Exhibit 10.1

 

INVESTMENT AGREEMENT

 

THIS INVESTMENT AGREEMENT (this “Agreement”), dated as of February 5, 2013, is
made by and among Cache, Inc., a Florida corporation (the “Company”), MFP
Partners, L.P., a Delaware limited partnership (“MFP”), Mill Road Capital, L.P.,
a Delaware limited partnership (“Mill Road”), and Jay Margolis, an individual
resident of the State of New York (“Margolis” together with MFP and Mill Road,
each an “Investor” and collectively, the “Investors”).

 

WHEREAS, the Company proposes to conduct a rights offering (the “Rights
Offering”) by distributing, at no charge, to each holder of record as of the
Record Date (as defined below) of shares (“Shares”) of the Company’s common
stock, par value $0.01 per share (the “Common Stock”), 0.374 transferable rights
(the “Rights”), for each Share held by such shareholder, to purchase Shares
which Rights, if exercised in full by each holder of record as of the Record
Date, will provide gross proceeds to the Company of $8.0 million (the “Aggregate
Offering Amount”);

 

WHEREAS, each holder of a whole Right will be entitled to purchase up to its pro
rata portion of the 4,848,484 Shares (the “Offered Shares”) offered in the
Rights Offering (the “Basic Subscription Privilege”) at a price equal to $1.65
per Share (as appropriately adjusted for any stock split, combination,
reorganization, recapitalization, stock dividend, stock distribution or similar
event, the “Exercise Price”);

 

WHEREAS, each holder of Rights who exercises all of its Rights will be entitled,
on a pro rata basis, to subscribe for additional Shares at the Exercise Price
(the “Over-Subscription Privilege”), to the extent that other holders of Rights
do not exercise all of their respective Basic Subscription Privileges in full,
but only up to the number of Shares purchased by such holder pursuant to its
Basic Subscription Privilege;

 

WHEREAS, in order to facilitate the Rights Offering, (i) MFP and Mill Road have
each agreed to subscribe for and purchase, at the Exercise Price, a number of
Shares equal to its full pro rata share of the Offered Shares (based on their
respective ownership of the Common Stock as of the date hereof) and (ii) MFP,
Mill Road and Margolis have each agreed, severally and not jointly, to subscribe
for and purchase, at the Exercise Price, upon expiration of the Rights Offering,
a specified portion (as specified herein) of the Offered Shares that are not
purchased pursuant to the exercise of Rights in the Rights Offering, in each
case, upon the terms and subject to the conditions set forth herein;

 

WHEREAS, on the date hereof, the Company is entering into a Voting and
Standstill Agreement among the Company and each of Andrew M. Saul and Thomas E.
Reinckens, pursuant to which each party (other than the Company) agrees (i) to
vote any and all of their respective Shares (and to cause all Shares held by any
of their Affiliates to be voted) in favor of the issuances of the Offered Shares
in the Rights Offering and the issuance of the Investor Shares (hereinafter
defined) to the Investors, as contemplated hereby and (ii) that such party will
not transfer, sell or dispose, and will cause his affiliates not to transfer,
sell or dispose,

 

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of any Shares prior to the date that is thirty (30) days following the earlier
of (i) the Closing Date and (ii) the Termination Date (as hereinafter defined);

 

WHEREAS, on the date hereof the Company is entering into an employment agreement
with Jay Margolis with respect to his employment as Chief Executive Officer of
the Company;

 

WHEREAS, at the Closing, the Company will enter into a Registration Rights
Agreement in the form of Exhibit A hereto among the Company, MFP and Mill Road
(the “Registration Rights Agreement”) pursuant to which the Company agrees to
register all of the Shares held by MFP and Mill Road with the Securities and
Exchange Commission (the “Commission”), in accordance with the terms thereof;

 

WHEREAS, on the date hereof the Company is entering into a Voting Agreement
among the Company, MFP and Mill Road setting forth certain agreements of the
parties on certain matters related to the governance of the Company, including
the nomination and election of persons to serve on the Board of Directors of the
Company (the “Board of Directors”), in accordance with the terms thereof; and

 

WHEREAS, the Board of Directors has unanimously approved this Agreement
(including the Rights Offering contemplated thereby), each of the other
Transaction Agreements and the transactions contemplated hereby and thereby
(including, without limitation, the issuance of the Investor Shares to the
Investors on the terms hereof) and has adopted a resolution recommending to the
shareholders that they vote in favor of the issuance of the Offered Shares in
the Rights Offering and the issuance of Investor Shares to the Investors under
this Agreement.

 

NOW, THEREFORE, in consideration of the mutual promises, agreements,
representations, warranties and covenants contained herein, each of the parties
hereto hereby agrees as follows:

 

1.                                      Rights Offering.

 

(a)                                 On the terms and subject to the conditions
set forth herein, the Company will distribute, at no charge, 0.374 Rights (the
“Rights Ratio”) to each holder of record of Common Stock (each, an “Eligible
Holder”) for each share of Common Stock held by such holder as of the close of
business on a record date to be determined by the Board of Directors (the
“Record Date”).  Each such Right shall be transferable separately from the
underlying Share on account of which the Right was issued.  Each whole Right
will entitle the holder thereof to purchase, at the election of the holder
thereof, one Share at the Exercise Price.  Each fractional Right will be rounded
down to the nearest whole number, and fractional Rights will not entitle any
holder to purchase any Shares.  No fractional Shares will be issued in the
Rights Offering.

 

(b)                                 The Rights (including the Basic Subscription
Privilege and the Over-Subscription Privilege) may be exercised during a period
(the “Rights Exercise Period”) commencing on the date on which Rights are issued
to Eligible Holders (the “Rights Offering Commencement Date”) and ending at
5:00 p.m. Eastern Daylight Time on a Business Day that shall not be less than
thirty (30) days after the Rights Offering Commencement Date, subject to
extension at the reasonable discretion of the Board of Directors, provided,
however, that the Rights Exercise

 

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Period shall not be extended by more than thirty (30) days without the prior
written consent of each of MFP and Mill Road (the “Expiration Time”).  “Business
Day” means each Monday, Tuesday, Wednesday, Thursday and Friday that is not a
day on which banking institutions in New York City are generally authorized or
obligated by law or executive order to close.

 

(c)                                  Each holder of Rights who wishes to
exercise all or a portion of its Rights under the Basic Subscription Privilege
shall (i) during the Rights Exercise Period return a duly executed election form
to a subscription agent selected by the Company (the “Subscription Agent”)
electing to exercise all or a portion of the Rights held by such holder
(provided that only whole Rights may be exercised) to purchase one Offered Share
for each Right so exercised and (ii) pay an amount equal to the Exercise Price
for each Share that the holder elects to purchase pursuant to the instructions
set forth in the Rights Offering Registration Statement (as hereinafter defined)
and related materials by a specified date to an escrow account established for
the Rights Offering.  On the Closing Date, the Company will issue to each holder
of Rights who validly exercised its Rights the number of Shares to which such
holder is entitled based on such exercise.  On the Closing Date, MFP and Mill
Road shall each purchase, and the Company shall issue and sell to MFP and Mill
Road, a number of Shares equal to such Investor’s pro rata portion of the
Offered Shares (based on its ownership of the Common Stock as of the Record
Date) at a price per Share equal to the Exercise Price (with respect to each of
MFP and Mill Road, its “Pro Rata Shares”).

 

(d)                                 In the event that all of the Offered Shares
are not purchased upon exercise of the Basic Subscription Privilege and the
purchase of the Pro Rata Shares by each of MFP and Mill Road, each holder of
Rights who exercises in full its Basic Subscription Privilege will be entitled
under the Over-Subscription Privilege to subscribe for additional Shares at the
Exercise Price up to an amount equal to the number of Shares such holder elected
to purchase under its Basic Subscription Privilege pursuant to the instructions
set forth in the Rights Offering Registration Statement and related materials. 
If the number of Offered Shares remaining after the exercise of Rights under the
Basic Subscription Privilege and the purchase of the Pro Rata Shares by each of
MFP and Mill Road (the “Remaining Offered Shares”) is not sufficient to satisfy
all requests for Shares under the Over-Subscription Privileges, the holders who
exercised their Over-Subscription Privileges will be allocated such Remaining
Offered Shares in proportion to the product (rounded to the nearest whole number
so that the Exercise Price multiplied by the aggregate number of Offered Shares
does not exceed the Aggregate Offering Amount) obtained by multiplying the
number of Offered Shares such holder subscribed for under the Over-Subscription
Privilege by a fraction the numerator of which is the number of Remaining
Offered Shares and the denominator of which is the total number of Offered
Shares sought to be subscribed for under the Over-Subscription Privilege by all
holders participating in such Over-Subscription Privilege.

 

(e)                                  The Company shall notify, or cause the
Subscription Agent to notify, each Investor, on each Friday during the Rights
Exercise Period and on each Business Day during the five Business Days
immediately prior to the Expiration Time (and any extensions thereto), or more
frequently if reasonably requested by any Investor, of the aggregate number of
Rights known by the Company or the Subscription Agent to have been exercised
pursuant to the Rights Offering as of the close of business on the preceding
Business Day or the most recent practicable time before such request, as the
case may be.

 

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(f)                                   The Company hereby agrees and undertakes
to give each Investor, by electronic or facsimile transmission, the
certification by an executive officer of the Company of either (i) the number of
Offered Shares elected to be purchased by holders of Rights pursuant to validly
exercised Rights (including, for the avoidance of doubt, pursuant to the Basic
Subscription Privilege and the Over-Subscription Privilege), the aggregate
Exercise Price therefor, the number of Offered Shares issuable pursuant to the
aggregate number of Rights that were not properly exercised by the holders
thereof during the Rights Offering (such Shares in the aggregate, less the
aggregate number of Pro Rata Shares, the “Unsubscribed Shares”) and the
aggregate Exercise Price therefor (a “Purchase Notice”) or (ii) in the absence
of any Unsubscribed Shares, the fact that there are no Unsubscribed Shares (a
“Satisfaction Notice”) as soon as practicable and, in any event, within two
(2) Business Days after the Expiration Time (the date of transmission of
confirmation of a Purchase Notice or a Satisfaction Notice, the “Determination
Date”).

 

(g)                                  On the Closing Date, on the terms and
subject to the conditions in this Agreement, each Investor, severally and not
jointly, agrees to purchase, and the Company will sell to each of the Investors,
at a purchase price equal to the Exercise Price, all of the Unsubscribed Shares
to be allocated among each of the Investors as follows: (i) first, Mill Road
shall subscribe for and purchase a number of Unsubscribed Shares until the
aggregate purchase price paid by Mill Road for its Pro Rata Shares and for the
Shares acquired by Mill Road pursuant to this subsection (g) is equal to
$3,500,000; (ii) second, Margolis shall subscribe for and purchase a number of
Unsubscribed Shares until the aggregate purchase price paid by Margolis for
Shares he acquired pursuant to this subsection (g) is equal to $1,000,000; and
(iii) third, MFP shall subscribe for and purchase a number of Unsubscribed
Shares until the aggregate purchase price paid by MFP for its Pro Rata Shares
and for the Shares acquired by MFP pursuant to this subsection (g) is equal to
$3,500,000 (each Investor’s obligation set forth in this Section 1(g), a
“Backstop Commitment”).

 

(h)                                 If Mill Road is unable to acquire an
aggregate number of Shares from its Pro Rata Shares and its Backstop Commitment
having an aggregate purchase price of $3,500,000, the Company shall issue at the
Closing additional Shares to Mill Road (together with any Shares acquired by
Margolis pursuant to Section 1(i), the “Additional Shares”), at a price equal to
the Exercise Price, such that the aggregate purchase price paid by Mill Road for
its Pro Rata Shares, and Shares acquired pursuant to its Backstop Commitment and
pursuant to this Section 1(h) is $3,500,000.  The parties acknowledge and agree
that the number of Additional Shares purchased by Mill Road pursuant to this
Section 1(h) shall have no effect on the Rights Ratio or the number of Shares to
be sold in the Rights Offering.

 

(i)                                     If Margolis is unable to acquire Shares
under his Backstop Commitment having an aggregate purchase price of $1,000,000,
the Company shall issue at the Closing additional Shares to Margolis at a
purchase price equal to the Exercise Price such that the aggregate purchase
price paid for Shares by Margolis under his Backstop Commitment and from the
Company pursuant to this Section 1(i) is $1,000,000.  The parties acknowledge
and agree that the number of Additional Shares purchased by Margolis pursuant to
this Section 1(i) shall have no effect on the Rights Ratio or the number of
Shares to be sold in the Rights Offering.

 

(j)                                    Each of MFP, Mill Road and Margolis shall
have the right to arrange for one or more of its Affiliates (each, an
“Affiliated Purchaser”) to purchase any Unsubscribed Shares issuable to such
Investor pursuant to its Backstop Commitment and any Additional Shares

 

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issuable to such Investor pursuant to Sections 1(h) or 1(i), by written notice
to the Company at least two (2) Business Days prior to the Closing Date, which
notice shall be signed by such Investor and each Affiliated Purchaser, and shall
contain a confirmation by the Affiliated Purchaser of the accuracy with respect
to it of the representations set forth in Section 4.  In no event will any such
arrangement relieve an Investor from its obligations under this Agreement.  The
term “Affiliate” shall have the meaning ascribed to such term in Rule 12b-2
under the Securities Exchange Act of 1934 in effect on the date hereof.

 

(k)                                 The closing of the purchase of the Shares to
be purchased in the Rights Offering and the Shares to be purchased by each of
the Investors hereunder (the “Closing”) will occur at 10:00 a.m., New York City
time, on the fourth (4th) Business Day following the Expiration Time (the
“Closing Date”).  Delivery (i) to each of MFP and Mill Road of its Pro Rata
Shares, (ii) of the Shares acquired by each Investor pursuant to its Backstop
Commitments, and (iii) of the aggregate Additional Shares acquired hereunder
((i), (ii) and (iii) collectively, the “Investor Shares”) will be made by the
Company to the respective accounts of each Investor (or to such other accounts,
including the account of an Affiliated Purchaser, as such Investor may designate
in accordance with this Agreement).  The documents to be delivered on the
Closing Date by or on behalf of the parties hereto and the Investor Shares will
be delivered at the offices of Schulte Roth & Zabel LLP, on the Closing Date.

 

(l)                                     All Investor Shares will be delivered
with any and all issue, stamp, transfer, sales and use, or similar Taxes or
duties payable in connection with such delivery duly paid by the Company.

 

2.                                      Fees and Expenses.  On the basis of the
representations and warranties herein contained, and in consideration for each
Investor’s respective Backstop Commitment, the Company will promptly reimburse
or pay, as the case may be, on the Closing Date, the reasonable out-of-pocket
costs and expenses incurred by each Investor in connection with the transactions
contemplated hereby (including, without limitation, the Rights Offering, the
Rights Offering Registration Statement, the Initial Resale Registration
Statement (as hereinafter defined), the Backstop Commitments and the negotiation
and execution of the Transaction Agreements) to the extent incurred on or before
the Closing Date (and thereafter all post-closing costs and expenses relating to
the transactions contemplated hereby to the extent incurred within three months
of the Closing Date), including reasonable fees and disbursements of counsel to
each Investor (collectively, “Transaction Expenses”); provided, that the Company
shall not be required to pay any out-of-pocket costs or expenses relating to or
arising out of any pending or threatened legal proceeding among or between one
or more of the Investors.  The provision for the payment of the Transaction
Expenses is an integral part of the transactions contemplated by this Agreement
and without this provision the Investors would not have entered into this
Agreement.

 

3.                                      Representations and Warranties of the
Company.  The Company represents and warrants to, and agrees with each Investor,
as set forth below.  Except for representations, warranties and agreements that
are expressly limited as to their date, each representation, warranty and
agreement is made as of the date hereof and as of the Closing Date after giving
effect to the transactions contemplated hereby:

 

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(a)                                 Organization and Qualification.  The Company
and each of its Subsidiaries has been duly organized and is validly existing in
good standing under the laws of its respective jurisdiction of incorporation,
with the requisite power and authority to own its properties and conduct its
business as currently conducted.  Each of the Company and its Subsidiaries has
been duly qualified as a foreign corporation or organization for the transaction
of business and is in good standing under the laws of each other jurisdiction in
which it owns or leases properties or conducts any business so as to require
such qualification, except to the extent that the failure to be so qualified or
be in good standing has not had and would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.  For the purpose of
this Agreement, “Material Adverse Effect” means (i) any material adverse effect
on the business, condition (financial or otherwise) or results of operations of
the Company or its Subsidiaries, taken as a whole, or (ii) any material adverse
effect on the ability of the Company, subject to the approvals and other
authorizations set forth in Section 3(g), to consummate the transactions
contemplated by this Agreement; provided, however, that “Material Adverse
Effect” shall not include the impact on such business, condition (financial or
otherwise), results of operations or ability to consummate the transactions
contemplated by this Agreement arising out of or attributable to, either alone
or in combination with any other change, effect, circumstance, occurrence,
event, condition or fact (“Effects”), (i) Effects that generally affect the
industries in which the Company and its Subsidiaries operate, (ii) general
economic conditions, (iii) Effects resulting from changes affecting financial,
banking, securities or commodities markets (including in each of clauses (i),
(ii) and (iii) above, any Effects resulting from an outbreak or escalation of
hostilities, acts of war or terrorism, political instability or other national
or international calamity, crisis or emergency, or any governmental or other
response to any of the foregoing, in each case whether or not involving the
United States), (iv) Effects arising from changes in laws, rules, regulations or
accounting principles, (v) Effects resulting from the announcement of the
transactions contemplated hereby or from taking any action required by the terms
and conditions of this Agreement or any of the other agreements or transactions
contemplated hereby, (vi) the historical seasonality of the business of the
Company or any Subsidiary or the failure to meet any projections or forecasts or
(vii) any change in the price or trading volume of the Company’s outstanding
securities (it being understood that the facts or occurrences giving rise to or
contributing to such change in stock price or trading volume may be deemed to
constitute, or be taken into account in determining whether there has been, or
will be, a Material Adverse Effect),; except if such Effect results from, or is
attributable to, any of the matters described in clauses (i), (ii), (iii),
(iv) or (vi) above and disproportionately affects the Company and its
Subsidiaries, taken as a whole, relative to other businesses in the industry in
which the Company and its Subsidiaries operate (but taking into account for
purposes of determining whether a Material Adverse Effect has occurred only the
disproportionate portion of such adverse effect).  For the purposes of this
Agreement, a “Subsidiary” of any person means, with respect to such person, any
corporation, partnership, joint venture or other legal entity of which such
person (either alone or through or together with any other subsidiary), owns,
directly or indirectly, more than 50% of the stock or other equity interests,
has the power to elect a majority of the board of directors or similar governing
body, or has the power to direct the business and policies.

 

(b)                                 Corporate Power and Authority.  The Company
has the requisite corporate power and authority to enter into, execute and
deliver this Agreement, the Registration Rights Agreement, the Voting Agreement,
the Voting and Standstill Agreement and each other agreement to which it will be
a party as contemplated by this Agreement (collectively, the

 

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“Transaction Agreements”) and, subject to the Shareholder Approval (as
hereinafter defined), to perform its obligations hereunder and thereunder and
consummate the transactions contemplated hereby and thereby, including the
issuance of the Rights, the Offered Shares and the Investor Shares.  The Company
has taken, subject to Shareholder Approval, all necessary corporate action
required for the due authorization, execution, delivery and performance by it of
this Agreement, including the issuance of the Rights, the Offered Shares and the
Investor Shares.

 

(c)                                  Execution and Delivery; Enforceability. 
Each Transaction Agreement has been, or prior to its execution and delivery at
the Closing will be, duly and validly executed and delivered by the Company, and
each such document constitutes, or will constitute, the valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms subject to (i) bankruptcy, insolvency, moratorium and other similar
laws now or hereafter in effect relating to or affecting creditors’ rights
generally, and (ii) general principles of equity (regardless of whether
considered in a proceeding at law or in equity).

 

(d)                                 Authorized and Issued Capital Stock.  The
authorized capital stock of the Company consists of 40,000,000 shares of Common
Stock, and 100,000 shares of preferred stock, par value $.01 per share.  At the
close of business on February 1, 2013 (the “Capital Structure Date”),
(i) 12,950,810 shares of Common Stock were issued and outstanding, (ii) no
shares of preferred stock were issued or outstanding, (iii) 3,682,199 shares of
Common Stock were held by the Company in its treasury, and, (iv) 665,675 shares
of Common Stock were reserved for issuance upon exercise of stock options and
other rights to purchase shares of Common Stock and vesting of restricted stock
units (each, an “Option” and, collectively, the “Options”) granted under any
stock option or stock-based compensation plan of the Company or otherwise (the
“Stock Plans”).  All capital stock or equity interests of each of the Company’s
Subsidiaries is owned by the Company.  The issued and outstanding shares of
capital stock of the Company and each of its Subsidiaries have been duly
authorized and validly issued and are fully paid and nonassessable, and are not
subject to any preemptive rights.  Except as set forth in this Section 3(d), at
the close of business on the Capital Structure Date, no shares of capital stock
or other equity securities or voting interest in the Company or any of its
Subsidiaries were issued, reserved for issuance or outstanding.  Since the close
of business on the Capital Structure Date, no shares of capital stock or other
equity securities or voting interest in the Company or any of its Subsidiaries
have been issued or reserved for issuance or become outstanding, other than
Shares described in this Section 3(d) that have been issued upon the exercise of
outstanding Options granted under the Stock Plans and other than the shares to
be issued hereunder.  Other than as set forth in (i) this Section 3(d), (ii) the
Voting Agreement, (iii) the Voting and Standstill Agreements, (iv) the
Separation and General Release Agreement between the Company and Thomas E.
Reinckens dated as of the date hereof, and (v) the Non-Qualified Stock Option
Agreement, dated as of the date hereof, between the Company and Margolis,
neither the Company nor any of its Subsidiaries is party to or otherwise bound
by or subject to any outstanding option, warrant, call, subscription or other
right (including any preemptive right), agreement or commitment which
(w) obligates the Company or any of its Subsidiaries to issue, deliver, sell or
transfer, or repurchase, redeem or otherwise acquire, or cause to be issued,
delivered, sold or transferred, or repurchased, redeemed or otherwise acquired,
any shares of the capital stock of, or other equity or voting interests in, the
Company or any of its Subsidiaries or any security convertible or exercisable
for or exchangeable into any capital stock of, or other equity or voting
interest in, the Company or any of its Subsidiaries, (x) obligates the Company
or

 

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any of its Subsidiaries to issue, grant, extend or enter into any such option,
warrant, call, right, security, commitment, contract, arrangement or
undertaking, (y) restricts the transfer of any shares of capital stock of the
Company or (z) relates to the voting of any shares of capital stock of the
Company or any of its Subsidiaries.  The Company does not currently have, and
has not ever had at any time, an aggregate of more than 20,000,000 shares of
Common Stock outstanding, held by the Company in its treasury, and reserved for
issuance upon exercise of stock options and other rights to purchase shares of
Common Stock or vesting of restricted stock units).

 

(e)                                  Issuance.  The Investor Shares to be issued
and sold by the Company to each Investor or any Affiliated Purchaser hereunder,
when such Shares are issued and delivered against payment therefor in accordance
with the terms hereof, will be duly and validly authorized, fully paid and
non-assessable, free and clear of all Taxes, liens, preemptive rights, rights of
first refusal, subscription and similar rights.

 

(f)                                   No Conflict.  The distribution of the
Rights, the sale, issuance and delivery of the Offered Shares upon exercise of
the Rights, the consummation of the Rights Offering by the Company and the
execution and delivery by the Company of the Transaction Agreements and
compliance by the Company with all of the provisions hereof and thereof and the
consummation of the transactions contemplated herein and therein (including
issuance and sale of Investor Shares to each Investor) (i) will not, in any
material respect, conflict with, or result in a breach or violation of, any of
the terms or provisions of, or constitute a default under (with or without
notice or lapse of time, or both), or result in the acceleration of, or the
creation of any lien under, any indenture, mortgage, deed of trust, loan
agreement or other material agreement or instrument to which the Company or any
of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound or to which any of the property or assets of the Company
or any of its Subsidiaries is subject,  (ii) will not result in any violation of
the provisions of the Articles of Incorporation or Bylaws or comparable
organizational documents of the Company or any of its Subsidiaries, and
(iii) subject to the receipt of the consents and approvals contemplated in
Section 3(g), will not result in any violation of, or any termination or
impairment of any rights under, any law, rule or regulation, any license,
authorization, injunction, judgment, order, decree, rule or regulation of any
court or governmental agency or body having jurisdiction over the Company or any
of its Subsidiaries or any of their properties, in each case, that is material
to the operations of the Company and its Subsidiaries.

 

(g)                                  Consents and Approvals.  No consent,
approval, authorization, order, registration, notice, filing, recording or
qualification of or with any court or governmental agency or body having
jurisdiction over the Company or any of its Subsidiaries or any of their
properties is required for the execution and delivery by the Company of the
Transaction Agreements, the performance by the Company of its obligations
hereunder and thereunder and the consummation of the transactions contemplated
hereby and thereby, the distribution of the Rights, or the sale, issuance and
delivery of (i) Offered Shares upon exercise of the Rights or (ii) the Investor
Shares to each Investor hereunder and the consummation of the Rights Offering by
the Company, except (i) the registration under the Securities Act of 1933, as
amended (the “Securities Act”), of the issuance of the Rights and the Offered
Shares pursuant to the exercise of Rights, and (ii) such consents, approvals,
authorizations, registrations or qualifications (x) as may be required under
state securities or Blue Sky laws in connection with the purchase of the
Investor Shares by an

 

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Investor or the distribution of the Rights and the sale of Shares to holders of
Rights, (y) pursuant to the rules of Nasdaq, including the approval of the
Company’s shareholders of the issuance of Shares contemplated hereby, including
the issuance of Offered Shares in the Rights Offering and the issuance of
Investor Shares to each Investor hereunder.

 

(h)                                 Arm’s Length.  The Company acknowledges and
agrees that each Investor is acting solely in the capacity of an arm’s length
contractual counterparty to the Company with respect to the transactions
contemplated hereby (including in connection with determining the terms of the
Rights Offering) and not as a financial advisor or a fiduciary to, or an agent
of, the Company or any other person or entity.  Additionally, none of the
Investors is advising the Company or any other person or entity as to any legal,
tax, investment, accounting or regulatory matters in any jurisdiction.  The
Company shall consult with its own advisors concerning such matters and shall be
responsible for making its own independent investigation and appraisal of the
transactions contemplated hereby, and no Investor shall have any responsibility
or liability to the Company, its Affiliates, or their respective shareholders,
directors, officers, employees, advisors or other representatives with respect
thereto.  Any review by any Investor of the Company, the transactions
contemplated hereby or other matters relating to such transactions will be
performed solely for the benefit of such Investor and shall not be on behalf of
the Company, its Affiliates, or their respective shareholders, directors,
officers, employees, advisors or other representatives and shall not affect any
of the representations or warranties contained herein or the remedies of any
Investor with respect thereto.

 

(i)                                     Company SEC Documents.  Since January 1,
2010, the Company has filed or submitted all required reports, schedules, forms,
statements and other documents (including exhibits and all other information
incorporated therein) (“Company SEC Documents”) with the Commission.  As of
their respective dates, each of the Company SEC Documents complied in all
material respects with the requirements of the Securities Act or the Exchange
Act and the rules and regulations of the Commission promulgated thereunder
applicable to such Company SEC Documents.  The Company has filed with the
Commission all “material contracts” (as such term is defined in Item
601(b)(10) of Regulation S-K under the Exchange Act) that are required to be
filed as exhibits to the Company SEC Documents and there are no contracts or
other documents that are required under the Exchange Act to be described in the
Company SEC Documents that are not so described.  No Company SEC Document filed
after January 1, 2010, when filed, or, in the case of any Company SEC Document
amended or superseded prior to the date of this Agreement, then on the date of
such amending or superseding filing, contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.  Any Company SEC Documents filed with the
Commission prior to the Closing Date, when filed, will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading.

 

(j)                                    Financial Statements.  The financial
statements and the related notes of the Company and its consolidated
Subsidiaries included or incorporated by reference in the Company SEC Documents,
and to be included or incorporated by reference in the Rights Offering
Registration Statement, the Rights Offering Prospectus and the Initial Resale
Registration Statement, comply or will comply, as the case may be, in all
material respects with

 

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the applicable requirements of the Securities Act, the Securities Exchange Act
of 1934, as amended, and the rules and regulation of the Commission thereunder
(the “Exchange Act”), as applicable, and present fairly in all material respects
the financial position, results of operations and cash flows of the Company and
its Subsidiaries as of the dates indicated and for the periods specified,
subject, in the case of the unaudited financial statements, to absence of
disclosure normally made in footnotes and to customary year end adjustments
which shall not be material; such financial statements have been prepared in
conformity with U.S. generally accepting accounting principles (“GAAP”) applied
on a consistent basis throughout the periods covered thereby, and the supporting
schedules included or incorporated by reference in the Company SEC Documents,
and to be included or incorporated by reference in the Rights Offering
Registration Statement, the Rights Offering Prospectus and the Initial Resale
Registration Statement, present fairly the information required to be stated
therein in all material respects; and the other financial information included
or incorporated by reference in the Company SEC Documents, and to be included or
incorporated by reference in the Rights Offering Registration Statement, the
Rights Offering Prospectus and the Initial Resale Registration Statement, has
been or will be derived from the accounting records of the Company and its
Subsidiaries and presents fairly or will present fairly the information shown
thereby in all material respects; and the pro forma financial information and
the related notes included or incorporated by reference in the Company SEC
Documents, and to be included or incorporated by reference in the Rights
Offering Registration Statement, the Rights Offering Prospectus and the Initial
Resale Registration Statement, have been or will be prepared in all material
respects in accordance with the applicable requirements of the Securities Act
and the Exchange Act, as applicable, and the assumptions underlying such pro
forma financial information are reasonable and are set forth in the Company SEC
Documents and will be set forth in the Rights Offering Registration Statement,
the Rights Offering Prospectus and the Initial Resale Registration Statement.

 

(k)                                 Rights Offering Registration Statement,
Rights Offering Prospectus and the Initial Resale Registration Statement.  The
Rights Offering Registration Statement or any post-effective amendment thereto
and the Initial Resale Registration Statement, will comply in all material
respects with the Securities Act, and will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; and as of the
applicable filing date of the Rights Offering Prospectus and any amendment or
supplement thereto and as of the Closing Date, the Rights Offering Prospectus
will not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.  On the Distribution Date and the Expiration Date, the Investment
Decision Package will not 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.  Each Issuer Free Writing Prospectus, at the time of use
thereof, when considered together with the Investment Decision Package, will not
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.  Each
Preliminary Rights Offering Prospectus, at the time of filing thereof, will
comply in all material respects with the Securities Act and will not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading.  Notwithstanding
the

 

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foregoing, the Company makes no representation and warranty with respect to any
statements or omissions made in reliance on and in conformity with information
relating to an Investor furnished to the Company in writing by such Investor
expressly for use in the Rights Offering Registration Statement and the Rights
Offering Prospectus and any amendment or supplement thereto.

 

For the purposes of this Agreement, (i) the term “Rights Offering Registration
Statement” means the Registration Statement on Form S-3 to be filed with the
Commission relating to the Rights Offering, including all exhibits thereto and
any post-effective amendment thereto that becomes effective; (ii) the term
“Rights Offering Prospectus” means the final prospectus contained in the Rights
Offering Registration Statement at the Securities Act Effective Date (including
information, if any, omitted pursuant to Rule 430A and subsequently provided
pursuant to Rule 424(b) under the Securities Act), and any amended form of such
prospectus provided under Rule 424(b) under the Securities Act or contained in a
post-effective amendment to the Rights Offering Registration Statement;
(iii) the term “Investment Decision Package” means the Rights Offering
Prospectus, together with any Issuer Free Writing Prospectus used by the Company
to offer the Shares to Eligible Holders pursuant to the Rights Offering,
(iv) the term “Issuer Free Writing Prospectus” means each “issuer free writing
prospectus” (as defined in Rule 433 of the rules promulgated under the
Securities Act) prepared by or on behalf of the Company or used or referred to
by the Company in connection with the Rights Offering, and (v) the term
“Preliminary Rights Offering Prospectus” means each prospectus included in the
Rights Offering Registration Statement (and any amendments thereto) before it
becomes effective, any prospectus filed with the Commission pursuant to
Rule 424(a) under the Securities Act and the prospectus included in the Rights
Offering Registration Statement, at the time of effectiveness that omits
information permitted to be excluded under Rule 430A under the Securities Act.

 

(l)                                     Absence of Certain Changes.  Since
January 1, 2012, other than as disclosed in the Company SEC Documents prior to
the date hereof, and except for actions to be taken pursuant to the Transaction
Agreements:

 

(i)                                     there has not been any change in the
capital stock from that set forth in Section 3(d) or in long-term debt of the
Company or any of its Subsidiaries, or any dividend or distribution of any kind
declared, set aside for payment, paid or made by the Company on any class of
capital stock;

 

(ii)                                  the Company has not incurred any material
liability other than in the ordinary course of business; and

 

(iii)                               no event, fact or circumstance has occurred
which has had or would reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect.

 

(m)                             No Violation or Default; Compliance with Laws. 
Neither the Company nor any of its Subsidiaries is in violation of its charter
or by-laws or similar organizational documents.  Neither the Company nor any of
its Subsidiaries is in material default, and no event has occurred that, with
notice or lapse of time or both, would constitute such a material default, in
the due performance or observance of any material term, covenant or condition
contained in any

 

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indenture, mortgage, deed of trust, loan agreement or other material agreement
or instrument to which the Company or any of its Subsidiaries is a party or by
which the Company or any of its Subsidiaries is bound or to which any of the
property or assets of the Company or any of its Subsidiaries is subject. 
Neither the Company nor any of its Subsidiaries is, or has been at any time
since January 1, 2010, in violation of any law or statute or any judgment,
order, rule or regulation of any court or arbitrator or governmental or
regulatory authority that is material to the operations of the Company and its
Subsidiaries.

 

(n)                                 Legal Proceedings.  Except as described in
the Company SEC Documents filed prior to the date hereof, there are no
(i) actions, suits or proceedings (“Actions”) pending against the Company or any
of its Subsidiaries, or (ii) pending or threatened investigations or audits by
any governmental or regulatory authority that are that required under the
Exchange Act to be described in the Company SEC Documents or the Rights Offering
Registration Statement or that if determined adversely to the Company or any of
its Subsidiaries, would be material to the operations of the Company and its
Subsidiaries taken together as a whole.  Except as described in the Company SEC
Documents filed prior to the date hereof, there are no outstanding orders,
writs, injunctions, decrees, stipulations, determinations or awards entered by
or with any governmental entity or addressed to or naming as a party the Company
or any Subsidiary, and there are no unsatisfied judgments, penalties or awards
against, relating to or affecting the Company or any Subsidiary.

 

(o)                                 Employee Benefit Matters.

 

(i)                                     The Company has made available to each
Investor a true, correct and complete copy of each welfare, benefit, retirement,
employment, compensation, incentive, stock option, restricted stock, stock
appreciation right, phantom equity, deferred compensation, change in control,
severance, vacation, paid time off, fringe-benefit and other similar agreement,
plan, policy, program and other arrangement (and any amendments thereto),
whether or not reduced to writing, in effect and covering one or more directors,
officers or employees, former directors, officers or employees and/or the
beneficiaries or dependents of any such director, officer or employee or former
director, officer or employee of the Company or any Subsidiary, that is
maintained, sponsored, contributed to, or required to be contributed to by
Company or any Subsidiary, or under which the Company or any Subsidiary has or
may have any liability for premiums or benefits (each, a “Benefit Plan”).

 

(ii)                                  Except as disclosed to each Investor prior
to the date hereof or specifically disclosed in the Company SEC Documents filed
prior to the date hereof, no Benefit Plan provides benefits or coverage in the
nature of health, life or disability insurance following retirement or other
termination of employment or service with the Company, as a director, officer or
employee of the Company.

 

(iii)                               Except as disclosed to each Investor prior
to the date hereof or specifically disclosed in the Company SEC Documents filed
prior to the date hereof, there have not been, nor are there presently, any
benefits or other amounts paid or payable to any current or former director of
the Company or any affiliate thereof.

 

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(iv)                              There is no pending or threatened Action
relating to a Benefit Plan, and no Benefit Plan has within the three (3) years
prior to the date hereof been the subject of an examination or audit by a
governmental entity or is the subject of an application or filing under, or is a
participant in, an amnesty, voluntary compliance, self-correction or similar
program sponsored by any governmental entity.

 

(p)                                 No Broker’s Fees.  Other than the amended
and restated engagement letter dated January 31, 2013, by and between the
Company and Financo, Inc., which engagement letter has been furnished to each of
the Investors, neither the Company nor any of its Subsidiaries is a party to any
contract, agreement or understanding with any person (other than this Agreement)
that would give rise to any brokerage commission, finder’s fee or like payment
in connection with the Rights Offering or the sale of the Investor Shares.

 

(q)                                 No Registration Rights.  Except as provided
for pursuant to the Registration Rights Agreements, no person has the right to
require the Company or any of its Subsidiaries to register any securities for
sale under the Securities Act.

 

(r)                                    Takeover Statutes; Charter.  The Board of
Directors has taken all necessary action to waive the applicability of Section
607.0902 of the Florida Business Corporation Act with respect to the execution
and delivery of the Transaction Agreements and the consummation of the
transactions contemplated hereby and thereby, including the acquisition of the
Investor Shares by each Investor pursuant to the terms of this Agreement and the
disinterested directors of the Company have approved each of the Transaction
Agreements and the consummation of the transactions contemplated hereby and
thereby, and the acquisition of the Investor Shares by the each Investor in
accordance with Section 607.0901(4)(a) of the Florida Business Corporation Act. 
The Board of Directors and the Audit Committee of the Board of Directors have
each taken all necessary action to waive and/or approve the Transaction
Agreements and the consummation of the transactions contemplated hereby and
thereby for purposes of the Company’s “Related Party Transaction Policy”. 
Except for the foregoing, no other “fair price,” “moratorium,” “control share
acquisition”, “business combination” or other similar anti-takeover statute or
regulation (a “Takeover Statute”) is applicable to the Company, the Common
Stock, the sale and issuance of the Offered Shares and the Investor Shares or
the other transactions contemplated by this Agreement and the Transaction
Agreements.

 

(s)                                   Transactions with Affiliates.  Except as
specifically disclosed in the Company SEC Documents, (i) there are no contracts,
agreements, arrangements, understandings (in each case whether written or oral),
liabilities or obligations between the Company or any Subsidiary, on the one
hand, and any current or former officer or director of the Company or any
Subsidiary (or any of their respective affiliates or immediate family members),
on the other hand, (ii) neither the Company nor any Subsidiary provides or
causes to be provided any assets, services or facilities to any person described
in clause (i) of this Section 3(s), (iii) no person described in clause (i) of
this Section 3(s) provides or causes to be provided any assets, services or
facilities to the Company or any Subsidiary, or derives any benefit from any
assets, services or facilities of the Company or any Subsidiary (other than as
explicitly contemplated by the terms of such person’s employment by the Company
or any Subsidiary).

 

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(t)                                    Termination of Certain Benefits.  The
Board of Directors has terminated and rescinded all prior resolutions of the
Board of Directors approving or granting any past or present executive or
non-executive director or former director of the Corporation and/or such
director’s respective affiliates any benefits, other than cash and equity
compensation for service as a director that is expressly disclosed in the
Company SEC Documents or any filings made by such directors under the Exchange
Act after September 29, 2012 but prior to the date hereof; provided, however,
that the Corporation is authorized and empowered to honor benefits or
entitlements previously granted to current directors of the Corporation subject
to a cap in out-of-pocket cost to the Corporation incurred on or after the date
hereof of $100,000 in the aggregate for all directors (past or present), such
benefit and the entitlement of any person thereunder to be administered by the
Compensation Committee of the Board of Directors as in effect from time to time.

 

(u)                                 No Material Misstatements.  No
representation or warranty made by the Company in this Agreement or any other
Transaction Agreement contains an untrue statement of a material fact or omits
to state a material fact required to be stated herein or therein or necessary to
make the statements contained herein or therein not misleading.

 

(v)                                 No Solicitation.  Neither the Company nor
any agent acting on its behalf has solicited or will solicit any offers to sell
or has offered to sell or will offer to sell all or any part of the Investor
Shares to any Person or Persons so as to bring the sale of such Investor Shares
to any of the Investors within the registration provisions of the Securities Act
or any state securities laws.

 

4.                                      Representations and Warranties of the
Investor.  Each Investor represents and warrants to, and agrees with the Company
and each other Investor, as set forth below.  Except for representations,
warranties and agreements that are expressly limited as to their date, each
representation, warranty and agreement is made as of the date hereof and as of
the Closing Date after giving effect to the transactions contemplated hereby:

 

(a)                                 Authority.  Such Investor has the requisite
power and authority to enter into, execute and deliver each Transaction
Agreement to which it will be a party as contemplated by this Agreement and,
subject to the Shareholder Approval, to perform its or his obligations hereunder
and thereunder and consummate the transactions contemplated hereby and thereby,
including the subscription for the Investor Shares.  Such Investor has taken all
necessary action required for the due authorization, execution, delivery and
performance by it or him of this Agreement, including the subscription for the
Investor Shares.

 

(b)                                 Execution and Delivery; Enforceability. 
Each Transaction Agreement to which such Investor is a party as contemplated by
this Agreement has been, or prior to its execution and delivery at the Closing
will be, duly and validly executed and delivered by such Investor, and each such
document constitutes, or will constitute, the valid and binding obligation of
such Investor, enforceable against such Investor in accordance with its terms
subject to (i) bankruptcy, insolvency, moratorium and other similar laws now or
hereafter in effect relating to or affecting creditors’ rights generally, and
(ii) general principles of equity (regardless of whether considered in a
proceeding at law or in equity).

 

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(c)                                  No Registration.  Such Investor understands
that the Investor Shares have not been registered under the Securities Act by
reason of a specific exemption from the registration provisions of the
Securities Act, the availability of which depends upon, among other things, the
bona fide nature of the investment intent and the accuracy of such Investor’s
representations as expressed herein or otherwise made pursuant hereto.

 

(d)                                 Investment Intent.  Except as provided in
Section 1(j) hereof, such Investor is acquiring its or his portion of the
Investor Shares for investment for its or his own account, not as a nominee or
agent, and not with the view to, or for resale in connection with, any
distribution thereof not in compliance with applicable securities laws, and such
Investor has no present intention of selling, granting any participation in, or
otherwise distributing the same, except in compliance with applicable securities
laws.

 

(e)                                  Securities Laws Compliance.  The Investor
Shares will not be offered for sale, sold or otherwise transferred by such
Investor except pursuant to a registration statement or in a transaction exempt
from, or not subject to, registration under the Securities Act and any
applicable state securities laws.

 

(f)                                   Sophistication.  Such Investor has such
knowledge and experience in financial and business matters that it or he is
capable of evaluating the merits and risks of its or his investment in the
Investor Shares being acquired hereunder.  Such Investor is a “qualified
institutional buyer” within the meaning of Rule 144A under the Securities Act or
an “accredited investor” within the meaning of Rule 501 of Regulation D under
the Securities Act.  Such Investor understands and is able to bear any economic
risks associated with such investment (including, without limitation, the
necessity of holding the Investor Shares for an indefinite period of time). 
Without derogating from or limiting the representations and warranties of the
Company, such Investor acknowledges that it or he has been afforded the
opportunity to ask questions and receive answers concerning the Company and to
obtain additional information that it or he has requested to verify the
information contained herein.

 

(g)                                  Legended Securities.  Such Investor
understands and acknowledges that upon the original issuance thereof, and until
such time as the same is no longer required under any applicable requirements of
the U.S. Securities Act or applicable state securities laws, the Investor Shares
shall be represented by a certificate bearing the following legend:

 

“THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”).  THE HOLDER
HEREOF, BY PURCHASING SUCH SECURITIES, AGREES FOR THE BENEFIT OF THE CORPORATION
THAT SUCH SECURITIES MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED ONLY PURSUANT
TO (1) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR (2) AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT.”

 

The foregoing legend shall be promptly removed from Investor Shares and the
Company shall issue, or cause to be issued, to an Investor a certificate for
such Investor Shares without such legend or any other legend, or, if so
requested by such Investor, by electronic delivery at the applicable balance
account at the Depository Trust Company (“DTC”), if one of the following
conditions is met: (a) such Investor Shares are eligible for resale pursuant to
Rule 144 of the

 

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Securities Act without regard to any volume limitations; (b) in connection with
a sale, assignment or other transfer of such Investor Shares, such Investor
provides the Company with an opinion of counsel, in a generally acceptable form
to the Company and its transfer agent, to the effect that such sale, assignment
or transfer of such Investor Shares may be made without registration under the
applicable requirements of the Securities Act and that the legend can be removed
from the Investor Shares; or (c) the Investor Shares are registered pursuant to
an effective registration statement for resale under the Securities Act
(including pursuant to the Initial Resale Registration Statement).

 

Any fees (with respect to the transfer agent or otherwise) associated with the
removal of such legend shall be borne by the Company.  Following the effective
date of the Initial Resale Registration Statement, or at such time as a legend
is no longer required for any Investor Shares, the Company will use its best
efforts to no later than three (3) trading days following the delivery by an
Investor to the Company or its transfer agent (with notice to the Company) of a
legended certificate representing such Investor Shares (endorsed or with stock
powers attached and otherwise in form necessary to effect the reissuance and/or
transfer) (such third trading day, the “Legend Removal Date”), deliver or cause
to be delivered to such Investor a certificate representing such Investor Shares
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 4(g).
Certificates for Investor Shares subject to legend removal hereunder may be
transmitted by the transfer agent to such Investor by crediting the account of
such Investor’s prime broker with DTC as directed by such Investor.

 

If the Company shall fail for any reason or for no reason to issue to an
Investor unlegended certificates by the Legend Removal Date, then, in addition
to all other remedies available to such Investor, if on or after the trading day
immediately following such three (3) trading day period, such Investor
purchases, or a broker through whom such Investor has sold Shares (a “Buy-In
Broker”) purchases (in an open market transaction or otherwise) Shares to
deliver in satisfaction of such sale in lieu of Investor Shares such Investor
anticipated receiving from the Company without any restrictive legend (a
“Buy-In”), then the Company shall, within three (3) business days after such
Investor’s request, honor its obligation to deliver to such Investor a
certificate or certificates without restrictive legends representing such
Investor Shares and pay cash to such Investor in an amount equal to the excess
(if any) of such Investor’s or Buy-In Broker’s total purchase price (including
brokerage commissions, if any) for the Shares so purchased over the product of
(i) such number of Shares, times (ii) the closing bid price on the Legend
Removal Date.

 

(h)                                 No Conflict.  The execution and delivery by
such Investor of each of the Transaction Agreements to which it or he is a party
and the compliance by such Investor with all of the provisions hereof and
thereof and the consummation of the transactions contemplated herein and therein
(including the subscription for and purchase of the Investor Shares by such
Investor) (i) will not conflict with, or result in a breach or violation of, any
of the terms or provisions of, or constitute a default under (with or without
notice or lapse of time, or both), or result, in the acceleration of, or the
creation of any lien under, any indenture, mortgage, deed of trust, loan
agreement or other material agreement or instrument to which such Investor is a
party or by which such Investor is bound or to which any of the property or
assets of such Investor is subject, (ii) will not result in any violation of the
provisions of the certificate of incorporation or

 

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bylaws or comparable organizational documents of such Investor and (iii) will
not result in any material violation of, or any termination or material
impairment of any rights under, any law, rule or regulation, any license,
authorization, injunction, judgment, order, decree, rule or regulation of any
court or governmental agency or body having jurisdiction over such Investor or
any of its or his properties, except in any such case described in subclause
(i) for any conflict, breach, violation, default, acceleration or lien which has
not and would not reasonably be expected, individually or in the aggregate, to
prohibit, materially delay or materially and adversely impact such Investor’s
performance of its obligations under this Agreement.

 

(i)                                     Consents and Approvals.  No consent,
approval, authorization, order, registration, notice, filing, recording or
qualification of or with any court or governmental agency or body having
jurisdiction over such Investor or any of its or his properties is required for
the execution and delivery by such Investor of the Transaction Agreements to
which it or he is a party, performance by such Investor of its obligations
hereunder and thereunder and the consummation of the transactions contemplated
hereby and thereby, except for any consent, approval, authorization, order,
registration or qualification which, if not made or obtained, has not and would
not reasonably be expected, individually or in the aggregate, to prohibit,
materially delay or materially and adversely impact such Investor’s performance
of its or his obligations under this Agreement.

 

(j)                                    Arm’s Length.  Such Investor acknowledges
and agrees that the Company and each other Investor is acting solely in the
capacity of an arm’s length contractual counterparty to such Investor with
respect to the transactions contemplated hereby (including in connection with
determining the terms of the Rights Offering) and not as a financial advisor or
a fiduciary to or an agent of, such Investor.  Additionally, without derogating
from or limiting the representations and warranties of the Company, such
Investor is not relying on the Company for any legal, tax, investment,
accounting or regulatory matters in any jurisdiction.  Without derogating from
or limiting the representations and warranties of the Company, such Investor
shall consult with its or his own advisors concerning such matters and shall be
responsible for making its or his own independent investigation and appraisal of
the transactions contemplated hereby.

 

(k)                                 Share Ownership.  As of the date hereof,
based on the methodology for calculating shares beneficially owned pursuant to
Rules 13d-3 and 16a-1 of the Exchange Act, MFP beneficially owns 2,203,749
shares of Common Stock, Mill Road beneficially owns 415,680 shares of Common
Stock and Margolis beneficially owns no shares of Common Stock.

 

(l)                                     Information Furnished.  Information
relating to an Investor furnished to the Company in writing by such Investor
expressly for use in the SEC Transaction Documents (as defined below) will not
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 not
misleading.

 

5.                                      Covenants of the Company.  Without
derogating from the obligations of the Company set forth elsewhere in this
Agreement, the Company agrees with each Investor as set forth below.

 

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(a)                                 Registration Statements and Proxy Statement.

 

(i)                                     As promptly as practicable following the
date of this Agreement, but in no event more than ten (10) Business Days
following the date hereof, the Company shall prepare and file (x) a Rights
Offering Registration Statement, and (y) a preliminary proxy statement
soliciting the approval of the Company’s shareholders of the issuance of Shares
contemplated by this Agreement and consummation of the transactions contemplated
hereby pursuant to the rules of Nasdaq, which shall include a recommendation of
the Board of Directors that the shareholders vote to approve the issuance of
Shares contemplated by this Agreement, including in the Rights Offering and the
issuance of Investors Shares to each of the Investors as set forth herein (the
“Proxy Statement”).

 

(ii)                                  Within ten (10) Business Days following
the date on which the Company files the Rights Offering Registration Statement,
the Company shall prepare and file a resale registration statement on Form S-3,
registering offers and sales of Investor Shares by each of the Investors and any
Affiliated Purchasers pursuant to Rule 415 under the Securities Act (such
registration statement together with including all exhibits thereto and any
post-effective amendment thereto that becomes effective, the “Initial Resale
Registration Statement”).

 

(iii)                               The definitive Proxy Statement, the Rights
Offering Registration Statement and the Initial Resale Registration Statement
(the “SEC Transaction Documents”) when filed with the Commission shall be
substantially consistent in all material respects with the last forms of such
documents provided to each of MFP and Mill Road and their respective counsel to
review prior to the filing thereof.  The Company shall: (x) provide each of MFP
and Mill Road with a reasonable opportunity to review any SEC Transaction
Document prior to its filing with the SEC and shall duly consider in good faith
any comments of each of MFP and Mill Road and their respective counsel; (y)
advise each of MFP and Mill Road promptly of the time when each of the SEC
Transaction Documents has been filed or when the Rights Offering Registration
Statement or the Initial Resale Registration Statement has become effective or
any Rights Offering Prospectus or Rights Offering Prospectus supplement has been
filed and shall furnish each of MFP and Mill Road with copies thereof; and
(z) advise each of MFP and Mill Road promptly after it receives notice of any
comments or inquiries by the Commission (and furnish each of MFP and Mill Road
with copies of any correspondence related thereto), of the issuance by the
Commission of any stop order or of any order preventing or suspending the use of
any SEC Transaction Document, of the initiation or threatening of any proceeding
for any such purpose, or of any request by the Commission for the amending or
supplementing any SEC Transaction Document or for additional information, and in
each such case, provide each of MFP and Mill Road with a reasonable opportunity
to review any such comments, inquiries, request or other communication from the
Commission and to review any amendment or supplement to any SEC Transaction
Document before any filing with the Commission, and to duly consider in good
faith any comments consistent with this Agreement and any other reasonable
comments of each of MFP and Mill Road and their respective counsel and in the
event of the issuance of any stop order or of any order preventing or suspending
the use of an

 

18

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SEC Transaction Document or suspending any such qualification, to use promptly
its reasonable best efforts to obtain its withdrawal.

 

(iv)                              The Company shall use its reasonable best
efforts to have the Proxy Statement, the Rights Offering Registration Statement
and the Initial Resale Registration Statement cleared or declared effective, as
the case may be, by the Commission as promptly as practicable after such
filing.  The Company shall take all action as may be reasonably necessary or
advisable so that the Rights Offering and the issuance and sale of the Investor
Shares and the other transactions contemplated by this Agreement will be
effected in accordance with the applicable provisions of the Securities Act and
the Exchange Act and any state or foreign securities or Blue Sky laws.  The
Company shall maintain the effectiveness of the Initial Resale Registration
Statement until the first date as of which all the Investor Shares included in
the Initial Resale Registration Statement have been sold.

 

(v)                                 The Company shall cause the Proxy Statement
to be mailed to the Company’s shareholders (or shall comply with the notice-only
delivery procedures of the Securities and Exchange Commission) as promptly as
practicable after it is cleared by the Commission.  Subject to applicable law,
the Company shall take all action necessary, in accordance with and subject to
the Florida Business Corporation Act and its articles of incorporation and
by-laws, to duly call, give notice of and convene and hold a special meeting of
its shareholders to consider and vote upon the issuance of the Offered Shares
and the Investor Shares contemplated hereby (the “Meeting”) as promptly as
practicable, to the extent required by applicable law or regulations or the
rules of the Nasdaq (the “Shareholder Approval”).  The Company shall use its
reasonable best efforts to obtain the requisite Shareholder Approval of this
Agreement and the transactions contemplated hereby at such Meeting, including
the issuance of the Offered Shares and the Investor Shares contemplated hereby.

 

(vi)                              If at any time prior to the Expiration Time,
any event occurs as a result of which the Investment Decision Package, as then
amended or supplemented, would include an untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, or if it shall be necessary to amend or supplement the Investment
Decision Package to comply with applicable law, the Company will promptly notify
each of the Investors of any such event and prepare an amendment or supplement
to the Investor Decision Package that is reasonably acceptable in form and
substance to each Investor that will correct such statement or omission or
effect such compliance.

 

(b)                                 Listing.  The Company shall use its
reasonable best efforts to list and maintain the listing of the Rights and the
Offered Shares on The Nasdaq Global Select Market.

 

(c)                                  Voting and Standstill.  The Company is
herewith entering into a Voting and Standstill Agreement (the “Voting and
Standstill Agreement”) among the Company and each of

 

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Andrew M. Saul and Thomas E. Reinckens, pursuant to which each party (other than
the Company) agrees (i) to vote any and all of their respective Shares (and to
cause all Shares held by any of their Affiliates to be voted) in favor of the
issuances of the Offered Shares in the Rights Offering and the issuance of the
Investor Shares to each of the Investors, as contemplated hereby and (ii) that
such party will not transfer, sell or dispose of, and will cause his affiliates
not to transfer, sell or dispose of, any Shares prior to the date that is thirty
(30) days following the earlier of (i) the Closing Date and (ii) the Termination
Date.

 

(d)                                 Reinckens Resignation.  The Company agrees
that any severance, payments or other benefits to be paid to Thomas E. Reinckens
in connection with the termination of his employment with the Company shall be
made in accordance with the Separation and General Release Agreement entered
into with him on the date hereof and may not be accelerated.  The Company agrees
that such termination of employment shall be effective as of the date of the
public announcement of the transactions contemplated hereby.  The Company shall
use its reasonable best efforts to take or cause to be taken all actions, and do
or cause to be done all things, reasonably necessary, proper or advisable in
connection with the foregoing.

 

(e)                                  Margolis Employment Agreement. The Company
is herewith entering into an employment agreement with Jay Margolis with respect
to his employment as Chief Executive Officer of the Company which may be
terminated by Mr. Margolis in accordance with the terms thereof in the event
that the Shareholder Approval has not been received or if the issuances of
Shares contemplated by this Agreement have not closed on or before July 4, 2013.

 

(f)                                   Registration Rights Agreement.  At the
Closing, the Company shall enter into the Registration Rights Agreement among
the Company, MFP and Mill Road pursuant to which the Company agrees to register
all of the Shares held by MFP and Mill Road with the Commission, in accordance
with the terms thereof.

 

(g)                                  Voting Agreement.  The Company is herewith
entering into a Voting Agreement (the “Voting Agreement”) among the Company, MFP
and Mill Road, setting forth certain agreements of the parties on certain
matters related to the governance of the Company, including the nomination and
election of persons to serve on the Board of Directors, in accordance with the
terms thereof.

 

(h)                                 Annual Meeting.  The Company shall hold its
2013 Annual Meeting of shareholders of the Company only following the earlier of
(i) the Closing Date and (ii) the Termination Date, subject to applicable law.

 

(i)                                     Company Expenses.  The Company will pay
all of its expenses associated with the Rights Offering, issuance of the
Investor Shares to each of the Investors as set forth herein, preparation,
negotiation and execution of all Transaction Agreements and the transactions
contemplated hereby and thereby, including, without limitation, filing and
printing fees, fees and expenses of any subscription and information agents, its
counsel and accounting fees and expenses, costs associated with the Rights
Offering Registration Statement, the Initial Resale Registration Statement, the
Proxy Statement, the Meeting and with clearing the Shares for sale under
applicable state securities laws and listing fees.

 

20

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(j)                                    Reasonable Best Efforts.  The Company
shall use its reasonable best efforts to take or cause to be taken all actions,
and do or cause to be done all things, reasonably necessary, proper or advisable
on its or their part under this Agreement and applicable laws to cooperate with
each of the Investors and to consummate and make effective the transactions
contemplated by this Agreement, including:

 

(i)                                     preparing and filing as promptly as
practicable all documentation to effect all necessary notices, reports and other
filings and to obtain as promptly as practicable all consents, registrations,
approvals, permits and authorizations necessary or advisable to be obtained from
any third party or governmental entity;

 

(ii)                                  defending any lawsuits or other actions or
proceedings, whether judicial or administrative, challenging this Agreement or
any other agreement contemplated by this Agreement or the consummation of the
transactions contemplated hereby and thereby, including seeking to have any stay
or temporary restraining order entered by any court or other governmental entity
vacated or reversed; and

 

(iii)                               executing, delivering and filing, as
applicable, any additional ancillary instruments or agreements reasonably
necessary to consummate the transactions contemplated by this Agreement and to
fully carry out the purposes of this Agreement and the transactions contemplated
hereby and thereby.

 

(k)                                 No Incurrence of Indebtedness.  Without the
prior written consent of each of MFP and Mill Road, the Company shall not incur
any Indebtedness prior to the Closing.

 

(l)                                     Rule 144.  The Company will use its
reasonable best efforts to timely file all reports and other documents required
to be filed by it under the Securities Act and the Exchange Act and the
rules and regulations adopted by the Securities and Exchange Commission
thereunder (or, if the Company is not required to file such reports, it will,
upon the request of any Investor, make publicly available such information as
necessary to permit sales pursuant to Rule 144 of the Securities Act), and will
use reasonable best efforts to take such further action as any Investor may
reasonably request, all to the extent required from time to time to enable each
Investor to sell Investor Shares without registration under the Securities Act
within the limitation of the exemptions provided by Rule 144 of the Securities
Act.

 

6.                                      Additional Covenants of each of the
Investors.  Without derogating from the obligations of each Investor set forth
elsewhere in this Agreement, each Investor agrees with the Company:

 

(a)                                 Information.  Such Investor shall provide
the Company with such information as the Company reasonably requests regarding
such Investor for inclusion in the SEC Transaction Documents.

 

(b)                                 Cooperation.  Such Investor shall cooperate
with the Company in taking all action necessary to consummate the transactions
contemplated by this Agreement, including executing, delivering and filing, as
applicable, any additional ancillary instruments or agreements necessary to
consummate the transactions contemplated by this Agreement and to fully carry
out the purposes of this Agreement and the transactions contemplated hereby and
thereby.

 

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7.                                      Voting of Shares at the Meeting.  Each
of MFP and Mill Road shall vote (or cause to be voted) all Shares held
beneficially or of record by such Investor as of the Record Date in favor of the
issuances of the Offered Shares in the Rights Offering and the issuance of the
Investor Shares to each of the Investors as contemplated hereby.

 

8.                                      Conditions to the Obligations of the
Parties.

 

(a)                                 The obligations of each of the Investors
hereunder to consummate the transactions contemplated hereby shall be subject to
the satisfaction prior to the Closing Date of each of the following conditions
(which may be waived in whole or in part by each of MFP and Mill Road, but only
as to the party so waiving, in their sole discretion):

 

(i)                                     Rights Offering Registration Statement
Effectiveness.  The Rights Offering Registration Statement shall have been
declared effective by the Commission and shall continue to be effective and no
stop order shall have been entered by the Commission with respect thereto.

 

(ii)                                  Rights Offering.  The Rights Offering
shall have been conducted in all material respects in accordance with this
Agreement and the Expiration Time shall have occurred.

 

(iii)                               Gross Proceeds.  The gross proceeds to be
received by the Company for the issuance and sale of the Offered Shares in the
Rights Offering plus the issuance and sale of the Investor Shares to each of the
Investors (including any Affiliated Purchasers) party to this Agreement
immediately prior to the Closing shall, in the aggregate, be equal to or greater
than the Aggregate Offering Amount.

 

(iv)                              Purchase or Satisfaction Notice.  Each of the
Investors shall have timely received either a Purchase Notice from the Company
on the Determination Date, certifying the number of Unsubscribed Shares to be
purchased pursuant to the Backstop Commitments, or a Satisfaction Notice.

 

(v)                                 Consents.  All other governmental and third
party notifications, filings, consents, waivers and approvals required for the
consummation of the transactions contemplated by this Agreement shall have been
made or received.

 

(vi)                              Shareholder Approval.  The Shareholder
Approval required for the consummation of the transactions contemplated by this
Agreement shall have been received.

 

(vii)                           No Legal Impediment to Issuance.  No statute,
rule, regulation or order shall have been enacted, adopted or issued by any
federal, state or foreign governmental or regulatory authority, and no judgment,
injunction, decree or order of any federal, state or foreign court shall have
been issued that prohibits the issuance of the Offered Shares in the Rights
Offering, the issuance of the Investor Shares to each of the Investors or the
consummation of the transactions contemplated by this Agreement.

 

22

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(viii)                        Good Standing.  Each of the Investors shall have
received on and as of the Closing Date satisfactory evidence of the good
standing of the Company in the State of Florida, in writing or any standard form
of telecommunication from the appropriate governmental authorities of such
jurisdiction.

 

(ix)                              Representations and Warranties.  The
representations and warranties of Company contained in this Agreement shall be
true and correct in all material respects (disregarding all qualifications and
exceptions contained therein relating to materiality, Material Adverse Effect or
similar qualifications) other than representations and warranties contained in
Sections 3(d) and 3(e), which shall be true and correct in all respects).

 

(x)                                 Covenants.  The Company shall have performed
and complied in all material respects with all of its respective covenants and
agreements contained in this Agreement and in any other document delivered
pursuant to this Agreement (including in any Transaction Agreement) through the
Closing Date.

 

(xi)                              Certificates.  The Company shall have
furnished to each of the Investors a certificate, dated the Closing Date, of an
officer of the Company, on behalf of the Company, confirming the matters set
forth in subsections (ix) and (x).

 

(xii)                           Fees and Expenses.  The Company shall have paid
all fees, costs and expenses payable to each of the Investors pursuant to
Section 2.

 

(xiii)                        No Material Adverse Effect.  Since the date of
this Agreement, there shall not have occurred any changes or events that,
individually or in the aggregate would reasonably be expected to result in a
Material Adverse Effect.

 

(xiv)                       No Market Adverse Event.  There shall not have
occurred (i) a material adverse change in the financial markets in the United
States, any outbreak of hostilities or escalation thereof or other calamity or
crisis or any change or development involving a prospective change in national
or international political, financial or economic conditions, or (ii) a
suspension or material limitation on trading, or minimum or maximum prices for
trading have been fixed, or maximum ranges for prices have been required, by any
securities exchange or by such system or by order of the SEC, the Nasdaq or any
other governmental authority, or (iii) a material disruption has occurred in
commercial banking or securities settlement or clearance services in the United
States, or (iv) if a banking moratorium has been declared by either Federal or
New York authorities.

 

(xv)                          Indebtedness.  Except to the extent approved in
advance in writing by each of MFP and Mill Road, the Company shall not have any
Indebtedness in excess of the amounts set forth in the Company’s Quarterly
Report on Form 10-Q for the period ended September 29, 2012, as filed with the
Commission on November 9, 2012.  For the purposes of this agreement,
“Indebtedness” shall mean:  all indebtedness for borrowed money or capital lease
obligations that is required to be classified as debt in Company’s financial
statements in accordance with GAAP,

 

23

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and shall not include indebtedness under securitization and other accounts
receivable factoring and financing programs.

 

(xvi)                       Nasdaq.  The Company shall have complied with the
requirements of the Nasdaq Stock Market, Inc., for the listing of the Rights and
the Offered Shares to be issued in the Rights Offering on The Nasdaq Global
Select Market.

 

(b)                                 The obligation of the Company to consummate
the Rights Offering and to issue and sell the Investor Shares are subject to the
following conditions (which may be waived in whole or in part by the Company in
its sole discretion), provided that the failure of a condition set forth in
Sections 8(b)(iv) to be satisfied may not be asserted by the Company if such
failure results from a breach by the Company of an obligation hereunder:

 

(i)                                     No Legal Impediment to Issuance.  No
statute, rule, regulation or order shall have been enacted, adopted or issued by
any federal, state or foreign governmental or regulatory authority, and no
judgment, injunction, decree or order of any federal, state or foreign court
shall have been issued that prohibits the issuance of the Offered Shares in the
Rights Offering, the issuance of the Investor Shares to each of the Investors or
the consummation of the transactions contemplated by this Agreement.

 

(ii)                                  Representations and Warranties.  The
representations and warranties of each Investor, each Affiliated Purchaser
contained in this Agreement or pursuant to Section 1(j) shall be true and
correct in all material respects (disregarding all qualifications and exceptions
contained therein relating to materiality, Material Adverse Effect or similar
qualifications)  other than such representations and warranties contained in
Sections 4(b) and 4(c), which shall be true and correct in all respects).

 

(iii)                               Covenants.  Each Investor shall have
performed and complied in all material respects with all of its or his covenants
and agreements contained in this Agreement and in any other document delivered
pursuant to this Agreement (including in any Transaction Agreement) through the
Closing Date.

 

(iv)                              Rights Offering.  The Rights Offering shall
have been conducted in all material respects in accordance with this Agreement
and the Expiration Time shall have occurred.

 

(v)                                 Rights Offering Registration Statement
Effectiveness.  The Rights Offering Registration Statement shall have been
declared effective by the Commission and shall continue to be effective and no
stop order shall have been entered by the Commission with respect thereto.

 

(vi)                              Shareholder Approval.  The Shareholder
Approval required for the consummation of the transactions contemplated by this
Agreement has been received.

 

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9.                                      Indemnification and Contribution.

 

(a)                                 Whether or not the Rights Offering, the
issuance of the Investor Shares to each of the Investors or the other
transactions contemplated hereby are consummated or this Agreement is
terminated, the Company (in such capacity, the “Indemnifying Party”) shall
indemnify and hold harmless each Investor and each Affiliated Purchaser, their
respective Affiliates and their respective officers, directors, members,
managers, partners, employees, agents, advisors and controlling persons (each,
an “Indemnified Person”) from and against any and all losses, claims, damages,
liabilities, amounts paid in settlement and reasonable expenses, joint or
several (“Losses”) incurred by such Indemnified Person or to which any such
Indemnified Person may become subject arising out of or in connection with any
claim, challenge, litigation, investigation or proceeding (“Proceedings”)
arising out of or relating to the Rights Offering, this Agreement or the other
Transaction Documents, the Rights Offering Registration Statement, any
Preliminary Rights Offering Prospectus, the Rights Offering Prospectus, any
Issuer Free Writing Prospectus, the Investment Decision Package, any amendment
or supplement thereto or the transactions contemplated by any of the foregoing
and shall reimburse such Indemnified Persons for any reasonable legal fees and
expenses or other out-of-pocket expenses incurred in connection with
investigating, responding to or defending any of the foregoing; provided that
the foregoing indemnification will not apply to Losses to the extent that they
resulted from (a) gross negligence or willful misconduct on the part of such
Indemnified Person or (b) statements or omissions in the Rights Offering
Registration Statement, any Preliminary Rights Offering Prospectus, the Rights
Offering Prospectus, any Issuer Free Writing Prospectus or any amendment or
supplement thereto made in reliance upon or in conformity with information
relating to such Indemnified Person furnished to the Company in writing by or on
behalf of such Indemnified Person expressly for use in the Rights Offering
Registration Statement, any Rights Offering Preliminary Prospectus, the Rights
Offering Prospectus, any Issuer Free Writing Prospectus or any amendment or
supplement thereto.  If for any reason the foregoing indemnification is
unavailable to any Indemnified Person (except as set forth in the proviso to the
immediately preceding section) or insufficient to hold it harmless, then the
Indemnifying Party shall contribute to the amount paid or payable by such
Indemnified Person as a result of such Losses in such proportion as is
appropriate to reflect not only the relative benefits received by the
Indemnifying Party on the one hand and such Indemnified Person on the other hand
but also the relative fault of the Indemnifying Party on the one hand and such
Indemnified Person on the other hand as well as any relevant equitable
considerations.

 

(b)                                 Promptly after receipt by an Indemnified
Person of notice of the commencement of any Proceedings with respect to which
the Indemnified Person may be entitled to indemnification hereunder, such
Indemnified Person will, if a claim is to be made hereunder against the
Indemnifying Party in respect thereof, notify the Indemnifying Party in writing
of the commencement thereof; provided that the omission so to notify the
Indemnifying Party will not relieve the Indemnifying Party from any liability
that it may have hereunder except to the extent it has been materially
prejudiced by such failure.  In case any such Proceedings are brought against
any Indemnified Person and it notifies the Indemnifying Party of the
commencement thereof, the Indemnifying Party will be entitled to participate
therein, and, to the extent that it may elect by written notice delivered to
such Indemnified Person, to assume the defense thereof, with counsel reasonably
satisfactory to such Indemnified Person; provided that if the defendants in any
such Proceedings include both such Indemnified Person and the Indemnifying Party
and such Indemnified Person shall have concluded that there may be legal
defenses available to it that are different from or additional to those
available to the Indemnifying Party, such

 

25

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Indemnified Person shall have the right to select separate counsel, which
selection shall be subject to the reasonable approval of the Indemnifying Party
(it being understood and agreed that each of Skadden, Arps, Slate, Meagher &
Flom LLP and Foley Hoag LLP are approved), to assert such legal defenses and to
otherwise participate in the defense of such Proceedings on behalf of such
Indemnified Person.  Upon receipt of notice from the Indemnifying Party to such
Indemnified Person of its election so to assume the defense of such Proceedings
and approval by such Indemnified Person of counsel, the Indemnifying Party shall
not be liable to such Indemnified Person for expenses incurred by such
Indemnified Person thereafter in connection with the defense thereof (other than
reasonable costs of investigation) unless (i) such Indemnified Person shall have
employed separate counsel in connection with the assertion of legal defenses in
accordance with the proviso to the preceding sentence (it being understood,
however, that the Indemnifying Party shall not be liable for the expenses of
more than one firm of counsel, plus local counsel, in any jurisdiction
representing the Indemnified Person), (ii) the Indemnifying Party shall not have
employed counsel reasonably satisfactory to such Indemnified Person to represent
such Indemnified Person within a reasonable time after notice of commencement of
the Proceedings or (iii) the Indemnifying Party shall have authorized in writing
the employment of counsel for such Indemnified Person.

 

(c)                                  The Indemnifying Party shall not be liable
for any settlement of any Proceedings effected without its written consent
(which consent shall not be unreasonably withheld, conditioned or delayed).  If
any settlement of any Proceeding is consummated with the written consent of the
Indemnifying Party or if there is a final judgment for the plaintiff in any such
Proceedings, the Indemnifying Party agrees to indemnify and hold harmless each
Indemnified Person from and against any and all Losses by reason of such
settlement or judgment in accordance with, and subject to the limitations of,
the provisions of this Section 9.  The Indemnifying Party shall not, without the
prior written consent of an Indemnified Person (which consent shall not be
unreasonably withheld, conditioned or delayed), effect any settlement of any
pending or threatened Proceedings in respect of which indemnity has been sought
hereunder by such Indemnified Person unless (i) such settlement includes an
unconditional release of such Indemnified Person in form and substance
satisfactory to such Indemnified Person from all liability on the claims that
are the subject matter of such Proceedings and (ii) such settlement does not
include any statement as to or any admission of fault, culpability or a failure
to act by or on behalf of any Indemnified Person.

 

(d)                                 Given that an Indemnified Person may be
entitled to indemnification (a “Jointly Indemnifiable Claim”) from both the
Company, pursuant to this Agreement, and from any other Person, whether pursuant
to applicable law, any indemnification agreement, the organizational documents
of such Person or otherwise (the “Indemnitee-Related Entities”), the Company
acknowledges and agrees that the Company shall be fully and primarily
responsible for the payment to the Indemnified Person in respect of
indemnification and advancement of expenses in connection with any such Jointly
Indemnifiable Claim, pursuant to and in accordance with the terms of this
Agreement, irrespective of any right of recovery the Indemnified Person may have
from the Indemnitee-Related Entities.  Under no circumstance shall the Company
be entitled to any right of subrogation or contribution by the
Indemnitee-Related Entities and no right of recovery the Indemnified Person may
have from the Indemnitee-Related Entities shall reduce or otherwise alter the
rights of the Indemnified Person or the obligations of the Company hereunder. 
In the event that any of the Indemnitee-Related Entities shall make any payment
to the

 

26

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Indemnified Person in respect of indemnification or advancement of expenses with
respect to any Jointly Indemnifiable Claim, the Indemnitee-Related Entity making
such payment shall be subrogated to the extent of such payment to all of the
rights of recovery of the Indemnified Person against the Company, and the
Indemnified Person shall execute all papers reasonably required and shall do all
things that may be reasonably necessary to secure such rights, including the
execution of such documents as may be necessary to enable the Indemnitee-Related
Entities effectively to bring suit to enforce such rights.  Each of the
Indemnitee-Related Entities shall be third-party beneficiaries with respect to
this Section 9(d), entitled to enforce this Section 9(d) against the Company as
though each such Indemnitee-Related Entity were a party to this Agreement.

 

10.                               Survival of Representations and Warranties. 
The representations and warranties made in this Agreement will survive the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby notwithstanding any investigation at any time
made by or on behalf of any party hereto until the date that is one year after
the Closing Date and the covenants shall survive in accordance with their
specific terms; provided, however, the representations and warrants contained in
Sections 3(b), (c), (d), (e) and (g) shall survive indefinitely.

 

11.                               Termination.  This Agreement may be terminated
and the transactions contemplated hereby may be abandoned prior to the Closing
Date:

 

(a)                                 by mutual written consent of the Company, on
the one hand, and both of MFP and Mill Road, on the other hand;

 

(b)                                 by each of the Investors with respect to
such Investor (without the consent of the Company or any other Investor):

 

(i)                                     if there has been a breach of any
covenant or a breach of any representation or warranty of the Company, which
breach would cause the failure of any condition precedent set forth in
Section 8(a), provided, that any such breach of a covenant or representation or
warranty is not capable of cure on or prior to July 4, 2013;

 

(ii)                                  upon the occurrence of any event which
results in a failure to satisfy any of the conditions set forth in Section 8(a),
which failure is not capable of cure on or prior to July 4, 2013;

 

(iii)                               if the Rights Offering Registration
Statement has not been declared effective by the Commission and the Rights
Offering Commencement Date has not occurred by July 4, 2013;

 

(iv)                              if any other Investor terminates this
Agreement pursuant to this Section 11(b); or

 

(v)                                 after July 4, 2013; provided, that the
Closing Date has not occurred by such date.

 

27

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(c)                                  by the Company:

 

(i) if there has been a breach of any covenant or a breach of any representation
or warranty of any of the Investors, which breach would cause the failure of any
condition precedent set forth in Section 8(b), provided, that any such breach of
a covenant or representation or warranty is not capable of cure on or prior to
July 4, 2013; or

 

(ii) upon the occurrence of any event which results in a failure to satisfy any
of the conditions set forth in Section 8(b), which failure is not capable of
cure on or prior to July 4, 2013.

 

(d)                                 If any Investor terminates this Agreement
with respect to itself pursuant to Section 11(b), each other Investor who does
not also elect to terminate the Agreement with respect to itself pursuant to
Section 11(b) (the “Remaining Investors”) and the Company shall negotiate in
good faith for a period of ten (10) Business Days to secure an alternative
source of capital for the Company from a source reasonably acceptable to such
Investor and the Company (an “Alternative Capital Source”); provided, that
nothing in this paragraph shall be deemed to (i) preclude any Investor from
electing to terminate the Agreement with respect to itself pursuant to
Section 11(b) at any time or (ii) require any Remaining Investor or the Company
to enter into a definitive agreement with any Person relating to an Alternative
Capital Source; provided, further, that each Remaining Investor and the Company
shall have the right to terminate this Agreement in the event that each of the
Remaining Investors and the Company shall have not entered into a definitive
agreement relating to an Alternative Capital Source upon the expiration of such
ten (10) Business Day period.

 

(e)                                  Any Investor desiring to terminate this
Agreement pursuant to Section 11(b) shall give written notice of such
termination to the Company and each other Investor.  For the purpose of this
Agreement, “Termination Date” means the later of (i) the date on which this
Agreement is terminated pursuant to Section 11(a) or (ii) the date on which each
remaining Investor that is party to this Agreement terminates this Agreement
pursuant to Section 11(b).

 

(f)                                   If this Agreement is terminated, provided
that there was no breach of any representations, warranties or covenants in this
Agreement by any of the Investors at the date of termination which breach had
materially delayed or materially or adversely impacted any Investor’s or the
Company’s performance of their respective obligations under this Agreement, the
Company shall pay to each of the Investors any Transaction Expenses due and
payable hereunder that have not been paid theretofore. Payment of the amounts
due under this Section 11(d) will be made no later than the close of business on
the third (3rd) Business Day following the date of such termination by wire
transfer of immediately available funds in U.S. dollars to an account or
accounts specified by each Investor to the Company.  The provision for the
payment of the Transaction Expenses is an integral part of the transactions
contemplated by this Agreement and without this provision the Investors would
not have entered into this Agreement.

 

(g)                                  Upon termination under this Section 11, all
rights and obligations of the parties under this Agreement shall terminate
without any liability of any party to any other party except that (x) nothing
contained herein shall release any party hereto from liability for any willful
breach and (y) the covenants and agreements made by the parties herein in
Section 2, and Sections 9 through 17 will survive indefinitely in accordance
with their terms.

 

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12.                               Notices.  All notices and other communications
in connection with this Agreement will be in writing and will be deemed given
(and will be deemed to have been duly given upon receipt) if delivered
personally, sent via electronic transmission or facsimile (with confirmation),
mailed by registered or certified mail (return receipt requested) or delivered
by an express courier (with confirmation) to the parties at the following
addresses (or at such other address for a party as will be specified by like
notice):

 

(a)                                 If to:

 

Cache, Inc.
1440 Broadway

New York, New York 10018
Attention:  Chief Executive Officer and Chief Financial Officer
Fax: 212-764-2082

 

with a copy (which shall not constitute notice) to:

 

Schulte Roth & Zabel LLP

919 Third Avenue

New York, NY 10022

Attention: Michael R. Littenberg

Fax: (212) 593-5955

Email:  michael.littenberg@srz.com

 

(b)                                 If to:

 

MFP Partners, L.P.

c/o MFP Investors LLC

667 Madison Avenue, 25th Floor

Attention: Timothy E. Ladin

Fax: (212) 752-7265

Email:  tladin@mfpllc.com

 

with a copy (which shall not constitute notice) to:

 

Skadden, Arps, Slate, Meagher & Flom LLP
One Rodney Square
P.O. Box 636
Wilmington, DE 19899
Fax:  (302) 651-3001
Attention:  Allison Land

Email: allison.land@skadden.com

 

(c)                                  If to:

 

Mill Road Capital, L.P.

382 Greenwich Avenue

Suite One

Greenwich, CT 06830

Attention: Charles Goldman

Email: cgoldman@millroadcapital.com

 

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with a copy (which shall not constitute notice) to:

 

Foley Hoag LLP

155 Seaport Blvd.

Boston, MA 02210

Attn: Peter M. Rosenblum

Fax: 617-832-7000

Email: PMR@foleyhoag.com

 

(d)                                 If to:

 

Jay Margolis

c/o Cache, Inc.
1440 Broadway

New York, New York 10018

Email: Jay@JayMMargolis.com

 

with a copy (which shall not constitute notice) to:

 

Mintz & Gold LLP

470 Park Avenue South

New York, NY 10016

Attn: Harvey Horowitz

Fax: 212-696-1231

Email: horowitz@mintzandgold.com

 

13.                               Assignment; Third Party Beneficiaries. 
Neither this Agreement nor any of the rights, interests or obligations under
this Agreement may be assigned by any of the parties (whether by operation of
law or otherwise) without the prior written consent of the other parties, except
to an Affiliated Purchaser pursuant to Section 1(j).  Except as provided in
Section 9 with respect to the Indemnified Persons, this Agreement (including the
documents and instruments referred to in this Agreement) is not intended to and
does not confer upon any person other than the parties hereto any rights or
remedies under this Agreement.  Any Indemnified Persons shall be entitled to
enforce and rely on the provisions listed in the immediately preceding sentence
as if they were a party to this Agreement.

 

14.                               Prior Negotiations; Entire Agreement.  This
Agreement (including the agreements attached as exhibits to and the documents
and instruments referred to in this Agreement) constitutes the entire agreement
of the parties and supersedes all prior agreements, arrangements or
understandings, whether written or oral, between the parties with respect to the
subject matter

 

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of this Agreement, except that the parties hereto acknowledge that any
confidentiality agreements heretofore executed among the parties will continue
in full force and effect.

 

15.                               GOVERNING LAW; VENUE.  THIS AGREEMENT WILL BE
GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW
YORK.  EACH OF THE INVESTORS HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF,
AND VENUE IN, THE UNITED STATES COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND
WAIVE ANY OBJECTION BASED ON FORUM NON CONVENIENS.  EACH PARTY ACKNOWLEDGES AND
AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO
INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL
BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR
RELATING TO THIS AGREEMENT, OR THE BREACH, TERMINATION OR VALIDITY OF THIS
AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.  EACH PARTY
CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (B) EACH
SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER,
(C) EACH SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (D) EACH SUCH PARTY HAS
BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS IN THIS SECTION 15.

 

16.                               Counterparts.  This Agreement may be executed
in any number of counterparts, all of which will be considered one and the same
agreement and will become effective when counterparts have been signed by each
of the parties and delivered to the other party (including via facsimile or
other electronic transmission), it being understood that each party need not
sign the same counterpart.

 

17.                               Waivers and Amendments.  This Agreement may be
amended, modified, superseded, cancelled, renewed or extended, and the terms and
conditions of this Agreement may be waived, only by a written instrument signed
by all the parties or, in the case of a waiver, by the party waiving
compliance.  No delay on the part of any party in exercising any right, power or
privilege pursuant to this Agreement will operate as a waiver thereof, nor will
any waiver on the part of any party of any right, power or privilege pursuant to
this Agreement, nor will any single or partial exercise of any right, power or
privilege pursuant to this Agreement, preclude any other or further exercise
thereof or the exercise of any other right, power or privilege pursuant to this
Agreement.  The rights and remedies provided pursuant to this Agreement are
cumulative and are not exclusive of any rights or remedies which any party
otherwise may have at law or in equity.

 

18.                               Adjustment to Shares.  If, prior to the
Closing Date, the Company effects a reclassification, stock split (including a
reverse stock split), stock dividend or distribution, recapitalization, merger,
issuer tender or exchange offer, or other similar transaction with respect to
any shares of its capital stock, references to the numbers of such shares and
the prices

 

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therefore shall be equitably adjusted to reflect such change and, as adjusted,
shall, from and after the date of such event, be subject to further adjustment
in accordance herewith.

 

19.                               Headings.  The headings in this Agreement are
for reference purposes only and will not in any way affect the meaning or
interpretation of this Agreement.

 

20.                               Publicity.  The Company and each of MFP and
Mill Road shall consult with each other prior to issuing any press releases (and
provide each other a reasonable opportunity to review and comment upon such
release prior to its public issuance) or otherwise making public announcements
with respect to the transactions contemplated by this Agreement; provided,
however, that in no event shall any such press release or other public
announcement name MFP or Mill Road without its prior written consent.  The
Company shall consult with each of MFP and Mill Road prior to making any filings
(and provide each of MFP and Mill Road a reasonable opportunity to review and
comment on such filings) with any third party or any governmental entity
(including any national securities exchange or interdealer quotation service)
with respect to the transactions contemplated by this Agreement, except as may
be required by law or by the request of any governmental entity.  Subject to the
Company’s foregoing obligations pursuant to this Section 20, nothing contained
in this Section 20 shall be interpreted to preclude the Company from making any
filing or disclosing any information in any filing, including with the
Securities and Exchange Commission, that the Company acting reasonably
determines is necessary or advisable; provided, however, that, if such filing
names MFP or Mill Road, the Company shall obtain the prior approval of MFP or
Mill Road, as applicable, and take into account any comments it may have thereto
unless, in the opinion of counsel to the Company, the filing is legally required
to be made as proposed by the Company without making changes to reflect such
comments.

 

[Signature Page Follows]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed
by their respective officers thereunto duly authorized, all as of the date first
written above.

 

 

CACHE, INC.

 

 

 

 

 

By:

/s/ Margaret Feeney

 

Name: Margaret Feeney

 

Title: EVP/CFO

 

 

 

MFP PARTNERS, L.P.

 

By:

MFP Investors LLC,

 

 

its General Partner

 

 

 

By:

/s/ Timothy Ladin

 

Name: Timothy Ladin

 

Title: General Counsel

 

 

 

MILL ROAD CAPITAL, L.P.

 

By:

Mill Road Capital GP LLC,

 

 

its General Partner

 

 

 

By:

/s/ Charles Goldman

 

Name: Charles Goldman

 

Title: Managing Director

 

 

 

/s/ Jay Margolis

 

Jay Margolis

 

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EXHIBIT A

 

FORM OF REGISTRATION RIGHTS AGREEMENT

 

This REGISTRATION RIGHTS AGREEMENT (“Agreement”), dated as of
                              , 2013, is made by and among Cache, Inc., a
Florida corporation (the “Company”), MFP Partners, L.P., a Delaware limited
partnership (“MFP”) and Mill Road Capital, L.P., a Delaware limited partnership
(“Mill Road” together with MFP, each an “Investor” and collectively, the
“Investors”).

 

W I T N E S S E T H

 

WHEREAS, the Company has entered into that certain Investment Agreement dated as
of February 4, 2013 (the “Investment Agreement”) among the Company, MFP, Mill
Road, and Jay Margolis, an individual resident of the State of New York
(“Margolis”); and

 

WHEREAS, the Company has conducted a rights offering (the “Rights Offering”) by
distributing, at no charge, to each holder of record (as of a record date
determined by the Board) of shares of the Company’s common stock, par value
$0.01 per share (the “Common Stock”), 0.374 transferable rights (the “Rights”),
for each share of Common Stock held by such shareholder, to purchase shares of
Common Stock which Rights, if exercised in full by each holder of record as of
such record date, would provide gross proceeds to the Company of $8.0 million
(the “Aggregate Offering Amount”);

 

WHEREAS, in order to facilitate the Rights Offering and pursuant to the
Investment Agreement, (i) MFP and Mill Road each agreed to subscribe for and
purchase, at a price per share equal to the exercise price per share of the
Rights issued in the Rights Offering (the “Exercise Price”), a number of shares
of Common Stock equal to its full pro rata share of the shares of Common Stock
offered in the Rights Offering (based on their respective ownership of the
Common Stock as of the date of the Investment Agreement), (ii) MFP, Mill Road
and Margolis each agreed, severally and not jointly, to subscribe for and
purchase, at the Exercise Price, upon expiration of the Rights Offering, a
specified portion (as specified in the Investment Agreement) of the shares of
Common Stock offered in the Rights Offering that were not purchased pursuant to
the exercise of Rights in the Rights Offering, and (iii) the Company agreed to
issue and sell to each of Mill Road and Margolis additional shares of Common
Stock at the Exercise Price in an amount sufficient to enable them to acquire an
aggregate of $3,500,000 and $1,000,000 of Common Stock, respectively, to the
extent that they were not able to acquire such amounts of Common Stock through
their respective purchases in subsection (i) and (ii) above, in each case, upon
the terms and subject to the conditions set forth in the Investment Agreement;

 

WHEREAS, pursuant to the Investment Agreement, the Company has committed to
prepare and file a resale registration statement on Form S-3, registering offers
and sales of the Shares acquired pursuant to the Investment Agreement by each of
MFP and Mill Road and any Affiliated Purchaser (as defined in the Investment
Agreement), pursuant to Rule 415 under the Securities Act (the “Initial Resale
Registration Statement”); and

 

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WHEREAS, in consideration of each Investor’s commitment to purchase certain
shares of Common Stock pursuant to, upon the terms, and subject to the
conditions set forth in the Investment Agreement, the Company has agreed, among
other things, and in addition to the preparation and filing of the Initial
Resale Registration Statement, to provide registration rights to the Investors
with respect to all shares of Common Stock owned or hereinafter acquired by the
Investors and their respective Affiliates (as defined below).

 

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

 

ARTICLE I

 

Certain Definitions

 

For purposes of this Agreement, the following terms shall have the following
meanings:

 

(a)                                 The term “Affiliate” means, with respect to
any Person, any other Person directly or indirectly controlling, controlled by,
or under common control with, such Person; provided that, for the purposes of
this definition, “control” (including, with correlative meanings, the terms
“controlled by” and “under common control with”), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise.

 

(b)                                 The term “Board” means the Board of
Directors of the Company.

 

(c)                                  The term “Commission” means the United
States Securities and Exchange Commission or any successor agency.

 

(d)                                 The term “Exchange Act” means the Securities
Exchange Act of 1934, as amended, and the rules and regulations promulgated
thereunder.

 

(e)                                  The term “Fair Market Value” means the fair
market value per share of the Common Stock as of a particular date determined
as:  (i) the average closing sales price per share of the Common Stock on the
national securities exchange on which the Common Stock is principally traded,
for the last five preceding dates on which there was a sale of such Common Stock
on such exchange; or (ii) if the shares of Common Stock are then traded in an
over-the-counter market, the average of the closing bid and asked prices for the
shares of Common Stock in such over-the-counter market for the last five
preceding dates on which there was a sale of such Common Stock in such market;
or (iii) if the shares of Common Stock are not then listed on a national
securities exchange or traded in an over-the-counter market, such value as the
Board, in its good faith judgment, shall determine.

 

(f)                                   The term “Person” (but not “person”) means
any individual, firm, corporation, partnership, limited liability company, trust
or other entity, and shall include any successor (by merger or otherwise) of
such entity.

 

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(g)                                  The term “Public Offering” means a public
offering of equity securities of the Company pursuant to an effective
registration statement under the Securities Act (other than (i) a registration
statement filed under Regulation A or on Form S-4 or any successor form or
(ii) a registration statement filed on Form S-8 or any successor form).

 

(h)                                 The term “Registrable Securities” means the
Shares, provided, however, that as to any particular Registrable Securities,
such securities shall cease to be Registrable Securities when (i) such
securities have been sold or otherwise transferred by the holder thereof
pursuant to an effective registration statement; or (ii) such securities are
sold in accordance with Rule 144 (or any successor provision) promulgated under
the Securities Act.

 

(i)                                     The term “Requisite Amount” means such
number of shares of Registrable Securities having an aggregate Fair Market Value
of $1,000,000.

 

(j)                                    The term “Securities Act” means the
Securities Act of 1933, as amended, and the rules and regulations promulgated
thereunder.

 

(k)                                 The term “Shares” means (i) all shares of
Common Stock owned immediately following the consummation of the transactions
contemplated by the Investment Agreement by each Investor and its Affiliates;
and (ii) any additional shares of Common Stock acquired by each Investor and its
Affiliates, in any manner after the date hereof.

 

ARTICLE II

 

Registration Rights

 

Section 2.01                                                     Demand
Registrations.

 

(a)                                 Requests for Registration.  At any time
after the date of this Agreement, subject to the conditions set forth herein,
each Investor shall be entitled to make, on its own behalf or on behalf of any
of its Affiliates, a written request of the Company (a “Demand”) for
registration under the Securities Act of all or any portion of the Registrable
Securities owned by such Investor (or such Investor’s Affiliates) (a “Demand
Registration”).  The Investor making such Demand (the “Demanding Investor”)
shall give written notice (a “Demand Notice”) to the Company and to the other
Investor specifying:  (i) the Demanding Investor’s intent to exercise a Demand;
(ii) the aggregate number of Registrable Securities requested to be registered,
provided that such Registrable Securities must have an aggregate Fair Market
Value of at least $2,000,000; and (iii) the intended method of distribution in
connection with such Demand Registration to the extent then known.  Within ten
(10) business days of receipt of a Demand Notice, the other Investor, should it
wish to participate in the Demand Registration, shall give written notice (a
“Demand Participation Notice”) to the Company and the Demanding Investor
specifying the aggregate number of Registrable Securities that such Investor, on
its own behalf or on behalf of any of its Affiliates, wishes to be included in
the Demand Registration.  Participation by such Investor in such Demand
Registration pursuant to a Demand Participation Notice shall not be counted as a
Demand of such Investor.  Subject to Section 2.01(f), the Company shall include
in the Demand Registration all Registrable Securities

 

3

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requested to be included in such Demand Registration by the Demanding Investor
and the other Investor, as set forth in the Demand Participation Notice.

 

(b)                                 Number of Demands.  Each Investor shall be
entitled to two (2) Demand Registrations.  For the avoidance of doubt, the
Initial Resale Registration Statement registering the Shares acquired by
Investors pursuant to the Investment Agreement shall not count as a Demand
Registration by either Investor.

 

(c)                                  Satisfaction of Obligations.  Subject to
the provisions of Section 2.04, a registration shall not be treated as a
permitted Demand for a Demand Registration until (i) the applicable registration
statement under the Securities Act has been filed with the Commission with
respect to such Demand Registration (which shall include any registration
statement that is not withdrawn by holders of Registrable Securities in the
circumstances contemplated by Section 2.04); and (ii) such registration
statement shall have been maintained continuously effective for a period of at
least one hundred eighty (180) days or, in the case of a registration statement
registering securities pursuant to Rule 415 under the Securities Act, until all
securities registered under such registration statement are sold.  For the
avoidance of doubt, notwithstanding any other provision hereof, the Initial
Resale Registration Statement shall not be deemed to be a Demand Registration
for any purpose and shall not satisfy the Company’s obligations pursuant to this
Section 2.01 with respect to Demand Registrations.

 

(d)                                 Availability of Short Form Registrations. 
The Company shall use its commercially reasonable efforts to comply with the
requirements for use of short form registration for the sale of Registrable
Securities under the Securities Act.

 

(e)                                  Restrictions on Demand Registrations.  The
Company shall not be obligated (i) in the case of a Demand Registration, to
maintain the effectiveness of a registration statement under the Securities Act
for a period of at least one hundred eighty (180) days or, in the case of a
registration statement registering securities pursuant to Rule 415 under the
Securities Act, until all securities registered under such Demand Registration
are sold; or (ii) to effect any Demand Registration requested by an Investor, in
each case, within ninety (90) days of the effective date of (A) a registration
in which such Investor, on its own behalf or on behalf of any of its Affiliates,
exercised “piggyback” rights pursuant to Section 2.02 hereof (provided that,
with respect to such a registration in which such piggyback rights were
exercised, such Investor was permitted to include in such registration at least
fifty percent (50%) of the Registrable Securities that such Investor and its
Affiliates sought to include therein) or (B) any other Demand Registration.  For
the avoidance of doubt, the effectiveness of the Initial Resale Registration
Statement shall not be deemed a registration for purposes of exceptions (A) or
(B) of this subsection above.  In addition, the Company shall be entitled to
postpone (upon written notice to each Investor) the filing or the effectiveness
of a registration statement in respect of a Demand (on one or more occasions),
provided that the aggregate number of days the Company shall be permitted to so
postpone, together with any and all days postponed in respect of a Shelf
Registration Statement pursuant to Section 2.03, shall not exceed an aggregate
of forty-five (45) days in any period of twelve (12) consecutive months, if the
Board determines in good faith and in its reasonable judgment that effecting the
Demand Registration in respect of such Demand would have a material adverse
effect on any proposal or plan by the Company to engage in any debt or equity
offering, material acquisition, or disposition of assets (other than in the
ordinary

 

4

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course of business) or any merger, consolidation, tender offer, or other similar
transaction.  In the event of a postponement by the Company of the filing or
effectiveness of a registration statement in respect of a Demand, the Demanding
Investor shall have the right to withdraw such Demand in accordance with
Section 2.04 hereof.

 

(f)                                   Participation in Demand Registrations. 
Except with the prior written consent of the Demanding Investor, the Company may
not include any securities to be sold for the Company’s account or for the
account of other Persons that are not holders of Registrable Securities, other
than the other Investor and its Affiliates, in a Demand Registration.  If, in
connection with a Demand Registration, any managing underwriter advises the
Company and the Demanding Investor that, in its opinion, the inclusion of all
the Registrable Securities and, if authorized pursuant to this Article II, other
securities of the Company, in each case, sought to be registered in connection
with such Demand Registration would adversely affect the marketability of the
Registrable Securities sought to be sold pursuant thereto, then the Company
shall include in the registration statement applicable to such Demand
Registration only such securities as the Company, the Demanding Investor, and
the other Investor are advised by such underwriter can be sold without such an
effect (the “Maximum Demand Number”), as follows and in the following order of
priority:

 

(i)                                     first, the number of Registrable
Securities sought to be registered by the Demanding Investor, on its own behalf
or on behalf of any of its Affiliates, pursuant to such Demand and the number of
Registrable Securities, if any, sought to be registered by the other Investor,
on its own behalf or on behalf of any of its Affiliates, pursuant to a Demand
Participation Notice; provided, however, that, in the event that the aggregate
number of Registrable Securities to be sold pursuant to this clause (i) exceeds
the Maximum Demand Number, then the number of Registrable Securities to be
registered by each of the Demanding Investor and the other Investor shall be
reduced pro rata in proportion to the number of Registrable Securities sought to
be registered by each such Investor such that the total number of Registrable
Securities to be registered equals the Maximum Demand Number; and

 

(ii)                                  second, and only if the number of
Registrable Securities to be included under clause (i) above is less than the
Maximum Demand Number, the number of securities sought to be included by the
Company, which in the aggregate, when added to the number of securities to be
included pursuant to clause (i) above, equals the Maximum Demand Number; and

 

(iii)                               third, and only if the number of Registrable
Securities to be included under clauses (i) and (ii) above is less than the
Maximum Demand Number, the number of securities sought to be sold for the
account of other Persons that the Company is obligated to register pursuant to
written contractual arrangements with such Persons, pro rata in proportion to
the number of securities sought to be sold by such Persons, which in the
aggregate, when added to the number of securities to be included pursuant to
clauses (i) and (ii) above, equals the Maximum Demand Number.

 

5

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(g)                                  Selection of Underwriters.  If the
Demanding Investor requests that such Demand Registration be an underwritten
offering, then the Demanding Investor shall select a nationally recognized
underwriter or underwriters to manage and administer such offering, such
underwriter or underwriters, as the case may be, to be subject to the approval
of the Company and the other Investor (to the extent such other Investor has
delivered a Demand Participation Notice), which approval shall not be
unreasonably withheld, conditioned or delayed.

 

(h)                                 Other Registrations.  If the Company has
received a Demand and if the applicable registration statement in respect of
such Demand has not been withdrawn or abandoned, the Company shall not file or
cause to be effected any other registration of any of its equity securities or
securities convertible or exchangeable into or exercisable for its equity
securities under the Securities Act (other than the preparation, filing,
effectiveness and maintenance of the Initial Resale Registration Statement, a
registration relating to the Company’s employee benefit plans, exchange offers
by the Company, or a merger or acquisition of a business or assets by the
Company, including, without limitation, a registration on Form S-4 or Form S-8
or any successor form), whether on its own behalf or at the request of any
holder or holders of such securities, until a period of at least ninety (90)
days has elapsed from the effective date of any Demand Registration, unless a
shorter period of time is approved by the Demanding Investor.  Notwithstanding
the foregoing, the Company shall be entitled to postpone any such Demand
Registration and may file or cause to be effected such other registration in
accordance with the terms of Section 2.01(e) hereof.  For the avoidance of
doubt, the effectiveness of the Initial Resale Registration Statement shall not
satisfy, limit, delay or reduce, the Company’s obligations pursuant to this
Section 2.01.

 

Section 2.02                                                     Piggyback
Registrations.

 

(a)                                 Right to Piggyback.  Whenever the Company
proposes to register any shares of its Common Stock or Common Stock held by any
stockholders of the Company under the Securities Act (other than the Initial
Resale Registration Statement, a registration under Regulation A or relating to
the Company’s employee benefit plans, exchange offers by the Company, or a
merger or acquisition of a business or assets by the Company, including, without
limitation, a registration on Form S-4 or Form S-8 or any successor form) (a
“Piggyback Registration”), the Company shall give each of the Investors prompt
written notice thereof (but not less than ten (10) business days prior to the
filing by the Company with the Commission of any registration statement with
respect thereto).  Such notice (a “Piggyback Notice”) shall specify the number
of securities proposed to be registered, the proposed date of filing of such
registration statement with the Commission, the proposed means of distribution,
the proposed managing underwriter or underwriters (if any and if known), and a
good faith estimate by the Company of the proposed minimum offering price of
such securities.  Upon the written request of an Investor, on its own behalf or
on behalf of any of its Affiliates, given to the Secretary of the Company within
five (5) business days of the receipt by such Investor of the Piggyback Notice
requesting that the Company include in such registration Registrable Securities
owned by such Investor or its Affiliates in an amount equal to or greater than
the Requisite Amount (which written request shall specify the number of
Registrable Securities intended to be disposed of by such Investor and its
Affiliates and the intended method of distribution thereof), the Company

 

6

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shall include in such registration all Registrable Securities with respect to
which the Company has received such written requests for inclusion, in
accordance with the terms hereof.

 

(b)                                 Priority on Piggyback Registrations.  If, in
connection with a Piggyback Registration, any managing underwriter (or, if such
Piggyback Registration is not an underwritten offering, a nationally recognized
independent underwriter selected by the Company) advises the Company and the
holders of the Registrable Securities to be included in such Piggyback
Registration, that, in its opinion, the inclusion of all the securities sought
to be included in such Piggyback Registration by the Company, by any Persons
other than the Investors who have sought to have shares registered thereunder
pursuant to rights to demand (other than pursuant to so-called “piggyback” or
other incidental or participation registration rights) such registration (such
demand rights, being “Other Demand Rights” and such other Persons, being “Other
Demanding Sellers”), or by any holders of securities (including the Investors)
seeking to sell such securities in such Piggyback Registration (“Piggyback
Sellers”), in each case, if any would materially adversely affect the
marketability of the securities sought to be sold pursuant thereto, then the
Company shall include in the registration statement applicable to such Piggyback
Registration only such securities as the Company, the Other Demanding Sellers,
and the Piggyback Sellers are so advised by such underwriter can be sold without
such an effect (the “Maximum Piggyback Number”), as follows and in the following
order of priority:

 

(i)                                     if the Piggyback Registration is an
offering on behalf of the Company and not a Demanding Investor pursuant to
Section 2.01 hereof or any Person exercising Other Demand Rights (whether or not
other Persons seek to include securities therein pursuant to so-called
“piggyback” or other incidental or participatory registration rights) (a
“Primary Offering”), then (A) first, such number of securities to be sold by the
Company as the Company, in its reasonable judgment and acting in good faith and
in accordance with sound financial practice, shall have determined; and
(B) second, if the number of securities to be included under clause (A) above is
less than the Maximum Piggyback Number, pro rata in proportion to the securities
sought to be registered by all the Piggyback Sellers which in the aggregate,
when added to the number of securities to be registered under clause (A) above,
equals the Maximum Piggyback Number; and

 

(ii)                                  if the Piggyback Registration is an
offering other than pursuant to a Primary Offering or a Demand Registration,
then (A) first, such number of securities sought to be registered by each Other
Demanding Seller, pro rata in proportion to the number of securities sought to
be registered by all such Other Demanding Sellers; and (B) second, if the number
of securities to be included under clause (A) above is less than the Maximum
Piggyback Number, the number of securities sought to be registered by each
Piggyback Seller, pro rata in proportion to the securities sought to be
registered by all the Piggyback Sellers, which in the aggregate, when added to
the number of securities to be registered under clause (A) above, equals the
Maximum Piggyback Number; and (C) third, if the number of securities to be
included under clauses (A) and (B) above is less than the Maximum Piggyback
Number, the number of securities to be sold by the Company for its own account,
which in the aggregate, when added

 

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to the number of securities to be registered under clauses (A) and (B) above,
equals the Maximum Piggyback Number.

 

(c)                                  Withdrawal by the Company.  If, at any time
after giving written notice of its intention to register any of its securities
as set forth in this Section 2.02 and prior to the time the registration
statement filed in connection with such registration is declared effective, the
Company shall determine not to go forward with a Primary Offering, the Company
may, at its election, give written notice of such determination to each Investor
and thereupon shall be relieved of its obligation to register any Registrable
Securities in connection with such particular withdrawn or abandoned
registration (but not from its obligation to pay the Registration Expenses in
connection therewith as provided herein).

 

Section 2.03                                                     Shelf
Registration

 

At the request of an Investor, the Company shall use its best efforts to
promptly file a registration statement on Form S-3 or such other form under the
Securities Act then available to the Company providing for the resale pursuant
to Rule 415 from time to time, and on a continuing basis, by the requesting
Investor of such number of Registrable Securities requested by the Investor to
be registered thereby (including the prospectus, amendments and supplements to
the shelf 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, if any, in such shelf
registration statement, the “Shelf Registration Statement”).  The Company shall
use its best efforts to cause the Shelf Registration Statement to be declared
effective by the Commission as promptly as practicable following such filing;
provided, however, that the Company will be permitted to postpone (upon written
notice to the Investors) the filing or the effectiveness of the Shelf
Registration Statement (on one or more occasions), provided that the aggregate
number of days the Company shall be permitted to so postpone, together with any
and all days postponed in respect of a registration statement with respect to
any and all Demands pursuant to Section 2.01(e), shall not exceed an aggregate
of forty-five (45) days in any period of twelve ((12) consecutive months), if
the Board determines in good faith and in its reasonable judgment that the
filing or effectiveness of the Shelf Registration Statement would have a
material adverse effect on any proposal or plan by the Company to engage in any
debt or equity offering, material acquisition or disposition of assets (other
than in the ordinary course of business) or any merger, consolidation, tender
offer or other similar transaction.  The Company shall maintain the
effectiveness of the Shelf Registration Statement until the first date as of
which all the Registrable Securities included in the Shelf Registration
Statement have been sold.  The Company shall maintain the effectiveness of the
Initial Resale Registration Statement until the first date as of which all the
shares of Common Stock included in the Initial Resale Registration Statement
have been sold.  The effectiveness of the Initial Resale Registration Statement
shall not constitute a Demand Registration for purposes of this Agreement;
provided, that any subsequent requests for a Shelf Registration Statement
pursuant to this Section 2.03 shall constitute a Demand hereunder.  For the
avoidance of doubt, the effectiveness of the Initial Resale Registration
Statement shall not satisfy, limit, delay or reduce, the Company’s obligations
pursuant to this Section 2.03.

 

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Section 2.04                                                     Withdrawal
Rights

 

Any Investor that has, on its own behalf or on behalf of any of its Affiliates,
notified or directed the Company to include any Registrable Securities in a
registration statement under the Securities Act shall have the right to withdraw
any such notice or direction with respect to any or all of the Registrable
Securities designated for registration thereby by giving written notice to such
effect to the Company prior to the effective date of such registration
statement.  In the event of any such withdrawal, the Company shall not include
such Registrable Securities in the applicable registration, and such Registrable
Securities shall continue to be Registrable Securities hereunder.  No such
withdrawal shall affect the obligations of the Company with respect to the
Registrable Securities not so withdrawn; provided that in the case of a Demand
Registration, if such withdrawal shall reduce the number of Registrable
Securities sought to be included in such registration below the Requisite
Amount, then the Company shall as promptly as practicable give each holder of
Registrable Securities sought to be registered notice to such effect, referring
to this Agreement and summarizing this Section 2.04, and within five
(5) business days of the effectiveness of such notice either the Company or the
holders of a majority of the Registrable Securities sought to be registered may,
by written notices made to each holder of Registrable Securities sought to be
registered and the Company, elect that such registration statement not be filed
or, if theretofore filed, be withdrawn.  During such period of five (5) business
days, the Company shall not file such registration statement if not theretofore
filed, or, if such registration statement has been theretofore filed, the
Company shall not seek, and shall use its best efforts to prevent, the
effectiveness thereof.  Any Demand Registration withdrawn in accordance with an
election by the Demanding Investor subsequent to the effectiveness of the
applicable Demand Registration Statement shall be counted as a Demand
Registration unless such Demanding Investor reimburses the Company for its
reasonable out-of-pocket expenses related to the preparation and filing of such
registration statement (in which event such registration statement shall not be
counted as a Demand Registration hereunder).

 

Section 2.05                                                     Holdback
Agreements.  Each Investor agrees not to effect any public sale or distribution
(including sales pursuant to Rule 144 (or any successor provision) promulgated
under the Securities Act) of equity securities of the Company, or any securities
convertible into or exchangeable or exercisable for such securities, during the
twenty (20) day period prior to the date on which the Company intends to
commence a Public Offering of primary shares issued by the Company (provided the
Investors are notified in writing in advance of such commencement date) and for
such period, if any, after the commencement of a Public Offering as is required
by the underwriters in such Public Offering, provided that such period shall not
exceed the ninety (90) day period immediately following the effective date of
any such Public Offering, provided, further that the underwriters in such Public
Offering may waive either such period or the remainder of any such period at any
time.

 

Section 2.06                                                     Registration
Procedures.

 

(a)                                 Whenever the Investors have, on their own
behalf or on the behalf of any of their respective Affiliates, requested that
any Registrable Securities be registered pursuant to this Agreement, the Company
(subject to its right to withdraw such registration as contemplated by
Section 2.02(c)) shall use commercially reasonable efforts to effect the
registration and the sale of such Registrable Securities in accordance with the
intended method of disposition thereof, and, in connection therewith, the
Company shall:

 

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(i)                                     use commercially reasonable efforts to
(A) register the Registrable Securities on Form S-3 or another available short
form registration statement, to the extent permitted under the Securities Act
and the rules and regulations thereunder, (B) cause the registration statement
to remain effective for a continuous period of not less than one hundred eighty
(180) days (or, if earlier, until all of the Registrable Securities included in
such registration statement have been sold thereunder) or, in the case of a
registration statement registering securities pursuant to Rule 415 under the
Securities Act, until all securities registered under such registration
statement are sold, in each case, subject to Section 2.06(c), and (C) obtain the
withdrawal of any order suspending the registration or qualification (or the
effectiveness thereof) or suspending or preventing the use of any related
prospectus in any jurisdiction with respect thereto;

 

(ii)                                  promptly notify each seller of Registrable
Securities of each of (A) the filing and effectiveness of the registration
statement and prospectus and any amendment or supplements thereto, (B) the
receipt of any comments from the Commission or any state securities law
authorities or any other governmental authorities with respect to any such
registration statement or prospectus or any amendments or supplements thereto,
and (C) any oral or written stop order with respect to such registration, any
suspension of the registration or qualification of the sale of such Registrable
Securities in any jurisdiction, or any initiation or threatening of any
proceedings with respect to any of the foregoing;

 

(iii)                               furnish to each seller of Registrable
Securities, the underwriters, and the sales or placement agent, if any, and
counsel for each of the foregoing, a conformed copy of such registration
statement and each amendment and supplement thereto (in each case, including all
exhibits thereto and documents incorporated by reference therein) and such
additional number of copies of such registration statement, each amendment, and
supplement thereto (in such case without such exhibits and documents), the
prospectus (including each preliminary prospectus) included in such registration
statement, and prospectus supplements and all exhibits thereto and documents
incorporated by reference therein, and such other documents as such seller,
underwriter, agent, or counsel may reasonably request in order to facilitate the
disposition of the Registrable Securities owned by such seller;

 

(iv)                              use commercially reasonable efforts to
register or qualify such Registrable Securities under such securities or “blue
sky” laws of such jurisdictions as the holders of Registrable Securities
reasonably request and do any and all other acts and things that may be
reasonably necessary or advisable to enable the holders of Registrable
Securities to consummate the disposition in such jurisdictions of the
Registrable Securities owned by such holders and keep such registration or
qualification in effect for so long as the registration statement remains
effective under the Securities Act (provided that the Company shall not be
required to (x) qualify generally to do business in any jurisdiction in which it
would not otherwise be required to qualify but for this paragraph, (y) subject
itself

 

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to taxation in any such jurisdiction in which it would not otherwise be subject
to taxation but for this paragraph, or (z) consent to the general service of
process in any jurisdiction in which it would not otherwise be subject to
general service of process but for this paragraph);

 

(v)                                 notify each seller of such Registrable
Securities, at any time when a prospectus relating thereto is required to be
delivered under the Securities Act and the rules and regulations thereunder,
upon the discovery that, or of the happening of any event as a result of which,
the registration statement covering such Registrable Securities, as then in
effect, contains an untrue statement of a material fact or omits to state any
material fact required to be stated therein or any fact necessary to make the
statements therein not misleading, and promptly prepare and furnish to each such
seller a supplement or amendment to the prospectus contained in such
registration statement so that such Registration Statement shall not, and such
prospectus as thereafter delivered to the purchasers of such Registrable
Securities shall not, contain an untrue statement of a material fact or omit to
state any material fact required to be stated therein or any fact necessary to
make the statements therein not misleading;

 

(vi)                              use commercially reasonable efforts to cause
all such Registrable Securities to be listed on any national securities exchange
or established over-the-counter market on which or through which similar
securities of the Company are then listed or traded and, if not so listed or
traded, to use commercially reasonable efforts to cause such Registrable
Securities to be listed on The Nasdaq Global Select Market or to be listed on an
automated quotation system and to secure designation of all such Registrable
Securities covered by such registration statement as an “NMS Security” within
the meaning of Regulation NMS under the Exchange Act;

 

(vii)                           provide and cause to be maintained a transfer
agent and registrar for all such Registrable Securities covered by such
registration statement not later than the effective date of such registration
statement;

 

(viii)                        make available for reasonable inspection by any
seller of Registrable Securities and any attorney, accountant, or other agent
retained by any such seller or underwriter all financial and other records,
pertinent corporate documents, and properties of the Company, and cause the
Company’s officers, directors, employees, attorneys, and independent accountants
to supply all information reasonably requested by any such sellers, attorneys,
accountants, or agents in connection with such registration statement;

 

(ix)                              use commercially reasonable efforts to comply
with all applicable laws related to such registration statement and offering and
sale of securities and all applicable rules and regulations of governmental
authorities in connection therewith (including, without limitation, the
Securities Act and the Exchange Act) and make generally available to its
security holders as soon as practicable (but in any event not later than fifteen
(15) months after the

 

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effectiveness of such registration statement) an earnings statement of the
Company and its subsidiaries complying with Section 11(a) of the Securities Act;

 

(x)                                 permit any Investor, which Investor, in its
sole and exclusive judgment, might be deemed to be an underwriter or controlling
Person of the Company, to participate in the preparation of such registration
statement and to require the insertion therein of material, furnished to the
Company in writing, that in the reasonable judgment of such Investor and such
Investor’s counsel should be included; and

 

(xi)                              use commercially reasonable efforts to furnish
to each seller of Registrable Securities a signed counterpart of (x) an opinion
of counsel for the Company and (y) a “comfort” letter signed by the independent
public accountants who have certified the Company’s financial statements
included or incorporated by reference in such registration statement, covering
such matters with respect to such registration statement and, in the case of the
accountants’ comfort letter, with respect to events subsequent to the date of
such financial statements, as are customarily covered in opinions of issuer’s
counsel and in accountants’ comfort letters delivered to the underwriters in
underwritten public offerings of securities for the account of, or on behalf of,
an issuer of common stock, such opinion and comfort letters to be dated the date
of such opinions and comfort letters are customarily dated in such transactions,
and covering in the case of such legal opinion, such other legal matters and, in
the case of such comfort letter, such other financial matters, as the holders of
a majority of the Registrable Securities being sold may reasonably request.

 

(b)                                 Underwriting.  Without limiting any of the
foregoing, in the event that the offering of Registrable Securities is to be
made by or through an underwriter, the Company shall enter into an underwriting
agreement with a managing underwriter or underwriters containing
representations, warranties, indemnities, and agreements customarily included
(but not inconsistent with the agreements contained herein) by an issuer of
common stock in underwriting agreements with respect to offerings of common
stock for the account of, or on behalf of, such an issuer.  In connection with
the sale of Registrable Securities hereunder, any seller of such Registrable
Securities may, at its option, require that any and all representations and
warranties by, and indemnities and agreements of, the Company to or for the
benefit of such underwriter or underwriters (or which would be made to or for
the benefit of such an underwriter or underwriters if such sale of Registrable
Securities were pursuant to a customary underwritten offering) be made to and
for the benefit of such seller and that any or all of the conditions precedent
to the obligations of such underwriter or underwriters (or which would be so for
the benefit of such underwriter or underwriters under a customary underwriting
agreement) be conditions precedent to the obligations of such seller in
connection with the disposition of its securities pursuant to the terms hereof. 
In connection with any offering of Registrable Securities registered pursuant to
this Agreement, the Company shall upon the effectiveness of the applicable
registration statement (x) furnish to the underwriter, if any (or, if no
underwriter, the sellers of such Registrable Securities), unlegended
certificates representing ownership of the Registrable Securities being sold, in
such denominations as requested, or, if so requested by such seller, by
electronic delivery at the applicable balance account at the DTC, and

 

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(y) instruct any transfer agent and registrar of the Registrable Securities to
release any stop transfer order with respect thereto.

 

(c)                                  Discontinued-Use of Prospectuses.  Each
seller of Registrable Securities hereunder agrees that upon receipt of any
notice from the Company of the happening of any event of the kind described in
Section 2.06(a)(v), such seller shall forthwith discontinue such seller’s
disposition of Registrable Securities pursuant to the applicable registration
statement and prospectus relating thereto until such seller’s receipt of the
copies of the supplemented or amended prospectus contemplated by
Section 2.06(a)(v) and, if so directed by the Company, shall confirm to the
Company that it has discontinued use of any copies, then in such seller’s
possession of the prospectus current at the time of receipt of such notice
relating to such Registrable Securities.  In the event the Company shall give
such notice, the one hundred and eighty (180) day period during which such
registration statement must remain effective pursuant to Section 2.06(a)(i) of
this Agreement (or such shorter period as permitted by Section 2.06(a)(i)) shall
be extended by the number of days during the period from the date of giving of a
notice regarding the happening of an event of the kind described in
Section 2.06(a)(v) to the date when all such sellers shall receive such a
supplemented or amended prospectus and such prospectus shall have been filed
with the Commission.

 

Section 2.07                                                          
Registration Expenses.  All expenses incident to the Company’s performance of,
or compliance with, its obligations under this Agreement, including, without
limitation, all registration and filing fees, all fees and expenses of
compliance with securities and “blue sky” laws, all printing and copying
expenses, all messenger and delivery expenses, all fees and expenses of
underwriters and sales and placement agents in connection therewith (excluding
discounts and commissions of such underwriters or placement agents), all fees
and expenses of the Company’s independent certified public accountants and
counsel (including, without limitation, with respect to “comfort” letters and
opinions) (collectively, the “Registration Expenses”) shall be borne by the
Company.  Notwithstanding the foregoing, all underwriting discounts and
commissions allocable to each Investor selling, or effecting the sale of,
Registrable Securities on its own behalf or on behalf of any of its Affiliates
shall be borne by such Investor.  Other than in the case of a Demand
Registration, the Company shall not be responsible for the fees and expenses of
any counsel, or any of the accountants, agents, or experts retained by the
Investors in connection with the sale of Registrable Securities, provided,
however, that in the case of a Demand Registration, the Company shall be
responsible for the reasonable fees and expenses of one counsel, who shall be
selected by the Demanding Investor.  The Company will pay its internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties, the expense of any annual
audit, and the expense of any liability insurance) and the expenses and fees for
listing the securities to be registered on each securities exchange and included
in each established over-the-counter market on which similar securities issued
by the Company are then listed or traded or for listing on any other exchange or
automated quotation system.

 

Section 2.08                                                          
Indemnification.

 

(a)                                 By the Company.  The Company agrees to
indemnify, to the fullest extent permitted by law, each holder of Registrable
Securities being sold, its directors, officers, employees, members, managers,
partners, agents, and each other Person, if any, who controls

 

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(within the meaning of the Securities Act and the rules and regulations
thereunder) such holder (each, an “Indemnified Person”) against all losses,
claims, damages, liabilities, and expenses (including legal fees and expenses
and all costs incident to investigation or preparation with respect to such
losses, claims, damages, liabilities, and expenses and to reimburse such
Indemnified Person for such costs as incurred) (collectively, the “Losses”)
caused by, resulting from, or relating to any untrue or alleged untrue statement
of material fact contained in any registration statement (including, without
limitation, the Initial Resale Registration Statement), prospectus, or
preliminary prospectus or any amendment thereof or supplement thereto or any
omission or alleged omission of a material fact required to be stated therein or
a fact necessary to make the statements therein not misleading, except insofar
as the same are caused by or contained in any information furnished to the
Company by or on behalf of such holder in writing expressly for use therein or
by such holder’s failure to deliver a copy of the registration statement or
prospectus or any amendments or supplements thereto after the Company has
furnished such holder with a sufficient number of copies of the same and
notified such holder of such obligation.  In connection with an underwritten
offering and without limiting any of the Company’s other obligations under this
Agreement, the Company shall indemnify such underwriters, their officers,
directors, employees, and agents and each Person who controls (within the
meaning of the Securities Act and the rules and regulations thereunder) such
underwriters or such other indemnified Person to the same extent as provided
above with respect to the indemnification of the holders of Registrable
Securities being sold.

 

(b)                                 By the Investors.  In connection with any
registration statement in which a holder of Registrable Securities is
participating pursuant to this Agreement, each such holder will, if requested,
furnish to the Company in writing information regarding such holder’s ownership
of Registrable Securities and, to the extent permitted by law, shall, severally
and not jointly, indemnify the Company, its directors, and each Person who
controls (within the meaning of the Securities Act and the rules and regulations
thereunder) the Company against all Losses caused by, resulting from, or
relating to any untrue or alleged untrue statement of material fact contained in
the registration statement, prospectus, or preliminary prospectus or any
amendment thereof or supplement thereto or any omission or alleged omission of a
material fact required to be stated therein or necessary to make the statements
therein not misleading, but only to the extent that such untrue statement or
omission is caused by and contained in such information so furnished to the
Company in writing by or on behalf of such holder; provided, however, that each
holder’s obligation to indemnify the Company hereunder shall be apportioned
between each holder based upon the net amount received by each holder from the
sale of Registrable Securities, as compared to the total net amount received by
all of the holders of Registrable Securities sold pursuant to such registration
statement, no such holder being liable to the Company in excess of such
apportionment; and provided, further (i) that each holder’s obligation to
indemnify the Company hereunder shall be apportioned between each holder as is
appropriate to reflect the relative fault of such holder on the one hand, and of
each other holder on the other, in connection with the statements or omissions
that resulted in such Losses.  The relative fault of each holder on the one
hand, and each other holder on the other, shall be determined by reference to,
among other things, whether any untrue or any alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by such holder and the parties’ relevant intent,
knowledge, information and opportunity to correct or prevent such statement or
omission.

 

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(c)                                  Notice.  Any Person entitled to
indemnification hereunder shall give prompt written notice to the indemnifying
party of any claim with respect to which its seeks indemnification; provided,
however, that the failure to give such notice shall not release the indemnifying
party from its obligation, except to the extent that the indemnifying party has
been materially prejudiced by such failure to provide such notice.

 

(d)                                 Defense of Actions.  In any case in which
any such action is brought against any indemnified party and it notifies an
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate therein and, to the extent that it may wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified party, and,
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party will not (so
long as it shall continue to have the right to defend, contest, litigate, and
settle the matter in question in accordance with this paragraph) be liable to
such indemnified party hereunder for any legal or other expense subsequently
incurred by such indemnified party in connection with the defense thereof other
than reasonable costs of investigation, supervision, and monitoring (unless such
indemnified party reasonably objects to such assumption on the grounds that
there may be defenses available to it that are different from or in addition to
the defenses available to such indemnifying party or if a conflict or potential
conflict of interest exists, in either of which event the indemnified party
shall be reimbursed by the indemnifying party for the expenses incurred in
connection with retaining separate legal counsel).  An indemnifying party shall
not be liable for any settlement of an action or claim effected without its
consent, which consent shall not be unreasonably withheld, conditioned or
delayed.  The indemnifying party shall lose its right to defend, contest,
litigate, and settle a matter if it shall fail diligently to contest such matter
(except to the extent settled in accordance with the next following sentence). 
No matter shall be settled by an indemnifying party without the consent of the
indemnified party (which consent shall not be unreasonably withheld, conditioned
or delayed).

 

(e)                                  Jointly Indemnifiable Claims.  Given that
an Indemnified Person may be entitled to indemnification (a “Jointly
Indemnifiable Claim”) from both the Company, pursuant to this Agreement, and
from any other Person, whether pursuant to applicable law, any indemnification
agreement, the organizational documents of such Person or otherwise (the
“Indemnitee-Related Entities”), the Company acknowledges and agrees that the
Company shall be fully and primarily responsible for the payment to the
Indemnified Person in respect of indemnification and advancement of expenses in
connection with any such Jointly Indemnifiable Claim, pursuant to and in
accordance with the terms of this Agreement, irrespective of any right of
recovery the Indemnified Person may have from the Indemnitee-Related Entities. 
Under no circumstance shall the Company be entitled to any right of subrogation
or contribution by the Indemnitee-Related Entities and no right of recovery the
Indemnified Person may have from the Indemnitee-Related Entities shall reduce or
otherwise alter the rights of the Indemnified Person or the obligations of the
Company hereunder.  In the event that any of the Indemnitee-Related Entities
shall make any payment to the Indemnified Person in respect of indemnification
or advancement of expenses with respect to any Jointly Indemnifiable Claim, the
Indemnitee-Related Entity making such payment shall be subrogated to the extent
of such payment to all of the rights of recovery of the Indemnified Person
against the Company, and the Indemnified Person shall execute all papers
reasonably required and shall do all things that may be reasonably

 

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necessary to secure such rights, including the execution of such documents as
may be necessary to enable the Indemnitee-Related Entities effectively to bring
suit to enforce such rights.  Each of the Indemnitee-Related Entities shall be
third-party beneficiaries with respect to this Section 2.08(e), entitled to
enforce this Section 2.08(e) against the Company as though each such
Indemnitee-Related Entity were a party to this Agreement.

 

(f)                                   Survival.  The indemnification provided
for under this Agreement shall remain in full force and effect regardless of any
investigation made by or on behalf of the indemnified Person and will survive
the transfer of the Registrable Securities and the termination of this
Agreement.

 

(g)                                  Contribution.  If recovery is not available
under the foregoing indemnification provisions for any reason or reasons other
than as specified therein, any Person who would otherwise be entitled to
indemnification by the terms thereof shall nevertheless be entitled to
contribution with respect to any Losses with respect to which such Person would
be entitled to such indemnification but for such reason or reasons.  In
determining the amount of contribution to which the respective Persons are
entitled, there shall be considered the Persons’ relative knowledge and access
to information concerning the matter with respect to which the claim was
asserted, the opportunity to correct and prevent any statement or omission, and
other equitable considerations appropriate under the circumstances, including
the relative fault of such Person, in connection with the statements or
omissions that resulted in Losses.  The relative fault of each Person shall be
determined by reference to, among other things, whether any untrue or any
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by such Person and the
parties’ relevant intent, knowledge, information and opportunity to correct or
prevent such statement or omission.  It is hereby agreed that it would not
necessarily be equitable if the amount of such contribution were determined by
pro rata or per capita allocation.  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.  Notwithstanding the foregoing, no Investor (and
no Affiliate of such Investor) shall be required to make a contribution in
excess of (i) the net amount received by such Investor (or its Affiliate) from
the sale of Registrable Securities.

 

Section 2.09                                                           Removal
of Legends from Shares.

 

(a)                                 To the extent that any Shares represented by
certificates bear a restrictive legend, such legend shall be promptly removed
from Shares and the Company shall issue, or cause to be issued, to an Investor a
certificate for such Shares without such legend or any other legend, or, if so
requested by such Investor, by electronic delivery at the applicable balance
account at the Depository Trust Company (“DTC”), if one of the following
conditions is met: (a) such Shares are eligible for resale pursuant to Rule 144
of the Securities Act without regard to any volume limitations; (b) in
connection with a sale, assignment or other transfer of such Shares, such
Investor provides the Company with an opinion of counsel, in a generally
acceptable form to the Company and its transfer agent, to the effect that such
sale, assignment or transfer of such Shares may be made without registration
under the applicable requirements of the Securities Act and that the legend can
be removed from the Shares; or (c) the Shares are registered for resale pursuant
to an effective registration statement under the Securities Act.

 

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(b)                                 Any fees (with respect to the transfer agent
or otherwise) associated with the removal of such legend (but not the legal fees
and expenses of counsel to an Investor) shall be borne by the Company.  At any
time as a legend is no longer required for any Shares, the Company will use its
best efforts to no later than three (3) trading days following the delivery by
an Investor to the Company or its transfer agent (with notice to the Company) of
a legended certificate representing such Shares (endorsed or with stock powers
attached and otherwise in form necessary to effect the reissuance and/or
transfer) (such third trading day, the “Legend Removal Date”), deliver or cause
to be delivered to such Investor a certificate representing such Shares 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 2.09(b). Certificates for
Shares subject to legend removal hereunder may be transmitted by the transfer
agent to such Investor by crediting the account of such Investor’s prime broker
with DTC as directed by such Investor.

 

(c)                                  If the Company shall fail for any reason or
for no reason to issue to an Investor unlegended certificates by the Legend
Removal Date, then, in addition to all other remedies available to such
Investor, if on or after the trading day immediately following such three
(3) trading day period, such Investor purchases, or a broker through whom such
Investor has sold Shares (a “Buy-In Broker”) purchases (in an open market
transaction or otherwise) shares of Common Stock to deliver in satisfaction of
such sale in lieu of Shares such Investor anticipated receiving from the Company
without any restrictive legend (a “Buy-In”), then the Company shall, within
three (3) business days after such Investor’s request, honor its obligation to
deliver to such Investor a certificate or certificates without restrictive
legends representing such Shares and pay cash to such Investor in an amount
equal to the excess (if any) of such Investor’s or Buy-In Broker’s total
purchase price (including brokerage commissions, if any) for the shares of
Common Stock so purchased over the product of (i) such number of such shares of
Common Stock, times (ii) the closing bid price on the Legend Removal Date.

 

(d)                                 The Company hereby agrees that it shall take
all action necessary or advisable to comply with, and to maintain compliance
with, the current public information requirement of Rule 144(c)(i) or
144(i)(2) of the Securities Act in order to facilitate sales of Shares by the
Investors pursuant to Rule 144.

 

ARTICLE III

 

Miscellaneous

 

Section 3.01                                                          
Inconsistent Agreements.  Except with respect to the Initial Resale Registration
Statement contemplated by the Investment Agreement, without the prior written
consent of each Investor, the Company shall not enter into any registration
rights agreement that conflicts, or is inconsistent, with the provisions of
Article II hereof.

 

Section 3.02                                                           Specific
Performance.  Each of the Investors and the Company acknowledge and agree that,
in the event of any breach of this Agreement, the non-breaching party or parties
would be irreparably harmed and could not be made whole by monetary damages. 
The Investors and the Company hereby agree that, in addition to any other remedy
to which the Investors may be entitled at law or in equity, each Investor shall
be entitled

 

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to compel specific performance of this Agreement in any action instituted in any
court of the United States or any state thereof having subject matter
jurisdiction for such action.

 

Section 3.03                                                           
Headings.  The headings in this Agreement are for convenience of reference only
and shall not control or affect the meaning or construction of any provisions
hereof.

 

Section 3.04                                                            Entire
Agreement.  Except for the Investment Agreement, including without limitation
the provisions thereof relating to the Initial Resale Registration Statement,
this Agreement (a) constitutes the entire agreement and understanding of the
parties hereto in respect of the subject matter contained herein, and there are
no restrictions, promises, representations, warranties, covenants, conditions,
or undertakings with respect to the subject matter hereof, other than those
expressly set forth or referred to herein, and (b) amends and supersedes all
prior agreements and understandings between the parties hereto with respect to
the subject matter hereof.

 

Section 3.05                                                           
Notices.  All notices and other communications hereunder shall be in writing and
shall be delivered personally, by next-day courier, by electronic or facsimile
transmission, or telecopied with confirmation of receipt to the parties at the
addresses specified below (or at such other address for a party as shall be
specified by like notice; provided that notices of change of address shall be
effective only upon receipt thereof).  Any such notice shall be effective upon
receipt, if personally delivered, delivered by electronic or facsimile
transmission, or telecopied, or one day after delivery to a courier for next-day
delivery.

 

If to the Company, to:

 

Cache, Inc.

1440 Broadway

New York, New York 10018
Attention:  Chief Executive Officer and Chief Financial Officer
Fax:  212-764-2082

 

with a copy (which shall not constitute notice) to:

 

Schulte Roth & Zabel LLP

919 Third Avenue

New York, NY 10022

Attention: Michael R. Littenberg

Fax: (212) 593-5955

Email:  michael.littenberg@srz.com

 

If to MFP, to:

 

MFP Partners, L.P.

c/o MFP Investors LLC

667 Madison Avenue, 25th Floor

Attention: Timothy E. Ladin

Fax: (212) 752-7265

Email:  tladin@mfpllc.com

 

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with a copy (which shall not constitute notice) to:

 

Skadden, Arps, Slate, Meagher & Flom LLP
One Rodney Square
P.O. Box 636
Wilmington, DE 19899

Attention:  Allison Land
Fax:  (302) 651-3001

Email: allison.land@skadden.com

 

If to Mill Road, to:

 

Mill Road Capital, L.P.

382 Greenwich Avenue

Suite One

Greenwich, CT 06830

Attention: Charles Goldman

Email: cgoldman@millroadcapital.com

 

with a copy (which shall not constitute notice) to:

 

Foley Hoag LLP

155 Seaport Blvd.

Boston, MA 02210

Attn: Peter M. Rosenblum

Fax: 617-832-7000

Email: PMR@foleyhoag.com

 

Section 3.06                                                           
Applicable Law.  The substantive laws of the State of New York shall govern the
interpretation, validity, and performance of the terms of this Agreement,
regardless of the law that might be applied under applicable principles of
conflicts of laws.

 

Section 3.07                                                           
Severability.  The invalidity, illegality, or unenforceability of one or more of
the provisions of this Agreement in any jurisdiction shall not affect the
validity, legality, or enforceability of the remainder of this Agreement in such
jurisdiction or the validity, legality, or enforceability of this Agreement,
including any such provision, in any other jurisdiction, it being intended that
all rights and obligations of the parties hereunder shall be enforceable to the
fullest extent permitted by law.

 

Section 3.08                                                           
Successors; Assigns.  The provisions of this Agreement shall be binding upon the
parties hereto and their respective heirs, successors, and permitted assigns,
including, without limitation and without the need for an express assignment or
assumption, any

 

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successor in interest to an Investor, whether by a sale of all or substantially
all of its assets, merger, consolidation, or otherwise.  Neither this Agreement
nor the rights or obligations of any party hereunder may be assigned, except as
otherwise provided in this Agreement.  Any such attempted assignment in
contravention of this Agreement shall be void and of no effect.

 

Section 3.09                                                          
Amendments.  This Agreement may not be amended, modified, or supplemented unless
such modification is in writing and signed by the Company and each Investor.

 

Section 3.10                                                           Waiver. 
Any waiver (express or implied) of any default or breach of this Agreement shall
not constitute a waiver of any other or subsequent default or breach.

 

Section 3.11                                                          
Counterparts.  This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original but all of which shall constitute one and
the same Agreement.

 

Section 3.12                                                          Term. 
Unless earlier terminated, this Agreement shall terminate upon the seventh
anniversary of the date of this Agreement; provided, however, that to the extent
that any Demand Registration or Piggyback Registration has commenced at such
time, this Agreement shall remain in effect until the termination or expiration
of such Demand Registration or Piggyback Registration, as the case may be, and
the Investors’ obligations pursuant to Section 2.05 hereof shall continue until
ninety (90) days following the effectiveness of the registration statement
related thereto.  Notwithstanding the foregoing, (i) each Investor may at any
time provide written notice to the Company of its irrevocable election to
withdraw from all of its rights and obligations under this Agreement; and
(ii) this Agreement shall automatically terminate with respect to an Investor,
upon the first date that such Investor no longer owns any Shares.  In either
such event, from and after the date of such notice, such Investor shall no
longer be bound by any obligations, or be entitled to any benefits, under this
Agreement (other than those that have accrued prior to such date), and from and
after such time, securities held directly or indirectly by such Investor shall
no longer be deemed to be Registrable Securities hereunder.

 

[SIGNATURE PAGE FOLLOWS]

 

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IN WITNESS WHEREOF, the undersigned hereby agree to be bound by the terms and
provisions of this Registration Rights Agreement as of the date first above
written.

 

 

 

CACHE, INC.

 

 

 

 

 

 

 

By:

 

 

Name:

 

Title:

 

 

 

 

 

 

 

 

MFP PARTNERS, L.P.

 

By:

MFP Investors LLC,

 

 

its General Partner

 

 

 

 

By:

 

 

Name:

 

Title:

 

 

 

 

 

MILL ROAD CAPITAL, L.P.

 

By:

Mill Road Capital GP LLC,

 

 

its General Partner

 

 

 

 

By:

 

 

Name:

 

Title:

 

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