Document:

Unassociated Document

    AGREEMENT

    

    Agreement
      dated as of the 25th
      of
      January 2007, by and between ROO Group, Inc., a Delaware corporation (the
“Company”), and News Corporation, a Delaware corporation (“News Corp”).

    

    WITNESSETH
      

    

    WHEREAS,
      the
      Company operates as a digital media company in the business of providing
      products and solutions that enable the broadcast of topical video content from
      its customers' Internet websites, specializing in providing the technology
      and
      content required for video to be played on computers via the Internet as well
      as
      emerging broadcasting platforms such as set top boxes and wireless devices;
      

    

    WHEREAS,
      the
      Company currently supplies to News Corp and its subsidiaries and affiliates
      a
      turnkey solution whereby News Corp is able to integrate licensed video and
      video
      advertising into its websites, provide daily management and updating of the
      content, and regular reporting on which content is being viewed;
      and

    

    WHEREAS,
      the
      parties wish to solidify their business relationship and provide for their
      continued working relationship for their mutual benefit. 

    

    NOW,
      THEREFORE,
      in
      consideration of the premises and for other good and valuable consideration
      the
      receipt of which is hereby acknowledged, the parties hereto agree as
      follows:

    

    1.  Issuance
      of Shares.
      Upon
      the
      terms and subject to the conditions of this Agreement, the Company hereby agrees
      to issue to News Corp an aggregate of Four Million (4,000,000) shares of its
      common stock, par value $.0001 (the “Shares”) as follows:

    

    (a)
       Two
      Million (2,000,000) shares of common stock (the “Escrow Shares”), which shares
      shall be issued upon the execution of this Agreement and shall be held in escrow
      by Sichenzia Ross Friedman Ference LLP, counsel to the Company, to be released
      to News Corp upon satisfaction of the conditions set forth in Exhibit 1(a)
      hereto, provided however, if the milestones set forth in Exhibit 1(a) are not
      achieved as set forth therein, the Company shall issue to News Corp by no later
      than 10 days after March 31, 2008 warrants to purchase 2,000,000 shares of
      the
      Company’s common stock, which shall be exercisable for a term of two (2) years
      at a price of $3.00 per share or such lesser price per share that is the closing
      price per share of the Company’s common stock on any date that is within 10 days
      prior to the date of this Agreement (with such exercise price subject to
      customary anti-dilution protection for stock splits, recapitalizations, stock
      dividends and the like); and

     

    (b) An
      additional Two Million (2,000,000) shares of common stock (the “Additional
      Shares”), which Additional Shares shall be issued to News Corp upon the
      achievement of certain milestones set forth in Exhibit 1(b) hereto; provided
      however, if the milestones set forth in Exhibit 1(b) are not achieved as set
      forth therein, the Company shall issue to News Corp by no later than 10 days
      after the third anniversary of the date of this Agreement warrants to purchase
      2,000,000 shares of the Company’s common stock, which shall be exercisable for a
      term of two (2) years at a price of $3.00 per share or such lesser price per
      share that is the closing price per share of the Company’s common stock on any
      date that is within 10 days prior to the date of this Agreement (with such
      exercise price subject to customary anti-dilution protection for stock splits,
      recapitalizations, stock dividends and the like). 

    

    
      
         

      

      
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    2.  
      yRepresentations
      and Warranties of the Company.

     

    The
      Company hereby represents and warrants to News Corp as follows

    

    (a) Corporate
      Organization.
      The
      Company is a corporation duly organized, validly existing and in good standing
      under the laws of the State of Delaware, and has the requisite corporate power
      and authority to own or lease its properties and to carry on its business as
      now
      being conducted. 

    

    (b) Authorization;
      Enforcement.
      (i) The
      Company has the requisite corporate power and authority to enter into and
      perform its obligations under this Agreement and to issue, sell and perform
      its
      obligations with respect to the Shares in accordance with the terms hereof,
      (ii)
      the execution and delivery of this Agreement by the Company and the consummation
      by it of the transactions contemplated hereby have been duly authorized by
      on
      the part of the Company. This Agreement, when executed and delivered by the
      Company, constitutes a valid and binding obligation of the Company enforceable
      against the Company in accordance with its terms, except as such enforceability
      may be limited by general principles of equity or applicable bankruptcy,
      insolvency, reorganization, moratorium, liquidation or similar laws relating
      to,
      or affecting generally, the enforcement of creditors’ rights and
      remedies.

     

    (c) Capitalization.

    

    (i) As
      of the
      date hereof, the authorized capital of the Company consists of 500,000,000
      shares of common stock, par value $.0001 per share, of which approximately
      40,000,000 are outstanding on a fully diluted basis and 10,000,000 shares of
      Series A Preferred Shares, par value $.0001 per share, of which 10,000,000
      are
      outstanding. 

    

    (ii) The
      Shares which are being issued hereunder have been duly and validly authorized
      and, when issued, sold and delivered in accordance with the terms hereof for
      the
      consideration provided for herein, will be validly issued, fully paid and
      nonassessable and will be free of restrictions on transfer other than
      restrictions on transfer under this Agreement and applicable federal and state
      securities laws. No further approval or authorization of the stockholders or
      of
      the directors of the Company is required for the issuance and sale of the Shares
      or the release of the Escrow Shares. The Company shall, at all times, reserve
      and keep available out of its authorized but unissued shares of common stock,
      solely for the purpose of effecting the issuance of the Shares, such number
      of
      shares of common stock as shall be sufficient to effect its obligations under
      this Agreement.

     

    
      
         

      

      
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    (iii) Except
      as
      disclosed in the SEC Reports, as defined below in Section 2(e), (A) no
      subscription, warrant, option, convertible or exchangeable security or other
      right (contingent or otherwise) to purchase or acquire any securities from
      the
      Company is authorized or outstanding, (B) there is not any commitment of the
      Company to issue any subscription, warrant, option, convertible or exchangeable
      security or other such right or to issue or distribute to the holders of any
      securities of the Company any evidences of indebtedness or any assets of the
      Company, (C) the Company has no obligation (contingent or otherwise) to
      purchase, redeem or otherwise acquire any of its securities or to pay any
      dividend or make any other distribution in respect thereof, (D) no person or
      entity is entitled to any preemptive or similar right with respect to the
      issuance of any securities of the Company, and (E) no person or entity has
      any
      rights to require the registration of any securities of the Company under the
      Securities Act of 1933, as amended (the “Securities Act”).

    

    (d) No
      Conflicts.

    

    (i) The
      Company is not in, nor shall the conduct of its business as presently conducted
      result in, any violation, breach or default of any term of the Company’s
      Certificate of Incorporation, as amended (the “Certificate”), or the Company’s
      bylaws (the “Bylaws”) or in any material respect of any term or provision of any
      mortgage, indenture, contract, agreement or instrument to which the Company
      is a
      party or by which it may be bound, (the “Company Contracts”), or of any
      provision of any foreign or domestic state or federal judgment, decree, order,
      statute, rule or regulation applicable to or binding upon the Company. The
      execution, delivery and performance of and compliance with this Agreement and
      the consummation of the transactions contemplated hereby will not result in
      any
      violation, breach or default, or be in conflict with or constitute, with or
      without the passage of time or the giving of notice or both, either a default
      under the Company’s Certificate or Bylaws or any material respect of any term or
      provision of any Company Contracts or a violation of any statutes, laws,
      regulations or orders, or an event which results in the creation of any lien,
      charge or encumbrance upon any asset of the Company.

     

    (ii) No
      consent, approval or authorization of, or declaration, registration or filing
      with, any person, entity or governmental authority on the part of the Company
      is
      required for the valid execution, delivery and performance of this Agreement
      or
      the valid consummation of the transactions contemplated hereby and thereby,
      except filings pursuant to foreign, federal and state securities laws, if any,
      which filings have been or will be made in a timely manner.

     

    (e) SEC
      Filings.
      The
      Company has filed all forms, reports and documents (including all exhibits)
      required to be filed by it with the SEC since its inception (the “SEC Reports”).
      The SEC Reports, each as amended prior to the date hereof, (i) have been
      prepared in all material respects in accordance with the requirements of the
      Securities Act or the Securities Exchange Act of 1934, as amended, as the case
      may be, and the rules and regulations promulgated thereunder and (ii) did not,
      when filed as amended prior to the date hereof, contain any untrue statement
      of
      a material fact or omit to state a material fact required to be stated therein
      or necessary in order to make the statements made therein, in the light of
      the
      circumstances under which they were made, not misleading.

    

    
      
         

      

      
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    (f) Disclosure.
      No
      representation or warranty by the Company contained in this Agreement or any
      Schedule or Exhibit hereto contains any untrue statement of a material fact
      or
      omits or will omit to state any material fact which is necessary in order to
      make the statements contained herein or therein, not misleading in light of
      the
      circumstances in which they were made. There is no fact known to the Company
      relating to the business, affairs, operations, condition or prospects of the
      Company which materially adversely affects the same and which has not been
      disclosed to News Corp by the Company.

    

    3.  Representations
      and Warranties of News Corp.

     

    News
      Corp
      hereby represents and warrants to the Company that: 

    

    (a) Organization.
      News
      Corp is a corporation, limited liability company or limited partnership, as
      the
      case may be, duly organized, validly existing and in good standing under the
      laws of its formation, and has the requisite corporate power and authority
      to
      own or lease its properties and to carry on its business as now being conducted.
      

    .
      

    (b) Authorization;
      Enforcement.
      (i)
      News Corp has the requisite power and authority to enter into and perform its
      obligations under this Agreement, (ii) the execution and delivery of this
      Agreement by News Corp and the consummation by it of the transactions
      contemplated hereby have been duly authorized by all necessary corporate action
      on the part of News Corp, and (c) this Agreement has been duly executed and
      delivered by News Corp. This Agreement, when executed and delivered, constitutes
      a valid and binding obligation of News Corp, enforceable against News Corp
      in
      accordance with its terms, except as such enforceability may be limited by
      general principles of equity or applicable bankruptcy, insolvency,
      reorganization, moratorium, liquidation or similar laws relating to, or
      affecting generally, the enforcement of creditors’ rights and
      remedies.

    

    (c)
       Investment
      Representations.

     

    (i)  News
      Corp
      is an “accredited investor”, as defined in Regulation D promulgated under the
      Securities Act, and has such knowledge, sophistication and experience in
      financial and business matters that News Corp is capable of evaluating the
      merits and risks of the investment in the Shares.

     

    (ii)  News
      Corp
      (i) has adequate means of providing for its current financial needs and possible
      contingencies, and has no need for liquidity of investment in the Company,
      (ii)
      can afford to hold unregistered Shares for an indefinite period of time and
      sustain a complete loss of the entire amount of the subscription, and (iii)
      has
      not made an overall commitment to investments which are not readily marketable
      that is so disproportionate as to cause such overall commitment to become
      excessive.

     

    
      
         

      

      
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    (iii)  News
      Corp
      agrees and understands that the Shares are being issued to News Corp in reliance
      upon specific exemptions from the registration requirements of the Securities
      Act and the rules and regulations promulgated thereunder and that, in order
      to
      determine the availability of such exemptions and the eligibility of News Corp
      to acquire the Shares, the Company is relying upon the truth and accuracy of
      News Corp’s representations and warranties, and compliance with News Corp’s
      covenants and agreements, set forth in this Agreement. News Corp hereby
      acknowledges that the offering of the Shares has not been reviewed by the SEC
      or
      any state regulatory authority since the offering of the Shares is intended
      to
      be exempt from the registration requirements of Section 5 of the Securities
      Act
      pursuant to Regulation D promulgated thereunder. News Corp understands that
      the
      Shares have not been registered under the Securities Act and agrees not to
      sell
      or otherwise transfer the Shares unless they are registered under the Securities
      Act or unless an exemption from such registration is available.

     

    (iv)  The
      Shares are being acquired by News Corp for its own account, for investment
      purposes only, not for the account of any other person, or corporation and
      not
      with a view to distribution, assignment or resale to others in whole or in
      part.
      News Corp has no present intention of selling, granting any participation in,
      or
      otherwise distributing the Shares. News Corp does not have any contract,
      undertaking, agreement or arrangement with any person to sell, transfer, pledge,
      hypothecate, grant any option to purchase or otherwise dispose of any of the
      Shares. Nothing herein shall prevent the distribution of any Shares to any
      subsidiary, member, partner, stockholder, affiliate or former member, partner,
      stockholder or affiliate of News Corp in compliance with the Securities Act
      and
      applicable state “blue sky” laws.

     

    (v)  News
      Corp
      has had access to the Company’s SEC Documents and other public
      filings.

     

    (vi)  With
      respect to corporate tax and other economic considerations involved in an
      investment in the Shares, News Corp is not relying on the Company. News Corp
      has
      carefully considered and has, to the extent News Corp believes such discussion
      necessary, discussed with its professional legal, tax, accounting and financial
      advisors the suitability of an investment in the Shares for its particular
      tax
      and financial situation and has determined that the Shares are a suitable
      investment for News Corp.

     

    
      
         

      

      
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    (vii)  The
      Company has made available to News Corp all documents and information that
      News
      Corp has requested relating to an investment in the Shares.

     

    (viii)  News
      Corp
      has not been formed for the specific purpose of acquiring the
      Shares.

     

    (d)
       Restricted
      Securities.
      (i) News
      Corp understands that the Shares have not been registered under the Securities
      Act, and will not sell, offer to sell, assign, pledge, hypothecate or otherwise
      transfer any of Shares 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 Shares 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 Shares can be sold pursuant to Rule
      144
      promulgated under the Securities Act (“Rule
      144”)
      or
      (iv) pursuant to Rule 144(k) promulgated under the Securities Act following
      the applicable holding period. 

     

    (e)  Legend.
      News
      Corp agrees that the certificates for the Shares shall bear the following legend
      and that News Corp 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.

     

    (f) Disclosure.
      No
      representation or warranty by News Corp contained in this Agreement or any
      Schedule or Exhibit hereto contains any untrue statement of a material fact
      or
      omits or will omit to state any material fact which is necessary in order to
      make the statements contained herein or therein, not misleading in light of
      the
      circumstances in which they were made. There is no fact known to News Corp
      relating to the business, affairs, operations, condition or prospects of News
      Corp which materially adversely affects any representation or warranty by News
      Corp contained in this Agreement or any Schedule or Exhibit hereto and which
      has
      not been disclosed to the Company by News Corp.

    

    
      
         

      

      
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    4. Registration
      Rights. 

    

    (a)
      If
      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, the Company
      shall, each such time, give to News Corp twenty (20) days’ prior written notice
      of its intent to do so, and such notice shall describe the proposed registration
      and shall offer News Corp the opportunity to include in such Registration
      Statement such number of the Shares as News Corp may request. Upon the written
      request of News Corp 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 Shares, to the extent requested to
      be
      registered, subject to clause (ii) below. Such notice shall be given and such
      request may be made by News Corp prior to the release of the Escrow Shares
      or
      issuance of Additional Shares if such release or issuance is expected to occur
      prior to the offering contemplated by such Registration Statement.

    

    (b)
       If
      a
      registration pursuant to this Section 4 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 News Corp 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 4 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 News Corp), pro rata among such stockholders on the basis of the
      number of shares of Common Stock that each of them has requested to be included
      in such registration. 

    

    (c)
       In
      connection with any offering involving an underwriting of shares, the Company
      shall not be required under this Section 4 or otherwise to include the Shares
      of
      News Corp therein unless News Corp 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.

     

    5. Public
      Announcements.
      The
      parties hereto agree that, promptly
      following the execution of this Agreement, the Company may issue a mutually
      agreed upon press release pertaining to the arrangement contemplated by this
      Agreement. 

     

    
      
         

      

      
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    6. Miscellaneous. 

     

    (a) Except
      as
      otherwise provided herein, this Agreement shall not be changed, modified or
      amended except by a writing signed by the parties to be charged, and this
      Agreement may not be discharged except by performance in accordance with its
      terms or by a writing signed by the party to be charged.

     

    (b) This
      Agreement shall be binding upon and inure to the benefit of the parties hereto
      and to their respective heirs, legal representatives, successors and assigns.
      This Agreement sets forth the entire agreement and understanding between the
      parties as to the subject matter hereof and merges and supersedes all prior
      discussions, agreements and understandings of any and every nature among
      them.

    

    (c) Unless
      otherwise provided, any notice required or permitted under this Agreement shall
      be given in writing and shall be deemed effectively given as hereinafter
      described (i) if given by personal delivery, then such notice shall be deemed
      given upon such delivery, (ii) if given by telex or telecopier, then such notice
      shall be deemed given upon receipt of confirmation of complete transmittal,
      (iii) if given by mail, then such notice shall be deemed given upon the earlier
      of (A) receipt of such notice by the recipient or (B) three (3) days after
      such
      notice is deposited in first class mail, postage prepaid, and (iv) if given
      by
      an internationally recognized overnight air courier, then such notice shall
      be
      deemed given one business day after delivery to such carrier. All notices shall
      be addressed to the party to the addresses set forth on the signature pages
      hereto. 

    

    If
      to the
      Company:

    

    ROO
      Group, Inc.

    228
      East
      45th
      Street,
      8th
      Floor

    New
      York,
      NY 10017

    Attn:
      Robert Petty, CEO 

    Phone:
      (646) 352-0260

    Fax:
      (646) 619-4074

    

    With
      a
      copy to:

    

    Sichenzia
      Ross Friedman Ference LLP

    1065
      Avenue of the Americas

    New
      York,
      New York 10018

    Attn:
      Richard A. Friedman, Esq. 

    Phone:
      212-930-9700

    Fax:
      212-930-9725

     

    If
      to
      News Corp:

    

    News
      Corporation1211 Avenue of the Americas

    Attn:
      Group General Counsel

    Phone:
      212-852-7000

    Fax:
      212-852-7896

     

    
      
         

      

      
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    With
      a
      copy to:

    

    Hogan
      & Hartson

    875
      Third
      Avenue

    New
      York,
      NY 10022

    Attn:
      Ira
      Sheinfeld

    Phone:
      212-918-3000

    Fax:
      212-918-3100

    

     

    (c) NOTWITHSTANDING
      THE PLACE WHERE THIS AGREEMENT MAY BE EXECUTED BY ANY OF THE PARTIES HERETO,
      THE
      PARTIES EXPRESSLY AGREE THAT ALL THE TERMS AND PROVISIONS HEREOF SHALL BE
      CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK
      WITHOUT REGARD TO SUCH STATE’S PRINCIPLES OF CONFLICTS OF LAW (OTHER THAN
      SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW). IN THE EVENT THAT
      A
      JUDICIAL PROCEEDING IS NECESSARY, THE SOLE FORUM FOR RESOLVING DISPUTES ARISING
      OUT OF OR RELATING TO THIS AGREEMENT IS THE SUPREME COURT OF THE STATE OF NEW
      YORK IN AND FOR THE COUNTY OF NEW YORK OR THE FEDERAL COURTS FOR SUCH STATE
      AND
      COUNTY, AND ALL RELATED APPELLATE COURTS, THE PARTIES HEREBY IRREVOCABLY CONSENT
      TO THE JURISDICTION OF SUCH COURTS AND AGREE TO SAID VENUE. 

     

    (d) In
      order
      to discourage frivolous claims the parties agree that unless a claimant in
      any
      proceeding arising out of this Agreement succeeds in establishing his claim
      and
      recovering a judgment against another party (regardless of whether such claimant
      succeeds against one of the other parties to the action), then the other party
      shall be entitled to recover from such claimant all of its/their reasonable
      legal costs and expenses relating to such proceeding and/or incurred in
      preparation therefor.

     

    (e) The
      holding of any provision of this Agreement to be invalid or unenforceable by
      a
      court of competent jurisdiction shall not affect any other provision of this
      Agreement, which shall remain in full force and effect. If any provision of
      this
      Agreement shall be declared by a court of competent jurisdiction to be invalid,
      illegal or incapable of being enforced in whole or in part, such provision
      shall
      be interpreted so as to remain enforceable to the maximum extent permissible
      consistent with applicable law and the remaining conditions and provisions
      or
      portions thereof shall nevertheless remain in full force and effect and
      enforceable to the extent they are valid, legal and enforceable, and no
      provisions shall be deemed dependent upon any other covenant or provision unless
      so expressed herein.

     

    (f) It
      is
      agreed that a waiver by either party of a breach of any provision of this
      Agreement shall not operate, or be construed, as a waiver of any subsequent
      breach by that same party.

     

    
      
         

      

      
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    (g) The
      parties agree to execute and deliver all such further documents, agreements
      and
      instruments and take such other and further action as may be necessary or
      appropriate to carry out the purposes and intent of this Agreement.

     

    (h) This
      Agreement may be executed by facsimile and in two or more counterparts each
      of
      which shall be deemed an original, but all of which shall together constitute
      one and the same instrument.

     

     [Signature
      page follows]

     

    
      
         

      

      
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    ROO
      Group, Inc. 

     

    

    By:_/s/
      Robert Petty________________

    Name: Robert
      Petty

    Title: Chief
      Executive Officer

    

    

    News
      Corporation

    

    

    By:
      __/s/
      Janet Nova_______________

    Name:
      Janet Nova

    Title:
      Senior Vice President

     

    
      
         

      

      
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    Exhibit
      1(a)

    

    Conditions
      to Release of Shares:

    

    The
      2,000,000 shares described in Section 1(a) of the Agreement shall be released
      to
      News Corp on January 1, 2008, provided that the average monthly revenue from
      News Corp and its affiliates for the three (3) month period ending December
      31,
      2007 is not less than the revenue from News Corp and its affiliates for the
      one
      (1) month period ended December 31, 2006 (the “Revenue Target”). Notwithstanding
      the foregoing, if News Corp does not satisfy the Revenue Target, the Company
      shall give News Corp written notice within five days of its failure to satisfy
      the Revenue Target, and if the average monthly revenue from News Corp and its
      affiliates for any consecutive three (3) month period during the six month
      period ending March 31, 2008 is not less than the Revenue Target, the Escrow
      Shares shall be released to News Corp within five days thereof.  

    

    Notwithstanding
      the foregoing, if a Change in Control (as hereinafter defined) occurs, the
      Escrow Shares shall be released to News Corp so long as the average monthly
      revenue from News Corp and its affiliates during the three (3) months prior
      to
      the Change of Control is not materially less than Revenue Target.

    

    For
      purposes of this Agreement a “Change
      in
      Control” shall be deemed to have occurred upon the occurrence of, any one of the
      following events: 

    

    (i)  The
      acquisition in one or more transactions by any individual, entity or group
      (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a
      "Person") of beneficial ownership (within the meaning of Rule l3d-3 promulgated
      under the Exchange Act) of shares or other securities (as defined in Section
      3(a)(10) of the Exchange Act) representing 40% or more of outstanding Stock;
      provided, however, that a Change in Control as defined in this clause (1) shall
      not be deemed to occur in connection with any acquisition by the Company, an
      employee benefit plan of the Company or any Person who immediately prior to
      the
      effective date of this Plan is a holder of Stock (a "Current Stockholder")
      so
      long as such acquisition does not result in any Person other than the Company,
      such employee benefit plan or such Current Stockholder beneficially owning
      shares or securities representing 40% or more of the outstanding Stock;
      or

    

    (ii)  Any
      election has occurred of persons as directors of the Company that causes
      two-thirds or more of the Board to consist of persons other than (i) persons
      who, were members of the Board on the effective date of this Plan and (ii)
      persons who were nominated by the Board for election as members of the Board
      at
      a time when at least two-thirds of the Board consisted of persons who were
      members of the Board on the effective date of this Plan; provided, however,
      that
      any person nominated for election by the Board when at least two-thirds of
      the
      members of the Board are persons described in subclause (i) or (ii) and persons
      who were themselves previously nominated in accordance with this clause (2)
      shall, for this purpose, be deemed to have been nominated by a Board composed
      of
      persons described in subclause (ii); or 

     

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

    
 

    (iii)  Approval
      by the stockholders of the Company of a reorganization, merger, consolidation
      or
      similar transaction (a "Reorganization Transaction"), in each case, unless,
      immediately following such Reorganization Transaction, more than 50% of,
      respectively, the outstanding shares of common stock (or similar equity
      security) of the corporation or other entity resulting from or surviving such
      Reorganization Transaction and the combined voting power of the securities
      of
      such corporation or other entity entitled to vote generally in the election
      of
      directors, is then beneficially owned, directly or indirectly, by the
      individuals and entities who were the respective beneficial owners of the
      outstanding Stock immediately prior to such Reorganization Transaction in
      substantially the same proportions as their ownership of the outstanding Stock
      immediately prior to such Reorganization Transaction; or 

    

    (iv)  Approval
      by the stockholders of the Company of (i) a complete liquidation or dissolution
      of the Company or (ii) the sale or other disposition of all or substantially
      all
      of the assets of the Company to a corporation or other entity, unless, with
      respect to such corporation or other entity, immediately following such sale
      or
      other disposition more than 50% of, respectively, the outstanding shares of
      common stock (or similar equity security) of such corporation or other entity
      and the combined voting power of the securities of such corporation or other
      entity entitled to vote generally in the election of directors, is then
      beneficially owned, directly or indirectly, by the individuals and entities
      who
      were the respective beneficial owners of the outstanding Stock immediately
      prior
      to such sale or disposition in substantially the same proportions as their
      ownership of the outstanding Stock immediately prior to such sale or
      disposition.

    
 

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

    
 

    Exhibit
      1(b)

    

    Conditions
      to Issuance of Additional Shares:

    

    The
      additional 2,000,000 shares described in Section 1(b) of the Agreement shall
      be
      issued to News Corp if, within three (3) years after the date of the Agreement,
      the average monthly revenue from News Corp and its affiliates for any
      consecutive three (3) month period equals at least six times the Revenue Target
      (as defined in Exhibit 1(a) of the Agreement).
      In
      connection with the foregoing, the Company shall prepare and deliver to News
      Corp, within ten days following the end of each quarter, a written notice
      accurately setting forth the revenue generated by News Corp and its affiliates
      for each month for the preceding three (3) month period. 

    

    

    
      
         

      

      
        14Exhibit
      10.1

    
 

    
      NATURALNANO,
        INC.

      

      OBSERVATION
        RIGHTS AGREEMENT

       

    

    This
      Agreement is made on the 20th
      day of
      July 2007 by and among NaturalNano, Inc., a Nevada corporation (the “Company”),
      Technology Innovations, llc,
      a New
      York limited liability company (the “Investor”) and Michael L. Weiner (“Weiner”)
      and Ross B. Kenzie (“Kenzie”), the designees to serve as the Investor’s initial
      representatives for purposes of this Agreement.

    

    Whereas,
      the Investor is the registered and beneficial owner of 70,303,189 shares of
      the
      Common Stock of the Company, representing approximately 57.2% of the Company’s
      issued and outstanding Common Stock; and

    

    Whereas,
      Weiner and Kenzie have served as members of the Board of Directors;

    

    Now,
      therefore, in consideration of the foregoing and for other good and valuable
      consideration, the receipt and adequacy of which are hereby acknowledged, the
      parties agree as follows:

    

    1.  For
      so
      long as the Investor owns not less than 25% of the shares of the Company’s
      Common Stock held by the Investor on the date hereof, the Company shall permit
      two representatives designated by the Investor (who shall initially be Weiner
      and Kenzie) to attend all meetings of the Company’s Board of Directors in a
      nonvoting observer capacity and, in this respect, shall give such
      representatives copies of all notices, minutes, consents, and other materials
      that it provides to its directors at the same time and in the same manner as
      provided to such directors; provided, however, that such representatives shall
      agree to hold in confidence and trust and to act in a fiduciary manner with
      respect to all information so provided; and provided, further, that the Company
      may withhold any information and exclude such representatives from any meeting
      or portion thereof if access to such information or attendance at such meeting
      could (i) adversely affect the attorney-client privilege between the Company
      and
      its counsel, (ii) result in disclosure of trade secrets or a conflict of
      interest, or (iii) if the Investor or a representative is a competitor of the
      Company.

    

    2.  Each
      of
      the Investor, Weiner and Kenzie, severally and not jointly, agrees that it
      or he
      will keep confidential and will not disclose, divulge or use for any purpose,
      other than to monitor the Investor’s investment in the Company, and
      otherwise to act in a fiduciary manner with respect to, any confidential
      information obtained from the Company, unless such confidential information
      (i)
      is known or becomes known to the
      public in general (other than as a result of a breach of this Section 2 by
      the
      Investor, Weiner or Kenzie), (ii) is or has been independently developed or
      conceived by the Investor, Weiner or Kenzie without use of the Company's
      confidential information or (iii) is or has been made known or disclosed to
      the
      Investor, Weiner or Kenzie by a third party without a breach of any obligation
      of confidentiality such third party may have to the Company; provided, however,
      that (a) the Investor may disclose confidential information to the
      Investor’s attorneys, accountants, consultants, and other professional advisers
      to the extent necessary to obtain their services in connection with monitoring
      the Investor’s investment in the Company and (b) the Investor, Weiner and Kenzie
      may disclose confidential information  as may be required by law, provided
      that the Investor, Weiner and Kenzie give the Company at least 48 hours’ notice
      prior to making any such required disclosure and take reasonable steps to
      minimize the extent of any such required disclosure.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    3.  This
      Agreement shall be governed by, and shall be interpreted in accordance with,
      the
      laws of the State of New York. This Agreement shall be binding upon, and shall
      inure to the benefit of, the parties hereto and their respective successors,
      assigns, heirs and personal representatives. This Agreement may be amended,
      and
      any provision hereof may be waived, only by a written instrument executed by
      all
      parties hereto.

    

    In
      witness whereof the Company, the Investor, Weiner and Kenzie have executed
      this
      Agreement as of the date first above set forth.

     

    
      	 	 	 
	 	
              NATURALNANO,
                INC.

            
	 
 	 
 	 
 
	 	By:  	/s/
              Cathy A. Fleischer, Ph.D.
	 	
              
Cathy
              A. Fleischer, Ph.D.
	 	President

    
      	 	 	 
	 	
              TECHNOLOGY
                INNOVATIONS, LLC

            
	 
 	 
 	 
 
	 	By:  	/s/
              Michael L. Weiner 
	 	
              
Michael
              L. Weiner
	 	Manager

    

    
 

    
      	 	
              /s/
                Michael L. Weiner

            
	 	
              
                
Michael
                L. Weiner

            
	 	
              (in
                his individual capacity) 

            

    

    

    

    
      	 	
              /s/
                Ross B. Kenzie 

            
	 	
              
                
Ross
                B. Kenzie

            
	 	
              (in
                his individual capacity)

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