Exhibit 10.1
COMMON STOCK PURCHASE
AGREEMENT
Dated as of October 20, 2005
by and among
ROO GROUP, INC.
and
THE PURCHASERS LISTED ON EXHIBIT A
TABLE OF CONTENTS
Page
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ARTICLE I Purchase and Sale of Common Stock...............................1
Section 1.1 Purchase and Sale of Common Stock........................1
Section 1.2 Purchase Price and Closing...............................1
ARTICLE II Representations and Warranties..................................2
Section 2.1 Representations and Warranties of the Company............2
Section 2.2 Representations and Warranties of the Purchasers........12
ARTICLE III Covenants......................................................20
Section 3.1 Securities Compliance...................................20
Section 3.2 Registration and Listing................................20
Section 3.3 Inspection Rights.......................................21
Section 3.4 Compliance with Laws....................................21
Section 3.5 Keeping of Records and Books of Account.................21
Section 3.6 Reporting Requirements..................................21
Section 3.7 Other Agreements........................................22
Section 3.8 Use of Proceeds.........................................16
Section 3.9 Reporting Status........................................16
Section 3.10 Disclosure of Transaction...............................16
Section 3.11 Disclosure of Material Information......................17
Section 3.12 Form D..................................................17
Section 3.13 No Integrated Offerings.................................17
Section 3.14 Pledge of Shares........................................17
Section 3.15 Reverse Stock Split.....................................17
Section 3.16 Conversion of Xxxxx Promissory Note.....................17
Section 3.17 Right of First Refusal..................................17
ARTICLE IV Conditions.....................................................23
Section 4.1 Conditions Precedent to the Obligation of the
Company to Close and to Sell the Shares.................23
Section 4.2 Conditions Precedent to the Obligation of the
Purchasers to Close and to Purchase the Shares..........24
ARTICLE V Certificate Legend.............................................27
Section 5.1 Legend..................................................20
ARTICLE VI Indemnification................................................28
Section 6.1 General Indemnity.......................................28
Section 6.2 Indemnification Procedure...............................29
ARTICLE VII Miscellaneous..................................................30
Section 7.1 Fees and Expenses.......................................30
Section 7.2 Specific Performance; Consent to Jurisdiction; Venue....31
Section 7.3 Entire Agreement; Amendment.............................31
Section 7.4 Notices.................................................32
Section 7.5 Waivers.................................................33
TABLE OF CONTENTS
(continued)
Page
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Section 7.6 Headings................................................33
Section 7.7 Successors and Assigns..................................33
Section 7.8 No Third Party Beneficiaries............................33
Section 7.9 Governing Law...........................................33
Section 7.10 Survival................................................33
Section 7.11 Counterparts............................................34
Section 7.12 Publicity...............................................34
Section 7.13 Severability............................................34
Section 7.14 Further Assurances......................................34
COMMON STOCK PURCHASE AGREEMENT
This COMMON STOCK PURCHASE AGREEMENT this ("Agreement"), dated as of
October 20, 2005 by and among ROO Group, Inc., a Delaware corporation (the
"Company"), and the purchasers listed on Exhibit A hereto (each a "Purchaser"
and collectively, the "Purchasers"), for the purchase and sale of shares of the
Company's common stock, par value $0.0001 per share (the "Common Stock") by the
Purchasers.
The parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF COMMON STOCK
Section 1.1 Purchase and Sale of Common Stock. Upon the following
terms and conditions, the Company shall issue and sell to the Purchasers, and
the Purchasers shall purchase from the Company, up to 1,500,000 shares of Common
Stock (the "Shares") at a price per share of $1.50 (the "Per Share Purchase
Price") for an aggregate purchase price of up to $2,250,000 (the "Purchase
Price"). Each Purchaser shall invest a minimum of $100,000 provided that the
Company may accept investments of less than $100,000 upon the mutual agreement
of the Company and Xxxxxxx Hill Partners, LLC, a division of Pali Capital, Inc.
The Company and the Purchasers are executing and delivering this Agreement in
accordance with and in reliance upon the exemption from securities registration
afforded by Section 4(2) of the U.S. Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder (the "Securities Act"), including
Regulation D ("Regulation D"), and/or upon such other exemption from the
registration requirements of the Securities Act as may be available with respect
to any or all of the investments to be made hereunder.
Section 1.2 Purchase Price and Closing. In consideration of and in
express reliance upon the representations, warranties, covenants, terms and
conditions of this Agreement, the Company agrees to issue and sell to the
Purchasers and, in consideration of and in express reliance upon the
representations, warranties, covenants, terms and conditions of this Agreement,
the Purchasers, severally but not jointly, agree to purchase the number of
Shares, in each case, set forth opposite their respective names on Exhibit A.
The closing of the purchase and sale of the Shares to be acquired by the
Purchasers from the Company under this Agreement shall take place at the offices
of Xxxxxx Xxxxx Xxxxxxxx & Xxxxxxx LLP, 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx,
Xxx Xxxx 00000 (the "Closing") at 10:00 a.m. on October 21, 2005 or at such time
and on such date as the Purchasers and the Company may agree upon (the "Closing
Date"), provided, that all of the conditions set forth in Article IV hereof and
applicable to the Closing shall have been fulfilled or waived in accordance
herewith. At the Closing, the Company shall deliver or cause to be delivered to
each Purchaser (i) a certificate registered in the name of the Purchaser
representing the number of Shares as is set forth opposite the name of such
Purchaser on Exhibit A and (ii) any other deliveries as required by Article IV.
At the Closing, each Purchaser shall deliver its portion of the Purchase Price
by wire transfer to an account designated by the Company.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1 Representations and Warranties of the Company. The
Company hereby represents and warrants to the Purchasers as follows, as of the
date hereof and the Closing Date, except as set forth on the Schedule of
Exceptions attached hereto with each numbered Schedule corresponding to the
section number herein:
(a) Organization, Good Standing and Power. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware and has the requisite corporate power to own,
lease and operate its properties and assets and to conduct its business as it is
now being conducted. The Company does not have any Subsidiaries (as defined in
Section 2.1(g)) or own securities of any kind in any other entity except as set
forth on Schedule 2.1(g) hereto. The Company and each such Subsidiary (as
defined in Section 2.1(g)) is duly qualified to do business as a foreign
corporation and is in good standing in every jurisdiction in which the nature of
the business conducted or property owned by it makes such qualification
necessary except for any jurisdiction(s) (alone or in the aggregate) in which
the failure to be so qualified will not have a Material Adverse Effect. For the
purposes of this Agreement, "Material Adverse Effect" means any effect on the
business, results of operations, prospects, assets or condition (financial or
otherwise) of the Company that is material and adverse to the Company and its
subsidiaries and/or any condition, circumstance, or situation that would
prohibit or otherwise materially interfere with the ability of the Company from
entering into and performing any of its obligations under the Transaction
Documents (as defined below) in any material respect.
(b) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and perform this Agreement, the
Escrow Agreement by and among the Company, the Purchasers and the escrow agent,
dated as of the date hereof, substantially in the form of Exhibit B hereto (the
"Escrow Agreement") and that certain Registration Rights Agreement by and among
the Company and the Purchasers, dated as of the date hereof, substantially in
the form of Exhibit C attached hereto (the "Registration Rights Agreement" and,
together with the Escrow Agreement and this Agreement, the "Transaction
Documents") and to issue and sell the Shares in accordance with the terms hereof
and to complete the transactions contemplated by the Transaction Documents. The
execution, delivery and performance of the Transaction Documents by the Company
and the consummation by it of the transactions contemplated thereby have been
duly and validly authorized by all necessary corporate action and no further
consent or authorization of the Company, its Board of Directors or stockholders
is required. When executed and delivered by the Company, each of the Transaction
Documents shall constitute a valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, reorganization,
moratorium, liquidation, conservatorship, receivership or similar laws relating
to, or affecting generally the enforcement of, creditors' rights and remedies or
by other equitable principles of general application.
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(c) Capitalization. The authorized capital stock of the Company as
of October 20, 2005 is set forth on Schedule 2.1(c) hereto. All of the
outstanding shares of the Common Stock and any other outstanding security of the
Company have been duly and validly authorized and validly issued, fully paid and
nonassessable and were issued in accordance with the registration or
qualification provisions of the Securities Act, or pursuant to valid exemptions
therefrom. Except as set forth in this Agreement and as set forth on Schedule
2.1(c) hereto, no shares of Common Stock or any other security of the Company
are entitled to preemptive rights, registration rights, rights of first refusal
or similar rights and there are no outstanding options, warrants, scrip, rights
to subscribe to, call or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company. Furthermore, except as set forth in this Agreement and as set forth on
Schedule 2.1(c) hereto, there are no contracts, commitments, understandings, or
arrangements by which the Company is or may become bound to issue additional
shares of the capital stock of the Company or options, securities or rights
convertible into shares of capital stock of the Company. Except for customary
transfer restrictions contained in agreements entered into by the Company in
order to sell restricted securities or as provided on Schedule 2.1(c) hereto,
the Company is not a party to or bound by any agreement or understanding
granting registration or anti-dilution rights to any person with respect to any
of its equity or debt securities. Except as set forth on Schedule 2.1(c), the
Company is not a party to, and it has no knowledge of, any agreement or
understanding restricting the voting or transfer of any shares of the capital
stock of the Company.
(d) Issuance of Shares. The Shares to be issued at the Closing have
been duly authorized by all necessary corporate action and, when paid for and
issued in accordance with the terms hereof, the Shares will be validly issued,
fully paid and nonassessable and free and clear of all liens, encumbrances and
rights of refusal of any kind and the holders shall be entitled to all rights
accorded to a holder of Common Stock.
(e) No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby do not and will not (i) violate any
provision of the Company's Certificate of Incorporation (the "Certificate") or
Bylaws (the "Bylaws"), each as amended to date, or any Subsidiary's comparable
charter documents, (ii) conflict with, or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or
give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, mortgage, deed of trust, indenture, note, bond,
license, lease agreement, instrument or obligation to which the Company or any
of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries' respective properties or assets are bound, or (iii) result in a
violation of any federal, state, local or foreign statute, rule, regulation,
order, judgment or decree (including federal and state securities laws and
regulations) applicable to the Company or any of its Subsidiaries or by which
any property or asset of the Company or any of its Subsidiaries is bound or
affected, except, in all cases, other than violations pursuant to clauses (i) or
(iii) (with respect to federal and state securities laws) above, except, for
such conflicts, defaults, terminations, amendments, acceleration, cancellations
and violations as would not, individually or in the aggregate, have a Material
Adverse Effect. Neither the Company nor any of its Subsidiaries is required
under federal, state, foreign or local law, rule or regulation to obtain any
consent, authorization or order of, or make any filing or registration with, any
court or governmental agency in order for it to execute, deliver or perform any
of its obligations under the Transaction Documents or issue and sell the Shares
in accordance with the terms hereof (other than any filings, consents and
approvals which may be required to be made by the Company under applicable state
and federal securities laws, rules or as may be required for the Company to
carry out its obligations under the Registration Rights Agreement).
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(f) Commission Documents, Financial Statements. The Common Stock of
the Company is registered pursuant to Section 12(b) or 12(g) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, except as disclosed
on Schedule 2.1(f) hereto, the Company has timely filed all reports, schedules,
forms, statements and other documents required to be filed by it with the
Securities and Exchange Commission (the "Commission") pursuant to the reporting
requirements of the Exchange Act, including pursuant to Sections 13, 14 or 15(d)
thereof (all of the foregoing and all exhibits included therein and financial
statement and schedules thereto, including filings incorporated by reference
therein being referred to herein as the "Commission Documents"). At the times of
their respective filings, the Form 10-QSB for the fiscal quarters ended March
31, 2005 and June 30, 2005, (collectively, the "Form 10-QSB") and the Form
10-KSB for the fiscal year ended December 31, 2004 (the "Form 10-KSB") complied
in all material respects with the requirements of the Exchange Act and the rules
and regulations of the Commission promulgated thereunder, and the Form 10-QSB
and Form 10-KSB at the time of their respective filings did not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. As of their
respective dates, the financial statements of the Company included in the
Commission Documents were complete and correct in all material respects and
complied with applicable accounting requirements and the published rules and
regulations of the Commission or other applicable rules and regulations with
respect thereto. Such financial statements have been prepared in accordance with
accounting principles generally accepted in the United States ("GAAP") applied
on a consistent basis during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the Notes thereto or (ii) in
the case of unaudited interim statements, to the extent they may not include
footnotes or may be condensed or summary statements), and fairly present in all
material respects the financial position of the Company and its Subsidiaries as
of the dates thereof and the results of operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments).
(g) Subsidiaries. Schedule 2.1(g) hereto sets forth each Subsidiary
of the Company, showing the jurisdiction of its incorporation or organization
and showing the percentage of each person's ownership of the outstanding stock
or other interests of such Subsidiary. For the purposes of this Agreement,
"Subsidiary" shall mean any corporation or other entity of which 100% of the
securities or other ownership interest having ordinary voting power (absolutely
or contingently) for the election of directors or other persons performing
similar functions are at the time owned directly or indirectly by the Company
and/or any of its other Subsidiaries. All of the outstanding shares of capital
stock of each Subsidiary have been duly authorized and validly issued, and are
fully paid and nonassessable. There are no outstanding preemptive, conversion or
other rights, options, warrants or agreements granted or issued by or binding
upon any Subsidiary for the purchase or acquisition of any shares of capital
stock of any Subsidiary or any other securities convertible into, exchangeable
for or evidencing the rights to subscribe for any shares of such capital stock.
Neither the Company nor any Subsidiary is subject to any obligation (contingent
or otherwise) to repurchase or otherwise acquire or retire any shares of the
capital stock of any Subsidiary or any convertible securities, rights, warrants
or options of the type described in the preceding sentence except as set forth
on Schedule 2.1(g) hereto. Neither the Company nor any Subsidiary is party to,
nor has any knowledge of, any agreement restricting the voting or transfer of
any shares of the capital stock of any Subsidiary.
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(h) No Material Adverse Change. Since December 31, 2004, the Company
has not experienced or suffered any Material Adverse Effect, except as disclosed
on Schedule 2.1(h) hereto.
(i) No Undisclosed Liabilities. Except as disclosed on Schedule
2.1(i) hereto, since December 31, 2004, neither the Company nor any of its
Subsidiaries has incurred any liabilities, obligations, claims or losses
(whether liquidated or unliquidated, secured or unsecured, absolute, accrued,
contingent or otherwise) other than those incurred in the ordinary course of the
Company's or its Subsidiaries respective businesses or which, individually or in
the aggregate, are not reasonably likely to have a Material Adverse Effect.
Since December 31, 2004, except as disclosed in Commission Documents, none of
the Company or any of its Subsidiaries has participated in any transaction
material to the condition of the Company which is outside of the ordinary course
of its business.
(j) No Undisclosed Events or Circumstances. Since December 31, 2004,
except as disclosed on Schedule 2.1(j) hereto, no event or circumstance has
occurred or exists with respect to the Company or its Subsidiaries or their
respective businesses, properties, operations or financial condition, which,
under applicable law, rule or regulation, requires public disclosure or
announcement by the Company but which has not been so publicly announced or
disclosed.
(k) Indebtedness. Schedule 2.1(k) hereto sets forth as of the date
hereof all outstanding secured and unsecured Indebtedness of the Company or any
Subsidiary, or for which the Company or any Subsidiary has commitments. For the
purposes of this Agreement, "Indebtedness" shall mean (a) any liabilities for
borrowed money or amounts owed in excess of $150,000 (other than trade accounts
payable incurred in the ordinary course of business), (b) all guaranties,
endorsements and other contingent obligations in respect of liabilities for
borrowed money of others in excess of $150,000, whether or not the same are or
should be reflected in the Company's balance sheet (or the notes thereto),
except guaranties by endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of business; and (c)
the present value of any lease payments in excess of $25,000 due under leases
required to be capitalized in accordance with GAAP. Neither the Company nor any
Subsidiary is in default with respect to any Indebtedness.
(l) Title to Assets. Each of the Company and the Subsidiaries has
good and valid title to all of its real and personal property reflected in the
Commission Documents, free and clear of any mortgages, pledges, charges, liens,
security interests or other encumbrances, except for those indicated on Schedule
2.1(l) hereto or such that, individually or in the aggregate, do not cause a
Material Adverse Effect. All said leases of the Company and each of its
Subsidiaries are valid and subsisting and in full force and effect.
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(m) Actions Pending. There is no action, suit, claim, investigation,
arbitration, alternate dispute resolution proceeding or other proceeding pending
or, to the knowledge of the Company, threatened against the Company or any
Subsidiary which questions the validity of this Agreement or any of the other
Transaction Documents or any of the transactions contemplated hereby or thereby
or any action taken or to be taken pursuant hereto or thereto. Except as set
forth on Schedule 2.1(m) hereto, there is no action, suit, claim, investigation,
arbitration, alternate dispute resolution proceeding or other proceeding pending
or, to the knowledge of the Company, threatened against or involving the
Company, any Subsidiary or any of their respective properties or assets, which
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect. There are no outstanding orders, judgments,
injunctions, awards or decrees of any court, arbitrator or governmental or
regulatory body against the Company or any Subsidiary or any officers or
directors of the Company or any Subsidiary in their capacities as such, which
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.
(n) Compliance with Law. The business of the Company and the
Subsidiaries has been and is presently being conducted in accordance with all
applicable federal, state and local governmental laws, rules, regulations and
ordinances, except as set forth in the Commission Documents or on Schedule
2.1(n) hereto or such that, individually or in the aggregate, the noncompliance
therewith could not reasonably be expected to have a Material Adverse Effect.
The Company and each of its Subsidiaries have all franchises, permits, licenses,
consents and other governmental or regulatory authorizations and approvals
necessary for the conduct of its business as now being conducted by it unless
the failure to possess such franchises, permits, licenses, consents and other
governmental or regulatory authorizations and approvals, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect.
(o) Taxes. Except as set forth on Schedule 2.1(o) hereto, the
Company and each of the Subsidiaries has accurately prepared and filed all
federal, state and other tax returns required by law to be filed by it, has paid
all taxes shown to be due and all additional assessments, and adequate
provisions have been and are reflected in the financial statements of the
Company and the Subsidiaries for all current taxes and other charges to which
the Company or any Subsidiary is subject and which are not currently due and
payable. Except as disclosed on Schedule 2.1(o) hereto, none of the federal
income tax returns of the Company or any Subsidiary has been audited by the
Internal Revenue Service. The Company has no knowledge of any additional
assessments, adjustments or contingent tax liability (whether federal or state)
of any nature whatsoever, whether pending or threatened against the Company or
any Subsidiary for any period, nor of any basis for any such assessment,
adjustment or contingency.
(p) Certain Fees. Except as set forth on Schedule 2.1(p) hereto, the
Company has not employed any broker or finder or incurred any liability for any
brokerage or investment banking fees, commissions, finders' structuring fees,
financial advisory fees or other similar fees in connection with the Transaction
Documents.
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(q) Disclosure. Neither this Agreement or the Schedules hereto nor
any other documents, certificates or instruments furnished to the Purchasers by
or on behalf of the Company or any Subsidiary in connection with the
transactions contemplated by this Agreement contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements made herein or therein, in the light of the circumstances under which
they were made herein or therein, not misleading.
(r) Operation of Business. Except as set forth on Schedule 2.1(r)
hereto, the Company and each of the Subsidiaries owns or possesses the rights to
use all patents, trademarks, domain names (whether or not registered) and any
patentable improvements or copyrightable derivative works thereof, websites and
intellectual property rights relating thereto, service marks, trade names,
copyrights, licenses and authorizations which are necessary for the conduct of
its business as now conducted without any conflict or infringement with the
rights of others.
(s) Environmental Compliance. Except as disclosed on Schedule 2.1(s)
hereto, the Company and each of its Subsidiaries have obtained all material
approvals, authorization, certificates, consents, licenses, orders and permits
or other similar authorizations of all governmental authorities, or from any
other person, that are required under any Environmental Laws. "Environmental
Laws" shall mean all applicable laws relating to the protection of the
environment including, without limitation, all requirements pertaining to
reporting, licensing, permitting, controlling, investigating or remediating
emissions, discharges, releases or threatened releases of hazardous substances,
chemical substances, pollutants, contaminants or toxic substances, materials or
wastes, whether solid, liquid or gaseous in nature, into the air, surface water,
groundwater or land, or relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of hazardous
substances, chemical substances, pollutants, contaminants or toxic substances,
material or wastes, whether solid, liquid or gaseous in nature. Except as set
forth on Schedule 2.1(s) hereto, the Company has all necessary governmental
approvals required under all Environmental Laws and used in its business or in
the business of any of its Subsidiaries, except for such instances as would not
individually or in the aggregate have a Material Adverse Effect. The Company and
each of its Subsidiaries are also in compliance with all other limitations,
restrictions, conditions, standards, requirements, schedules and timetables
required or imposed under all Environmental Laws. Except for such instances as
would not individually or in the aggregate have a Material Adverse Effect, there
are no past or present events, conditions, circumstances, incidents, actions or
omissions relating to or in any way affecting the Company or its Subsidiaries
that violate or would be reasonably likely to violate any Environmental Law
after the Closing or that would be reasonably likely to give rise to any
environmental liability, or otherwise form the basis of any claim, action,
demand, suit, proceeding, hearing, study or investigation (i) under any
Environmental Law or (ii) based on or related to the manufacture, processing,
distribution, use, treatment, storage (including, without limitation,
underground storage tanks), disposal, transport or handling, or the emission,
discharge, release or threatened release of any hazardous substance.
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(t) Books and Records; Internal Accounting Controls. The records and
documents of the Company and its Subsidiaries accurately reflect in all material
respects the information relating to the business of the Company and its
Subsidiaries, the location and collection of their assets, and the nature of all
transactions giving rise to the obligations or accounts receivable of the
Company or any Subsidiary. The Company and each of its Subsidiaries maintain a
system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with management's
general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with GAAP and to
maintain asset accountability, (iii) access to assets is permitted only in
accordance with management's general or specific authorization, (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate actions are taken with respect to any
differences and (v) accounts, notes and other receivables and inventory are
recorded accurately, and proper and adequate procedures are implemented to
effect the collection thereof on a current and timely basis. Except as set forth
on Schedule 2.1(t) hereto, there are no significant deficiencies or material
weaknesses in the design or operation of internal controls over financial
reporting that would reasonably be expected to adversely affect the Company's
ability to record, process, summarize and report financial information, and
there is no fraud, whether or not material, that involves management or, to the
knowledge of the Company, other employees who have a significant role in the
Company's internal controls and the Company has provided to the Purchaser copies
of any written materials relating to the foregoing.
(u) Material Agreements. Except for the Transaction Documents (with
respect to clause (i) only), as disclosed in the Commission Documents or as set
forth on Schedule 2.1(u) hereto, or as would not be reasonably likely to have a
Material Adverse Effect, (i) the Company and each of its Subsidiaries have
performed all obligations required to be performed by them to date under any
written or oral contract, instrument, agreement, commitment, obligation, plan or
arrangement, filed or required to be filed with the Commission (the "Material
Agreements"), (ii) neither the Company nor any of its Subsidiaries has received
any notice of default under any Material Agreement and, (iii) to the best of the
Company's knowledge, neither the Company nor any of its Subsidiaries is in
default under any Material Agreement.
(v) Transactions with Affiliates. Except as set forth on Schedule
2.1(v) hereto, there are no loans, leases, agreements, contracts, royalty
agreements, management contracts or arrangements or other continuing
transactions between (a) the Company, any Subsidiary or any of their respective
customers or suppliers on the one hand, and (b) on the other hand, any officer,
employee, consultant or director of the Company, or any of its Subsidiaries, or
any person owning any capital stock of the Company or any Subsidiary or any
member of the immediate family of such officer, employee, consultant, director
or stockholder or any corporation or other entity controlled by such officer,
employee, consultant, director or stockholder, or a member of the immediate
family of such officer, employee, consultant, director or stockholder which, in
each case, is required to be disclosed in the Commission Documents or in the
Company's most recently filed definitive proxy statement on Schedule 14A, that
is not so disclosed in the Commission Documents or in such proxy statement.
(w) Securities Act of 1933. Based in material part upon the
representations and warranties of the Purchasers contained in Section 2.2
hereof, the Company has complied and will comply with all applicable federal and
state securities laws in connection with the offer, issuance and sale of the
Shares hereunder. Neither the Company nor anyone acting on its behalf, directly
or indirectly, has or will sell, offer to sell or solicit offers to buy any of
the Shares or similar securities to, or solicit offers with respect thereto
from, or enter into any negotiations relating thereto with, any person, or has
taken or will take any action so as to bring the issuance and sale of any of the
Shares under the registration provisions of the Securities Act and applicable
state securities laws, and neither the Company nor any of its affiliates, nor
any person acting on its or their behalf, has engaged in any form of general
solicitation or general advertising (within the meaning of Regulation D under
the Securities Act) in connection with the offer or sale of any of the Shares.
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(x) Governmental Approvals. Except for the filing of any notice
prior or subsequent to the Closing that may be required under applicable state
and/or federal securities laws (which if required, shall be filed on a timely
basis), no authorization, consent, approval, license, exemption of, filing or
registration with any court or governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, is or will be necessary
for, or in connection with, the execution or delivery of the Shares, or for the
performance by the Company of its obligations under the Transaction Documents.
(y) Employees; Labor Relations. Neither the Company nor any
Subsidiary has any collective bargaining arrangements or agreements covering any
of its employees, except as set forth on Schedule 2.1(y) hereto or disclosed in
the Commission Documents. Except as set forth on Schedule 2.1(y) hereto or
disclosed in the Commission Documents, neither the Company nor any Subsidiary
has any employment contract, agreement regarding proprietary information,
non-competition agreement, non-solicitation agreement, confidentiality
agreement, or any other similar contract or restrictive covenant, relating to
the right of any officer, employee or consultant to be employed or engaged by
the Company or such Subsidiary required to be disclosed in the Commission
Documents that is not so disclosed. Since December 31, 2004, no officer,
consultant or key employee of the Company or any Subsidiary whose termination,
either individually or in the aggregate, would be reasonably likely to have a
Material Adverse Effect, has terminated or, to the knowledge of the Company, has
any present intention of terminating his or her employment or engagement with
the Company or any Subsidiary. Except as could not reasonably be expected to
have a Material Adverse Effect, (i) neither the Company nor any of its
Subsidiaries is engaged in any unfair labor practice, (ii) there is no strike,
labor dispute, slowdown or stoppage pending or, to the knowledge of the Company,
threatened against the Company or any of its Subsidiaries, and (iii) neither the
Company nor any of its Subsidiaries is a party to any collective bargaining
agreement or contract.
(z) Absence of Certain Developments. Except as provided on Schedule
2.1(z) hereto, since December 31, 2004, neither the Company nor any Subsidiary
has:
(i) issued any stock, bonds or other corporate securities or
any right, options or warrants with respect thereto;
(ii) borrowed any amount in excess of $150,000 or incurred or
become subject to any other liabilities in excess of $150,000 (absolute or
contingent) except current liabilities incurred in the ordinary course of
business which are comparable in nature and amount to the current liabilities
incurred in the ordinary course of business during the comparable portion of its
prior fiscal year, as adjusted to reflect the current nature and volume of the
business of the Company and its Subsidiaries;
9
(iii) discharged or satisfied any lien or encumbrance in
excess of $150,000 or paid any obligation or liability (absolute or contingent)
in excess of $150,000, other than current liabilities paid in the ordinary
course of business;
(iv) declared or made any payment or distribution of cash or
other property to stockholders with respect to its stock, or purchased or
redeemed, or made any agreements so to purchase or redeem, any shares of its
capital stock, in each case in excess of $50,000 individually or $100,000 in the
aggregate;
(v) sold, assigned or transferred any other tangible assets,
or canceled any debts or claims, in each case in excess of $150,000, except in
the ordinary course of business;
(vi) sold, assigned or transferred any patent rights,
trademarks, trade names, copyrights, trade secrets or other intangible assets or
intellectual property rights in excess of $250,000, or disclosed any proprietary
confidential information to any person except to customers in the ordinary
course of business or to the Purchasers or their representatives;
(vii) suffered any material losses or waived any rights of
material value, whether or not in the ordinary course of business, or suffered
the loss of any material amount of prospective business;
(viii) made any changes in employee compensation except in the
ordinary course of business and consistent with past practices;
(ix) made capital expenditures or commitments therefor that
aggregate in excess of $150,000;
(x) entered into any material transaction, whether or not in
the ordinary course of business;
(xi) made charitable contributions or pledges in excess of
$10,000;
(xii) suffered any material damage, destruction or casualty
loss, whether or not covered by insurance;
(xiii) experienced any material problems with labor or
management in connection with the terms and conditions of their employment; or
(xiv) entered into an agreement, written or otherwise, to take
any of the foregoing actions.
10
(aa) Public Utility Holding Company Act and Investment Company Act
Status. The Company is not a "holding company" or a "public utility company" as
such terms are defined in the Public Utility Holding Company Act of 1935, as
amended. The Company is not, and as a result of and immediately upon the Closing
will not be, an "investment company" or a company "controlled" by an "investment
company," within the meaning of the Investment Company Act of 1940, as amended.
(bb) ERISA. No liability to the Pension Benefit Guaranty Corporation
has been incurred with respect to any Plan by the Company or any of its
Subsidiaries which is or would be materially adverse to the Company and its
Subsidiaries. The execution and delivery of this Agreement and the issuance and
sale of the Shares will not involve any transaction which is subject to the
prohibitions of Section 406 of the Employee Retirement Income Security Act of
1974, as amended ("ERISA") or in connection with which a tax could be imposed
pursuant to Section 4975 of the Internal Revenue Code of 1986, as amended,
provided that, if any of the Purchasers, or any person or entity that owns a
beneficial interest in any of the Purchasers, is an "employee pension benefit
plan" (within the meaning of Section 3(2) of ERISA) with respect to which the
Company is a "party in interest" (within the meaning of Section 3(14) of ERISA),
the requirements of Sections 407(d)(5) and 408(e) of ERISA, if applicable, are
met. As used in this Section 2.1(bb), the term "Plan" shall mean an "employee
pension benefit plan" (as defined in Section 3 of ERISA) which is or has been
established or maintained, or to which contributions are or have been made, by
the Company or any Subsidiary or by any trade or business, whether or not
incorporated, which, together with the Company or any Subsidiary, is under
common control, as described in Section 414(b) or (c) of the Code.
(cc) Anti-takeover Device. Neither the Company nor any of its
Subsidiaries has any outstanding shareholder rights plan or "poison pill" or any
similar arrangement. There are no provisions of any anti-takeover or business
combination statute applicable to the Company, the Certificate and the Bylaws
which would preclude the issuance and sale of the Shares and the consummation of
the other transactions contemplated by this Agreement or any of the other
Transaction Documents.
(dd) Independent Nature of Purchasers. The Company acknowledges that
the obligations of each Purchaser under the Transaction Documents are several
and not joint with the obligations of any other Purchaser, and no Purchaser
shall be responsible in any way for the performance of the obligations of any
other Purchaser under the Transaction Documents and the Company shall not be
excused from performance of its obligations to any Purchaser under the
Transaction Documents as a result of nonperformance or breach by any other
Purchaser. The Company acknowledges that the decision of each Purchaser to
purchase Shares pursuant to this Agreement has been made by such Purchaser
independently of any other purchaser and independently of any information,
materials, statements or opinions as to the business, affairs, operations,
assets, properties, liabilities, results of operations, condition (financial or
otherwise) or prospects of the Company or of its Subsidiaries which may have
made or given by any other Purchaser or by any agent or employee of any other
Purchaser, and no Purchaser or any of its agents or employees shall have any
liability to any Purchaser (or any other person) relating to or arising from any
such information, materials, statements or opinions. The Company acknowledges
that nothing contained herein, or in any Transaction Document, and no action
taken by any Purchaser pursuant hereto or thereto, shall be deemed to constitute
the Purchasers as a partnership, an association, a joint venture or any other
kind of entity, or create a presumption that the Purchasers are in any way
acting in concert or as a group with respect to such obligations or the
transactions contemplated by the Transaction Documents. The Company acknowledges
that each Purchaser shall be entitled to independently protect and enforce its
rights, including without limitation, the rights arising out of this Agreement
or out of the other Transaction Documents, and it shall not be necessary for any
other Purchaser to be joined as an additional party in any proceeding for such
purpose. The Company acknowledges that for reasons of administrative convenience
only, the Transaction Documents have been prepared by counsel for one of the
Purchasers and such counsel does not represent all of the Purchasers but only
such Purchaser and the other Purchasers have retained their own individual
counsel with respect to the transactions contemplated hereby. The Company
acknowledges that it has elected to provide all Purchasers with the same terms
and Transaction Documents for the convenience of the Company and not because it
was required or requested to do so by the Purchasers. The Company acknowledges
that such procedure with respect to the Transaction Documents in no way creates
a presumption that the Purchasers are in any way acting in concert or as a group
with respect to the Transaction Documents or the transactions contemplated
hereby or thereby.
11
(ee) No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales of any security or solicited any offers to
buy any security under circumstances that would cause the offering of the Shares
pursuant to this Agreement to be integrated with prior offerings by the Company
for purposes of the Securities Act which would prevent the Company from selling
the Shares pursuant to Regulation D and Rule 506 thereof under the Securities
Act, or any applicable exchange-related stockholder approval provisions, nor
will the Company or any of its affiliates or subsidiaries take any action or
steps that would cause the offering of the Shares to be integrated with other
offerings if such other offering, if integrated, would cause the offer and sale
of the Shares not to be exempt from registration pursuant to Regulation D and
Rule 506 thereof under the Securities Act. The Company does not have any
registration statement pending before the Commission or currently under the
Commission's review and, except as disclosed in Schedule 2.1(z), since March 1,
2005, the Company has not offered or sold any of its equity securities or debt
securities convertible into shares of Common Stock.
(ff) Xxxxxxxx-Xxxxx Act. The Company is in compliance with the
applicable provisions of the Xxxxxxxx-Xxxxx Act of 2002 (the "Xxxxxxxx-Xxxxx
Act"), and the rules and regulations promulgated thereunder, that are effective
and for which compliance by the Company is required as of the date hereof and
intends to comply with other applicable provisions of the Xxxxxxxx-Xxxxx Act,
and the rules and regulations promulgated thereunder, upon the effectiveness of
such provisions or the date by which compliance therewith by the Company is
required.
Section 2.2 Representations and Warranties of the Purchasers. Each
of the Purchasers hereby represents and warrants to the Company with respect
solely to itself and not with respect to any other Purchaser as follows as of
the date hereof and as of the Closing Date:
12
(a) Organization and Standing of the Purchasers. If the Purchaser is
an entity, such Purchaser is a corporation, limited liability company or
partnership duly incorporated or organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization.
(b) Authorization and Power. Such Purchaser has the requisite power
and authority to enter into and perform the Transaction Documents and to
purchase the Shares being sold to it hereunder. The execution, delivery and
performance of the Transaction Documents by such Purchaser and the consummation
by it of the transactions contemplated hereby have been duly authorized by all
necessary corporate, partnership or other action, and no further consent or
authorization of such Purchaser or its Board of Directors, stockholders,
partners or members, as the case may be, is required. When executed and
delivered by the Purchasers, the other Transaction Documents shall constitute
valid and binding obligations of such Purchaser enforceable against such
Purchaser in accordance with their terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation, conservatorship, receivership or similar laws relating to, or
affecting generally the enforcement of, creditor's rights and remedies or by
other equitable principles of general application.
(c) No Conflict. The execution, delivery and performance of the
Transaction Documents by such Purchaser and the consummation by such Purchaser
of the transactions contemplated thereby and hereby do not and will not (i)
violate any provision of such Purchaser's charter or organizational documents,
(ii) conflict with, or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, any
agreement, mortgage, deed of trust, indenture, note, bond, license, lease
agreement, instrument or obligation to which such Purchaser is a party or by
which such Purchaser's respective properties or assets are bound, or (iii)
result in a violation of any federal, state, local or foreign statute, rule,
regulation, order, judgment or decree (including federal and state securities
laws and regulations) applicable to such Purchaser or by which any property or
asset of such Purchaser are bound or affected, except, in all cases, other than
violations pursuant to clauses (i) or (iii) (with respect to federal and state
securities laws) above, for such conflicts, defaults, terminations, amendments,
accelerations, cancellations and violations as would not, individually or in the
aggregate, materially and adversely affect such Purchaser's ability to perform
its obligations under the Transaction Documents.
(d) Acquisition for Investment. Such Purchaser is purchasing the
Shares solely for its own account and not with a view to or for sale in
connection with distribution. Such Purchaser does not have a present intention
to sell any of the Shares, nor a present arrangement (whether or not legally
binding) or intention to effect any distribution of any of the Shares, to or
through any person or entity; provided, however, that by making the
representations herein, such Purchaser does not agree to hold the Shares for any
minimum or other specific term and reserves the right to dispose of the Shares
at any time in accordance with Federal and state securities laws applicable to
such disposition. Such Purchaser acknowledges that it (i) has such knowledge and
experience in financial and business matters such that Purchaser is capable of
evaluating the merits and risks of Purchaser's investment in the Company, (ii)
is able to bear the financial risks associated with an investment in the Shares
and (iii) has been given full access to such records of the Company and the
Subsidiaries and to the officers of the Company and the Subsidiaries as it has
deemed necessary or appropriate to conduct its due diligence investigation.
13
(e) Rule 144. Such Purchaser understands that the Shares must be
held indefinitely unless such Shares are registered under the Securities Act or
an exemption from registration is available. Such Purchaser acknowledges that
such person is familiar with Rule 144 of the rules and regulations of the
Commission, as amended, promulgated pursuant to the Securities Act ("Rule 144"),
and that such Purchaser has been advised that Rule 144 permits resales only
under certain circumstances. Such Purchaser understands that to the extent that
Rule 144 is not available, such Purchaser will be unable to sell any Shares
without either registration under the Securities Act or the existence of another
exemption from such registration requirement.
(f) General. Such Purchaser understands that the Shares are being
offered and sold in reliance on a transactional exemption from the registration
requirements of federal and state securities laws and the Company is relying
upon the truth and accuracy of the representations, warranties, agreements,
acknowledgments and understandings of such Purchaser set forth herein in order
to determine the applicability of such exemptions and the suitability of such
Purchaser to acquire the Shares. Such Purchaser understands that no United
States federal or state agency or any government or governmental agency has
passed upon or made any recommendation or endorsement of the Shares.
(g) No General Solicitation. Such Purchaser acknowledges that the
Shares were not offered to such Purchaser by means of any form of general or
public solicitation or general advertising, or publicly disseminated
advertisements or sales literature, including (i) any advertisement, article,
notice or other communication published in any newspaper, magazine, or similar
media, or broadcast over television or radio, or (ii) any seminar or meeting to
which such Purchaser was invited by any of the foregoing means of
communications. Such Purchaser, in making the decision to purchase the Shares,
has relied upon independent investigation made by it and the representations,
warranties and agreements set forth in the Transaction Documents and has not
relied on any information or representations made by third parties.
(h) Accredited Investor. Such Purchaser is an "accredited investor"
(as defined in Rule 501 of Regulation D), and such Purchaser has such experience
in business and financial matters that it is capable of evaluating the merits
and risks of an investment in the Shares. Such Purchaser is not required to be
registered as a broker-dealer under Section 15 of the Exchange Act and such
Purchaser is not a broker-dealer. Such Purchaser acknowledges that an investment
in the Shares is speculative and involves a high degree of risk. Such Purchaser
has completed or caused to be completed the Investor Questionnaire Certification
attached hereto as Exhibit D certifying as to its status as an "accredited
investor" and understands that the Company is relying upon the truth and
accuracy of such information set forth therein to determine the suitability of
such Purchaser to acquire the Shares.
(i) Certain Fees. The Purchasers have not employed any broker or
finder or incurred any liability for any brokerage or investment banking fees,
commissions, finders' structuring fees, financial advisory fees or other similar
fees in connection with the Transaction Documents.
14
(j) Independent Investment. No Purchaser has agreed to act with any
other Purchaser for the purpose of acquiring, holding, voting or disposing of
the Shares purchased hereunder for purposes of Section 13(d) under the Exchange
Act, and each Purchaser is acting independently with respect to its investment
in the Shares.
(k) Short Sales. Each Purchaser covenants that neither it nor any
affiliates acting on its behalf or pursuant to any understanding with it will
execute any Short Sales (as defined below) during the period after the date that
such Purchaser first received a term sheet from the Company or any other person
or entity setting forth the material terms of the transactions contemplated
hereunder until the date that the transactions contemplated by this Agreement
are first publicly announced as described in Section 3.10. For purposes hereof,
"Short Sales" shall include all "short sales" as defined in Rule 200 of
Regulation SHO under the Exchange Act.
ARTICLE III
COVENANTS
The Company covenants with each Purchaser as follows, which covenants are
for the benefit of each Purchaser and their respective permitted assignees.
Section 3.1 Securities Compliance. The Company shall notify the
Commission in accordance with its rules and regulations, of the transactions
contemplated by any of the Transaction Documents and shall take all other
necessary action and proceedings as may be required and permitted by applicable
law, rule and regulation, for the legal and valid issuance of the Shares to the
Purchasers, or their respective subsequent holders.
Section 3.2 Registration and Listing. The Company shall cause its
Common Stock to continue to be registered under Sections 12(b) or 12(g) of the
Exchange Act, to comply in all respects with its reporting and filing
obligations under the Exchange Act, to comply with all requirements related to
any registration statement filed pursuant to this Agreement, and to not take any
action or file any document (whether or not permitted by the Securities Act or
the rules promulgated thereunder) to terminate or suspend such registration or
to terminate or suspend its reporting and filing obligations under the Exchange
Act or Securities Act, except as permitted herein. The Company will take all
action necessary to continue the listing or trading of its Common Stock on the
OTC Bulletin Board or any successor market. Subject to the terms of the
Transaction Documents, the Company further covenants that it will take such
further action as the Purchasers may reasonably request, all to the extent
required from time to time to enable the Purchasers to sell the Shares without
registration under the Securities Act within the limitation of the exemptions
provided by Rule 144 promulgated under the Securities Act. Upon the request of
the Purchasers, the Company shall deliver to the Purchasers a written
certification of a duly authorized officer as to whether it has complied with
such requirements.
15
Section 3.3 Inspection Rights. The Company shall permit, during
normal business hours and upon reasonable request and reasonable notice, each
Purchaser or any employees, agents or representatives thereof, so long as such
Purchaser shall be obligated hereunder to purchase the Shares or shall
beneficially own any Shares, for purposes reasonably related to such Purchaser's
interests as a stockholder to examine and make reasonable copies of the records
and books of account of, and visit and inspect the properties, assets,
operations and business of the Company and any Subsidiary, and to discuss the
affairs, finances and accounts of the Company and any Subsidiary with any of its
officers, consultants, directors, and key employees.
Section 3.4 Compliance with Laws. The Company shall comply, and
cause each Subsidiary to comply, with all applicable laws, rules, regulations
and orders, noncompliance with which would be reasonably likely to have a
Material Adverse Effect.
Section 3.5 Keeping of Records and Books of Account. The Company
shall keep and cause each Subsidiary to keep adequate records and books of
account, in which complete entries will be made in accordance with GAAP
consistently applied, reflecting all financial transactions of the Company and
its Subsidiaries.
Section 3.6 Reporting Requirements. If the Company ceases to file
its periodic reports with the Commission, or if the Commission ceases making
these periodic reports available via the Internet without charge, then the
Company shall, promptly after filing with the Commission, furnish the following
to each Purchaser so long as such Purchaser shall be obligated hereunder to
purchase the Shares or shall beneficially own Shares:
(a) Quarterly Reports filed with the Commission on Form 10-QSB;
(b) Annual Reports filed with the Commission on Form 10-KSB; and
(c) Copies of all notices, information and proxy statements in
connection with any meetings, that are, in each case, provided to holders of
shares of Common Stock, contemporaneously with the delivery of such notices or
information to such holders of Common Stock.
Section 3.7 Other Agreements. The Company shall not enter into any
agreement in which the terms of such agreement would restrict or impair the
right or ability of the Company or any Subsidiary to perform its obligations
under any Transaction Document.
Section 3.8 Use of Proceeds. The net proceeds from the sale of the
Shares will be used by the Company for working capital and general corporate
purposes.
Section 3.9 Reporting Status. So long as a Purchaser beneficially
owns any of the Shares, the Company shall timely file all reports required to be
filed with the Commission pursuant to the Exchange Act, and the Company shall
not terminate its status as an issuer required to file reports under the
Exchange Act even if the Exchange Act or the rules and regulations thereunder
would permit such termination.
16
Section 3.10 Disclosure of Transaction. The Company shall issue a
press release describing the material terms of the transactions contemplated
hereby (the "Press Release") as soon as practicable after the Closing but in no
event later than twenty-four hours after the Closing; provided, however, that if
the Closing occurs after 4:00 P.M. Eastern Time on any Trading Day, the Company
shall issue the Press Release no later than 9:00 A.M. Eastern Time on the first
Trading Day following the Closing Date. The Company shall also file with the
Commission a Current Report on Form 8-K (the "Form 8-K") describing the material
terms of the transactions contemplated hereby (and attaching as exhibits thereto
this Agreement, the Registration Rights Agreement, the Escrow Agreement, and the
Press Release) as soon as practicable following such Closing Date but in no
event more than two (2) Trading Days following such Closing Date, which Press
Release and Form 8-K shall be subject to prior review and comment by the
Purchasers. "Trading Day" means any day during which the OTC Bulletin Board (or
other principal exchange on which the Common Stock is traded) shall be open for
trading.
Section 3.11 Disclosure of Material Information. The Company
covenants and agrees that neither it nor any other person acting on its behalf
has provided or will provide any Purchaser or its agents or counsel with any
information that the Company believes constitutes material non-public
information, unless prior thereto such Purchaser shall have executed a written
agreement regarding the confidentiality and use of such information. The Company
understands and confirms that each Purchaser shall be relying on the foregoing
representations in effecting transactions in securities of the Company.
Section 3.12 Form D. The Company agrees to file a Form D with
respect to the Shares as required by Rule 506 under Regulation D and to provide
a copy thereof to the Purchasers promptly after such filing.
Section 3.13 No Integrated Offerings. The Company shall not make any
offers or sales of any security (other than the Shares being offered or sold
hereunder) under circumstances that would require registration of the Shares
being offered or sold hereunder under the Securities Act.
Section 3.14 Pledge of Shares. The Company acknowledges and agrees
that the Shares may be pledged by a Purchaser in connection with a bona fide
margin agreement or other loan or financing arrangement that is secured by the
Common Stock. The pledge of Common Stock shall not be deemed to be a transfer,
sale or assignment of the Common Stock hereunder, and no Purchaser effecting a
pledge of Common Stock shall be required to provide the Company with any notice
thereof or otherwise make any delivery to the Company pursuant to this Agreement
or any other Transaction Document; provided that a Purchaser and its pledgee
shall be required to comply with the provisions of Article V hereof in order to
effect a sale, transfer or assignment of Common Stock to such pledgee. At the
Purchasers' expense, the Company hereby agrees to execute and deliver such
documentation as a pledgee of the Common Stock may reasonably request in
connection with a pledge of the Common Stock to such pledgee by a Purchaser.
17
ARTICLE IV
CONDITIONS
Section 4.1 Conditions Precedent to the Obligation of the Company to
Close and to Sell the Shares. The obligation hereunder of the Company to close
and issue and sell the Shares to the Purchasers at the Closing Date is subject
to the satisfaction or waiver, at or before the Closing of the conditions set
forth below. These conditions are for the Company's sole benefit and may be
waived by the Company at any time in its sole discretion.
(a) Accuracy of the Purchasers' Representations and Warranties. The
representations and warranties of each Purchaser shall be true and correct in
all material respects as of the date when made and as of the Closing Date as
though made at that time, except for representations and warranties that are
expressly made as of a particular date, which shall be true and correct in all
material respects as of such date.
(b) Performance by the Purchasers. Each Purchaser shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by such Purchaser at or prior to the Closing Date.
(c) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
(d) Delivery of Purchase Price. The Purchasers shall have delivered
to the Company the Purchase Price for the Shares to be purchased by each
Purchaser.
(e) Delivery of Transaction Documents. The Transaction Documents to
which the Purchasers are a party shall have been duly executed by the Purchasers
and delivered to the Company.
(f) Escrow Agreement. The Escrow Agreement shall have been executed
and delivered by the Purchasers and the escrow agent to the Company.
Section 4.2 Conditions Precedent to the Obligation of the Purchasers
to Close and to Purchase the Shares. The obligation hereunder of each Purchaser
to purchase the Shares and consummate the transactions contemplated by this
Agreement is subject to the satisfaction or waiver, at or before the Closing
Date, of each of the conditions set forth below. These conditions are for the
Purchaser's sole benefit and may be waived by the Purchaser at any time in its
sole discretion.
(a) Accuracy of the Company's Representations and Warranties. Each
of the representations and warranties of the Company in this Agreement and the
Registration Rights Agreement shall be true and correct in all respects as of
the Closing Date, except for representations and warranties that speak as of a
particular date, which shall be true and correct in all respects as of such
date.
18
(b) Performance by the Company. The Company shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to the Closing Date.
(c) No Suspension, Etc. Trading in the Common Stock shall not have
been suspended by the Commission or the OTC Bulletin Board (except for any
suspension of trading of limited duration agreed to by the Company, which
suspension shall be terminated prior to the Closing), and, at any time prior to
the Closing Date, trading in securities generally as reported by Bloomberg
Financial Markets ("Bloomberg") shall not have been suspended or limited, or
minimum prices shall not have been established on securities whose trades are
reported by Bloomberg, or on the New York Stock Exchange, nor shall a banking
moratorium have been declared either by the United States or New York State
authorities.
(d) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
(e) No Proceedings or Litigation. No action, suit or proceeding
before any arbitrator or any governmental authority shall have been commenced,
and no investigation by any governmental authority shall have been threatened,
against the Company or any Subsidiary, or any of the officers, directors or
affiliates of the Company or any Subsidiary seeking to restrain, prevent or
change the transactions contemplated by this Agreement, or seeking damages in
connection with such transactions.
(f) Opinion of Counsel. The Purchasers shall have received an
opinion of counsel to the Company, dated the date of such Closing, substantially
in the form of Exhibit E hereto, with such exceptions and limitations as shall
be reasonably acceptable to counsel to the Purchasers.
(g) Shares. At or prior to the Closing, the Company shall have
delivered to the Purchasers certificates representing the Shares (in such
denominations as each Purchaser may request) being acquired by the Purchasers at
the Closing.
(h) Secretary's Certificate. The Company shall have delivered to the
Purchasers a secretary's certificate, dated as of the Closing Date, as to (i)
the resolutions adopted by the Board of Directors approving the transactions
contemplated hereby, (ii) the Certificate, (iii) the Bylaws, each as in effect
at the Closing, and (iv) the authority and incumbency of the officers of the
Company executing the Transaction Documents and any other documents required to
be executed or delivered in connection therewith.
(i) Officer's Certificate. On the Closing Date, the Company shall
have delivered to the Purchasers a certificate signed by an executive officer on
behalf of the Company, dated as of such Closing Date, confirming the accuracy of
the Company's representations, warranties and its compliance with covenants as
of the Closing Date and confirming the compliance by the Company with the
conditions precedent set forth in paragraphs (b)-(e) of this Section 4.2 as of
the Closing Date (provided that, with respect to the matters in paragraphs (d)
and (e) of this Section 4.2, such confirmation shall be based on the knowledge
of the executive officer after due inquiry).
19
(j) Registration Rights Agreement. As of the Closing Date, the
Company shall have duly executed and delivered the Registration Rights Agreement
in the form of Exhibit C attached hereto.
(k) Material Adverse Effect. No Material Adverse Effect shall have
occurred at or before the Closing Date.
(l) Escrow Agreement. As of the Closing Date, the Company and the
escrow agent shall have executed and delivered the Escrow Agreement to the
Purchasers.
(m) Conversion of Xxxxx Promissory Note. At or prior to the Closing
Date, Xxxxxx Xxxxx, the Company's Chief Executive Officer, shall convert at
least $600,000 of a promissory note issued on May 18, 2005 in the aggregate
principal amount of $1,100,000 at a price per share equal to the Per Share
Purchase Price.
ARTICLE V
CERTIFICATE LEGEND
Section 5.1 Legend. Each certificate representing the Shares shall
be stamped or otherwise imprinted with a legend substantially in the following
form (in addition to any legend required by applicable state securities or "blue
sky" laws):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE (THE "SECURITIES")
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS AND MAY
NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED
UNDER THE SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES LAWS
OR ROO GROUP, INC. SHALL HAVE RECEIVED AN OPINION OF COUNSEL THAT
REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT AND UNDER
THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.
The Company agrees to reissue certificates representing any of the Shares,
without the legend set forth above if at such time, prior to making any transfer
of any such Shares, such holder thereof shall give written notice to the Company
describing the manner and terms of such transfer and removal as the Company may
reasonably request. Such proposed transfer and removal will not be effected
until: (a) either (i) the Company has received an opinion of counsel reasonably
satisfactory to the Company, to the effect that the registration of the Shares
under the Securities Act is not required in connection with such proposed
transfer, (ii) a registration statement under the Securities Act covering such
proposed disposition has been filed by the Company with the Commission and has
become and remains effective under the Securities Act, (iii) the Company has
received other evidence reasonably satisfactory to the Company that such
registration and qualification under the Securities Act and state securities
laws are not required, or (iv) the holder provides the Company with reasonable
assurances that such security can be sold pursuant to Rule 144 under the
Securities Act; and (b) either (i) the Company has received an opinion of
counsel reasonably satisfactory to the Company, to the effect that registration
or qualification under the securities or "blue sky" laws of any state is not
required in connection with such proposed disposition, or (ii) compliance with
applicable state securities or "blue sky" laws has been effected or a valid
exemption exists with respect thereto. The Company will respond to any such
notice from a holder within five (5) business days. In the case of any proposed
transfer under this Section 5.1, the Company will use reasonable efforts to
comply with any such applicable state securities or "blue sky" laws, but shall
in no event be required, (x) to qualify to do business in any state where it is
not then qualified, or (y) to take any action that would subject it to tax or to
the general service of process in any state where it is not then subject. The
restrictions on transfer contained in this Section 5.1 shall be in addition to,
and not by way of limitation of, any other restrictions on transfer contained in
any other section of this Agreement. Whenever a certificate representing the
Shares is required to be issued to a Purchaser without a legend, in lieu of
delivering physical certificates representing the Shares, provided the Company's
transfer agent is participating in the Depository Trust Company ("DTC") Fast
Automated Securities Transfer program, the Company shall use its reasonable best
efforts to cause its transfer agent to electronically transmit the Shares to a
Purchaser by crediting the account of such Purchaser's Prime Broker with DTC
through its Deposit Withdrawal Agent Commission ("DWAC") system (to the extent
not inconsistent with any provisions of this Agreement).
20
ARTICLE VI
INDEMNIFICATION
Section 6.1 General Indemnity. The Company agrees to indemnify and
hold harmless the Purchasers (and their respective directors, officers,
affiliates, agents, successors and assigns) from and against any and all losses,
liabilities, deficiencies, costs, damages and expenses (including, without
limitation, reasonable attorneys' fees, charges and disbursements) incurred by
the Purchasers and their directors, officers, affiliates, agents, successors and
assigns as a result of any inaccuracy in or breach of the representations,
warranties or covenants made by the Company herein. Each Purchaser severally but
not jointly agrees to indemnify and hold harmless the Company and its directors,
officers, affiliates, agents, successors and assigns from and against any and
all losses, liabilities, deficiencies, costs, damages and expenses (including,
without limitation, reasonable attorneys' fees, charges and disbursements)
incurred by the Company and its directors, officers, affiliates, agents,
successors and assigns as a direct result of any inaccuracy in or breach of the
representations, warranties or covenants made by such Purchaser herein. The
maximum aggregate liability of each Purchaser pursuant to its indemnification
obligations under this Article VI shall not exceed the portion of the Purchase
Price paid by such Purchaser hereunder.
21
Section 6.2 Indemnification Procedure. Any party entitled to
indemnification under this Article VI (an "indemnified party") will give written
notice to the indemnifying party of any matters giving rise to a claim for
indemnification; provided, that the failure of any indemnified party to give
notice as provided herein shall not relieve the indemnifying party of its
obligations under this Article VI except to the extent that the indemnifying
party is actually prejudiced by such failure to give notice. In case any such
action, proceeding or claim is brought against an indemnified party in respect
of which indemnification is sought hereunder, the indemnifying party shall be
entitled to participate in and, unless in the reasonable judgment of the
indemnifying party a conflict of interest between it and the indemnified party
exists with respect to such action, proceeding or claim (in which case the
indemnifying party shall be responsible for the reasonable fees and expenses of
one separate counsel for the indemnified parties), to assume the defense thereof
with counsel reasonably satisfactory to the indemnified party. In the event that
the indemnifying party advises an indemnified party that it will not contest
such a claim for indemnification hereunder, or fails, within thirty (30) days of
receipt of any indemnification notice to notify, in writing, such person of its
election to defend, settle or compromise, at its sole cost and expense, any
action, proceeding or claim (or discontinues its defense at any time after it
commences such defense), then the indemnified party may, at its option, defend,
settle or otherwise compromise or pay such action or claim. In any event, unless
and until the indemnifying party elects in writing to assume and does so assume
the defense of any such claim, proceeding or action, the indemnified party's
costs and expenses arising out of the defense, settlement or compromise of any
such action, claim or proceeding shall be losses subject to indemnification
hereunder. The indemnified party shall cooperate fully with the indemnifying
party in connection with any negotiation or defense of any such action or claim
by the indemnifying party and shall furnish to the indemnifying party all
information reasonably available to the indemnified party which relates to such
action or claim. The indemnifying party shall keep the indemnified party fully
apprised at all times as to the status of the defense or any settlement
negotiations with respect thereto. If the indemnifying party elects to defend
any such action or claim, then the indemnified party shall be entitled to
participate in such defense with counsel of its choice at its sole cost and
expense. The indemnifying party shall not be liable for any settlement of any
action, claim or proceeding effected without its prior written consent which
consent shall not be unreasonably withheld. Notwithstanding anything in this
Article VI to the contrary, the indemnifying party shall not, without the
indemnified party's prior written consent, settle or compromise any claim or
consent to entry of any judgment in respect thereof which imposes any future
obligation on the indemnified party or which does not include, as an
unconditional term thereof, the giving by the claimant or the plaintiff to the
indemnified party of a release from all liability in respect of such claim. The
indemnification required by this Article VI shall be made by periodic payments
of the amount thereof during the course of investigation or defense, as and when
bills are received or expense, loss, damage or liability is incurred, so long as
the indemnified party irrevocably agrees to refund such moneys if it is
ultimately determined by a court of competent jurisdiction that such party was
not entitled to indemnification. The indemnity agreements contained herein shall
be in addition to (a) any cause of action or similar rights of the indemnified
party against the indemnifying party or others, and (b) any liabilities the
indemnifying party may be subject to pursuant to the law.
22
ARTICLE VII
MISCELLANEOUS
Section 7.1 Fees and Expenses. Each party shall pay the fees and
expenses of its advisors, counsel, accountants and other experts, if any, and
all other expenses, incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement, provided
that the Company shall pay all actual attorneys' fees and expenses (including
disbursements and out-of-pocket expenses) up to a maximum of $10,000 for one
counsel to the Purchasers incurred by the Purchasers in connection with (i) the
preparation, negotiation, execution and delivery of this Agreement and the other
Transaction Documents and the transactions contemplated thereunder, which
payment shall be made at Closing, (ii) the filing and declaration of
effectiveness by the Commission of the Registration Statement (as defined in the
Registration Rights Agreement) and (iii) any amendments, modifications or
waivers of this Agreement or any of the other Transaction Documents. In
addition, the Company shall pay all reasonable fees and expenses incurred by the
Purchasers in connection with the enforcement of this Agreement or any of the
other Transaction Documents, including, without limitation, all reasonable
attorneys' fees and expenses.
Section 7.2 Specific Performance; Consent to Jurisdiction; Venue.
(a) The Company and the Purchasers acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement or the other Transaction Documents are not performed in accordance
with their specific terms or are otherwise breached. It is accordingly agreed
that the parties shall be entitled to an injunction or injunctions to prevent or
cure breaches of the provisions of this Agreement or the other Transaction
Documents and to enforce specifically the terms and provisions hereof or
thereof, this being in addition to any other remedy to which any of them may be
entitled by law or equity.
(b) The parties agree that venue for any dispute arising under this
Agreement will lie exclusively in the state or federal courts located in New
York County, New York, and the parties irrevocably waive any right to raise
forum non conveniens or any other argument that New York is not the proper
venue. The parties irrevocably consent to personal jurisdiction in the state and
federal courts of the state of New York. The Company and each Purchaser consent
to process being served in any such suit, action or proceeding by mailing a copy
thereof to such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing in this Section 7.2 shall affect
or limit any right to serve process in any other manner permitted by law. The
Company and the Purchasers hereby agree that the prevailing party in any suit,
action or proceeding arising out of or relating to the Shares, this Agreement or
the Registration Rights Agreement, shall be entitled to reimbursement for
reasonable legal fees from the non-prevailing party.
Section 7.3 Entire Agreement; Amendment. This Agreement and the
Transaction Documents contain the entire understanding and agreement of the
parties with respect to the matters covered hereby and, except as specifically
set forth herein or in the other Transaction Documents, neither the Company nor
any Purchaser make any representation, warranty, covenant or undertaking with
respect to such matters, and they supersede all prior understandings and
agreements with respect to said subject matter, all of which are merged herein.
Following the Closing, no provision of this Agreement may be waived or amended
other than by a written instrument signed by the Company and the Purchasers
holding at least a majority of all Shares then held by the Purchasers. Any
amendment or waiver effected in accordance with this Section 7.3 shall be
binding upon each Purchaser (and their permitted assigns) and the Company.
23
Section 7.4 Notices. Any notice, demand, request, waiver or other
communication required or permitted to be given hereunder shall be in writing
and shall be effective (a) upon hand delivery by telecopy or facsimile at the
address or number designated below (if delivered on a business day during normal
business hours where such notice is to be received), or the first business day
following such delivery (if delivered other than on a business day during normal
business hours where such notice is to be received) or (b) on the second
business day following the date of mailing by express courier service, fully
prepaid, addressed to such address, or upon actual receipt of such mailing,
whichever shall first occur. The addresses for such communications shall be:
If to the Company: Xxxxxx Xxxxx
c/o ROO Group, Inc.
000 Xxxx 00xx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, XX 00000
Tel. No.: (000) 000-0000
Fax No.: (000) 000-0000
with copies to (which shall not constitute notice):
Sichenzia Xxxx Xxxxxxxx Xxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxxx, Esq.
Tel No.: (000) 000-0000
Fax No.: (000) 000-0000
If to any Purchaser: At the address of such Purchaser set forth on
Exhibit A to this Agreement.
with copies to: Xxxxxx Xxxxx Xxxxxxxx & Xxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxxxxxx X. Xxxxxxx
Tel No.: (000) 000-0000
Fax No.: (000) 000-0000
24
Any party hereto may from time to time change its address for notices by
giving written notice of such changed address to the other parties hereto.
Section 7.5 Waivers. No waiver by any party of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any other
provision, condition or requirement hereof, nor shall any delay or omission of
any party to exercise any right hereunder in any manner impair the exercise of
any such right accruing to it thereafter.
Section 7.6 Headings. The article, section and subsection headings
in this Agreement are for convenience only and shall not constitute a part of
this Agreement for any other purpose and shall not be deemed to limit or affect
any of the provisions hereof.
Section 7.7 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their successors and assigns.
After the Closing, the assignment by a party to this Agreement of any rights
hereunder shall not affect the obligations of such party under this Agreement.
Subject to Section 5.1 hereof and subject to Section 7(h) of the Registration
Rights Agreement, the Purchasers may assign the Shares and its rights under this
Agreement and the other Transaction Documents and any other rights hereto and
thereto without the consent of the Company.
Section 7.8 No Third Party Beneficiaries. This Agreement is intended
for the benefit of the parties hereto and their respective permitted successors
and assigns and is not for the benefit of, nor may any provision hereof be
enforced by, any other person.
Section 7.9 Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York, without
giving effect to any of the conflicts of law principles which would result in
the application of the substantive law of another jurisdiction. This Agreement
shall not be interpreted or construed with any presumption against the party
causing this Agreement to be drafted.
Section 7.10 Survival. The representations and warranties of the
Company and the Purchasers shall survive the execution and delivery hereof and
the Closing until the third anniversary of the Closing Date except the
agreements and covenants set forth in Articles I, III, V, VI and VII of this
Agreement shall survive the execution and delivery hereof and the Closing.
Section 7.11 Counterparts. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument and shall become effective when counterparts have been signed by
each party and delivered to the other parties hereto, it being understood that
all parties need not sign the same counterpart.
Section 7.12 Publicity. Except as discussed in the Registration
Statement (as defined in the Registration Rights Agreement), the Company agrees
that it will not disclose, and will not include in any public announcement, the
names of the Purchasers without the consent of the Purchasers, which consent
shall not be unreasonably withheld or delayed, or unless and until such
disclosure is required by law, rule or applicable regulation, and then only to
the extent of such requirement.
25
Section 7.13 Severability. The provisions of this Agreement are
severable and, in the event that any court of competent jurisdiction shall
determine that any one or more of the provisions or part of the provisions
contained in this Agreement shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision or part of a provision of
this Agreement and this Agreement shall be reformed and construed as if such
invalid or illegal or unenforceable provision, or part of such provision, had
never been contained herein, so that such provisions would be valid, legal and
enforceable to the maximum extent possible.
Section 7.14 Further Assurances. From and after the date of this
Agreement, upon the request of the Purchasers or the Company, the Company and
each Purchaser shall execute and deliver such instruments, documents and other
writings as may be reasonably necessary or desirable to confirm and carry out
and to effectuate fully the intent and purposes of this Agreement and the
Registration Rights Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
26
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the date first above
written.
ROO GROUP, INC.
By:
-------------------------------------
Name: Xxxxx Xxxxx
Title: Chief Financial Officer
PURCHASER:
-------------------------------------
Name:
Title:
27
EXHIBIT A
LIST OF PURCHASERS
Names and Addresses Number of Shares
of Purchasers Purchased
------------------- ----------------
i
EXHIBIT B
ESCROW AGREEMENT
ii
EXHIBIT C
FORM OF REGISTRATION RIGHTS AGREEMENT
iii
EXHIBIT D
INVESTOR QUESTIONNAIRE CERTIFICATION
ROO GROUP, INC.
INVESTOR QUESTIONNAIRE
(ALL INFORMATION WILL BE TREATED CONFIDENTIALLY)
To: ROO Group, Inc.
This Investor Questionnaire ("Questionnaire") must be completed by each
potential investor in connection with the offer and sale of the shares of
restricted common stock of ROO Group, Inc. (the "Shares"). The Shares are being
offered and sold by ROO Group, Inc. (the "Company") without registration under
the Securities Act of 1933, as amended (the "Act"), and the securities laws of
certain states, in reliance on the exemptions contained in Section 4(2) of the
Act and on Regulation D promulgated thereunder and in reliance on similar
exemptions under applicable state laws. The Company must determine that a
potential investor meets certain suitability requirements before offering or
selling Shares to such investor. The purpose of this Questionnaire is to assure
the Company that each investor will meet the applicable suitability
requirements. The information supplied by you will be used in determining
whether you meet such criteria, and reliance upon the private offering
exemptions from registration is based in part on the information herein
supplied.
This Questionnaire does not constitute an offer to sell or a solicitation of an
offer to buy any security. Your answers will be kept strictly confidential.
However, by signing this Questionnaire, you will be authorizing the Company to
provide a completed copy of this Questionnaire to such parties as the Company
deems appropriate in order to ensure that the offer and sale of the Shares will
not result in a violation of the Act or the securities laws of any state and
that you otherwise satisfy the suitability standards applicable to purchasers of
the Shares. All potential investors must answer all applicable questions and
complete, date and sign this Questionnaire. Please print or type your responses
and attach additional sheets of paper if necessary to complete your answers to
any item.
A. BACKGROUND INFORMATION
Name:___________________________________________________________________________
Address of Principal Residence (or Principal Place of Business if investor is an
entity):
________________________________________________________________________________
(Number and Street)
________________________________________________________________________________
(City) (State) (Zip Code)
Telephone Number: _____________________________
If an individual:
Age: __________ Citizenship: ____________
If a corporation, partnership, limited liability company, trust or other
entity:
Type of entity:_______________________________________________________________
State of formation:______________________ Date of formation: ___________________
Social Security or Taxpayer Identification No.________________________________
B. STATUS AS ACCREDITED INVESTOR
The undersigned is an "accredited investor" as such term is defined in
Regulation D under the Act, and at the time of the offer and sale of the Shares
the undersigned falls and will fall within one or more of the following
categories (Please initial one or more, as applicable): (1)
------------
(1) As used in this Questionnaire, the term "net worth" means the excess
of total assets over total liabilities. In computing net worth for the purpose
of subsection (4), the principal residence of the investor must be valued at
cost, including cost of improvements, or at recently appraised value by an
institutional lender making a secured loan, net of encumbrances. In determining
income, the investor should add to the investor's adjusted gross income any
amounts attributable to tax exempt income received, losses claimed as a limited
partner in any limited partnership, contributions to an XXX or XXXXX retirement
plan, alimony payments, and any amount by which income from long-term capital
gains has been reduced in arriving at adjusted gross income.
iv
____ (1) a bank as defined in Section 3(a)(2) of the Act, or a savings and loan
association or other institution as defined in Section 3(a)(5)(A) of the Act
whether acting in its individual or fiduciary capacity; a broker or dealer
registered pursuant to Section 15 of the Securities Exchange Act of 1934; an
insurance company as defined in Section 2(13) of the Act; an investment company
registered under the Investment Company Act of 1940 or a business development
company as defined in Section 2(a)(48) of that Act; a Small Business Investment
Company licensed by the U.S. Small Business Administration under Section 301(c)
or (d) of the Small Business Investment Act of 1958; a plan established and
maintained by a state, its political subdivisions, or any agency or
instrumentality of a state or its political subdivisions for the benefit of its
employees, if such plan has total assets in excess of $5,000,000; an employee
benefit plan within the meaning of the Employee Retirement Income Security Act
of 1974, if the investment decision is made by a plan fiduciary, as defined in
Section 3(21) of such Act, which is either a bank, savings and loan association,
insurance company, or registered investment adviser, or if the employee benefit
plan has total assets in excess of $5,000,000 or, if a self-directed plan, with
the investment decisions made solely by persons that are accredited investors;
____ (2) a private business development company as defined in Section 202(a)(22)
of the Investment Advisers Act of 1940;
____ (3) an organization described in Section 501(c)(3) of the Internal Revenue
Code of 1986, as amended, corporation, Massachusetts or similar business trust,
or partnership, not formed for the specific purpose of acquiring the Shares
offered, with total assets in excess of $5,000,000;
____ (4) a natural person whose individual net worth, or joint net worth with
that person's spouse, at the time of such person's purchase of the Shares
exceeds $1,000,000;
____ (5) a natural person who had an individual income in excess of $200,000 in
each of the two most recent years or joint income with that person's spouse in
excess of $300,000 in each of those years and has a reasonable expectation of
reaching the same income level in the current year;
____ (6) a trust, with total assets in excess of $5,000,000, not formed for the
specific purpose of acquiring the Shares offered, whose purchase is directed by
a sophisticated person as described in Rule 506(b)(2)(ii) of Regulation D; and
____ (7) an entity in which all of the equity owners are accredited investors
(as defined above).
IN WITNESS WHEREOF, the undersigned has executed this Questionnaire this ____
day of __________, 2005, and declares under oath that it is truthful and
correct.
__________________________________________
Print Name
By: ______________________________________
Signature
Title: ___________________________________
(required for any purchaser that is
a corporation, partnership, limited
liability company, trust or other
entity)
v
EXHIBIT E
FORM OF OPINION
1. The Company is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Delaware and has the requisite
corporate power to own, lease and operate its properties and assets, and to
carry on its business as presently conducted. The Company is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction
in which the failure to so qualify would have a Material Adverse Effect.
2. The Company has the requisite corporate power and authority to enter
into and perform its obligations under the Transaction Documents and to issue
the Shares. The execution, delivery and performance of each of the Transaction
Documents by the Company and the consummation by it of the transactions
contemplated thereby have been duly and validly authorized by all necessary
corporate action and no further consent or authorization of the Company, its
Board of Directors or its stockholders is required. Each of the Transaction
Documents have been duly executed and delivered and each of the Transaction
Documents constitutes a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its respective terms. The
Shares are not subject to any preemptive rights under the Certificate of
Incorporation or the Bylaws.
3. The Shares have been duly authorized and, the Shares when delivered
against payment in full as provided in the Purchase Agreement, will be validly
issued, fully paid and nonassessable.
4. The execution, delivery and performance of and compliance with the
terms of the Transaction Documents and the issuance of the Shares do not (a)
violate any provision of the Certificate of Incorporation or Bylaws, (b)
conflict with, or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any material agreement,
mortgage, deed of trust, indenture, note, bond, license, lease agreement,
instrument or obligation to which the Company is a party and which is known to
us, (c) create or impose a lien, charge or encumbrance on any property of the
Company under any agreement or any commitment known to us to which the Company
is a party or by which the Company is bound or by which any of its respective
properties or assets are bound, or (d) result in a violation of any Federal,
state, local or foreign statute, rule, regulation, order, judgment, injunction
or decree (including Federal and state securities laws and regulations)
applicable to the Company or by which any property or asset of the Company is
bound or affected, except, in all cases other than violations pursuant to
clauses (a) and (d) above, for such conflicts, default, terminations,
amendments, acceleration, cancellations and violations as would not,
individually or in the aggregate, have a Material Adverse Effect.
5. No consent, approval or authorization of or designation, declaration or
filing with any governmental authority on the part of the Company is required
under Federal, state or local law, rule or regulation in connection with the
valid execution, delivery and performance of the Transaction Documents, or the
offer, sale or issuance of the Shares other than filings as may be required by
applicable Federal and state securities laws.
vi
6. To our knowledge, there is no action, suit, claim, investigation or
proceeding pending or threatened against the Company which questions the
validity of the Agreement or the transactions contemplated thereby or any action
taken or to be taken pursuant thereto. There is no action, suit, claim,
investigation or proceeding pending, or to our knowledge, threatened, against or
involving the Company or any of its properties or assets and which, if adversely
determined, is reasonably likely to result in a Material Adverse Effect. There
are no outstanding orders, judgments, injunctions, awards or decrees of any
court, arbitrator or governmental or regulatory body against the Company or any
officers or directors of the Company in their capacities as such.
7. The offer, issuance and sale of the Shares are exempt from the
registration requirements of the Securities Act of 1933, as amended.
8. The Company is not, and as a result of and immediately upon Closing
will not be, an "investment company" or a company "controlled" by an "investment
company," within the meaning of the Investment Company Act of 1940, as amended.
vii
Schedule of Exceptions
to
Common Stock Purchase Agreement
(Prepared in connection with Shares sold by the Company to the Purchasers under
the Common Stock Purchase Agreement dated October 20, 2005 (the "October 2005
Purchase Agreement"). Capitalized terms not defined herein shall have the
meaning given to such terms in the October 2005 Purchase Agreement.)
October 21, 2005
Schedule 2.1(c)
Capitalization
Authorized Capital Stock:
As of October 20, 2005, the authorized capital stock of the Company
consists of (i) 500,000,000 shares of Common Stock, of which approximately
8,963,156 shares are issued and outstanding; and (ii) 20,000,000 shares of
preferred stock, of which 10,000,000 shares are designated as Series A Preferred
Stock of which 9,500,000 shares are issued and outstanding.
Outstanding Options:
Exercise
Name qty Price($) Notes
---------------------------------------------- --------- -------- -------------------
Options issued under Company Stock Option Plan
Xxxxxx Xxxxx 120,000 2.00 Chairman CEO
Xxxxx Xxxxx 60,000 2.00 Director & CFO
Xxxxxx Xxxxx and Xxxxx Xxxxx to be Upon meeting
issued against agreed milestones 600,000 2.00 selected Milestones
Upon meeting
Xxxxxx Xxxxxxxxx 120,000 2.00 selected Milestones
Other Staff Members 99,050 2.00
Other Staff to be issued Upon meeting
against agreed milestones 784,000 2.00 selected Milestones
Options not under Plan
Kensington Capital 40,000 2.50
Legend Merchant 30,000 2.50
Legend Merchant 50,000 5.00
Xxxxx Family Trust 13,500 5.00
Xxxxx Xxxxx 4,000 5.00
Strategic Growth 140,000 5.00
Total Options Issued 2,060,550
=========
Debt Conversion:
Pursuant to a Common Stock Purchase Agreement dated August 19, 2005, the
Company's Chairman and Chief Executive Officer is required to convert at least
$600,000 of a $1,100,000 principal amount promissory note held by him into
shares of the Company's Common Stock at a price of $1.50 per share within five
business days of October 3, 2005.
Warrants:
As of October 20, 2005, the Company had the following warrants
outstanding:
Warrants to purchase an aggregate of 383,333 shares of Common Stock,
exercisable until five years from the date of issuance (August 23, 2005) at a
purchase price of $1.50 per share, as adjusted (the "August 2005 $1.50
Warrants"). The warrant holders may exercise these warrants on a cashless basis
if the shares of Common Stock underlying the warrants are not then registered
pursuant to an effective registration statement.
Warrants to purchase an aggregate of 48,000 shares of Common Stock,
exercisable until five years from the date of issuance (August 23, 2005) at a
purchase price of $1.25 per share, as adjusted (the "August 2005 $1.25
Warrants"). The warrant holders may exercise these warrants on a cashless basis
if the shares of Common Stock underlying the warrants are not then registered
pursuant to an effective registration statement.
Warrants to purchase an aggregate of 22,000 shares of Common Stock,
exercisable until five years from the date of issuance (July 18, 2005) at a
purchase price of $10.00 per share, as adjusted (the "July 2005 Warrants"). The
warrant holders may exercise these warrants on a cashless basis if the shares of
Common Stock underlying the warrants are not then registered pursuant to an
effective registration statement. These warrants have antidilution rights.
Warrants to purchase an aggregate of 60,000 shares of Common Stock
exercisable until five years from the date of issuance (1/3 were issued
September 10, 2004, 1/3 were issued November 23, 2004 and 1/3 were issued
February 3, 2005) at a purchase price of $5.00 per share, as adjusted. The
holders may exercise these warrants on a cashless basis if the shares of Common
Stock underlying the warrants are not then registered pursuant to an effective
registration statement. These warrants have antidilution rights.
Pursuant to an Omnibus Consent and Waiver agreement dated August 18, 2005,
the Company is required to issue to certain security holders warrants entitling
such holders to purchase 60,000 shares of Common Stock within five business days
after October 3, 2005. These warrants will have an exercise price of $1.50 per
share and will be exercisable for a period of five years after the date of
issuance. The holders may exercise these warrants on a cashless basis if the
shares of Common Stock underlying the warrants are not then registered pursuant
to an effective registration statement.
Outstanding Preferred Stock:
On March 17, 2005, the Company issued 6,000,000 shares of Series A
Preferred Stock to its Chief Executive Officer, Xxxxxx Xxxxx, and 1,500,000
shares of Series A Preferred Stock to its Chief Financial Officer, Xxxxx Xxxxx.
These shares have a combined valuation of $750,000. These shares were issued as
a performance bonus to Messrs. Xxxxx and Xxxxx for, among other things, their
role in helping expand and grow the Company's business operations.
Also on March 17, 2005, the Company issued an aggregate of 2,000,000
shares of Series A Preferred Stock to two accredited investors as consideration
for investor relations services. These shares have a combined valuation of
$200,000.
Beginning two years from the date of issuance of the Series A Preferred
Stock, each one share of Series A Preferred Stock is convertible, at the option
of the holder, into 0.04 shares of the Company's common stock. However, holders
cannot convert any share of Series A Preferred Stock if the market price of the
Company's common stock is below $3.00 per share.
Registration Rights:
The Company is required to file a registration statement registering the
resale of shares of Common Stock issuable upon exercise of the July 2005
Warrants, within 30 days from receipt of a written demand from the warrant
holders for the Company to do so.
As described under "Xxxxxx Xxxxx Note Purchase Agreement" under Schedule
2.1(i) hereof, the Company has agreed to register the resale of Common Stock
issuable by Xxxxxx Xxxxx to certain security holders. The Company is
contractually obligated to file such registration statement by November 25,
2005. This transaction will be included in the registration statement required
to be filed by the Company pursuant to the Registration Rights Agreement.
The Company has agreed to register the resale of approximately 3,833,333
shares of Common Stock sold to investors on August 23, 2005. The Company is
contractually obligated to file such registration statement by October 7, 2005.
This transaction will be included in the registration statement required to be
filed by the Company pursuant to the Registration Rights Agreement.
The August 2005 $1.25 Warrants and the August 2005 $1.50 Warrants have
piggyback registration rights. This transaction will be included in the
registration statement required to be filed by the Company pursuant to the
Registration Rights Agreement.
The shares underlying the placement agent warrants described in Schedule
2.1(p) will have standard piggyback registration rights, a cashless exercise
provision, will be non-redeemable and will be included in the registration
statement required to be filed by the Company pursuant to the Registration
Rights Agreement.
Schedule 2.1(e)
No Conflicts
The Registration Rights Agreement conflicts with certain of the
registration rights described in Schedule 2.1(c).
Schedule 2.1(f)
Commission Documents; Financial Statements
The Company untimely filed a current report on Form 8-K reporting the
purchase of all of the outstanding shares of common stock of Bickhams Media,
Inc., a Delaware corporation.
The Company untimely filed a current report on Form 8-K reporting entering
into a new lease agreement and changing the location of its principal executive
office in New York.
Schedule 2.1(g)
Subsidiaries
ROO Media Corporation, a Delaware corporation and wholly owned subsidiary of the
Company
ROO Media (Aust.) Pty Ltd., an Australia corporation and wholly owned subsidiary
of the Company
ROO Broadcasting Ltd., an Australia corporation and wholly owned subsidiary of
the Company
Undercover Media (Aust.) Pty Ltd., an Australia corporation and wholly owned
subsidiary of the Company
ROO TV Pty Ltd., an Australia corporation and wholly owned subsidiary of the
Company
Bickhams Media, Inc., a Delaware corporation and wholly owned subsidiary of the
Company
XxxxxXxxx.xxx Networks, Inc., a wholly owned subsidiary of Bickhams Media, Inc.
and a California corporation
Schedule 2.1(h)
No Material Adverse Change
None.
Schedule 2.1(i)
No Undisclosed Liabilities
Xxxxxx Xxxxx Note Purchase Agreement:
On May 18, 2005, the Company entered into a note purchase agreement with
Xxxxxx Xxxxx, the Company's Chairman and Chief Executive Officer. In
consideration for gross proceeds of $600,000, the Company incurred a debt
payable to Xx. Xxxxx in the amount of $600,000. The Company paid transaction
fees totaling $92,500, which includes a $60,000 placement agent fee in
connection with the sale by Xx. Xxxxx of $600,000 principal amount of secured
convertible promissory notes (described below) and $32,500 in legal fees in
connection with the below transactions. As evidence of the $600,000 debt and a
prior existing $500,000 debt payable to Xx. Xxxxx, the Company issued Xx. Xxxxx
a promissory note in the principal amount of $1,100,000. The principal sum of
$1,100,000 plus interest at the rate of 10% per annum calculated beginning June
1, 2005 is due to be re-paid on December 31, 2005. The Company's obligations
under the promissory note are secured by a subordinated security interest in all
of the Company's assets. Pursuant to a Common Stock Purchase Agreement dated
August 19, 2005, the Company's Chairman and Chief Executive Officer is required
to convert at least $600,000 of the $1,100,000 principal amount promissory note
into shares of the Company's Common Stock at a price of $1.50 per share within
five business days of October 3, 2005.
On May 19, 2005, the Company applied $200,000 of the $600,000 gross
proceeds from Xx. Xxxxx'x loan to redeem $142,857 principal amount of the
Company's outstanding $3,000,000 principal amount of callable secured
convertible notes issued to the NIR Group. As consideration for the redemption,
the holders of the callable secured convertible notes agreed not to convert any
amount due under the callable secured convertible notes at a conversion price
less than $0.10 per share for a 60-day period ending July 18, 2005. A complete
description of the material terms of the Company's agreement with the holders of
the callable secured convertible notes is described in a Form 8-K which was
filed with the Securities and Exchange Commission on May 12, 2005.
In connection with the above loan from Xx. Xxxxx to the Company, Xx. Xxxxx
personally sold an aggregate of $600,000 principal amount of secured convertible
promissory notes to certain investors. The secured convertible promissory notes
are convertible into common stock held by Xx. Xxxxx at a price of $1.25 per
share, as adjusted. Xx. Xxxxx'x obligations under the secured convertible
promissory notes are secured by a security interest in the $1,100,000 principal
amount promissory note payable by the Company to Xx. Xxxxx. The secured
convertible promissory notes bear interest at a rate of 8% per annum.
As partial consideration for the loan from Xx. Xxxxx, the Company entered
into a registration rights agreement, pursuant to which the Company agreed to
prepare and file a registration statement providing for the resale of the shares
of common stock issuable upon conversion of the secured convertible promissory
notes, including shares of common stock that may be issued as interest payments
under the secured convertible promissory notes. If the registration statement is
not filed by November 25, 2005 or declared effective by December 25, 2005, Xx.
Xxxxx must pay liquidated damages equal to 2% per calendar month or portion
thereof of aggregate $600,000 aggregate principal amount of the secured
convertible promissory notes. Any liquidated damages may be paid in Xx. Xxxxx'x
option in cash or shares of common stock of the Company which are owned by Xx.
Xxxxx.
July 2005 Securities Purchase Agreement:
On July 18, 2005, the Company entered into a Securities Purchase Agreement
with four accredited investors (the NIR Group) for the sale of up to: (i)
$2,500,000 in callable secured convertible notes; and (ii) warrants to purchase
up to 5,000,000 shares of Common Stock. The investors are obligated to provide
the Company with the funds as follows: (i) $550,000 was disbursed on July 19,
2005; and (ii) approximately $177,273 will be disbursed on the final business
day of each month beginning in August 2005 and ending June 2006. However, the
entire $2,500,000 must be funded by the investors within five business days
after effectiveness of a registration statement covering the number of shares of
Common Stock underlying the callable secured convertible notes and the warrants.
All outstanding callable secured convertible notes held by the NIR Group were
repaid on August 23, 2005.
The warrants are exercisable until five years from the date of issuance at
a purchase price of $10.00 per share, as adjusted. The investors may exercise
the warrants on a cashless basis if the shares of Common Stock underlying the
warrants are not then registered pursuant to an effective registration
statement. The warrants have antidilution rights.
Schedule 2.1(j)
No Undisclosed Events and Circumstances
None.
Schedule 2.1(k)
Indebtedness
See the disclosure under "Xxxxxx Xxxxx Note Purchase Agreement" under
Schedule 2.1(i).
Schedule 2.1(l)
Title to Assets
As described in Schedule 2.1(i) under "Xxxxxx Xxxxx Note Purchase
Agreement," the Company has granted a security interest in certain of the
Company's assets to Xxxxxx Xxxxx, the Company's Chairman and Chief Executive
Officer, in connection with a $1.1 million principal amount promissory note.
Schedule 2.1(m)
Actions Pending
None.
Schedule 2.1(n)
Compliance with Law
None.
Schedule 2.1(o)
Taxes
None.
Schedule 2.1(p)
Certain Fees
The Company has entered into an agreement with Xxxxxxx Hill Partners
("Xxxxxxx"), pursuant to which, in connection with the Transaction Documents,
the Company must pay Xxxxxxx a cash fee equal to 10% of the gross proceeds up to
$3 million and 8% of the gross proceeds in excess of $3 million. In addition,
the Company must issue Xxxxxxx or its assigns placement agent warrants in an
amount equal to 10% of the securities issued in connection with the Transaction
Documents. The placement agent warrants will be exercisable at the Per Share
Purchase Price and will expire five years from the issuance date of the
placement agent warrants. The shares underlying the placement agent warrants
will have standard piggyback registration rights, a cashless exercise provision,
will be non-redeemable and will be included in the registration statement
required to be filed by the Company pursuant to the Registration Rights
Agreement.
Schedule 2.1(r)
Operation of Business
See the disclosure under Schedule 2.1(l).
Schedule 2.1(s)
Environmental Compliance
None.
Schedule 2.1(t)
Books and Records; Internal Accounting Controls
None.
Schedule 2.1(u)
Material Agreements
None.
Schedule 2.1(v)
Transactions with Affiliates
January 7, 2003 Loan Agreement:
On January 7, 2003, ROO Media Corporation entered into a new loan
agreement with Mr. Xxxxxx Xxxxx to replace a loan agreement entered into with
Xx. Xxxxx dated July 29, 2001. The interest on the loan is 10% per annum and the
outstanding balance as of June 30, 2004 was $516,000. Xx. Xxxxx has agreed that
no demand for payment will be made to the company through December 13, 2004 and
any principal repayment during any month above $20,000 will require board
approval. The loan is secured by all of the assets of ROO Media. This loan is
evidenced partially by the promissory note described below under "Xxxxxx Xxxxx
Note Purchase Agreement."
Reality Group Pty Ltd.
Pursuant to a Stock Purchase Agreement dated as of March 11, 2004 between
the Company and the shareholders (the "RGP Shareholders") of Reality Group Pty
Ltd., a corporation formed under the laws of Australia ("RGP"), the Company
purchased 80% of the outstanding ordinary shares of RPG. As consideration for
this purchase, the Company issued 8,360,000 shares (167,200 shares post
one-for-50 reverse split) of common stock to the RGP Shareholders.
During the period ending twelve months after the RGP Shareholders may sell
their Company shares under Rule 144 (the "Guarantee Period"), the RGP
Shareholders have the option (the "Buy-back Option") to buy back an aggregate of
29 RGP shares, or such number of RGP shares as shall decrease the ownership
percentage of the Company in RGP to 51% (the "Buy-back Shares"), from the
Company. The consideration for such Buy-back Shares shall be 2,280 (post
one-for-50 reverse split) Company shares.
Pursuant to the March 11, 2004 Stock Purchase Agreement, the Company
guaranteed (the "Guarantee") that the RGP Shareholders will be able to sell
their Company shares, pursuant to the volume restrictions set forth in Rule 144,
for greater than or equal to US$0.30 per share (pre one-for-50 reverse split)
during the Guarantee Period. In the event that the RGP Shareholders are unable
to sell their Company shares for greater than or equal to US$0.30 per share (pre
one-for-50 reverse split) during the Guarantee Period, a share variance (the
"Share Variance") will be determined based on the difference between (a) the
number of Company shares to be sold multiplied by US$0.30 per share (pre
one-for-50 reverse split) and (b) the number of Company shares to be sold
multiplied by the closing sale price of the Company's shares on the trading day
immediately prior to the day that a RGP Shareholder notifies the Company of its
enforcement of the Guarantee. In the event that a RGP Shareholder enforces the
Guarantee, the Company, in its sole discretion, may pay the Share Variance to
the RGP Shareholder in one of the following ways: (1) in cash; (2) the Company
shall authorize the Escrow Agent (as defined in the March 11, 2004 Stock
Purchase Agreement) to return to the RGP Shareholders on a pro rata basis that
amount of Company shares, based on a share valuation of US$20,900 per RGP
ordinary share, that shall constitute the Share Variance; or (3) if mutually
agreeable to the RGP Shareholders, in shares of common stock of the Company
based on the average closing sale price of shares of common stock of the Company
during the previous fifteen (15) trading days. The shares issuable by the
Company as payment of the Share Variance will be included in the registration
statement required to be filed by the Company pursuant to the Registration
Rights Agreement.
Purchase of Bickhams Media, Inc.:
On September 10, 2004, the Company entered into an agreement to purchase
of all of the outstanding shares of common stock of Bickhams Media, Inc. from
Avenue Group, Inc. Avenue Group is a founding shareholder of the Company and
currently owns approximately 17% of the Company's outstanding common stock.
Also, in connection with the purchase of Bickhams Media, the Company agreed to
guaranty all of the obligations of XxxxxXxxx.xxx Networks, Inc. under a
promissory note of VideoDome that was issued to Avenue Group in October 2003 in
the principal amount of $290,000. These obligations are required to be re-paid
by the Company twelve months after the date of the agreement. The Company's
management believes that the terms of this transaction were at least as
favorable as could have been obtained from an unrelated third party.
Series A Preferred Stock:
On March 17, 2005, the Company issued 6,000,000 shares of Series A
Preferred Stock to its Chief Executive Officer, Xxxxxx Xxxxx, and 1,500,000
shares of Series A Preferred Stock to its Chief Financial Officer, Xxxxx Xxxxx.
These shares have a combined valuation of $750,000. These shares were issued as
a performance bonus to Messrs. Xxxxx and Xxxxx for, among other things, their
role in helping expand and grow the Company's business operations.
Xxxxxx Xxxxx Note Purchase Agreement:
See the disclosure under Schedule 2.1(i) under "Xxxxxx Xxxxx Note Purchase
Agreement."
Schedule 2.1(y)
Employees; Labor Relations
None.
Schedule 2.1(z)
Absence of Certain Developments
Corporate Securities:
The Company has borrowed an aggregate gross amount of $1,550,000 and
issued an aggregate principal amount of $1,550,000 callable secured convertible
notes and related warrants to purchase an aggregate of 42,000 shares (post
one-for-50 reverse split) of Common Stock, and Common Stock pursuant to
conversions of outstanding callable secured convertible notes. On August 23,
2005, all outstanding callable secured convertible notes were repaid by the
Company totaling in excess of $3,000,000. A related lien on the Company's assets
was terminated on August 23, 2005.
The Company has issued shares of Series A Preferred Stock described under
"Outstanding Preferred Stock" under Schedule 2.1(c).
The Company has issued a promissory note to Xxxxxx Xxxxx, the Company's
Chairman and Chief Executive Officer, described under "Xxxxxx Xxxxx Note
Purchase Agreement" under Schedule 2.1(i).
In addition to the above, the Company has issued the following securities
since December 31, 2004:
On March 1, 2005 the Company issued 140,000 options (post one-for-50
reverse split) to Strategic Growth with an exercise price of $5.00, as adjusted,
valued under the Black-Scholes method as $190,456 as payment for investor
relations consulting services.
On May 9, 2005 the requirements of the second milestone in the stock
purchase agreement with Bickhams Media and Xxxxxx and Xxxxxx Xxxxxxxxx dated
November 1, 2004 being Commercial Launch of combined platform ROO Media and
VideoDome Media Manager platform having been met the Company authorized the
payment of $100,000 and that 40,000 shares (post one-for-50 reverse split) of
common stock of the Company be issued.
On August 23, 2005, the Company sold approximately 3,833,333 shares (post
one-for-50 reverse split) of Common Stock to accredited investors at a price of
$1.50 per share, as adjusted.
On August 23, 2005, the Company issued warrants to purchase an aggregate
of approximately 383,333 shares (post one-for-50 reverse split) of Common Stock,
exercisable until five years from the date of issuance at a purchase price of
$1.50 per share, as adjusted.
On August 23, 2005, the Company issued warrants to purchase an aggregate
of 48,000 shares (post one-for-50 reverse split) of Common Stock, exercisable
until five years from the date of issuance at a purchase price of $1.25 per
share, as adjusted.
Within five business days after October 3, 2005, the Company's Chairman
and Chief Executive Officer is required to convert at least $600,000 of a
$1,100,000 principal amount promissory note held by him into shares of the
Company's Common Stock at a price of $1.50 per share, as adjusted.
Within five business days after October 3, 2005, the Company is required
to issue warrants to certain security holders entitling such holders to purchase
60,000 shares (post one-for-50 reverse split) of Common Stock. These warrants
will have an exercise price of $1.50 per share, as adjusted, and will be
exercisable for a period of five years after the date of issuance.
Material Transactions Not Described Elsewhere in this Schedule 2.1(z):
On March 9, 2005, the Company amended its certificate of incorporation to
designate the rights of Series A Preferred Stock.
On April 1, 2005, the Company entered into a sublease for and on June 7,
2005 moved its principal executive office to premises located at 000 Xxxx 00xx
Xxxxxx 0xx Xxxxx Xxx Xxxx, XX 00000.
On September 30, 2005, the Company filed a certificate of amendment to its
certificate of incorporation to effect a one-for-50 reverse split of the
outstanding shares of the Company's Common Stock. The effective date of the
reverse stock split was October 3, 2005.
Section 7.15 On September 30, 2005, the Company amended the terms of its
Series A Preferred Stock to provide that: (1) the holders thereof may not
convert shares of Series A Preferred Stock if the market price of the Common
Stock is below $3.00 per share; and (2) removing the following restriction on
the holders thereof from converting shares of Series A Preferred Stock
immediately prior to a change in control of the Company:
"if at the time of a conversion under this Section 5.2 the
market price of the Common Stock is below $0.40 per share, then each
share of Series A Preferred Stock shall convert into such number of
shares of Common Stock equal to (x) two (2), multiplied by (y) the
closing price of the Common Stock on the date of the event
triggering an automatic conversion under this Section 5.2 divided by
$0.20."
