COMMON STOCK PURCHASE
AGREEMENT
DATED AS OF AUGUST 19, 2005
BY AND AMONG
ROO GROUP, INC.
AND
THE PURCHASERS LISTED ON EXHIBIT A
TABLE OF CONTENTS
Page
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.........................................................15
Section 3.1 Securities Compliance.........................................15
Section 3.2 Registration and Listing......................................15
Section 3.3 Inspection Rights.............................................16
Section 3.4 Compliance with Laws..........................................16
Section 3.5 Keeping of Records and Books of Account.......................16
Section 3.6 Reporting Requirements........................................16
Section 3.7 Other Agreements..............................................16
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.........................................................19
Section 4.1 Conditions Precedent to the Obligation of the Company to Close
and to Sell the Shares........................................19
Section 4.2 Conditions Precedent to the Obligation of the Purchasers to
Close and to Purchase the Shares..............................19
ARTICLE V Certificate Legend.................................................21
Section 5.1 Legend........................................................20
ARTICLE VI Indemnification....................................................22
Section 6.1 General Indemnity.............................................22
Section 6.2 Indemnification Procedure.....................................23
ARTICLE VII Miscellaneous.....................................................24
Section 7.1 Fees and Expenses.............................................24
Section 7.2 Specific Performance; Consent to Jurisdiction; Venue..........24
Section 7.3 Entire Agreement; Amendment...................................25
Section 7.4 Notices.......................................................25
Section 7.5 Waivers.......................................................26
TABLE OF CONTENTS
(continued)
Page
Section 7.6 Headings......................................................26
Section 7.7 Successors and Assigns........................................26
Section 7.8 No Third Party Beneficiaries..................................26
Section 7.9 Governing Law.................................................26
Section 7.10 Survival......................................................26
Section 7.11 Counterparts..................................................26
Section 7.12 Publicity.....................................................27
Section 7.13 Severability..................................................27
Section 7.14 Further Assurances............................................27
COMMON STOCK PURCHASE AGREEMENT
This COMMON STOCK PURCHASE AGREEMENT this ("Agreement"), dated as of
August 19, 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 191,666,667 shares of Common
Stock (the "Shares") at a price per share of $0.03 (the "Per Share Purchase
Price") for an aggregate purchase price of up to $5,750,000 (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. 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 August 22, 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.
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, except as
set forth on Schedule 2.1(b), 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
August 19, 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
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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).
(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 quarter ended March 31,
2005, (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.
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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.
(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.
(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
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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
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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.
(x) Governmental Approvals. Except as set forth on Schedule 2.1(x) hereto,
and 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;
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(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.
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(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
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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.
(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:
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(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.
(l) Reverse Stock Split. Each Purchaser hereby covenants and agrees to
vote any shares of Common Stock beneficially owned by such Purchaser in favor of
the Reverse Stock Split (as defined in Section 3.15 hereof).
(m) Subsequent Common Stock Financing. Each Purchaser acknowledges and
agrees that the Company may sell up to $2,250,000 of shares of Common Stock on
terms substantially identical to the terms of this Agreement (or on terms more
favorable to the Company) to be consummated within forty-five (45) days of the
Closing Date (the "Subsequent Common Stock Financing").
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
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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.
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.
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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
except that $3,400,000 of the net proceeds shall be used to pay off certain
senior convertible promissory notes held by NIR Group as more fully set forth on
Exhibit F hereto.
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.
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
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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.
Section 3.15 Reverse Stock Split. The Company shall effect a reverse stock
split of the Common Stock at a ratio of 1-for-50 within forty-five (45) days
following the Closing Date (the "Reverse Stock Split").
Section 3.16 Conversion of Xxxxx Promissory Note. Within five (5) business
days of the date of the Reverse Stock Split, 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.
Section 3.17 Right of First Refusal for Subsequent Common Stock Financing.
The Company covenants and agrees to promptly notify in writing (a "Rights
Notice") the Purchasers of the terms and conditions of the Subsequent Common
Stock Financing. The Rights Notice shall describe, in reasonable detail, the
proposed Subsequent Common Stock Financing, the proposed closing date of the
Subsequent Financing, which shall not be sooner than three (3) Trading Days from
the date the Rights Notice is given, including, without limitation, all of the
material terms and conditions thereof and proposed definitive documentation to
be entered into in connection therewith. The Rights Notice shall provide each
Purchaser an option (the "Rights Option") during the two (2) Trading Days
following delivery of the Rights Notice (the "Option Period") to purchase up to
fifty percent (50%) of its "pro rata" portion of the securities being offered in
the Subsequent Common Stock Financing on the same terms and conditions as
contemplated by the Subsequent Common Stock Financing (the "First Refusal
Rights"). If any Purchaser elects not to participate in the Subsequent Common
Stock Financing, the other Purchasers may participate on a pro-rata basis so
long as such participation in the aggregate does not exceed fifty percent (50%)
of the total Purchase Price hereunder. For purposes of this Section, all
references to "pro rata" means, for any Purchaser electing to participate in the
Subsequent Common Stock Financing, the percentage obtained by dividing (x) the
total number of Shares purchased by such Purchaser at the Closing by (y) the
total number of Shares purchased by all of the participating Purchasers at the
Closing. Delivery of any Rights Notice constitutes a representation and warranty
by the Company that there are no other material terms and conditions,
arrangements, agreements or otherwise except for those disclosed in the Rights
Notice, to provide additional compensation to any party participating in any
proposed Subsequent Financing, including, but not limited to, additional
compensation based on changes in the Purchase Price or any type of reset or
adjustment of a purchase or conversion price or to issue additional securities
at any time after the closing date of the Subsequent Common Stock Financing. If
the Company does not receive notice of exercise of the Rights Option from any of
the Purchasers within the Option Period, the Company shall have the right to
close the Subsequent Common Stock Financing on the scheduled closing date with a
third party (and, if applicable, with such Purchasers as shall have exercised
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their Rights Option); provided that all of the material terms and conditions of
the closing are the same as those provided to the Purchasers in the Rights
Notice. If the closing of the proposed Subsequent Common stock Financing does
not occur within ten (10) trading days from the date the Rights Notice is given,
any closing of the contemplated Subsequent Common Stock Financing shall be
subject to all of the provisions of this Section, including, without limitation,
the delivery of a new Rights Notice.
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.
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(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.
(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.
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(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).
(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) NIR Group. As of the Closing Date, the Company shall have received
copies of signed written consents and waivers of the NIR Group, a form of which
is attached hereto as Exhibit F, with respect to, among other things, consenting
to the consummation of the transactions contemplated by this Agreement and
waiving its rights to have shares of Common Stock reserved for issuance upon the
conversion of certain convertible promissory notes held by the NIR Group.
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.
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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).
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,
-22-
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.
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.
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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 $22,500 (which amount includes up to
$7,500 pursuant to Section 4 of the Registration Rights Agreement) 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.
-24-
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.
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.
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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
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.
-26-
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.
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]
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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: Xxxxxx Xxxxx
Title: Chief Executive Officer
PURCHASER:
By:_______________________________
Name:
Title:
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EXHIBIT A
LIST OF PURCHASERS
NAMES AND ADDRESSES NUMBER OF SHARES
OF PURCHASERS PURCHASED
------------------- ----------------
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EXHIBIT B
ESCROW AGREEMENT
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EXHIBIT C
FORM OF REGISTRATION RIGHTS AGREEMENT
-i-
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
-i-
___ (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 __________, 200_, 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)
--------------------------------------------------------------------------------
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.
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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.
-i-
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.
-ii-
EXHIBIT F
FORM OF NIR CONSENT AND WAIVER
OMNIBUS CONSENT AND WAIVER
This Omnibus Consent and Waiver (this "CONSENT AND WAIVER"), dated as of
August 18, 2005, is entered into by and between ROO Group, Inc., a Delaware
corporation (the "COMPANY"), AJW Offshore, Ltd., AJW Qualified Partners, LLC,
AJW Partners, LLC and New Millennium Capital Partners II, LLC (collectively, the
"HOLDERS" and each a "HOLDER"), in connection with: (1) the Securities Purchase
Agreement dated as of September 10, 2004 (the "2004 SECURITIES PURCHASE
AGREEMENT") by and among the Company and the Holders and the related Callable
Secured Convertible Notes (the "2004 NOTES") and Stock Purchase Warrants (the
"2004 WARRANTS") issued by Company to the Holders dated as of September 10,
2004, November 23, 2004 and February 3, 2005; and (2) the Securities Purchase
Agreement dated as of July 18, 2005 (the "2005 SECURITIES PURCHASE AGREEMENT,"
and together with the 2004 Securities Purchase Agreement, the "PURCHASE
AGREEMENTS") by and among the Company and the Holders and the related Callable
Secured Convertible Notes (the "2005 NOTES," and together with the 2004 Notes,
the "NOTES") and Stock Purchase Warrants (the "2005 WARRANTS," and together with
the 2004 Warrants, the "WARRANTS") issued by Company to the Holders dated as of
July 18, 2005. Capitalized terms used herein without definition shall have the
meanings ascribed to such terms in the Purchase Agreements, the Notes and the
Warrants, as applicable.
WHEREAS, the Holders have agreed to consent to a private placement (the
"PRIVATE PLACEMENT") by the Company of up to 266,666,666 shares of the Company's
common stock to accredited investors at a purchase price of $0.03 per share in
one or more closings;
WHEREAS, part of the proceeds from the Private Placement will be used to
complete an Optional Prepayment in full and final settlement of the Notes and
interest thereon, as outlined in Schedule A hereto (the "Prepayment"); and
WHEREAS, in connection with the Private Placement and the Prepayment, the
Holders have agreed to waive certain obligations of the Company under the
Purchase Agreements, the Notes and the Warrants as set forth herein.
NOW, THEREFORE, in consideration of the above, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. The Holders hereby consent to the Private Placement.
2. The Holders hereby agree that Exhibit A hereto sets for the
consideration required from the Company as payment in full and final
settlement of the Optional Prepayment Sum (as defined in the Notes)
required for the Company to effect an Optional Prepayment of the
Notes in full.
-i-
3. For a period beginning the date hereof and ending the earlier of (a)
the date the Prepayment is completed or (b) ten (10) business days
of the date of this Consent and Waiver, and solely in connection
with the Private Placement and the Prepayment of the Notes, the
Holders hereby waive any requirement by the Company to have
authorized, and reserved for the purpose of issuance, a sufficient
number of shares of Common Stock to provide for the full conversion
or exercise of the outstanding Notes and Warrants and issuance of
the Conversion Shares and Warrant Shares in connection therewith.
4. The Holders hereby agree that they will not exercise any of the
Warrants until after the Company completes a reverse split of its
outstanding shares of common stock or increases the number of its
authorized shares of common stock.
5. The Company covenants that it will complete a reverse split of its
outstanding shares of common stock or increase the number of its
authorized shares of common stock within 75 days of the date of this
Consent and Waiver. In the event the Company does not complete
either of the aforementioned actions within the permitted timeframe,
the Company shall be required to pay damages in the amount of $2,000
for every seven day period until such time as one of the
aforementioned actions are completed.
6. The Holders hereby waive the requirement of the Company to provide
prior written notice to the Holders before the Company is permitted
to effect an Optional Prepayment.
7. The Holders hereby waive their right to and hereby agree not to
convert any portion of the Notes prior to the Optional Prepayment
Date.
8. If the Company does not complete the Optional Prepayment within ten
(10) business days of the date of this Consent and Waiver, then this
Consent and Waiver shall immediately terminate and the provisions
hereof shall be void.
9. Except as expressly agreed hereby, all of the terms and provisions
of the Purchase Agreements, Notes and Warrants are and shall remain
in full force and effect.
10. This Consent and Waiver shall be construed and interpreted in
accordance with the laws of the State of New York without giving
effect to the conflict of laws rules thereof or the actual domiciles
of the parties.
11. This Consent and Waiver may be executed in one or more counterparts,
each of which shall be deemed an original and all of which taken
together shall constitute a single Consent and Waiver.
[SIGNATURE PAGE FOLLOWS.]
-ii-
IN WITNESS WHEREOF, each of the Company and each Holder has caused this
Consent and Waiver to be signed in their respective name as of this 18th day of
August 2005.
ROO Group, Inc. AJW Offshore, Ltd.
By: First Street Manager II, LLC
______________________________ __________________________________
Xxxxxx Xxxxx Xxxxx X. Xxxxxxxx
Chief Executive Officer Manager
AJW Partners, LLC New Millennium Capital Partners
By: SMS Group, LLC II, LLC
By: First Street Manager II, LLP
______________________________ __________________________________
Xxxxx X. Xxxxxxxx Xxxxx X. Xxxxxxxx
Manager Manager
AJW Qualified Partners, LLC
By: AJW Manager, LLC
______________________________
Xxxxx X. Xxxxxxxx
Manager
-iii-
SCHEDULE A
PREPAYMENT
The following shall constitute full and final settlement of the Optional
Prepayment Sum (as defined in the Notes) to effect an Optional Prepayment of the
Notes in full:
1. Payment by the Company to the Holders of $3,400,000 (Three Million
Four Hundred Thousand Dollars) cash within five (5) business days of
the date of this Consent and Waiver; and
2. Issuance by the Company to the Holders of warrants (the "PREPAYMENT
WARRANTS") entitling the Holders to purchase 3,000,000 (Three
Million) shares of the Company's common stock, which shall be issued
to the Holders within five business days after the Company completes
a reverse split or increases its authorized capital of its
outstanding shares of common stock. The Prepayment Warrants shall
have a fixed exercise price of $0.03 per share and shall be
exercisable for a period of five years after the date the Prepayment
Warrants are issued.
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 August 19, 2005 (the "August 2005
Purchase Agreement"). Capitalized terms not defined herein shall have the
meaning given to such terms in the August 2005 Purchase Agreement.)
AUGUST 19, 2005
SCHEDULE 2.1(B)
AUTHORIZATION; ENFORCEMENT
As of August 19, 2005, the authorized capital stock of the Company
includes 500,000,000 shares of Common Stock, of which 256,491,117 shares are
issued and outstanding, 50,000,000 shares are reserved for issuance pursuant to
the Company's stock option plans, and 193,508,883 shares are reserved for
issuance pursuant to outstanding callable secured convertible notes (the
"Notes"). Until either: (i) the Company pre-pays the Notes; or (ii) amends the
Company's certificate of incorporation to increase the authorized number of
shares of Common Stock and/or effect a reverse stock split of the Company's
outstanding shares of Common Stock, the Company does not have sufficient shares
of Common Stock available to sell and issue the Shares.
The Company plans to immediately upon receipt of funds make payment in
full to the holders of the Notes releasing sufficient authorized capital to
issue the Shares. The Company will also complete a 1 for 50 reverse split of the
Company's Common Stock within 45 days of the transaction being completed.
SCHEDULE 2.1(C)
CAPITALIZATION
AUTHORIZED CAPITAL STOCK:
As of August 19, 2005, the authorized capital stock of the Company
consists of (i) 500,000,000 shares of Common Stock, of which 256,491,117 shares
are issued and outstanding, 50,000,000 shares are reserved for issuance pursuant
to the Company's stock option plans, 193,508,883 shares are reserved for
issuance pursuant to securities exercisable for, or convertible into or
exchangeable for shares of Common Stock; 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 6,000,000 0.13 Chairman CEO
-------------------------------------------------------------------------------
Director ROO Media
Xxxxxxx Xxxxxxx 3,000,000 0.12 Corporation
-------------------------------------------------------------------------------
Xxxxx Xxxxx 3,000,000 0.13 Director & CFO
-------------------------------------------------------------------------------
Marc Mulgram 500,000 0.16
-------------------------------------------------------------------------------
Tristan Place 500,000 0.12
-------------------------------------------------------------------------------
Xxxx Xxxxxxx 200,000 0.12
-------------------------------------------------------------------------------
Xxxxxx Xxxxxxxx 50,000 0.16
-------------------------------------------------------------------------------
Xxxxxxx Xxxxxx 50,000 0.16
-------------------------------------------------------------------------------
Xxxxx Xxxxxxx 50,000 0.16
-------------------------------------------------------------------------------
Xxxxx Xxxxx 100,000 0.16
-------------------------------------------------------------------------------
Upon meeting selected
Xxxxxx Xxxxxxxxx 6,000,000 0.10 Milestones
-------------------------------------------------------------------------------
Xxxxx Xxxxxxxx 250,000 0.10
-------------------------------------------------------------------------------
Xxxxx Xxxxxxxx 150,000 0.10
-------------------------------------------------------------------------------
OPTIONS NOT UNDER PLAN
-------------------------------------------------------------------------------
Kensington Capital 2,000,000 0.05
-------------------------------------------------------------------------------
Legend Merchant 1,500,000 0.05
-------------------------------------------------------------------------------
Legend Merchant 2,500,000 0.10
-------------------------------------------------------------------------------
Xxxxx Family Trust 675,000 0.10
-------------------------------------------------------------------------------
Xxxxx Xxxxx 200,000 0.10
-------------------------------------------------------------------------------
Strategic Growth 7,000,000 0.20
-------------------------------------------------------------------------------
TOTAL OPTIONS ISSUED 37,325,000
-------------------------------------------------------------------------------
OUTSTANDING CONVERTIBLE DEBT AND WARRANTS:
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: (i) $2,500,000
in callable secured convertible notes; and (ii) warrants to purchase 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.
The callable secured convertible notes mature three years from the date of
issuance and bear interest at 8% per annum, provided that no interest will be
due for any month in which the trading price of our common stock is greater than
$0.02575 for each trading day of the month. The callable secured convertible
notes are convertible into the Company's Common Stock at the investors' option,
at the lower of: (i) $0.10; or (ii) 50% of the average of the three lowest
intraday trading prices for the Common Stock on the OTC Bulletin Board for the
20 trading days before but not including the conversion date. The callable
secured convertible notes have anti-dilution rights.
The warrants are exercisable until five years from the date of issuance at
a purchase price of $0.20 per share. 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.
September 2004 Securities Purchase Agreement
The Company entered into a securities purchase agreement with four
accredited investors (the NIR Group) on September 10, 2004 for the sale of (i)
$3,000,000 in callable secured convertible notes and (ii) warrants to purchase
3,000,000 shares of common stock. The investors provided the Company aggregate
gross proceeds of $3,000,000 as follows:
o $1,000,000 was disbursed on September 13, 2004;
o $1,000,000 was disbursed on November 26, 2004, after filing a
registration statement covering the number of shares of common stock
underlying the secured convertible notes and the warrants; and
o $1,000,000 was disbursed on February 9, 2004, after effectiveness of
the registration statement.
The callable secured convertible notes bear interest at 8%, mature two
years from the date of issuance, and are convertible into our common stock, at
the investors' option, at the lower of:
o $0.20; or
o 65% of the average of the three lowest intraday trading prices for
the common stock on the Over-The-Counter Bulletin Board for the 20
trading days before but not including the conversion date.
The callable secured convertible notes have antidilution rights.
The warrants are exercisable until five years from the date of issuance at
a purchase price of $0.10 per share. 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.
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 and 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 two 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 $0.40 per share. If prior to two years from the
date of issuance, there is a sale or other disposition of all or substantially
all of the Company's assets, a transaction or series of related transactions in
which more than 50% of the voting power of the Company is disposed of, or upon a
consolidation, merger or other business combination where the Company is not the
survivor, then immediately prior to such event each holder of Series A Preferred
Stock may convert any or all of such holder's shares of Series A Preferred Stock
into common stock as described above. In such event, if the market price of the
Company's common stock is below $0.40 per share, then each share of Series A
Preferred Stock will convert into such shares of common stock equal to (x) two,
multiplied by (y) the closing price of the common stock on the date of the event
triggering a conversion, divided by $.20.
REGISTRATION RIGHTS:
In connection with the transaction described under "July 2005 Securities
Purchase Agreement" above, the Company is required to file a registration
statement, which will include the Common Stock underlying the callable secured
convertible notes and the warrants, within 30 days from receipt of a written
demand from the investors 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 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(D)
ISSUANCE OF SHARES
As of August 19, 2005, the authorized capital stock of the Company
includes 500,000,000 shares of Common Stock, of which 256,491,117 shares are
issued and outstanding, 50,000,000 shares are reserved for issuance pursuant to
the Company's stock option plans, and 193,508,883 shares are reserved for
issuance pursuant to outstanding callable secured convertible notes (the
"Notes"). Until either: (i) the Company pre-pays the Notes; or (ii) amends the
Company's certificate of incorporation to increase the authorized number of
shares of Common Stock and/or effect a reverse stock split of the Company's
outstanding shares of Common Stock, the Company does not have sufficient shares
of Common Stock available to sell and issue the Shares.
SCHEDULE 2.1(E)
NO CONFLICTS
The sale of the Shares will cause an adjustment to the fixed conversion
price of the callable secured convertible notes described in Schedule 2.1(c).
The Registration Rights Agreement conflicts with registration rights
described in Schedule 2.1(c).
As of August 19, 2005, the authorized capital stock of the Company
includes 500,000,000 shares of Common Stock, of which 256,491,117 shares are
issued and outstanding, 50,000,000 shares are reserved for issuance pursuant to
the Company's stock option plans, and 193,508,883 shares are reserved for
issuance pursuant to outstanding callable secured convertible notes (the
"Notes"). Until either: (i) the Company pre-pays the Notes; or (ii) amends the
Company's certificate of incorporation to increase the authorized number of
shares of Common Stock and/or effect a reverse stock split of the Company's
outstanding shares of Common Stock, the Company does not have sufficient shares
of Common Stock available to sell and issue the Shares.
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.
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 $.0.025 per
share. Xx. Xxxxx'x obligations under the secured convertible promissory notes
are secured by a subordinated 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: (i) $2,500,000
in callable secured convertible notes; and (ii) warrants to purchase 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.
The callable secured convertible notes mature three years from the date of
issuance and bear interest at 8% per annum, provided that no interest will be
due for any month in which the trading price of our common stock is greater than
$0.02575 for each trading day of the month. The callable secured convertible
notes are convertible into the Company's Common Stock at the investors' option,
at the lower of: (i) $0.10; or (ii) 50% of the average of the three lowest
intraday trading prices for the Common Stock on the OTC Bulletin Board for the
20 trading days before but not including the conversion date. The callable
secured convertible notes have anti-dilution rights.
The warrants are exercisable until five years from the date of issuance at
a purchase price of $0.20 per share. 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 "Outstanding Convertible Debt and Warrants" under
Schedule 2.1(c) and the disclosure under "Xxxxxx Xxxxx Note Purchase Agreement"
under Schedule 2.1(i).
SCHEDULE 2.1(L)
TITLE TO ASSETS
The Company has granted a security interest in certain of the Company's
assets to the investors described in Schedule 2.1(c) hereof under "Outstanding
Convertible Debt and Warrants."
As described in Schedule 2.1(i) under "Xxxxxx Xxxxx Note Purchase
Agreement," the Company has granted a subordinated security interesting 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
The Company currently has outstanding a withholding tax payable in
Australia. The approximate amount of the outstanding payment is USD $100,000
which will be paid in full immediately upon completing transaction.
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 principle repayment during any month above $20,000 will require board
approval. The loan is secured by all of the assets of ROO Media. The loan is
subordinate to the first priority interest granted to the Secured Party (as
defined in the Security Agreement, dated September 10, 2004, with NIR Group and
the Intellectual Property Security Agreement, dated September 10, 2004, with NIR
Group) in and to the Collateral (as defined in the Security Agreement, dated
September 10, 2004, with NIR Group) and the Intellectual Property (as defined in
the Intellectual Property Security Agreement, dated September 10, 2004, with NIR
Group). This loan is evidenced partially by the promissory note described below
under "Xxxxxx Xxxxx Note Purchase 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. 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(X)
GOVERNMENTAL APPROVALS
As of August 19, 2005, the authorized capital stock of the Company
includes 500,000,000 shares of Common Stock, of which 256,491,117 shares are
issued and outstanding, 50,000,000 shares are reserved for issuance pursuant to
the Company's stock option plans, and 193,508,883 shares are reserved for
issuance pursuant to outstanding callable secured convertible notes (the
"Notes"). Until either: (i) the Company pre-pays the Notes; or (ii) amends the
Company's certificate of incorporation to increase the authorized number of
shares of Common Stock and/or effect a reverse stock split of the Company's
outstanding shares of Common Stock, the Company does not have sufficient shares
of Common Stock available to sell and issue the Shares. In order to amend the
Company's certificate of incorporation, the Company must file either a proxy
statement or an information statement with the Commission and mail such proxy
statement or information statement to the Company's shareholders before the
amendment will become effective.
SCHEDULE 2.1(Y)
EMPLOYEES; LABOR RELATIONS
None.
SCHEDULE 2.1(Z)
ABSENCE OF CERTAIN DEVELOPMENTS
CORPORATE SECURITIES:
The Company has issued callable secured convertible notes and warrants and
Common Stock pursuant to conversions of the callable secured convertible notes
described under "Outstanding Convertible Debt and Warrants" under Schedule
2.1(c).
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 7,000,000 options to Strategic Growth
with an exercise price of 20 cents 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 2,000,000 shares of common stock of the Company be
issued.
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.
