On June 22, 2012, KIT acquired from Invigor Group Limited all of the capital stock of Invigor’s subsidiaries, in consideration of AUD$17,215,485.00 payable in shares of Common Stock of KIT (representing approximately 3.2% of the outstanding stock issued by KIT) (the “Closing Common Stock”), or, at KIT’s election, in cash, pursuant to a Securities Purchase Agreement, dated as of April 21, 2012, by and between KIT and Invigor, and as amended by the Amendment to Securities Purchase Agreement, dated June 3, 2012 (the “Purchase Agreement”).
Under the Purchase Agreement KIT made an initial grant of 1,838,134 shares to the Reporting Person (Invigor Group Limited). The Purchase Agreement also contained a “top-up” provision (the “Top-Up Provision”) whereby the Issuer (KIT) agreed to issue to Reporting Person (Invigor) additional shares of Common Stock on December 22, 20121 (the “Trigger Date”), if the Weighted Average Price (as defined in the Purchase Agreement) of the Common Stock fell below $8.10 per share. The mechanism for determining the amount of additional shares of Common Stock that Invigor is entitled to is made pursuant to the formula set out in the Purchase Agreement, which was filed as Exhibit 1 of the Schedule 13D.
KIT digital, however, has taken the position that it has no obligation to issue the additional shares under the Top-Up Provision. Invigor acknowledges that KIT does not intend to issue the additional shares under the Top-Up Provision and, accordingly, Invigor´s ownership in KIT is 1,838,134, amounting to a percentage interest in KIT of approximately 3.2%.
In the Purchase Agreement, KIT digital represented and warranted to Invigor that, among other things, the KIT’s Securities and Exchange Commission (the “SEC”) filings complied in all material respects with the requirements of the Securities Act of 1933 and the Securities and Exchange Act of 1934 and with the rules and regulations of the SEC promulgated thereunder and did not contain any untrue statement of a material fact and did not omit to state any material fact required to make the statements made therein not misleading. In the Purchase Agreement, KIT digital promised to hold the Invigor harmless from any damages incurred by the Invigor by reason of the inaccuracy of any representation or warranty and also to indemnify Invigor against any such damages.
The “Trigger Date” is determined pursuant to the Purchase Agreement and is the earlier of the date (i) immediately prior to a Change in Control (as defined in the Purchase Agreement) of KIT and (ii) Invigor is first entitled to sell its shares of Common Stock under Rule 144 of the Securities Act.
Source: KIT digital