Document:

Unassociated Document

    ROO
      GROUP, INC.

    d/b/a
      KIT digital

    SECURITIES
      PURCHASE AGREEMENT

    

    This
      Securities Purchase Agreement
      (this
“Agreement”)
      is
      made and entered into as of May 8, 2008, by and among Roo
      Group, Inc.,
      a
      Delaware corporation, d/b/a KIT digital (the “Company”),
      and
      each of the purchasers listed on Exhibit
      A
      attached
      hereto (collectively, the “Purchasers”
and
      individually, a “Purchaser”).

    

    Recitals

    

    A. The
      Company desires to issue and sell to the Purchasers, and the Purchasers desire
      to purchase from the Company, up to 75,000,000 units (each, a “Unit”),
      each
      Unit consisting of one share of common stock, par value $0.0001 per share,
      of
      the Company (the “Common
      Stock”),
      and a
      five-year warrant to purchase one share of Common Stock, on the terms and
      subject to the conditions set forth in this Agreement.

    

    B. The
      Company and each Purchaser are executing and delivering this Agreement in
      reliance upon the exemption from securities registration afforded by the
      provisions of Regulation D (“Regulation
      D”),
      as
      promulgated by the United States Securities and Exchange Commission (the
“SEC”)
      under
      the Securities Act of 1933, as amended (the “Securities
      Act”).

    

    The
      parties hereto agree as follows:

    

    1. Agreement
      To Purchase And Sell Stock.

    

    (a) Authorization.
      The
      Company’s Board of Directors has authorized the issuance and sale, pursuant to
      the terms and conditions of this Agreement, of up to 75,000,000 Units, each
      Unit
      consisting of one share of Common Stock (the “Purchased
      Shares”)
      and a
      five-year warrant to purchase one share of Common Stock, substantially in the
      form attached hereto as Exhibit B. Each warrant included in the Units shall
      be
      exercisable to purchase one share of Common Stock at $0.34 per share (the
“Purchased
      Warrants”
and
      together with the Purchased Shares, the “Purchased
      Securities”).

    

    (b) Agreement
      to Purchase and Sell Securities.
      On the
      terms and subject to the conditions contained in this Agreement, each Purchaser
      severally agrees to purchase, and the Company agrees to sell and issue to each
      Purchaser, at Closing (as defined below), that number of Units set forth on
      such
      Purchaser’s signature page. The purchase price of each Unit (the “Per
      Unit Price”)
      shall
      be $0.20. The minimum number of Units sold hereunder shall be not less than
      62,500,000 for aggregate gross proceeds of $12,500,000. 

    

    (c) Use
      of Proceeds.
      The
      Company intends to apply the net proceeds from the sale of the Purchased
      Securities for working capital and general corporate purposes, as well as for
      strategic purposes in connection with selected acquisitions that may be
      considered in the future to expand its product and service
      offerings.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (d) Obligations
      Several Not Joint.
      The
      obligations of each Purchaser under this Agreement are several and not joint
      with the obligations of any other Purchaser, and no Purchaser shall be
      responsible in any way for the performance of the obligations of any other
      Purchaser under this Agreement. Nothing contained herein, and no action taken
      by
      any Purchaser pursuant hereto, shall be deemed to constitute the Purchasers
      as a
      partnership, an association, a joint venture or any other kind of entity, or
      create a presumption that the Purchasers are in any way acting in concert or
      as
      a group with respect to such obligations or the transactions contemplated by
      this Agreement. Each Purchaser shall be entitled to independently protect and
      enforce its rights, including without limitation the rights arising out of
      this
      Agreement, and it shall not be necessary for any other Purchaser to be joined
      as
      an additional party in any proceeding for such purpose.

    

    2. Closing.
      The
      closing of the purchase and sale of the Purchased Securities shall take place
      at
      the offices of Sichenzia Ross Friedman Ference LLP, 61 Broadway, 32nd
      Floor,
      New York New York 10006 (the “SRFF
      Offices”)
      at
      10:00 a.m. Eastern time on or before May 9, 2008, or at such other time and
      place as the Company and Purchasers representing a majority of the Units to
      be
      purchased mutually agree upon (which time and place are referred to in this
      Agreement as the “Closing”).
      At
      the Closing, the Company shall, against delivery of payment for the Purchased
      Securities by wire transfer of immediately available funds in accordance with
      the Company’s instructions, (a) authorize its transfer agent to issue to each
      Purchaser one or more stock certificates (the “Certificates”)
      registered in the name of each Purchaser (or in such nominee name(s) as
      designated by such Purchaser in the Stock Certificate Questionnaire (attached
      hereto as Appendix I) (the “Stock
      Certificate Questionnaire”),
      representing the appropriate number of Purchased Shares based
      on
      the number of Units to be purchased by such Purchaser as set forth on such
      Purchaser’s signature page,
      and
      bearing the legend set forth in Section 4(j) herein and (b) issue the
      appropriate number of Purchased Warrants based on the number of Units to be
      purchased by such Purchaser as set forth on such Purchaser’s signature page.
      Closing documents may be delivered by facsimile with original signature pages
      sent by overnight courier. The date of the Closing is referred to herein as
      the
“Closing Date.”

    

    3. Representations
      and Warranties of The Company.
      The
      Company hereby represents and warrants to each Purchaser that the statements
      in
      this Section 3 are true and correct:

    

    (a) Organization,
      Good Standing and Qualification.
      The
      Company and each of its Subsidiaries is a corporation duly organized, validly
      existing and in good standing under the laws of the jurisdiction in which it
      was
      formed. Each of the Company and its Subsidiaries has all corporate power and
      authority required to carry on its business as presently conducted and as
      described in the SEC Documents (as described below), and the Company has all
      corporate power and authority required to enter into this Agreement and the
      other agreements, instruments and documents contemplated hereby, and to
      consummate the transactions contemplated hereby and thereby. Each of the Company
      and its Subsidiaries is duly qualified as a foreign entity to do business and
      is
      in good standing in each jurisdiction in which the failure to so qualify would
      have a Material Adverse Effect. As used in this Agreement “Subsidiaries”
      means
      any entity in which the Company owns, directly or indirectly, 100% of the
      capital stock. Further, as used in this Agreement, “Material
      Adverse Effect”
means
      a
      material adverse effect on, or a material adverse change in, or a group of
      such
      effects on or changes in, the business, operations, condition, financial or
      otherwise, results of operations, prospects, assets or liabilities of the
      Company and its subsidiaries, taken as a whole. 

     

    
      
        
        

      

      
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    (b) Capitalization.
      The
      capitalization of the Company, without listing the Purchased Securities to
      be
      purchased pursuant to this Agreement, is as follows:

    

    (i) The
      authorized capital stock of the Company consists of 500,000,000 shares of Common
      Stock, par value $0.0001 per share, and 20,000,000 shares of preferred stock,
      par value $0.0001 per share (“Preferred
      Stock”),
      of
      which 10,000,000 shares of Preferred Stock have been designated as Series A
      Preferred Stock. On March 30, 2008, shareholders holding a majority of the
      Company’s outstanding voting stock approved the filing of an amendment to the
      Company’s Articles of Incorporation (the “Amendment”), to reduce the number of
      authorized Preferred Stock from 20,000,000 shares to 10,000,000. Upon the filing
      of the Amendment, the Company intends to take action to cause the conversion
      of
      the outstanding shares of Series A Preferred Stock into an aggregate of 400,000
      shares of Common Stock which will result in the elimination of the Company’s
      class of Preferred Stock. To date, the Company has obtained the consent of
      the
      holders of at least a majority of the shares of the Company’s Series A Preferred
      Stock to effect the conversion of the Series A Preferred Stock into shares
      of
      Common Stock of the Company, which represents the requisite approval to effect
      such conversion.

    

    In
      the
      event that all of the outstanding shares of the Company's Series A
      Preferred Stock are not converted into Common Stock within 30 days
      following the Closing Date, the Company shall pay to each Purchaser liquidated
      damages (in addition to the rights and remedies available to each Purchaser
      under applicable law and this Agreement), in cash, (i) on the 31st day following
      the Closing Date, ten percent (10%) of the total purchase price of the Purchased
      Securities purchased by such Purchaser pursuant to this Agreement and (ii)
      thereafter, at a rate equal to ten percent (10%) per month (pro rata on a
      30-day basis) of the total purchase price of the Purchased Securities purchased
      by such Purchaser pursuant to this Agreement until all of the outstanding shares
      of Series A Preferred Stock are converted into Common Stock. Except for the
      first payment (which is payable on the 31st day following the Closing Date),
      such liquidated damages shall be payable within ten (10) days of the end of
      each
      one-month anniversary of the conversion deadline set forth in this Section
      3(b)(i).

    

    (ii) As
      of May
      7, 2008, the issued and outstanding capital stock of the Company consisted
      of
      38,936,039 shares of Common Stock and 10,000,000 shares of Series A Preferred
      Stock. The shares of issued and outstanding capital stock of the Company have
      been duly authorized and validly issued, are fully paid and nonassessable and
      have not been issued in violation of or are not otherwise subject to any
      preemptive or other similar rights. All such shares have been issued in
      compliance with applicable securities laws.

    

    (iii) As
      of May
      7, 2008, the Company had (a) 3,652,019 shares of Common Stock reserved for
      issuance upon exercise of outstanding options granted under the Company’s 2004
      Stock Option Plan, as amended and 8,285,000 shares of Common Stock reserved
      for
      issuance upon exercise of outstanding options granted under the Company’s 2008
      Stock Option Plan; (b) 600,000 shares of Common Stock reserved for issuance
      upon
      exercise of options not granted under the Option Plan; and (c) 20,056,639 shares
      of Common Stock reserved for issuance upon exercise of outstanding warrants.
      

     

    
      
        
        

      

      
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    (iv) As
      of May
      7, 2008, the Company had 8,347,981 shares of Common Stock available for future
      grant under the Company’s 2004 Stock Option Plan, as amended and 5,715,000
      shares available for future grant under the Company’s 2008 Stock Option
      Plan.

    

    With
      the
      exception of the foregoing in this Section 3(b) and except as set forth in
      the
      Disclosure Letter attached hereto as Exhibit B
      (the “Disclosure Letter”),
      there
      are no outstanding subscriptions, options, warrants, convertible or exchangeable
      securities or other rights granted to or by the Company to purchase shares
      of
      Common Stock or other securities of the Company and there are no commitments,
      plans or arrangements to issue any shares of Common Stock or any security
      convertible into or exchangeable for Common Stock. Except as set forth in
      Disclosure Letter, (A) no securities of the Company are entitled to preemptive
      or similar rights, and no person has any right of first refusal, preemptive
      right, right of participation, or any similar right to participate in the
      transactions contemplated by this Agreement; and (B) the issue and sale of
      the
      Purchased Securities will not obligate the Company to issue shares of Common
      Stock or other securities to any person (other than the Purchasers) and will
      not
      result in a right of any holder of Company securities to adjust the exercise,
      conversion, exchange or reset price under such securities. Except as set forth
      in the Disclosure Letter, there are no stockholders agreements, voting
      agreements or other similar agreements with respect to the Company’s capital
      stock to which the Company is a party or, to the knowledge of the Company,
      between or among any of the Company’s stockholders.

    

    (c) Subsidiaries.
      Except
      as set forth in the Disclosure Letter, (i) the Company does not have any
      subsidiaries, and, does not own any capital stock of, assets comprising the
      business of, obligations of, or any other interest (including any equity or
      partnership interest) in, any person or entity; (ii) the Company owns, directly
      or indirectly, all of the capital stock or other equity interests of each
      subsidiary free and clear of any liens, and all the issued and outstanding
      shares of capital stock of each subsidiary are validly issued and are fully
      paid, non-assessable and free of preemptive and similar rights to subscribe
      for
      or purchase securities.

    

    (d) Due
      Authorization.
      All
      corporate actions on the part of the Company necessary for the authorization,
      execution, delivery of, and the performance of all obligations of the Company
      under this Agreement and the authorization, issuance, reservation for issuance
      and delivery of all of the Purchased Securities being sold under this Agreement
      have been taken, no further consent or authorization of the Company or the
      Board
      of Directors or its stockholders is required, and this Agreement constitutes
      the
      legal, valid and binding obligation of the Company, enforceable against the
      Company in accordance with its terms, except (i) as may be limited by (A)
      applicable bankruptcy, insolvency, reorganization or others laws of general
      application relating to or affecting the enforcement of creditors’ rights
      generally and (B) the effect of rules of law governing the availability of
      equitable remedies and (ii) as rights to indemnity or contribution may be
      limited under federal or state securities laws or by principles of public policy
      thereunder. In connection with any Board approvals obtained in connection with
      the transactions contemplated hereby, at least a majority of the disinterested
      directors (as such term is used in Section 144 of the Delaware General
      Corporation Law) voted in favor of the transactions contemplated
      hereby.

     

    
      
        
        

      

      
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    (e) Valid
      Issuance of Purchased Securities.

    

    (i) Purchased
      Shares.
      The
      Purchased Shares will be, upon payment therefor by the Purchasers in accordance
      with this Agreement, duly authorized, validly issued, fully paid and
      non-assessable, free from all taxes, liens, claims, encumbrances with respect
      to
      the issuance of such Purchased Shares and will not be subject to any pre-emptive
      rights or similar rights.

    

    (ii) Purchased
      Warrants.
      The
      Purchased Warrants will be, upon payment therefor by the Purchasers in
      accordance with this Agreement, duly authorized and validly issued, free from
      all taxes, liens, claims, encumbrances with respect to the issuance of such
      Purchased Warrants and will not be subject to any pre-emptive rights or similar
      rights.

    

    (iii) Underlying
      Shares of Common Stock.
      The
      issuance of the shares of Common Stock issued or issuable from time to time
      upon
      the exercise of the Purchased Warrants (the “Underlying
      Shares”)
      will
      be, and at all times prior to such exercise, will have been, duly authorized,
      duly reserved for issuance upon such exercise and payment of the exercise price
      of the Purchased Warrants, and will be, upon such exercise and payment, validly
      issued, fully paid and non-assessable free from all taxes, liens, claim,
      encumbrances with respect to the issuance of such shares and will not be subject
      to any pre-emptive rights or similar rights. The Purchased Shares and the
      Underlying Shares are sometimes referred to herein as the
      Securities.

    

    (iv) Compliance
      with Securities Laws.
      Subject
      to the accuracy of the representations made by the Purchasers in Section 4
      hereof, the Purchased Securities (assuming no unlawful redistribution of the
      Purchased Securities by the Purchasers or other parties as of the date hereof)
      will be issued to the Purchasers in compliance with applicable exemptions from
      (A) the registration and prospectus delivery requirements of the Securities
      Act
      and (B) the registration and qualification requirements of all applicable
      securities laws of the states of the United States.

    

    (f) Consents
      and Approvals.
      No
      consent, approval, order or authorization of, or registration, qualification,
      designation, declaration or filing with, or notice to, any federal, state or
      local governmental authority or self regulatory agency or any other person
      on
      the part of the Company is required in connection with the issuance of the
      Purchased Securities to the Purchasers, or the consummation of the other
      transactions contemplated by this Agreement, except (i) such filings as have
      been made prior to the date hereof and (ii) such additional post-Closing filings
      as may be required to comply with applicable state and federal securities
      laws.

    

    (g) Non-Contravention.
      The
      execution, delivery and performance of this Agreement by the Company, and the
      consummation by the Company of the transactions contemplated hereby (including
      issuance of the Purchased Securities and Underlying Shares), do not, and will
      not in the case of the Underlying Shares: (i) contravene or conflict with the
      Certificate of Incorporation of the Company, as amended to date (the
“Certificate
      of Incorporation”),
      or
      the Bylaws of the Company, as amended to date (the “Bylaws”)
      or the
      organizational documents of any Subsidiary; (ii) constitute a violation of
      any
      provision of any federal, state, local or foreign law, rule, regulation, order
      or decree applicable to the Company; or (iii) constitute a default (or an event
      that with notice or lapse of time or both would become a default) or require
      any
      consent under, give rise to any right of termination, cancellation or
      acceleration of, or to a loss of any material benefit to which the Company
      is
      entitled under, or result in the creation or imposition of any lien, claim
      or
      encumbrance on any assets of the Company under, any material contract to which
      the Company is a party or any material permit, license or similar right relating
      to the Company or by which the Company may be bound or affected.

     

    
      
        
        

      

      
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    (h) Litigation.
      Except
      as set forth in the Disclosure Letter, there is no action, suit, proceeding,
      claim, arbitration or investigation (“Action”)
      pending or, to the Company’s knowledge, threatened in writing: (i) against
      the Company or any of its Subsidiaries, their respective activities, properties
      or assets, or any officer, director or employee of the Company or any of its
      Subsidiaries in connection with such officer’s, director’s or employee’s
      relationship with, or actions taken on behalf of, the Company or any of its
      Subsidiaries, that is reasonably likely to have a Material Adverse Effect;
      or
      (ii) that seeks to prevent, enjoin, alter, challenge or delay the transactions
      contemplated by this Agreement (including the issuance of the Purchased
      Securities). Neither the Company nor any of its Subsidiaries is a party to
      or
      subject to the provisions of, any order, writ, injunction, judgment or decree
      of
      any court or government agency or instrumentality. No Action is currently
      pending nor does the Company or any of its Subsidiaries intend to initiate
      any
      Action that is reasonably likely to have a Material Adverse Effect.

    

    (i) Compliance.
      The
      Company is not in violation or default of any provisions of the Certificate
      of
      Incorporation or the Bylaws and none of the Company’s Subsidiaries is in
      violation nor default of any provisions of their respective organizational
      documents. The Company and each of its Subsidiaries has complied and is
      currently in compliance with all applicable statutes, laws, rules, regulations
      and orders of the United States of America and all states thereof, foreign
      countries and other governmental bodies and agencies having jurisdiction over
      the Company’s or each subsidiary’s respective businesses or properties, except
      for any instance of non-compliance that has not had, and would not reasonably
      be
      expected to have, a Material Adverse Effect. Neither the Company nor any of
      its
      Subsidiaries is in default under or in violation of (and no event has occurred
      that has not been waived that, with notice or lapse of time or both, would
      result in a default by the Company or any subsidiary under), nor has the Company
      or any Subsidiary received notice of a claim that it is in default under or
      that
      it is in violation of, any indenture, loan or credit agreement or any other
      agreement or instrument to which it is a party or by which it or any of its
      properties is bound (whether or not such default or violation has been waived),
      except as does not, individually or in the aggregate, have or reasonably be
      expected to result in a Material Adverse Effect.

    

    (j) Material
      Non-Public Information.
      The
      Company has not provided to the Purchasers any material non-public information
      other than information related to the transactions contemplated by this
      Agreement, all of which information related to the transactions contemplated
      hereby shall be disclosed by the Company pursuant to Section 8(m) hereof. The
      Company understands and confirms that each Purchaser shall be relying on the
      foregoing representations in effecting transactions in securities of the
      Company.

     

    
      
        
        

      

      
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    (k) SEC
      Documents.

    

    (i) Reports.
      Except
      as set forth in the Disclosure Letter, the Company has filed in a timely manner
      all reports, schedules, forms, statements and other documents required to be
      filed by it with the SEC pursuant to the reporting requirements of the
      Securities Exchange Act of 1934, as amended (the “Exchange
      Act”),
      and
      the rules and regulations promulgated thereunder. The Company has made available
      to the Purchasers prior to the date hereof copies of its Annual Report on Form
      10-KSB for the fiscal year ended December 31, 2007 (the “Form
      10-KSB”),
      and
      any Current Report on Form 8-K for events occurring since December 31, 2007
      (“Forms
      8-K”)
      filed
      by the Company with the SEC (the Form 10-KSB and the Forms 8-K are
      collectively referred to herein as the “SEC
      Documents”).
      Each
      of the SEC Documents, as of the respective dates thereof (or, if amended or
      superseded by a filing prior to the Closing Date, then on the date of such
      filing), did not contain any untrue statement of a material fact or omit to
      state a material fact necessary in order to make the statements made therein,
      in
      light of the circumstances under which they were made, not misleading. Each
      SEC
      Document, as it may have been subsequently amended by filings made by the
      Company with the SEC prior to the date hereof, complied in all material respects
      with the requirements of the Exchange Act and the rules and regulations of
      the
      SEC promulgated thereunder applicable to such SEC Document. The Company
      covenants that the Form 10-Q for the quarter ended March 31, 2008 will be timely
      filed on or before May 20, 2008 and will not contain any untrue statement of
      material fact or omit to state a material fact necessary in order to make the
      statements made therein, in light of the circumstances in which they were made,
      not misleading.

    

    (ii) Sarbanes-Oxley.
      The
      Chief Executive Officer and the Chief Financial Officer of the Company have
      signed, and the Company has furnished to the SEC, all certifications required
      by
      Sections 302 and 906 of the Sarbanes-Oxley Act of 2002. Such certifications
      contain no qualifications or exceptions to the matters certified therein and
      have not been modified or withdrawn; and neither the Company nor any of its
      officers has received notice from any governmental entity questioning or
      challenging the accuracy, completeness, form or manner of filing or submission
      of such certifications. The Company is otherwise in compliance in all material
      respects with all applicable effective provisions of the Sarbanes-Oxley Act
      of
      2002 and the rules and regulations issued thereunder by the SEC. The
      Company has established disclosure controls and procedures (as defined in
      Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and designed such
      disclosure controls and procedures to ensure that information required to be
      disclosed by the Company in the reports it files or submits under the Exchange
      Act is recorded, processed, summarized and reported, within the time periods
      specified in the SEC’s rules and forms. The Company has established internal
      control over financial reporting (as defined in Exchange Act Rules 13a-15(f)
      and
      15d-15(f)) for the Company and designed such internal control over financial
      reporting to provide reasonable assurance regarding the reliability of financial
      reporting and the preparation of financial statements for external purposes
      in
      accordance with generally accepted accounting principals. The Company’s
      certifying officers have evaluated the effectiveness of the Company’s disclosure
      controls and procedures and internal control over financial reporting as of
      the
      end of the period covered by the Company’s most recently filed periodic report
      under the Exchange Act (such date, the “Evaluation
      Date”).
      The
      Company presented in its most recently filed periodic report under the Exchange
      Act the conclusions of the certifying officers about the effectiveness of the
      disclosure controls and procedures and internal control over financial reporting
      based on their evaluations as of the Evaluation Date. Since the Evaluation
      Date,
      there have been no changes in the Company’s internal control over financial
      reporting that has materially affected, or is reasonably likely to materially
      affect, the Company’s internal control over financial reporting. 

     

    
      
        
        

      

      
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    (iii) Financial
      Statements.
      The
      financial statements of the Company in the SEC Documents present fairly, in
      accordance with United States generally accepted
      accounting principles (“GAAP”),
      consistently applied, the financial position of the Company as of the dates
      indicated, and the results of its operations and cash flows for the periods
      therein specified, subject, in the case of unaudited financial statements for
      interim periods, to normal year-end audit adjustments.

    

    (l) Absence
      of Certain Changes Since the Balance Sheet Date.
      Except
      as set forth in the Disclosure Letter, since December 31, 2007, the business
      and
      operations of the Company and each of its Subsidiaries have been conducted
      in
      the ordinary course consistent with past practice, and there has not
      been:

    

    (i) any
      declaration, setting aside or payment of any dividend or other distribution
      of
      the assets of the Company or any of its Subsidiaries with respect to any shares
      of capital stock of the Company or any of its Subsidiaries or any repurchase,
      redemption or other acquisition by the Company or any subsidiary of the Company
      of any outstanding shares of the Company’s capital stock (and the Company has
      not made any agreements to do any of the foregoing);

    

    (ii) any
      damage, destruction or loss, whether or not covered by insurance, except for
      such occurrences, individually and collectively, that have not had, and would
      not reasonably be expected to have, a Material Adverse Effect;

    

    (iii) any
      waiver by the Company or any of its Subsidiaries of a valuable right or of
      a
      material debt owed to it, except for such waivers, individually and
      collectively, that have not had, and would not reasonably be expected to have,
      a
      Material Adverse Effect;

    

    (iv) any
      material change or amendment to, or any waiver of any material right under
      a
      material contract or arrangement by which the Company or any of its Subsidiaries
      or any of its or their respective assets or properties is bound or
      subject;

    

    (v) any
      change by the Company in its accounting principles, methods or practices or
      in
      the manner in which it keeps its accounting books and records, except any such
      change required by a change in GAAP or by the SEC; or

    

    (vi) any
      other
      event or condition of any character, except for such events and conditions
      that
      have not resulted, and are not expected to result, either individually or
      collectively, in a Material Adverse Effect.

     

    
      
        
        

      

      
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    (m) Intellectual
      Property.

    

    (i) Except
      as
      set forth in the Disclosure Letter, the Company and each of its Subsidiaries
      owns or possesses sufficient rights to use all patents, patent rights,
      inventions, trade secrets, know-how, trademarks, service marks, trade names,
      copyrights, information and other proprietary rights and processes
      (collectively, “Intellectual
      Property”),
      which
      are necessary to conduct its or their respective businesses as currently
      conducted and as described in the SEC Documents free and clear of all liens,
      encumbrances and other adverse claims, except where the failure to own or
      possess free and clear of all liens, encumbrances and other adverse claims
      would
      not reasonably be expected to result, either individually or in the aggregate,
      in a Material Adverse Effect. 

    

    (ii) Neither
      the Company nor any of its Subsidiaries has received any written notice of,
      nor
      has knowledge of, any infringement of or conflict with rights of others with
      respect to any Intellectual Property and neither the Company nor any of its
      Subsidiaries has knowledge of any infringement, misappropriation or other
      violation of any Intellectual Property by any third party, which, in either
      case, either individually or in the aggregate, if the subject of an unfavorable
      decision, ruling or finding, would reasonably be expected to have a Material
      Adverse Effect.

    

    (iii) To
      the
      Company’s knowledge, none of the patent rights owned or licensed by the Company
      or any of its Subsidiaries are unenforceable or invalid.

    

    (iv) Each
      employee, consultant and contractor of the Company and each of its Subsidiaries
      who has had access to the Intellectual Property has executed a valid and
      enforceable agreement to maintain the confidentiality of such Intellectual
      Property and assigning all rights to the Company or such subsidiary to any
      inventions, improvements, discoveries or information relating to the business
      of
      the Company or such subsidiary. The Company is not aware that any of its or
      its
      Subsidiaries’ employees is obligated under any contract (including licenses,
      covenants or commitments of any nature) or other agreement, or subject to any
      judgment, decree or order of any court or administrative agency, that would
      interfere with their duties to the Company or such subsidiary or that would
      conflict with the Company’s or such subsidiary’s business.

    

    (v) Neither
      the Company nor any of its Subsidiaries is subject to any “open source” or
“copyleft” obligations or otherwise required to make any public disclosure or
      general availability of source code either used or developed by the Company
      or
      any of its Subsidiaries.

    

    (n) Registration
      Rights.
      Except
      as provided in Section 5 herein and except as set forth in the Disclosure
      Letter, the Company is not currently subject to any agreement providing any
      person or entity any rights (including piggyback registration rights) to have
      any securities of the Company registered with the SEC or registered or qualified
      with any other governmental authority.

    

    (o) Title
      to Property and Assets.
      Except
      as set forth in the Disclosure Letter, the properties and assets of the Company
      and its Subsidiaries are owned by the Company and its Subsidiaries free and
      clear of all mortgages, deeds of trust, liens, charges, encumbrances and
      security interests except for (i) statutory liens for the payment of current
      taxes that are not yet delinquent and (ii) liens, encumbrances and security
      interests that arise in the ordinary course of business and do not in any
      material respect affect the properties and assets of the Company. With respect
      to the property and assets it leases, the Company is in compliance with such
      leases in all material respects.

     

    
      
        
        

      

      
        -9-

        
          

        

      

      
        
        

      

    

     

    (p) Taxes.
      The
      Company and each of its Subsidiaries has filed or has valid extensions of the
      time to file all necessary federal, state, and foreign income and franchise
      tax
      returns due prior to the date hereof and has paid or accrued all taxes shown
      as
      due thereon, and the Company has no knowledge of any material tax deficiency
      that has been or might be asserted or threatened against it or any of its
      Subsidiaries.

    

    (q) Insurance.
      The
      Company and its Subsidiaries maintain insurance of the types and in the amounts
      that the Company reasonably believes is prudent and adequate for its business
      and which is at least as extensive as is customary for other companies in the
      Company’s industry, all of which insurance is in full force and effect.

    

    (r) Labor
      Relations.
      No
      material labor dispute exists or, to the knowledge of the Company, is imminent
      with respect to any of the employees of the Company or any of its Subsidiaries.
      No executive officer, to the knowledge of the Company, is, or is now expected
      to
      be, in violation of any material term of any employment contract,
      confidentiality, disclosure or proprietary information agreement or
      non-competition agreement, or any other contract or agreement or any restrictive
      covenant, and the continued employment of each such executive officer does
      not
      subject the Company or any of its Subsidiaries to any liability with respect
      to
      any of the foregoing matters.

    

    (s) Internal
      Accounting Controls.
      The
      Company and its Subsidiaries maintain a system of internal accounting controls
      sufficient to provide reasonable assurance that (i) transactions are
      executed in accordance with management’s general or specific authorizations,
      (ii) transactions are recorded as necessary to permit preparation of
      financial statements in conformity with GAAP and to maintain asset
      accountability, (iii) access to assets is permitted only in accordance with
      management’s general or specific authorization and (iv) the recorded
      accountability for assets is compared with the existing assets at reasonable
      intervals and appropriate action is taken with respect to any
      differences.

    

    (t) Transactions
      With Officers and Directors.
      Except
      as set forth in the Disclosure Letter, none of the officers or directors of
      the
      Company has entered into any transaction with the Company or any Subsidiary
      that
      would be required to be disclosed pursuant to Item 404(a) or (c) of Regulation
      S-K of the SEC.

    

    (u) General
      Solicitation.
      Neither
      the Company nor any other person or entity authorized by the Company to act
      on
      its behalf has engaged in a general solicitation or general advertising (within
      the meaning of Regulation D of the Securities Act) of investors with respect
      to
      offers or sales of the Purchased Securities. The Company has offered the
      Securities for sale only to the Purchasers and certain other “accredited
      investors” within the meaning of Rule 501 under the Securities Act.

     

    
      
        
        

      

      
        -10-

        
          

        

      

      
        
        

      

    

     

    (v) Registration
      Statement Matters.
      The
      Company meets the eligibility requirements for use of a registration statement
      on Form S-1 for the resale of the Purchased Shares and sale of the Underlying
      Shares by the Purchasers. Assuming the completion and timely delivery of the
      Registration Statement Questionnaire (attached hereto as Appendix II) (the
      “Registration
      Statement Questionnaire”)
      by
      each Purchaser to the Company, the Company is not aware of any facts or
      circumstances that would prohibit or delay the preparation and filing of a
      registration statement with respect to the Registrable Shares (as defined
      below).

    

    (w) Listing
      Matters.
      The
      Common Stock of the Company is listed on the Over The Counter Bulletin Board
      (the “OTCBB”)
      under
      the ticker symbol “RGRP.” The issuance and sale of the Purchased Securities
      under this Agreement does not contravene the rules and regulations of the
      OTCBB.

    

    (x) Investment
      Company.
      The
      Company and each of its Subsidiaries is not now, and after the sale of the
      Purchased Securities under this Agreement and the application of the net
      proceeds from the sale of the Purchased Securities described in Section 1(b)
      herein will not be, an “investment company” within the meaning of the Investment
      Company Act of 1940, as amended.

    

    (y) No
      Integrated Offering.
      Neither
      the Company, nor any Affiliate of the Company, nor any person acting on its
      or
      their behalf has, directly or indirectly, engaged in any form of general
      solicitation or general advertising with respect to any security or made any
      offers or sales of any security or solicited any offers to buy any security,
      under circumstances that would cause the offering or issuance of the Purchased
      Securities to be integrated with prior offerings by the Company for purposes
      of
      the Securities Act which would cause Regulation D or any other applicable
      exemption from registration under the Securities Act to be unavailable, or
      would
      cause any applicable state securities laws exemptions or any applicable
      stockholder approval provisions exemptions, including, without limitation,
      under
      the rules and regulations of any national securities exchange or automated
      quotation system on which any of the securities of the Company are listed or
      designated to be unavailable, nor will the Company take any action or steps
      that
      would cause the offering or issuance of the Purchased Securities to be
      integrated with other offerings.

    

    (z) Brokers.
      Except
      for Merriman Curhan Ford & Co. or any approved agents, neither the Company
      nor any Subsidiary has any liability to pay any fees, commissions or other
      similar compensation to any broker, finder, investment banker, financial advisor
      or other similar person in connection with the transactions contemplated by
      this
      Agreement. The Purchasers shall have no obligation with respect to any fees
      or
      with respect to any claims made by or on behalf of other persons for fees of
      a
      type contemplated in this Section that may be due in connection with the
      transactions contemplated by this Agreement.

    

    (aa) Pensions;
      Benefits. (a)
      Neither the Company nor any subsidiary or ERISA Affiliate maintains or
      contributes to any Plan other than those disclosed in the Disclosure
      Letter.

     

    
      
        
        

      

      
        -11-

        
          

        

      

      
        
        

      

    

     

    (i) The
      Company and each ERISA Affiliate is in compliance with ERISA and no
      contributions required to be made by the Company or any ERISA Affiliate to
      any
      pension plan are overdue.

    

    (ii) No
      liability to the PBGC has been or is expected to be incurred by the Company
      or
      any ERISA Affiliate with respect to any pension plan that, individually or
      in
      the aggregate, could reasonably be expected to have a Material Adverse Effect.
      No circumstance exists that constitutes grounds under section 4042 of ERISA
      entitling the PBGC to institute proceedings to terminate, or appoint a trustee
      to administer, any pension plan or trust created thereunder, nor has the PBGC
      instituted any such proceeding.

    

    (ii) Neither
      the Company nor any ERISA Affiliate has incurred or presently expects to incur
      any withdrawal liability under Title IV of ERISA with respect to any
      multiemployer plan. There have been no “reportable events” (as such term is
      defined in section 4043 of ERISA) with respect to any multiemployer plan that
      could result in the termination of such multiemployer plan and give rise to
      a
      liability of the Company or any ERISA Affiliate in respect thereof. Neither
      the
      Company or any subsidiary has incurred or does it expect to incur liability
      under Sections 412 or 4971 of the Code; and each “pension plan” for which the
      Company would have any liability that is intended to be qualified under Section
      401(a) of the Code has been determined by the Internal Revenue Service to be
      so
      qualified and nothing has occurred, whether by action or by failure to act,
      which could reasonably be expected to cause the loss of such
      qualification.

    

    For
      purposes of this section 3(aa) “Code”
means
      the Internal Revenue Code of 1986; “ERISA”
means
      the Employee Retirement Income Security Act of 1974; “ERISA
      Affiliate”
means
      any person required to be aggregated with the Company or any subsidiary of
      the
      Company under Sections 414(b), (c), (m) or (o) of the Code; “PBGC”
means
      the Pension Benefit Guaranty Corporation; and “Plan”
means
      any employee benefit plan, program or arrangement, whether oral or written,
      maintained or contributed to by the Company, any subsidiary of the Company
      or
      any ERISA Affiliate, or with respect to which the Company, any of its
      Subsidiaries or any ERISA Affiliate may incur liability.

    

    (bb) Application
      of Takeover Protections.
      The
      Company and its Board of Directors have taken all necessary action, if any,
      in
      order to render inapplicable any control share acquisition, business
      combination, poison pill (including any distribution under a rights agreement)
      or other similar anti-takeover provision under the Company’s Certificate of
      Incorporation (or similar charter documents) or the laws of its state of
      incorporation that is or could become applicable to the Purchasers as a result
      of the Purchasers and the Company fulfilling their obligations or exercising
      their rights under this Agreement and the Purchased Warrants, including without
      limitation as a result of the Company’s issuance of the Purchased Securities and
      the Purchasers’ ownership of the Purchased Securities.

    

    (cc) Purchaser
      Representations.
      The
      Company acknowledges and agrees that no Purchaser makes or has made any
      representations or warranties with respect to the transactions contemplated
      hereby other than those specifically set forth in Section 4 hereof.

     

    
      
        
        

      

      
        -12-

        
          

        

      

      
        
        

      

    

     

    (dd) Solvency.
      Based
      on the financial condition of the Company as of the Closing Date after giving
      effect to the receipt by the Company of the proceeds from the sale of the
      Purchased Securities hereunder, (i) the fair saleable value of the Company’s
      assets exceeds the amount that will be required to be paid on or in respect
      of
      the Company’s existing debts and other liabilities (including known contingent
      liabilities) as they mature; (ii) the Company’s assets do not constitute
      unreasonably small capital to carry on its business as now conducted and as
      proposed to be conducted including its capital needs taking into account the
      particular capital requirements of the business conducted by the Company, and
      projected capital requirements and capital availability thereof; and (iii)
      the
      current cash flow of the Company, together with the proceeds the Company would
      receive, were it to liquidate all of its assets, after taking into account
      all
      anticipated uses of the cash, would be sufficient to pay all amounts on or
      in
      respect of its liabilities when such amounts are required to be paid. The
      Company does not intend to incur debts beyond its ability to pay such debts
      as
      they mature (taking into account the timing and amounts of cash to be payable
      on
      or in respect of its debt). The SEC Documents set forth as of the dates thereof
      all outstanding secured and unsecured Indebtedness of the Company or any
      subsidiary, or for which the Company or any subsidiary has commitments. For
      the
      purposes of this Agreement, “Indebtedness”
shall
      mean (a) any liabilities for borrowed money or amounts owed in excess of $50,000
      (other than trade accounts payable incurred in the ordinary course of business),
      (b) all guaranties, endorsements and other contingent obligations in respect
      of
      Indebtedness of others, whether or not the same are or should be reflected
      in
      the Company’s balance sheet (or the notes thereto), except guaranties by
      endorsement of negotiable instruments for deposit or collection or similar
      transactions in the ordinary course of business; and (c) the present value
      of
      any lease payments
      in excess of $50,000 due under leases required to be capitalized in accordance
      with GAAP. Neither
      the Company nor any subsidiary is in default with respect to any
      Indebtedness.

    

    (ee) No
      Disagreements with Accountants and Lawyers.
      There
      are no disagreements of any kind presently existing, or reasonably anticipated
      by the Company to arise, between the Company and the accountants and lawyers
      formerly or presently employed by the Company.

    

    (ff) Acknowledgment
      Regarding Purchasers’ Purchase of Purchased Securities.
      The
      Company acknowledges and agrees that each of the Purchasers is acting solely
      in
      the capacity of an arm’s length purchaser with respect to this Agreement and the
      transactions contemplated hereby. The Company further acknowledges that no
      Purchaser is acting as a financial advisor or fiduciary of the Company (or
      in
      any similar capacity) with respect to this Agreement and the transactions
      contemplated hereby and any advice given by any Purchaser or any of their
      respective representatives or agents in connection with this Agreement and
      the
      transactions contemplated hereby is merely incidental to the Purchasers’
purchase of the Purchased Securities. The Company further represents to each
      Purchaser that the Company’s decision to enter into this Agreement has been
      based solely on the independent evaluation of the transactions contemplated
      hereby by the Company and its representatives.

    

    (gg) Manipulation
      of Price. 
      The Company has not, and to its knowledge no one acting on its behalf has,
      (i)
      taken, directly or indirectly, any action designed to cause or to result in
      the
      stabilization or manipulation of the price of any security of the Company to
      facilitate the sale or resale of any of the Purchased Securities, (ii) sold,
      bid
      for, purchased, or, paid any compensation for soliciting purchases of, any
      of
      the Purchased Securities or (iii) paid or agreed to pay to any person any
      compensation for soliciting another to purchase any other securities of the
      Company, other than, in the case of clauses (ii) and (iii), compensation paid
      to
      the Company’s placement agent and any approved broker-dealers in connection with
      the placement of the Purchased Securities.

     

    
      
        
        

      

      
        -13-

        
          

        

      

      
        
        

      

    

     

    (hh) Legend
      Removal.
      The
      Company agrees, upon a Purchaser’s reasonable request, to reissue certificates
      representing any of the Purchased Shares and Underlying Shares without the
      legend set forth in Section 4(j)(i) below: (i) while a registration statement
      covering the resale of such securities is effective under the Securities Act,
      (ii) following any sale of such securities pursuant to Rule 144 (assuming the
      transferor is not an affiliate of the Company), (iii) if such Securities are
      eligible for sale under Rule 144(b) (to the extent that the applicable Purchaser
      provides a certification or legal opinion to the Company to that effect), or
      (iv) if such legend is not required under applicable requirements of the
      Securities Act (including controlling judicial interpretations and
      pronouncements issued by the Commission). Following the effective date of a
      registration statement, which includes the Purchased Securities, or at such
      earlier time as a legend is no longer required for the Purchased Shares and
      the
      Underlying Shares, the Company will, promptly following the delivery by a
      Purchaser to the Company or the Company’s transfer agent of a legended
      certificate representing such securities, deliver or cause to be delivered
      to
      such Purchaser a certificate representing such securities that is free from
      all
      restrictive legends. If requested by a Purchaser, certificates for securities
      subject to legend removal hereunder shall be transmitted by the transfer agent
      of the Company to the Purchasers by crediting the account of the Purchaser’s
      prime broker with the Depository Trust Company (“DTC”).

    

    (ii) Buy-In.
      If the
      Company shall fail for any reason or for no reason to issue to the holder of
      the
      Securities within three (3) trading days after the occurrence of any of Section
      3(hh)(i) through (hh)(iv) above (the “Delivery
      Date”)
      a
      certificate without such legend to the holder or to issue such Securities to
      such holder by electronic delivery at the applicable balance account at DTC,
      and
      if on or after such Delivery Date the Purchaser purchases (in an open market
      transaction or otherwise) shares of Common Stock to deliver in satisfaction
      of a
      sale by the Purchaser of shares of Common Stock that the Purchaser anticipated
      receiving from the Company without any restrictive legend (a “Buy-In”),
      then
      the Company shall, within three (3) trading days after the Purchaser’s request
      and in the Purchaser’s sole discretion, either (i) pay cash to the Purchaser in
      an amount equal to the Purchaser’s total purchase price (including brokerage
      commissions, if any) for the shares of Common Stock so purchased (the
“Buy-In
      Price”),
      at
      which point the Company’s obligation to deliver such certificate shall terminate
      and such shares shall be cancelled, or (ii) promptly honor its obligation to
      deliver to the Purchaser a certificate or certificates representing such number
      of shares of Common Stock that would have been issued if the Company timely
      complied with its obligations hereunder (“Unlegended
      Shares”)
      and
      pay cash to the Purchaser in an amount equal to the excess (if any) of the
      Buy-In Price over the aggregate Market Price of the Unlegended Shares on the
      date the Company delivers the Unlegended Shares to the Purchaser. For purposes
      of this clause (iv), “Market
      Price”
means
      (i) if the principal trading market for such securities is an exchange, the
      bid
      price per share on the OTCBB or other trading market, (ii) if clause (i) is
      not
      applicable, the bid price per share as set forth by Nasdaq or (iii) if clauses
      (i) and (ii) are not applicable, the bid price per share as set forth in the
      Pink Sheets.

     

    
      
        
        

      

      
        -14-

        
          

        

      

      
        
        

      

    

     

    (jj) Equal
      Treatment of Purchasers.
      No
      consideration shall be offered or paid to any person to amend or consent to
      a
      waiver or modification of any provision of any of this Agreement or the
      Purchased Warrants unless the same consideration is also offered to all of
      the
      parties to such agreements. For clarification purposes, this provision
      constitutes a separate right granted to each Purchaser by the Company and
      negotiated separately by each Purchaser, and is intended for the Company to
      treat the Purchasers as a class and shall not in any way be construed as the
      Purchasers acting in concert or as a group with respect to the purchase,
      disposition or voting of Securities or otherwise.

    

    (kk) Shell
      Company Status.
      The
      Company has ceased to be an issuer defined in Rule 144(i)(1)(i); is subject
      to
      the reporting requirements of Section 13 or 15 (d) of the Exchange Act; has
      filed all reports and other materials required to be filed by Section 13 or
      15(d) of the Exchange Act, as applicable, during the preceding 12 months, other
      than Form
      8-K
      reports;
      has filed current "Form 10 information" (as defined in Rule 144(i)(3)) with
      the
      SEC reflecting its status as an entity that is no longer an issuer described
      in
      Rule 144(i)(1)(i); and at least one year has elapsed from the date the Company
      filed “Form 10 information” with the SEC.

    

    (ll)
       Related
      Party Acquisition. Neither
      the Company nor any of its Subsidiaries will consummate an acquisition by the
      Company, whether through an acquisition of stock, merger or asset
      purchase--requiring payment of consideration to any entity in which an officer,
      director, or affiliate of the Company has any interest in excess of $250,000
      individually or in the aggregate, or is a current officer, director, trustee,
      affiliate or partner (the "Related Party Interest") without the prior written
      consent of the majority of the holders of Common Stock (excluding any Common
      Stock held directly or indirectly by the officers, directors or employees of
      the
      Company with the Related Party Interest)."

    

    

    4. Representations,
      Warranties and Certain Agreements of The Purchasers.
      Each
      Purchaser hereby represents and warrants to the Company, severally and not
      jointly, and agrees that:

    

    (a) Organization,
      Good Standing and Qualification.
      The
      Purchaser has all corporate, membership or partnership power and authority
      required to enter into this Agreement and the other agreements, instruments
      and
      documents contemplated hereby, and to consummate the transactions contemplated
      hereby and thereby.

    

    (b) Authorization.
      The
      execution of this Agreement has been duly authorized by all necessary corporate,
      membership or partnership action on the part of the Purchaser. This Agreement
      constitutes the Purchaser’s legal, valid and binding obligation, enforceable in
      accordance with its terms, except (i) as may be limited by (A) applicable
      bankruptcy, insolvency, reorganization or other laws of general application
      relating to or affecting the enforcement of creditors’ rights generally and (B)
      the effect of rules of law governing the availability of equitable remedies
      and
      (ii) as rights to indemnity or contribution may be limited under federal or
      state securities laws or by principles of public policy thereunder.

     

    
      
        
        

      

      
        -15-

        
          

        

      

      
        
        

      

    

     

    (c) Litigation.
      There is
      no Action pending to which such Purchaser is a party that is reasonably likely
      to prevent, enjoin, alter or delay the transactions contemplated by this
      Agreement.

    

    (d) Purchase
      for Own Account.
      The
      Purchased Securities are being acquired for investment for the Purchaser’s own
      account, not as a nominee or agent, and not with a view to the public resale
      or
      distribution thereof within the meaning of the Securities Act, without
      prejudice, however, to such Purchaser’s right at all times to sell or otherwise
      dispose of all or any part of such securities in compliance with applicable
      federal and state securities laws and as otherwise contemplated by this
      Agreement. The Purchaser also represents that it has not been formed for the
      specific purpose of acquiring the Purchased Securities.

    

    (e) Investment
      Experience.
      The
      Purchaser understands that the purchase of the Purchased Securities involves
      substantial risk. The Purchaser has experience as an investor in securities
      of
      companies and acknowledges that it can bear the economic risk of its investment
      in the Purchased Securities and has such knowledge and experience in financial
      or business matters that it is capable of evaluating the merits and risks of
      this investment in the Purchased Securities and protecting its own interests
      in
      connection with this investment.

    

    (f) Accredited
      Investor Status.
      The
      Purchaser is an “accredited investor” within the meaning of Regulation D
      promulgated under the Securities Act.

    

    (g) Reliance
      Upon Purchaser’s Representations.
      The
      Purchaser understands that the issuance and sale of the Purchased Securities
      to
      it will not be registered under the Securities Act on the ground that such
      issuance and sale will be exempt from registration under the Securities Act
      pursuant to Section 4(2) thereof, and that the Company’s reliance on such
      exemption is based on each Purchaser’s representations set forth
      herein.

    

    (h) Receipt
      of Information.
      The
      Purchaser has had an opportunity to ask questions and receive answers from
      the
      Company regarding the terms and conditions of the issuance and sale of the
      Purchased Securities and the business, properties, prospects and financial
      condition of the Company and to obtain any additional information requested
      and
      has received and considered all information it deems relevant to make an
      informed decision to purchase the Purchased Securities. Neither such inquiries
      nor any other investigation conducted by or on behalf of such Purchaser or
      its
      representatives or counsel shall modify, amend or affect such Purchaser’s right
      to rely on the truth, accuracy and completeness of such information and the
      Company’s representations and warranties contained in this
      Agreement.

    

    (i) Restricted
      Securities.
      The
      Purchaser understands that the Purchased Securities have not been registered
      under the Securities Act and will not sell, offer to sell, assign, pledge,
      hypothecate or otherwise transfer any of the Purchased Securities unless (i)
      pursuant to an effective registration statement under the Securities Act, (ii)
      such holder provides the Company with an opinion of counsel, in form and
      substance reasonably acceptable to the Company, to the effect that a sale,
      assignment or transfer of the Purchased Securities may be made without
      registration under the Securities Act and the transferee agrees to be bound
      by
      the terms and conditions of this Agreement, (iii) such holder provides the
      Company with reasonable assurances (in the form of seller and broker
      representation letters) that the Purchased Shares or the Underlying Shares,
      as
      the case may be, can be sold pursuant to Rule 144 promulgated under the
      Securities Act (“Rule
      144”)
      or
      (iv) pursuant to Rule 144(b) promulgated under the Securities Act following
      the applicable holding period. Notwithstanding anything to the contrary
      contained in this Agreement, including but not limited to in Section 5(d)(i)
      below, the Purchaser may transfer (without restriction and without the need
      for
      an opinion of counsel) the Purchased Shares or the Underlying Shares to its
      Affiliates (as defined below) provided that each such Affiliate is an
“accredited investor” under Regulation D, and such Affiliate agrees to be bound
      by the terms and conditions of this Agreement and shall have the rights of
      a
      Purchaser hereunder.

     

    
      
        
        

      

      
        -16-

        
          

        

      

      
        
        

      

    

    
 

    For
      the
      purposes of this Agreement, an “Affiliate”
of
      any
      specified Purchaser means any other person or entity directly or indirectly
      controlling, controlled by or under direct or indirect common control with
      such
      specified Purchaser. For purposes of this definition, “control”
means
      the power to direct the management and policies of such person or firm, directly
      or indirectly, whether through the ownership of voting securities, by contract
      or otherwise.

    

    (j) Legends. 

    

    (i) Purchased
      Shares and Underlying Shares.
      The
      Purchaser agrees that the certificates for the Purchased Shares and Underlying
      Shares shall bear the following legend and that the Purchaser will comply with
      the restrictions on transfer set forth in such legend:

    

    “THESE
      SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION
      OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
      REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
      ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
      EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
      AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
      REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
      SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR
      TO
      SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
      COMPANY.”

    

    The
      Company acknowledges and agrees that a Purchaser may from time to time pledge
      pursuant to a bona fide margin agreement with a registered broker-dealer or
      grant a security interest in some or all of the Purchased Securities to a
      financial institution that is an “accredited investor” as defined in Rule 501(a)
      under the Securities Act and who agrees to be bound by the provisions of this
      Agreement and, if required under the terms of such arrangement, such Purchaser
      may transfer pledged or secured Purchased Securities to the pledgees or secured
      parties. Further, no notice shall be required of such pledge. At the appropriate
      Purchaser’s expense, the Company will execute and deliver such reasonable
      documentation as a pledgee or secured party of Purchased Securities may
      reasonably request in connection with a pledge or transfer of the Purchased
      Securities, the preparation and filing of any required prospectus supplement
      under Rule 424(b)(3) under the Securities Act or other applicable provision
      of
      the Securities Act to appropriately amend the list of selling stockholders
      thereunder.

     

    
      
        
        

      

      
        -17-

        
          

        

      

      
        
        

      

    

     

    In
      addition, the Purchaser agrees that the Company may place stop transfer orders
      with its transfer agent with respect to such certificates in order to implement
      the restrictions on transfer set forth in this Agreement. The appropriate
      portion of the legend and the stop transfer orders will be removed promptly
      (but
      in
      no event later than three (3) business days) upon
      delivery to the Company of such satisfactory evidence as reasonably may be
      required by the Company that such legend or stop orders are not required to
      ensure compliance with the Securities Act. In addition, upon the declaration
      of
      the effectiveness of the Registration Statement which includes the Purchased
      Securities, the Company shall cause its counsel to deliver a blanket opinion
      (or
      separate opinions if the transfer agent will not accept a blanket opinion)
      to
      its transfer agent to cause the stock certificates evidencing the Purchased
      Shares and Underlying Shares to be issued to the Purchasers free of any
      Securities Act restrictive legends assuming compliance with the prospectus
      delivery requirements, to the extent required by Rule 172 of the Securities
      Act.
      Each of the Purchaser acknowledges and agrees that the Company will endeavor
      to
      remove any Securities Act restrictive legends pursuant to this Section j(ii)
      upon the representation contained herein that the Purchasers will comply with
      the prospectus delivery requirements, to the extent required by Rule 172 of
      the
      Securities Act. 

    

    (ii) Purchased
      Warrants.
      The
      Purchaser agrees that Purchased Warrants shall bear the following
      legend:

    

    “THIS
      WARRANT AND THE SHARES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED
      UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR WITH ANY
      STATE SECURITIES COMMISSION, AND MAY NOT BE TRANSFERRED OR DISPOSED OF BY THE
      HOLDER IN THE ABSENCE OF A REGISTRATION STATEMENT WHICH IS EFFECTIVE UNDER
      THE
      SECURITIES ACT AND APPLICABLE STATE LAWS AND RULES, OR, UNLESS, IMMEDIATELY
      PRIOR TO THE TIME SET FOR TRANSFER, SUCH TRANSFER MAY BE EFFECTED WITHOUT
      VIOLATION OF THE SECURITIES ACT AND OTHER APPLICABLE STATE LAWS AND
      RULES.
      NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION
      WITH
      A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY
      THE
      SECURITIES.”

    

    (k) Questionnaires.
      The
      Purchaser has completed or caused to be completed the Stock Certificate
      Questionnaire and the Registration Statement Questionnaire for use in
      preparation of the Registration Statement (as defined in Section 5(a)(ii)
      below), and the answers to such questionnaires are true and correct as of the
      date of this Agreement; provided,
      that the
      Purchasers shall be entitled to update such information by providing written
      notice thereof to the Company before the effective date of the Registration
      Statement.

     

    
      
        
        

      

      
        -18-

        
          

        

      

      
        
        

      

    

     

    (l) Prohibited
      Transactions.

    

    (i) During
      the last thirty (30) days prior to the date hereof, neither such Purchaser
      nor
      any Affiliate of such Purchaser, foreign or domestic, has, directly or
      indirectly, effected or agreed to effect any “short sale” (as defined in Rule
      200 under Regulation SHO), whether or not against the box, established any
“put
      equivalent position” (as defined in Rule 16a-1(h) under the 1934 Act) with
      respect to the Common Stock, borrowed or pre-borrowed any shares of Common
      Stock, or granted any other right (including, without limitation, any put or
      call option) with respect to the Common Stock or with respect to any security
      that includes, relates to or derived any significant part of its value from
      the
      Common Stock or otherwise sought to hedge its position in the Company’
securities (each, a “Prohibited
      Transaction”).

    

    (ii) Prior
      to
      the earliest to occur of (i) the termination of this Agreement, (ii) the date
      the Registration Statement, as defined below, is declared effective by the
      Securities and Exchange Commission or (iii) 90
      days
      from the Closing Date (120 days if the registration statement is reviewed by
      the
      SEC)
      such
      Purchaser shall not, and shall cause its Affiliates not to, engage, directly
      or
      indirectly, in (a) a Prohibited Transaction nor (b) any sale, assignment,
      pledge, hypothecation, put, call, or other transfer of any of the shares of
      Common Stock, warrants or other securities of the issuer acquired
      hereunder.

    

    5. Form
      D Filing; Registration; Compliance With The Securities
      Act.

    

    (a) Form
      D Filing; Registration of the Purchased Shares and Underlying Shares; Piggyback
      Registration. The
      Company hereby agrees that it shall:

    

    (i) file
      in a
      timely manner a Form D relating to the sale of the Purchased Securities under
      this Agreement, pursuant to Regulation D promulgated under the Securities Act;
      

    

    (ii) prepare
      and file with the SEC as soon as practicable, and in no event later than 30
      days
      following the Closing, a registration statement on Form S-1 (the “Registration
      Statement”),
      which
      shall contain (except if otherwise required pursuant to written comments
      received from the SEC upon a review of such Registration Statement) the “Plan of
      Distribution” attached hereto as Annex
      A,
      to
      enable the offer and resale of all Purchased Shares and the sale of all
      Underlying Shares (together with any shares of Common Stock issued as a dividend
      or other distribution with respect to, or in exchange for, or in replacement
      of,
      the Purchased Shares or the Underlying Shares, the “Registrable
      Shares”)
      by the
      Purchasers from time to time on a delayed or continuous basis pursuant to Rule
      415 under the Securities Act and use all reasonable best efforts to cause such
      Registration Statement to be declared effective as promptly as possible after
      filing, but in any event, within 90 days following the Closing Date or, in
      the event of a review of the Registration Statement by the SEC, within 120
      days
      following the Closing Date, and to remain continuously effective until the
      date
      on which all Registrable Shares purchased by the Purchasers pursuant to this
      Agreement have been sold either under the Registration Statement or pursuant
      to
      Rule 144 promulgated under the Securities Act (the “Registration
      Period”).
      If
      for any reason, the SEC does not permit all Registrable Shares to be included
      in
      such Registration Statement (such that the Registration Statement may be used
      for resales in a manner that does not constitute, in the SEC’s view, an offering
      by the Company and that permits the continuous resale at the market by the
      Purchasers participating therein without being named therein as
“underwriters”)(“Rule 415 Issue”), then the Company shall prepare and file with
      the SEC one or more separate Registration Statements that meets such criteria
      with respect to any such Registrable Shares not included in the previous
      Registration Statement. The Company will then use its best efforts at the first
      opportunity that is permitted by the SEC, but in no event later than the later
      of sixty (60) calendar days from the date substantially all of the Registrable
      Securities registered under the Registration Statement have been sold by the
      Purchasers or six (6) months from the date the Registration Statement was
      declared effective, to register for resale the Registrable Securities that
      have
      been excluded from being registered (provided such Registration Statement meets
      the criteria set forth above). The Company shall use all reasonable best efforts
      to cause any such Registration Statement to be declared effective within
      90 days following the filing thereof or, in the event of a review of the
      registration statement by the SEC, within 120 days following the filing thereof,
      and to remain continuously effective for the Registration Period. By 9:30 a.m.
      on the business day immediately following the effective date of the applicable
      Registration Statement, the Company shall file with the SEC in accordance with
      Rule 424 under the Securities Act the final prospectus to be used in connection
      with sales pursuant to such Registration Statement. In no event shall the
      Company include securities other than Registrable Shares on any Registration
      Statement filed pursuant to this Section 5.

     

    
      
        
        

      

      
        -19-

        
          

        

      

      
        
        

      

    

     

    (iii) Notwithstanding
      anything to the contrary contained in this Agreement, in the event the SEC
      does
      not permit a Registration Statement to include all of the Registrable Shares
      because of a Rule 415 Issue, then the Company shall (i) first, exclude the
      shares held by any officer or director of the Company or any Affiliate of any
      such officer or director and (ii) second, reduce the number of Registrable
      Shares to be included in such Registration Statement by all other Purchasers
      until such time as the SEC shall so permit such Registration Statement to become
      effective and be used for resales in a manner that does not constitute an
      offering by the Company and that permits the continuous resale at the market
      by
      the Purchasers participating therein without being named therein as
“underwriters.”  In making such reduction, the Company shall reduce the
      number of shares to be included by all such Purchasers on a pro rata basis
      (based upon the number of Registrable Securities otherwise required to be
      included for each such Purchaser). Any reduction of Registrable Shares pursuant
      to this paragraph will first reduce Warrant Shares. In no event shall a
      Purchaser be required to be named as an “underwriter” in a Registration
      Statement without such Purchaser’s prior written consent. In the event that the
      Company shall be required to exclude the Warrant Shares from the Registration
      Statement, the Company shall be permitted to deregister that portion of the
      Registrable Securities held by the Purchasers, not including the Registrable
      Securities held by the Purchasers set forth on Exhibit A-1, that can be sold
      pursuant to Rule 144 after a period of six (6) months without regard to volume
      limitations, and file a subsequent registration statement that shall include
      the
      Warrant Shares and shall use all reasonable best efforts to cause any such
      registration statement to be declared effective within 90 days following
      the filing thereof or, in the event of a review of the registration statement
      by
      the SEC, within 120 days following the filing thereof, and to remain
      continuously effective for the Registration Period. 

     

    
      
        
        

      

      
        -20-

        
          

        

      

      
        
        

      

    

     

    (iv) prepare
      and file with the SEC such amendments (including post-effective amendments)
      and
      supplements to the Registration Statement and the Prospectus (as defined below)
      used in connection therewith as may be necessary to keep the Registration
      Statement effective at all times until the end of the Registration Period and
      prepare and file with the SEC such additional Registration Statements in order
      to register for resale under the Securities Act all of the Registrable Shares;
      and (B) respond as promptly as reasonably possible, and in any event within
      thirty days, to any comments received from the SEC with respect to the
      Registration Statement or any amendment thereto and as promptly as reasonably
      possible provide the Purchasers, upon their request, true and complete copies
      of
      all correspondence from and to the SEC relating to the Registration Statement
      (with all material, non-public information redacted from such
      copies);

    

    (v) not
      less
      than two trading days prior to the filing of a Registration Statement or any
      related Prospectus or any amendment or supplement thereto, the Company shall
      furnish to the Purchasers copies of all such documents proposed to be filed,
      which documents will be subject to the review of such Purchasers;

    

    (vi) furnish
      to the Purchasers with respect to the Registrable Shares registered under the
      Registration Statement such reasonable number of copies of any Prospectus (as
      defined below) in conformity with the requirements of the Securities Act and
      such other documents as the Purchaser may reasonably request, in order to
      facilitate the public sale or other disposition of all or any of the Registrable
      Shares by the Purchasers;

    

    (vii) use
      its
      reasonable best efforts to file documents required of the Company for normal
      blue sky clearance in states specified in writing by the Purchasers;
provided,
      however,
      that
      the Company shall not be required to qualify to do business or consent to
      service of process in any jurisdiction in which it is not now so qualified
      or
      has not so consented;

    

    (viii) promptly
      notify the Purchasers simultaneously in writing, in no event more than one
      (1)
      business day after the Registration Statement has been declared
      effective;

    

    (ix) promptly
      file with the SEC a request for acceleration in accordance with Rule 461
      promulgated under the Securities Act after the date that the Company is notified
      (orally or in writing, whichever is earlier) by the SEC that a Registration
      Statement will not be “reviewed,” or will not be subject to further review, such
      that the Registration Statement shall be declared effective no later than 5
      trading days after such notification;

    

    (x) promptly
      notify the Purchasers in writing of the existence of any fact or the happening
      of any event, during the Registration Period (but not as to the substance of
      any
      such fact or event), that makes any statement of a material fact made in the
      Registration Statement, the Prospectus, any amendment or supplement thereto,
      or
      any document incorporated by reference therein untrue, or that requires the
      making of any additions to or changes in the Registration Statement or the
      Prospectus in order to make the statements therein not misleading (provided,
      however,
      that no
      notice by the Company shall be required pursuant to this subsection (vii)
      in the event that the Company contemporaneously files a prospectus supplement
      or
      amendment to update the Prospectus, which, in either case, contains the
      requisite information with respect to such material event that results in such
      Registration Statement no longer containing any such untrue or misleading
      statements);

     

    
      
        
        

      

      
        -21-

        
          

        

      

      
        
        

      

    

     

    (xi) furnish
      to each Purchaser upon written request, from the date of this Agreement until
      the end of the Registration Period, one copy of its periodic reports filed
      with
      the SEC pursuant to the Exchange Act and the rules and regulations promulgated
      thereunder; and

    

    (xii) bear
      all
      expenses in connection with the procedures described in paragraphs (i) through
      (viii) of this Section 5(a) and the registration of the Registrable Shares
      pursuant to the Registration Statement other than fees and expenses, if any,
      of
      legal counsel or other advisers to the Purchasers or underwriting discounts,
      brokerage fees and commissions incurred by the Purchasers, if any; provided,
      however, that the Company shall pay all reasonable fees and disbursements of
      one
      counsel to the Purchasers.

    

    It
      shall
      be a condition precedent to the obligations of the Company to take any action
      pursuant to this Section 5(a) with respect to Registrable Shares held by a
      Purchaser that such Purchaser shall timely furnish to the Company a completed
      Registration Statement Questionnaire on or before the fifth business day
      following the Closing Date and such other written information regarding itself,
      the Registrable Shares to be sold by such Purchaser, and the intended method
      of
      disposition of the Registrable Shares as shall be required to effect the
      registration of the Registrable Shares. 

    

    (b)  Piggyback
      Registration

    

    (i) If
      during
      the Registration Period one or more Registration Statements covering all
      Registrable Shares are not or cease to be effective and continue to be not
      effective and during such time the Company proposes to register any of its
      Common Stock under the Securities Act, whether as a result of an offering for
      its own account or the account of others (but excluding any registrations to
      be
      effected for Forms S-4 or S-8 or other applicable successor Forms) on a
      Registration Statement that is to become effective prior to the expiration
      of
      the Registration Period, the Company shall, each such time, give to the
      Purchasers twenty (20) days’ prior written notice of its intent to do so, and
      such notice shall describe the proposed registration and shall offer such
      Purchasers the opportunity to include in such Registration Statement such number
      of Purchased Shares and Underlying Shares as each such Purchaser may request.
      Upon the written request of any Purchaser given to the Company within fifteen
      (15) days after the receipt of any such notice by the Company, the Company
      shall
      include in such Registration Statement all or part of the Purchased Shares
      and
      Underlying Shares of such Purchaser, to the extent requested to be registered,
      subject to clause (ii) below.

    

    (ii) If
      a
      registration pursuant to this Section 5(b) involves an underwritten offering
      and
      the managing underwriter shall advise the Company in writing that, in its
      opinion, the number of shares of Common Stock requested by the Purchasers to
      be
      included in such registration is likely to materially and adversely affect
      the
      success of the offering or the price that would be received for any shares
      of
      Common Stock included in such offering, then, notwithstanding anything in this
      Section 5(b) to the contrary, the Company shall only be required to include
      in
      such registration, to the extent of the number of shares of Common Stock which
      the Company is so advised can be sold in such offering, (A) first, any shares
      of
      Common Stock proposed to be included in such registration for the account of
      the
      Company, and (B) second, the number of shares of Common Stock requested to
      be
      included in such registration for the account of any stockholders of the Company
      (including the Purchasers), pro rata among such stockholders on the basis of
      the
      number of shares of Common Stock (including Underlying Shares) that each of
      them
      has requested to be included in such registration.

     

    
      
        
        

      

      
        -22-

        
          

        

      

      
        
        

      

    

     

    In
      connection with any offering involving an underwriting of shares, the Company
      shall not be required under this Section 5(b) or otherwise to include the
      Purchased Shares or Underlying Shares of any Purchaser therein unless such
      Purchaser accepts and agrees to the terms of the underwriting, which shall
      be
      reasonable and customary, as agreed upon between the Company and the
      underwriters selected by the Company (which underwriters shall be reasonably
      acceptable to the holders of a majority of the then outstanding Purchased
      Securities.

    

    (c) Liquidated
      Damages.

    

    (i) Delay
      in Filing of Registration Statement.
      In the
      event that the Registration Statement is not filed with the SEC within 30 days
      following the Closing Date, or in the event any subsequent Registration
      Statement is not filed within the time periods set forth in Section 5(a)(ii),
      the Company shall pay to each Purchaser liquidated damages (in addition to
      the
      rights and remedies available to each Purchaser under applicable law and this
      Agreement), in cash at a rate equal to one (1%) percent per month (pro rata
      on a
      30-day basis) of the total purchase price of the Purchased Securities purchased
      by such Purchaser pursuant to this Agreement, up to a maximum of ten (10%)
      percent of the total purchase price of the Purchased Securities purchased by
      such Purchaser, until the Registration Statement is filed with the SEC.

    

    (ii) Delay
      in Effectiveness of Registration Statement.
      In the
      event that a Registration Statement covering all of the Registrable Shares
      is
      not declared effective (i) within 90 days following the Closing Date (or 120
      days following the Closing Date in the event of a review of the Registration
      Statement by the SEC), or (ii) within 5 trading days after the date the Company
      is notified (orally or in writing, whichever is earlier) that such Registration
      Statement will not be “reviewed” or will not be subject to further review, the
      Company shall pay to each Purchaser liquidated damages (in addition to the
      rights and remedies available to each Purchaser under applicable law and this
      Agreement), in cash at a rate equal to one (1%) percent per month (pro rata
      on a
      30-day basis) of the total purchase price of the Purchased Securities purchased
      by such Purchaser pursuant to this Agreement, up to a maximum, together with
      all
      payments made by the Company to such Purchaser pursuant to Section 5(c)(i),
      of ten (10%) percent of the total purchase price of the Purchased Securities
      purchased by such Purchaser, until the Registration Statement is declared
      effective; provided
      however,
      if one
      or more Registration Statements covering all Registrable Shares shall not be
      effective on the date that is two years after the date of Closing the Company
      shall pay to the Purchasers (in addition to the rights and remedies available
      to
      each Purchaser under applicable law and this Agreement) pro rata in a single
      payment on such date liquidated damages (in addition to the prior ten (10%)
      percent of the total purchase price of the Purchase Securities) of eight (8%)
      percent of the total purchase price of the Purchased Securities. 

     

    
      
        
        

      

      
        -23-

        
          

        

      

      
        
        

      

    

     

    (iii) Lapse
      in Effectiveness of Registration Statement.
      In the
      event that one or more Registration Statements covering all of the Registrable
      Shares is filed and declared effective but, during the Registration Period,
      shall thereafter cease to be effective or useable or the prospectus included
      in
      any such Registration Statement (the “Prospectus”,
      as
      amended or supplemented by any prospectus supplement and by all other amendments
      thereto and all material incorporated by reference in such Prospectus) ceases
      to
      be usable, in either case, in connection with resales of Registrable Shares,
      without such lapse being cured within ten (10) business days (the “Cure
      Period”)
      by a
      post-effective amendment to such Registration Statement or a supplement to
      the
      Prospectus or other action that cures such lapse, then the Company shall pay
      to
      each Purchaser that at the time of such lapse continues to hold Registrable
      Shares, liquidated damages (in addition to the rights and remedies available
      to
      each Purchaser under applicable law and this Agreement), in cash for the period
      from and including the first day following the expiration of the Cure Period
      until, but excluding, the earlier of (A) the date on which such failure is
      cured
      and (B) the date on which the Registration Period expires, at a rate equal
      to
      one (1%) percent per month (pro rata on a 30-day basis) of the total purchase
      price of the Purchased Securities purchased by such Purchaser that are held
      by
      such Purchaser at the time of such lapse pursuant to this Agreement up to a
      maximum of ten (10%) percent of the total purchase price of the Purchased
      Securities purchased by such Purchaser. Notwithstanding anything herein to
      the
      contrary, the Company shall not be required to pay liquidated damages under
      this
      Section 5(c)(iii) for any portion of the Registrable Securities that have been
      deregistered pursuant to the last sentence of Section 5(a)(iii) of this
      Agreement. 

    

    (iv) Current
      Public Information Default.
      In the
      event that, after the six month anniversary of the Closing Date, the Registrable
      Shares may not be sold pursuant to Rule 144 because the Company has not filed
      with the SEC all reports and other materials required to be filed by Section
      13
      or 15(d) of the Exchange Act, as applicable, during the preceding 12 months,
      other than Form 8-K reports (a “Current Public Information Default”), the
      Company shall pay to each Purchaser liquidated damages (in addition to the
      rights and remedies available to each Purchaser under applicable law and this
      Agreement), in cash at a rate equal to one (1%) percent per month (pro rata
      on a
      30-day basis) of the total purchase price of the Purchased Securities purchased
      by such Purchaser pursuant to this Agreement until the Current Public
      Information Default is cured. 

    

    (v) Strategic
      Investor.
      If at
      any time prior to the date on which the Registration Statement has been declared
      effective the Company enters into an agreement to issue equity securities to
      an
      investor that, in the reasonable, good faith determination of the Company is
      a
      strategic investor the Company will be granted a 30-day extension of the
      timeframes set forth in Sections 5(c)(i) and 5(c)(ii) above, and no liquidated
      damages shall accrue during such 30-day period so long as the Company
      consummates the issuance of the equity securities to such strategic investor.
      

    

    (vi) Payment
      of Liquidated Damages. Any
      liquidated damages payable as required pursuant to this Section 5 shall be
      payable by the Company quarterly in arrears. 

     

    
      
        
        

      

      
        -24-

        
          

        

      

      
        
        

      

    

     

    (d) Transfer
      of Registrable Shares After Registration; Suspension.

    

    (i) The
      Purchasers agree that they will not offer to sell or make any sale, assignment,
      pledge, hypothecation or other transfer with respect to the Registrable Shares
      that would constitute a sale within the meaning of the Securities Act except
      pursuant to either (A) the Registration Statement, (B) Rule 144 of the
      Securities Act or another available
      exemption from, or in a transaction not subject to, the registration
      requirements of the Securities Act and in accordance with applicable state
      securities laws as evidenced by a legal opinion of counsel to the transferor
      to
      such effect, the substance of which shall be reasonably acceptable to the
      Company
      and that
      they will promptly notify the Company of any changes in the information set
      forth in the Registration Statement after it is prepared regarding the Purchaser
      or its plan of distribution to the extent required by applicable law. The
      Company will prepare and file any required prospectus supplement under Rule
      424(b)(3) or post-effective amendment under the Securities Act or other
      applicable provision of the Securities Act to appropriately amend the list
      of
      selling stockholders or the plan of distribution thereunder.

    

    (ii) In
      addition to any suspension rights under paragraph (iii) below, if the Company
      shall furnish to the Purchasers a certificate signed by the President or Chief
      Executive Officer of the Company stating that the Board of Directors of the
      Company has made a good faith determination upon the advice of counsel (i)
      that
      the continued use by the Purchasers of the Registration Statement for purposes
      of effecting offers or sales of Purchased Shares and Underlying Shares pursuant
      hereto would require, under the Securities Act, premature disclosure in the
      Registration Statement (or the Prospectus relating thereto) of material,
      nonpublic information concerning the Company, its business or prospects or
      any
      proposed material transaction involving the Company and (ii) that such premature
      disclosure would be materially adverse to the Company, its business or prospects
      or any such proposed material transaction, then the Company may, on not more
      than two occasions for not more than 30 days on each such occasion, suspend
      use
      of the Prospectus, on written notice to each Purchaser (which notice will not
      disclose the content of any material non-public information and will indicate
      the date of the beginning and end of the intended period of suspension, if
      known), in which case each Purchaser shall discontinue disposition of
      Registrable Shares covered by the Registration Statement or Prospectus until
      copies of a supplemented or amended Prospectus are distributed to the Purchasers
      or until the Purchasers are advised in writing by the Company that sales of
      Registrable Shares under the applicable Prospectus may be resumed and have
      received copies of any additional or supplemental filings that are incorporated
      or deemed incorporated by reference in any such Prospectus. The suspension
      and
      notice thereof described in this Section 5(d)(ii) shall be held in strictest
      confidence and shall not be disclosed by the Purchasers.

     

    
      
        
        

      

      
        -25-

        
          

        

      

      
        
        

      

    

     

    (iii) Subject
      to paragraph (iv) below, in the event of: (A) any request by the SEC or any
      other federal or state governmental authority during the period of effectiveness
      of the Registration Statement for amendments or supplements to a Registration
      Statement or related prospectus or for additional information; (B) the issuance
      by the SEC or any other federal or state governmental authority of any stop
      order suspending the effectiveness of a Registration Statement or the initiation
      of any proceedings for that purpose; (C) the receipt by the Company of any
      notification with respect to the suspension of the qualification or exemption
      from qualification of any of the Registrable Shares for sale in any jurisdiction
      or the initiation of any proceeding for such purpose; or (D) any event or
      circumstance that necessitates the making of any changes in the Registration
      Statement or Prospectus, or any document incorporated or deemed to be
      incorporated therein by reference, so that, in the case of the Registration
      Statement, it will not contain any untrue statement of a material fact or any
      omission to state a material fact required to be stated therein or necessary
      to
      make the statements therein not misleading, and that in the case of the
      Prospectus, it will not contain any untrue statement of a material fact or
      any
      omission to state a material fact required to be stated therein or necessary
      to
      make the statements therein, in the light of the circumstances under which
      they
      were made, not misleading, then the Company shall deliver a certificate in
      writing to the Purchasers (the “Suspension
      Notice”)
      to the
      effect of the foregoing (which notice will not disclose the content of any
      material non-public information and will indicate the date of the beginning
      and
      end of the intended period of suspension, if known), and, upon receipt of such
      Suspension Notice, the Purchasers will discontinue disposition of Registrable
      Shares covered by to the Registration Statement or Prospectus (a “Suspension”)
      until
      the Purchasers’ receipt of copies of a supplemented or amended Prospectus
      prepared and filed by the Company, or until the Purchasers are advised in
      writing by the Company that the current Prospectus may be used, and have
      received copies of any additional or supplemental filings that are incorporated
      or deemed incorporated by reference in any such prospectus. In the event of
      any
      Suspension, the Company will use its reasonable best efforts to cause the use
      of
      the Prospectus so suspended to be resumed as soon as possible after delivery
      of
      a Suspension Notice to the Purchasers. 

    

    (iv) Provided
      that a Suspension is not then in effect, the Purchasers may sell Registrable
      Shares under the Registration Statement, provided that the selling Purchaser
      arranges for delivery of a current Prospectus to the transferee of such
      Registrable Shares to the extent such delivery is required by applicable
      law.

    

    (e) Indemnification.
      For the
      purpose of this Section 5(e), the term “Registration
      Statement”
shall
      include any preliminary or final Prospectus, exhibit, supplement or amendment
      included in or relating to the Registration Statement referred to in Section
      5(a).

    

    (i) Indemnification
      by the Company.
      The
      Company agrees to indemnify and hold harmless each of the Purchasers and their
      affiliates and their respective officers, directors, agents, employees,
      subsidiaries, partners, members, investment advisors and controlling persons
      and
      each person, if any, who controls any Purchaser within the meaning of the
      Securities Act, to the fullest extent permitted by law, against any and all
      losses, claims, damages, liabilities or expenses, joint or several, to which
      such Purchasers or such controlling person may become subject, under the
      Securities Act, the Exchange Act or any other federal or state statutory law
      or
      regulation, or at common law or otherwise (including in settlement of any
      litigation, if such settlement is effected with the written consent of the
      Company, which consent shall not be unreasonably withheld), insofar as such
      losses, claims, damages, liabilities or expenses (or actions in respect thereof
      as contemplated below) arise out of or are based upon (A) any breach by the
      Company of any representations, warranties, covenants or agreements of the
      Company contained in this Agreement or the Purchased Warrants, (B) the breach
      by
      the Company or any present or former director of the Company of any of their
      respective fiduciary duties to the stockholders of the Company whether or not
      arising in connection with the transactions contemplated by this Agreement,
      and
      (C) any untrue statement or alleged untrue statement of any material fact
      contained in the Registration Statement, the Prospectus, or any amendment or
      supplement thereto, or arise out of or are based upon the omission or alleged
      omission to state in any of them a material fact required to be stated therein
      or necessary to make the statements in any of them, in light of the
      circumstances under which they were made, not misleading, and will reimburse
      each Purchaser and each such controlling person for any reasonable legal and
      other expenses as such reasonable expenses are incurred by such Purchaser or
      such controlling person in connection with investigating, defending, settling,
      compromising or paying any such loss, claim, damage, liability, expense or
      action; provided,
      however,
      that
      the Company will not be liable in any such case to the extent that any such
      loss, claim, damage, liability, expense or action arises out of or is based
      upon
      (A) an untrue statement or alleged untrue statement or omission or alleged
      omission made in the Registration Statement, the Prospectus or any amendment
      to
      or supplement of the Registration Statement or Prospectus made in reliance
      upon
      and in conformity with written information furnished to the Company by or on
      behalf of the Purchaser expressly for use in the Registration Statement or
      the
      Prospectus, (B) the failure of such Purchaser to comply with the covenants
      and
      agreements contained in this Agreement respecting resale of the Purchased Shares
      or the sale of the Underlying Shares or (C) any untrue statement or omission
      of
      a material fact required to make such statement not misleading in any Prospectus
      that is corrected in any subsequent Prospectus before the pertinent sale or
      sales by the Purchaser.

     

    
      
        
        

      

      
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    (ii) Indemnification
      by the Purchaser.
      Each
      Purchaser will severally and not jointly indemnify and hold harmless the
      Company, each of its directors, each of its officers who signed the Registration
      Statement and each person, if any, who controls the Company within the meaning
      of the Securities Act, against any losses, claims, damages, liabilities or
      expenses to which the Company, its directors, its officers who signed the
      Registration Statement and any controlling persons may become subject, under
      the
      Securities Act, the Exchange Act, or any other federal or state statutory law
      or
      regulation, or at common law or otherwise (including in settlement of any
      litigation, if such settlement is effected with the written consent of such
      Purchaser, which consent shall not be unreasonably withheld) insofar as such
      losses, claims, damages, liabilities or expenses (or actions in respect thereof
      as contemplated below) arise out of or are based upon any untrue statement
      of
      any material fact contained in the Registration Statement, the Prospectus,
      or
      any amendment or supplement to the Registration Statement or Prospectus, or
      arise out of or are based upon the omission to state therein a material fact
      required to be stated therein or necessary to make the statements therein not
      misleading, in each case to the extent, but only to the extent, that such untrue
      statement or omission was made in the Registration Statement, the Prospectus,
      or
      any amendment or supplement thereto, in reliance upon and in strict conformity
      with written information furnished to the Company by or on behalf of such
      Purchaser expressly for use therein, and the Purchaser will reimburse the
      Company, each of its directors, each of its officers who signed the Registration
      Statement, and any controlling persons for any reasonable legal and other
      expense incurred by the Company, its directors, its officers who signed the
      Registration Statement, and any controlling persons, in connection with
      investigating, defending, settling, compromising or paying any such loss, claim,
      damage, liability, expense or action; provided,
      however,
      that
      the Purchaser shall not be liable for any such untrue statement or omission
      with
      respect to which the Purchaser has delivered to the Company in writing a
      correction before the occurrence of the event from which such loss was incurred.
      Notwithstanding the provisions of this Section 5(e), the Purchaser shall not
      be
      liable for any indemnification obligation under this Agreement in excess of
      the
      aggregate amount of net proceeds received by the Purchaser from the sale of
      the
      Registrable Shares pursuant to the Registration Statement.

     

    
      
        
        

      

      
        -27-

        
          

        

      

      
        
        

      

    

     

    (iii) Indemnification
      Procedure.

    

    (A) Promptly
      after receipt by an indemnified party under this Section 5(e) of notice of
      the
      threat or commencement of any action, such indemnified party will, if a claim
      in
      respect thereof is to be made against an indemnifying party under this Section
      5(e), promptly notify the indemnifying party in writing of the claim; but the
      omission so to notify the indemnifying party will not relieve it from any
      liability that it may have to any indemnified party for contribution or
      otherwise under the indemnity agreement contained in this Section 5(e) or
      otherwise, to the extent it is not prejudiced as a result of such
      failure.

    

    (B) In
      case
      any such action is brought against any indemnified party and such indemnified
      party seeks or intends to seek indemnity from an indemnifying party, the
      indemnifying party will be entitled to participate in, and, to the extent that
      it may wish, jointly with all other indemnifying parties similarly notified,
      to
      assume the defense thereof with counsel reasonably satisfactory to such
      indemnified party; provided,
      however,
      if the
      defendants in any such action include both the indemnified party and the
      indemnifying party and the indemnified party shall have reasonably concluded
      that there may be a conflict between the positions of the indemnifying party
      and
      the indemnified party in conducting the defense of any such action or that
      there
      may be legal defenses available to it or other indemnified parties that are
      different from or additional to those available to the indemnifying party,
      the
      indemnified party or parties shall have the right to select separate counsel
      to
      assume such legal defenses and to otherwise participate in the defense of such
      action on behalf of such indemnified party or parties. Upon receipt of notice
      from the indemnifying party to such indemnified party of its election so to
      assume the defense of such action and approval by the indemnified party of
      counsel, the indemnifying party will not be liable to such indemnified party
      under this Section 5(e) for any legal or other expenses subsequently incurred
      by
      such indemnified party in connection with the defense thereof
      unless:

    

    (I) the
      indemnified party shall have employed such counsel in connection with the
      assumption of legal defenses in accordance with the proviso to the preceding
      sentence (it being understood, however, that the indemnifying party shall not
      be
      liable for the expenses of more than one separate counsel, approved by such
      indemnifying party, representing all of the indemnified parties who are parties
      to such action); or

    

    (II) the
      indemnifying party shall not have employed counsel reasonably satisfactory
      to
      the indemnified party to represent the indemnified party within a reasonable
      time after notice of commencement of the action against the indemnified party,
      in
      each
      of which cases the reasonable fees and expenses of counsel for the indemnified
      party shall be at the expense of the indemnifying party.

    

    (iv) Contribution.
      If the
      indemnification provided for in this Section 5(e) is required by its terms
      but
      is for any reason held to be unavailable to, or is otherwise insufficient to
      hold harmless, an indemnified party under this Section 5(e) with respect to
      any
      losses, claims, damages, liabilities or expenses referred to in this Agreement,
      then each indemnifying party shall contribute to the amount paid or payable
      by
      such indemnified party as a result of any losses, claims, damages, liabilities
      or expenses referred to in this Agreement:

     

    
      
        
        

      

      
        -28-

        
          

        

      

      
        
        

      

    

     

    (A) in
      such
      proportion as is appropriate to reflect the relative faults of the Company
      and
      the Purchaser in connection with the statements or omissions or inaccuracies
      in
      the representations and warranties in this Agreement that resulted in such
      losses, claims, damages, liabilities or expenses, as well as any other relevant
      equitable considerations, or

    

    (B) if
      the
      allocation provided by clause (A) above is not permitted by applicable law,
      in
      such proportion as is appropriate to reflect not only the relative faults
      referred to in clause (A) above but the relative benefits received by the
      Company and the Purchaser from the sale of the Purchased
      Securities.

    

    The
      respective relative benefits received by the Company on the one hand and each
      Purchaser on the other shall be deemed to be in the same proportion as the
      amount to which the consideration paid by such Purchaser to the Company pursuant
      to this Agreement for the Purchased Securities purchased by such Purchaser
      that
      were sold pursuant to the Registration Statement bears to the difference (the
      “Difference”)
      between the amount such Purchaser paid for the Purchased Securities that were
      sold pursuant to the Registration Statement and the amount received by such
      Purchaser from such sale. The relative fault of the Company and each Purchaser
      shall be determined by reference to, among other things, whether the untrue
      or
      alleged untrue statement of a material fact or the omission or alleged omission
      to state a material fact or the inaccurate or the alleged inaccurate material
      fact relates to information supplied by the Company or by such Purchaser and the
      parties’ relative intent, knowledge, access to information and opportunity to
      correct or prevent such statement or omission. The amount paid or payable by
      a
      party as a result of the losses, claims, damages, liabilities and expenses
      referred to above shall be deemed to include, subject to the limitations set
      forth in Section 5(e)(iii), any reasonable legal or other fees or expenses
      incurred by such party in connection with investigating or defending any such
      action or claim. The provisions set forth in Section 5(e)(iii) with respect
      to
      the notice of the threat or commencement of any threat or action shall apply
      if
      a claim for contribution is to be made under this Section 5(e)(iv); provided,
      however, that no additional notice shall be required with respect to any threat
      or action for which notice has been given under Section 5(e)(iii) for purposes
      of indemnification. The Company and each Purchaser agree that it would not
      be
      just and equitable if contribution pursuant to this Section 5(e)(iv) were
      determined solely by pro rata allocation (even if the Purchasers were treated
      as
      one entity for such purpose) or by any other method of allocation that does
      not
      take account of the equitable considerations referred to in this paragraph.
      Notwithstanding the provisions of this Section 5(e)(iv), no Purchaser shall
      be
      required to contribute any amount in excess of the amount by which the
      Difference exceeds the amount of any damages that such Purchaser has otherwise
      been required to pay by reason of such untrue or alleged untrue statement or
      omission or alleged omission. No person guilty of fraudulent misrepresentation
      (within the meaning of Section 11(f) of the Securities Act) shall be entitled
      to
      contribution from any person who is not guilty of such fraudulent
      misrepresentation. The Purchasers’ obligations to contribute pursuant to this
      Section 5(e)(iv) are several and not joint.

     

    
      
        
        

      

      
        -29-

        
          

        

      

      
        
        

      

    

     

    (f) Rule
      144 Information.
      After
      the date of this Agreement, the Company shall file in a timely manner all
      reports required to be filed by it under the Securities Act and the Exchange
      Act
      and the rules and regulations promulgated thereunder and shall take such further
      action to the extent required to enable the Purchasers to sell the Purchased
      Shares and the Underlying Shares pursuant to Rule 144 under the Securities
      Act
      (as such rule may be amended from time to time).

    

    6. Conditions
      to The Purchaser’s Obligations at the Closing. 
      The
      obligations of the Purchasers under Section 1(b) of this Agreement are subject
      to the fulfillment or waiver, on or before the Closing, of each of the following
      conditions:

    

    (a) Representations
      and Warranties True.
      Each of
      the representations and warranties of the Company contained in Section 3 shall
      be true and correct in all material respects on and as of the date hereof
      (provided,
      however,
      that
      such materiality qualification shall only apply to representations or warranties
      not otherwise qualified by materiality) and on and as of the date of the Closing
      with the same effect as though such representations and warranties had been
      made
      as of the Closing; provided, however, that if a representation and warranty
      is
      made as of a specific date, it shall be true and correct in all material
      respects only as of such date.

    

    (b) Performance.
      The
      Company shall have performed and complied in all material respects with all
      agreements, obligations and conditions contained in this Agreement that are
      required to be performed or complied with by it on or before the Closing and
      shall have obtained all approvals, consents and qualifications necessary to
      complete the purchase and sale described herein; provided,
      however,
      that
      the Company may furnish to each Purchaser a facsimile copy of the warrant
      representing the Purchased Warrants and the stock certificate representing
      the
      Purchased Shares, with the original warrant and stock certificate held in trust
      by counsel for the Company until delivery thereof on the next business
      day.

    

    (c) Compliance
      Certificate.
      The
      Company will have delivered to the Purchasers a certificate signed on its behalf
      by its Chief Executive Officer or Chief Financial Officer certifying that the
      conditions specified in Sections 6(a) and 6(b) hereof have been
      fulfilled.

    

    (d) Agreement.
      The
      Company shall have executed and delivered to the Purchasers this
      Agreement.

    

    (e) Securities
      Exemptions.
      The
      offer and sale of the Purchased Securities to the Purchasers pursuant to this
      Agreement shall be exempt from the registration requirements of the Securities
      Act and the registration and/or qualification requirements of all applicable
      state securities laws.

    

    (f) No
      Suspension of Trading or Listing of Common Stock.
      The
      Common Stock of the Company (i) shall be designated for quotation or listed
      on
      the OTCBB and (ii) shall not have been suspended from trading on the
      OTCBB.

    

    (g) Good
      Standing Certificates.
      The
      Company shall have delivered to the Purchasers a certificate of the Secretary
      of
      State of the State of Delaware, dated as of a date within ten days of the date
      of the Closing, with respect to the good standing of the Company.

     

    
      
        
        

      

      
        -30-

        
          

        

      

      
        
        

      

    

     

    (h) Secretary’s
      Certificate.
      The
      Company shall have delivered to the Purchasers a certificate of the Company
      executed by the Company’s Secretary attaching and certifying to the truth and
      correctness of (i) the Certificate of Incorporation, (ii) the Bylaws and
      (iii) the resolutions adopted by the Company’s Board of Directors in
      connection with the transactions contemplated by this Agreement.

    

    (i) Opinion
      of Company Counsel.
      The
      Purchasers will have received an opinion on behalf of the Company, dated as
      of
      the date of the Closing, from Sichenzia Ross Friedman Ference LLP, counsel
      to
      the Company, in the form attached as Exhibit
      C.

    

    (j) No
      Statute or Rule Challenging Transaction.
      No
      statute, rule, regulation, executive order, decree, ruling, injunction, action,
      proceeding or interpretation shall have been enacted, entered, promulgated,
      endorsed or adopted by any court or governmental authority of competent
      jurisdiction or any self-regulatory organization or the staff of any of the
      foregoing, having authority over the matters contemplated hereby that questions
      the validity of, or challenges or prohibits the consummation of, any of the
      transactions contemplated by this Agreement.

    

    (k) Other
      Actions.
      The
      Company shall have executed such certificates, agreements, instruments and
      other
      documents, and taken such other actions as shall be customary or reasonably
      requested by the Purchasers in connection with the transactions contemplated
      hereby.

    

    7. Conditions
      to The Company’s Obligations at the Closing.
      The
      obligations of the Company to the Purchasers under this Agreement are subject
      to
      the fulfillment or waiver, on or before the Closing, of each of the following
      conditions:

    

    (a) Representations
      and Warranties True.
      The
      representations and warranties of the Purchasers contained in Section 4 shall
      be
      true and correct in all material respects on and as of the date hereof
      (provided,
      however,
      that
      such materiality qualification shall only apply to representations and
      warranties not otherwise qualified by materiality) and on and as of the date
      of
      the Closing with the same effect as though such representations and warranties
      had been made as of the Closing.

    

    (b) Performance.
      The
      Purchasers shall have performed and complied in all material respects with
      all
      agreements, obligations and conditions contained in this Agreement that are
      required to be performed or complied with by it on or before the Closing and
      shall have obtained all approvals, consents and qualifications necessary to
      complete the purchase and sale described herein.

    

    (c) Agreement.
      The
      Purchasers shall have executed and delivered to the Company this Agreement
      (and
      Appendix I and Appendix II hereto).

    

    (d) Securities
      Exemptions.
      The
      offer and sale of the Purchased Securities to the Purchasers pursuant to this
      Agreement shall be exempt from the registration requirements of the Securities
      Act and the registration and/or qualification requirements of all applicable
      state securities laws.

     

    
      
        
        

      

      
        -31-

        
          

        

      

      
        
        

      

    

     

    (e) Payment
      of Purchase Price.
      The
      Purchasers shall have delivered to the Company by wire transfer of immediately
      available funds, full payment of the purchase price for the Purchased Securities
      as specified in Section 1(b).

    

    (f) No
      Statute or Rule Challenging Transaction.
      No
      statute, rule, regulation, executive order, decree, ruling, injunction, action,
      proceeding or interpretation shall have been enacted, entered, promulgated,
      endorsed or adopted by any court or governmental authority of competent
      jurisdiction or any self-regulatory organization or the staff of any of the
      foregoing, having authority over the matters contemplated hereby that questions
      the validity of, or challenges or prohibits the consummation of, any of the
      transactions contemplated by this Agreement.

    

    8. Subsequent
      Financing; Right of Participation.
      During
      the period commencing on the date of the Closing Date and ending on the date
      that is sixty (60) days following the Closing Date, the Company covenants and
      agrees to promptly notify in writing (a “Rights
      Notice”)
      the
      Purchasers of the terms and conditions of any proposed financing by the Company
      of its Common Stock with a strategic investor (a “Subsequent
      Financing”).
      The
      Rights Notice shall describe, the material terms of the proposed Subsequent
      Financing, the proposed closing date of the Subsequent Financing and a list
      of
      the proposed definitive documentation to be entered into in connection
      therewith. The Rights Notice shall provide each Purchaser an option (the
“Rights
      Option”)
      during
      the three (3) trading days following delivery of the Rights Notice (the
“Option
      Period”)
      to
      purchase up to its pro rata share of the number of Purchased Shares subscribed
      for hereunder, together with the other Purchasers exercising the Rights Option,
      for up to fifty percent (50%) of the amount of the securities being offered
      in
      such Subsequent Financing on the same, absolute terms and conditions as
      contemplated by such Subsequent Financing; provided, however, that no Purchaser
      shall be required to comply with any non-monetary term or condition or otherwise
      provide any goods or services provided by such strategic investor in any
      Subsequent Financing. If any Purchaser elects not to participate in such
      Subsequent Financing, the other Purchasers may participate on a pro-rata basis
      so long as such participation in the aggregate does not exceed fifty percent
      (50%) of the total amount of the Subsequent Financing. For purposes of this
      Section, all references to “pro rata” means, for any Purchaser electing to
      participate in such Subsequent Financing, the percentage obtained by dividing
      (x) the total number of Purchased Shares purchased by such Purchaser at the
      Closing by (y) the total number of Purchased Shares purchased by all of the
      participating Purchasers at the Closing. If the Company does not receive notice
      of exercise of the Rights Option from any of the Purchasers within the Option
      Period, the Company shall have the right to close the Subsequent Financing
      on
      the scheduled closing date with the strategic partner (and, if applicable,
      with
      such Purchasers as shall have exercised their Rights Option); provided that
      all
      of the material terms and conditions of the closing are the same as those
      provided to the Purchasers in the Rights Notice. If the closing of the proposed
      Subsequent Financing does not occur within 60 days from the date the Rights
      Notice is given, any closing of the contemplated Subsequent Financing or any
      other Subsequent Financing shall be subject to all of the provisions of this
      Section, including, without limitation, the delivery of a new Rights
      Notice.

    

    Notwithstanding
      the foregoing, during the period commencing on the Closing Date and ending
      on
      the date that is sixty (60) days following the Closing Date, the Company
      covenants and agrees that it will not consummate a Subsequent Financing with
      a
      strategic investor at a price that is less than the Per Unit Price.

     

    
      
        
        

      

      
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    9. MISCELLANEOUS.

    

    (a) Successors
      and Assigns.
      The
      terms and conditions of this Agreement will inure to the benefit of and be
      binding upon the respective successors and permitted assigns of the parties.
      The
      Company shall not assign this Agreement or any rights or obligations hereunder
      without the prior written consent of the Purchasers holding a majority of the
      total aggregate number of Purchased Shares and Underlying Shares then
      outstanding (excluding any shares sold to the public pursuant to Rule 144 or
      otherwise). Any Purchaser may assign its rights under this Agreement to any
      person to whom the Purchaser assigns or transfers any Purchased Securities,
      provided that such transferee agrees in writing to be bound by the terms and
      provisions of this Agreement, and such transfer is in compliance with the terms
      and provisions of this Agreement and permitted by federal and state securities
      laws.

    

    (b) Governing
      Law.
      This
      Agreement will be governed by and construed and enforced under the internal
      laws
      of the State of New York, without reference to principles of conflict of laws
      or
      choice of laws. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE,
      AND
      AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE
      HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY
      TRANSACTION CONTEMPLATED HEREBY.

    

    (c) Survival.
      The
      representations and warranties of the Company and the Purchasers contained
      in
      Sections 3 and 4 of this Agreement shall survive until the earlier of (i) the
      fourth anniversary of the Closing Date or (ii) the occurrence of a Fundamental
      Transaction.

    

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

    

    (e) Headings.
      The
      headings and captions used in this Agreement are used for convenience only
      and
      are not to be considered in construing or interpreting this Agreement. All
      references in this Agreement to sections, paragraphs, exhibits and schedules
      will, unless otherwise provided, refer to sections and paragraphs hereof and
      exhibits and schedules attached hereto, all of which exhibits and schedules
      are
      incorporated herein by reference.

    

    (f) Notices.
      Any
      notices and other communications required or permitted under this Agreement
      shall be in writing and shall be delivered (i) personally by hand or by courier,
      (ii) mailed by United States first-class mail, postage prepaid or (iii) sent
      by
      facsimile directed (A) if to a Purchaser, at such Purchaser’s address or
      facsimile number set forth on such Purchaser’s signature page to this Agreement,
      or at such address or facsimile number as such Purchaser may designate by giving
      at least ten days’ advance written notice to the Company or (B) if to the
      Company, to its address or facsimile number set forth below, or at such other
      address or facsimile number as the Company may designate by giving at least
      ten
      days’ advance written notice to the Purchaser. All such notices and other
      communications shall be deemed given upon (I) receipt or refusal of receipt,
      if
      delivered personally, (II) three days after being placed in the mail, if mailed,
      or (III) confirmation of facsimile transfer, if faxed.

     

    
      
        
        

      

      
        -33-

        
          

        

      

      
        
        

      

    

     

    The
      address of the Company for the purpose of this Section 8(f) is as
      follows:

    

    ROO
      Group, Inc.

    228
      East
      45th
      Street,
      8th
      Floor

    New
      York,
      NY 10017

    Tel:
      (646) 352-0260

    Fax:
      (646) 619-4074

    Attention:
      Kaleil Isaza Tuzman

    

    with
      a
      copy to:

    

    Sichenzia
      Ross Friedman Ference LLP

    61
      Broadway, 32nd
      Floor

    New
      York,
      NY 10006

    Tel:
      (212) 930-9700

    Fax:
      (212) 930-9725

    Attention:
      Richard A. Friedman, Esq.

    

    (g) Amendments
      and Waivers.
      This
      Agreement may be amended and the observance of any term of this Agreement may
      be
      waived only with the written consent of the Company and the Purchasers holding
      a
      majority of the total aggregate number of Purchased Shares and Underlying Shares
      then outstanding (excluding any shares sold to the public pursuant to Rule
      144
      or otherwise). Any amendment effected in accordance with this Section 8(g)
      will
      be binding upon the Purchasers, the Company and their respective successors
      and
      permitted assigns.

    

    (h) Severability.
      If any
      provision of this Agreement is held to be unenforceable under applicable law,
      such provision will be excluded from this Agreement and the balance of the
      Agreement will be interpreted as if such provision were so excluded and will
      be
      enforceable in accordance with its terms.

    

    (i) Entire
      Agreement.
      This
      Agreement, together with all exhibits and schedules hereto and thereto,
      including, without limitation, the Purchased Warrants, constitutes the entire
      agreement and understanding of the parties with respect to the subject matter
      hereof and supersedes any and all prior negotiations, correspondence,
      agreements, understandings, duties or obligations between the parties with
      respect to the subject matter hereof.

    

    (j) No
      Additional Agreements.
      The
      Company does not have any written or oral contract, agreement, arrangement
      or
      understanding with any Purchaser with respect to the transactions contemplated
      by this Agreement other than as expressly stated herein. 

    

    (k) Further
      Assurances.
      From and
      after the date of this Agreement, upon the request of the Company or the
      Purchasers, the Company and the Purchasers will execute and deliver such
      instruments, documents or other writings, and take such other actions, as may
      be
      reasonably necessary or desirable to confirm and carry out and to effectuate
      fully the intent and purposes of this Agreement.

     

    
      
        
        

      

      
        -34-

        
          

        

      

      
        
        

      

    

     

    (l) Meaning
      of Include and Including.
      Whenever
      in this Agreement the word “include” or “including” is used, it shall be deemed
      to mean “include, without limitation” or “including, without limitation,” as the
      case may be, and the language following “include” or “including” shall not be
      deemed to set forth an exhaustive list.

    

    (m) Fees,
      Costs and Expenses.
      All
      fees, costs and expenses (including attorneys’ fees and expenses) incurred by
      any party hereto in connection with the preparation, negotiation and execution
      of this Agreement and the exhibits and schedules hereto and the consummation
      of
      the transactions contemplated hereby and thereby shall be the sole and exclusive
      responsibility of such party. In addition, the Company will pay the costs
      associated with any filings with, or compliance with any of the requirements
      of
      any governmental authorities. 

    

    (n) 8-K
      Filing and Publicity; Standstill. On
      or
      before 8:30 a.m., eastern time, on the first business day following the date
      of
      this Agreement, the Company shall issue a press release describing the terms
      of
      the transactions contemplated by this Agreement, but not including the names
      of
      the Purchasers or the individual amounts of Purchased Securities purchased
      hereby without the Purchaser’s consent. On or before 8:30 a.m., eastern time, on
      the second business day following the date of this Agreement, the Company shall
      file a Current Report on Form 8-K describing the terms of the transactions
      contemplated by this Agreement in the form required by the Exchange Act and
      attaching this Agreement as an exhibit to such filing (the “8-K
      Filing”),
      but
      not including the names of the Purchasers or the individual amounts of Purchased
      Securities purchased hereby without the Purchaser’s consent. From and after the
      filing of the 8-K Filing with the SEC, the Purchasers as a consequence of
      participating in the transactions contemplated by this Agreement shall not
      be in
      possession of any material, nonpublic information received from the Company,
      any
      of its subsidiaries or any of their respective officers, directors, employees
      or
      agents authorized to disclose such information, that is not disclosed in the
      8-K
      Filing. The Company shall not, and shall cause each of its subsidiaries and
      its
      and each of their respective officers, directors, employees and agents, not
      to,
      provide the Purchasers with any material, nonpublic information regarding the
      Company or any of its subsidiaries from and after the filing of the 8-K Filing
      with the SEC without the consent of the Purchasers. If a Purchaser has, or
      believes it has, received any such material, nonpublic information regarding
      the
      Company or any of its subsidiaries prior to the Closing Date, it shall provide
      the Company with written notice thereof and the Company shall within five (5)
      business days thereafter, make public disclosure of such material, nonpublic
      information if permitted under applicable law or without breach or violation
      of
      any agreement, contract or other obligation of the Company unless the Board
      of
      Directors of the Company shall determine that such disclosure would reasonably
      be expected to result in a material and adverse effect on the Company or its
      business, prospects, finances or properties. Except
      for such disclosure as the Company is advised by counsel is required to be
      included in documents filed with the SEC or otherwise required by law, the
      Company shall not use the name of, or make reference to, any Purchaser or any
      of
      its Affiliates or investment advisers in any press release or in any public
      manner (including any reports or filings made by the Company under the Exchange
      Act) without such Purchaser's prior written consent. 

     

    
      
        
        

      

      
        -35-

        
          

        

      

      
        
        

      

    

     

    (o) Stock
      Splits, Dividends and other Similar Events.
      The
      provisions of this Agreement shall be appropriately adjusted to reflect any
      stock split, stock dividend, reorganization or other similar event that may
      occur with respect to the Company after the date hereof.

    

    (p) Remedies.
      In
      addition to being entitled to exercise all rights provided herein or granted
      by
      law, including recovery of damages, each Purchaser and the Company will be
      entitled to specific performance under this Agreement. The parties agree that
      monetary damages may not be adequate compensation for any loss incurred by
      reason of any breach of obligations described in the foregoing sentence and
      hereby agrees to waive in any action for specific performance of any such
      obligation the defense that a remedy at law would be adequate.

    

    (q) Several
      Liability; Advice. Each
      Purchaser agrees that no other Purchaser nor the respective controlling persons,
      officers, directors, partners, agents or employees of any other Purchaser shall
      be liable to such Purchaser for any losses incurred by such Purchaser in
      connection with its investment in the Company. Each Purchaser acknowledges
      that
      it is not relying upon any person, firm or corporation (including without
      limitation any other Purchaser), other than the Company and its officers and
      directors (acting in their capacity as representatives of the Company), in
      deciding to invest and in making its investment in the Company. The Company
      acknowledges that no Purchaser is acting or has acted as an advisor, agent
      or
      fiduciary of the Company (or in any similar capacity) with respect to this
      Agreement and any advice given by any Purchaser or any of its representatives
      in
      connection with this Agreement is merely incidental to the Purchasers’ purchase
      of securities of the Company hereunder.

    

    [Remainder
      of page intentionally left blank.]

    

    *
      *
      *

    

    
      
        
        

      

      
        -36-

        
          

        

      

      
        
        

      

    

    

    
 

    The
      parties hereto have executed this Agreement as of the date and year first above
      written.

     

    
      	 	 	 
	 	Roo
              Group,
              Inc.
	 
 	 
 	 
 
	 	By: 	/s/ Kaleil
              Isaza Tuzman
	 	
              
Kaleil
              Isaza Tuzman
	 	Chief
              Executive Officer

    

    

    

    

    

    [PURCHASER
      SIGNATURE PAGES TO FOLLOW]

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    SIGNATURE
      PAGE TO

    

    SECURITIES
      PURCHASE AGREEMENT

    

    DATED
      AS OF MAY 8, 2008

    

    BY
      AND AMONG

    

    ROO
      GROUP, INC.

    

    AND
      EACH PURCHASER NAMED THEREIN

    

    The
      undersigned hereby executes and delivers to ROO Group, Inc. d/b/a KIT digital,
      the Securities Purchase Agreement (the “Agreement”)
      to
      which this signature page is attached, which Agreement and signature page,
      together with all counterparts of such Agreement and signature pages of the
      other Purchasers named in such Agreement, shall constitute one and the same
      document in accordance with the terms of such Agreement.

    

    Number
      of
      Units: __________

    

    Name
      of Purchaser

    

    Signature:
      ____________________________

    

    By:
      _________________________________ 

    

    Title:
      ________________________________

    

    Address:
      _____________________________

     

                    
      _____________________________

    
       

                      
        _____________________________

    

    

    

    Telephone:
      ____________________________

    

    Fax:
      __________________________________

    

    Tax
      ID
      Number: _________________________

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    EXHIBIT
      A

    

    Schedule
      of Purchasers

    

     

     

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    EXHIBIT
      A-1

    

    

    British
      Columbia Investment Management Corporation

    

    Public
      Sector Pension Investment Board

    

    Radian
      Group Inc. 

    

    New
      York State Nurses Association Pension Plan

    

    Retirement
      Plan for Employees of Union Carbide Corporation and its Participating Subsidiary
      Companies

    

    Wellington
      Trust Company, National Association Multiple Common Trust Funds Trust, Emerging
      Companies Portfolio 

    

    The
      Robert Wood Johnson Foundation

    

    Lockheed
      Martin Corporation Master Retirement Trust

    

    Dow
      Employees’ Pension Plan 

    

    Oregon
      Public Employees Retirement Fund

    

    Wellington
      Trust Company, National Association Multiple Collective Investment Funds Trust,
      Emerging Companies Portfolio 

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    EXHIBIT
      B

    

    Form
      Of Warrant

    

    

     

     

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    EXHIBIT
      C

    

    Disclosure
      Letter

    

    

    Schedule
      3(b)

    Capitalization
      

    
      	 	
              (i)

            	
              Outstanding
                Warrants:

            

    

    

    A. Warrants
      to purchase 680,600 shares of Common Stock exercisable until five years from
      the
      date of issuance (December 28, 2005) at a purchase price of $4.00 per share.
      

    

    B. Warrants
      to purchase 155,000 shares of Common Stock exercisable until five years from
      the
      date of issuance (December 28, 2005) at a purchase price of $3.00 per share.
      The
      warrant holders may exercise these warrants on a cashless basis commencing
      one
      year from the date of issuance if the closing bid price of the Company’s common
      stock is greater that the exercise price of the warrant shares and the shares
      of
      Common Stock underlying the warrants are not then registered pursuant to an
      effective registration statement.

    

    C. Warrants
      to purchase an aggregate of 150,000 shares of Common Stock, exercisable for
      a
      period of five years from the date of issuance (October 23, 2005) at a purchase
      price of $1.50 per share. The warrant holders may exercise these warrants on
      a
      cashless basis if the shares of Common Stock underlying the warrants are not
      then registered pursuant to an effective registration statement.

    

    D. Warrants
      to purchase 50,000 shares of Common Stock exercisable until five years from
      the
      date of issuance (October 23, 2005) at a purchase price of $3.00 per share.
      

    

    E. Warrants
      to purchase an aggregate of 60,000 shares of Common Stock, exercisable until
      five years from the date of issuance (August 18, 2005) at a purchase price
      of
      $1.50 per share. The holders may exercise these warrants on a cashless basis
      if
      the shares of Common Stock underlying the warrants are not then registered
      pursuant to an effective registration statement.

    

    F. Warrants
      to purchase an aggregate of 90,000 shares of Common Stock, exercisable until
      five years from the date of issuance (August 23, 2005) at a purchase price
      of
      $1.50 per share, as adjusted (the “August 2005 $1.50 Warrants”). The warrant
      holders may exercise these warrants on a cashless basis if the shares of Common
      Stock underlying the warrants are not then registered pursuant to an effective
      registration statement. 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    G. Warrants
      to purchase an aggregate of 48,000 shares of Common Stock, exercisable until
      five years from the date of issuance (August 23, 2005) at a purchase price
      of
      $1.25 per share, as adjusted (the “August 2005 $1.25 Warrants”). The warrant
      holders may exercise these warrants on a cashless basis if the shares of Common
      Stock underlying the warrants are not then registered pursuant to an effective
      registration statement. 

    

    H. Warrants
      to purchase an aggregate of 22,000 shares of Common Stock, exercisable until
      five years from the date of issuance (July 18, 2005) at a purchase price of
      $10.00 per share, as adjusted (the “July 2005 Warrants”). The warrant holders
      may exercise these warrants on a cashless basis if the shares of Common Stock
      underlying the warrants are not then registered pursuant to an effective
      registration statement. 

    

    I. Warrants
      to purchase an aggregate of 60,000 shares of Common Stock exercisable until
      five
      years from the date of issuance (1/3 were issued September 10, 2004, 1/3 were
      issued November 23, 2004 and 1/3 were issued February 3, 2005) at a purchase
      price of $5.00 per share, as adjusted. The holders may exercise these warrants
      on a cashless basis if the shares of Common Stock underlying the warrants are
      not then registered pursuant to an effective registration statement.

    

    (i) The
      warrants described above in paragraphs H and I provide for the adjustment of
      the
      purchase price and number of warrant shares if the Company issues or sells
      any
      shares of its common stock for no consideration or for a consideration per
      share
      less than the market price on the date of issuance. Any such required adjustment
      shall be a weighted average adjustment. The market price is defined as the
      average means the average of the last reported sale prices for the shares of
      Common Stock on the OTCBB for the five (5) Trading Days immediately preceding
      such date as reported by Bloomberg, or (ii) if the OTCBB is not the principal
      trading market for the shares of Common Stock, the average of the last reported
      sale prices on the principal trading market for the Common Stock during the
      same
      period as reported by Bloomberg, or (iii) if market value cannot be calculated
      as of such date on any of the foregoing bases, the Market Price shall be the
      fair market value as reasonably determined in good faith by (a) the Board of
      Directors of the Company or, at the option of a majority-in-interest of the
      holders of the outstanding Warrants by (b) an independent investment bank of
      nationally recognized standing in the valuation of businesses similar to the
      business of the corporation. 

    

    (b)  Upon
      each
      adjustment of the exercise price of the warrants, the number of shares of Common
      Stock issuable upon exercise of the warrant will be adjusted by multiplying
      a
      number equal to the exercise price in effect immediately prior to such
      adjustment by the number of shares of Common Stock issuable upon exercise of
      the
      warrant immediately prior to such adjustment and dividing the product so
      obtained by the adjusted exercise price.

    

    

    J. Warrants
      to purchase an aggregate of 50,000 shares of Common Stock, exercisable until
      five years from the date of issuance (July 28, 2006) at a purchase price of
      $2.00 per share. The warrant holders may exercise these warrants on a cashless
      basis if the shares of Common Stock underlying the warrants are not then
      registered pursuant to an effective registration statement. 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    K. Warrants
      to purchase an aggregate of 1,735,000 shares of Common Stock, exercisable until
      five years from the date of issuance (August 23, 2006) at a purchase price
      of
      $2.00 per share. The warrant holders may exercise these warrants on a cashless
      basis if after one year of issuance, the shares of Common Stock underlying
      the
      warrants are not then registered pursuant to an effective registration
      statement. The warrants are also callable if at any time after issuance the
      market price of the Company’s common stock exceeds $5.00. 

    

    L. Warrants
      to purchase an aggregate of 791,369 shares of Common Stock, exercisable until
      five years from the date of issuance (August 18, 2006) at a purchase price
      of
      $1.25 per share. The warrant holders may exercise these warrants on a cashless
      basis if after one year of issuance, the shares of Common Stock underlying
      the
      warrants are not then registered pursuant to an effective registration
      statement. The warrants are also callable if at any time after issuance the
      market price of the Company’s common stock exceeds $5.00. 

    

    M. Warrants
      to purchase an aggregate of 475,000 shares of Common Stock, exercisable until
      five years from the date of issuance (August 18, 2006) at a purchase price
      of
      $2.00 per share. The warrant holders may exercise these warrants on a cashless
      basis if after one year of their issuance, the shares of Common Stock underlying
      the warrants are not then registered pursuant to an effective registration
      statement. The warrants are also callable if at any time after issuance the
      market price of the Company’s common stock exceeds $5.00. 

     

    N. Warrants
      to purchase an aggregate of 2,513,513 shares of Common Stock, exercisable until
      five years from the date of issuance (November 16, 2006) at a purchase price
      of
      $3.00 per share. The warrant holders may exercise these warrants on a cashless
      basis if after one year of their issuance, the shares of Common Stock underlying
      the warrants are not then registered pursuant to an effective registration
      statement. The warrants are also callable if at any time after issuance the
      market price of the Company’s common stock exceeds $5.00. 

    

    P. Warrants
      to purchase an aggregate of 326,757 shares of Common Stock, exercisable until
      five years from the date of issuance (November 16, 2006) at a purchase price
      of
      $3.00 per share. The warrant holders may exercise these warrants on a cashless
      basis if after one year of their issuance, the shares of Common Stock underlying
      the warrants are not then registered pursuant to an effective registration
      statement. The warrants are also callable if at any time after issuance the
      market price of the Company’s common stock exceeds $5.00. 

     

    Q. Warrants
      to purchase an aggregate of 3,000,000 shares of Common Stock, exercisable until
      five years from the date of issuance (May 9, 2007) at a purchase price of $4.50
      per share. The warrant holders may exercise these warrants on a cashless basis
      if after one year of their issuance, the shares of Common Stock underlying
      the
      warrants are not then registered pursuant to an effective registration
      statement. The warrants are also callable if at any time after issuance the
      market price of the Company’s common stock exceeds $6.00 for 10 trading days
      during any 20 consecutive trading days, provided that the Company may not call
      the warrant unless there is a current registration statement covering the
      underlying shares and the Company’s stock is listed on an exchange or quoted on
      the OTCBB. 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    R.
       Pursuant
      to a Separation Agreement and Release dated March 30, 2008, the Company granted
      to Robert Petty, fully vested warrants to purchase up to 7,000,000 common shares
      in the Company at an exercise price equal to the 3-day trailing weighted average
      closing price per share as of March 26, 2008 (the Effective Date”) (the
“Exercise Price”). The Warrants shall be exercisable in one-twelfth
      (1/12th)
      increments during the period commencing six (6) months after the March 26,
      2008
      (the “Effective Date”) and ending on the first (1st)
      anniversary date thereafter, provided however that if the Company experiences
      a
      change of control (as defined in the Company’s current 2008 Employee Stock
      Option Plan), the Warrants shall immediately become fully exercisable.

    

    S.
       Pursuant
      to a Separation and Re-Employment Agreement dated March 30, 2008, the Company
      granted to Robin Smyth, two (2) tranches of warrants (collectively, the
“Warrants”) on March 30, 2008 (the “Effective Date”), the first tranche gives
      Mr. Smyth the right to purchase up to 1,650,000 common shares in the Company
      (the “First Tranche”) and the second tranche gives Mr. Smyth the right to
      purchase up to 1,200,000 common shares in the Company (the “Second Tranche”)
      both at an exercise price equal to the 3-day trailing weighted average closing
      price per share as of the Effective Date. The First Tranche shall vest
      immediately upon the Effective Date and shall be exercisable in one-twelfth
      (1/12th)
      increments during the period commencing six (6) months after the Effective
      Date
      and ending on the first (1st)
      anniversary date thereafter. The Second Tranche shall vest during the 3-year
      period commencing upon the Effective Date (1/36th
      per
      month) and shall cease to vest at any time during which Mr. Smyth’s employment
      with the Company terminates for any reason.

    

    (ii) Outstanding
      Options:   

    

    
      	
               

            	
               

            	
              Avg

            	
               

            
	
               

            	 	
              Exercise

            	
               

            
	
              Name

            	
              Qty

            	
              Price
                $

            	
              Notes

            
	
              Options
                Outstanding under 2008 Company Stock Option Plan

            	
               

            	
               

            	
               

            
	
              Gavin
                Campion

            	
               
                1,200,000

            	
               
                $0.08

            	
              President

            
	
              Robin
                Smyth

            	
               
                410,000

            	
               
                $0.08

            	
              Executive
                Director and CFO

            
	
               Robert
                Petty

            	
               
                110,000

            	
               $0.08

            	
               Director

            
	
              Kamal
                El-Tayara

            	
               
                285,000

            	
               $0.08

            	
               Director

            
	
               Daniel
                Hart

            	
               
                285,000

            	
               $0.13

            	
               Director

            
	
               Lars
                Kroijer

            	
               
                285,000

            	
               $0.08

            	
               Director

            
	
               Wayne
                Walker

            	
               
                285,000

            	
               $0.08

            	
               Director

            
	
              Other
                Staff Members

            	
               
                5,425,000

            	
               $0.08
                

            	
               

            
	
              Total

            	
              8,285,000

            	 	 
	 	
               

            	 	 
	
              Options
                outstanding under 2004 Company Stock Option Plan

            	
               

            	
               

            	
               

            
	
              KIT
                Capital, Ltd.

            	
               
                2,100,000

            	
               
                $0.1745

            	
              Chairman
                and CEO

            
	
              Other
                Staff Members

            	
               
                1,552,019

            	
               
                $2.72 

            	
               

            
	
              Total

            	
              3,652,019

            	 	 
	 	
               

            	 	 
	
               

            	
               

            	
               

            	
               

            
	
              Options
                not under Plan

            	
               

            	
               

            	
               

            
	
              Consultants
                Options

            	
                  550,000

            	
               
                $4.58

            	
               

            
	
               

            	
               

            	
               

            	
               

            
	
              Total
                Options Outstanding

            	
               
                12,487,019

            	
               

            	
               

            

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    Pursuant
      to the Executive Management Agreement with KIT Capital Limited dated December
      18, 2007, the Company agreed to create a synthetic or “phantom” stock plan
      pursuant to which the Company will grant “phantom” shares equal to 2,100,000
      shares of the Company’s common stock which will vest, pro rata on a monthly
      basis over a three year period.

    

    

    Voting
      Agreements

    

    Steve
      Quinn has executed an Irrevocable Proxy (the “Proxy”) dated March 21, 2008,
      pursuant to which Mr. Quinn appointed the Company as his sole exclusive attorney
      and proxy with respect to all of his shares of the Company. The Proxy expires
      on
      June 10, 2008. 

    

    Schedule
      3(c)

    Subsidiaries

    

    ROO
      Media
      Corporation, a Delaware corporation and wholly owned subsidiary of the
      Company

    

    ROO
      Media
      (Australia) Pty Limited, an Australia corporation and wholly owned subsidiary
      of
      the Company

    

    ROO
      Broadcasting Ltd., an Australia corporation and wholly owned subsidiary of
      the
      Company

    

    Undercover
      Media Pty Ltd., an Australia corporation and wholly owned subsidiary of the
      Company

    

    ROO
      TV
      Pty. Ltd., an Australia corporation and wholly owned subsidiary of the
      Company

    

    Bickhams
      Media, Inc., a Delaware corporation and wholly owned subsidiary of the
      Company

    

    VideoDome.Com
      Networks, Inc., a wholly owned subsidiary of Bickhams Media, Inc. and a
      California corporation

    

    ROO
      Media
      Europe Limited, a United Kingdom corporation and wholly owned subsidiary of
      the
      Company

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    ROO
      HD,
      Inc., a Delaware corporation and wholly owned subsidiary of the
      Company

    

    Reality
      Group Pty. Ltd., an Australia corporation and 51% owned subsidiary of the
      Company

    

    Sputnik
      Agency Pty. Ltd., an Australia corporation and 51% owned subsidiary of the
      Company

    

    Schedule
      3(h)

    Litigation

    

    The
      Company’s wholly owned subsidiary, ROO HD, Inc. (“ROO HD”), has been served as a
      defendant in a lawsuit entitled Julie Vittengl et
      al.
      vs. ROO
      HD, Inc., a purported class action pending in New York Supreme Court, Saratoga
      County. The suit, brought by four former employees of Wurld Media, Inc.
      (“Wurld”) purportedly on behalf of themselves and “others similarly situated,”
claims that ROO HD’s acquisition of certain assets of Wurld was a fraudulent
      conveyance and that ROO HD is the alter-ego of Wurld. Plaintiffs seek the
      appointment of a receiver to take charge of the Company’s property in
      constructive trust for plaintiff and payment of plaintiff’s unpaid wages and
      costs of suit, both in an unspecified dollar amount. ROO
      HD
      timely filed
      its
      answer to the complaint, and there have been no further developments. ROO HD
      believes the suit is without merit and will defend it vigorously.

    

    On
      December 24, 2007, Rick Gell and Todd Pavlin, two former consultants of ROO
      Media sued that entity together with ROO Group and ROO Group’s Founder Chairman
      Robert Petty and ROO Media’s former President and Chief Operating Officer Steve
      Quinn in New York Supreme Court, New York County, alleging breach of an oral
      employment agreement, fraudulent inducement and other claims relating to the
      plaintiffs’ employment at ROO Media. Defendants have moved to dismiss the
      complaint, and the motion is scheduled to be argued in June 2008. We believe
      the
      suit is without merit and will defend it vigorously.

    

    

    Schedule
      3(i)

    Reports

    

    The
      Company untimely filed a current report on Form 8-K reporting the purchase
      of
      all of the outstanding shares of common stock of Bickhams Media, Inc., a
      Delaware corporation.

    

    The
      Company untimely filed a current report on Form 8-K reporting entering into
      a
      new lease agreement and changing the location of its principal executive office
      in New York.

    

    The
      Company untimely filed a current report on Form 8-K in connection with the
      appointment of Lou Kerner as the Company’s CFO. 

    

    The
      Company untimely filed a current report on Form 8-K in connection with a press
      release announcing its financial results for the fiscal year ended December
      31,
      2007 and an earnings call held by the Company on March 31, 2008. 

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    Schedule
      3(l)

    Absence
      of Certain Changes since the Balance Sheet Date

    

    None

    

    Schedule
      3(n)

    Registration
      Rights

    

    The
      Company has granted piggyback registration rights to News Corporation, pursuant
      to that certain agreement date January 25, 2007. 

    

    Pursuant
      to the Securities Purchase Agreement dated May 4, 2007 by and among the Company
      and the purchasers thereto (the “Purchasers”) the Company grated piggy back
      registration rights to the Purchases in the event a registration statement
      covering the shares issued to the Purchasers was not or cease to be effective
      and continued not to be effective and during such time the Company proposes
      to
      register shares of its common stock under the Securities Act. 

    

    The
      Company has granted piggyback registration rights to Robert
      Petty in connection with warrants issued pursuant to the Separation Agreement
      and Release dated March 30, 2008. 

    

    The
      Company has granted piggyback registration rights to Robin
      Smyth in connection with warrants issued pursuant to a Separation and
      Re-Employment Agreement dated March 30, 2008.

     

    Schedule
      3(o)

    Title
      to Property and Assets

    

    Not
      applicable

    

    Schedule
      3(t)

    Transactions
      with Officers and Directors 

    

    None

    

    

    Schedule
      3(aa)

    Pensions;
      Benefits

    

    None

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    EXHIBIT
      D

    

    Opinion
      of Company Counsel

    

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    Annex
      A

    

    Plan
      of
      Distribution

    

    The
      Selling Stockholders and any of their pledgees, donees, transferees, assignees
      and successors-in-interest may, from time to time, sell any or all of their
      shares of Common Stock on any stock exchange, market or trading facility on
      which the shares are traded or in private transactions. These sales may be
      at
      fixed or negotiated prices. The Selling Stockholders may use any one or more
      of
      the following methods when selling shares:

    

    
      	 	
              ·

            	
              ordinary
                brokerage transactions and transactions in which the broker-dealer
                solicits purchasers;

            

    

    

    
      	 	
              ·

            	
              block
                trades in which the broker-dealer will attempt to sell the shares
                as agent
                but may position and resell a portion of the block as principal to
                facilitate the transaction;

            

    

    

    
      	 	
              ·

            	
              purchases
                by a broker-dealer as principal and resale by the broker-dealer for
                its
                account;

            

    

    

    
      	 	
              ·

            	
              an
                exchange distribution in accordance with the rules of the applicable
                exchange;

            

    

    

    
      	 	
              ·

            	
              privately
                negotiated transactions;

            

    

    

    
      	 	
              ·

            	
              short
                sales; 

            

    

    

    
      	 	
              ·

            	
              broker-dealers
                may agree with the selling stockholders to sell a specified number
                of such
                shares at a stipulated price per
                share;

            

    

    

    
      	 	
              ·

            	
              through
                the writing or settlement of options or other hedging transactions,
                whether through an options exchange or
                otherwise;

            

    

    

    
      	 	
              ·

            	
              a
                combination of any such methods of sale;
                and

            

    

    

    
      	 	
              ·

            	
              any
                other method permitted pursuant to applicable
                law.

            

    

    

    The
      Selling Stockholders may also sell shares under Rule 144 under the Securities
      Act, if available, rather than under this prospectus.

    

    Broker-dealers
      engaged by the Selling Stockholders may arrange for other brokers-dealers to
      participate in sales. Broker-dealers may receive commissions or discounts from
      the Selling Stockholders (or, if any broker-dealer acts as agent for the
      purchaser of shares, from the purchaser) in amounts to be negotiated. The
      Selling Stockholders do not expect these commissions and discounts to exceed
      what is customary in the types of transactions involved.

    

    The
      Selling Stockholders may from time to time pledge or grant a security interest
      in some or all of the Shares owned by them and, if they default in the
      performance of their secured obligations, the pledgees or secured parties may
      offer and sell shares of Common Stock from time to time under this prospectus,
      or under an amendment or supplement to this prospectus under Rule 424(b)(3)
      or
      other applicable provision of the Securities Act of 1933 amending the list
      of
      selling stockholders to include the pledgee, transferee or other successors
      in
      interest as selling stockholders under this prospectus.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Upon
      the
      Company being notified in writing by a Selling Stockholder that any material
      agreement has been entered into with a broker-dealer for the sale of Common
      Stock through a block trade, special offering, exchange distribution or
      secondary distribution or a purchase by a broker or dealer, a supplement to
      this
      prospectus will be filed, if required disclosing (i) the name of each such
      Selling Stockholder and of the participating broker-dealer(s), (ii) the number
      of shares involved, (iii) the price at which such shares of Common Stock were
      sold, (iv) the commissions paid or discounts or concessions allowed to such
      broker-dealers, where applicable, (v) if applicable, that such broker-dealer(s)
      did not conduct any investigation to verify the information set out or
      incorporated by reference in this prospectus, and (vi) other facts material
      to
      the transaction. In addition, upon the Company being notified in writing by
      a
      Selling Stockholder that a donee or pledgee intends to sell more than 500 shares
      of Common Stock, a supplement to this prospectus will be filed if then required
      in accordance with applicable securities laws. 

    

    The
      Selling Stockholders also may transfer the shares of Common Stock in other
      circumstances, in which case the transferees, pledgees or other successors
      in
      interest will be the selling beneficial owners for purposes of this
      prospectus.

    

    The
      Selling Stockholders may also enter into option or other transactions with
      broker-dealers or other financial institutions or the creation of one or more
      derivative securities which require the delivery to such broker-dealer or other
      financial institution of shares offered by this Prospectus, which shares such
      broker-dealer or other financial institution may resell pursuant to this
      Prospectus (as supplemented or amended to reflect such
      transaction).

    

    The
      Selling Stockholders and any broker-dealers or agents that are involved in
      selling the shares may be deemed to be “underwriters” within the meaning of the
      Securities Act in connection with such sales. In such event, any commissions
      received by such broker-dealers or agents and any profit on the resale of the
      shares purchased by them may be deemed to be underwriting commissions or
      discounts under the Securities Act. Discounts, concessions, commissions and
      similar selling expenses, if any, attributable to the sale of shares will be
      borne by the Selling Stockholder. Each Selling Stockholder has represented
      and
      warranted to the Company that it acquired the securities subject to this
      registration statement in the ordinary course of such Selling Stockholder’s
      business and, at the time of its purchase of such securities such Selling
      Stockholder had no agreements or understandings, directly or indirectly, with
      any person to distribute any such securities. 

    

    The
      Company has advised each Selling Stockholder that it may not use shares
      registered on this Registration Statement to cover short sales of Common Stock
      made prior to the date on which this Registration Statement shall have been
      declared effective by the Commission. If the Selling Stockholders use this
      prospectus for any sale of the Common Stock, they will be subject to the
      prospectus delivery requirements of the Securities Act unless an exemption
      therefrom is available. The Selling Stockholders will be responsible to comply
      with the applicable provisions of the Securities Act and Exchange Act, and
      the
      rules and regulations thereunder promulgated, including, without limitation,
      to
      the extent applicable, Regulation M, as applicable to such Selling Stockholders
      in connection with resales of their respective shares under this Registration
      Statement.

    

    In
      connection with sales of the shares of Common Stock or otherwise, the Selling
      Stockholders may enter into hedging transactions with broker-dealers, which
      may
      in turn engage in short sales of the shares of Common Stock in the course of
      hedging in positions they assume. The Selling Stockholders may also sell shares
      of Common Stock short and deliver shares of Common Stock covered by this
      prospectus to close out short positions and to return borrowed shares in
      connection with such short sales. The Selling Stockholders may also loan or
      pledge shares of Common Stock to broker-dealers that in turn may sell such
      shares.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    The
      Company is required to pay all fees and expenses incident to the registration
      of
      the shares, but we will not receive any proceeds from the sale of the Common
      Stock. The Company has agreed to indemnify the Selling Stockholders against
      certain losses, claims, damages and liabilities, including liabilities under
      the
      Securities Act and state securities laws, relating to the registration of the
      shares offered by this Prospectus. 

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Appendix
      I

    

    STOCK
      CERTIFICATE QUESTIONNAIRE

    

    

    Please
      provide us with the following information:

    
      	1.	
              The
                exact name that the Securities are to be registered in (this is the
                name
                that will appear on the stock certificate(s)). You may use a
                

            	 	
            
	 	
              nominee name if appropriate:

               

            	 	 
	
              2.

            	
              The
                relationship between the Purchaser of the Securities and the Registered
                Holder listed in response to item 1 above:

            	 	 
	3. 	
              The
                mailing address of the Registered Holder listed in response to
                

            	 	
            
	 	
              item 1 above:

               

            	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	4.	
              The
                Tax Identification Number of the Registered Holder listed in response
                to
                item 1 above:

            	 	 

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Appendix
      II

    

    REGISTRATION
      STATEMENT QUESTIONNAIRE

    

    

    In
      connection with the preparation of the Registration Statement, please provide
      us
      with the following information regarding the Purchaser.

    
      	
              A.

            	
              General
                Information

            

    

    

    1. Please
      state your organization’s name exactly as it should appear in the Registration
      Statement: ___________________________________

    

    2. Have
      you
      or your organization had any position, office or other material relationship
      within the past three years with the Company or its affiliates other than as
      disclosed in the Prospectus included in the Registration Statement?

    

     ̈
      Yes      ̈
      No

    

    If
      yes,
      please indicate the nature of any such relationships below:

     

    
      
        

      

       

      
        

      

    

    
      	
              B.

            	
              Securities
                Holdings

            

    

     

    Please
      fill in all blanks in the following questions related to your beneficial
      ownership of
      the
      Company’s capital stock. Generally, the term “beneficial
      ownership”
refers
      to any direct or indirect interest in the securities which entitles you to
      any
      of the rights or benefits of ownership, even though you may not be the holder
      of
      record of the securities. For example, securities held in “street name” over
      which you exercise voting or investment power would be considered beneficially
      owned
      by you.
      Other examples of indirect ownership include ownership by a partnership in
      which
      you are a partner or by an estate or trust of which you or any member of your
      immediate
      family
      is a
      beneficiary. Ownership of securities held in the names of your spouse, minor
      children or other relatives who live in the same household may be attributed
      to
      you.

    

    
      	
              Please
                note: If
                you have any reason to believe that any interest in securities of
                the
                Company which you may have, however remote, is a beneficial interest,
                please describe such interest. For purposes of responding to this
                questionnaire, it is preferable to err on the side of inclusion rather
                than exclusion. Where the SEC’s interpretation of beneficial
                ownership
                would require disclosure of your interest or possible interest in
                certain
                securities of the Company, and you believe that you do not actually
                possess the attributes of beneficial ownership, an appropriate response
                is
                to disclose the interest and at the same time disclaim beneficial
                ownership of the securities.

            

    

    

    1. As
      of
May
      ___, 2008,
      I owned
      outright (including shares registered in my name individually or jointly with
      others, shares held in the name of a bank, broker, nominee, depository or in
      “street name” for my account), the following number of shares of the Company’s
      capital stock: _________________.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    2. In
      addition to the number of shares I own outright as indicated by my answer to
      question B(1), as of May
      ___, 2008,
      I had or
      shared voting power or investment power, directly or indirectly, through a
      contract, arrangement, understanding, relationship or otherwise, over the
      following number of shares of the Company’s capital stock:
      _________________.

    

    If
      the
      answer to this question B(2) was not “zero,” please complete the following: with
      whom shared; and the nature of the relationship and any underlying voting trust
      agreement, investment arrangement or the like:

    

     
      Shared Voting Power:

    
      	
               

               

              Number
                of Shares

            	
               

              With
                Whom Shared

            	
               

              Nature
                of Relationship

            
	 	 	 
	 	 	 
	 	 	 

    

    

     
      Shared Investment Power:

    
      	
               

               

              Number
                of Shares

            	
               

              With
                Whom Shared

            	
               

              Nature
                of Relationship

            
	 	 	 
	 	 	 
	 	 	 

    

    

    

    As
      of
MAY___,
      2008,
      I will
      have the right to acquire ________ shares of the Company’s capital stock
      pursuant to outstanding stock options issued under the Company’s stock option
      plans and
      ______ shares pursuant to the exercise of outstanding warrants
      (none,
      indicated by “0” above).

     

    
      	
               

              Options
                and Warrants

            
	
              Class

            	
              Number
                of Shares

            
	 	 
	 	 
	 	 

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
       

      (4) Please
        identify the natural person or persons who have voting and/or investment
        control
        over the Company’s securities that you own, and state whether such person(s)
        disclaims beneficial ownership of the securities. For example, if you are
        a
        general partnership, please identify the general partners in the
        partnership.

    

     

    
      
        

      

       

      
        

      

       

      
        

      

       

      
        

      

       

      
        

      

       

      
        

      

    

     

    
      	
              C.

            	
              NASD
                Questions

            

    

     

    
       

        1. 
          Are
          you
          (i) a “member”1
          of
          the
          National Association of Securities Dealers, Inc. (the“NASD”),
          (ii) an “affiliate”2
          of a
          member of the NASD, (iii) a “person associated with a member” or an “associated
          person of a member”3
          of the
          NASD or (iv) an immediate family member4
          of any
          of the

      

      

      1             
        NASD
        defines a “member” as any broker or dealer admitted to membership in the NASD,
        or any officer or partner or branch manager of such a member, or any person
        occupying a similar status or performing a similar function for such a member.
        

      

      2            
        The term “affiliate” means a person that directly, or indirectly through one or
        more intermediaries, controls, or is controlled by, or is in common control
        with, the person specified. Persons who have acted or are acting on behalf
        of or
        for the benefit of a person include, but are not necessarily limited to,
        directors, officers, employees, agents, consultants and sales representatives.
        The following should apply for purposes of the foregoing: 

      

      (i)
        a
        person should be presumed to control a Member if the person beneficially
        owns 10
        percent or more the outstanding voting securities of a Member which is a
        corporation, or beneficially owns a partnership interest in 10 percent or
        more
        of the distributable profits or losses of a Member which is a partnership;
        

      

      (ii)
        a
        Member should be presumed to control a person if the Member and Persons
        Associated With a Member beneficially own 10 percent or more of the outstanding
        voting securities of a person which is a corporation, or beneficially own
        a
        partnership interest in 10 percent or more of the distributable profits or
        losses of a person which is a partnership; 

      

      (iii)
        a
        person
        should be presumed to be under common control with a Member if:

       

        (1)
          the
          same person controls both the Member and another person by beneficially
          owning
          10 percent
          or more of the outstanding voting securities of a Member or person which
          is a
          corporation, or by beneficially owning a partnership interest in 10 percent
          or
          more of the distributable profits or losses of a Member or person which
          is a
          partnership; or 

      

      

      (2)
        a
        person having the power to direct or cause the direction of the management
        or
        policies of the Member or such person also has the power to direct or cause
        the
        direction of the management or policies of the other entity in question.
        

      

      3             
        The NASD defines a “person associated with a member” or an “associated person of
        a member” as being every sole proprietor, partner, equity owner, officer,
        director or branch manager of any member, or any natural foregoing
        persons? If
        yes,
        please
        identify the member and describe such relationship (whether direct or indirect),
        and please respond to Question Number 2 below; if
        no,
        please
        proceed directly to Question Number 3. 

      

      Yes
        _____        No
        _____

       

      Description:

       

      2.
        If you
        answered “yes” to Question Number 1, please furnish any information as to
        whether any such member intends to participate in any capacity in the public
        offering, including the details of such participation: 

      

      Description:

       

      3.
        Are you
        or have you been an “underwriter or related person”5
        or a
        person associated with an underwriter or related person, including, without
        limitation, with respect to the proposed public offering? If yes, please
        identify the underwriter or related person and describe such relationship
        (whether direct or indirect). 

       

      Yes
        _____        No
        _____

      
Description:

       

      4.
        If
        known, please describe in detail any underwriting compensations, arrangements
        or
        dealings entered into during the previous twelve months, or proposed to be
        consummated in the next twelve months, between (i) any underwriter or related
        person, member of the NASD, affiliate of a member of the NASD, person associated
        with a member or associated person of a member of the NASD or any immediate
        family member thereof, on the one hand, and (ii) the Company, or any director,
        officer or shareholder thereof, on the other hand, which provides for the
        receipt of any item of value and/or the transfer of any warrants, options
        or
        other securities from the Company to any such person (other than the information
        relating to the arrangements with any investment firm or underwriting
        organization which may participate in the proposed public offering).

       

        
          

        

      

       

      person
        occupying a similar status or performing similar functions, or any natural
        person engaged in the investment banking or securities business who directly
        or
        indirectly controls or is controlled by such member (for example, any employee),
        whether or not any such person is registered or exempt from registration
        with
        the NASD. 

       

      

      4              Immediate
        family includes parents, mother-in-law, father-in-law, husband or wife, brother
        or sister, brother-in-law or sister-in-law, son-in-law or daughter-in-law,
        and
        children, or any other person who is supported, directly or indirectly, to
        a
        material extent, by a person associated with a member of the NASD or any
        other
        broker/dealer.

      

      5                    
        The
        term
“underwriter or related person” includes underwriters, underwriters’ counsel,
        financial consultants and advisors, finders, members of the selling or
        distribution group, and any and all other persons associated with or related
        to
        any of such persons, including members of the immediate family of such persons.
        

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      

      Description:

       

      5.
        Have you
        purchased the securities in the ordinary course of business?

       

      
        Yes
          _____        No
          _____

      

      

      The
        answers to the foregoing questions are correctly stated to the best of my
        information and belief. I shall advise the Company’s outside counsel promptly of
        any changes in the foregoing information. 

      
 

      
        	 	 
	 	(Print name of Selling
                Security
                Holder
	 	 	 
	 	
              
	 	(Signature)
	 	 
	 	By:
                	 
	 	(Name and title of signatory,
                if
                stockholder is an entity)
	 	 	 
	 	 
	 	(Date)Unassociated Document

     

    ESCROW
      AGREEMENT

     

    THIS
      ESCROW AGREEMENT (this “Agreement”)
      is
      made as of May 8, 2008, by and among ROO Group Inc., a Delaware corporation
      d/b/a KIT digital (the “Company”),
      the
      purchasers signatory hereto (each a “Purchaser”
and
      together the “Purchasers”)
      and
      Sichenzia Ross Friedman Ference LLP, with an address at 61 Broadway, New York,
      New York 10006 (the “Escrow
      Agent”).
      Capitalized terms used but not defined herein shall have the meanings set forth
      in the Securities Purchase Agreement referred to in the first
      recital.

     

    WITNESSETH:

     

    WHEREAS,
      the Purchasers will be purchasing from the Company, severally and not jointly
      with the other Purchasers, in the aggregate, up to 75,000,000 of Units (the
      “Units”), each unit consisting of one share of common stock, par value $0.0001
      per share, of the Company, and a five-year warrant to purchase one share of
      the
      Company’s common stock as set forth in the Securities Purchase Agreement (the
“Purchase
      Agreement”)
      dated
      the date hereof between the Purchasers and the Company, which securities will
      be
      issued under the terms contained herein and in the Purchase Agreement; and
      

     

    WHEREAS,
      it is intended that the purchase of the securities be consummated in accordance
      with the requirements set forth in Regulation D promulgated under the Securities
      Act of 1933, as amended; and

     

    WHEREAS,
      the Company and the Purchasers have requested that the Escrow Agent hold the
      subscription amounts with respect to the purchase of the Units in escrow upon
      the terms set forth herein; and

     

    NOW,
      THEREFORE, in consideration of the covenants and mutual promises contained
      herein and other good and valuable consideration, the receipt and legal
      sufficiency of which are hereby acknowledged and intending to be legally bound
      hereby, the parties agree as follows:

     

    ARTICLE
      1

     

    TERMS
      OF
      THE ESCROW

     

    1.1.  The
      parties hereby agree to establish an escrow account with the Escrow Agent
      whereby the Escrow Agent shall hold the funds for the purchase of the
      Units
      as contemplated by the Purchase Agreement. 

     

    1.2.  Upon
      the
      Escrow Agent’s receipt of each Purchaser’s subscription amount into its master
      escrow account, together with executed counterpart signature pages of the
      Purchase Agreement and this Agreement from each Purchaser and all other closing
      documents required under Section 7 of the Purchase Agreement, it
      shall
      advise the Company of the amount of funds it has received into its master escrow
      account.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    1.3.  Wire
      transfers to the Escrow Agent shall be made as follows:

     

    Citibank

    New
      York,
      NY

    A/C
      of
      Sichenzia Ross Friedman Ference LLP, IOLA

    A/C#:                 
      92883436

    ABA#:               
      021000089

    SWIFT
      Code: CITIUS33

    REMARK:
      ROO Group, Inc. 

    

    1.4  The
      Company promptly following being advised by the Escrow Agent that the Escrow
      Agent has received the subscription amounts from each Purchaser, copies of
      counterpart signature pages of the Purchase Agreement from each Purchaser and
      the Company and all other closing documents required under Section 7 of the
      Purchase Agreement, shall deliver to the Escrow Agent a Release Notice, in
      the
      form attached hereto as Exhibit
      A
      (the
“Release
      Notice”).

     

    1.5  Once
      the
      Escrow Agent receives the Release Notice executed by the Company, it shall
      wire
      the Subscription Amount for the Units delivered by each Purchaser per the
      disbursement instructions of the Company, it being understood that the Escrow
      Agent may transfer the aggregate subscription amount in multiple increments
      as
      the Subscription Amounts for each Purchaser are being delivered to it; provided,
      however, that the Escrow Agent shall have no obligation to wire funds in an
      amount of less than $100,000. 

     

    1.6  If
      the
      Closing shall not have occurred or the Release Notice shall not have been
      delivered by the Company, in either case, on or before May 31, 2008, then the
      Escrow Agent shall immediately, and in any event, no later than June 15, 2008,
      return by wire transfer in immediately available funds, the Subscription Amounts
      then held by the Escrow Agent to the Purchaser who delivered each such
      Subscription Amount to the Escrow Agent. 

     

    1.7  Wire
      transfers to the Company shall be made pursuant to written instructions from
      the
      Company provided to the Escrow Agent on the Closing Date. 

     

    ARTICLE
      II

     

    MISCELLANEOUS

     

    2.1  No
      waiver
      or any breach of any covenant or provision herein contained shall be deemed
      a
      waiver of any preceding or succeeding breach thereof, or of any other covenant
      or provision herein contained. No extension of time for performance of any
      obligation or act shall be deemed an extension of the time for performance
      of
      any other obligation or act.

     

    2.2  
      All
      notices or other communications required or permitted hereunder shall be in
      writing, and shall be sent as set forth in the Purchase Agreement.

     

    2.3  
      This
      Escrow Agreement shall be binding upon and shall inure to the benefit of the
      permitted successors and permitted assigns of the parties hereto.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    2.4  
      This
      Escrow Agreement is the final expression of, and contains the entire agreement
      between, the parties with respect to the subject matter hereof and supersedes
      all prior understandings with respect thereto. This Escrow Agreement may not
      be
      modified, changed, supplemented or terminated, nor may any obligations hereunder
      be waived, except by written instrument signed by the parties to be charged
      or
      by its agent duly authorized in writing or as otherwise expressly permitted
      herein.

     

    2.5  
      Whenever
      required by the context of this Escrow Agreement, the singular shall include
      the
      plural and masculine shall include the feminine. This Escrow Agreement shall
      not
      be construed as if it had been prepared by one of the parties, but rather as
      if
      all parties had prepared the same. Unless otherwise indicated, all references
      to
      Articles are to this Escrow Agreement.

     

    2.6  
      The
      parties hereto expressly agree that this Escrow Agreement shall be governed
      by,
      interpreted under and construed and enforced in accordance with the laws of
      the
      State of New York. Any action to enforce, arising out of, or relating in any
      way
      to, any provisions of this Escrow Agreement shall only be brought in a state
      or
      Federal court sitting in New York City.

     

    2.7  
      The
      Escrow Agent’s duties hereunder may be altered, amended, modified or revoked
      only by a writing signed by the Company, each Purchaser and the Escrow
      Agent.

     

    2.8  
      The
      Escrow Agent shall be obligated only for the performance of such duties as
      are
      specifically set forth herein and may rely and shall be protected in relying
      or
      refraining from acting on any instrument reasonably believed by the Escrow
      Agent
      to be genuine and to have been signed or presented by the party or parties
      hereto. The Escrow Agent shall not be personally liable for any act the Escrow
      Agent may do or omit to do hereunder as the Escrow Agent while acting in good
      faith and in the absence of gross negligence, fraud and willful misconduct,
      and
      any act done or omitted by the Escrow Agent pursuant to the advice of the Escrow
      Agent’s attorneys-at-law shall be conclusive evidence of such good faith, in the
      absence of gross negligence, fraud and willful misconduct.

     

    2.9  
      The
      Escrow Agent is hereby expressly authorized to disregard any and all warnings
      given by any of the parties hereto or by any other person or corporation,
      excepting only orders or process of courts of law and is hereby expressly
      authorized to comply with and obey orders, judgments or decrees of any court.
      In
      case the Escrow Agent obeys or complies with any such order, judgment or decree,
      the Escrow Agent shall not be liable to any of the parties hereto or to any
      other person, firm or corporation by reason of such decree being subsequently
      reversed, modified, annulled, set aside, vacated or found to have been entered
      without jurisdiction.

     

    2.10  The
      Escrow Agent shall not be liable in any respect on account of the identity,
      authorization or rights of the parties executing or delivering or purporting
      to
      execute or deliver the Purchase Agreement or any documents or papers deposited
      or called for thereunder in the absence of gross negligence, fraud and willful
      misconduct.

     

    2.11  The
      Escrow Agent shall be entitled to employ such legal counsel and other experts
      as
      the Escrow Agent may deem necessary properly to advise the Escrow Agent in
      connection with the Escrow Agent’s duties hereunder, may rely upon the advice of
      such counsel, and may pay such counsel reasonable compensation; provided that
      the costs of such compensation shall be borne by the Escrow Agent. 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    2.12  The
      Escrow Agent’s responsibilities as escrow agent hereunder shall terminate if the
      Escrow Agent shall resign by giving written notice to the Company and the
      Purchasers. In the event of any such resignation, the Purchasers and the Company
      shall appoint a successor Escrow Agent and the Escrow Agent shall deliver to
      such successor Escrow Agent any escrow funds and other documents held by the
      Escrow Agent.

     

    2.13  If
      the
      Escrow Agent reasonably requires other or further instruments in connection
      with
      this Escrow Agreement or obligations in respect hereto, the necessary parties
      hereto shall join in furnishing such instruments.

     

    2.14  It
      is
      understood and agreed that should any dispute arise with respect to the delivery
      and/or ownership or right of possession of the documents or the escrow funds
      held by the Escrow Agent hereunder, the Escrow Agent is authorized and directed
      in the Escrow Agent’s sole discretion (1) to retain in the Escrow Agent’s
      possession without liability to anyone at all or any part of said documents
      or
      the escrow funds until such disputes shall have been settled either by mutual
      written agreement of the parties concerned by a final order, decree or judgment
      or a court of competent jurisdiction after the time for appeal has expired
      and
      no appeal has been perfected, but the Escrow Agent shall be under no duty
      whatsoever to institute or defend any such proceedings or (2) to deliver the
      escrow funds and any other property and documents held by the Escrow Agent
      hereunder to a state or Federal court having competent subject matter
      jurisdiction and located in the City of New York in accordance with the
      applicable procedure therefore

     

    2.15  The
      Company and each Purchaser agree severally, and only to the extent and dollar
      amount of such Purchaser’s investment in the Company,
      to
      indemnify and hold harmless the Escrow Agent and its partners, employees, agents
      and representatives from any and all claims, liabilities, costs or expenses
      in
      any way arising from or relating to the duties or performance of the Escrow
      Agent hereunder or the transactions contemplated hereby or by the Purchase
      Agreement other than any such claim, liability, cost or expense to the extent
      the same shall have been determined by final, unappealable judgment of a court
      of competent jurisdiction to have resulted from the gross negligence, fraud
      or
      willful misconduct of the Escrow Agent.

     

    ************************

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    

    IN
      WITNESS WHEREOF, the parties hereto have executed this Escrow Agreement as
      of
      date first written above.

     

    
      	
              ROO
                GROUP, INC. 

              d/b/a
                KIT digital

            	 
	 	 
	 	 
	 	 
	
              By:      
                /s/
                Kaleil Isaza
                Tuzman                                   

                
                Name: Kaleil Isaza Tuzman

                 Title:
                Chief Executive Officer

            	 
	 	 
	
              With
                a copy to (which shall not constitute notice):

               

               

               

               

            	 
	
              ESCROW
                AGENT:

            	 
	 	 
	
              SICHENZIA
                ROSS FRIEDMAN FERENCE LLP

               

            	 
	
              By:      
                /s/
                Richard A.
                Friedman                                    
                

                
                Name: Richard A. Friedman

                
                Title: Partner

            	 

    

     

    

    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK

    SIGNATURE
      PAGES FOR PURCHASERS FOLLOW]

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    [SIGNATURE
      PAGE OF PURCHASERS TO ESCROW AGREEMENT]

     

     

    Name
      of
      Purchaser: 

    Signature
      of Authorized Signatory of Purchaser:
      __________________________

    Name
      of
      Authorized Signatory: _________________________

    Title
      of
      Authorized Signatory: __________________________

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Exhibit
      A 

    

    

    RELEASE
      NOTICE

     

    The
      UNDERSIGNED, pursuant to the Escrow Agreement, dated as of May____, 2008, among
      ROO Group, Inc. d/b/a KIT digital, the Purchasers signatory thereto, and
      Sichenzia Ross Friedman Ference LLP, as Escrow Agent (the “Escrow
      Agreement”;
      capitalized terms used herein and not defined shall have the meaning ascribed
      to
      such terms in the Escrow Agreement), hereby notify the Escrow Agent that each
      of
      the conditions precedent to the purchase and sale of the Shares set forth in
      the
      Securities Purchase Agreement have been satisfied. The
      Company and the undersigned Purchaser hereby confirm that all of their
      respective representations and warranties contained in the Purchase Agreement
      remain true and correct and authorize the release by the Escrow Agent of the
      funds and documents to be released at the Closing as described in the Escrow
      Agreement. This Release Notice shall not be effective until executed by the
      Company and the Purchaser. 

     

    This
      Release Notice shall not be effective until executed by the Company and the
      Purchasers. 

     

    This
      Release Notice may be signed in one or more counterparts, each of which shall
      be
      deemed an original.

     

    IN
      WITNESS WHEREOF, the undersigned have caused this Release Notice to be duly
      executed and delivered as of this ____day of May 2008.

     

       

    
      	
              ROO
                GROUP, INC. 

               

            
	
              By:_________________________________________

               
                Name: Kaleil Isaza Tuzman

               
                Title: Chief Executive Officer

            

    

    

    [SIGNATURE
      PAGE OF PURCHASERS FOLLOWS]

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    [SIGNATURE
      PAGE OF PURCHASERS TO ESCROW RELEASE]

     

     

    Name
      of
      Purchaser: 

    Signature
      of Authorized Signatory of Purchaser:
      __________________________

    Name
      of
      Authorized Signatory: _________________________

    Title
      of
      Authorized Signatory: __________________________

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