreement, understanding or
arrangement between any Investor and its pledgee or secured party. At the
appropriate Investor’s expense, the Company will execute and deliver such
reasonable documentation as a pledgee or secured party of Securities may
reasonably request in connection with a pledge or transfer of the Securities,
including the preparation and filing of any required prospectus supplement under
Rule 424(b)(3) of the Securities Act or other applicable provision of the
Securities Act to appropriately amend the list of Selling Stockholders
thereunder. Provided that the Company is in compliance with the terms of this
Section 4.1(c), the Company’s indemnification obligations pursuant to
Section 6.7 shall not extend to any Proceeding or Losses arising out of or
related to this Section 4.1(c).

4.2 Furnishing of Information. Until the date that any Investor owning
Securities may sell all of them under Rule 144 of the Securities Act (or any
successor provision) without volume limitations and without the requirement that
there be adequate current public information with regards to the Company, the
Company covenants to use its commercially reasonable efforts to timely file (or
obtain extensions in respect thereof and file within the applicable grace
period) all reports required to be

 

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filed by the Company after the date hereof pursuant to the Exchange Act. The
Company further covenants that it will take such further action as any holder of
Securities may reasonably request to satisfy the provisions of this Section 4.2.

4.3 Integration. The Company shall not, and shall use its commercially
reasonable efforts to ensure that no Affiliate thereof shall, sell, offer for
sale or solicit offers to buy or otherwise negotiate in respect of any security
(as defined in Section 2 of the Securities Act) that would be integrated with
the offer or sale of the Securities in a manner that would require the
registration under the Securities Act of the sale of the Securities to the
Investors or that would be integrated with the offer or sale of the Securities
for purposes of the rules and regulations of any Trading Market.

4.4 Securities Laws Disclosure; Publicity. The Company shall, at or before 9:00
a.m., New York time, on the second Trading Day following execution of this
Agreement, issue a press release disclosing all material terms of the
transactions contemplated hereby. On the Closing Date, the Company shall file a
Current Report on Form 8-K with the SEC (the “8-K Filing”) describing the terms
of the transactions contemplated by the Transaction Documents and including as
exhibits to such Current Report on Form 8-K the material Transaction Documents
(including this Agreement and the schedules hereto, and the names, and addresses
of the Investors and the principal amount of Notes respectively purchased), in
the form required by the Exchange Act. Thereafter, the Company shall timely file
any filings and notices required by the SEC or applicable law with respect to
the transactions contemplated hereby and provide copies thereof to the Investors
promptly after filing. Except as herein provided, neither the Company nor any
Subsidiary shall publicly disclose the name of any Investor, or include the name
of any Investor in any press release without the prior written consent of such
Investor (which consent shall not be unreasonably withheld or delayed), unless
otherwise required by law, regulatory authority or Trading Market. Neither the
Company nor any Subsidiary shall, nor shall any of their respective officers,
directors, employees and agents, provide any Investor with any material
nonpublic information regarding the Company or any Subsidiary from and after the
issuance of the above referenced press release without the express written
consent of such Investor.

4.5 Stockholder Approval. The Company shall use commercially reasonable efforts
to provide each stockholder entitled to vote at a special meeting of
stockholders of the Company (the “Stockholder Meeting”) a proxy statement
soliciting each such stockholder’s affirmative vote at the Stockholder Meeting
for approval of resolutions (“Stockholder Resolutions”) providing for the
Company’s issuance of all of the Securities as described in the Transaction
Documents in accordance with applicable law and the rules and regulations of the
Principal Market (such affirmative approval being referred to herein as the
“Stockholder Approval”, and the date such Stockholder Approval is obtained, the
“Stockholder Approval Date”), and the Company shall use its commercially
reasonable efforts to solicit its stockholders’ approval of such Stockholder
Resolutions and shall cause the Board of Directors of the Company to recommend
to the stockholders that they approve such Stockholder Resolutions. The Company
shall use its commercially reasonable efforts to cause the Stockholder Meeting
to be promptly called and held not later than ninetieth (90th) day following the
Closing Date. Each Investor agrees to vote all shares of Common Stock it
beneficially owns on the record date applicable to the Stockholder Meeting that
are eligible to vote in connection with the Stockholder Resolutions in favor of
adopting the Stockholder Resolutions.

 

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4.6 Use of Proceeds. Until such time as all of the Notes have been repaid in
full (or have been automatically converted, in full, in accordance with their
terms), the proceeds from the sale of the Securities will be placed in an
interest bearing account with JPMorgan Chase Bank, N.A. and the Company shall
not use or withdraw such proceeds or grant any Person (other than the Lead
Investor, in its capacity as collateral agent for the Investors) any right,
title or interest in or to the proceeds, which proceeds shall secure the
obligations of the Company under the Notes. After such date as all of the Notes
have been automatically converted, in full, in accordance with their terms, the
Company intends to use the net proceeds from the sale of the Securities to repay
a portion of the outstanding amounts under our existing Credit Agreement and for
working capital and general corporate purposes.

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

4.8 Salus Amendment. The Company shall promptly (but in no event more than one
(1) Business Day following the Closing) take all action required by Section 3 of
the Salus Amendment to cause the Salus Amendment to become effective.

ARTICLE V

CONDITIONS

5.1 Conditions Precedent to the Obligations of the Investors. The obligation of
each Investor to acquire the Securities at the Closing is subject to the
satisfaction or waiver by such Investor, at or before the Closing, of each of
the following conditions:

(a) Representations and Warranties. The representations and warranties of the
Company contained herein shall be true and correct in all material respects
(except for those representations and warranties which are qualified as to
materiality, in which case such representations and warranties shall be true and
correct in all respects) as of the date when made and as of the Closing as
though made on and as of such date (except for representations and warranties
that speak as of a specific date, which shall be true and correct as of such
specific date); and

(b) Performance. The Company and each other Investor shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by the Transaction Documents to be performed, satisfied
or complied with by it at or prior to the Closing.

(c) No Suspensions of Trading in Common Stock; Listing. Trading in the Common
Stock shall not have been suspended by the SEC or any Trading Market (except for
any suspensions of trading of not more than one Trading Day solely to permit
dissemination of

 

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material information regarding the Company) at any time since the date of
execution of this Agreement, and the Common Stock shall have been at all times
since such date listed for trading on a Trading Market.

(d) Absence of Litigation. No action, suit or proceeding by or before any court
or any governmental body or authority, against the Company or any Subsidiary or
pertaining to the transactions contemplated by this Agreement or their
consummation, shall have been instituted on or before the Closing Date, which
action, suit or proceeding would, if determined adversely, have a Material
Adverse Effect.

(e) Follow-On Offering. The Underwriters shall have purchased, concurrent with
the purchase of the Securities by the Investors hereunder, the shares of Common
Stock in Follow-On Offering at the same purchase price (less any underwriting
discounts or commissions) per Conversion Share payable by the Investors
hereunder (assuming full conversion of the Notes).

(f) Company Deliverables. The Company shall have delivered the deliverables
specified in Section 2.2(a) of this Agreement.

5.2 Conditions Precedent to the Obligations of the Company. The obligation of
the Company to sell the Securities at the Closing is subject to the satisfaction
or waiver by the Company, at or before the Closing, of each of the following
conditions:

(a) Representations and Warranties. The representations and warranties of the
Investors contained herein shall be true and correct in all material respects
(except for those representations and warranties which are qualified as to
materiality, in which case such representations and warranties shall be true and
correct in all respects) as of the date when made and as of the Closing Date as
though made on and as of such date (except for representations and warranties
that speak as of a specific date, which shall be true and correct as of such
specific date); and

(b) Performance. The Investors shall have performed, satisfied and complied in
all material respects with all covenants, agreements and conditions required by
the Transaction Documents to be performed, satisfied or complied with by the
Investors at or prior to the Closing.

(c) Follow-On Offering. The Underwriters shall have purchased, concurrent with
the purchase of the Securities by the Investors hereunder, the shares of Common
Stock in Follow-On Offering at the same purchase price (less any underwriting
discounts or commissions) per Conversion Share payable by the Investors
hereunder (assuming full conversion of the Notes).

(d) Investor Deliverables. The Investors shall have delivered the deliverables
specified in Section 2.2(b) of this Agreement.

 

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ARTICLE VI

REGISTRATION RIGHTS

6.1 Required Registration Statement.

(a) As promptly as possible, and in any event on or prior to the Filing Date,
the Company shall prepare and file with the SEC a Registration Statement
covering the resale of all Registrable Securities for an offering to be made on
a continuous basis pursuant to Rule 415. The Registration Statement shall be on
Form S-3 (except if the Company is not then eligible to register for resale the
Registrable Securities on Form S-3, in which case such registration shall be on
another appropriate form in accordance with the Securities Act and the Exchange
Act) and shall contain (except if otherwise directed by the Investors or
requested by the SEC) the “Plan of Distribution” in substantially the form
attached hereto as Exhibit C.

(b) The Company shall use its commercially reasonable efforts to cause the
Registration Statement to be declared effective by the SEC as promptly as
possible after the filing thereof, but in any event prior to the Required
Effectiveness Date, and shall use its commercially reasonable efforts to keep
the Registration Statement continuously effective under the Securities Act until
the date that all Conversion Shares covered by such Registration Statement have
been sold or can be sold publicly under Rule 144 without volume limitations by
the holders of the Registrable Securities (the “Effectiveness Period”). Upon
notification by the SEC that a Registration Statement will not be reviewed or is
no longer subject to further review and comments, the Company shall request
acceleration of such Registration Statement within five (5) Trading Days after
receipt of such notice and request that it become effective on 4:00 p.m. New
York City time on the Effective Date and file a prospectus supplement for any
Registration Statement, whether or not required under Rule 424 (or otherwise),
by 9:00 a.m. New York City time the day after the Effective Date.

(c) If the Company receives SEC Comments to a Registration Statement filed
pursuant to Section 6.1(a), the Company shall be obligated to use its
commercially efforts to advocate with the SEC for the registration of all of the
Registrable Securities requested to be included in the Registration Statement in
accordance with applicable SEC guidance. If it is determined by the Company that
all of the Registrable Securities requested to be included in a Registration
Statement cannot be included due to the SEC Comments, then the Company shall use
its commercially reasonable efforts to prepare and file as expeditiously as
practicable, such number of additional Registration Statements as may be
necessary in order to ensure that all Registrable Securities are covered by an
existing and effective Registration Statement. Any cutbacks of Registrable
Securities from a Registration Statement filed pursuant to Section 6.1(a), due
to SEC Comments shall be applied to the Investors pro rata in accordance with
the number of such Registrable Securities sought to be included in such
Registration Statement by reference to the number of such Purchaser’s
Registrable Securities relative to all outstanding Registrable Securities.

(d) The Company shall notify the Investors in writing promptly (and in any event
within two Trading Days) after receiving notification from the SEC that the
Registration Statement has been declared effective.

 

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(e) Should an Event (as defined below) occur, then, upon the occurrence of such
Event, and on every monthly anniversary thereof until the applicable Event is
cured, the Company shall pay to each Investor an amount in cash, as liquidated
damages and not as a penalty, equal to one percent (1.0%) of the purchase price
paid by such Investor for the Notes purchased under this Agreement; provided,
however, that the total amount of payments pursuant to this Section 6.1(e) shall
not exceed, when aggregated with all such payments paid to all Investors under
this Section 6.1(e), five percent (5%) of the aggregate purchase price of the
Notes purchased pursuant to this Agreement. The payments to which an Investor
shall be entitled pursuant to this Section 6.1(e) are referred to herein as
“Event Payments.” Any Event Payments payable pursuant to the terms hereof shall
be made no later than three (3) Business Days following the occurrence of the
Event or on the monthly anniversary of such Event and shall apply on a pro rated
basis for any portion of a month prior to the cure of an Event. In the event the
Company fails to make Event Payments in a timely manner, such Event Payments
shall bear interest at the rate of one percent (1.0%) per month (prorated for
partial months) until paid in full. All pro rated calculations made pursuant to
this paragraph shall be based upon the actual number of days in such pro rated
month. Notwithstanding the foregoing, the maximum payment to an Investor
associated with all Events in the aggregate shall not exceed (i) in any 30-day
period, an aggregate of 1.0% of the purchase price paid by such Investor for its
Notes and (ii) 5.0% of the purchase paid by such Investor for its Notes.

For such purposes, each of the following shall constitute an “Event”: (i) the
Registration Statement required to be filed by Section 6.1(a) is not filed on or
prior to the Filing Date; or (ii) the Registration Statement required to be
filed by Section 6.1(a) is not declared effective on or prior to the Required
Effectiveness Date.

(f) The Company shall not, from the date hereof until the Effective Date of the
Registration Statement, prepare and file with the SEC a registration statement
relating to an offering for its own account or the account of others under the
Securities Act of any of its equity securities, other than any registration
statement or post-effective amendment to a registration statement (or supplement
thereto) relating to the Company’s employee benefit plans registered on Form
S-8.

(g) Neither the Company nor any of its security holders (other than the
Investors in such capacity pursuant hereto) may include securities of the
Company in the Registration Statement required to be filed under Section 6.1(a)
other than the Registrable Securities.

6.2 Demand Registration.

(a) At any time following the first anniversary date of the Closing Date,
Excluded Investors holding at least fifty percent (50%) of the Registrable
Securities held by the Excluded Investors (the “Demanding Investors”) may make a
written demand for registration under the Securities Act of an underwritten
offering of all or part of their Registrable Securities held by the Investors (a
“Underwritten Demand Registration Request”). The Company shall cause each
Registration Statement required to be filed under this Section 6.2(a) to be
declared effective under the Securities Act as soon as possible but, in any
event, no later than One Hundred and Fifty (150) days after the Company received
the Underwritten Demand Registration Request. Upon

 

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notification by the SEC that a Registration Statement will not be reviewed or is
no longer subject to further review and comments, the Company shall request
acceleration of such Registration Statement within five (5) Trading Days after
receipt of such notice and request that it become effective on 4:00 p.m. New
York City time on the Effective Date and file a prospectus supplement for any
Registration Statement, whether or not required under Rule 424 (or otherwise),
by 9:00 a.m. New York City time the day after the Effective Date. The Company
shall not be obligated to effect more than an aggregate of one registration
under this Section 6.2(a) in respect of Registrable Securities.

(b) If in any requested registration made pursuant to Section 6.2(a) hereof the
lead managing underwriter of such offering advises the Company that, in its
view, the number of securities requested to be included in such registration by
the Investors or any other Persons, including those shares of Common Stock
requested by the Company to be included in such registration, exceeds the
largest number (the “Sale Number”) that can be sold in an orderly manner in such
offering within a price range acceptable to the Investors, the Company shall use
its best efforts to include in such registration:

(i) first, all Registrable Securities requested to be included in such
registration by the Investors; provided, however, that, if the number of such
Registrable Securities exceeds the Sale Number, the number of such Registrable
Securities (not to exceed the Sale Number) to be included in such registration
shall be allocated on a pro rata basis among all Investors requesting that
Registrable Securities be included in such registration, based on the number of
Registrable Securities then owned by each such Investor requesting inclusion in
relation to the number of Registrable Securities owned by all Investors
requesting inclusion; and

(ii) second, to the extent that the number of securities to be included pursuant
to clause (i) of this Section 6.2(b) is less than the Sale Number, any other
securities that the Investors propose to register, up to the Sale Number; and

(iii) third, to the extent that the number of securities to be included pursuant
to clauses (i) and (ii) of this Section 6.2(b) is less than the Sale Number, any
securities that the Company proposes to register for its own account and any
securities that any other Person proposes to register, up to the Sale Number.

If, as a result of the proration provisions of this Section 6.2, any Investor
shall not be entitled to include all Registrable Securities in a registration
that such Investor has requested be included, such Investor may elect to
withdraw its request to include Registrable Securities in such registration or
may reduce the number requested to be included; provided, however, that (A) such
request must be made in writing prior to the earlier of the execution of the
underwriting agreement or the execution of the custody agreement with respect to
such registration and (B) such withdrawal shall be irrevocable and, after making
such withdrawal, such Investor shall no longer have any right to include
Registrable Securities in the registration as to which such withdrawal was made.

(c) The lead managing underwriter to be used in connection with such
registration shall be selected by the Demanding Investors.

(d) The Company shall (together with all Investors selling Registrable
Securities) enter into an underwriting agreement in customary form with the lead
managing Underwriter selected pursuant to Section 6.2(c) above, and each
Investor participating in such underwritten offering

 

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6.3 Effectiveness of Registration Statement. Notwithstanding anything in this
Agreement to the contrary, the Company may, by written notice to the Investors,
suspend sales under a Registration Statement after the Effective Date thereof
and/or require that the Investors immediately cease the sale of shares of Common
Stock pursuant thereto and/or defer the filing of any subsequent Registration
Statement if the Board of Directors determines in good faith, by appropriate
resolutions, that, the disclosure of material non-public information concerning
the Company (A) would be materially detrimental to the Company (other than as
relating solely to the price of the Common Stock) to maintain a Registration
Statement at such time or (B) it is in the best interests of the Company to
suspend sales under such registration at such time. Upon receipt of such notice,
each Investor shall immediately discontinue any sales of Registrable Securities
pursuant to such registration until such Investor is advised in writing by the
Company that the current Prospectus or amended Prospectus, as applicable, may be
used. In no event, however, shall this right be exercised to suspend sales
beyond the period during which (in the good faith determination of the Company’s
Board of Directors) the failure to require such suspension would be materially
detrimental to the Company. The Company’s rights under this Section 6.3 may be
exercised for a period of no more than 20 Trading Days at a time and not more
than three times in any twelve-month period. Immediately after the end of any
suspension period under this Section 6.3, the Company shall take all necessary
actions (including filing any required supplemental prospectus) to restore the
effectiveness of the applicable Registration Statement and the ability of the
Investors to publicly resell their Registrable Securities pursuant to such
effective Registration Statement.

6.4 Registration Procedures. In connection with the Company’s registration
obligations under Sections 6.1 and 6.2, the Company shall:

(a) Not less than three Trading Days prior to the filing of a Registration
Statement or any related Prospectus or any amendment or supplement thereto,
furnish via email to those Investors who have supplied the Company with email
addresses copies of all such documents proposed to be filed, which documents
(other than any document that is incorporated or deemed to be incorporated by
reference therein) will be subject to the review of such Investors. The Company
shall reflect in each such document when so filed with the SEC such comments
regarding the Investors and the plan of distribution as the Investors may
reasonably and promptly propose no later than two Trading Days after the
Investors have been so furnished with copies of such documents as aforesaid.

(b) (i) Subject to Section 6.3, prepare and file with the SEC such amendments,
including post-effective amendments, to each Registration Statement and the
Prospectus used in connection therewith as may be necessary to keep the
Registration Statement continuously effective, as to the applicable Registrable
Securities for the Effectiveness Period and prepare and file with the SEC such
additional Registration Statements in order to register for resale under the
Securities Act all of the Registrable Securities; (ii) cause the related
Prospectus to be amended or supplemented by any required Prospectus supplement,
and as so supplemented or amended to be

 

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filed pursuant to Rule 424; (iii) respond as promptly as reasonably possible,
and in any event within 15 Trading Days (except to the extent that the Company
reasonably requires additional time to respond to accounting comments), to any
comments received from the SEC with respect to the Registration Statement or any
amendment thereto; and (iv) comply in all material respects with the provisions
of the Securities Act and the Exchange Act with respect to the disposition of
all Registrable Securities covered by the Registration Statement during the
applicable period in accordance with the intended methods of disposition by the
Investors thereof set forth in the Registration Statement as so amended or in
such Prospectus as so supplemented.

(c) Notify the Investors as promptly as reasonably possible, and (if requested
by the Investors) confirm such notice in writing no later than two Trading Days
thereafter, of any of the following events: (i) the SEC notifies the Company
whether there will be a “review” of any Registration Statement; (ii) the SEC
comments in writing on any Registration Statement; (iii) any Registration
Statement or any post-effective amendment is declared effective; (iv) the SEC or
any other Federal or state governmental authority requests any amendment or
supplement to any Registration Statement or Prospectus or requests additional
information related thereto; (v) the SEC issues any stop order suspending the
effectiveness of any Registration Statement or initiates any Proceedings for
that purpose; (vi) the Company receives notice of any suspension of the
qualification or exemption from qualification of any Registrable Securities for
sale in any jurisdiction, or the initiation or threat of any Proceeding for such
purpose; or (vii) the financial statements included in any Registration
Statement become ineligible for inclusion therein or any Registration Statement
or Prospectus or other document contains any untrue statement of a material fact
or omits to state any 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.

(d) Use its commercially reasonable efforts to avoid the issuance of or, if
issued, obtain the withdrawal of (i) any order suspending the effectiveness of
any Registration Statement, or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale in
any jurisdiction, as soon as possible.

(e) If requested by an Investor, provide such Investor without charge, at least
one conformed copy of each Registration Statement and each amendment thereto,
including financial statements and schedules, and all exhibits to the extent
requested by such Person (including those previously furnished or incorporated
by reference) promptly after the filing of such documents with the SEC.

(f) Promptly deliver to each Investor, without charge, as many copies of the
Prospectus or Prospectuses (including each form of prospectus) and each
amendment or supplement thereto as such Persons may reasonably request. The
Company hereby consents to the use of such Prospectus and each amendment or
supplement thereto by each of the selling Investors in connection with the
offering and sale of the Registrable Securities covered by such Prospectus and
any amendment or supplement thereto to the extent permitted by federal and state
securities laws and regulations.

 

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(g) (i) In the time and manner required by each Trading Market, prepare and file
with such Trading Market an additional shares listing application covering all
of the Registrable Securities; (ii) take all steps necessary to cause such
Conversion Shares to be approved for listing on each Trading Market as soon as
possible thereafter; (iii) provide to each Investor evidence of such listing;
and (iv) during the Effectiveness Period, maintain the listing of such
Conversion Shares on each such Trading Market or another Eligible Market.

(h) Prior to any public offering of Registrable Securities, use its commercially
reasonable efforts to register or qualify or cooperate with the selling
Investors in connection with the registration or qualification (or exemption
from such registration or qualification) of such Registrable Securities for
offer and sale under the securities or Blue Sky laws of such jurisdictions
within the United States as any Investor requests in writing, to keep each such
registration or qualification (or exemption therefrom) effective for so long as
required, but not to exceed the duration of the Effectiveness Period, and to do
any and all other acts or things reasonably necessary or advisable to enable the
disposition in such jurisdictions of the Registrable Securities covered by a
Registration Statement; provided, however, that the Company shall not be
obligated to file any general consent to service of process or to qualify as a
foreign corporation or as a dealer in securities in any jurisdiction in which it
is not so qualified or to subject itself to taxation in respect of doing
business in any jurisdiction in which it is not otherwise so subject.

(i) Cooperate with the Investors to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be delivered to
a transferee pursuant to a Registration Statement, which certificates shall be
free, to the extent permitted by this Agreement and under law, of all
restrictive legends, and to enable such certificates to be in such denominations
and registered in such names as any such Investors may reasonably request.

(j) Upon the occurrence of any event described in Section 6.4(c)(vii), as
promptly as reasonably possible, prepare a supplement or amendment, including a
post-effective amendment, to the Registration Statement or a supplement to the
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference, and file any other required document so that, as
thereafter delivered, neither the Registration Statement nor such Prospectus
will contain an 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 light of the circumstances under which they were made, not misleading.

(k) Cooperate with any reasonable due diligence investigation undertaken by the
Investors in connection with the sale of Registrable Securities, including,
without limitation, by making available documents and information; provided that
the Company will not deliver or make available to any Investor material,
nonpublic information unless such Investor requests in advance in writing to
receive material, nonpublic information and agrees to keep such information
confidential.

(l) Comply with all rules and regulations of the SEC applicable to the
registration of the securities.

 

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(m) It shall be a condition precedent to the obligations of the Company to
complete the registration pursuant to this Agreement with respect to the
Registrable Securities of any particular Investor that such Investor furnish to
the Company the information specified in Exhibits A-1, A-2 and A-3 hereto and
such other information regarding itself, the Registrable Securities and other
shares of Common Stock held by it and the intended method of disposition of the
Registrable Securities held by it (if different from the Plan of Distribution
set forth on Exhibit C hereto) as shall be reasonably required to effect the
registration of such Registrable Securities and shall complete and execute such
documents in connection with such registration as the Company may reasonably
request.

(n) The Company shall comply with all applicable rules and regulations of the
SEC under the Securities Act and the Exchange Act, including, without
limitation, Rule 172 under the Securities Act, file any final Prospectus,
including any supplement or amendment thereof, with the SEC pursuant to Rule 424
under the Securities Act, promptly inform the Investors in writing if, at any
time during the Effectiveness Period, the Company does not satisfy the
conditions specified in Rule 172 and, as a result thereof, the Investors are
required to make available a Prospectus in connection with any disposition of
Registrable Securities and take such other actions as may be reasonably
necessary to facilitate the registration of the Registrable Securities
hereunder.

6.5 Registration Expenses – Registration Required by Section 6.1. The Company
shall pay all fees and expenses incurred by the Company in connection with (and
incident to) the performance of its obligations under Section 6.1 of this
Agreement by the Company, including without limitation (a) all registration and
filing fees and expenses, including without limitation those related to filings
with the SEC, any Trading Market and in connection with applicable state
securities or Blue Sky laws, (b) printing expenses (including without limitation
expenses of printing certificates for Registrable Securities), (c) messenger,
telephone and delivery expenses, (d) fees and disbursements of counsel for the
Company, (e) fees and expenses of all other Persons retained by the Company in
connection with the consummation of the transactions contemplated by this
Agreement, and (f) all listing fees to be paid by the Company to the Trading
Market. The Company shall also pay reasonable attorneys’ fees and expenses
incurred in connection with the legal review of the Registration Statement filed
pursuant to Section 6.1 on behalf of the Investors to one counsel designated by
the Investors in an amount not to exceed $5,000.

6.6 Registration Expenses – Registration Required by Section 6.2. The Investors
participating in any registration pursuant to Section 6.2 of this Agreement
shall pay all fees and expenses incurred by the Company in connection with (and
incident to) the performance of its obligations under Section 6.2 of this
Agreement by the Company (pro rata among the participating Investors based on
the number of Registrable Securities included in such registration by such
participating Investors), including without limitation (a) all registration and
filing fees and expenses, including without limitation those related to filings
with the SEC, any Trading Market and in connection with applicable state
securities or Blue Sky laws, (b) printing expenses (including without limitation
expenses of printing certificates for Registrable Securities), (c) messenger,
telephone and delivery expenses, (d) fees and disbursements of counsel for the
Company, the underwriter and the Investors, (e) fees and expenses of all other
non-Affiliated Persons retained by the Company in connection with

 

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the consummation of the transactions contemplated by this Agreement (including,
without limitation, fees and expenses payable to the underwriter engaged by the
Company and the Company’s accountants), and (f) all listing fees to be paid by
the Company to the Trading Market; provided, however, the Investors shall not be
responsible for any allocation of internal expenses of the Company (including
salaries and expenses of the Company’s officers and employees). Notwithstanding
the foregoing, to the extent the Company or any Person (other than the
Investors) include securities in any registration pursuant to Section 6.2 of
this Agreement, the Company or such Persons, as applicable, shall bear their pro
rata share of such expenses based on the number of securities held by the
Company or such Persons to be included in such registration compared to the
total number of securities to be included in such registration.

6.7 Indemnification

(a) Indemnification by the Company. The Company shall, notwithstanding any
termination of this Agreement, indemnify and hold harmless each Investor, the
officers, directors, partners, members, agents and employees of each of them,
each Person who controls any such Investor (within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act) and the officers,
directors, partners, members, agents and employees of each such controlling
Person, to the fullest extent permitted by applicable law, from and against any
and all Losses, as incurred, arising out of or relating to (i) any
misrepresentation or breach of any representation or warranty made by the
Company in the Transaction Documents or any other certificate, instrument or
document contemplated hereby or thereby, (ii) any breach of any covenant,
agreement or obligation of the Company contained in the Transaction Documents or
any other certificate, instrument or document contemplated hereby or thereby,
(iii) any cause of action, suit or claim brought or made against such
Indemnified Party (as defined in Section 6.7 (c) below) by a third party
(including for these purposes a derivative action brought on behalf of the
Company), arising out of or resulting from (x) the execution, delivery,
performance or enforcement of the Transaction Documents or any other
certificate, instrument or document contemplated hereby or thereby, (y) any
transaction financed or to be financed in whole or in part, directly or
indirectly, with the proceeds of the issuance of the Securities, or (z) the
status of Indemnified Party as holder of the Securities (unless, and only to the
extent that, such action, suit or claim is based upon a breach of such
Investor’s representations, warranties or covenants under the Transaction
Documents or any conduct by such Investor that constitutes fraud, gross
negligence or willful misconduct) or (iv) any untrue or alleged untrue statement
of a material fact contained in the Registration Statement, any Prospectus or
any form of Company prospectus or in any amendment or supplement thereto or in
any Company preliminary prospectus, or arising out of or relating to any
omission or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein (in the case of any Prospectus or form
of prospectus or supplement thereto, in the light of the circumstances under
which they were made) not misleading, except to the extent, but only to the
extent, that (A) such untrue statements, alleged untrue statements, omissions or
alleged omissions are based solely upon information regarding such Investor
furnished in writing to the Company by such Investor for use therein, or to the
extent that such information relates to such Investor or such Investor’s
proposed method of distribution of Registrable Securities and was reviewed and
expressly approved by such Investor in writing expressly for use in the
Registration Statement, or (B) with respect to any prospectus, if the untrue

 

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statement or omission of material fact contained in such prospectus was
corrected on a timely basis in the prospectus, as then amended or supplemented,
if such corrected prospectus was timely made available by the Company to the
Investor, and the Investor seeking indemnity hereunder was advised in writing
not to use the incorrect prospectus prior to the use giving rise to Losses.

(b) Indemnification by Investors. Each Investor shall, severally and not
jointly, indemnify and hold harmless the Company and its directors, officers,
agents and employees to the fullest extent permitted by applicable law, from and
against all Losses (as determined by a court of competent jurisdiction in a
final judgment not subject to appeal or review) arising solely out of any untrue
statement of a material fact contained in the Registration Statement, any
Prospectus, or any form of prospectus, or in any amendment or supplement
thereto, or arising out of or relating to any omission of a material fact
required to be stated therein or necessary to make the statements therein (in
the case of any Prospectus or form of prospectus or supplement thereto, in the
light of the circumstances under which they were made) not misleading, but only
to the extent that (i) such untrue statements or omissions are based solely upon
information regarding such Investor furnished to the Company by such Investor in
writing expressly for use therein, or to the extent that such information
relates to such Investor or such Investor’s proposed method of distribution of
Registrable Securities and was reviewed and expressly approved in writing by
such Investor expressly for use in the Registration Statement (it being
understood that the information provided by the Investor to the Company in
(i) Exhibits A-1, A-2 and A-3 and the Plan of Distribution set forth on Exhibit
C, as the same may be modified by such Investor or (ii) in writing constitutes
information reviewed and expressly approved by such Investor in writing
expressly for use in the Registration Statement), such Prospectus or such form
of prospectus or in any amendment or supplement thereto. In no event shall the
liability of any selling Investor hereunder be greater in amount than the dollar
amount of the net proceeds received by such Investor upon the sale of the
Registrable Securities giving rise to such indemnification obligation.

(c) Conduct of Indemnification Proceedings. If any Proceeding shall be brought
or asserted against any Person entitled to indemnity hereunder (an “Indemnified
Party”), such Indemnified Party shall promptly notify the Person from whom
indemnity is sought (the “Indemnifying Party”) in writing, and the Indemnifying
Party shall assume the defense thereof, including the employment of counsel
reasonably satisfactory to the Indemnified Party and the payment of all fees and
expenses incurred in connection with defense thereof; provided, that the failure
of any Indemnified Party to give such notice shall not relieve the Indemnifying
Party of its obligations or liabilities pursuant to this Agreement, except (and
only) to the extent that it shall be finally determined by a court of competent
jurisdiction (which determination is not subject to appeal or further review)
that such failure shall have proximately and materially adversely prejudiced the
Indemnifying Party.

An Indemnified Party shall have the right to employ separate counsel in any such
Proceeding and to participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of such Indemnified Party or Parties
unless: (i) the Indemnifying Party has agreed in writing to pay such fees and
expenses; or (ii) the Indemnifying Party shall have failed promptly to assume
the defense of such Proceeding and to employ counsel reasonably satisfactory to
such

 

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Indemnified Party in any such Proceeding; or (iii) the named parties to any such
Proceeding (including any impleaded parties) include both such Indemnified Party
and the Indemnifying Party, and such Indemnified Party shall have been advised
by counsel that a conflict of interest is likely to exist if the same counsel
were to represent such Indemnified Party and the Indemnifying Party (in which
case, if such Indemnified Party notifies the Indemnifying Party in writing that
it elects to employ separate counsel at the expense of the Indemnifying Party,
the Indemnifying Party shall not have the right to assume the defense thereof
and the reasonable fees and expenses of separate counsel shall be at the expense
of the Indemnifying Party). It shall be understood, however, that the
Indemnifying Party shall not, in connection with any one such Proceeding
(including separate Proceedings that have been or will be consolidated before a
single judge) be liable for the fees and expenses of more than one separate firm
of attorneys at any time for all Indemnified Parties, which firm shall be
appointed by a majority of the Indemnified Parties. The Indemnifying Party shall
not be liable for any settlement of any such Proceeding effected without its
written consent, which consent shall not be unreasonably withheld. No
Indemnifying Party shall, without the prior written consent of the Indemnified
Party, effect any settlement of any pending Proceeding in respect of which any
Indemnified Party is a party, unless such settlement includes an unconditional
release of such Indemnified Party from all liability on claims that are the
subject matter of such Proceeding.

All reasonable fees and expenses of the Indemnified Party (including reasonable
fees and expenses to the extent incurred in connection with investigating or
preparing to defend such Proceeding in a manner not inconsistent with this
Section) shall be paid to the Indemnified Party, as incurred, within 20 Trading
Days of written notice thereof to the Indemnifying Party (regardless of whether
it is ultimately determined that an Indemnified Party is not entitled to
indemnification hereunder; provided, that the Indemnifying Party may require
such Indemnified Party to undertake to reimburse all such fees and expenses to
the extent it is finally judicially determined that such Indemnified Party is
not entitled to indemnification hereunder).

(d) Contribution. If a claim for indemnification under Section 6.7(a) or (b) is
unavailable to an Indemnified Party (by reason of public policy or otherwise),
then each 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 Losses, in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Party and Indemnified Party in connection
with the actions, statements or omissions that resulted in such Losses as well
as any other relevant equitable considerations. The relative fault of such
Indemnifying Party and Indemnified Party shall be determined by reference to,
among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission of a
material fact, has been taken or made by, or relates to information supplied by,
such Indemnifying Party or Indemnified Party, and the parties’ relative intent,
Knowledge, access to information and opportunity to correct or prevent such
action, statement or omission. The amount paid or payable by a party as a result
of any Losses shall be deemed to include, subject to the limitations set forth
in Section 6.7(c), any reasonable attorneys’ or other reasonable fees or
expenses incurred by such party in connection with any Proceeding to the extent
such party would have been indemnified for such fees or expenses if the
indemnification provided for in this Section was available to such party in
accordance with its terms.

 

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The parties hereto agree that it would not be just and equitable if contribution
pursuant to this Section 6.7(d) were determined by pro rata allocation or by any
other method of allocation that does not take into account the equitable
considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 6.7(d), no Investor shall be
required to contribute, in the aggregate, any amount in excess of the amount by
which the net proceeds actually received by such Investor from the sale of the
Registrable Securities subject to the Proceeding exceed the amount of any
damages that such Investor has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. 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.

The indemnity and contribution agreements contained in this Section are in
addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties.

6.8 Dispositions. Each Investor agrees that it will comply with the prospectus
delivery requirements of the Securities Act as applicable to it in connection
with sales of Registrable Securities pursuant to the Registration Statement and
shall sell its Registrable Securities in accordance with the Plan of
Distribution set forth in the Prospectus. Each Investor further agrees that,
upon receipt of a notice from the Company of the occurrence of any event of the
kind described in Sections 6.4(c)(v), (vi) or (vii), such Investor will
discontinue disposition of such Registrable Securities under the Registration
Statement until such Investor is advised in writing by the Company that the use
of the Prospectus, or amended Prospectus, as applicable, may be resumed. The
Company may provide appropriate stop orders to enforce the provisions of this
paragraph. Each Investor, severally and not jointly with the other Investors,
agrees that the removal of the restrictive legend from certificates representing
Securities as set forth in this Section 4.1 is predicated upon the Company’s
reliance that the Investor will comply with the provisions of this subsection.
Both the Company and the Transfer Agent, and their respective directors,
officers, employees and agents, may rely on this subsection.

6.9 Piggy-Back Registrations. If at any time during the Effectiveness Period
there is not an effective Registration Statement covering all of the Registrable
Securities and the Company shall determine to prepare and file with the SEC a
registration statement relating to an offering for its own account or the
account of others under the Securities Act of any of its equity securities,
other than on Form S-4 or Form S-8 (each as promulgated under the Securities
Act) or their then equivalents relating to equity securities to be issued solely
in connection with any acquisition of any entity or business or equity
securities issuable in connection with stock option or other employee benefit
plans, then the Company shall send to each Investor not then eligible to sell
all of their Registrable Securities under Rule 144 in a three-month period,
written notice of such determination and if, within ten days after receipt of
such notice, any such Investor shall so request in writing, the Company shall
include in such registration statement all or any part of such Registrable
Securities such Investor requests to be registered. Notwithstanding the
foregoing, in the event that, in connection with any underwritten public
offering, the managing underwriter(s) thereof shall impose a limitation on the
number of shares of Common Stock which may be included in the Registration
Statement because, in such underwriter(s)’ judgment, marketing or other factors
dictate such limitation is necessary to facilitate public distribution, then the
Company shall be obligated to include in such Registration

 

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Statement only such limited portion of the Registrable Securities with respect
to which such Investor has requested inclusion hereunder as the underwriter
shall permit; provided, however, that (i) the Company shall not exclude any
Registrable Securities unless the Company has first excluded all outstanding
securities, the holders of which are not contractually entitled to inclusion of
such securities in such Registration Statement or are not contractually entitled
to pro rata inclusion with the Registrable Securities and (ii) after giving
effect to the immediately preceding proviso, any such exclusion of Registrable
Securities shall be made pro rata among the Investors seeking to include
Registrable Securities and the holders of other securities having the
contractual right to inclusion of their securities in such Registration
Statement by reason of demand registration rights, in proportion to the number
of Registrable Securities or other securities, as applicable, sought to be
included by each such Investor or other holder. If an offering in connection
with which an Investor is entitled to registration under this Section 6.9 is an
underwritten offering, then each Investor whose Registrable Securities are
included in such Registration Statement shall, unless otherwise agreed by the
Company, offer and sell such Registrable Securities in an underwritten offering
using the same underwriter or underwriters and, subject to the provisions of
this Agreement, on the same terms and conditions as other shares of Common Stock
included in such underwritten offering and shall enter into an underwriting
agreement in a form and substance reasonably satisfactory to the Company and the
underwriter or underwriters.

ARTICLE VII

MISCELLANEOUS

7.1 Termination. This Agreement may be terminated by the Company or any Investor
(as to itself only), by written notice to the other parties, if the Closing has
not been consummated by the fifth Trading Day following the date of this
Agreement; provided that no such termination will affect the right of any party
to sue for any breach by the other party (or parties).

7.2 Fees and Expenses. The Company shall reimburse Prentice Capital Management,
LP for all out-of-pocket costs and expenses (including, without limitation, as
applicable, all legal fees) incurred by it in connection with this Agreement and
the transactions contemplated by this Agreement. Except as expressly set forth
in the Transaction Documents to the contrary, each party shall pay the fees and
expenses of its advisers, counsel, accountants and other experts, if any, and
all other expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement. The Company
shall pay all Transfer Agent fees, stamp taxes and other taxes and duties levied
in connection with the sale and issuance of the applicable Securities.

7.3 Entire Agreement. The Transaction Documents, together with the Exhibits and
Schedules thereto, contain the entire understanding of the parties with respect
to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules. At or
after the Closing, and without further consideration, the Company will execute
and deliver to the Investors such further documents as may be reasonably
requested in order to give practical effect to the intention of the parties
under the Transaction Documents.

7.4 Notices. Any and all notices or other communications or deliveries required
or permitted to be provided hereunder shall be in writing and shall be deemed
given and effective on the earliest of

 

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(a) the date of transmission, if such notice or communication is delivered via
facsimile or email at the facsimile number or email address specified in this
Section prior to 6:30 p.m. (New York City time) on a Trading Day, (b) the next
Trading Day after the date of transmission, if such notice or communication is
delivered via facsimile or email at the facsimile number or email address
specified in this Section on a day that is not a Trading Day or later than 6:30
p.m. (New York City time) on any Trading Day, (c) the Trading Day following the
date of deposit with a nationally recognized overnight courier service, or
(d) upon actual receipt by the party to whom such notice is required to be
given. The addresses, facsimile numbers and email addresses for such notices and
communications are those set forth on the signature pages hereof, or such other
address or facsimile number as may be designated in writing hereafter, in the
same manner, by any such Person.

7.5 Amendments; Waivers. No provision of this Agreement may be waived or amended
except in a written instrument signed, in the case of an amendment, by the
Company and each of the Investors or, in the case of a waiver, by the party
against whom enforcement of any such waiver is sought. No waiver of any default
with respect to any provision, condition or requirement of this Agreement shall
be deemed to be a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of any party to exercise any right hereunder in any
manner impair the exercise of any such right. Notwithstanding the foregoing, a
waiver or consent to depart from the provisions hereof with respect to a matter
that relates exclusively to the rights of Investors under Article VI may be
given by (i) in the case of Section 6.1, Investors holding at least a majority
of the Registrable Securities to which such waiver or consent relates (which
majority must include the Lead Investor) or (ii) in the case of Section 6.2, the
Lead Investor.

7.6 Construction. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof. 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.

7.7 Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of the parties and their successors and permitted assigns. The
Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Investors. Any Investor may assign its
rights under this Agreement to any Person to whom such Investor assigns or
transfers any Securities, provided (i) such transferor agrees in writing with
the transferee or assignee to assign such rights, and a copy of such agreement
is furnished to the Company after such assignment, (ii) the Company is furnished
with written notice of (x) the name and address of such transferee or assignee
and (y) the Registrable Securities with respect to which such registration
rights are being transferred or assigned, (iii) following such transfer or
assignment, the further disposition of such securities by the transferee or
assignee is restricted under the Securities Act and applicable state securities
laws, (iv) such transferee agrees in writing to be bound, with respect to the
transferred Securities, by the provisions hereof that apply to the “Investors”
and (v) such transfer shall have been made in accordance with the applicable
requirements of this Agreement and with all laws applicable thereto.

7.8 No Third-Party Beneficiaries. This Agreement is intended for the benefit of
the parties hereto and their respective successors and permitted assigns and is
not for the benefit of, nor may any

 

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provision hereof be enforced by, any other Person, except that each Indemnified
Party is an intended third party beneficiary of Section 6.7 and (in each case)
may enforce the provisions of such Section directly against the parties with
obligations thereunder.

7.9 Governing Law; Venue; Waiver of Jury Trial. THE CORPORATE LAWS OF THE STATE
OF DELAWARE SHALL GOVERN ALL ISSUES CONCERNING THE RELATIVE RIGHTS OF THE
COMPANY AND ITS STOCKHOLDERS. ALL QUESTIONS CONCERNING THE CONSTRUCTION,
VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT
REAGRD TO CONFLICTS OF LAW PRINCIPLES THAT WOULD DEFER TO THE LAW OF ANOTHER
JURISDICATION. THE COMPANY AND INVESTORS HEREBY IRREVOCABLY SUBMIT TO THE
NON-EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN THE CITY
OF NEW YORK, BOROUGH OF MANHATTAN FOR THE ADJUDICATION OF ANY DISPUTE BROUGHT BY
THE COMPANY OR ANY INVESTOR HEREUNDER, IN CONNECTION HEREWITH OR WITH ANY
TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED HEREIN (INCLUDING WITH RESPECT TO
THE ENFORCEMENT OF ANY OF THE TRANSACTION DOCUMENTS), AND HEREBY IRREVOCABLY
WAIVE, AND AGREE NOT TO ASSERT IN ANY SUIT, ACTION OR PROCEEDING BROUGHT BY THE
COMPANY OR ANY INVESTOR, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE
JURISDICTION OF ANY SUCH COURT, OR THAT SUCH SUIT, ACTION OR PROCEEDING IS
IMPROPER. EACH PARTY HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND
CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY
MAILING A COPY THEREOF VIA REGISTERED OR CERTIFIED MAIL OR OVERNIGHT DELIVERY
(WITH EVIDENCE OF DELIVERY) TO SUCH PARTY AT THE ADDRESS IN EFFECT FOR NOTICES
TO IT UNDER THIS AGREEMENT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD
AND SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING CONTAINED HEREIN
SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS IN ANY MANNER
PERMITTED BY LAW. THE COMPANY AND INVESTORS HEREBY WAIVE ALL RIGHTS TO A TRIAL
BY JURY.

7.10 Survival. The representations and warranties, agreements and covenants
contained herein shall survive the Closing.

7.11 Execution. This Agreement may be executed in two or more counterparts, all
of which when taken together shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party, it being understood that both parties need not
sign the same counterpart. In the event that any signature is delivered by
facsimile transmission or email attachment, such signature shall create a valid
and binding obligation of the party executing (or on whose behalf such signature
is executed) with the same force and effect as if such facsimile or
email-attached signature page were an original thereof.

7.12 Severability. If any provision of this Agreement is held to be invalid or
unenforceable in any respect, the validity and enforceability of the remaining
terms and provisions of this Agreement shall not in any way be affected or
impaired thereby and the parties will attempt to agree upon a valid and
enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.

 

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

7.14 Replacement of Securities. If any certificate or instrument evidencing any
Securities is mutilated, lost, stolen or destroyed, the Company shall issue or
cause to be issued in exchange and substitution for and upon cancellation
thereof, or in lieu of and substitution therefor, a new certificate or
instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and the execution by the holder
thereof of a customary lost certificate affidavit of that fact and an agreement
to indemnify and hold harmless the Company for any losses in connection
therewith. The applicants for a new certificate or instrument under such
circumstances shall also pay any reasonable third-party costs associated with
the issuance of such replacement Securities.

7.15 Remedies. In addition to being entitled to exercise all rights provided
herein or granted by law, including recovery of damages, each of the Investors
and the Company will be entitled to seek specific performance under the
Transaction Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agree to waive in any
action for specific performance of any such obligation (other than in connection
with any action for a temporary restraining order) the defense that a remedy at
law would be adequate.

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

7.17 Adjustments in Share Numbers and Prices. In the event of any stock split,
subdivision, dividend or distribution payable in shares of Common Stock (or
other securities or rights convertible into, or entitling the holder thereof to
receive directly or indirectly shares of Common Stock), combination or other
similar recapitalization or event occurring after the date hereof, each
reference in any Transaction Document to a number of shares or a price per share
shall be amended to appropriately account for such event.

 

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7.18 Independent Nature of Investors’ Obligations and Rights. The obligations of
each Investor under any Transaction Document are several and not joint with the
obligations of any other Investor, and no Investor shall be responsible in any
way for the performance of the obligations of any other Investor under any
Transaction Documents. The decision of each Investor to purchase Securities
pursuant to this Agreement has been made by such Investor independently of any
other Investor and independently of any information, materials, statements or
opinions as to the business, affairs, operations, assets, properties,
liabilities, results of operations, condition (financial or otherwise) or
prospects of the Company which may have been made or given by any other Investor
or by any agent or employee of any other Investor, and no Investor or any of its
agents or employees shall have any liability to any other Investor (or any other
person) relating to or arising from any such information, materials, statements
or opinions. Nothing contained herein or in any Transaction Document, and no
action taken by any Investor pursuant thereto, shall be deemed to constitute the
Investors as a partnership, an association, a joint venture or any other kind of
entity, or create a presumption that the Investors are in any way acting in
concert or as a group with respect to such obligations or the transactions
contemplated by the Transaction Document. Each Investor acknowledges that no
other Investor has acted as agent for such Investor in connection with making
its investment hereunder and that no other Investor will be acting as agent of
such Investor in connection with monitoring its investment hereunder. Each
Investor shall be entitled to independently protect and enforce its rights,
including without limitation the rights arising out of this Agreement or out of
the other Transaction Documents, and it shall not be necessary for any other
Investor to be joined as an additional party in any Proceeding for such purpose.

[SIGNATURE PAGES TO FOLLOW]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.

 

dELiA*s, INC. By:  

/s/ David J. Dick

Name:   David J. Dick Title:  

Senior Vice President, Chief Financial Officer and Treasurer

 

Address for Notice:

 

dELiA*s, Inc.

50 West 23rd Street

New York, New York 10010

Tel: (212) 590-6204

Fax: (212) – 590-6310

Attn: General Counsel

With a copy to:

 

Troutman Sanders LLP

The Chrysler Buildings

405 Lexington Avenue

New York, New York 10174

Tel: (212) 704-6000

Fax: (212) 704-6288

Attn: William D. Freedman, Esq.

COMPANY SIGNATURE PAGE

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Investor Signature Page

By its execution and delivery of this signature page, the undersigned Investor
hereby joins in and agrees to be bound by the terms and conditions of the
Securities Purchase Agreement dated as of July 25, 2013 (the “Purchase
Agreement”) by and among dELiA*s, Inc. and the Investors (as defined therein),
as to the principal amount of the Notes set forth below, and authorizes this
signature page to be attached to the Purchase Agreement or counterparts thereof.

 

Name of Investor:

Valinor Capital Partners, L.P.

 

By:  

/s/ David Angstreich

  Name:   David Angstreich   Title:   Authorized Signatory

 

Address:  

 

 

 

Telephone No.:  

 

Facsimile No.:  

 

Email Address:  

 

Principal Amount of Notes: $  

 

Aggregate Purchase Price: $  

 

Delivery Instructions (if different than above):

 

c/o:   

 

  

Address:   

 

     

 

  

Telephone No.:  

 

   Facsimile No.:  

 

  

Other Special Instructions:  

 

  

--------------------------------------------------------------------------------

Investor Signature Page

By its execution and delivery of this signature page, the undersigned Investor
hereby joins in and agrees to be bound by the terms and conditions of the
Securities Purchase Agreement dated as of July 25, 2013 (the “Purchase
Agreement”) by and among dELiA*s, Inc. and the Investors (as defined therein),
as to the principal amount of the Notes set forth below, and authorizes this
signature page to be attached to the Purchase Agreement or counterparts thereof.

 

Name of Investor:

Valinor Capital Partners Offshore Master Fund, L.P.

 

By:  

/s/ David Angstreich

  Name:   David Angstreich   Title:   Authorized Signatory

 

Address:  

 

 

 

Telephone No.:  

 

Facsimile No.:  

 

Email Address:  

 

Principal Amount of Notes: $  

 

Aggregate Purchase Price: $  

 

Delivery Instructions (if different than above):

 

c/o:   

 

  

Address:   

 

     

 

  

Telephone No.:  

 

   Facsimile No.:  

 

  

Other Special Instructions:  

 

  

--------------------------------------------------------------------------------

Investor Signature Page

By its execution and delivery of this signature page, the undersigned Investor
hereby joins in and agrees to be bound by the terms and conditions of the
Securities Purchase Agreement dated as of July 25, 2013 (the “Purchase
Agreement”) by and among dELiA*s, Inc. and the Investors (as defined therein),
as to the principal amount of the Notes set forth below, and authorizes this
signature page to be attached to the Purchase Agreement or counterparts thereof.

 

Name of Investor:

Leon Cooperman

 

By:  

/s/ Leon Cooperman

  Name:     Title:  

 

Address:  

 

 

 

Telephone No.:  

 

Facsimile No.:  

 

Email Address:  

 

Principal Amount of Notes: $  

 

Aggregate Purchase Price: $  

 

Delivery Instructions (if different than above):

 

c/o:   

 

  

Address:   

 

     

 

  

Telephone No.:  

 

   Facsimile No.:  

 

  

Other Special Instructions:  

 

  

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Investor Signature Page

By its execution and delivery of this signature page, the undersigned Investor
hereby joins in and agrees to be bound by the terms and conditions of the
Securities Purchase Agreement dated as of July 25, 2013 (the “Purchase
Agreement”) by and among dELiA*s, Inc. and the Investors (as defined therein),
as to the principal amount of the Notes set forth below, and authorizes this
signature page to be attached to the Purchase Agreement or counterparts thereof.

 

Name of Investor:

Prendel LLC

 

By:  

/s/ Michael Zimmerman

  Name:   Michael Zimmerman   Title:   Managing Member

 

Address:  

 

 

 

Telephone No.:  

 

Facsimile No.:  

 

Email Address:  

 

Principal Amount of Notes: $  

 

Aggregate Purchase Price: $  

 

Delivery Instructions (if different than above):

 

c/o:   

 

  

Address:   

 

     

 

  

Telephone No.:  

 

   Facsimile No.:  

 

  

Other Special Instructions:  

 

  

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Investor Signature Page

By its execution and delivery of this signature page, the undersigned Investor
hereby joins in and agrees to be bound by the terms and conditions of the
Securities Purchase Agreement dated as of July 25, 2013 (the “Purchase
Agreement”) by and among dELiA*s, Inc. and the Investors (as defined therein),
as to the principal amount of the Notes set forth below, and authorizes this
signature page to be attached to the Purchase Agreement or counterparts thereof.

 

Name of Investor:

North Run Master Fund, LP

 

By:  

/s/ Thomas B. Ellis

  Name:   Thomas B. Ellis   Title:   Member, North Run Advisors, LLC (GP of GP
of Investor)

 

Address:  

 

 

 

Telephone No.:  

 

Facsimile No.:  

 

Email Address:  

 

Principal Amount of Notes: $  

 

Aggregate Purchase Price: $  

 

Delivery Instructions (if different than above):

 

c/o:   

 

  

Address:   

 

     

 

  

Telephone No.:  

 

   Facsimile No.:  

 

  

Other Special Instructions:  

 

  

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Investor Signature Page

By its execution and delivery of this signature page, the undersigned Investor
hereby joins in and agrees to be bound by the terms and conditions of the
Securities Purchase Agreement dated as of July 25, 2013 (the “Purchase
Agreement”) by and among dELiA*s, Inc. and the Investors (as defined therein),
as to the principal amount of the Notes set forth below, and authorizes this
signature page to be attached to the Purchase Agreement or counterparts thereof.

 

Name of Investor:

Morris Goldfarb

 

By:  

/s/ Morris Goldfarb

  Name:   Title:

 

Address:  

 

 

 

Telephone No.:  

 

Facsimile No.:  

 

Email Address:  

 

Principal Amount of Notes: $  

 

Aggregate Purchase Price: $  

 

Delivery Instructions (if different than above):

 

c/o:   

 

  

Address:   

 

     

 

  

Telephone No.:  

 

   Facsimile No.:  

 

  

Other Special Instructions:  

 

  

--------------------------------------------------------------------------------

Investor Signature Page

By its execution and delivery of this signature page, the undersigned Investor
hereby joins in and agrees to be bound by the terms and conditions of the
Securities Purchase Agreement dated as of July 25, 2013 (the “Purchase
Agreement”) by and among dELiA*s, Inc. and the Investors (as defined therein),
as to the principal amount of the Notes set forth below, and authorizes this
signature page to be attached to the Purchase Agreement or counterparts thereof.

 

Name of Investor:

Jeffrey Goldfarb

 

By:  

/s/ Jeffrey Goldfarb

  Name:   Title:

 

Address:  

 

 

 

Telephone No.:  

 

Facsimile No.:  

 

Email Address:  

 

Principal Amount of Notes: $  

 

Aggregate Purchase Price: $  

 

Delivery Instructions (if different than above):

 

c/o:   

 

  

Address:   

 

     

 

  

Telephone No.:  

 

   Facsimile No.:  

 

  

Other Special Instructions:  

 

  

--------------------------------------------------------------------------------

Investor Signature Page

By its execution and delivery of this signature page, the undersigned Investor
hereby joins in and agrees to be bound by the terms and conditions of the
Securities Purchase Agreement dated as of July 25, 2013 (the “Purchase
Agreement”) by and among dELiA*s, Inc. and the Investors (as defined therein),
as to the principal amount of the Notes set forth below, and authorizes this
signature page to be attached to the Purchase Agreement or counterparts thereof.

 

Name of Investor:

Laura Finvarb

 

By:  

/s/ Laura Finvarb

  Name:   Title:

 

Address:  

 

 

 

Telephone No.:  

 

Facsimile No.:  

 

Email Address:  

 

Principal Amount of Notes: $  

 

Aggregate Purchase Price: $  

 

Delivery Instructions (if different than above):

 

c/o:   

 

  

Address:   

 

     

 

  

Telephone No.:  

 

   Facsimile No.:  

 

  

Other Special Instructions:  

 

  

--------------------------------------------------------------------------------

Investor Signature Page

By its execution and delivery of this signature page, the undersigned Investor
hereby joins in and agrees to be bound by the terms and conditions of the
Securities Purchase Agreement dated as of July 25, 2013 (the “Purchase
Agreement”) by and among dELiA*s, Inc. and the Investors (as defined therein),
as to the principal amount of the Notes set forth below, and authorizes this
signature page to be attached to the Purchase Agreement or counterparts thereof.

 

Name of Investor:

P.A.W. Small Cap Partners, L.P.

 

By:  

/s/ Peter A. Wright

  Name:   Peter A. Wright   Title:   C.I.O. and General Partner

 

Address:  

 

 

 

Telephone No.:  

 

Facsimile No.:  

 

Email Address:  

 

Principal Amount of Notes: $  

 

Aggregate Purchase Price: $  

 

Delivery Instructions (if different than above):

 

c/o:   

 

  

Address:   

 

     

 

  

Telephone No.:  

 

   Facsimile No.:  

 

  

Other Special Instructions:  

 

  

--------------------------------------------------------------------------------

Investor Signature Page

By its execution and delivery of this signature page, the undersigned Investor
hereby joins in and agrees to be bound by the terms and conditions of the
Securities Purchase Agreement dated as of July 25, 2013 (the “Purchase
Agreement”) by and among dELiA*s, Inc. and the Investors (as defined therein),
as to the principal amount of the Notes set forth below, and authorizes this
signature page to be attached to the Purchase Agreement or counterparts thereof.

 

Name of Investor:

Tracy Gardner

 

By:  

/s/ Tracy Gardner

  Name:     Title:  

 

Address:  

 

 

 

Telephone No.:  

 

Facsimile No.:  

 

Email Address:  

 

Principal Amount of Notes: $  

 

Aggregate Purchase Price: $  

 

Delivery Instructions (if different than above):

 

c/o:   

 

  

Address:   

 

     

 

  

Telephone No.:  

 

   Facsimile No.:  

 

  

Other Special Instructions:  

 

  

--------------------------------------------------------------------------------

Annexes:

 

A Form of Notes

Exhibits:

 

A Instruction Sheet for Investors

 

B Opinion of Company Corporate Counsel

 

C Plan of Distribution

 

D Company Transfer Agent Instructions

 

-2-

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Annex A

See Exhibit 4.1 to the Form 8-K of dELiA*s, Inc. filed on July 26, 2013

--------------------------------------------------------------------------------

Exhibit A

INSTRUCTION SHEET FOR INVESTOR

(to be read in conjunction with the entire Securities Purchase Agreement)

 

A. Complete the following items in the Securities Purchase Agreement:

 

  1. Complete and execute the Investor Signature Page. The Agreement must be
executed by an individual authorized to bind the Investor.

Provide the information requested by the Investor Questionnaire:

 

  2. Exhibit A-1 - Investor Questionnaire.

Provide the information requested by the Registration Statement Questionnaire:

 

  3. Exhibit A-2 - Registration Statement Questionnaire.

Provide the information requested by the Investor Certificate:

 

  4. Exhibit A-3 - Investor Certificate. Please provide Certificate 1 or
Certificate 2, as applicable.

Return Documents to the Company.

 

  5. Return, via facsimile, the signed Securities Purchase Agreement including
the properly completed Exhibits A-1 through A-3, to:

Facsimile:

Telephone:

Attn:

 

  6. After completing instruction number five (5) above, deliver the original
signed Securities Purchase Agreement including the properly completed Exhibits
A-1 through A-3 to:

Address:

 

B. Instructions regarding the wire transfer of funds for the purchase of the
Securities will be telecopied to the Investor by the Company at a later date.

 

-3-

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Exhibit A-1

dELiA*s, Inc.

INVESTOR QUESTIONNAIRE

 

   Please provide us with the following information:    1.    The exact name
that the Notes are to be registered in (this is also the name that will appear
on the stock certificate(s) for the Conversion Shares). You may use a nominee
name if appropriate:   

 

2.    The relationship between the Investor of the Securities and the Registered
Holder listed in response to item 1 above:   

 

3.    The mailing address, telephone and telecopy number and email address of
the Registered Holder listed in response to item 1 above:   

 

     

 

     

 

     

 

     

 

4.    The Tax Identification Number of the Registered Holder listed in response
to item 1 above:   

 

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Exhibit A-2

dELiA*s, Inc.

REGISTRATION STATEMENT QUESTIONNAIRE

In connection with the Registration Statement, please provide us with the
following information regarding the Investor.

1. Please state your organization’s name exactly as it should appear in the
Registration Statement:

 

 

Except as set forth below, your organization does not hold any equity securities
of the Company on behalf of another person or entity. State any exceptions here:

 

If the Investor is not a natural person, please identify the natural person or
persons who will have voting and investment control over the Notes and
Conversion Shares owned by the Investor:

 

2. Address of your organization:

 

 

 

Telephone:  

 

  Fax:  

 

  Contact Person:  

 

 

3. Have you or your organization had any position, office or other material
relationship within the past three years with the Company or its affiliates?
(Include any relationships involving you or any of your affiliates, officers,
directors, or principal equity holders (5% or more) that has held any position
or office or has had any other material relationship with the Company (or its
predecessors or affiliates) during the past three years.)

--------------------------------------------------------------------------------

                 Yes                                     No

If yes, please indicate the nature of any such relationship below:

 

4. Are you the beneficial owner of any other securities of the Company? (Include
any equity securities that you beneficially own or have a right to acquire
within 60 days after the date hereof, and as to which you have sole voting
power, shared voting power, sole investment power or shared investment power.)

                 Yes                                     No

If yes, please describe the nature and amount of such ownership as of a recent
date.

 

5. Except as set forth below, you wish that all the shares of the Company’s
common stock beneficially owned by you or that you have the right to acquire
from the Company be offered for your account in the Registration Statement.

State any exceptions here:

 

6. Have you made or are you aware of any arrangements relating to the
distribution of the shares of the Company pursuant to the Registration
Statement?

                 Yes                                     No

If yes, please describe the nature and amount of such arrangements.

 

7. FINRA Matters

(a) State below whether (i) you or any associate or affiliate of yours are a
member of the FINRA, a controlling shareholder of an FINRA member, a person
associated with a member, a direct or indirect affiliate of a member, or an
underwriter or related person with respect to the

 

-2-

--------------------------------------------------------------------------------

proposed offering; (ii) you or any associate or affiliate of yours owns any
stock or other securities of any FINRA member not purchased in the open market;
or (iii) you or any associate or affiliate of yours has made any outstanding
subordinated loans to any FINRA member. If you are a general or limited
partnership, a no answer asserts that no such relationship exists for you as
well as for each of your general or limited partners.

 

    Yes:        No:                             

If “yes,” please identify the FINRA member and describe your relationship,
including, in the case of a general or limited partner, the name of the partner:

 

If you answer “no” to Question 7(a), you need not respond to Question 7(b).

        (b) State below whether you or any associate or affiliate of yours has
been an underwriter, or a controlling person or member of any investment banking
or brokerage firm which has been or might be an underwriter for securities of
the Corporation or any affiliate thereof including, but not limited to, the
common stock now being registered.

 

    Yes:        No:                             

If “yes,” please identify the FINRA member and describe your relationship,
including, in the case of a general or limited partner, the name of the partner.

 

-3-

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ACKNOWLEDGEMENT

The undersigned hereby agrees to notify the Company promptly of any changes in
the foregoing information which should be made as a result of any developments,
including the passage of time. The undersigned also agrees to provide the
Company and the Company’s counsel any and all such further information regarding
the undersigned promptly upon request in connection with the preparation,
filing, amending, and supplementing of the Registration Statement (or any
prospectus contained therein). The undersigned hereby consents to the use of all
such information in the Registration Statement.

The undersigned understands and acknowledges that the Company will rely on the
information set forth herein for purposes of the preparation and filing of the
Registration Statement.

The undersigned understands that the undersigned may be subject to serious civil
and criminal liabilities if the Registration Statement, when it becomes
effective, either contains an untrue statement of a material fact or omits to
state a material fact required to be stated in the Registration Statement or
necessary to make the statements in the Registration Statement not misleading.
The undersigned represents and warrants that all information it provides to the
Company and its counsel is currently accurate and complete and will be accurate
and complete at the time the Registration Statement becomes effective and at all
times subsequent thereto, and agrees during the Effectiveness Period and any
additional period in which the undersigned is making sales of Shares under and
pursuant to the Registration Statement, and agrees during such periods to notify
the Company immediately of any misstatement of a material fact in the
Registration Statement, and of the omission of any material fact necessary to
make the statements contained therein not misleading.

 

Dated:

  

 

 

 

Name

 

Signature

 

Name and Title of Signatory

 

-4-

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Exhibit A-3

dELiA*s, Inc.

INVESTOR CERTIFICATE

If the Investor is a corporation, partnership, limited liability company, trust,
pension plan, foundation, joint Investor (other than a married couple) or other
entity, an authorized officer, partner, or trustee must complete, date and sign
this Certificate 1. If the Investor is an individual, such individual must
complete, date and sign Certificate 2.

CERTIFICATE 1

CERTIFICATE FOR CORPORATE, PARTNERSHIP, LIMITED LIABILITY COMPANY,

TRUST, FOUNDATION AND JOINT INVESTORS

The undersigned certifies that the representations and responses below are true
and accurate:

(a) The Investor has been duly formed and is validly existing and has full power
and authority to invest in the Company. The person signing on behalf of the
undersigned has the authority to execute and deliver the Securities Purchase
Agreement on behalf of the Investor and to take other actions with respect
thereto.

(b) Indicate the form of entity of the undersigned:

           Limited Partnership

           General Partnership

           Limited Liability Company

           Corporation

           Revocable Trust (identify each grantor and indicate under what
circumstances the trust is revocable by the
grantor):                                       
                                         
                                         
                                                                               

 

 

(Continue on a separate piece of paper, if necessary.)

           Other type of Trust (indicate type of trust and, for trusts other
than pension trusts, name the grantors and beneficiaries):
                                         
                                         
                                         
                                                                    

 

 

(Continue on a separate piece of paper, if necessary.)

           Other form of organization (indicate form of organization
(                                         
                                                    

 

 

  ).

 

-5-

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(c) Indicate the approximate date the undersigned entity was formed:
                                        .

(d) In order for the Company to offer and sell the Securities in conformance
with state and federal securities laws, the following information must be
obtained regarding your investor status. Please initial each category applicable
to you as an investor in the Company.

 

              1. A bank as defined in Section 3(a)(2) of the Securities Act, or
any savings and loan association or other institution as defined in Section
3(a)(5)(A) of the Securities Act whether acting in its individual or fiduciary
capacity;               2. A broker or dealer registered pursuant to Section 15
of the Securities Exchange Act of 1934;               3. An insurance company as
defined in Section 2(13) of the Securities Act;               4. An investment
company registered under the Investment Company Act of 1940 or a business
development company as defined in Section 2(a)(48) of that Act;               5.
A Small Business Investment Company licensed by the U.S. Small Business
Administration under Section 301(c) or (d) of the Small Business Investment Act
of 1958;               6. A plan established and maintained by a state, its
political subdivisions, or any agency or instrumentality of a state or its
political subdivisions, for the benefit of its employees, if such plan has total
assets in excess of $5,000,000;               7. An employee benefit plan within
the meaning of the Employee Retirement Income Security Act of 1974, if the
investment decision is made by a plan fiduciary, as defined in Section 3(21) of
such Act, which is either a bank, savings and loan association, insurance
company, or registered investment advisor, or if the employee benefit plan has
total assets in excess of $5,000,000 or, if a self-directed plan, with
investment decisions made solely by persons that are accredited investors;  
            8. A private business development company as defined in
Section 202(a)(22) of the Investment Advisers Act of 1940;               9. Any
partnership or corporation or any organization described in Section 501(c)(3) of
the Internal Revenue Code or similar business trust, not formed for the specific
purpose of acquiring the Shares, with total assets in excess of $5,000,000;  
            10. A trust, with total assets in excess of $5,000,000, not formed
for the specific purpose of acquiring the Shares, whose purchase is directed by
a sophisticated person as described in Rule 506(b)(2)(ii) of the Exchange Act;

 

-6-

--------------------------------------------------------------------------------

 

        

  11. An entity in which all of the equity owners qualify under any of the above
or below subparagraphs. If the undersigned belongs to this investor category
only, list the equity owners of the undersigned, and the investor category which
each such equity owner satisfies:

 

     

 

      (Continue on a separate piece of paper, if necessary.)

 

  a. Any natural person whose individual net worth, or joint net worth with that
person’s spouse, at the time of the purchase exceeds $1,000,0001; and/or

 

  b. Any natural person who had an individual income in excess of $200,000 in
each of the two most recent years or joint income with that person’s spouse in
excess of $300,000 in each of the two most recent years and who reasonably
expects to reach the same income level in the current year; and/or

 

  c. Any director or executive officer of the Company.

Please set forth in the space provided below the (i) states, if any, in the U.S.
in which you maintained your principal office during the past two years and the
dates during which you maintained your office in each state, (ii) state(s), if
any, in which you are incorporated or otherwise organized and (iii) state(s), if
any, in which you pay income taxes.

 

     

 

     

 

Dated:             , 2013

 

 

Print Name of Investor

 

Name: Title:

(Signature and title of authorized officer, partner or trustee)

 

1  “Net worth” means the excess of total assets at fair market value (including
personal and real property, but excluding the estimated fair market value of a
person’s primary home) over total liabilities. Total liabilities excludes any
mortgage on the primary home in an amount of up to the home’s estimated fair
market value as long as the mortgage was incurred more than 60 days before the
securities are purchased or acquired, but includes (i) any mortgage amount in
excess of the home’s fair market value and (ii) any mortgage amount that was
borrowed during the 60-day period before the closing date for the sale of
securities for the purpose of investing in the securities.

 

-7-

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CERTIFICATE 2

CERTIFICATE FOR INDIVIDUALS

The undersigned certifies that the representations and responses below are true
and accurate:

(a) The Investor has the authority and capacity to invest in the Company.

(b) In order for the Company to offer and sell the securities in conformance
with state and federal securities laws, the following information must be
obtained regarding your investor status. Please initial each category applicable
to you as an investor in the Company.

 

             1.   Any natural person whose individual net worth, or joint net
worth with that person’s spouse, at the time of the purchase exceeds
$1,000,0002; and/or              2.   Any natural person who had an individual
income in excess of $200,000 in each of the two most recent years or joint
income with that person’s spouse in excess of $300,000 in each of the two most
recent years and who reasonably expects to reach the same income level in the
current year; and/or              3.   Any director or executive officer of the
Company.

(Please note that “income” does not refer simply to gross income or total
revenues. For instance, if appropriate, your operating expenses or costs of
revenues should be deducted from your total income, if those amounts are
material. Your “income” for a particular year may be calculated by adding to
your adjusted gross income as calculated for federal income tax purposes any
deduction for long term capital gains, any deduction for depletion allowance,
any exclusion for tax exempt interest and any losses of a partnership allocated
to you as a partner.)

Please set forth in the space provided below the (i) states, if any, in the U.S.
in which you maintained your principal residence during the past two years and
the dates during which you maintained your principal residence in each state,
(ii) state(s), if any, in which you are registered to vote; (iii) states, if
any, in which you hold a driver’s license, and (iv) state(s), if any, in which
you pay income taxes.

 

2 

“Net worth” means the excess of total assets at fair market value (including
personal and real property, but excluding the estimated fair market value of a
person’s primary home) over total liabilities. Total liabilities excludes any
mortgage on the primary home in an amount of up to the home’s estimated fair
market value as long as the mortgage was incurred more than 60 days before the
securities are purchased or otherwise acquired, but includes (i) any mortgage
amount in excess of the home’s fair market value and (ii) any mortgage amount
that was borrowed during the 60-day period before the closing date for the sale
of securities for the purpose of investing in the securities.

 

-8-

--------------------------------------------------------------------------------

 

 

 

Please set forth in the space provided below the name, address and
title/capacity (e.g., parent, legal guardian, joint owners (if securities are
held jointly), executor, etc.) of each person, if any, that has the sole or
shared power to vote or to direct the vote the Securities.

 

 

 

Dated:             , 2013

 

 

Print Name of Investor

 

Signature of Investor

 

Print Name of Joint Investor

 

Signature of Joint Investor

 

-9-

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Exhibit B

OPINION OF COMPANY COUNSEL

 

-10-

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Exhibit C

PLAN OF DISTRIBUTION

The selling stockholders may, from time to time, sell any or all of their shares
of common stock on any stock exchange, market or trading facility on which the
shares are traded or in private transactions. These sales may be at fixed or
negotiated prices. The selling stockholders may use any one or more of the
following methods when selling shares:

 

  •  

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;

 

  •  

broker-dealers may agree with the selling stockholders 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.

The selling stockholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus.

Broker-dealers engaged by the selling stockholders may arrange for other
brokers-dealers to participate in sales. Broker-dealers may receive commissions
or discounts from the selling stockholders (or, if any broker-dealer acts as
agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. The selling stockholders do not expect these commissions and
discounts to exceed what is customary in the types of transactions involved. Any
profits on the resale of shares of common stock by a broker-dealer acting as
principal might be deemed to be underwriting discounts or commissions under the
Securities Act. Discounts, concessions, commissions and similar selling
expenses, if any, attributable to the sale of shares will be borne by a selling
stockholder. The selling stockholders may agree to indemnify any agent, dealer
or broker-dealer that participates in transactions involving sales of the shares
if liabilities are imposed on that person under the Securities Act.

--------------------------------------------------------------------------------

The selling stockholders may from time to time pledge or grant a security
interest in some or all of the shares of common stock owned by them and, if they
default in the performance of their secured obligations, the pledgees or secured
parties may offer and sell the shares of common stock from time to time under
this prospectus after we have filed a supplement to this prospectus under
Rule 424(b)(3) or other applicable provision of the Securities Act of 1933
supplementing or amending the list of selling stockholders to include the
pledgee, transferee or other successors in interest as selling stockholders
under this prospectus.

The selling stockholders also may transfer the shares of common stock in other
circumstances, in which case the transferees, pledgees or other successors in
interest will be the selling beneficial owners for purposes of this prospectus
and may sell the shares of common stock from time to time under this prospectus
after we have filed a supplement to this prospectus under Rule 424(b)(3) or
other applicable provision of the Securities Act of 1933 supplementing or
amending the list of selling stockholders to include the pledgee, transferee or
other successors in interest as selling stockholders under this prospectus.

The selling stockholders and any broker-dealers or agents that are involved in
selling the shares of common stock may be deemed to be “underwriters” within the
meaning of the Securities Act in connection with such sales. In such event, any
commissions received by such broker-dealers or agents and any profit on the
resale of the shares of common stock purchased by them may be deemed to be
underwriting commissions or discounts under the Securities Act.

We are required to pay all fees and expenses incident to the registration of the
shares of common stock. We have agreed to indemnify the selling stockholders
against certain losses, claims, damages and liabilities, including liabilities
under the Securities Act.

The selling stockholders have advised us that they have not entered into any
agreements, understandings or arrangements with any underwriters or
broker-dealers regarding the sale of their shares of common stock, nor is there
an underwriter or coordinating broker acting in connection with a proposed sale
of shares of common stock by any selling stockholder. If we are notified by any
selling stockholder that any material arrangement has been entered into with a
broker-dealer for the sale of shares of common stock, if required, we will file
a supplement to this prospectus. If the selling stockholders use this prospectus
for any sale of the shares of common stock, they will be subject to the
prospectus delivery requirements of the Securities Act.

The anti-manipulation rules of Regulation M under the Securities Exchange Act of
1934 may apply to sales of our common stock and activities of the selling
stockholders.

 

-2-

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Exhibit D

COMPANY TRANSFER AGENT INSTRUCTIONS

[TRANSFER AGENT]

[                    ]

[                    ]

Attention: [                    ] Representative

Ladies and Gentlemen:

Reference is made to that certain Securities Purchase Agreement, dated as of
[Month]     ], 2013(the “Agreement”), by and among dELiA*s, Inc., a Delaware
corporation (the “Company”), and the investors named on the Schedule of
Investors attached thereto (collectively, the “Holders”), pursuant to which the
Company is issuing to the Holders Convertible Notes (the “Notes”) which are
convertible into shares of common stock, par value $0.001 per share (the “Common
Stock”), of the Company (“Conversion Shares”).

In connection with the consummation of the transactions contemplated by the
Agreement, this letter shall serve as our irrevocable authorization and
direction to you:

(i) to issue (provided that you are the transfer agent of the Company at such
time) upon further written direction of the Company to be provided after the
Company obtains the approval of its stockholders to issue the Conversion Shares,
an aggregate of [            ] shares of our Common Stock in the names and
denominations set forth on Annex I attached hereto. The certificates should bear
the legend set forth on Annex II attached hereto and “stop transfer”
instructions should be placed against their subsequent transfer. Kindly deliver
the certificates to the respective delivery addresses set forth on Annex I via
hand delivery or overnight courier. We confirm that these shares will be validly
issued, fully paid and non-assessable upon issuance; and

(ii) to issue (provided that you are the transfer agent of the Company at such
time) certificates for the Conversion Shares upon transfer or resale of the
Conversion Shares and receipt by you of certificate(s) for the Conversion Shares
so transferred or sold (duly endorsed or accompanied by stock powers duly
endorsed, in each case with signatures guaranteed and otherwise in form eligible
for transfer).

You acknowledge and agree that so long as you have previously received written
confirmation from the Company’s legal counsel that the Conversion Shares are
eligible for sale in conformity with Rule 144(c)(i) under the Securities Act of
1933, as amended, then, unless otherwise required by law, within three
(3) business days of your receipt of certificates representing the Conversion
Shares, you shall issue the certificates representing the Conversion Shares to
the Holders or their transferees, as the case may be, registered in the names of
such Holders or transferees, as the case may be, and such certificates shall not
bear any legend restricting transfer of the Conversion Shares thereby and should
not be subject to any stop-transfer restriction.

--------------------------------------------------------------------------------

A form of written confirmation from the Company’s outside legal counsel that a
registration statement covering resales of the Conversion Shares has been
declared effective by the SEC under the Securities Act is attached hereto as
Annex II.

Please be advised that the Holders are relying upon this letter as an inducement
to enter into the Agreement and, accordingly, each Holder is a third party
beneficiary to these instructions.

Please execute this letter in the space indicated to acknowledge your agreement
to act in accordance with these instructions. Should you have any questions
concerning this matter, please contact our counsel, [                    ],
Esq., at [(        )         -        ].

 

Very truly yours, dELiA*s, Inc. By:  

 

  Name:   Title:

THE FOREGOING INSTRUCTIONS ARE

ACKNOWLEDGED AND AGREED TO

this      day of [Month], 20[    ]

 

[TRANSFER AGENT] By:  

 

  Name:  

 

  Title:  

 

Enclosures

 

-2-

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ANNEX I

SCHEDULE OF INVESTORS

 

-3-

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ANNEX II

FORM OF NOTICE OF EFFECTIVENESS OF REGISTRATION STATEMENT

[TRANSFER AGENT]

[                    ]

[                    ]

Attention: [                    ] Representative

 

  Re: dELiA*s, Inc.

Ladies and Gentlemen:

We are counsel to dELiA*s, Inc., a Delaware corporation (the “Company”), and
have represented the Company in connection with that certain Securities Purchase
Agreement, dated as of July [    ], 2013 (the “Securities Purchase Agreement”),
entered into by and among the Company and the buyers named therein
(collectively, the “Purchasers”) pursuant to which the Company issued to the
Purchasers Convertible Notes (the “Notes”) which are convertible into shares of
common stock, par value $0.001 per share (“Common Stock”), of the Company (the
“Conversion Shares”). Pursuant to the Securities Purchase Agreement, the Company
agreed to register the resale of the Conversion Shares (collectively, the
“Registrable Securities”) under the Securities Act of 1933, as amended (the
“Securities Act”). In connection with the Company’s obligations under the
Securities Purchase Agreement, on [Month]     ], 20[    ], the Company filed a
Registration Statement on Form S-3 (File No. 333-[            ] ) (the
“Registration Statement”) with the Securities and Exchange Commission (the
“Commission”) relating to the Registrable Securities which names each of the
Purchasers 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 Securities Act at [            ]
[a.m.][p.m.] on [            ], 20[    ], and we have no Knowledge, after
telephonic inquiry of a member of the 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 Commission and the Registrable Securities
are available for resale under the Securities Act pursuant to the Registration
Statement.

 

-4-

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Schedule 3.1(a)

None

--------------------------------------------------------------------------------

Schedule 3.1(f)

 

1. Preferred Stock: $.001 par value, 25,000,000 shares authorized, none issued.

 

2. Common Stock, $.001 par value, 100,000,000 shares authorized, 32,848,453
shares issued and outstanding.

 

3. 4,201,968 shares of common stock, $.001 par value, are issuable pursuant to
options granted under the Company’s 2005 Stock Incentive Plan.

 

4. 215,343 shares of common stock, $.001 par value, are issuable pursuant to the
exercise of warrants issued by the Company.

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Schedule 3.1(h)

None

--------------------------------------------------------------------------------

Schedule 3.1(v)

None