ROO GROUP, INC. d/b/a KIT digital SECURITIES PURCHASE AGREEMENT
ROO
GROUP, INC.
d/b/a
KIT digital
This
Securities Purchase Agreement
(this
“Agreement”)
is
made and entered into as of May 8, 2008, by and among Roo
Group, Inc.,
a
Delaware corporation, d/b/a KIT digital (the “Company”),
and
each of the purchasers listed on Exhibit
A
attached
hereto (collectively, the “Purchasers”
and
individually, a “Purchaser”).
Recitals
A. The
Company desires to issue and sell to the Purchasers, and the Purchasers desire
to purchase from the Company, up to 75,000,000 units (each, a “Unit”),
each
Unit consisting of one share of common stock, par value $0.0001 per share,
of
the Company (the “Common
Stock”),
and a
five-year warrant to purchase one share of Common Stock, on the terms and
subject to the conditions set forth in this Agreement.
B. The
Company and each Purchaser are executing and delivering this Agreement in
reliance upon the exemption from securities registration afforded by the
provisions of Regulation D (“Regulation
D”),
as
promulgated by the United States Securities and Exchange Commission (the
“SEC”)
under
the Securities Act of 1933, as amended (the “Securities
Act”).
The
parties hereto agree as follows:
1. Agreement
To Purchase And Sell Stock.
(a) Authorization.
The
Company’s Board of Directors has authorized the issuance and sale, pursuant to
the terms and conditions of this Agreement, of up to 75,000,000 Units, each
Unit
consisting of one share of Common Stock (the “Purchased
Shares”)
and a
five-year warrant to purchase one share of Common Stock, substantially in the
form attached hereto as Exhibit B. Each warrant included in the Units shall
be
exercisable to purchase one share of Common Stock at $0.34 per share (the
“Purchased
Warrants”
and
together with the Purchased Shares, the “Purchased
Securities”).
(b) Agreement
to Purchase and Sell Securities.
On the
terms and subject to the conditions contained in this Agreement, each Purchaser
severally agrees to purchase, and the Company agrees to sell and issue to each
Purchaser, at Closing (as defined below), that number of Units set forth on
such
Purchaser’s signature page. The purchase price of each Unit (the “Per
Unit Price”)
shall
be $0.20. The minimum number of Units sold hereunder shall be not less than
62,500,000 for aggregate gross proceeds of $12,500,000.
(c) Use
of Proceeds.
The
Company intends to apply the net proceeds from the sale of the Purchased
Securities for working capital and general corporate purposes, as well as for
strategic purposes in connection with selected acquisitions that may be
considered in the future to expand its product and service
offerings.
(d) Obligations
Several Not Joint.
The
obligations of each Purchaser under this Agreement 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 this Agreement. Nothing contained herein, and no action taken
by
any Purchaser pursuant hereto, 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
this Agreement. Each Purchaser shall be entitled to independently protect and
enforce its rights, including without limitation the rights arising out of
this
Agreement, and it shall not be necessary for any other Purchaser to be joined
as
an additional party in any proceeding for such purpose.
2. Closing.
The
closing of the purchase and sale of the Purchased Securities shall take place
at
the offices of Sichenzia ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ LLP, ▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (the “SRFF
Offices”)
at
10:00 a.m. Eastern time on or before May 9, 2008, or at such other time and
place as the Company and Purchasers representing a majority of the Units to
be
purchased mutually agree upon (which time and place are referred to in this
Agreement as the “Closing”).
At
the Closing, the Company shall, against delivery of payment for the Purchased
Securities by wire transfer of immediately available funds in accordance with
the Company’s instructions, (a) authorize its transfer agent to issue to each
Purchaser one or more stock certificates (the “Certificates”)
registered in the name of each Purchaser (or in such nominee name(s) as
designated by such Purchaser in the Stock Certificate Questionnaire (attached
hereto as Appendix I) (the “Stock
Certificate Questionnaire”),
representing the appropriate number of Purchased Shares based
on
the number of Units to be purchased by such Purchaser as set forth on such
Purchaser’s signature page,
and
bearing the legend set forth in Section 4(j) herein and (b) issue the
appropriate number of Purchased Warrants based on the number of Units to be
purchased by such Purchaser as set forth on such Purchaser’s signature page.
Closing documents may be delivered by facsimile with original signature pages
sent by overnight courier. The date of the Closing is referred to herein as
the
“Closing Date.”
3. Representations
and Warranties of The Company.
The
Company hereby represents and warrants to each Purchaser that the statements
in
this Section 3 are true and correct:
(a) Organization,
Good Standing and Qualification.
The
Company and each of its Subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction in which it
was
formed. Each of the Company and its Subsidiaries has all corporate power and
authority required to carry on its business as presently conducted and as
described in the SEC Documents (as described below), and the Company has all
corporate power and authority required to enter into this Agreement and the
other agreements, instruments and documents contemplated hereby, and to
consummate the transactions contemplated hereby and thereby. Each of the Company
and its Subsidiaries is duly qualified as a foreign entity to do business and
is
in good standing in each jurisdiction in which the failure to so qualify would
have a Material Adverse Effect. As used in this Agreement “Subsidiaries”
means
any entity in which the Company owns, directly or indirectly, 100% of the
capital stock. Further, as used in this Agreement, “Material
Adverse Effect”
means
a
material adverse effect on, or a material adverse change in, or a group of
such
effects on or changes in, the business, operations, condition, financial or
otherwise, results of operations, prospects, assets or liabilities of the
Company and its subsidiaries, taken as a whole.
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(b) Capitalization.
The
capitalization of the Company, without listing the Purchased Securities to
be
purchased pursuant to this Agreement, is as follows:
(i) The
authorized capital stock of the Company consists of 500,000,000 shares of Common
Stock, par value $0.0001 per share, and 20,000,000 shares of preferred stock,
par value $0.0001 per share (“Preferred
Stock”),
of
which 10,000,000 shares of Preferred Stock have been designated as Series A
Preferred Stock. On March 30, 2008, shareholders holding a majority of the
Company’s outstanding voting stock approved the filing of an amendment to the
Company’s Articles of Incorporation (the “Amendment”), to reduce the number of
authorized Preferred Stock from 20,000,000 shares to 10,000,000. Upon the filing
of the Amendment, the Company intends to take action to cause the conversion
of
the outstanding shares of Series A Preferred Stock into an aggregate of 400,000
shares of Common Stock which will result in the elimination of the Company’s
class of Preferred Stock. To date, the Company has obtained the consent of
the
holders of at least a majority of the shares of the Company’s Series A Preferred
Stock to effect the conversion of the Series A Preferred Stock into shares
of
Common Stock of the Company, which represents the requisite approval to effect
such conversion.
In
the
event that all of the outstanding shares of the Company's Series A
Preferred Stock are not converted into Common Stock within 30 days
following the Closing Date, the Company shall pay to each Purchaser liquidated
damages (in addition to the rights and remedies available to each Purchaser
under applicable law and this Agreement), in cash, (i) on the 31st day following
the Closing Date, ten percent (10%) of the total purchase price of the Purchased
Securities purchased by such Purchaser pursuant to this Agreement and (ii)
thereafter, at a rate equal to ten percent (10%) per month (pro rata on a
30-day basis) of the total purchase price of the Purchased Securities purchased
by such Purchaser pursuant to this Agreement until all of the outstanding shares
of Series A Preferred Stock are converted into Common Stock. Except for the
first payment (which is payable on the 31st day following the Closing Date),
such liquidated damages shall be payable within ten (10) days of the end of
each
one-month anniversary of the conversion deadline set forth in this Section
3(b)(i).
(ii) As
of May
7, 2008, the issued and outstanding capital stock of the Company consisted
of
38,936,039 shares of Common Stock and 10,000,000 shares of Series A Preferred
Stock. The shares of issued and outstanding capital stock of the Company have
been duly authorized and validly issued, are fully paid and nonassessable and
have not been issued in violation of or are not otherwise subject to any
preemptive or other similar rights. All such shares have been issued in
compliance with applicable securities laws.
(iii) As
of May
7, 2008, the Company had (a) 3,652,019 shares of Common Stock reserved for
issuance upon exercise of outstanding options granted under the Company’s 2004
Stock Option Plan, as amended and 8,285,000 shares of Common Stock reserved
for
issuance upon exercise of outstanding options granted under the Company’s 2008
Stock Option Plan; (b) 600,000 shares of Common Stock reserved for issuance
upon
exercise of options not granted under the Option Plan; and (c) 20,056,639 shares
of Common Stock reserved for issuance upon exercise of outstanding warrants.
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(iv) As
of May
7, 2008, the Company had 8,347,981 shares of Common Stock available for future
grant under the Company’s 2004 Stock Option Plan, as amended and 5,715,000
shares available for future grant under the Company’s 2008 Stock Option
Plan.
With
the
exception of the foregoing in this Section 3(b) and except as set forth in
the
Disclosure Letter attached hereto as Exhibit B
(the “Disclosure Letter”),
there
are no outstanding subscriptions, options, warrants, convertible or exchangeable
securities or other rights granted to or by the Company to purchase shares
of
Common Stock or other securities of the Company and there are no commitments,
plans or arrangements to issue any shares of Common Stock or any security
convertible into or exchangeable for Common Stock. Except as set forth in
Disclosure Letter, (A) no securities of the Company are entitled to preemptive
or similar rights, and no person has any right of first refusal, preemptive
right, right of participation, or any similar right to participate in the
transactions contemplated by this Agreement; and (B) the issue and sale of
the
Purchased Securities will not obligate the Company to issue shares of Common
Stock or other securities to any person (other than the Purchasers) and will
not
result in a right of any holder of Company securities to adjust the exercise,
conversion, exchange or reset price under such securities. Except as set forth
in the Disclosure Letter, there are no stockholders agreements, voting
agreements or other similar agreements with respect to the Company’s capital
stock to which the Company is a party or, to the knowledge of the Company,
between or among any of the Company’s stockholders.
(c) Subsidiaries.
Except
as set forth in the Disclosure Letter, (i) the Company does not have any
subsidiaries, and, does not own any capital stock of, assets comprising the
business of, obligations of, or any other interest (including any equity or
partnership interest) in, any person or entity; (ii) the Company owns, directly
or indirectly, all of the capital stock or other equity interests of each
subsidiary free and clear of any liens, and all the issued and outstanding
shares of capital stock of each subsidiary are validly issued and are fully
paid, non-assessable and free of preemptive and similar rights to subscribe
for
or purchase securities.
(d) Due
Authorization.
All
corporate actions on the part of the Company necessary for the authorization,
execution, delivery of, and the performance of all obligations of the Company
under this Agreement and the authorization, issuance, reservation for issuance
and delivery of all of the Purchased Securities being sold under this Agreement
have been taken, no further consent or authorization of the Company or the
Board
of Directors or its stockholders is required, and this Agreement constitutes
the
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, except (i) as may be limited by (A)
applicable bankruptcy, insolvency, reorganization or others laws of general
application relating to or affecting the enforcement of creditors’ rights
generally and (B) the effect of rules of law governing the availability of
equitable remedies and (ii) as rights to indemnity or contribution may be
limited under federal or state securities laws or by principles of public policy
thereunder. In connection with any Board approvals obtained in connection with
the transactions contemplated hereby, at least a majority of the disinterested
directors (as such term is used in Section 144 of the Delaware General
Corporation Law) voted in favor of the transactions contemplated
hereby.
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(e) Valid
Issuance of Purchased Securities.
(i) Purchased
Shares.
The
Purchased Shares will be, upon payment therefor by the Purchasers in accordance
with this Agreement, duly authorized, validly issued, fully paid and
non-assessable, free from all taxes, liens, claims, encumbrances with respect
to
the issuance of such Purchased Shares and will not be subject to any pre-emptive
rights or similar rights.
(ii) Purchased
Warrants.
The
Purchased Warrants will be, upon payment therefor by the Purchasers in
accordance with this Agreement, duly authorized and validly issued, free from
all taxes, liens, claims, encumbrances with respect to the issuance of such
Purchased Warrants and will not be subject to any pre-emptive rights or similar
rights.
(iii) Underlying
Shares of Common Stock.
The
issuance of the shares of Common Stock issued or issuable from time to time
upon
the exercise of the Purchased Warrants (the “Underlying
Shares”)
will
be, and at all times prior to such exercise, will have been, duly authorized,
duly reserved for issuance upon such exercise and payment of the exercise price
of the Purchased Warrants, and will be, upon such exercise and payment, validly
issued, fully paid and non-assessable free from all taxes, liens, claim,
encumbrances with respect to the issuance of such shares and will not be subject
to any pre-emptive rights or similar rights. The Purchased Shares and the
Underlying Shares are sometimes referred to herein as the
Securities.
(iv) Compliance
with Securities Laws.
Subject
to the accuracy of the representations made by the Purchasers in Section 4
hereof, the Purchased Securities (assuming no unlawful redistribution of the
Purchased Securities by the Purchasers or other parties as of the date hereof)
will be issued to the Purchasers in compliance with applicable exemptions from
(A) the registration and prospectus delivery requirements of the Securities
Act
and (B) the registration and qualification requirements of all applicable
securities laws of the states of the United States.
(f) Consents
and Approvals.
No
consent, approval, order or authorization of, or registration, qualification,
designation, declaration or filing with, or notice to, any federal, state or
local governmental authority or self regulatory agency or any other person
on
the part of the Company is required in connection with the issuance of the
Purchased Securities to the Purchasers, or the consummation of the other
transactions contemplated by this Agreement, except (i) such filings as have
been made prior to the date hereof and (ii) such additional post-Closing filings
as may be required to comply with applicable state and federal securities
laws.
(g) Non-Contravention.
The
execution, delivery and performance of this Agreement by the Company, and the
consummation by the Company of the transactions contemplated hereby (including
issuance of the Purchased Securities and Underlying Shares), do not, and will
not in the case of the Underlying Shares: (i) contravene or conflict with the
Certificate of Incorporation of the Company, as amended to date (the
“Certificate
of Incorporation”),
or
the Bylaws of the Company, as amended to date (the “Bylaws”)
or the
organizational documents of any Subsidiary; (ii) constitute a violation of
any
provision of any federal, state, local or foreign law, rule, regulation, order
or decree applicable to the Company; or (iii) constitute a default (or an event
that with notice or lapse of time or both would become a default) or require
any
consent under, give rise to any right of termination, cancellation or
acceleration of, or to a loss of any material benefit to which the Company
is
entitled under, or result in the creation or imposition of any lien, claim
or
encumbrance on any assets of the Company under, any material contract to which
the Company is a party or any material permit, license or similar right relating
to the Company or by which the Company may be bound or affected.
-5-
(h) Litigation.
Except
as set forth in the Disclosure Letter, there is no action, suit, proceeding,
claim, arbitration or investigation (“Action”)
pending or, to the Company’s knowledge, threatened in writing: (i) against
the Company or any of its Subsidiaries, their respective activities, properties
or assets, or any officer, director or employee of the Company or any of its
Subsidiaries in connection with such officer’s, director’s or employee’s
relationship with, or actions taken on behalf of, the Company or any of its
Subsidiaries, that is reasonably likely to have a Material Adverse Effect;
or
(ii) that seeks to prevent, enjoin, alter, challenge or delay the transactions
contemplated by this Agreement (including the issuance of the Purchased
Securities). Neither the Company nor any of its Subsidiaries is a party to
or
subject to the provisions of, any order, writ, injunction, judgment or decree
of
any court or government agency or instrumentality. No Action is currently
pending nor does the Company or any of its Subsidiaries intend to initiate
any
Action that is reasonably likely to have a Material Adverse Effect.
(i) Compliance.
The
Company is not in violation or default of any provisions of the Certificate
of
Incorporation or the Bylaws and none of the Company’s Subsidiaries is in
violation nor default of any provisions of their respective organizational
documents. The Company and each of its Subsidiaries has complied and is
currently in compliance with all applicable statutes, laws, rules, regulations
and orders of the United States of America and all states thereof, foreign
countries and other governmental bodies and agencies having jurisdiction over
the Company’s or each subsidiary’s respective businesses or properties, except
for any instance of non-compliance that has not had, and would not reasonably
be
expected to have, a Material Adverse Effect. Neither the Company nor any of
its
Subsidiaries is in default under or in violation of (and no event has occurred
that has not been waived that, with notice or lapse of time or both, would
result in a default by the Company or any subsidiary under), nor has the Company
or any Subsidiary received notice of a claim that it is in default under or
that
it is in violation of, any indenture, loan or credit agreement or any other
agreement or instrument to which it is a party or by which it or any of its
properties is bound (whether or not such default or violation has been waived),
except as does not, individually or in the aggregate, have or reasonably be
expected to result in a Material Adverse Effect.
(j) Material
Non-Public Information.
The
Company has not provided to the Purchasers any material non-public information
other than information related to the transactions contemplated by this
Agreement, all of which information related to the transactions contemplated
hereby shall be disclosed by the Company pursuant to Section 8(m) hereof. The
Company understands and confirms that each Purchaser shall be relying on the
foregoing representations in effecting transactions in securities of the
Company.
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(k) SEC
Documents.
(i) Reports.
Except
as set forth in the Disclosure Letter, the Company has filed in a timely manner
all reports, schedules, forms, statements and other documents required to be
filed by it with the SEC pursuant to the reporting requirements of the
Securities Exchange Act of 1934, as amended (the “Exchange
Act”),
and
the rules and regulations promulgated thereunder. The Company has made available
to the Purchasers prior to the date hereof copies of its Annual Report on Form
10-KSB for the fiscal year ended December 31, 2007 (the “Form
10-KSB”),
and
any Current Report on Form 8-K for events occurring since December 31, 2007
(“Forms
8-K”)
filed
by the Company with the SEC (the Form 10-KSB and the Forms 8-K are
collectively referred to herein as the “SEC
Documents”).
Each
of the SEC Documents, as of the respective dates thereof (or, if amended or
superseded by a filing prior to the Closing Date, then on the date of such
filing), did not contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements made therein,
in
light of the circumstances under which they were made, not misleading. Each
SEC
Document, as it may have been subsequently amended by filings made by the
Company with the SEC prior to the date hereof, complied in all material respects
with the requirements of the Exchange Act and the rules and regulations of
the
SEC promulgated thereunder applicable to such SEC Document. The Company
covenants that the Form 10-Q for the quarter ended March 31, 2008 will be timely
filed on or before May 20, 2008 and will not contain any untrue statement of
material fact or omit to state a material fact necessary in order to make the
statements made therein, in light of the circumstances in which they were made,
not misleading.
(ii) ▇▇▇▇▇▇▇▇-▇▇▇▇▇.
The
Chief Executive Officer and the Chief Financial Officer of the Company have
signed, and the Company has furnished to the SEC, all certifications required
by
Sections 302 and 906 of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002. Such certifications
contain no qualifications or exceptions to the matters certified therein and
have not been modified or withdrawn; and neither the Company nor any of its
officers has received notice from any governmental entity questioning or
challenging the accuracy, completeness, form or manner of filing or submission
of such certifications. The Company is otherwise in compliance in all material
respects with all applicable effective provisions of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act
of
2002 and the rules and regulations issued thereunder by the SEC. The
Company has established disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and designed such
disclosure controls and procedures to ensure that information required to be
disclosed by the Company in the reports it files or submits under the Exchange
Act is recorded, processed, summarized and reported, within the time periods
specified in the SEC’s rules and forms. The Company has established internal
control over financial reporting (as defined in Exchange Act Rules 13a-15(f)
and
15d-15(f)) for the Company and designed such internal control over financial
reporting to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes
in
accordance with generally accepted accounting principals. The Company’s
certifying officers have evaluated the effectiveness of the Company’s disclosure
controls and procedures and internal control over financial reporting as of
the
end of the period covered by the Company’s most recently filed periodic report
under the Exchange Act (such date, the “Evaluation
Date”).
The
Company presented in its most recently filed periodic report under the Exchange
Act the conclusions of the certifying officers about the effectiveness of the
disclosure controls and procedures and internal control over financial reporting
based on their evaluations as of the Evaluation Date. Since the Evaluation
Date,
there have been no changes in the Company’s internal control over financial
reporting that has materially affected, or is reasonably likely to materially
affect, the Company’s internal control over financial reporting.
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(iii) Financial
Statements.
The
financial statements of the Company in the SEC Documents present fairly, in
accordance with United States generally accepted
accounting principles (“GAAP”),
consistently applied, the financial position of the Company as of the dates
indicated, and the results of its operations and cash flows for the periods
therein specified, subject, in the case of unaudited financial statements for
interim periods, to normal year-end audit adjustments.
(l) Absence
of Certain Changes Since the Balance Sheet Date.
Except
as set forth in the Disclosure Letter, since December 31, 2007, the business
and
operations of the Company and each of its Subsidiaries have been conducted
in
the ordinary course consistent with past practice, and there has not
been:
(i) any
declaration, setting aside or payment of any dividend or other distribution
of
the assets of the Company or any of its Subsidiaries with respect to any shares
of capital stock of the Company or any of its Subsidiaries or any repurchase,
redemption or other acquisition by the Company or any subsidiary of the Company
of any outstanding shares of the Company’s capital stock (and the Company has
not made any agreements to do any of the foregoing);
(ii) any
damage, destruction or loss, whether or not covered by insurance, except for
such occurrences, individually and collectively, that have not had, and would
not reasonably be expected to have, a Material Adverse Effect;
(iii) any
waiver by the Company or any of its Subsidiaries of a valuable right or of
a
material debt owed to it, except for such waivers, individually and
collectively, that have not had, and would not reasonably be expected to have,
a
Material Adverse Effect;
(iv) any
material change or amendment to, or any waiver of any material right under
a
material contract or arrangement by which the Company or any of its Subsidiaries
or any of its or their respective assets or properties is bound or
subject;
(v) any
change by the Company in its accounting principles, methods or practices or
in
the manner in which it keeps its accounting books and records, except any such
change required by a change in GAAP or by the SEC; or
(vi) any
other
event or condition of any character, except for such events and conditions
that
have not resulted, and are not expected to result, either individually or
collectively, in a Material Adverse Effect.
-8-
(m) Intellectual
Property.
(i) Except
as
set forth in the Disclosure Letter, the Company and each of its Subsidiaries
owns or possesses sufficient rights to use all patents, patent rights,
inventions, trade secrets, know-how, trademarks, service marks, trade names,
copyrights, information and other proprietary rights and processes
(collectively, “Intellectual
Property”),
which
are necessary to conduct its or their respective businesses as currently
conducted and as described in the SEC Documents free and clear of all liens,
encumbrances and other adverse claims, except where the failure to own or
possess free and clear of all liens, encumbrances and other adverse claims
would
not reasonably be expected to result, either individually or in the aggregate,
in a Material Adverse Effect.
(ii) Neither
the Company nor any of its Subsidiaries has received any written notice of,
nor
has knowledge of, any infringement of or conflict with rights of others with
respect to any Intellectual Property and neither the Company nor any of its
Subsidiaries has knowledge of any infringement, misappropriation or other
violation of any Intellectual Property by any third party, which, in either
case, either individually or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would reasonably be expected to have a Material
Adverse Effect.
(iii) To
the
Company’s knowledge, none of the patent rights owned or licensed by the Company
or any of its Subsidiaries are unenforceable or invalid.
(iv) Each
employee, consultant and contractor of the Company and each of its Subsidiaries
who has had access to the Intellectual Property has executed a valid and
enforceable agreement to maintain the confidentiality of such Intellectual
Property and assigning all rights to the Company or such subsidiary to any
inventions, improvements, discoveries or information relating to the business
of
the Company or such subsidiary. The Company is not aware that any of its or
its
Subsidiaries’ employees is obligated under any contract (including licenses,
covenants or commitments of any nature) or other agreement, or subject to any
judgment, decree or order of any court or administrative agency, that would
interfere with their duties to the Company or such subsidiary or that would
conflict with the Company’s or such subsidiary’s business.
(v) Neither
the Company nor any of its Subsidiaries is subject to any “open source” or
“copyleft” obligations or otherwise required to make any public disclosure or
general availability of source code either used or developed by the Company
or
any of its Subsidiaries.
(n) Registration
Rights.
Except
as provided in Section 5 herein and except as set forth in the Disclosure
Letter, the Company is not currently subject to any agreement providing any
person or entity any rights (including piggyback registration rights) to have
any securities of the Company registered with the SEC or registered or qualified
with any other governmental authority.
(o) Title
to Property and Assets.
Except
as set forth in the Disclosure Letter, the properties and assets of the Company
and its Subsidiaries are owned by the Company and its Subsidiaries free and
clear of all mortgages, deeds of trust, liens, charges, encumbrances and
security interests except for (i) statutory liens for the payment of current
taxes that are not yet delinquent and (ii) liens, encumbrances and security
interests that arise in the ordinary course of business and do not in any
material respect affect the properties and assets of the Company. With respect
to the property and assets it leases, the Company is in compliance with such
leases in all material respects.
-9-
(p) Taxes.
The
Company and each of its Subsidiaries has filed or has valid extensions of the
time to file all necessary federal, state, and foreign income and franchise
tax
returns due prior to the date hereof and has paid or accrued all taxes shown
as
due thereon, and the Company has no knowledge of any material tax deficiency
that has been or might be asserted or threatened against it or any of its
Subsidiaries.
(q) Insurance.
The
Company and its Subsidiaries maintain insurance of the types and in the amounts
that the Company reasonably believes is prudent and adequate for its business
and which is at least as extensive as is customary for other companies in the
Company’s industry, all of which insurance is in full force and effect.
(r) Labor
Relations.
No
material labor dispute exists or, to the knowledge of the Company, is imminent
with respect to any of the employees of the Company or any of its Subsidiaries.
No executive officer, to the knowledge of the Company, is, or is now expected
to
be, in violation of any material term of any employment contract,
confidentiality, disclosure or proprietary information agreement or
non-competition agreement, or any other contract or agreement or any restrictive
covenant, and the continued employment of each such executive officer does
not
subject the Company or any of its Subsidiaries to any liability with respect
to
any of the foregoing matters.
(s) Internal
Accounting Controls.
The
Company and 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 and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any
differences.
(t) Transactions
With Officers and Directors.
Except
as set forth in the Disclosure Letter, none of the officers or directors of
the
Company has entered into any transaction with the Company or any Subsidiary
that
would be required to be disclosed pursuant to Item 404(a) or (c) of Regulation
S-K of the SEC.
(u) General
Solicitation.
Neither
the Company nor any other person or entity authorized by the Company to act
on
its behalf has engaged in a general solicitation or general advertising (within
the meaning of Regulation D of the Securities Act) of investors with respect
to
offers or sales of the Purchased Securities. The Company has offered the
Securities for sale only to the Purchasers and certain other “accredited
investors” within the meaning of Rule 501 under the Securities Act.
-10-
(v) Registration
Statement Matters.
The
Company meets the eligibility requirements for use of a registration statement
on Form S-1 for the resale of the Purchased Shares and sale of the Underlying
Shares by the Purchasers. Assuming the completion and timely delivery of the
Registration Statement Questionnaire (attached hereto as Appendix II) (the
“Registration
Statement Questionnaire”)
by
each Purchaser to the Company, the Company is not aware of any facts or
circumstances that would prohibit or delay the preparation and filing of a
registration statement with respect to the Registrable Shares (as defined
below).
(w) Listing
Matters.
The
Common Stock of the Company is listed on the Over The Counter Bulletin Board
(the “OTCBB”)
under
the ticker symbol “RGRP.” The issuance and sale of the Purchased Securities
under this Agreement does not contravene the rules and regulations of the
OTCBB.
(x) Investment
Company.
The
Company and each of its Subsidiaries is not now, and after the sale of the
Purchased Securities under this Agreement and the application of the net
proceeds from the sale of the Purchased Securities described in Section 1(b)
herein will not be, an “investment company” within the meaning of the Investment
Company Act of 1940, as amended.
(y) No
Integrated Offering.
Neither
the Company, nor any Affiliate of the Company, nor any person acting on its
or
their behalf has, directly or indirectly, engaged in any form of general
solicitation or general advertising with respect to any security or made any
offers or sales of any security or solicited any offers to buy any security,
under circumstances that would cause the offering or issuance of the Purchased
Securities to be integrated with prior offerings by the Company for purposes
of
the Securities Act which would cause Regulation D or any other applicable
exemption from registration under the Securities Act to be unavailable, or
would
cause any applicable state securities laws exemptions or any applicable
stockholder approval provisions exemptions, including, without limitation,
under
the rules and regulations of any national securities exchange or automated
quotation system on which any of the securities of the Company are listed or
designated to be unavailable, nor will the Company take any action or steps
that
would cause the offering or issuance of the Purchased Securities to be
integrated with other offerings.
(z) Brokers.
Except
for ▇▇▇▇▇▇▇▇ Curhan Ford & Co. or any approved agents, neither the Company
nor any Subsidiary has any liability to pay any fees, commissions or other
similar compensation to any broker, finder, investment banker, financial advisor
or other similar person in connection with the transactions contemplated by
this
Agreement. The Purchasers shall have no obligation with respect to any fees
or
with respect to any claims made by or on behalf of other persons for fees of
a
type contemplated in this Section that may be due in connection with the
transactions contemplated by this Agreement.
(aa) Pensions;
Benefits. (a)
Neither the Company nor any subsidiary or ERISA Affiliate maintains or
contributes to any Plan other than those disclosed in the Disclosure
Letter.
-11-
(i) The
Company and each ERISA Affiliate is in compliance with ERISA and no
contributions required to be made by the Company or any ERISA Affiliate to
any
pension plan are overdue.
(ii) No
liability to the PBGC has been or is expected to be incurred by the Company
or
any ERISA Affiliate with respect to any pension plan that, individually or
in
the aggregate, could reasonably be expected to have a Material Adverse Effect.
No circumstance exists that constitutes grounds under section 4042 of ERISA
entitling the PBGC to institute proceedings to terminate, or appoint a trustee
to administer, any pension plan or trust created thereunder, nor has the PBGC
instituted any such proceeding.
(ii) Neither
the Company nor any ERISA Affiliate has incurred or presently expects to incur
any withdrawal liability under Title IV of ERISA with respect to any
multiemployer plan. There have been no “reportable events” (as such term is
defined in section 4043 of ERISA) with respect to any multiemployer plan that
could result in the termination of such multiemployer plan and give rise to
a
liability of the Company or any ERISA Affiliate in respect thereof. Neither
the
Company or any subsidiary has incurred or does it expect to incur liability
under Sections 412 or 4971 of the Code; and each “pension plan” for which the
Company would have any liability that is intended to be qualified under Section
401(a) of the Code has been determined by the Internal Revenue Service to be
so
qualified and nothing has occurred, whether by action or by failure to act,
which could reasonably be expected to cause the loss of such
qualification.
For
purposes of this section 3(aa) “Code”
means
the Internal Revenue Code of 1986; “ERISA”
means
the Employee Retirement Income Security Act of 1974; “ERISA
Affiliate”
means
any person required to be aggregated with the Company or any subsidiary of
the
Company under Sections 414(b), (c), (m) or (o) of the Code; “PBGC”
means
the Pension Benefit Guaranty Corporation; and “Plan”
means
any employee benefit plan, program or arrangement, whether oral or written,
maintained or contributed to by the Company, any subsidiary of the Company
or
any ERISA Affiliate, or with respect to which the Company, any of its
Subsidiaries or any ERISA Affiliate may incur liability.
(bb) Application
of Takeover Protections.
The
Company and its Board of Directors have taken all necessary action, if any,
in
order to render inapplicable any control share acquisition, business
combination, poison pill (including any distribution under a rights agreement)
or other similar anti-takeover provision under the Company’s Certificate of
Incorporation (or similar charter documents) or the laws of its state of
incorporation that is or could become applicable to the Purchasers as a result
of the Purchasers and the Company fulfilling their obligations or exercising
their rights under this Agreement and the Purchased Warrants, including without
limitation as a result of the Company’s issuance of the Purchased Securities and
the Purchasers’ ownership of the Purchased Securities.
(cc) Purchaser
Representations.
The
Company acknowledges and agrees that no Purchaser makes or has made any
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in Section 4 hereof.
-12-
(dd) Solvency.
Based
on the financial condition of the Company as of the Closing Date after giving
effect to the receipt by the Company of the proceeds from the sale of the
Purchased Securities hereunder, (i) the fair saleable value of the Company’s
assets exceeds the amount that will be required to be paid on or in respect
of
the Company’s existing debts and other liabilities (including known contingent
liabilities) as they mature; (ii) the Company’s assets do not constitute
unreasonably small capital to carry on its business as now conducted and as
proposed to be conducted including its capital needs taking into account the
particular capital requirements of the business conducted by the Company, and
projected capital requirements and capital availability thereof; and (iii)
the
current cash flow of the Company, together with the proceeds the Company would
receive, were it to liquidate all of its assets, after taking into account
all
anticipated uses of the cash, would be sufficient to pay all amounts on or
in
respect of its liabilities when such amounts are required to be paid. The
Company does not intend to incur debts beyond its ability to pay such debts
as
they mature (taking into account the timing and amounts of cash to be payable
on
or in respect of its debt). The SEC Documents set forth as of the dates thereof
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 $50,000
(other than trade accounts payable incurred in the ordinary course of business),
(b) all guaranties, endorsements and other contingent obligations in respect
of
Indebtedness of others, 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 $50,000 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.
(ee) No
Disagreements with Accountants and Lawyers.
There
are no disagreements of any kind presently existing, or reasonably anticipated
by the Company to arise, between the Company and the accountants and lawyers
formerly or presently employed by the Company.
(ff) Acknowledgment
Regarding Purchasers’ Purchase of Purchased Securities.
The
Company acknowledges and agrees that each of the Purchasers is acting solely
in
the capacity of an arm’s length purchaser with respect to this Agreement and the
transactions contemplated hereby. The Company further acknowledges that no
Purchaser is acting as a financial advisor or fiduciary of the Company (or
in
any similar capacity) with respect to this Agreement and the transactions
contemplated hereby and any advice given by any Purchaser or any of their
respective representatives or agents in connection with this Agreement and
the
transactions contemplated hereby is merely incidental to the Purchasers’
purchase of the Purchased Securities. The Company further represents to each
Purchaser that the Company’s decision to enter into this Agreement has been
based solely on the independent evaluation of the transactions contemplated
hereby by the Company and its representatives.
(gg) Manipulation
of Price.
The Company has not, and to its knowledge no one acting on its behalf has,
(i)
taken, directly or indirectly, any action designed to cause or to result in
the
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of any of the Purchased Securities, (ii) sold,
bid
for, purchased, or, paid any compensation for soliciting purchases of, any
of
the Purchased Securities or (iii) paid or agreed to pay to any person any
compensation for soliciting another to purchase any other securities of the
Company, other than, in the case of clauses (ii) and (iii), compensation paid
to
the Company’s placement agent and any approved broker-dealers in connection with
the placement of the Purchased Securities.
-13-
(hh) Legend
Removal.
The
Company agrees, upon a Purchaser’s reasonable request, to reissue certificates
representing any of the Purchased Shares and Underlying Shares without the
legend set forth in Section 4(j)(i) below: (i) while a registration statement
covering the resale of such securities is effective under the Securities Act,
(ii) following any sale of such securities pursuant to Rule 144 (assuming the
transferor is not an affiliate of the Company), (iii) if such Securities are
eligible for sale under Rule 144(b) (to the extent that the applicable Purchaser
provides a certification or legal opinion to the Company to that effect), or
(iv) if such legend is not required under applicable requirements of the
Securities Act (including controlling judicial interpretations and
pronouncements issued by the Commission). Following the effective date of a
registration statement, which includes the Purchased Securities, or at such
earlier time as a legend is no longer required for the Purchased Shares and
the
Underlying Shares, the Company will, promptly following the delivery by a
Purchaser to the Company or the Company’s transfer agent of a legended
certificate representing such securities, deliver or cause to be delivered
to
such Purchaser a certificate representing such securities that is free from
all
restrictive legends. If requested by a Purchaser, certificates for securities
subject to legend removal hereunder shall be transmitted by the transfer agent
of the Company to the Purchasers by crediting the account of the Purchaser’s
prime broker with the Depository Trust Company (“DTC”).
(ii) Buy-In.
If the
Company shall fail for any reason or for no reason to issue to the holder of
the
Securities within three (3) trading days after the occurrence of any of Section
3(hh)(i) through (hh)(iv) above (the “Delivery
Date”)
a
certificate without such legend to the holder or to issue such Securities to
such holder by electronic delivery at the applicable balance account at DTC,
and
if on or after such Delivery Date the Purchaser purchases (in an open market
transaction or otherwise) shares of Common Stock to deliver in satisfaction
of a
sale by the Purchaser of shares of Common Stock that the Purchaser anticipated
receiving from the Company without any restrictive legend (a “Buy-In”),
then
the Company shall, within three (3) trading days after the Purchaser’s request
and in the Purchaser’s sole discretion, either (i) pay cash to the Purchaser in
an amount equal to the Purchaser’s total purchase price (including brokerage
commissions, if any) for the shares of Common Stock so purchased (the
“Buy-In
Price”),
at
which point the Company’s obligation to deliver such certificate shall terminate
and such shares shall be cancelled, or (ii) promptly honor its obligation to
deliver to the Purchaser a certificate or certificates representing such number
of shares of Common Stock that would have been issued if the Company timely
complied with its obligations hereunder (“Unlegended
Shares”)
and
pay cash to the Purchaser in an amount equal to the excess (if any) of the
Buy-In Price over the aggregate Market Price of the Unlegended Shares on the
date the Company delivers the Unlegended Shares to the Purchaser. For purposes
of this clause (iv), “Market
Price”
means
(i) if the principal trading market for such securities is an exchange, the
bid
price per share on the OTCBB or other trading market, (ii) if clause (i) is
not
applicable, the bid price per share as set forth by Nasdaq or (iii) if clauses
(i) and (ii) are not applicable, the bid price per share as set forth in the
Pink Sheets.
-14-
(jj) Equal
Treatment of Purchasers.
No
consideration shall be offered or paid to any person to amend or consent to
a
waiver or modification of any provision of any of this Agreement or the
Purchased Warrants unless the same consideration is also offered to all of
the
parties to such agreements. For clarification purposes, this provision
constitutes a separate right granted to each Purchaser by the Company and
negotiated separately by each Purchaser, and is intended for the Company to
treat the Purchasers as a class and shall not in any way be construed as the
Purchasers acting in concert or as a group with respect to the purchase,
disposition or voting of Securities or otherwise.
(kk) Shell
Company Status.
The
Company has ceased to be an issuer defined in Rule 144(i)(1)(i); is subject
to
the reporting requirements of Section 13 or 15 (d) of the Exchange Act; has
filed all reports and other materials required to be filed by Section 13 or
15(d) of the Exchange Act, as applicable, during the preceding 12 months, other
than Form
8-K
reports;
has filed current "Form 10 information" (as defined in Rule 144(i)(3)) with
the
SEC reflecting its status as an entity that is no longer an issuer described
in
Rule 144(i)(1)(i); and at least one year has elapsed from the date the Company
filed “Form 10 information” with the SEC.
(ll)
Related
Party Acquisition. Neither
the Company nor any of its Subsidiaries will consummate an acquisition by the
Company, whether through an acquisition of stock, merger or asset
purchase--requiring payment of consideration to any entity in which an officer,
director, or affiliate of the Company has any interest in excess of $250,000
individually or in the aggregate, or is a current officer, director, trustee,
affiliate or partner (the "Related Party Interest") without the prior written
consent of the majority of the holders of Common Stock (excluding any Common
Stock held directly or indirectly by the officers, directors or employees of
the
Company with the Related Party Interest)."
4. Representations,
Warranties and Certain Agreements of The Purchasers.
Each
Purchaser hereby represents and warrants to the Company, severally and not
jointly, and agrees that:
(a) Organization,
Good Standing and Qualification.
The
Purchaser has all corporate, membership or partnership power and authority
required to enter into this Agreement and the other agreements, instruments
and
documents contemplated hereby, and to consummate the transactions contemplated
hereby and thereby.
(b) Authorization.
The
execution of this Agreement has been duly authorized by all necessary corporate,
membership or partnership action on the part of the Purchaser. This Agreement
constitutes the Purchaser’s legal, valid and binding obligation, enforceable in
accordance with its terms, except (i) as may be limited by (A) applicable
bankruptcy, insolvency, reorganization or other laws of general application
relating to or affecting the enforcement of creditors’ rights generally and (B)
the effect of rules of law governing the availability of equitable remedies
and
(ii) as rights to indemnity or contribution may be limited under federal or
state securities laws or by principles of public policy thereunder.
-15-
(c) Litigation.
There is
no Action pending to which such Purchaser is a party that is reasonably likely
to prevent, enjoin, alter or delay the transactions contemplated by this
Agreement.
(d) Purchase
for Own Account.
The
Purchased Securities are being acquired for investment for the Purchaser’s own
account, not as a nominee or agent, and not with a view to the public resale
or
distribution thereof within the meaning of the Securities Act, without
prejudice, however, to such Purchaser’s right at all times to sell or otherwise
dispose of all or any part of such securities in compliance with applicable
federal and state securities laws and as otherwise contemplated by this
Agreement. The Purchaser also represents that it has not been formed for the
specific purpose of acquiring the Purchased Securities.
(e) Investment
Experience.
The
Purchaser understands that the purchase of the Purchased Securities involves
substantial risk. The Purchaser has experience as an investor in securities
of
companies and acknowledges that it can bear the economic risk of its investment
in the Purchased Securities and has such knowledge and experience in financial
or business matters that it is capable of evaluating the merits and risks of
this investment in the Purchased Securities and protecting its own interests
in
connection with this investment.
(f) Accredited
Investor Status.
The
Purchaser is an “accredited investor” within the meaning of Regulation D
promulgated under the Securities Act.
(g) Reliance
Upon Purchaser’s Representations.
The
Purchaser understands that the issuance and sale of the Purchased Securities
to
it will not be registered under the Securities Act on the ground that such
issuance and sale will be exempt from registration under the Securities Act
pursuant to Section 4(2) thereof, and that the Company’s reliance on such
exemption is based on each Purchaser’s representations set forth
herein.
(h) Receipt
of Information.
The
Purchaser has had an opportunity to ask questions and receive answers from
the
Company regarding the terms and conditions of the issuance and sale of the
Purchased Securities and the business, properties, prospects and financial
condition of the Company and to obtain any additional information requested
and
has received and considered all information it deems relevant to make an
informed decision to purchase the Purchased Securities. Neither such inquiries
nor any other investigation conducted by or on behalf of such Purchaser or
its
representatives or counsel shall modify, amend or affect such Purchaser’s right
to rely on the truth, accuracy and completeness of such information and the
Company’s representations and warranties contained in this
Agreement.
(i) Restricted
Securities.
The
Purchaser understands that the Purchased Securities have not been registered
under the Securities Act and will not sell, offer to sell, assign, pledge,
hypothecate or otherwise transfer any of the Purchased Securities unless (i)
pursuant to an effective registration statement under the Securities Act, (ii)
such holder provides the Company with an opinion of counsel, in form and
substance reasonably acceptable to the Company, to the effect that a sale,
assignment or transfer of the Purchased Securities may be made without
registration under the Securities Act and the transferee agrees to be bound
by
the terms and conditions of this Agreement, (iii) such holder provides the
Company with reasonable assurances (in the form of seller and broker
representation letters) that the Purchased Shares or the Underlying Shares,
as
the case may be, can be sold pursuant to Rule 144 promulgated under the
Securities Act (“Rule
144”)
or
(iv) pursuant to Rule 144(b) promulgated under the Securities Act following
the applicable holding period. Notwithstanding anything to the contrary
contained in this Agreement, including but not limited to in Section 5(d)(i)
below, the Purchaser may transfer (without restriction and without the need
for
an opinion of counsel) the Purchased Shares or the Underlying Shares to its
Affiliates (as defined below) provided that each such Affiliate is an
“accredited investor” under Regulation D, and such Affiliate agrees to be bound
by the terms and conditions of this Agreement and shall have the rights of
a
Purchaser hereunder.
-16-
For
the
purposes of this Agreement, an “Affiliate”
of
any
specified Purchaser means any other person or entity directly or indirectly
controlling, controlled by or under direct or indirect common control with
such
specified Purchaser. For purposes of this definition, “control”
means
the power to direct the management and policies of such person or firm, directly
or indirectly, whether through the ownership of voting securities, by contract
or otherwise.
(j) Legends.
(i) Purchased
Shares and Underlying Shares.
The
Purchaser agrees that the certificates for the Purchased Shares and Underlying
Shares shall bear the following legend and that the Purchaser will comply with
the restrictions on transfer set forth in such legend:
“THESE
SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION
OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR
TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY.”
The
Company acknowledges and agrees that a Purchaser may from time to time pledge
pursuant to a bona fide margin agreement with a registered broker-dealer or
grant a security interest in some or all of the Purchased Securities to a
financial institution that is an “accredited investor” as defined in Rule 501(a)
under the Securities Act and who agrees to be bound by the provisions of this
Agreement and, if required under the terms of such arrangement, such Purchaser
may transfer pledged or secured Purchased Securities to the pledgees or secured
parties. Further, no notice shall be required of such pledge. At the appropriate
Purchaser’s expense, the Company will execute and deliver such reasonable
documentation as a pledgee or secured party of Purchased Securities may
reasonably request in connection with a pledge or transfer of the Purchased
Securities, the preparation and filing of any required prospectus supplement
under Rule 424(b)(3) under the Securities Act or other applicable provision
of
the Securities Act to appropriately amend the list of selling stockholders
thereunder.
-17-
In
addition, the Purchaser agrees that the Company may place stop transfer orders
with its transfer agent with respect to such certificates in order to implement
the restrictions on transfer set forth in this Agreement. The appropriate
portion of the legend and the stop transfer orders will be removed promptly
(but
in
no event later than three (3) business days) upon
delivery to the Company of such satisfactory evidence as reasonably may be
required by the Company that such legend or stop orders are not required to
ensure compliance with the Securities Act. In addition, upon the declaration
of
the effectiveness of the Registration Statement which includes the Purchased
Securities, the Company shall cause its counsel to deliver a blanket opinion
(or
separate opinions if the transfer agent will not accept a blanket opinion)
to
its transfer agent to cause the stock certificates evidencing the Purchased
Shares and Underlying Shares to be issued to the Purchasers free of any
Securities Act restrictive legends assuming compliance with the prospectus
delivery requirements, to the extent required by Rule 172 of the Securities
Act.
Each of the Purchaser acknowledges and agrees that the Company will endeavor
to
remove any Securities Act restrictive legends pursuant to this Section j(ii)
upon the representation contained herein that the Purchasers will comply with
the prospectus delivery requirements, to the extent required by Rule 172 of
the
Securities Act.
(ii) Purchased
Warrants.
The
Purchaser agrees that Purchased Warrants shall bear the following
legend:
“THIS
WARRANT AND THE SHARES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR WITH ANY
STATE SECURITIES COMMISSION, AND MAY NOT BE TRANSFERRED OR DISPOSED OF BY THE
HOLDER IN THE ABSENCE OF A REGISTRATION STATEMENT WHICH IS EFFECTIVE UNDER
THE
SECURITIES ACT AND APPLICABLE STATE LAWS AND RULES, OR, UNLESS, IMMEDIATELY
PRIOR TO THE TIME SET FOR TRANSFER, SUCH TRANSFER MAY BE EFFECTED WITHOUT
VIOLATION OF THE SECURITIES ACT AND OTHER APPLICABLE STATE LAWS AND
RULES.
NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION
WITH
A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY
THE
SECURITIES.”
(k) Questionnaires.
The
Purchaser has completed or caused to be completed the Stock Certificate
Questionnaire and the Registration Statement Questionnaire for use in
preparation of the Registration Statement (as defined in Section 5(a)(ii)
below), and the answers to such questionnaires are true and correct as of the
date of this Agreement; provided,
that the
Purchasers shall be entitled to update such information by providing written
notice thereof to the Company before the effective date of the Registration
Statement.
-18-
(l) Prohibited
Transactions.
(i) During
the last thirty (30) days prior to the date hereof, neither such Purchaser
nor
any Affiliate of such Purchaser, foreign or domestic, has, directly or
indirectly, effected or agreed to effect any “short sale” (as defined in Rule
200 under Regulation SHO), whether or not against the box, established any
“put
equivalent position” (as defined in Rule 16a-1(h) under the ▇▇▇▇ ▇▇▇) with
respect to the Common Stock, borrowed or pre-borrowed any shares of Common
Stock, or granted any other right (including, without limitation, any put or
call option) with respect to the Common Stock or with respect to any security
that includes, relates to or derived any significant part of its value from
the
Common Stock or otherwise sought to hedge its position in the Company’
securities (each, a “Prohibited
Transaction”).
(ii) Prior
to
the earliest to occur of (i) the termination of this Agreement, (ii) the date
the Registration Statement, as defined below, is declared effective by the
Securities and Exchange Commission or (iii) 90
days
from the Closing Date (120 days if the registration statement is reviewed by
the
SEC)
such
Purchaser shall not, and shall cause its Affiliates not to, engage, directly
or
indirectly, in (a) a Prohibited Transaction nor (b) any sale, assignment,
pledge, hypothecation, put, call, or other transfer of any of the shares of
Common Stock, warrants or other securities of the issuer acquired
hereunder.
5. Form
D Filing; Registration; Compliance With The Securities
Act.
(a) Form
D Filing; Registration of the Purchased Shares and Underlying Shares; Piggyback
Registration. The
Company hereby agrees that it shall:
(i) file
in a
timely manner a Form D relating to the sale of the Purchased Securities under
this Agreement, pursuant to Regulation D promulgated under the Securities Act;
(ii) prepare
and file with the SEC as soon as practicable, and in no event later than 30
days
following the Closing, a registration statement on Form S-1 (the “Registration
Statement”),
which
shall contain (except if otherwise required pursuant to written comments
received from the SEC upon a review of such Registration Statement) the “Plan of
Distribution” attached hereto as Annex
A,
to
enable the offer and resale of all Purchased Shares and the sale of all
Underlying Shares (together with any shares of Common Stock issued as a dividend
or other distribution with respect to, or in exchange for, or in replacement
of,
the Purchased Shares or the Underlying Shares, the “Registrable
Shares”)
by the
Purchasers from time to time on a delayed or continuous basis pursuant to Rule
415 under the Securities Act and use all reasonable best efforts to cause such
Registration Statement to be declared effective as promptly as possible after
filing, but in any event, within 90 days following the Closing Date or, in
the event of a review of the Registration Statement by the SEC, within 120
days
following the Closing Date, and to remain continuously effective until the
date
on which all Registrable Shares purchased by the Purchasers pursuant to this
Agreement have been sold either under the Registration Statement or pursuant
to
Rule 144 promulgated under the Securities Act (the “Registration
Period”).
If
for any reason, the SEC does not permit all Registrable Shares to be included
in
such Registration Statement (such that the Registration Statement may be used
for resales in a manner that does not constitute, in the SEC’s view, an offering
by the Company and that permits the continuous resale at the market by the
Purchasers participating therein without being named therein as
“underwriters”)(“Rule 415 Issue”), then the Company shall prepare and file with
the SEC one or more separate Registration Statements that meets such criteria
with respect to any such Registrable Shares not included in the previous
Registration Statement. The Company will then use its best efforts at the first
opportunity that is permitted by the SEC, but in no event later than the later
of sixty (60) calendar days from the date substantially all of the Registrable
Securities registered under the Registration Statement have been sold by the
Purchasers or six (6) months from the date the Registration Statement was
declared effective, to register for resale the Registrable Securities that
have
been excluded from being registered (provided such Registration Statement meets
the criteria set forth above). The Company shall use all reasonable best efforts
to cause any such Registration Statement to be declared effective within
90 days following the filing thereof or, in the event of a review of the
registration statement by the SEC, within 120 days following the filing thereof,
and to remain continuously effective for the Registration Period. By 9:30 a.m.
on the business day immediately following the effective date of the applicable
Registration Statement, the Company shall file with the SEC in accordance with
Rule 424 under the Securities Act the final prospectus to be used in connection
with sales pursuant to such Registration Statement. In no event shall the
Company include securities other than Registrable Shares on any Registration
Statement filed pursuant to this Section 5.
-19-
(iii) Notwithstanding
anything to the contrary contained in this Agreement, in the event the SEC
does
not permit a Registration Statement to include all of the Registrable Shares
because of a Rule 415 Issue, then the Company shall (i) first, exclude the
shares held by any officer or director of the Company or any Affiliate of any
such officer or director and (ii) second, reduce the number of Registrable
Shares to be included in such Registration Statement by all other Purchasers
until such time as the SEC shall so permit such Registration Statement to become
effective and be used for resales in a manner that does not constitute an
offering by the Company and that permits the continuous resale at the market
by
the Purchasers participating therein without being named therein as
“underwriters.” In making such reduction, the Company shall reduce the
number of shares to be included by all such Purchasers on a pro rata basis
(based upon the number of Registrable Securities otherwise required to be
included for each such Purchaser). Any reduction of Registrable Shares pursuant
to this paragraph will first reduce Warrant Shares. In no event shall a
Purchaser be required to be named as an “underwriter” in a Registration
Statement without such Purchaser’s prior written consent. In the event that the
Company shall be required to exclude the Warrant Shares from the Registration
Statement, the Company shall be permitted to deregister that portion of the
Registrable Securities held by the Purchasers, not including the Registrable
Securities held by the Purchasers set forth on Exhibit A-1, that can be sold
pursuant to Rule 144 after a period of six (6) months without regard to volume
limitations, and file a subsequent registration statement that shall include
the
Warrant Shares and shall use all reasonable best efforts to cause any such
registration statement to be declared effective within 90 days following
the filing thereof or, in the event of a review of the registration statement
by
the SEC, within 120 days following the filing thereof, and to remain
continuously effective for the Registration Period.
-20-
(iv) prepare
and file with the SEC such amendments (including post-effective amendments)
and
supplements to the Registration Statement and the Prospectus (as defined below)
used in connection therewith as may be necessary to keep the Registration
Statement effective at all times until the end of the Registration Period and
prepare and file with the SEC such additional Registration Statements in order
to register for resale under the Securities Act all of the Registrable Shares;
and (B) respond as promptly as reasonably possible, and in any event within
thirty days, to any comments received from the SEC with respect to the
Registration Statement or any amendment thereto and as promptly as reasonably
possible provide the Purchasers, upon their request, true and complete copies
of
all correspondence from and to the SEC relating to the Registration Statement
(with all material, non-public information redacted from such
copies);
(v) not
less
than two trading days prior to the filing of a Registration Statement or any
related Prospectus or any amendment or supplement thereto, the Company shall
furnish to the Purchasers copies of all such documents proposed to be filed,
which documents will be subject to the review of such Purchasers;
(vi) furnish
to the Purchasers with respect to the Registrable Shares registered under the
Registration Statement such reasonable number of copies of any Prospectus (as
defined below) in conformity with the requirements of the Securities Act and
such other documents as the Purchaser may reasonably request, in order to
facilitate the public sale or other disposition of all or any of the Registrable
Shares by the Purchasers;
(vii) use
its
reasonable best efforts to file documents required of the Company for normal
blue sky clearance in states specified in writing by the Purchasers;
provided,
however,
that
the Company shall not be required to qualify to do business or consent to
service of process in any jurisdiction in which it is not now so qualified
or
has not so consented;
(viii) promptly
notify the Purchasers simultaneously in writing, in no event more than one
(1)
business day after the Registration Statement has been declared
effective;
(ix) promptly
file with the SEC a request for acceleration in accordance with Rule 461
promulgated under the Securities Act after the date that the Company is notified
(orally or in writing, whichever is earlier) by the SEC that a Registration
Statement will not be “reviewed,” or will not be subject to further review, such
that the Registration Statement shall be declared effective no later than 5
trading days after such notification;
(x) promptly
notify the Purchasers in writing of the existence of any fact or the happening
of any event, during the Registration Period (but not as to the substance of
any
such fact or event), that makes any statement of a material fact made in the
Registration Statement, the Prospectus, any amendment or supplement thereto,
or
any document incorporated by reference therein untrue, or that requires the
making of any additions to or changes in the Registration Statement or the
Prospectus in order to make the statements therein not misleading (provided,
however,
that no
notice by the Company shall be required pursuant to this subsection (vii)
in the event that the Company contemporaneously files a prospectus supplement
or
amendment to update the Prospectus, which, in either case, contains the
requisite information with respect to such material event that results in such
Registration Statement no longer containing any such untrue or misleading
statements);
-21-
(xi) furnish
to each Purchaser upon written request, from the date of this Agreement until
the end of the Registration Period, one copy of its periodic reports filed
with
the SEC pursuant to the Exchange Act and the rules and regulations promulgated
thereunder; and
(xii) bear
all
expenses in connection with the procedures described in paragraphs (i) through
(viii) of this Section 5(a) and the registration of the Registrable Shares
pursuant to the Registration Statement other than fees and expenses, if any,
of
legal counsel or other advisers to the Purchasers or underwriting discounts,
brokerage fees and commissions incurred by the Purchasers, if any; provided,
however, that the Company shall pay all reasonable fees and disbursements of
one
counsel to the Purchasers.
It
shall
be a condition precedent to the obligations of the Company to take any action
pursuant to this Section 5(a) with respect to Registrable Shares held by a
Purchaser that such Purchaser shall timely furnish to the Company a completed
Registration Statement Questionnaire on or before the fifth business day
following the Closing Date and such other written information regarding itself,
the Registrable Shares to be sold by such Purchaser, and the intended method
of
disposition of the Registrable Shares as shall be required to effect the
registration of the Registrable Shares.
(b) Piggyback
Registration
(i) If
during
the Registration Period one or more Registration Statements covering all
Registrable Shares are not or cease to be effective and continue to be not
effective and during such time the Company proposes to register any of its
Common Stock under the Securities Act, whether as a result of an offering for
its own account or the account of others (but excluding any registrations to
be
effected for Forms S-4 or S-8 or other applicable successor Forms) on a
Registration Statement that is to become effective prior to the expiration
of
the Registration Period, the Company shall, each such time, give to the
Purchasers twenty (20) days’ prior written notice of its intent to do so, and
such notice shall describe the proposed registration and shall offer such
Purchasers the opportunity to include in such Registration Statement such number
of Purchased Shares and Underlying Shares as each such Purchaser may request.
Upon the written request of any Purchaser given to the Company within fifteen
(15) days after the receipt of any such notice by the Company, the Company
shall
include in such Registration Statement all or part of the Purchased Shares
and
Underlying Shares of such Purchaser, to the extent requested to be registered,
subject to clause (ii) below.
(ii) If
a
registration pursuant to this Section 5(b) involves an underwritten offering
and
the managing underwriter shall advise the Company in writing that, in its
opinion, the number of shares of Common Stock requested by the Purchasers to
be
included in such registration is likely to materially and adversely affect
the
success of the offering or the price that would be received for any shares
of
Common Stock included in such offering, then, notwithstanding anything in this
Section 5(b) to the contrary, the Company shall only be required to include
in
such registration, to the extent of the number of shares of Common Stock which
the Company is so advised can be sold in such offering, (A) first, any shares
of
Common Stock proposed to be included in such registration for the account of
the
Company, and (B) second, the number of shares of Common Stock requested to
be
included in such registration for the account of any stockholders of the Company
(including the Purchasers), pro rata among such stockholders on the basis of
the
number of shares of Common Stock (including Underlying Shares) that each of
them
has requested to be included in such registration.
-22-
In
connection with any offering involving an underwriting of shares, the Company
shall not be required under this Section 5(b) or otherwise to include the
Purchased Shares or Underlying Shares of any Purchaser therein unless such
Purchaser accepts and agrees to the terms of the underwriting, which shall
be
reasonable and customary, as agreed upon between the Company and the
underwriters selected by the Company (which underwriters shall be reasonably
acceptable to the holders of a majority of the then outstanding Purchased
Securities.
(c) Liquidated
Damages.
(i) Delay
in Filing of Registration Statement.
In the
event that the Registration Statement is not filed with the SEC within 30 days
following the Closing Date, or in the event any subsequent Registration
Statement is not filed within the time periods set forth in Section 5(a)(ii),
the Company shall pay to each Purchaser liquidated damages (in addition to
the
rights and remedies available to each Purchaser under applicable law and this
Agreement), in cash at a rate equal to one (1%) percent per month (pro rata
on a
30-day basis) of the total purchase price of the Purchased Securities purchased
by such Purchaser pursuant to this Agreement, up to a maximum of ten (10%)
percent of the total purchase price of the Purchased Securities purchased by
such Purchaser, until the Registration Statement is filed with the SEC.
(ii) Delay
in Effectiveness of Registration Statement.
In the
event that a Registration Statement covering all of the Registrable Shares
is
not declared effective (i) within 90 days following the Closing Date (or 120
days following the Closing Date in the event of a review of the Registration
Statement by the SEC), or (ii) within 5 trading days after the date the Company
is notified (orally or in writing, whichever is earlier) that such Registration
Statement will not be “reviewed” or will not be subject to further review, the
Company shall pay to each Purchaser liquidated damages (in addition to the
rights and remedies available to each Purchaser under applicable law and this
Agreement), in cash at a rate equal to one (1%) percent per month (pro rata
on a
30-day basis) of the total purchase price of the Purchased Securities purchased
by such Purchaser pursuant to this Agreement, up to a maximum, together with
all
payments made by the Company to such Purchaser pursuant to Section 5(c)(i),
of ten (10%) percent of the total purchase price of the Purchased Securities
purchased by such Purchaser, until the Registration Statement is declared
effective; provided
however,
if one
or more Registration Statements covering all Registrable Shares shall not be
effective on the date that is two years after the date of Closing the Company
shall pay to the Purchasers (in addition to the rights and remedies available
to
each Purchaser under applicable law and this Agreement) pro rata in a single
payment on such date liquidated damages (in addition to the prior ten (10%)
percent of the total purchase price of the Purchase Securities) of eight (8%)
percent of the total purchase price of the Purchased Securities.
-23-
(iii) Lapse
in Effectiveness of Registration Statement.
In the
event that one or more Registration Statements covering all of the Registrable
Shares is filed and declared effective but, during the Registration Period,
shall thereafter cease to be effective or useable or the prospectus included
in
any such Registration Statement (the “Prospectus”,
as
amended or supplemented by any prospectus supplement and by all other amendments
thereto and all material incorporated by reference in such Prospectus) ceases
to
be usable, in either case, in connection with resales of Registrable Shares,
without such lapse being cured within ten (10) business days (the “Cure
Period”)
by a
post-effective amendment to such Registration Statement or a supplement to
the
Prospectus or other action that cures such lapse, then the Company shall pay
to
each Purchaser that at the time of such lapse continues to hold Registrable
Shares, liquidated damages (in addition to the rights and remedies available
to
each Purchaser under applicable law and this Agreement), in cash for the period
from and including the first day following the expiration of the Cure Period
until, but excluding, the earlier of (A) the date on which such failure is
cured
and (B) the date on which the Registration Period expires, at a rate equal
to
one (1%) percent per month (pro rata on a 30-day basis) of the total purchase
price of the Purchased Securities purchased by such Purchaser that are held
by
such Purchaser at the time of such lapse pursuant to this Agreement up to a
maximum of ten (10%) percent of the total purchase price of the Purchased
Securities purchased by such Purchaser. Notwithstanding anything herein to
the
contrary, the Company shall not be required to pay liquidated damages under
this
Section 5(c)(iii) for any portion of the Registrable Securities that have been
deregistered pursuant to the last sentence of Section 5(a)(iii) of this
Agreement.
(iv) Current
Public Information Default.
In the
event that, after the six month anniversary of the Closing Date, the Registrable
Shares may not be sold pursuant to Rule 144 because the Company has not filed
with the SEC all reports and other materials required to be filed by Section
13
or 15(d) of the Exchange Act, as applicable, during the preceding 12 months,
other than Form 8-K reports (a “Current Public Information Default”), the
Company shall pay to each Purchaser liquidated damages (in addition to the
rights and remedies available to each Purchaser under applicable law and this
Agreement), in cash at a rate equal to one (1%) percent per month (pro rata
on a
30-day basis) of the total purchase price of the Purchased Securities purchased
by such Purchaser pursuant to this Agreement until the Current Public
Information Default is cured.
(v) Strategic
Investor.
If at
any time prior to the date on which the Registration Statement has been declared
effective the Company enters into an agreement to issue equity securities to
an
investor that, in the reasonable, good faith determination of the Company is
a
strategic investor the Company will be granted a 30-day extension of the
timeframes set forth in Sections 5(c)(i) and 5(c)(ii) above, and no liquidated
damages shall accrue during such 30-day period so long as the Company
consummates the issuance of the equity securities to such strategic investor.
(vi) Payment
of Liquidated Damages. Any
liquidated damages payable as required pursuant to this Section 5 shall be
payable by the Company quarterly in arrears.
-24-
(d) Transfer
of Registrable Shares After Registration; Suspension.
(i) The
Purchasers agree that they will not offer to sell or make any sale, assignment,
pledge, hypothecation or other transfer with respect to the Registrable Shares
that would constitute a sale within the meaning of the Securities Act except
pursuant to either (A) the Registration Statement, (B) Rule 144 of the
Securities Act or another available
exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act and in accordance with applicable state
securities laws as evidenced by a legal opinion of counsel to the transferor
to
such effect, the substance of which shall be reasonably acceptable to the
Company
and that
they will promptly notify the Company of any changes in the information set
forth in the Registration Statement after it is prepared regarding the Purchaser
or its plan of distribution to the extent required by applicable law. The
Company will prepare and file any required prospectus supplement under Rule
424(b)(3) or post-effective amendment under the Securities Act or other
applicable provision of the Securities Act to appropriately amend the list
of
selling stockholders or the plan of distribution thereunder.
(ii) In
addition to any suspension rights under paragraph (iii) below, if the Company
shall furnish to the Purchasers a certificate signed by the President or Chief
Executive Officer of the Company stating that the Board of Directors of the
Company has made a good faith determination upon the advice of counsel (i)
that
the continued use by the Purchasers of the Registration Statement for purposes
of effecting offers or sales of Purchased Shares and Underlying Shares pursuant
hereto would require, under the Securities Act, premature disclosure in the
Registration Statement (or the Prospectus relating thereto) of material,
nonpublic information concerning the Company, its business or prospects or
any
proposed material transaction involving the Company and (ii) that such premature
disclosure would be materially adverse to the Company, its business or prospects
or any such proposed material transaction, then the Company may, on not more
than two occasions for not more than 30 days on each such occasion, suspend
use
of the Prospectus, on written notice to each Purchaser (which notice will not
disclose the content of any material non-public information and will indicate
the date of the beginning and end of the intended period of suspension, if
known), in which case each Purchaser shall discontinue disposition of
Registrable Shares covered by the Registration Statement or Prospectus until
copies of a supplemented or amended Prospectus are distributed to the Purchasers
or until the Purchasers are advised in writing by the Company that sales of
Registrable Shares under the applicable Prospectus may be resumed and have
received copies of any additional or supplemental filings that are incorporated
or deemed incorporated by reference in any such Prospectus. The suspension
and
notice thereof described in this Section 5(d)(ii) shall be held in strictest
confidence and shall not be disclosed by the Purchasers.
-25-
(iii) Subject
to paragraph (iv) below, in the event of: (A) any request by the SEC or any
other federal or state governmental authority during the period of effectiveness
of the Registration Statement for amendments or supplements to a Registration
Statement or related prospectus or for additional information; (B) the issuance
by the SEC or any other federal or state governmental authority of any stop
order suspending the effectiveness of a Registration Statement or the initiation
of any proceedings for that purpose; (C) the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Shares for sale in any jurisdiction
or the initiation of any proceeding for such purpose; or (D) any event or
circumstance that necessitates the making of any changes in the Registration
Statement or Prospectus, or any document incorporated or deemed to be
incorporated therein by reference, so that, in the case of the Registration
Statement, it will not contain any untrue statement of a material fact or any
omission to state a material fact required to be stated therein or necessary
to
make the statements therein not misleading, and that in the case of the
Prospectus, it will not contain any untrue statement of a material fact or
any
omission to state a material fact required to be stated therein or necessary
to
make the statements therein, in the light of the circumstances under which
they
were made, not misleading, then the Company shall deliver a certificate in
writing to the Purchasers (the “Suspension
Notice”)
to the
effect of the foregoing (which notice will not disclose the content of any
material non-public information and will indicate the date of the beginning
and
end of the intended period of suspension, if known), and, upon receipt of such
Suspension Notice, the Purchasers will discontinue disposition of Registrable
Shares covered by to the Registration Statement or Prospectus (a “Suspension”)
until
the Purchasers’ receipt of copies of a supplemented or amended Prospectus
prepared and filed by the Company, or until the Purchasers are advised in
writing by the Company that the current Prospectus may be used, and have
received copies of any additional or supplemental filings that are incorporated
or deemed incorporated by reference in any such prospectus. In the event of
any
Suspension, the Company will use its reasonable best efforts to cause the use
of
the Prospectus so suspended to be resumed as soon as possible after delivery
of
a Suspension Notice to the Purchasers.
(iv) Provided
that a Suspension is not then in effect, the Purchasers may sell Registrable
Shares under the Registration Statement, provided that the selling Purchaser
arranges for delivery of a current Prospectus to the transferee of such
Registrable Shares to the extent such delivery is required by applicable
law.
(e) Indemnification.
For the
purpose of this Section 5(e), the term “Registration
Statement”
shall
include any preliminary or final Prospectus, exhibit, supplement or amendment
included in or relating to the Registration Statement referred to in Section
5(a).
(i) Indemnification
by the Company.
The
Company agrees to indemnify and hold harmless each of the Purchasers and their
affiliates and their respective officers, directors, agents, employees,
subsidiaries, partners, members, investment advisors and controlling persons
and
each person, if any, who controls any Purchaser within the meaning of the
Securities Act, to the fullest extent permitted by law, against any and all
losses, claims, damages, liabilities or expenses, joint or several, to which
such Purchasers or such controlling person may become subject, under the
Securities Act, the Exchange Act or any other federal or state statutory law
or
regulation, or at common law or otherwise (including in settlement of any
litigation, if such settlement is effected with the written consent of the
Company, which consent shall not be unreasonably withheld), insofar as such
losses, claims, damages, liabilities or expenses (or actions in respect thereof
as contemplated below) arise out of or are based upon (A) any breach by the
Company of any representations, warranties, covenants or agreements of the
Company contained in this Agreement or the Purchased Warrants, (B) the breach
by
the Company or any present or former director of the Company of any of their
respective fiduciary duties to the stockholders of the Company whether or not
arising in connection with the transactions contemplated by this Agreement,
and
(C) any untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement, the Prospectus, or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state in any of them a material fact required to be stated therein
or necessary to make the statements in any of them, in light of the
circumstances under which they were made, not misleading, and will reimburse
each Purchaser and each such controlling person for any reasonable legal and
other expenses as such reasonable expenses are incurred by such Purchaser or
such controlling person in connection with investigating, defending, settling,
compromising or paying any such loss, claim, damage, liability, expense or
action; provided,
however,
that
the Company will not be liable in any such case to the extent that any such
loss, claim, damage, liability, expense or action arises out of or is based
upon
(A) an untrue statement or alleged untrue statement or omission or alleged
omission made in the Registration Statement, the Prospectus or any amendment
to
or supplement of the Registration Statement or Prospectus made in reliance
upon
and in conformity with written information furnished to the Company by or on
behalf of the Purchaser expressly for use in the Registration Statement or
the
Prospectus, (B) the failure of such Purchaser to comply with the covenants
and
agreements contained in this Agreement respecting resale of the Purchased Shares
or the sale of the Underlying Shares or (C) any untrue statement or omission
of
a material fact required to make such statement not misleading in any Prospectus
that is corrected in any subsequent Prospectus before the pertinent sale or
sales by the Purchaser.
-26-
(ii) Indemnification
by the Purchaser.
Each
Purchaser will severally and not jointly indemnify and hold harmless the
Company, each of its directors, each of its officers who signed the Registration
Statement and each person, if any, who controls the Company within the meaning
of the Securities Act, against any losses, claims, damages, liabilities or
expenses to which the Company, its directors, its officers who signed the
Registration Statement and any controlling persons may become subject, under
the
Securities Act, the Exchange Act, or any other federal or state statutory law
or
regulation, or at common law or otherwise (including in settlement of any
litigation, if such settlement is effected with the written consent of such
Purchaser, which consent shall not be unreasonably withheld) insofar as such
losses, claims, damages, liabilities or expenses (or actions in respect thereof
as contemplated below) arise out of or are based upon any untrue statement
of
any material fact contained in the Registration Statement, the Prospectus,
or
any amendment or supplement to the Registration Statement or Prospectus, or
arise out of or are based upon the omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, in each case to the extent, but only to the extent, that such untrue
statement or omission was made in the Registration Statement, the Prospectus,
or
any amendment or supplement thereto, in reliance upon and in strict conformity
with written information furnished to the Company by or on behalf of such
Purchaser expressly for use therein, and the Purchaser will reimburse the
Company, each of its directors, each of its officers who signed the Registration
Statement, and any controlling persons for any reasonable legal and other
expense incurred by the Company, its directors, its officers who signed the
Registration Statement, and any controlling persons, in connection with
investigating, defending, settling, compromising or paying any such loss, claim,
damage, liability, expense or action; provided,
however,
that
the Purchaser shall not be liable for any such untrue statement or omission
with
respect to which the Purchaser has delivered to the Company in writing a
correction before the occurrence of the event from which such loss was incurred.
Notwithstanding the provisions of this Section 5(e), the Purchaser shall not
be
liable for any indemnification obligation under this Agreement in excess of
the
aggregate amount of net proceeds received by the Purchaser from the sale of
the
Registrable Shares pursuant to the Registration Statement.
-27-
(iii) Indemnification
Procedure.
(A) Promptly
after receipt by an indemnified party under this Section 5(e) of notice of
the
threat or commencement of any action, such indemnified party will, if a claim
in
respect thereof is to be made against an indemnifying party under this Section
5(e), promptly notify the indemnifying party in writing of the claim; but the
omission so to notify the indemnifying party will not relieve it from any
liability that it may have to any indemnified party for contribution or
otherwise under the indemnity agreement contained in this Section 5(e) or
otherwise, to the extent it is not prejudiced as a result of such
failure.
(B) In
case
any such action is brought against any indemnified party and such indemnified
party seeks or intends to seek indemnity from an indemnifying party, the
indemnifying party will be entitled to participate in, and, to the extent that
it may wish, jointly with all other indemnifying parties similarly notified,
to
assume the defense thereof with counsel reasonably satisfactory to such
indemnified party; provided,
however,
if the
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be a conflict between the positions of the indemnifying party
and
the indemnified party in conducting the defense of any such action or that
there
may be legal defenses available to it or other indemnified parties that are
different from or additional to those available to the indemnifying party,
the
indemnified party or parties shall have the right to select separate counsel
to
assume such legal defenses and to otherwise participate in the defense of such
action on behalf of such indemnified party or parties. Upon receipt of notice
from the indemnifying party to such indemnified party of its election so to
assume the defense of such action and approval by the indemnified party of
counsel, the indemnifying party will not be liable to such indemnified party
under this Section 5(e) for any legal or other expenses subsequently incurred
by
such indemnified party in connection with the defense thereof
unless:
(I) the
indemnified party shall have employed such counsel in connection with the
assumption of legal defenses in accordance with the proviso to the preceding
sentence (it being understood, however, that the indemnifying party shall not
be
liable for the expenses of more than one separate counsel, approved by such
indemnifying party, representing all of the indemnified parties who are parties
to such action); or
(II) the
indemnifying party shall not have employed counsel reasonably satisfactory
to
the indemnified party to represent the indemnified party within a reasonable
time after notice of commencement of the action against the indemnified party,
in
each
of which cases the reasonable fees and expenses of counsel for the indemnified
party shall be at the expense of the indemnifying party.
(iv) Contribution.
If the
indemnification provided for in this Section 5(e) is required by its terms
but
is for any reason held to be unavailable to, or is otherwise insufficient to
hold harmless, an indemnified party under this Section 5(e) with respect to
any
losses, claims, damages, liabilities or expenses referred to in this Agreement,
then each indemnifying party shall contribute to the amount paid or payable
by
such indemnified party as a result of any losses, claims, damages, liabilities
or expenses referred to in this Agreement:
-28-
(A) in
such
proportion as is appropriate to reflect the relative faults of the Company
and
the Purchaser in connection with the statements or omissions or inaccuracies
in
the representations and warranties in this Agreement that resulted in such
losses, claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations, or
(B) if
the
allocation provided by clause (A) above is not permitted by applicable law,
in
such proportion as is appropriate to reflect not only the relative faults
referred to in clause (A) above but the relative benefits received by the
Company and the Purchaser from the sale of the Purchased
Securities.
The
respective relative benefits received by the Company on the one hand and each
Purchaser on the other shall be deemed to be in the same proportion as the
amount to which the consideration paid by such Purchaser to the Company pursuant
to this Agreement for the Purchased Securities purchased by such Purchaser
that
were sold pursuant to the Registration Statement bears to the difference (the
“Difference”)
between the amount such Purchaser paid for the Purchased Securities that were
sold pursuant to the Registration Statement and the amount received by such
Purchaser from such sale. The relative fault of the Company and each Purchaser
shall be determined by reference to, among other things, whether the untrue
or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact or the inaccurate or the alleged inaccurate material
fact relates to information supplied by the Company or by such Purchaser and the
parties’ relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The amount paid or payable by
a
party as a result of the losses, claims, damages, liabilities and expenses
referred to above shall be deemed to include, subject to the limitations set
forth in Section 5(e)(iii), any reasonable legal or other fees or expenses
incurred by such party in connection with investigating or defending any such
action or claim. The provisions set forth in Section 5(e)(iii) with respect
to
the notice of the threat or commencement of any threat or action shall apply
if
a claim for contribution is to be made under this Section 5(e)(iv); provided,
however, that no additional notice shall be required with respect to any threat
or action for which notice has been given under Section 5(e)(iii) for purposes
of indemnification. The Company and each Purchaser agree that it would not
be
just and equitable if contribution pursuant to this Section 5(e)(iv) were
determined solely by pro rata allocation (even if the Purchasers were treated
as
one entity for such purpose) or by any other method of allocation that does
not
take account of the equitable considerations referred to in this paragraph.
Notwithstanding the provisions of this Section 5(e)(iv), no Purchaser shall
be
required to contribute any amount in excess of the amount by which the
Difference exceeds the amount of any damages that such Purchaser has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled
to
contribution from any person who is not guilty of such fraudulent
misrepresentation. The Purchasers’ obligations to contribute pursuant to this
Section 5(e)(iv) are several and not joint.
-29-
(f) Rule
144 Information.
After
the date of this Agreement, the Company shall file in a timely manner all
reports required to be filed by it under the Securities Act and the Exchange
Act
and the rules and regulations promulgated thereunder and shall take such further
action to the extent required to enable the Purchasers to sell the Purchased
Shares and the Underlying Shares pursuant to Rule 144 under the Securities
Act
(as such rule may be amended from time to time).
6. Conditions
to The Purchaser’s Obligations at the Closing.
The
obligations of the Purchasers under Section 1(b) of this Agreement are subject
to the fulfillment or waiver, on or before the Closing, of each of the following
conditions:
(a) Representations
and Warranties True.
Each of
the representations and warranties of the Company contained in Section 3 shall
be true and correct in all material respects on and as of the date hereof
(provided,
however,
that
such materiality qualification shall only apply to representations or warranties
not otherwise qualified by materiality) and on and as of the date of the Closing
with the same effect as though such representations and warranties had been
made
as of the Closing; provided, however, that if a representation and warranty
is
made as of a specific date, it shall be true and correct in all material
respects only as of such date.
(b) Performance.
The
Company shall have performed and complied in all material respects with all
agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing and
shall have obtained all approvals, consents and qualifications necessary to
complete the purchase and sale described herein; provided,
however,
that
the Company may furnish to each Purchaser a facsimile copy of the warrant
representing the Purchased Warrants and the stock certificate representing
the
Purchased Shares, with the original warrant and stock certificate held in trust
by counsel for the Company until delivery thereof on the next business
day.
(c) Compliance
Certificate.
The
Company will have delivered to the Purchasers a certificate signed on its behalf
by its Chief Executive Officer or Chief Financial Officer certifying that the
conditions specified in Sections 6(a) and 6(b) hereof have been
fulfilled.
(d) Agreement.
The
Company shall have executed and delivered to the Purchasers this
Agreement.
(e) Securities
Exemptions.
The
offer and sale of the Purchased Securities to the Purchasers pursuant to this
Agreement shall be exempt from the registration requirements of the Securities
Act and the registration and/or qualification requirements of all applicable
state securities laws.
(f) No
Suspension of Trading or Listing of Common Stock.
The
Common Stock of the Company (i) shall be designated for quotation or listed
on
the OTCBB and (ii) shall not have been suspended from trading on the
OTCBB.
(g) Good
Standing Certificates.
The
Company shall have delivered to the Purchasers a certificate of the Secretary
of
State of the State of Delaware, dated as of a date within ten days of the date
of the Closing, with respect to the good standing of the Company.
-30-
(h) Secretary’s
Certificate.
The
Company shall have delivered to the Purchasers a certificate of the Company
executed by the Company’s Secretary attaching and certifying to the truth and
correctness of (i) the Certificate of Incorporation, (ii) the Bylaws and
(iii) the resolutions adopted by the Company’s Board of Directors in
connection with the transactions contemplated by this Agreement.
(i) Opinion
of Company Counsel.
The
Purchasers will have received an opinion on behalf of the Company, dated as
of
the date of the Closing, from Sichenzia ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ LLP, counsel
to
the Company, in the form attached as Exhibit
C.
(j) No
Statute or Rule Challenging Transaction.
No
statute, rule, regulation, executive order, decree, ruling, injunction, action,
proceeding or interpretation shall have been enacted, entered, promulgated,
endorsed or adopted by any court or governmental authority of competent
jurisdiction or any self-regulatory organization or the staff of any of the
foregoing, having authority over the matters contemplated hereby that questions
the validity of, or challenges or prohibits the consummation of, any of the
transactions contemplated by this Agreement.
(k) Other
Actions.
The
Company shall have executed such certificates, agreements, instruments and
other
documents, and taken such other actions as shall be customary or reasonably
requested by the Purchasers in connection with the transactions contemplated
hereby.
7. Conditions
to The Company’s Obligations at the Closing.
The
obligations of the Company to the Purchasers under this Agreement are subject
to
the fulfillment or waiver, on or before the Closing, of each of the following
conditions:
(a) Representations
and Warranties True.
The
representations and warranties of the Purchasers contained in Section 4 shall
be
true and correct in all material respects on and as of the date hereof
(provided,
however,
that
such materiality qualification shall only apply to representations and
warranties not otherwise qualified by materiality) and on and as of the date
of
the Closing with the same effect as though such representations and warranties
had been made as of the Closing.
(b) Performance.
The
Purchasers shall have performed and complied in all material respects with
all
agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing and
shall have obtained all approvals, consents and qualifications necessary to
complete the purchase and sale described herein.
(c) Agreement.
The
Purchasers shall have executed and delivered to the Company this Agreement
(and
Appendix I and Appendix II hereto).
(d) Securities
Exemptions.
The
offer and sale of the Purchased Securities to the Purchasers pursuant to this
Agreement shall be exempt from the registration requirements of the Securities
Act and the registration and/or qualification requirements of all applicable
state securities laws.
-31-
(e) Payment
of Purchase Price.
The
Purchasers shall have delivered to the Company by wire transfer of immediately
available funds, full payment of the purchase price for the Purchased Securities
as specified in Section 1(b).
(f) No
Statute or Rule Challenging Transaction.
No
statute, rule, regulation, executive order, decree, ruling, injunction, action,
proceeding or interpretation shall have been enacted, entered, promulgated,
endorsed or adopted by any court or governmental authority of competent
jurisdiction or any self-regulatory organization or the staff of any of the
foregoing, having authority over the matters contemplated hereby that questions
the validity of, or challenges or prohibits the consummation of, any of the
transactions contemplated by this Agreement.
8. Subsequent
Financing; Right of Participation.
During
the period commencing on the date of the Closing Date and ending on the date
that is sixty (60) days following the Closing Date, the Company covenants and
agrees to promptly notify in writing (a “Rights
Notice”)
the
Purchasers of the terms and conditions of any proposed financing by the Company
of its Common Stock with a strategic investor (a “Subsequent
Financing”).
The
Rights Notice shall describe, the material terms of the proposed Subsequent
Financing, the proposed closing date of the Subsequent Financing and a list
of
the proposed definitive documentation to be entered into in connection
therewith. The Rights Notice shall provide each Purchaser an option (the
“Rights
Option”)
during
the three (3) trading days following delivery of the Rights Notice (the
“Option
Period”)
to
purchase up to its pro rata share of the number of Purchased Shares subscribed
for hereunder, together with the other Purchasers exercising the Rights Option,
for up to fifty percent (50%) of the amount of the securities being offered
in
such Subsequent Financing on the same, absolute terms and conditions as
contemplated by such Subsequent Financing; provided, however, that no Purchaser
shall be required to comply with any non-monetary term or condition or otherwise
provide any goods or services provided by such strategic investor in any
Subsequent Financing. If any Purchaser elects not to participate in such
Subsequent 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 amount of the Subsequent Financing. For purposes of this
Section, all references to “pro rata” means, for any Purchaser electing to
participate in such Subsequent Financing, the percentage obtained by dividing
(x) the total number of Purchased Shares purchased by such Purchaser at the
Closing by (y) the total number of Purchased Shares purchased by all of the
participating Purchasers at the Closing. 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 Financing
on
the scheduled closing date with the strategic partner (and, if applicable,
with
such Purchasers as shall have exercised 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 Financing does not occur within 60 days from the date the Rights
Notice is given, any closing of the contemplated Subsequent Financing or any
other Subsequent Financing shall be subject to all of the provisions of this
Section, including, without limitation, the delivery of a new Rights
Notice.
Notwithstanding
the foregoing, during the period commencing on the Closing Date and ending
on
the date that is sixty (60) days following the Closing Date, the Company
covenants and agrees that it will not consummate a Subsequent Financing with
a
strategic investor at a price that is less than the Per Unit Price.
-32-
9. MISCELLANEOUS.
(a) Successors
and Assigns.
The
terms and conditions of this Agreement will inure to the benefit of and be
binding upon the respective successors and permitted assigns of the parties.
The
Company shall not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Purchasers holding a majority of the
total aggregate number of Purchased Shares and Underlying Shares then
outstanding (excluding any shares sold to the public pursuant to Rule 144 or
otherwise). Any Purchaser may assign its rights under this Agreement to any
person to whom the Purchaser assigns or transfers any Purchased Securities,
provided that such transferee agrees in writing to be bound by the terms and
provisions of this Agreement, and such transfer is in compliance with the terms
and provisions of this Agreement and permitted by federal and state securities
laws.
(b) Governing
Law.
This
Agreement will be governed by and construed and enforced under the internal
laws
of the State of New York, without reference to principles of conflict of laws
or
choice of laws. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE,
AND
AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE
HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY
TRANSACTION CONTEMPLATED HEREBY.
(c) Survival.
The
representations and warranties of the Company and the Purchasers contained
in
Sections 3 and 4 of this Agreement shall survive until the earlier of (i) the
fourth anniversary of the Closing Date or (ii) the occurrence of a Fundamental
Transaction.
(d) Counterparts.
This
Agreement may be executed in two or more counterparts, each of which will be
deemed an original, but all of which together will constitute one and the same
instrument.
(e) Headings.
The
headings and captions used in this Agreement are used for convenience only
and
are not to be considered in construing or interpreting this Agreement. All
references in this Agreement to sections, paragraphs, exhibits and schedules
will, unless otherwise provided, refer to sections and paragraphs hereof and
exhibits and schedules attached hereto, all of which exhibits and schedules
are
incorporated herein by reference.
(f) Notices.
Any
notices and other communications required or permitted under this Agreement
shall be in writing and shall be delivered (i) personally by hand or by courier,
(ii) mailed by United States first-class mail, postage prepaid or (iii) sent
by
facsimile directed (A) if to a Purchaser, at such Purchaser’s address or
facsimile number set forth on such Purchaser’s signature page to this Agreement,
or at such address or facsimile number as such Purchaser may designate by giving
at least ten days’ advance written notice to the Company or (B) if to the
Company, to its address or facsimile number set forth below, or at such other
address or facsimile number as the Company may designate by giving at least
ten
days’ advance written notice to the Purchaser. All such notices and other
communications shall be deemed given upon (I) receipt or refusal of receipt,
if
delivered personally, (II) three days after being placed in the mail, if mailed,
or (III) confirmation of facsimile transfer, if faxed.
-33-
The
address of the Company for the purpose of this Section 8(f) is as
follows:
ROO
Group, Inc.
▇▇▇
▇▇▇▇
▇▇▇▇
▇▇▇▇▇▇,
▇▇▇
▇▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇ ▇▇▇▇▇
Tel:
(▇▇▇) ▇▇▇-▇▇▇▇
Fax:
(▇▇▇) ▇▇▇-▇▇▇▇
Attention:
Kaleil ▇▇▇▇▇ Tuzman
with
a
copy to:
Sichenzia
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ LLP
▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇ ▇▇▇▇▇
Tel:
(▇▇▇) ▇▇▇-▇▇▇▇
Fax:
(▇▇▇) ▇▇▇-▇▇▇▇
Attention:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
(g) Amendments
and Waivers.
This
Agreement may be amended and the observance of any term of this Agreement may
be
waived only with the written consent of the Company and the Purchasers holding
a
majority of the total aggregate number of Purchased Shares and Underlying Shares
then outstanding (excluding any shares sold to the public pursuant to Rule
144
or otherwise). Any amendment effected in accordance with this Section 8(g)
will
be binding upon the Purchasers, the Company and their respective successors
and
permitted assigns.
(h) Severability.
If any
provision of this Agreement is held to be unenforceable under applicable law,
such provision will be excluded from this Agreement and the balance of the
Agreement will be interpreted as if such provision were so excluded and will
be
enforceable in accordance with its terms.
(i) Entire
Agreement.
This
Agreement, together with all exhibits and schedules hereto and thereto,
including, without limitation, the Purchased Warrants, constitutes the entire
agreement and understanding of the parties with respect to the subject matter
hereof and supersedes any and all prior negotiations, correspondence,
agreements, understandings, duties or obligations between the parties with
respect to the subject matter hereof.
(j) No
Additional Agreements.
The
Company does not have any written or oral contract, agreement, arrangement
or
understanding with any Purchaser with respect to the transactions contemplated
by this Agreement other than as expressly stated herein.
(k) Further
Assurances.
From and
after the date of this Agreement, upon the request of the Company or the
Purchasers, the Company and the Purchasers will execute and deliver such
instruments, documents or other writings, and take such other actions, as may
be
reasonably necessary or desirable to confirm and carry out and to effectuate
fully the intent and purposes of this Agreement.
-34-
(l) Meaning
of Include and Including.
Whenever
in this Agreement the word “include” or “including” is used, it shall be deemed
to mean “include, without limitation” or “including, without limitation,” as the
case may be, and the language following “include” or “including” shall not be
deemed to set forth an exhaustive list.
(m) Fees,
Costs and Expenses.
All
fees, costs and expenses (including attorneys’ fees and expenses) incurred by
any party hereto in connection with the preparation, negotiation and execution
of this Agreement and the exhibits and schedules hereto and the consummation
of
the transactions contemplated hereby and thereby shall be the sole and exclusive
responsibility of such party. In addition, the Company will pay the costs
associated with any filings with, or compliance with any of the requirements
of
any governmental authorities.
(n) 8-K
Filing and Publicity; Standstill. On
or
before 8:30 a.m., eastern time, on the first business day following the date
of
this Agreement, the Company shall issue a press release describing the terms
of
the transactions contemplated by this Agreement, but not including the names
of
the Purchasers or the individual amounts of Purchased Securities purchased
hereby without the Purchaser’s consent. On or before 8:30 a.m., eastern time, on
the second business day following the date of this Agreement, the Company shall
file a Current Report on Form 8-K describing the terms of the transactions
contemplated by this Agreement in the form required by the Exchange Act and
attaching this Agreement as an exhibit to such filing (the “8-K
Filing”),
but
not including the names of the Purchasers or the individual amounts of Purchased
Securities purchased hereby without the Purchaser’s consent. From and after the
filing of the 8-K Filing with the SEC, the Purchasers as a consequence of
participating in the transactions contemplated by this Agreement shall not
be in
possession of any material, nonpublic information received from the Company,
any
of its subsidiaries or any of their respective officers, directors, employees
or
agents authorized to disclose such information, that is not disclosed in the
8-K
Filing. The Company shall not, and shall cause each of its subsidiaries and
its
and each of their respective officers, directors, employees and agents, not
to,
provide the Purchasers with any material, nonpublic information regarding the
Company or any of its subsidiaries from and after the filing of the 8-K Filing
with the SEC without the consent of the Purchasers. If a Purchaser has, or
believes it has, received any such material, nonpublic information regarding
the
Company or any of its subsidiaries prior to the Closing Date, it shall provide
the Company with written notice thereof and the Company shall within five (5)
business days thereafter, make public disclosure of such material, nonpublic
information if permitted under applicable law or without breach or violation
of
any agreement, contract or other obligation of the Company unless the Board
of
Directors of the Company shall determine that such disclosure would reasonably
be expected to result in a material and adverse effect on the Company or its
business, prospects, finances or properties. Except
for such disclosure as the Company is advised by counsel is required to be
included in documents filed with the SEC or otherwise required by law, the
Company shall not use the name of, or make reference to, any Purchaser or any
of
its Affiliates or investment advisers in any press release or in any public
manner (including any reports or filings made by the Company under the Exchange
Act) without such Purchaser's prior written consent.
-35-
(o) Stock
Splits, Dividends and other Similar Events.
The
provisions of this Agreement shall be appropriately adjusted to reflect any
stock split, stock dividend, reorganization or other similar event that may
occur with respect to the Company after the date hereof.
(p) Remedies.
In
addition to being entitled to exercise all rights provided herein or granted
by
law, including recovery of damages, each Purchaser and the Company will be
entitled to specific performance under this Agreement. The parties agree that
monetary damages may not be adequate compensation for any loss incurred by
reason of any breach of obligations described in the foregoing sentence and
hereby agrees to waive in any action for specific performance of any such
obligation the defense that a remedy at law would be adequate.
(q) Several
Liability; Advice. Each
Purchaser agrees that no other Purchaser nor the respective controlling persons,
officers, directors, partners, agents or employees of any other Purchaser shall
be liable to such Purchaser for any losses incurred by such Purchaser in
connection with its investment in the Company. Each Purchaser acknowledges
that
it is not relying upon any person, firm or corporation (including without
limitation any other Purchaser), other than the Company and its officers and
directors (acting in their capacity as representatives of the Company), in
deciding to invest and in making its investment in the Company. The Company
acknowledges that no Purchaser is acting or has acted as an advisor, agent
or
fiduciary of the Company (or in any similar capacity) with respect to this
Agreement and any advice given by any Purchaser or any of its representatives
in
connection with this Agreement is merely incidental to the Purchasers’ purchase
of securities of the Company hereunder.
[Remainder
of page intentionally left blank.]
*
*
*
-36-
The
parties hereto have executed this Agreement as of the date and year first above
written.
| Roo Group, Inc. | ||
| |
|
|
| By: | /s/ Kaleil ▇▇▇▇▇ ▇▇▇▇▇▇ | |
|
Kaleil ▇▇▇▇▇ Tuzman |
||
| Chief Executive Officer | ||
[PURCHASER
SIGNATURE PAGES TO FOLLOW]
SIGNATURE
PAGE TO
DATED
AS OF MAY 8, 2008
BY
AND AMONG
ROO
GROUP, INC.
AND
EACH PURCHASER NAMED THEREIN
The
undersigned hereby executes and delivers to ROO Group, Inc. d/b/a KIT digital,
the Securities Purchase Agreement (the “Agreement”)
to
which this signature page is attached, which Agreement and signature page,
together with all counterparts of such Agreement and signature pages of the
other Purchasers named in such Agreement, shall constitute one and the same
document in accordance with the terms of such Agreement.
Number
of
Units: __________
Name
of Purchaser
Signature:
____________________________
By:
_________________________________
Title:
________________________________
Address:
_____________________________
_____________________________
_____________________________
Telephone:
____________________________
Fax:
__________________________________
Tax
ID
Number: _________________________
EXHIBIT
A
Schedule
of Purchasers
EXHIBIT
▇-▇
▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ Investment Management Corporation
Public
Sector Pension Investment Board
Radian
Group Inc.
New
York State Nurses Association Pension Plan
Retirement
Plan for Employees of Union Carbide Corporation and its Participating Subsidiary
Companies
Wellington
Trust Company, National Association Multiple Common Trust Funds Trust, Emerging
Companies Portfolio
The
▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ Foundation
Lockheed
▇▇▇▇▇▇ Corporation Master Retirement Trust
Dow
Employees’ Pension Plan
Oregon
Public Employees Retirement Fund
Wellington
Trust Company, National Association Multiple Collective Investment Funds Trust,
Emerging Companies Portfolio
EXHIBIT
B
Form
Of Warrant
EXHIBIT
C
Disclosure
Letter
Schedule
3(b)
Capitalization
|
(i)
|
Outstanding
Warrants:
|
A. Warrants
to purchase 680,600 shares of Common Stock exercisable until five years from
the
date of issuance (December 28, 2005) at a purchase price of $4.00 per share.
B. Warrants
to purchase 155,000 shares of Common Stock exercisable until five years from
the
date of issuance (December 28, 2005) at a purchase price of $3.00 per share.
The
warrant holders may exercise these warrants on a cashless basis commencing
one
year from the date of issuance if the closing bid price of the Company’s common
stock is greater that the exercise price of the warrant shares and the shares
of
Common Stock underlying the warrants are not then registered pursuant to an
effective registration statement.
C. Warrants
to purchase an aggregate of 150,000 shares of Common Stock, exercisable for
a
period of five years from the date of issuance (October 23, 2005) at a purchase
price of $1.50 per share. The warrant holders may exercise these warrants on
a
cashless basis if the shares of Common Stock underlying the warrants are not
then registered pursuant to an effective registration statement.
D. Warrants
to purchase 50,000 shares of Common Stock exercisable until five years from
the
date of issuance (October 23, 2005) at a purchase price of $3.00 per share.
E. Warrants
to purchase an aggregate of 60,000 shares of Common Stock, exercisable until
five years from the date of issuance (August 18, 2005) at a purchase price
of
$1.50 per share. The holders may exercise these warrants on a cashless basis
if
the shares of Common Stock underlying the warrants are not then registered
pursuant to an effective registration statement.
F. Warrants
to purchase an aggregate of 90,000 shares of Common Stock, exercisable until
five years from the date of issuance (August 23, 2005) at a purchase price
of
$1.50 per share, as adjusted (the “August 2005 $1.50 Warrants”). The warrant
holders may exercise these warrants on a cashless basis if the shares of Common
Stock underlying the warrants are not then registered pursuant to an effective
registration statement.
G. Warrants
to purchase an aggregate of 48,000 shares of Common Stock, exercisable until
five years from the date of issuance (August 23, 2005) at a purchase price
of
$1.25 per share, as adjusted (the “August 2005 $1.25 Warrants”). The warrant
holders may exercise these warrants on a cashless basis if the shares of Common
Stock underlying the warrants are not then registered pursuant to an effective
registration statement.
H. Warrants
to purchase an aggregate of 22,000 shares of Common Stock, exercisable until
five years from the date of issuance (July 18, 2005) at a purchase price of
$10.00 per share, as adjusted (the “July 2005 Warrants”). The warrant holders
may exercise these warrants on a cashless basis if the shares of Common Stock
underlying the warrants are not then registered pursuant to an effective
registration statement.
I. Warrants
to purchase an aggregate of 60,000 shares of Common Stock exercisable until
five
years from the date of issuance (1/3 were issued September 10, 2004, 1/3 were
issued November 23, 2004 and 1/3 were issued February 3, 2005) at a purchase
price of $5.00 per share, as adjusted. The holders may exercise these warrants
on a cashless basis if the shares of Common Stock underlying the warrants are
not then registered pursuant to an effective registration statement.
(i) The
warrants described above in paragraphs H and I provide for the adjustment of
the
purchase price and number of warrant shares if the Company issues or sells
any
shares of its common stock for no consideration or for a consideration per
share
less than the market price on the date of issuance. Any such required adjustment
shall be a weighted average adjustment. The market price is defined as the
average means the average of the last reported sale prices for the shares of
Common Stock on the OTCBB for the five (5) Trading Days immediately preceding
such date as reported by Bloomberg, or (ii) if the OTCBB is not the principal
trading market for the shares of Common Stock, the average of the last reported
sale prices on the principal trading market for the Common Stock during the
same
period as reported by Bloomberg, or (iii) if market value cannot be calculated
as of such date on any of the foregoing bases, the Market Price shall be the
fair market value as reasonably determined in good faith by (a) the Board of
Directors of the Company or, at the option of a majority-in-interest of the
holders of the outstanding Warrants by (b) an independent investment bank of
nationally recognized standing in the valuation of businesses similar to the
business of the corporation.
(b) Upon
each
adjustment of the exercise price of the warrants, the number of shares of Common
Stock issuable upon exercise of the warrant will be adjusted by multiplying
a
number equal to the exercise price in effect immediately prior to such
adjustment by the number of shares of Common Stock issuable upon exercise of
the
warrant immediately prior to such adjustment and dividing the product so
obtained by the adjusted exercise price.
J. Warrants
to purchase an aggregate of 50,000 shares of Common Stock, exercisable until
five years from the date of issuance (July 28, 2006) at a purchase price of
$2.00 per share. The warrant holders may exercise these warrants on a cashless
basis if the shares of Common Stock underlying the warrants are not then
registered pursuant to an effective registration statement.
K. Warrants
to purchase an aggregate of 1,735,000 shares of Common Stock, exercisable until
five years from the date of issuance (August 23, 2006) at a purchase price
of
$2.00 per share. The warrant holders may exercise these warrants on a cashless
basis if after one year of issuance, the shares of Common Stock underlying
the
warrants are not then registered pursuant to an effective registration
statement. The warrants are also callable if at any time after issuance the
market price of the Company’s common stock exceeds $5.00.
L. Warrants
to purchase an aggregate of 791,369 shares of Common Stock, exercisable until
five years from the date of issuance (August 18, 2006) at a purchase price
of
$1.25 per share. The warrant holders may exercise these warrants on a cashless
basis if after one year of issuance, the shares of Common Stock underlying
the
warrants are not then registered pursuant to an effective registration
statement. The warrants are also callable if at any time after issuance the
market price of the Company’s common stock exceeds $5.00.
M. Warrants
to purchase an aggregate of 475,000 shares of Common Stock, exercisable until
five years from the date of issuance (August 18, 2006) at a purchase price
of
$2.00 per share. The warrant holders may exercise these warrants on a cashless
basis if after one year of their issuance, the shares of Common Stock underlying
the warrants are not then registered pursuant to an effective registration
statement. The warrants are also callable if at any time after issuance the
market price of the Company’s common stock exceeds $5.00.
N. Warrants
to purchase an aggregate of 2,513,513 shares of Common Stock, exercisable until
five years from the date of issuance (November 16, 2006) at a purchase price
of
$3.00 per share. The warrant holders may exercise these warrants on a cashless
basis if after one year of their issuance, the shares of Common Stock underlying
the warrants are not then registered pursuant to an effective registration
statement. The warrants are also callable if at any time after issuance the
market price of the Company’s common stock exceeds $5.00.
P. Warrants
to purchase an aggregate of 326,757 shares of Common Stock, exercisable until
five years from the date of issuance (November 16, 2006) at a purchase price
of
$3.00 per share. The warrant holders may exercise these warrants on a cashless
basis if after one year of their issuance, the shares of Common Stock underlying
the warrants are not then registered pursuant to an effective registration
statement. The warrants are also callable if at any time after issuance the
market price of the Company’s common stock exceeds $5.00.
Q. Warrants
to purchase an aggregate of 3,000,000 shares of Common Stock, exercisable until
five years from the date of issuance (May 9, 2007) at a purchase price of $4.50
per share. The warrant holders may exercise these warrants on a cashless basis
if after one year of their issuance, the shares of Common Stock underlying
the
warrants are not then registered pursuant to an effective registration
statement. The warrants are also callable if at any time after issuance the
market price of the Company’s common stock exceeds $6.00 for 10 trading days
during any 20 consecutive trading days, provided that the Company may not call
the warrant unless there is a current registration statement covering the
underlying shares and the Company’s stock is listed on an exchange or quoted on
the OTCBB.
R.
Pursuant
to a Separation Agreement and Release dated March 30, 2008, the Company granted
to ▇▇▇▇▇▇ ▇▇▇▇▇, fully vested warrants to purchase up to 7,000,000 common shares
in the Company at an exercise price equal to the 3-day trailing weighted average
closing price per share as of March 26, 2008 (the Effective Date”) (the
“Exercise Price”). The Warrants shall be exercisable in one-twelfth
(1/12th)
increments during the period commencing six (6) months after the March 26,
2008
(the “Effective Date”) and ending on the first (1st)
anniversary date thereafter, provided however that if the Company experiences
a
change of control (as defined in the Company’s current 2008 Employee Stock
Option Plan), the Warrants shall immediately become fully exercisable.
S.
Pursuant
to a Separation and Re-Employment Agreement dated March 30, 2008, the Company
granted to ▇▇▇▇▇ ▇▇▇▇▇, two (2) tranches of warrants (collectively, the
“Warrants”) on March 30, 2008 (the “Effective Date”), the first tranche gives
▇▇. ▇▇▇▇▇ the right to purchase up to 1,650,000 common shares in the Company
(the “First Tranche”) and the second tranche gives ▇▇. ▇▇▇▇▇ the right to
purchase up to 1,200,000 common shares in the Company (the “Second Tranche”)
both at an exercise price equal to the 3-day trailing weighted average closing
price per share as of the Effective Date. The First Tranche shall vest
immediately upon the Effective Date and shall be exercisable in one-twelfth
(1/12th)
increments during the period commencing six (6) months after the Effective
Date
and ending on the first (1st)
anniversary date thereafter. The Second Tranche shall vest during the 3-year
period commencing upon the Effective Date (1/36th
per
month) and shall cease to vest at any time during which ▇▇. ▇▇▇▇▇’▇ employment
with the Company terminates for any reason.
(ii) Outstanding
Options:
|
|
|
Avg
|
|
|
|
Exercise
|
|
|
|
Name
|
Qty
|
Price
$
|
Notes
|
|
Options
Outstanding under 2008 Company Stock Option Plan
|
|
|
|
|
▇▇▇▇▇
▇▇▇▇▇▇▇
|
1,200,000
|
$0.08
|
President
|
|
▇▇▇▇▇
▇▇▇▇▇
|
410,000
|
$0.08
|
Executive
Director and CFO
|
|
▇▇▇▇▇▇
▇▇▇▇▇
|
110,000
|
$0.08
|
Director
|
|
Kamal
El-Tayara
|
285,000
|
$0.08
|
Director
|
|
▇▇▇▇▇▇
▇▇▇▇
|
285,000
|
$0.13
|
Director
|
|
▇▇▇▇
▇▇▇▇▇▇▇
|
285,000
|
$0.08
|
Director
|
|
▇▇▇▇▇
▇▇▇▇▇▇
|
285,000
|
$0.08
|
Director
|
|
Other
Staff Members
|
5,425,000
|
$0.08
|
|
|
Total
|
8,285,000
|
||
|
|
|||
|
Options
outstanding under 2004 Company Stock Option Plan
|
|
|
|
|
KIT
Capital, Ltd.
|
2,100,000
|
$0.1745
|
Chairman
and CEO
|
|
Other
Staff Members
|
1,552,019
|
$2.72
|
|
|
Total
|
3,652,019
|
||
|
|
|||
|
|
|
|
|
|
Options
not under Plan
|
|
|
|
|
Consultants
Options
|
550,000
|
$4.58
|
|
|
|
|
|
|
|
Total
Options Outstanding
|
12,487,019
|
|
|
Pursuant
to the Executive Management Agreement with KIT Capital Limited dated December
18, 2007, the Company agreed to create a synthetic or “phantom” stock plan
pursuant to which the Company will grant “phantom” shares equal to 2,100,000
shares of the Company’s common stock which will vest, pro rata on a monthly
basis over a three year period.
Voting
Agreements
▇▇▇▇▇
▇▇▇▇▇ has executed an Irrevocable Proxy (the “Proxy”) dated March 21, 2008,
pursuant to which ▇▇. ▇▇▇▇▇ appointed the Company as his sole exclusive attorney
and proxy with respect to all of his shares of the Company. The Proxy expires
on
June 10, 2008.
Schedule
3(c)
Subsidiaries
ROO
Media
Corporation, a Delaware corporation and wholly owned subsidiary of the
Company
ROO
Media
(Australia) Pty Limited, 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 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
▇▇▇▇▇▇▇▇▇.▇▇▇
Networks, Inc., a wholly owned subsidiary of Bickhams Media, Inc. and a
California corporation
ROO
Media
Europe Limited, a United Kingdom corporation and wholly owned subsidiary of
the
Company
ROO
HD,
Inc., a Delaware corporation and wholly owned subsidiary of the
Company
Reality
Group Pty. Ltd., an Australia corporation and 51% owned subsidiary of the
Company
Sputnik
Agency Pty. Ltd., an Australia corporation and 51% owned subsidiary of the
Company
Schedule
3(h)
Litigation
The
Company’s wholly owned subsidiary, ROO HD, Inc. (“ROO HD”), has been served as a
defendant in a lawsuit entitled ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ et
al.
vs. ROO
HD, Inc., a purported class action pending in New York Supreme Court, Saratoga
County. The suit, brought by four former employees of Wurld Media, Inc.
(“Wurld”) purportedly on behalf of themselves and “others similarly situated,”
claims that ROO HD’s acquisition of certain assets of Wurld was a fraudulent
conveyance and that ROO HD is the alter-ego of Wurld. Plaintiffs seek the
appointment of a receiver to take charge of the Company’s property in
constructive trust for plaintiff and payment of plaintiff’s unpaid wages and
costs of suit, both in an unspecified dollar amount. ROO
HD
timely filed
its
answer to the complaint, and there have been no further developments. ROO HD
believes the suit is without merit and will defend it vigorously.
On
December 24, 2007, ▇▇▇▇ ▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇, two former consultants of ROO
Media sued that entity together with ROO Group and ROO Group’s Founder Chairman
▇▇▇▇▇▇ ▇▇▇▇▇ and ROO Media’s former President and Chief Operating Officer ▇▇▇▇▇
▇▇▇▇▇ in New York Supreme Court, New York County, alleging breach of an oral
employment agreement, fraudulent inducement and other claims relating to the
plaintiffs’ employment at ROO Media. Defendants have moved to dismiss the
complaint, and the motion is scheduled to be argued in June 2008. We believe
the
suit is without merit and will defend it vigorously.
Schedule
3(i)
Reports
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.
The
Company untimely filed a current report on Form 8-K in connection with the
appointment of ▇▇▇ ▇▇▇▇▇▇ as the Company’s CFO.
The
Company untimely filed a current report on Form 8-K in connection with a press
release announcing its financial results for the fiscal year ended December
31,
2007 and an earnings call held by the Company on March 31, 2008.
Schedule
3(l)
Absence
of Certain Changes since the Balance Sheet Date
None
Schedule
3(n)
Registration
Rights
The
Company has granted piggyback registration rights to News Corporation, pursuant
to that certain agreement date January 25, 2007.
Pursuant
to the Securities Purchase Agreement dated May 4, 2007 by and among the Company
and the purchasers thereto (the “Purchasers”) the Company grated piggy back
registration rights to the Purchases in the event a registration statement
covering the shares issued to the Purchasers was not or cease to be effective
and continued not to be effective and during such time the Company proposes
to
register shares of its common stock under the Securities Act.
The
Company has granted piggyback registration rights to ▇▇▇▇▇▇
▇▇▇▇▇ in connection with warrants issued pursuant to the Separation Agreement
and Release dated March 30, 2008.
The
Company has granted piggyback registration rights to ▇▇▇▇▇
▇▇▇▇▇ in connection with warrants issued pursuant to a Separation and
Re-Employment Agreement dated March 30, 2008.
Schedule
3(o)
Title
to Property and Assets
Not
applicable
Schedule
3(t)
Transactions
with Officers and Directors
None
Schedule
3(aa)
Pensions;
Benefits
None
EXHIBIT
D
Opinion
of Company Counsel
Annex
A
Plan
of
Distribution
The
Selling Stockholders and any of their pledgees, donees, transferees, assignees
and successors-in-interest may, from time to time, sell any or all of their
shares of Common Stock on any stock exchange, market or trading facility on
which the shares are traded or in private transactions. These sales may be
at
fixed or negotiated prices. The Selling Stockholders may use any one or more
of
the following methods when selling shares:
|
·
|
ordinary
brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
|
|
·
|
block
trades in which the broker-dealer will attempt to sell the shares
as agent
but may position and resell a portion of the block as principal to
facilitate the transaction;
|
|
·
|
purchases
by a broker-dealer as principal and resale by the broker-dealer for
its
account;
|
|
·
|
an
exchange distribution in accordance with the rules of the applicable
exchange;
|
|
·
|
privately
negotiated transactions;
|
|
·
|
short
sales;
|
|
·
|
broker-dealers
may agree with the selling stockholders to sell a specified number
of such
shares at a stipulated price per
share;
|
|
·
|
through
the writing or settlement of options or other hedging transactions,
whether through an options exchange or
otherwise;
|
|
·
|
a
combination of any such methods of sale;
and
|
|
·
|
any
other method permitted pursuant to applicable
law.
|
The
Selling Stockholders may also sell shares under Rule 144 under the Securities
Act, if available, rather than under this prospectus.
Broker-dealers
engaged by the Selling Stockholders may arrange for other brokers-dealers to
participate in sales. Broker-dealers may receive commissions or discounts from
the Selling Stockholders (or, if any broker-dealer acts as agent for the
purchaser of shares, from the purchaser) in amounts to be negotiated. The
Selling Stockholders do not expect these commissions and discounts to exceed
what is customary in the types of transactions involved.
The
Selling Stockholders may from time to time pledge or grant a security interest
in some or all of the Shares owned by them and, if they default in the
performance of their secured obligations, the pledgees or secured parties may
offer and sell shares of Common Stock from time to time under this prospectus,
or under an amendment or supplement to this prospectus under Rule 424(b)(3)
or
other applicable provision of the Securities Act of 1933 amending the list
of
selling stockholders to include the pledgee, transferee or other successors
in
interest as selling stockholders under this prospectus.
Upon
the
Company being notified in writing by a Selling Stockholder that any material
agreement has been entered into with a broker-dealer for the sale of Common
Stock through a block trade, special offering, exchange distribution or
secondary distribution or a purchase by a broker or dealer, a supplement to
this
prospectus will be filed, if required disclosing (i) the name of each such
Selling Stockholder and of the participating broker-dealer(s), (ii) the number
of shares involved, (iii) the price at which such shares of Common Stock were
sold, (iv) the commissions paid or discounts or concessions allowed to such
broker-dealers, where applicable, (v) if applicable, that such broker-dealer(s)
did not conduct any investigation to verify the information set out or
incorporated by reference in this prospectus, and (vi) other facts material
to
the transaction. In addition, upon the Company being notified in writing by
a
Selling Stockholder that a donee or pledgee intends to sell more than 500 shares
of Common Stock, a supplement to this prospectus will be filed if then required
in accordance with applicable securities laws.
The
Selling Stockholders also may transfer the shares of Common Stock in other
circumstances, in which case the transferees, pledgees or other successors
in
interest will be the selling beneficial owners for purposes of this
prospectus.
The
Selling Stockholders may also enter into option or other transactions with
broker-dealers or other financial institutions or the creation of one or more
derivative securities which require the delivery to such broker-dealer or other
financial institution of shares offered by this Prospectus, which shares such
broker-dealer or other financial institution may resell pursuant to this
Prospectus (as supplemented or amended to reflect such
transaction).
The
Selling Stockholders and any broker-dealers or agents that are involved in
selling the shares may be deemed to be “underwriters” within the meaning of the
Securities Act in connection with such sales. In such event, any commissions
received by such broker-dealers or agents and any profit on the resale of the
shares purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act. Discounts, concessions, commissions and
similar selling expenses, if any, attributable to the sale of shares will be
borne by the Selling Stockholder. Each Selling Stockholder has represented
and
warranted to the Company that it acquired the securities subject to this
registration statement in the ordinary course of such Selling Stockholder’s
business and, at the time of its purchase of such securities such Selling
Stockholder had no agreements or understandings, directly or indirectly, with
any person to distribute any such securities.
The
Company has advised each Selling Stockholder that it may not use shares
registered on this Registration Statement to cover short sales of Common Stock
made prior to the date on which this Registration Statement shall have been
declared effective by the Commission. If the Selling Stockholders use this
prospectus for any sale of the Common Stock, they will be subject to the
prospectus delivery requirements of the Securities Act unless an exemption
therefrom is available. The Selling Stockholders will be responsible to comply
with the applicable provisions of the Securities Act and Exchange Act, and
the
rules and regulations thereunder promulgated, including, without limitation,
to
the extent applicable, Regulation M, as applicable to such Selling Stockholders
in connection with resales of their respective shares under this Registration
Statement.
In
connection with sales of the shares of Common Stock or otherwise, the Selling
Stockholders may enter into hedging transactions with broker-dealers, which
may
in turn engage in short sales of the shares of Common Stock in the course of
hedging in positions they assume. The Selling Stockholders may also sell shares
of Common Stock short and deliver shares of Common Stock covered by this
prospectus to close out short positions and to return borrowed shares in
connection with such short sales. The Selling Stockholders may also loan or
pledge shares of Common Stock to broker-dealers that in turn may sell such
shares.
The
Company is required to pay all fees and expenses incident to the registration
of
the shares, but we will not receive any proceeds from the sale of the Common
Stock. The Company has agreed to indemnify the Selling Stockholders against
certain losses, claims, damages and liabilities, including liabilities under
the
Securities Act and state securities laws, relating to the registration of the
shares offered by this Prospectus.
Appendix
I
STOCK
CERTIFICATE QUESTIONNAIRE
Please
provide us with the following information:
| 1. |
The
exact name that the Securities are to be registered in (this is the
name
that will appear on the stock certificate(s)). You may use a
|
||
|
nominee name if appropriate:
|
|||
|
2.
|
The
relationship between the Purchaser of the Securities and the Registered
Holder listed in response to item 1 above:
|
||
| 3. |
The
mailing address of the Registered Holder listed in response to
|
||
|
item 1 above:
|
|||
| 4. |
The
Tax Identification Number of the Registered Holder listed in response
to
item 1 above:
|
Appendix
II
REGISTRATION
STATEMENT QUESTIONNAIRE
In
connection with the preparation of the Registration Statement, please provide
us
with the following information regarding the Purchaser.
|
A.
|
General
Information
|
1. Please
state your organization’s name exactly as it should appear in the Registration
Statement: ___________________________________
2. Have
you
or your organization had any position, office or other material relationship
within the past three years with the Company or its affiliates other than as
disclosed in the Prospectus included in the Registration Statement?
¨
Yes ¨
No
If
yes,
please indicate the nature of any such relationships below:
|
B.
|
Securities
Holdings
|
Please
fill in all blanks in the following questions related to your beneficial
ownership of
the
Company’s capital stock. Generally, the term “beneficial
ownership”
refers
to any direct or indirect interest in the securities which entitles you to
any
of the rights or benefits of ownership, even though you may not be the holder
of
record of the securities. For example, securities held in “street name” over
which you exercise voting or investment power would be considered beneficially
owned
by you.
Other examples of indirect ownership include ownership by a partnership in
which
you are a partner or by an estate or trust of which you or any member of your
immediate
family
is a
beneficiary. Ownership of securities held in the names of your spouse, minor
children or other relatives who live in the same household may be attributed
to
you.
|
Please
note: If
you have any reason to believe that any interest in securities of
the
Company which you may have, however remote, is a beneficial interest,
please describe such interest. For purposes of responding to this
questionnaire, it is preferable to err on the side of inclusion rather
than exclusion. Where the SEC’s interpretation of beneficial
ownership
would require disclosure of your interest or possible interest in
certain
securities of the Company, and you believe that you do not actually
possess the attributes of beneficial ownership, an appropriate response
is
to disclose the interest and at the same time disclaim beneficial
ownership of the securities.
|
1. As
of
May
___, 2008,
I owned
outright (including shares registered in my name individually or jointly with
others, shares held in the name of a bank, broker, nominee, depository or in
“street name” for my account), the following number of shares of the Company’s
capital stock: _________________.
2. In
addition to the number of shares I own outright as indicated by my answer to
question B(1), as of May
___, 2008,
I had or
shared voting power or investment power, directly or indirectly, through a
contract, arrangement, understanding, relationship or otherwise, over the
following number of shares of the Company’s capital stock:
_________________.
If
the
answer to this question B(2) was not “zero,” please complete the following: with
whom shared; and the nature of the relationship and any underlying voting trust
agreement, investment arrangement or the like:
Shared Voting Power:
|
Number
of Shares
|
With
Whom Shared
|
Nature
of Relationship
|
Shared Investment Power:
|
Number
of Shares
|
With
Whom Shared
|
Nature
of Relationship
|
As
of
MAY___,
2008,
I will
have the right to acquire ________ shares of the Company’s capital stock
pursuant to outstanding stock options issued under the Company’s stock option
plans and
______ shares pursuant to the exercise of outstanding warrants
(none,
indicated by “0” above).
|
Options
and Warrants
|
|
|
Class
|
Number
of Shares
|
(4) Please
identify the natural person or persons who have voting and/or investment
control
over the Company’s securities that you own, and state whether such person(s)
disclaims beneficial ownership of the securities. For example, if you are
a
general partnership, please identify the general partners in the
partnership.
|
C.
|
NASD
Questions
|
1.
Are
you
(i) a “member”1
of
the
National Association of Securities Dealers, Inc. (the“NASD”),
(ii) an “affiliate”2
of a
member of the NASD, (iii) a “person associated with a member” or an “associated
person of a member”3
of the
NASD or (iv) an immediate family member4
of any
of the
1
NASD
defines a “member” as any broker or dealer admitted to membership in the NASD,
or any officer or partner or branch manager of such a member, or any person
occupying a similar status or performing a similar function for such a member.
2
The term “affiliate” means a person that directly, or indirectly through one or
more intermediaries, controls, or is controlled by, or is in common control
with, the person specified. Persons who have acted or are acting on behalf
of or
for the benefit of a person include, but are not necessarily limited to,
directors, officers, employees, agents, consultants and sales representatives.
The following should apply for purposes of the foregoing:
(i)
a
person should be presumed to control a Member if the person beneficially
owns 10
percent or more the outstanding voting securities of a Member which is a
corporation, or beneficially owns a partnership interest in 10 percent or
more
of the distributable profits or losses of a Member which is a partnership;
(ii)
a
Member should be presumed to control a person if the Member and Persons
Associated With a Member beneficially own 10 percent or more of the outstanding
voting securities of a person which is a corporation, or beneficially own
a
partnership interest in 10 percent or more of the distributable profits or
losses of a person which is a partnership;
(iii)
a
person
should be presumed to be under common control with a Member if:
(1)
the
same person controls both the Member and another person by beneficially
owning
10 percent
or more of the outstanding voting securities of a Member or person which
is a
corporation, or by beneficially owning a partnership interest in 10 percent
or
more of the distributable profits or losses of a Member or person which
is a
partnership; or
(2)
a
person having the power to direct or cause the direction of the management
or
policies of the Member or such person also has the power to direct or cause
the
direction of the management or policies of the other entity in question.
3
The NASD defines a “person associated with a member” or an “associated person of
a member” as being every sole proprietor, partner, equity owner, officer,
director or branch manager of any member, or any natural foregoing
persons? If
yes,
please
identify the member and describe such relationship (whether direct or indirect),
and please respond to Question Number 2 below; if
no,
please
proceed directly to Question Number 3.
Yes
_____ No
_____
Description:
2.
If you
answered “yes” to Question Number 1, please furnish any information as to
whether any such member intends to participate in any capacity in the public
offering, including the details of such participation:
Description:
3.
Are you
or have you been an “underwriter or related person”5
or a
person associated with an underwriter or related person, including, without
limitation, with respect to the proposed public offering? If yes, please
identify the underwriter or related person and describe such relationship
(whether direct or indirect).
Yes
_____ No
_____
Description:
4.
If
known, please describe in detail any underwriting compensations, arrangements
or
dealings entered into during the previous twelve months, or proposed to be
consummated in the next twelve months, between (i) any underwriter or related
person, member of the NASD, affiliate of a member of the NASD, person associated
with a member or associated person of a member of the NASD or any immediate
family member thereof, on the one hand, and (ii) the Company, or any director,
officer or shareholder thereof, on the other hand, which provides for the
receipt of any item of value and/or the transfer of any warrants, options
or
other securities from the Company to any such person (other than the information
relating to the arrangements with any investment firm or underwriting
organization which may participate in the proposed public offering).
person
occupying a similar status or performing similar functions, or any natural
person engaged in the investment banking or securities business who directly
or
indirectly controls or is controlled by such member (for example, any employee),
whether or not any such person is registered or exempt from registration
with
the NASD.
4 Immediate
family includes parents, mother-in-law, father-in-law, husband or wife, brother
or sister, brother-in-law or sister-in-law, son-in-law or daughter-in-law,
and
children, or any other person who is supported, directly or indirectly, to
a
material extent, by a person associated with a member of the NASD or any
other
broker/dealer.
5
The
term
“underwriter or related person” includes underwriters, underwriters’ counsel,
financial consultants and advisors, finders, members of the selling or
distribution group, and any and all other persons associated with or related
to
any of such persons, including members of the immediate family of such persons.
Description:
5.
Have you
purchased the securities in the ordinary course of business?
Yes
_____ No
_____
The
answers to the foregoing questions are correctly stated to the best of my
information and belief. I shall advise the Company’s outside counsel promptly of
any changes in the foregoing information.
| (Print name of Selling Security Holder | ||
| (Signature) | ||
| By: | ||
| (Name and title of signatory, if stockholder is an entity) | ||
| (Date) | ||