[FORM OF WARRANT]
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 THAT 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.
ROO GROUP, INC.
WARRANT
Warrant No. ___ Dated: November __, 2006
ROO Group, Inc., a Delaware corporation (the "Company"), hereby
certifies that, for value received, [INSERT PURCHASER NAME] or its registered
assigns (including permitted transferees, the "Holder"), is entitled to purchase
from the Company up to a total of [o] shares (as adjusted from time to time as
provided in Section 9) of Common Stock (as defined below) (each such share, a
"Warrant Share" and all such shares, the "Warrant Shares") at an exercise price
equal to $3.00 per share (as adjusted from time to time as provided in Section
9, the "Exercise Price"), at any time and from time to time from and after the
date of this Warrant (the "Initial Exercise Date") through and including
November __, 2011 (the "Expiration Date"), and subject to the following terms
and conditions. This Warrant is one of a series of similar warrants (the
"Warrants") issued pursuant to that certain Securities Purchase Agreement, dated
as of November __, 2006, by and among the Company, the Holder and certain other
investors (the "Purchase Agreement"), providing for the issuance and sale of
Common Stock and Warrants by the Company to the Holder and such other investors.
1. Definitions. The capitalized terms used herein and not otherwise
defined shall have the meanings set forth below:
"Affiliate" of any specified Person means any other person or entity
directly or indirectly controlling, controlled by or under direct or indirect
common control with such specified Person. 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.
"Common Stock" means the common stock of the Company, $0.0001 par value
per share, as constituted on the Original Issue Date.
"Company Offer" means any tender offer (including exchange offer), as
amended from time to time, made by the Company or any of its subsidiaries for
the purchase (including the acquisition pursuant to an exchange offer) of all or
any portion of the outstanding shares of Common Stock, except as permitted
pursuant to Rule 10b-18 promulgated under the Securities Exchange Act of 1934,
as amended.
"Convertible Securities" means any stock or securities (other than
Options) directly or indirectly convertible into or exercisable or exchangeable
for shares of Common Stock.
"Eligible Market" means any of the New York Stock Exchange, the American
Stock Exchange, Nasdaq Stock Market or the Over-the-Counter Bulletin Board (the
"OTCBB").
"Market Price" shall mean (i) if the principal trading market for such
securities is an exchange, the average of the last reported sale prices per
share for the last five previous Trading Days on the OTCBB or other Trading
Market, (ii) if clause (i) is not applicable, the average of the closing bid
price per share for the last five previous Trading Days as set forth by Nasdaq
or (iii) if clauses (i) and (ii) are not applicable, the average of the closing
bid price per share for the last five previous Trading Days as set forth in the
Pink Sheets(R). Notwithstanding the foregoing, if there is no reported sales
price or closing bid price, as the case may be, on any of the ten (10) Trading
Days preceding the event requiring a determination of Market Price hereunder,
then the Market Price shall be determined in good faith by resolution of the
Board of Directors of the Company, based on the best information available to
it.
"Original Issue Date" means November__, 2006.
"Other Securities" refers to any capital stock (other than Common Stock)
and other securities of the Company or any other Person that the Holder of this
Warrant at any time shall be entitled to receive, or shall have received, upon
the exercise of this Warrant, in lieu of or in addition to Common Stock, or that
at any time shall be issuable or shall have been issued in exchange for or in
replacement of Common Stock or Other Securities pursuant to Section 9 hereof or
otherwise.
"Person" means any court or other federal, state, local or other
governmental authority or other individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision thereof)
or other entity of any kind.
"Registration Statement" shall have the meaning set forth in the Purchase
Agreement.
"Required Holders" shall mean the holders of the then unexercised Warrants
issued pursuant to the Purchase Agreement, which represent a majority of the
Warrant Shares underlying such unexercised warrants.
"Trading Day" means any day on which the Common Stock is listed or quoted
on any Eligible Market.
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"Transfer Agent" shall mean Continental Stock Transfer and Trust Company
or such other Person as the Company may appoint from time to time.
"Warrant Shares" shall initially mean shares of Common Stock and in
addition may include Other Securities and Distributed Property (as defined in
Section 9(e)) issued or issuable from time to time upon exercise of this
Warrant.
"Weighted Average Price" means, for any security as of any date, the
dollar volume-weighted average price for such security on the OTC Bulletin Board
during the period beginning at 9:30:01 a.m., New York City time, and ending at
4:00:00 p.m., New York City time, as reported by Bloomberg through its "Volume
at Price" function or, if the foregoing does not apply, the dollar
volume-weighted average price of such security in the over-the-counter market on
the electronic bulletin board for such security during the period beginning at
9:30:01 a.m., New York City time, and ending at 4:00:00 p.m., New York City
time, as reported by Bloomberg, or, if no dollar volume-weighted average price
is reported for such security by Bloomberg for such hours, the average of the
highest closing bid price and the lowest closing ask price of any of the market
makers for such security as reported in the "pink sheets" by Pink Sheets LLC
(formerly the National Quotation Bureau, Inc.). If the Weighted Average Price
cannot be calculated for such security on such date on any of the foregoing
bases, the Weighted Average Price of such security on such date shall be the
fair market value as mutually determined by the Company and the Holder. If the
Company and the Holder are unable to agree upon the fair market value of such
security, then such dispute shall be resolved pursuant to Section 16 with the
term "Weighted Average Price" being substituted for the term "Exercise Price."
All such determinations shall be appropriately adjusted for any share dividend,
share split or other similar transaction during such period.
2. Registration of Warrant. The Company shall register this Warrant, upon
records to be maintained by the Company for that purpose (the "Warrant
Register"), in the name of the record Holder hereof from time to time. The
Company may deem and treat the registered Holder of this Warrant as the absolute
owner hereof for the purpose of any exercise hereof or any distribution to the
Holder, and for all other purposes, absent actual notice to the contrary.
3. Registration of Transfers. The Company shall register the transfer of
any portion of this Warrant in the Warrant Register, upon surrender of this
Warrant, with the Form of Assignment attached hereto as Appendix A duly
completed and signed, to the Company at its address specified herein. Upon any
such registration and transfer, a new warrant in substantially the form of a
Warrant (any such new warrant, a "New Warrant"), evidencing the portion of this
Warrant so transferred shall be issued to the transferee and a New Warrant
evidencing the remaining portion of this Warrant not so transferred, if any,
shall be issued to the transferring Holder. The acceptance of the New Warrant by
the transferee thereof shall be deemed the acceptance by such transferee of all
of the rights and obligations of a holder of a Warrant.
4. Exercise and Duration of Warrant.
(a) This Warrant shall be exercisable by the registered Holder at any time
and from time to time on and after the Initial Exercise Date to and including
the Expiration Date. At 5:00 P.M. New York City time on the Expiration Date, the
portion of this Warrant not exercised prior thereto shall be and become void and
of no value.
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(b) A Holder may exercise this Warrant by delivering to the Company (i) an
exercise notice, in the form attached hereto as Appendix B (the "Exercise
Notice"), appropriately completed and duly signed, and (ii) payment of the
Exercise Price for the number of Warrant Shares as to which this Warrant is
being exercised (as set forth in Section 4(d) below), and the date such items
are received by the Company is an "Exercise Date." Execution and delivery of the
Exercise Notice shall have the same effect as cancellation of the original
Warrant and issuance of a New Warrant evidencing the right to purchase the
remaining number of Warrant Shares.
(c) At any time at which the Market Price of the Company's Common Stock
exceeds $5.00 for ten (10) Trading Days during any twenty (20) consecutive
Trading Days, as adjusted for stock splits, combinations, recapitalizations and
the like, the Company may elect to call this Warrant; provided however, the
Company may not call this Warrant unless the Registration Statement is
effective. The Company shall provide the Holder with prompt notice of its
election to call the Warrant. Effective as of such election, the Holder shall be
deemed to have exercised this Warrant by means of a "cashless exercise" pursuant
to Section 4(d) below. Upon such election by the Company, no action need be
taken by the Holder in order to effect the exercise of this Warrant, and this
Warrant shall be deemed to have been presented and surrendered to the Company.
(d) The Holder shall pay the Exercise Price (i) in cash, by certified bank
check payable to the order of the Company or by wire transfer of immediately
available funds in accordance with the Company's instructions or (ii) if on or
after the one (1) year anniversary of the Original Issue Date (x) there is no
effective Registration Statement registering the resale of the Warrant Shares by
the Holder and (y) the Market Price exceeds the Exercise Price, by means of a
"cashless exercise", by presenting and surrendering to the Company this Warrant,
in which event the Company shall issue to the Holder the number of Warrant
Shares determined as follows:
X = Y [(A-B)/A]
where:
X = the number of Warrant Shares to be issued to the Holder
upon such cashless exercise;
Y = the number of Warrant Shares with respect to which this
Warrant is being exercised;
A = the Market Price on the Exercise Date; and
B = the Exercise Price.
(e) If an exercise of this Warrant is to be made in connection with a
registered public offering or sale of the Company, such exercise may, at the
election of the Holder, be conditioned on the consummation of the public
offering or sale of the Company, in which case such exercise shall not be deemed
effective until the consummation of such transaction.
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5. Delivery of Warrant Shares.
(a) Upon exercise of this Warrant, the Company shall within three Trading
Days after receipt of the Exercise Notice attached hereto as Appendix B, issue
or cause to be issued and deliver or cause to be delivered to the Holder, in
such name or names as the Holder may designate, a certificate for the Warrant
Shares issuable upon such exercise bearing (only if such legend is required by
applicable law) the restrictive legend set forth in Section 4(j)(ii) of the
Purchase Agreement. The Holder, or any Person so designated by the Holder to
receive the Warrant Shares, shall be deemed to have become holder of record of
such Warrant Shares as of the Exercise Date.
(b) This Warrant is exercisable, either in its entirety or, from time to
time, for a portion of the number of Warrant Shares. Upon surrender of this
Warrant following one or more partial exercises, the Company shall issue or
cause to be issued, at its expense, a New Warrant evidencing the right to
purchase the remaining number of Warrant Shares.
6. Charges, Taxes and Expenses. Issuance and delivery of certificates for
shares of Common Stock upon exercise of this Warrant shall be made without
charge to the Holder for any issue or transfer tax, withholding tax, transfer
agent fee or other incidental tax or expense in respect of the issuance of such
certificates, all of which taxes and expenses shall be paid by the Company;
provided, however, that the Company shall not be required to pay any tax that
may be payable in respect of any transfer involved in the registration of any
certificates for Warrant Shares or Warrant in a name other than that of the
Holder. The Holder shall be responsible for all other tax liability that may
arise as a result of holding or transferring this Warrant or receiving Warrant
Shares upon exercise hereof.
7. Replacement of Warrant. If this Warrant is mutilated, lost, stolen or
destroyed, the Company shall issue or cause to be issued in exchange and
substitution for and upon cancellation hereof, or in lieu of and in substitution
for this Warrant, a New Warrant, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction and customary and
reasonable indemnity, if requested.
8. Reservation of Warrant Shares. The Company covenants that it will at
all times reserve and keep available out of the aggregate of its authorized but
unissued and otherwise unreserved Common Stock, solely for the purpose of
enabling it to issue Warrant Shares upon exercise of this Warrant as herein
provided, the number of Warrant Shares that are then issuable and deliverable
upon the exercise of this entire Warrant, free from all taxes, liens, claims,
encumbrances with respect to the issuance of such Warrant Shares and will not be
subject to any pre-emptive rights or similar rights (taking into account the
adjustments and restrictions of Section 9 hereof). The Company covenants that
all Warrant Shares so issuable and deliverable shall, upon issuance and the
payment of the applicable Exercise Price in accordance with the terms hereof, be
duly and validly authorized, issued, fully paid and nonassessable. The Company
will take all such action as may be necessary to assure that such shares of
Common Stock may be issued as provided herein without violation of any
applicable law or regulation, or of any requirements of any securities exchange
or automated quotation system upon which the Common Stock may be listed or
quoted, as the case may be.
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9. Certain Adjustments. The Exercise Price and number of Warrant Shares
issuable upon exercise of this Warrant are subject to adjustment from time to
time as set forth in this Section 9.
(a) Stock Dividends. If the Company, at any time while this Warrant is
outstanding, pays a dividend on its Common Stock payable in additional shares of
Common Stock or otherwise makes a distribution on any class of capital stock
that is payable in shares of Common Stock, then in each such case the Exercise
Price shall be multiplied by a fraction, (i) the numerator of which shall be the
number of shares of Common Stock outstanding immediately prior to the opening of
business on the day after the record date for the determination of stockholders
entitle to receive such dividend or distribution and (ii) the denominator of
which shall be the number of shares of Common Stock outstanding immediately
after such event. Any adjustment made pursuant to this Section 9(a) shall become
effective immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution.
(b) Stock Splits. If the Company, at any time while this Warrant is
outstanding, (i) subdivides outstanding shares of Common Stock into a larger
number of shares, or (ii) combines outstanding shares of Common Stock into a
smaller number of shares, then in each such case the Exercise Price shall be
multiplied by a fraction, (A) the numerator of which shall be the number of
shares of Common Stock outstanding immediately before such event and (B) the
denominator of which shall be the number of shares of Common Stock outstanding
immediately after such event. Any adjustment pursuant to this Section 9(b) shall
become effective immediately after the effective date of such subdivision or
combination.
(c) Reclassifications. A reclassification of the Common Stock (other than
any such reclassification in connection with a merger or consolidation to which
Section 9(f) applies) into shares of any other class of stock shall be deemed:
(i) a distribution by the Company to the holders of its Common Stock of
such shares of such other class of stock for the purposes and within the meaning
of this Section 9; and
(ii) if the outstanding shares of Common Stock shall be changed into a
larger or smaller number of shares of Common Stock as part of such
reclassification, such change shall be deemed a subdivision or combination, as
the case may be, of the outstanding shares of Common Stock for the purposes and
within the meaning of Section 9(b).
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(d) Self-Tender Offers. In the event, at any time or from time to time
after the Original Issue Date while the Warrants remain outstanding and
unexpired, in whole or in part, a Company Offer shall be made and expire, then
and in each such event the Exercise Price in effect immediately prior to close
of business on the date of the last time (the "Expiration Time") tenders could
have been made pursuant to such Company Offer shall be decreased by multiplying
such Exercise Price by a fraction (not to be greater than 1):
(i) the numerator of which shall be equal to (A) the product of (1) the
Market Price per share of the Common Stock on the date of the Expiration Time
and (2) the number of shares of Common Stock outstanding (including any tendered
shares) at the Expiration Time less (B) the fair market value (as determined in
good faith by the Board of Directors of the Company) of the aggregate
consideration payable to stockholders based on the acceptance (up to any maximum
specified in the terms of the Company Offer) of all shares validly tendered and
not withdrawn as of the Expiration Time (the shares deemed so accepted, up to
any maximum amount provided for in connection with such Company Offer, being
referred to as the "Purchased Shares"); and
(ii) the denominator of which shall be equal to the product of (A) the
Market Price per share of the Common Stock on the date of the Expiration Time
and (B) the number of shares of Common Stock outstanding (including any tendered
shares) on the Expiration Time less the number of Purchased Shares.
Any adjustment under this Section 9(d) shall become effective immediately
prior to the opening of business on the day after the Expiration Time.
(e) Other Distributions. If the Company, at any time while this Warrant is
outstanding, distributes to holders of Common Stock (i) evidences of its
indebtedness, (ii) any security (other than a distribution of Common Stock
covered by Section 9(a)), (iii) rights or warrants to subscribe for or purchase
any security or (iv) any other asset (in each case, "Distributed Property"),
then in each such case the Exercise Price in effect immediately prior to the
record date fixed for determination of stockholders entitled to receive such
distribution (and the Exercise Price thereafter applicable) shall be adjusted
(effective on and after such record date) to equal the product of such Exercise
Price multiplied by a fraction, (A) the numerator of which shall be Market Price
on such record date less the then fair market value per share of the Distributed
Property distributed in respect of one outstanding share of Common Stock, which,
if the Distributed Property is other than cash or marketable securities, shall
be as determined in good faith by the Board of Directors of the Company, and (B)
the denominator of which shall be the Market Price on such record date.
(f) Fundamental Transactions. If, at any time while this Warrant is
outstanding, (i) the Company effects any merger or consolidation of the Company
with or into another Person, (ii) the Company effects any sale of all or
substantially all of its assets in one or a series of related transactions or
(iii) there shall occur any merger of another Person into the Company whereby
the Common Stock is cancelled, converted or reclassified into or exchanged for
other securities, cash or property (in any such case, a "Fundamental
Transaction"), then, as a condition to the consummation of such Fundamental
Transaction, the Company shall (or, in the case of any Fundamental Transaction
in which the Company is not the surviving entity, the Company shall take all
reasonable steps to cause such other Person to) execute and deliver to each
Holder of Warrants a written instrument providing that:
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(x) so long as any Warrant remains outstanding on such terms and
subject to such conditions as shall be nearly equivalent as may be
practicable to the provisions set forth in this Warrant, each Warrant,
upon the exercise thereof at any time on or after the consummation of such
Fundamental Transaction, shall be exercisable into, in lieu of Common
Stock issuable upon such exercise prior to such consummation, the
securities or other property (the "Substituted Property") that would have
been received in connection with such Fundamental Transaction by a holder
of the number of shares of Common Stock into which such Warrant was
exercisable immediately prior to such Fundamental Transaction, assuming
such holder of Common Stock:
(A) is not a Person with which the Company consolidated or into
which the Company merged or which merged into the Company or to which such
sale or transfer was made, as the case may be (a "Constituent Person"), or
an Affiliate of a Constituent Person; and
(B) failed to exercise such Holder's rights of election, if any, as
to the kind or amount of securities, cash and other property receivable in
connection with such Fundamental Transaction (provided, however, that if
the kind or amount of securities, cash or other property receivable in
connection with such Fundamental Transaction is not the same for each
share of Common Stock held immediately prior to such Fundamental
Transaction by a Person other than a Constituent Person or an Affiliate
thereof and in respect of which such rights of election shall not have
been exercised (a "Non-Electing Share"), then, for the purposes of this
Section 9(f), the kind and amount of securities, cash and other property
receivable in connection with such Fundamental Transaction by each
Non-Electing Share shall be deemed to be the kind and amount so receivable
per share by a plurality of the Non-Electing Shares); and
(y) the rights and obligations of the Company (or, in the event of a
transaction in which the Company is not the surviving Person, such other
Person) and the Holders in respect of Substituted Property shall be as
nearly equivalent as may be practicable to the rights and obligations of
the Company and Holders in respect of Common Stock hereunder.
Such written instrument shall provide for adjustments that, for events
subsequent to the effective date of such written instrument, shall be as nearly
equivalent as may be practicable to the adjustments provided for in Section 9.
The above provisions of this Section 9(f) shall similarly apply to successive
Fundamental Transactions. Notwithstanding the foregoing, in the event of a
Dilutive Fundamental Transaction, at the request of the Holder delivered before
the 90th day after the effective date of such Dilutive Fundamental Transaction,
the Company (or successor entity) shall purchase this Warrant from the Holder by
paying to the Holder, within five business days after such request, cash in an
amount equal to the value of the remaining unexercised portion of this Warrant
on the effective date of such Dilutive Fundamental Transaction, which value
shall be determined by use of the Black-Scholes option pricing model, where the
volatility input shall not be greater than 50%. For purposes of this section, a
"Dilutive Fundamental Transaction" is a Fundamental Transaction in which the
aggregate proceeds to the Holder, had the Holder exercised the then-unexercised
portion of this Warrant in full immediately prior to the effective date of such
Fundamental Transaction, is less than the aggregate Exercise Price of the
Warrant with respect to the then-unexercised portion of this Warrant immediately
prior to the effectiveness of such Fundamental Transaction.
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(g) Issuance of Shares of Common Stock. The Exercise Price and the number of
Warrant Shares shall be adjusted from time to time as follows:
(i) If and whenever on or after the Subscription Date, for a period of ninety
(90) days after the date hereof, the Company issues or sells, or in accordance
with this Section 9 is deemed to have issued or sold, any shares of Common Stock
(including the issuance or sale of shares of Common Stock owned or held by or
for the account of the Company), but excluding shares of Common Stock deemed to
have been issued by the Company in connection with any Excluded Securities or an
Excluded Issuance) for a consideration per share (the "New Issuance Price") less
than a price (the "Applicable Price") equal to the Exercise Price in effect
immediately prior to such issue or sale or deemed issuance or sale (the
foregoing a "Dilutive Issuance"), then immediately after such Dilutive Issuance,
the Exercise Price then in effect shall be reduced to an amount equal to the
formula below:
Adjusted Exercise Price = (A x B) + D
-----------
A+C
where
A = the number of shares of Common Stock outstanding immediately preceding
such Dilutive Issuance
B = the Exercise Price in effect immediately preceding such Dilutive
Issuance
C = the number of Additional Shares of Common Stock (as adjusted for stock
splits, stock combinations, recapitalizations, and dividends and the like)
outstanding or deemed outstanding hereunder as a result of such Dilutive
Issuance
D = the aggregate consideration, if any, received or deemed to be received
by the Corporation upon such Dilutive Issuance
For purposes of this subsection (i), "Additional Shares of Common Stock"
shall mean all shares of Common Stock issued by the Corporation or deemed to be
issued pursuant to this Section 9(h)(i), other than Excluded Issuances (as
defined in Section 9(h)(ii) hereof).
For purposes of determining the adjusted Exercise Price under this
Section 9(h), the following shall be applicable:
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(1) Issuance of Options. If the Company in any manner grants any
Options and the lowest price per share for which one share of Common
Stock is issuable upon the exercise of any such Option or upon
conversion, exercise or exchange of any Convertible Securities
issuable upon exercise of any such Option is less than the
Applicable Price, then such share of Common Stock shall be deemed to
be outstanding and to have been issued and sold by the Company at
the time of the granting or sale of such Option for such price per
share. For purposes of this Section 9(h)(i)(1), the "lowest price
per share for which one share of Common Stock is issuable upon
exercise of such Options or upon conversion, exercise or exchange of
such Convertible Securities" shall be equal to the sum of the lowest
amounts of consideration (if any) received or receivable by the
Company with respect to any one share of Common Stock upon the
granting or sale of the Option, upon exercise of the Option and upon
conversion, exercise or exchange of any Convertible Security
issuable upon exercise of such Option. No further adjustment of the
Exercise Price or number of Warrant Shares shall be made upon the
actual issuance of such shares of Common Stock or of such
Convertible Securities upon the exercise of such Options or upon the
actual issuance of such shares of Common Stock upon conversion,
exercise or exchange of such Convertible Securities.
(2) Issuance of Convertible Securities. If the Company in any manner
issues or sells any Convertible Securities and the lowest price per
share for which one share of Common Stock is issuable upon the
conversion, exercise or exchange thereof is less than the Applicable
Price, then such share of Common Stock shall be deemed to be
outstanding and to have been issued and sold by the Company at the
time of the issuance or sale of such Convertible Securities for such
price per share. For the purposes of this Section 9(h)(i)(2), the
"lowest price per share for which one share of Common Stock is
issuable upon the conversion, exercise or exchange" shall be equal
to the sum of the lowest amounts of consideration (if any) received
or receivable by the Company with respect to one share of Common
Stock upon the issuance or sale of the Convertible Security and upon
conversion, exercise or exchange of such Convertible Security. No
further adjustment of the Exercise Price or number of Warrant Shares
shall be made upon the actual issuance of such shares of Common
Stock upon conversion, exercise or exchange of such Convertible
Securities, and if any such issue or sale of such Convertible
Securities is made upon exercise of any Options for which adjustment
of this Warrant has been or is to be made pursuant to other
provisions of this Section 9(h), no further adjustment of the
Exercise Price or number of Warrant Shares shall be made by reason
of such issue or sale.
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(3) Change in Option Price or Rate of Conversion. If the purchase
price provided for in any Options, the additional consideration, if
any, payable upon the issue, conversion, exercise or exchange of any
Convertible Securities, or the rate at which any Convertible
Securities are convertible into or exercisable or exchangeable for
shares of Common Stock increases or decreases at any time, the
Exercise Price and the number of Warrant Shares in effect at the
time of such increase or decrease shall be adjusted to the Exercise
Price and the number of Warrant Shares which would have been in
effect at such time had such Options or Convertible Securities
provided for such increased or decreased purchase price, additional
consideration or increased or decreased conversion rate, as the case
may be, at the time initially granted, issued or sold. For purposes
of this Section 9(h)(i)(3), if the terms of any Option or
Convertible Security that was outstanding as of the date of issuance
of this Warrant are increased or decreased in the manner described
in the immediately preceding sentence, then such Option or
Convertible Security and the shares of Common Stock deemed issuable
upon exercise, conversion or exchange thereof shall be deemed to
have been issued as of the date of such increase or decrease. No
adjustment pursuant to this Section 9(h) shall be made if such
adjustment would result in an increase of the Exercise Price then in
effect or a decrease in the number of Warrant Shares.
(4) Calculation of Consideration Received. In case any Option is
issued in connection with the issue or sale of other securities of
the Company, together comprising one integrated transaction in which
no specific consideration is allocated to such Options by the
parties thereto, the Options will be deemed to have been issued for
a consideration of $0.01. If any shares of Common Stock, Options or
Convertible Securities are issued or sold or deemed to have been
issued or sold for cash, the consideration received therefor will be
deemed to be the net amount received by the Company therefor. If any
shares of Common Stock, Options or Convertible Securities are issued
or sold for a consideration other than cash, the amount of such
consideration received by the Company will be the fair value of such
consideration, except where such consideration consists of
securities, in which case the amount of consideration received by
the Company will be the Weighted Average Price of such security on
the date of receipt. If any shares of Common Stock, Options or
Convertible Securities are issued to the owners of the non-surviving
entity in connection with any merger in which the Company is the
surviving entity, the amount of consideration therefor will be
deemed to be the fair value of such portion of the net assets and
business of the non-surviving entity as is attributable to such
shares of Common Stock, Options or Convertible Securities, as the
case may be. The fair value of any consideration other than cash or
securities will be determined jointly by the Company and the
Required Holders. If such parties are unable to reach agreement
within ten (10) days after the occurrence of an event requiring
valuation (the "Valuation Event"), the fair value of such
consideration will be determined within five (5) Business Days after
the tenth (10th) day following the Valuation Event by an
independent, reputable appraiser jointly selected by the Company and
the Required Holders. The determination of such appraiser shall be
final and binding upon all parties absent manifest error and the
fees and expenses of such appraiser shall be borne by the Company.
-11-
(5) Record Date. If the Company takes a record of the holders of
shares of Common Stock for the purpose of entitling them (A) to
receive a dividend or other distribution payable in shares of Common
Stock, Options or in Convertible Securities or (B) to subscribe for
or purchase shares of Common Stock, Options or Convertible
Securities, then such record date will be deemed to be the date of
the issue or sale of the shares of Common Stock deemed to have been
issued or sold upon the declaration of such dividend or the making
of such other distribution or the date of the granting of such right
of subscription or purchase, as the case may be.
(ii) For purposes of the this Section h(i): "Excluded Issuance" means
any Dilutive Issuance during the ninety day period after the Subscription Date
in which the New Issuance Price is greater than $3.00 (subject to adjustment for
stock splits, stock dividends, recapitalizations, reorganizations,
reclassification, combinations, reverse stock splits or other similar events
after the Subscription Date) per share of Common Stock. "Excluded Securities"
means any Common Stock issued or issuable: (i) in connection with any Approved
Stock Plan; (ii) upon the exercise of this Warrant; (iii) upon conversion,
exercise or exchange of any Options or Convertible Securities which are
outstanding on the day immediately preceding the Subscription Date, provided
that the terms of such Options or Convertible Securities are not amended,
modified or changed on or after the Subscription Date; or (iv) in connection
with any acquisition by the Company, whether through an acquisition of stock or
a merger of any business, assets or technologies or an investment made in the
Company by an operating company in a business synergistic with the business of
the Company and in which the Company receives benefits in addition to the
investment of funds, in each case, the primary purpose of which is not to raise
equity capital in an amount.
(h) Calculations. All calculations under this Section 9 shall be made to
the nearest cent or the nearest 1/100th of a share, as applicable. The number of
shares of Common Stock outstanding at any given time shall not include shares
owned or held by or for the account of the Company, and the disposition of any
such shares shall be considered an issue or sale of Common Stock.
(i) Adjustments. Notwithstanding any provision of this Section 9, no
adjustment of the Exercise Price shall be required if such adjustment is less
than $0.01; provided, however, that any adjustments that by reason of this
Section 9(i) are not required to be made shall be carried forward and taken into
account for purposes of any subsequent adjustment.
(j) Adjustment of Number of Shares. Upon each adjustment in the Exercise
Price pursuant to this Section 9, the number of Warrant Shares purchasable
hereunder shall be adjusted, to the nearest whole share, to the product obtained
by multiplying the number of Warrant Shares purchasable immediately prior to
such adjustment by a fraction, (i) the numerator of which shall be the Exercise
Price immediately prior to such adjustment, and (ii) the denominator of which
shall be the Exercise Price immediately thereafter.
(k) Notice of Adjustments. Upon the occurrence of each adjustment pursuant
to this Section 9, the Company will promptly deliver to the Holder a certificate
executed by the Company's Chief Financial Officer setting forth, in reasonable
detail, the event requiring such adjustment and the method by which such
adjustment was calculated, the adjusted Exercise Price and the adjusted number
or type of Warrant Shares or other securities issuable upon exercise of this
Warrant (as applicable). The Company will retain at its office copies of all
such certificates and cause the same to be available for inspection at said
office during normal business hours by the Holder or any prospective purchaser
of the Warrant designated by the Holder.
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(l) Notice of Corporate Events. If the Company (i) declares a dividend or
any other distribution of cash, securities or other property in respect of its
Common Stock, including, without limitation, any granting of rights or warrants
to subscribe for or purchase any capital stock of the Company or any subsidiary
of the Company, (ii) authorizes, approves, enters into any agreement
contemplating, or solicits stockholder approval for, any Fundamental Transaction
or (iii) authorizes the voluntary dissolution, liquidation or winding up of the
affairs of the Company, then the Company shall deliver to the Holder a notice
describing the material terms and conditions of such transaction at least 15
calendar days prior to the applicable record or effective date on which a Person
would need to hold Common Stock in order to participate in or vote with respect
to such transaction, and the Company will take all steps reasonably necessary in
order to ensure that the Holder is given the practical opportunity to exercise
this Warrant prior to such time so as to participate in or vote with respect to
such transaction; provided, however, that the failure to deliver such notice or
any defect therein shall not affect the validity of the corporate action
required to be described in such notice.
10. Fractional Shares. The Company shall not be required to issue or cause
to be issued fractional Warrant Shares on the exercise of this Warrant. If any
fraction of a Warrant Share would, except for the provisions of this Section, be
issuable upon exercise of this Warrant, the Company shall make a cash payment to
the Holder equal to (a) such fraction multiplied by (b) the Market Price on the
Exercise Date of one full Warrant Share.
11. Restricted Securities. The Holder represents and warrants that it (i)
understands that the Warrant and the Warrant Shares have not been registered
under the Securities Act and (ii) understands the restrictions set forth on the
legend printed on the face of this Warrant.
12. Listing on Securities Exchanges. In furtherance and not in limitation
of any other provision of this Warrant, if the Company at any time shall list
any Common Stock on any Eligible Market, the Company will, at its expense,
simultaneously list the Warrant Shares (and maintain such listing) on such
Eligible Market, upon official notice of issuance following the exercise of this
Warrant; and the Company will so list, register and maintain such listing on any
Eligible Market any Other Securities, if and at the time that any securities of
like class or similar type shall be listed on such Eligible Market by the
Company.
13. Remedies. The Company stipulates that the remedies at law of the
Holder of this Warrant in the event of any default or threatened default by the
Company in the performance of or compliance with any of the terms of this
Warrant are not and will not be adequate, and that such terms may be
specifically enforced by a decree for the specific performance of any agreement
contained herein or by an injunction against a violation of any of the terms
hereof or otherwise.
-13-
14. Notices. Any and all notices or other communications or deliveries
hereunder (including without limitation any Exercise Notice) shall be in writing
and shall be mailed by certified mail, return receipt requested, or by a
nationally recognized courier service or delivered (in person or by facsimile),
against receipt to the party to whom such notice or other communication is to be
given. The address for such notices or communications shall be as set forth in
the Purchase Agreement entered into by the Holder and the Company. Any notice or
other communication given by means permitted by this Section 14 shall be deemed
given at the time of receipt thereof.
15. Warrant Agent. The Company shall serve as warrant agent under this
Warrant. Upon 30 days' notice to the Holder, the Company may appoint a new
warrant agent. Any Person into which any new warrant agent may be merged, any
Person resulting from any consolidation to which any new warrant agent shall be
a party or any Person to which any new warrant agent transfers substantially all
of its corporate trust or shareholders services business shall be a successor
warrant agent under this Warrant without any further act. Any such successor
warrant agent shall promptly cause notice of its succession as warrant agent to
be mailed (by first class mail, postage prepaid) to the Holder at the Holder's
last address as shown on the Warrant Register.
16. Miscellaneous. (a) This Warrant may be assigned by the Holder. This
Warrant may not be assigned by the Company, except to a successor in the event
of a Fundamental Transaction. This Warrant shall be binding on and inure to the
benefit of the parties hereto and their respective successors and assigns.
Subject to the preceding sentence, nothing in this Warrant shall be construed to
give to any Person other than the Company and the Holder any legal or equitable
right, remedy or cause of action under this Warrant. This Warrant may be amended
only in writing signed by the Company and the Holder and their successors and
assigns.
(b) The Company will not, by amendment of its governing documents or
through any reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms
of this Warrant, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such action as may
be necessary or appropriate in order to protect the rights of the Holder
against impairment. Without limiting the generality of the foregoing, the
Company (i) will not increase the par value of any Warrant Shares above
the amount payable therefor upon exercise thereof, (ii) will take all such
action as may be reasonably necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable Warrant
Shares on the exercise of this Warrant, free from all taxes, liens, claims
and encumbrances and (iii) will not close its shareholder books or records
in any manner that interferes with the timely exercise of this Warrant.
(c) This Warrant shall be governed by and construed and enforced in
accordance with the laws of the State of New York without regard to
conflicts of laws principles thereof. Each party hereby irrevocably
submits to the exclusive jurisdiction of the state and Federal courts
sitting in the City of New York, Borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with
any transaction contemplated hereby or discussed herein (including with
respect to the enforcement of the Securities Purchase Agreement), and
hereby irrevocably waives, and agrees not to assert any suit, action or
proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process
and consents to process being served in any such suit, action or
proceeding by mailing a copy thereof via registered or certified mail or
overnight delivery (with evidence of delivery) to such party at the
address in effect for notices to it under this Warrant and agrees that
such service shall constitute good and sufficient service of process and
notice thereof. Nothing contained herein shall be deemed to limit in any
way any right to serve process in any manner permitted by law. THE PARTIES
HEREBY WAIVE ALL RIGHTS TO A TRIAL BY JURY.
-14-
(d) Neither party shall be deemed in default of any provision of
this Warrant, to the extent that performance of its obligations or
attempts to cure a breach hereof are delayed or prevented by any event
reasonably beyond the control of such party, including, without
limitation, war, hostilities, acts of terrorism, revolution, riot, civil
commotion, national emergency, strike, lockout, unavailability of
supplies, epidemic, fire, flood, earthquake, force of nature, explosion,
embargo, or any other Act of God, or any law, proclamation, regulation,
ordinance, or other act or order of any court, government or governmental
agency, provided that such party gives the other party written notice
thereof promptly upon discovery thereof and uses reasonable best efforts
to cure or mitigate the delay or failure to perform.
(e) The headings herein are for convenience only, do not constitute
a part of this Warrant and shall not be deemed to limit or affect any of
the provisions hereof.
(f) In case any one or more of the provisions of this Warrant shall
be deemed invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Warrant shall
not in any way be affected or impaired thereby and the parties will
attempt in good faith to agree upon a valid and enforceable provision that
shall be a commercially reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Warrant.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK,
SIGNATURE PAGE FOLLOWS]
-15-
The Company has caused this Warrant to be duly executed by its
authorized officer as of the date first indicated above.
ROO GROUP, INC.
By:
-------------------------------------------
Name:
Title:
APPENDIX A
FORM OF ASSIGNMENT
(to be completed and signed only upon transfer of Warrant)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ________________________________________ the right represented by the
within Warrant to purchase _____________ shares of Common Stock of Roo Group,
Inc. to which the within warrant relates and appoints __________________________
attorney to transfer said right on the books of Roo Group, Inc. with full power
of substitution in the premises.
Dated:
---------------------- ------------------------------------------
(Signature must conform in all respects to
name of Holder as specified on face of the
Warrant)
Address of Transferee:
------------------------------------------
------------------------------------------
------------------------------------------
APPENDIX B
FORM OF EXERCISE NOTICE
(To be executed by the Holder to exercise the right to purchase shares of Common
Stock under the foregoing Warrant)
To: ROO GROUP, INC.
The undersigned is the Holder of Warrant No. _________ (the "Warrant") issued by
ROO GROUP, INC., a Delaware corporation (the "Company"). Capitalized terms used
herein and not otherwise defined have the respective meanings set forth in the
Warrant.
1. The Warrant is currently exercisable to purchase a total of _________
Warrant Shares.
2. The undersigned Holder hereby exercises its right to purchase
__________ Warrant Shares pursuant to the Warrant
3. The Holder intends that payment of the Exercise Price shall be made as
(check one):
Cash Exercise _______
Cashless Exercise _______
4. If the Holder has elected a Cash Exercise, the Holder shall pay the
sum of $________ to the Company in accordance with the terms of the
Warrant.
5. If the Holder has elected a Cashless Exercise, a certificate shall be
issued to the Holder for the number of shares equal to the whole number
portion of the product of the calculation set forth below, which is
________. The Company shall pay a cash adjustment in respect of the
fractional portion of the product of the calculation set forth below in
an amount equal to the product of the fractional portion of such
product and the Market Price on the Exercise Day, which product is
__________.
X = Y[(A-B)/A]
X = the number of Warrant Shares to be issued to the Holder.
Number of Warrant Shares being exercised: ("Y").
------------------
Market Price on the Exercise Day: ("A").
--------------------
Exercise Price: ("B")
-----------
6. Pursuant to this exercise, the Company shall deliver to the Holder
Warrant Shares in accordance with the terms of the Warrant.
1
7. Following this exercise, the Warrant shall be exercisable to
purchase a total of __________ Warrant Shares.
Dated: NAME OF HOLDER:
--------------------
-------------------------------------------
(Print)
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
(Signature must conform in all respects to
name of holder as specified on the face of
the Warrant)
2