Exhibit 10.1

 

Stock Purchase Agreement

 

The attached Stock Purchase Agreement is identical in all material respects for each of the 100 accredited investors who participated in the offering except as to the parties thereto, the dates of execution, and other investment specific details. See table below.

 

Date	Shares	$ Amount	Exact Name in Which Title is to be Held	Authorized Signature	Print Name of Signatory and Capacity in Which Signed if an Entity	Signature (if Joint Tenants or Tenants in Common)	Print Name of above Signatory
6/20/2007	50,000	$500,000.00	Hillson Partners LP	/s/ Daniel H Abramowitz	Daniel H Abramowitz, President of GP
6/22/2007	40,000	$400,000.00	Meadowbrook Opportunity Fund LLC	/s/ Michael Ragins	Michael Ragin, Manager
6/11/2007	30,000	$300,000.00	London Family Trust	/s/ Robert S London	Robert S London	/s/ Heath H London	Heath H London
6/5/2007	25,000	$250,000.00	Robert W Allen & Susan M Allen JTWROS	/s/ Robert W Allen	Robert W Allen	/s/ Susan M Allen	Susan M Allen
6/20/2007	25,000	$250,000.00	Neal Goldman	/s/ Neal Goldman	Neal Goldman
6/8/2007	25,000	$250,000.00	E H Arnold	/s/ Edward H Arnold	Edward H Arnold
6/6/2007	25,000	$250,000.00	Michael N Taglich	/s/ Michael N Taglich	Michael N Taglich
6/7/2007	25,000	$250,000.00	Robert F Taglich	/s/ Robert F Taglich	Robert F Taglich
6/13/2007	20,000	$200,000.00	Shadow Capital LLC Attn B Kent Garlinghouse	/s/ B Kent Garlinghouse	B Kent Garlinghouse, Manager

 

 

 

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6/1/2007	20,000	$200,000.00	John R Bertsch Trust Dtd 12/4/2004 John R Bertsch Trustee	/s/ John R Bertsch	John R Bertsch, Trustee
6/19/2007	15,000	$150,000.00	Sara Bower Penn TTEE Sara Bower Penn Living Trust Dtd 4/30/02	/s/ Sara J Penn	Sara J Penn, Trustee
6/4/2007	15,000	$150,000.00	Dennis Fortin	/s/ Dennis Fortin	Dennis Fortin
6/19/2007	12,500	$125,000.00	Susan Thorstenn & Magnus Thorstenn JTWROS	/s/ Magnus G Thorstenn	Magnus G Thorstenn	/s/ Susan E Thorstenn	Susan E Thorstenn
6/15/2007	10,500	$105,000.00	Paul Seid	/s/ Paul Seid	Paul Seid
6/21/2007	10,000	$100,000.00	John L Palazzola	/s/ John L Palazzola	John L Palazzola
6/21/2007	10,000	$100,000.00	Videotape Products, Inc	/s/ John L Palazzola	John L Palazzola, President
6/12/2007	10,000	$100,000.00	Clyde Berg	/s/ Clyde Berg	Clyde Berg
6/19/2007	10,000	$100,000.00	Lighthouse Capital LLC	/s/ Lloyd B Emberg	Lloyd B Emberg, Managing Member
6/20/2007	10,000	$100,000.00	Hillson Private Partners II, LLLP	/s/ Daniel H Abramowitz	Daniel H Abramowitz, President of GP
6/21/2007	7,500	$75,000.00	Sandra L Brecher	/s/ Sandra L Brecher	Sandra L Brecher
6/5/2007	6,500	$65,000.00	William C Steele TTEE William C Steele Living Trust UAD 5-11-98	/s/ William C Steele	William C Steele
6/18/2007	6,000	$60,000.00	Keith Becker	/s/ Keith Becker	Keith Becker
6/20/2007	6,000	$60,000.00	Glenn Schabel	/s/ Glenn Schabel	Glenn Schabel
6/7/2007	5,600	$56,000.00	Alvin R Bonnette Rev Trust U A Dtd 1/31/85 Alvin R Bonnette Trustee	/s/ Alvin R Bonnette	Alvin R Bonnette, Trustee
6/7/2007	5,000	$50,000.00	Thomas J Bean	/s/ Thomas J Bean	Thomas J Bean

 

 

 

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6/7/2007	5,000	$50,000.00	Robert G Moussa	/s/ Robert G Moussa	Robert G Moussa
6/7/2007	5,000	$50,000.00	Biscayne National Corp	/s/ Milton J Wallace	Milton J Wallace, President
6/13/2007	5,000	$50,000.00	Albert Esposito & Margaret Esposito JTWROS	/s/ Albert J Esposito	Albert J Esposito	/s/ Margaret Esposito	Margaret Esposito
6/18/2007	5,000	$50,000.00	William P Kaiser	/s/ William P Kaiser	William P Kaiser
6/15/2007	5,000	$50,000.00	Peder G Larsen and Margaret S Larsen JTWROS	/s/ Margaret S Larsen	Margaret S Larsen	/s/ Peder G Larsen	Peder G Larsen
6/19/2007	5,000	$50,000.00	Mike Taglich POA Tag/Kent Partnership F/B/O Garlinghouse/M Taglich B Taglich	/s/ Michael Taglich	Michael Taglich
6/19/2007	4,200	$42,000.00	John P Junge & Sue H Junge TTEE FBO Junge Revocable Trust UAD 12-9-91	/s/ John P Junge	John P Junge, Trustee
6/10/2007	4,200	$42,000.00	RFS Trust U/A/D 12/30/96 Richard F Sherman TTEE	/s/ Richard F Sherman	Richard F Sherman
6/11/2007	4,000	$40,000.00	Richard A Kraemer Trust U A/D 12/12/96 Richard A Kraemer TTEE	/s/ Richard A Kraemer	Richard A Kraemer, Trustee
6/13/2007	4,000	$40,000.00	David L Allen	/s/ David L Allen	David L Allen
6/17/2007	4,000	$40,000.00	Robert W Allen Jr	/s/ Robert W Allen Jr	Robert W Allen Jr
6/5/2007	3,000	$30,000.00	Mark Ravich	/s/ Mark Ravich	Mark Ravich
6/11/2007	3,000	$30,000.00	Frank M Durrance	/s/ Frank M Durrance	Frank M Durrance

 

 

 

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6/13/2007	3,000	$30,000.00	Kenneth Bodenstein TR Kenneth Bodenstein TTEE Dtd 7/30/84	/s/ Kenneth A Bodenstein	Kenneth A Bodenstein, Trustee
5/12/2007	3,000	$30,000.00	Brian F Leonard and Martha E Leonard JT TEN WROS	/s/ Brian F Leonard	Brian F Leonard	/s/ Martha E Leonard	Martha E Leonard
6/19/2007	3,000	$30,000.00	Mark C Ladendorf & Debra Ladendorf JTWROS	/s/ Mark C Ladendorf	Mark C Ladendorf	/s/ Debra L Ladendorf	Debra L Ladendorf
6/5/2007	3,000	$30,000.00	B Roy Smith & Joyce L Smith JTWROS	/s/ Roy Smith	Roy Smith	/s/ Joyce Smith	Joyce Smith
6/22/2007	2,800	$28,000.00	Arthur H Finnel	/s/ Arthur H Finnel	Arthur H Finnel
6/21/2007	2,800	$28,000.00	Harvey Bibicoff and Jacqueline Bibicoff Trustees of the Bibicoff Family Trust Dtd May 16, 2000	/s/ Harvey Bibicoff	Harvey Bibicoff, Trustee
6/1/2007	2,800	$28,000.00	Michael P Hagerty	/s/ Michael P Hagerty	Michael P Hagerty
6/5/2007	2,800	$28,000.00	Robert Whitfield Donegan	/s/ Robert W Donegan	Robert W Donegan
6/14/2007	2,800	$28,000.00	Stephen Friedland and Linda Friedland JTWROS	/s/ Stephen Friedland	Stephen Friedland	/s/ Linda Friedland	Linda Friedland
6/20/2007	2,800	$28,000.00	James B Deutsch & Deborah M Deutsch JTWROS	/s/ James B Deutsch	James B Deutsch	/s/ Deborah M Deutsch	Deborah M Deutsch
6/5/2007	2,800	$28,000.00	Donald McCulloch & Jacqueline McCulloch JTWROS	/s/ Donald McCulloch	Donald McCulloch	/s/ Jacqueline McCulloch	Jacqueline McCulloch
6/4/2007	2,500	$25,000.00	Raymond M Beebe & Joan D Beebe JTWROS	/s/ Raymond M Beebe	Raymond M Beebe	/s/ Joan P Beebe	Joan P Beebe

 

 

 

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6/14/2007	2,500	$25,000.00	Albert C Esposito Brooke Crowley Esposito JT TEN	/s/ Albert C Esposito	Albert C Esposito	/s/ Brooke V Crowley	Brooke V Crowley
6/14/2007	2,500	$25,000.00	Dr Baldev S Brar & Dr Gurmukh K Brar JT TENWROS	/s/ Baldev S Brar	Baldev S Brar	/s/ Gurmukh K Brar	Gurmukh K Brar
6/21/2007	2,500	$25,000.00	Robert G Paul	/s/ Robert G Paul	Robert G Paul
6/4/2007	2,500	$25,000.00	Applebaun Family LTD Partners Irving Applebaum General Ptnr	/s/ Irvine Applebaum	Irvine Applebaum, General Partner
6/11/2007	2,100	$21,000.00	IRA FBO Russel J Bernier Pershing LLC as Custodian Rollover Account	/s/ Russell J Bernier	Russell J Bernier
6/5/2007	2,000	$20,000.00	Lawrence Kane	/s/ Larry Kane	Larry Kane
6/8/2007	2,000	$20,000.00	SEP FBO John Stevens Pershing LLC as Custodian	/s/ John Stevens	John Stevens
6/11/2007	2,000	$20,000.00	T Mark Sledge	/s/ T Mark Sledge	T Mark Sledge
6/12/2007	2,000	$20,000.00	William Kehl	/s/ William W Kehl	William W Kehl
6/5/2007	2,000	$20,000.00	Angus Bruce Lauralee Bruce	/s/ Angus Bruce	Angus Bruce	/s/ Lauralee Bruce	Lauralee Bruce
6/8/2007	1,500	$15,000.00	SEP FBO Ronald C Hintz Pershing LLC as Custodian	/s/ Ronald C Hintz	Ronald C Hintz
6/8/2007	1,500	$15,000.00	IRA FBO Arthur Resnikoff Pershing LLC as Custodian Rollover Account	/s/ Arthur Resnikoff	Arthur Resnikoff

 

 

 

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6/5/2007	1,400	$14,000.00	Jeffrey L Sadar & Barbara A Sadar JTWROS	/s/ Jeffrey L Sadar	Barbara A Sadar	/s/ Barbara A Sadar
6/6/2007	1,400	$14,000.00	Terry E Hagen and Dawn R Hagen as JTWROS	/s/ Terry E Hagen	Terry E Hagen	/s/ Dawn R Hagen	Dawn R Hagen
6/5/2007	1,400	$14,000.00	Tad Wilson	/s/ Tad Wilson	Tad Wilson
6/14/2007	1,400	$14,000.00	Robert B Cashion	/s/ Robert B Cashion	Robert B Cashion
6/18/2007	1,400	$14,000.00	John W Crow	/s/ John W Crow	John W Crow
6/16/2007	1,400	$14,000.00	Wulf Paulick & Renate Paulick JTWROS	/s/ Wulf Paulick	Wulf Paulick	/s/ Renate Paulick	Renate Paulick
6/15/2007	1,400	$14,000.00	Steve Redmon & Brenda Redmon JT TEN WROS	/s/ Steve Redmon	Steve Redmon	/s/ Breda Redmon	Breda Redmon
6/19/2007	1,400	$14,000.00	Kenneth J Feroldi Nancy J Feroldi JTWROS	/s/ Nancy J Feroldi	Nancy J Feroldi	/s/ Kenneth J Feroldi	Kenneth J Feroldi
6/19/2007	1,400	$14,000.00	IRA FBO Angel Rosario Pershing LLC as Custodian Rollover Account	/s/ Angel Rosario	Angel Rosario
6/19/2007	1,400	$14,000.00	David J Larkworthy TOD Dtd 1/20/06	/s/ David Larkworthy	David Larkworthy
6/20/2007	1,400	$14,000.00	Samuel L Box & Lisa Marsh Box JT TEN WROS	/s/ Samuel L Box	Samuel L Box	/s/ Lisa M Box	Lisa M Box
6/18/2007	1,400	$14,000.00	Elliot D Cohen & Bonnie S Cohen JTWROS	/s/ Elliot D Cohen	Elliot D Cohen	/s/ Bonnie S Cohen	Bonnie S Cohen
6/19/2007	1,400	$14,000.00	Peter S Gold	/s/ Peter S Gold	Peter S Gold
6/21/2007	1,400	$14,000.00	Ronald Courey	/s/ Ronald Courey	Ronald Courey
6/5/2007	1,200	$12,000.00	Paul Berko	/s/ Paul Berko	Paul Berko
6/22/2007	1,000	$10,000.00	David G Linville	/s/ David G Linville	David G Linville

 

 

 

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6/15/2007	1,000	$10,000.00	Joseph F Domenice	/s/ Joseph F Domenice	Joseph F Domenice
6/5/2007	1,000	$10,000.00	Darrell Frost	/s/ Darrell Frost	Darrell Frost
6/5/2007	1,000	$10,000.00	Charles M Thompson	/s/ Charles M Thompson	Charles M Thompson
6/7/2007	1,000	$10,000.00	Dr Richard V Nuttall & Annetta Mets Nuttall JTWROS	/s/ Richard V Nuttall	Richard V Nuttall	/s/ Annetta Mets Nuttall	Annetta Mets Nuttall
6/12/2007	1,000	$10,000.00	Barbara Susca	/s/ Barbara Susca	Barbara Susca
6/15/2007	1,000	$10,000.00	Walter E Beisler	/s/ Walter E Beisler	Walter E Beisler
6/15/2007	1,000	$10,000.00	Michael L Smith & Larry E Smith JT TEN WROS	/s/ Michael L Smith	Michael L Smith	/s/ Larry E Smith	Larry E Smith
6/12/2007	1,000	$10,000.00	Joseph Martha	/s/ Joseph A Martha	Joseph A Martha
6/8/2007	1,000	$10,000.00	Bart & Wendy Baker JTWROS	/s/ Bart Baker	Bart Baker	/s/ Wendy Baker	Wendy Baker
6/16/2007	1,000	$10,000.00	Mark Bourque	/s/ Mark S Bourque	Mark S Bourque
6/13/2007	1,000	$10,000.00	Tom C Mina	/s/ Thomas C Mina	Thomas C Mina
6/15/2007	1,000	$10,000.00	Ann B Oldfather	/s/ Ann B Oldfather	Ann B Oldfather
6/15/2007	1,000	$10,000.00	Ronald D Cowan	/s/ Ronald D Cowan	Ronald D Cowan
6/15/2007	1,000	$10,000.00	Powell Family Limited Partners C/O Ron Powell	/s/ Ron Powell	Ron Powell, General Partner
6/15/2007	1,000	$10,000.00	John J Resich Jr TTEE John J Resich Jr RET Trust	/s/ John J Resich	John J Resich
6/17/2007	1,000	$10,000.00	Mary M Schnurer	/s/ Mary M Schnurer	Mary M Schnurer
6/19/2007	1,000	$10,000.00	Stephen C Radocchia	/s/ Stephen Radocchia	Stephen Radocchia
6/19/2007	1,000	$10,000.00	John Faure	/s/ John P Faure	John P Faure
6/19/2007	1,000	$10,000.00	Thomas R Jennett & Jodi K Jennett JT TEN WROS	/s/ Thomas R Jennett	Thomas R Jennett	/s/ Jodi K Jennett	Jodi K Jennett
6/21/2007	1,000	$10,000.00	Mavin J Loutsenhizer	/s/ Marvin J Loutsenhizer	Mavin J Loutsenhizer
6/4/2007	1,000	$10,000.00	Valdemar Skov	/s/ Valdemar A Skov	Valdemar A Skov
6/1/2007	1,000	$10,000.00	Peter Carroll & Maureen Carroll JT/WROS	/s/ Peter Carroll	Peter Carroll	/s/ Maureen Carroll	Maureen Carroll

 

 

 

 

 

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PARK CITY GROUP, INC.

STOCK PURCHASE AGREEMENT

 

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STOCK PURCHASE AGREEMENT

PARK CITY GROUP, INC.

STOCK PURCHASE AGREEMENT (as amended or supplemented from time to time, this “Agreement”) made as of ___________________, 2007, between PARK CITY GROUP, INC. , a Nevada corporation, with its principal offices at 3160 Pinebrook Rd, Utah 84098 (the “Company”) and the undersigned (the “Subscriber”).

W I T N E S S E T H :

WHEREAS, the Company desires to issue, in a private placement, shares of Series A Convertible Preferred Stock , $0.01 par value per share (the “Preferred Stock”) at a price equal to $10.00 per share (as defined in the Memorandum), with a minimum aggregate purchase price of $1,000,000 (the “Minimum Amount”) of Preferred Stock and a maximum aggregate purchase price of $3,500,000 (the “Maximum Amount”) of Preferred Stock;

WHEREAS, Subscriber desires to acquire the number of shares of Preferred Stock (the “Shares”) having an aggregate purchase price set forth on the signature page hereof (the “Purchase Price”) together with warrants in the form attached hereto as Exhibit A (the “Warrants”) exercisable for 1,000 shares of common stock for each $14,000 in purchase price of Preferred Stock (the Shares and accompanying Warrants being herein referred to as the “Securities”).

NOW, THEREFORE, for and in consideration of the premises and the mutual covenants hereinafter set forth, the parties hereto do hereby agree as follows:

1.

SUBSCRIPTION FOR SECURITIES AND REPRESENTATIONS BY SUBSCRIBER.

1.1.           Subject to the terms and conditions hereinafter set forth, the Subscriber hereby subscribes for and agrees to purchase from the Company the Shares for the Purchase Price and the Company agrees to sell such Shares and issue Warrants in the amount referred to above to the Subscriber for the Purchase Price, subject to the Company’s right to sell to the Subscriber such lesser number of Shares (and issue a correspondingly smaller number of Warrants) as it may, in its sole discretion, deem necessary or desirable. As the Company will not issue fractional Shares, each Subscriber will be issued that number of whole Shares which the Purchase Price will purchase (to the extent accepted), rounded down to the next whole Share. Any portion of the Purchase Price not applied to the purchase of Shares will be returned to the Subscriber, without interest. The Purchase Price is payable, at or prior to the closing of this Agreement, by wire transfer, subject to collection, as set forth in the “INSTRUCTIONS TO SUBSCRIBERS” contained in the Subscription Documents Booklet of which this Agreement is a part.

1.2.          The Subscriber recognizes that the purchase of the Securities involves a high degree of risk in that (i) the Securities have not been registered under the Securities Act of 1933, as amended (“1933 Act”), and the Company has no obligation to register the Securities,

 

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except as set forth in Section 3 of this Agreement; (ii) an investment in the Securities is highly speculative and only investors who can afford the loss of their entire investment should consider investing in the Company; (iii) the Subscriber may not be able to liquidate the Subscriber’s investment; and (iv) the Subscriber could sustain the loss of Subscriber’s entire investment. Such risks are more fully set forth in the Company’s Confidential Private Placement Memorandum dated May 31, 2007, including the Exhibits thereto (as amended or supplemented from time to time, collectively, the “Memorandum”).

1.3.          The private placement of the Shares by the Company (the “Private Placement Offering”) pursuant to the Memorandum shall continue for a period commencing on the date of the Memorandum and ending on the date set forth in the Memorandum.

1.4.          Treasury Department Circular 230 Disclosure . To ensure compliance with Treasury Department Circular 230, the Subscriber is hereby notified that: (i) any discussion of U.S. Federal tax issues in this Agreement or the Memorandum is not intended or written to be relied upon, and cannot be relied upon, by the Subscriber for the purpose of avoiding penalties that may be imposed on the Subscriber under the Internal Revenue Code of 1986, as amended (the “Code”); (ii) such discussion is included herein by the Company in connection with the promotion or marketing (within the meaning of Circular 230) by the Company of the transactions or matters addressed herein or therein; and (iii) the Subscriber should seek advice based on its particular circumstances from an independent tax advisor.

1.5.

The Subscriber represents as follows:

(a)            The Subscriber represents that the Subscriber is an Accredited Investor (as defined in Rule 501 of Regulation D promulgated under the 1933 Act) as indicated by the Subscriber’s responses to the Confidential Investor Questionnaire, a copy of which is included in the Subscription Documents Booklet, and that the Subscriber is able to bear the economic risk of investment in the Securities. The Subscriber is not an officer, director or “affiliate” (as defined in Rule 403 under the 1933 Act) of the Company.

(b)            The Subscriber acknowledges that the Subscriber has significant prior investment experience, including investment in non-listed and non-registered securities. The Subscriber recognizes the highly speculative nature of this investment. The Subscriber acknowledges that the Subscriber has carefully read the Memorandum, including but not limited to, the Company’s Registration Statement on Form SB-2/A filed on January 19, 2007, Current Report on Form 8-K filed on March 26, 2007, and Quarterly Report on Form 10-QSB for the period ended March 31, 2007, and fully understands the contents thereof, and the Subscriber has not received any other offering literature or prospectus and no representations or warranties have been made to the Subscriber by the Company or its employees, affiliates or agents, other than the representations set forth in the Memorandum.

(c)            The Subscriber acknowledges that the Securities were not offered to the Subscriber by any means of general solicitation or general advertising. In that regard, the Subscriber is not subscribing for the Securities: (i) as a result of, or subsequent to, becoming aware of any advertisement, article, notice or other communication published in any newspaper, magazine or similar medium, generally available electronic communication, broadcast over

 

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television or radio or generally available to the public on the internet or worldwide web; (ii) as a result of, or subsequent to, attendance at a seminar or meeting called by any of the means set forth in (i) above; or (iii) as a result of, or subsequent to, any solicitations by a person not previously known to the Subscriber in connection with investment in securities generally.

(d)            The Subscriber hereby acknowledges that the Private Placement Offering and the Memorandum have not been reviewed by the Securities and Exchange Commission (the “SEC”) or by a state securities regulator because it is intended to be a nonpublic offering pursuant to Sections 4(2) and 4(6) of the 1933 Act and Regulation D promulgated thereunder. The Subscriber represents and warrants that the Securities are being purchased for the Subscriber’s own account, for investment purposes only and not for distribution or resale to others. The Subscriber agrees that the Subscriber will not sell or otherwise transfer the Securities unless they are registered under the 1933 Act or unless an exemption from such registration is available.

(e)            The Subscriber understands that the Securities have not been registered under the 1933 Act by reason of a claimed exemption under the provisions of the 1933 Act which depends, in part, upon the Subscriber’s investment intention. In this connection, the Subscriber understands that it is the position of the SEC that the statutory basis for such exemption would not be present if the Subscriber’s representation merely meant that the Subscriber’s present intention was to hold the Securities for a short period, such as the capital gains period of tax statutes, for a deferred sale, for a market rise, assuming that a market develops, or for any other fixed period. The Subscriber realizes that, in the view of the SEC, a purchase now with an intent to resell after a pre-determined amount of time would represent a purchase with an intent inconsistent with the Subscriber’s representations and warranties to the Company, and the SEC might regard such a sale or disposition as a deferred sale to which such exemptions are not available.

(f)             The Subscriber understands that Rule 144 (the “Rule”) promulgated by the SEC under the 1933 Act requires, among other conditions, a one (1) year holding period prior to the resale (in limited amounts) of securities acquired in a non-public offering without having to satisfy the registration requirements under the 1933 Act. The Subscriber understands that the Company makes no representation or warranty regarding its fulfillment in the future of any reporting requirements under the Securities Exchange Act of 1934, as amended, or its dissemination to the public of any current financial or other information concerning the Company, as is required by the Rule as one of the conditions of its availability. The Subscriber understands and hereby acknowledges that the Company is the only entity that can register the Securities (and the common stock issuable upon conversion or exercise thereof) under the 1933 Act and that the Company is under no obligation to register the same under the 1933 Act, with the exception of certain registration rights set forth in Section 3 of this Agreement. The Subscriber acknowledges that the Company may, if it desires, permit the transfer of the Securities out of the Subscriber’s name only when the Subscriber’s request for transfer is accompanied by an opinion of counsel reasonably satisfactory to the Company that neither the sale nor the proposed transfer results in a violation of the 1933 Act or any applicable state “blue sky” laws and subject to the provisions of Section 1.4(g) of this Agreement.

 

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(g)            The Subscriber consents to the placement of a legend on any certificate or other document evidencing the Securities stating that they are “restricted securities” (as defined in the Rule) and may only be publicly offered and sold pursuant to an effective registration statement filed with the SEC or pursuant to an exemption from the registration requirements.

(h)            The Subscriber understands that the Company will review this Agreement and the Confidential Investor Questionnaire; and it is further agreed that the Company reserves the unrestricted right to reject or limit any subscription for any reason or for no reason and to close the Private Placement Offering at any time.

(i)             The Subscriber hereby represents that the address of the Subscriber furnished by the Subscriber at the end of this Agreement is the Subscriber’s principal residence, if the Subscriber is an individual, or its principal business address, if the Subscriber is a corporation or other entity.

(j)             The Subscriber and its advisors, if any, have had a reasonable opportunity to ask questions of and receive answers from the Company concerning the Company and the Private Placement Offering, and all such questions, if any, have been answered to the full satisfaction of the Subscriber and its advisors, if any; and the Company shall provide the Subscriber or its advisors, if any, with the opportunity to ask additional questions of and receive answers (all of which information shall be limited to information in the public realm) from the Company concerning the Company during the period which the Subscriber owns the Shares.

(k)            The Subscriber is not relying on the Placement Agent or the Company with respect to any legal or tax considerations involved in the purchase, ownership and disposition of the Shares.

(l)             The Subscriber has such knowledge and expertise in financial and business matters that the Subscriber is capable of evaluating the merits and risks involved in an investment in the Shares. All information that the Subscriber has provided concerning the Subscriber and the Subscriber’s financial position (including, without limitation, information in this Agreement or in the Confidential Investor Questionnaire included in the Subscription Documents Booklet) is true, correct and complete.

(m)           The Subscriber has full power and authority to execute and deliver this Agreement and to perform its obligations hereunder; and this Agreement is a legally binding obligation of the Subscriber in accordance with its terms.

(n)            Except as set forth in the Memorandum no representations or warranties have been made to the Subscriber by the Company, the Placement Agent (as defined in the Memorandum) or any of their respective agents, employees or affiliates and in entering into this transaction, the Subscriber is not relying on any information, other than that contained in the Memorandum or the results of an independent investigation by the Subscriber.

(o)            The Subscriber agrees that the Subscriber will not sell or otherwise transfer the Shares unless they are registered under the 1933 Act and applicable state “blue sky” laws or unless an exemption from such registration is available. The Subscriber represents and

 

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warrants that (i) the Subscriber has adequate means of providing for the Subscriber’s current needs and possible personal contingencies; (ii) the Subscriber has no need for liquidity in this investment; (iii) the Subscriber is able to bear the substantial economic risk of an investment in the Shares for an indefinite period; and (iv) at the present time the Subscriber could afford a complete loss of such investment.

(p)            It is understood that all documents, records and books pertaining to this investment have been made available for the inspection by the Subscriber’s attorney and/or accountant and the Subscriber, and that the books and records of the Company will be available upon reasonable notice during business hours at its principal place of business.

(q)            The Subscriber acknowledges and agrees that any changes made by the Subscriber to any of the documents delivered to the Subscriber in connection with the Private Placement Offering shall not be effective unless the Company consents to such changes.

(r)             The Subscriber understands that it and its representative(s) could be subject to fines, penalties and other liabilities under applicable securities laws if the Subscriber or its representative(s), while in possession of any material, non-public information that may be contained in the Memorandum, trade in the Common Stock or other securities of the Company or communicate such information to any other person under circumstances in which it is reasonably foreseeable that such person is likely to trade in such Common Stock or other securities. The Subscriber agrees that it and its representative(s) will refrain from trading in the Common Stock or other securities of the Company until such time as they are no longer prohibited from trading in such Common Stock or other securities under all applicable securities laws (whether because the Company has publicly disclosed all material information in the Memorandum, the Memorandum no longer containing material non-public information or otherwise).

(s)             In the event that the Subscriber is acting as agent, representative or nominee for another party (each, a “Beneficial Owner”), the Subscriber understands and acknowledges that the representations, warranties and agreements made herein are made by the Subscriber: (i) with respect to the Subscriber; and (ii) with respect to each Beneficial Owner of the Shares subscribed for hereby. The Subscriber represents and warrants that he, she or it has all requisite power and authority from said Beneficial Owner(s) to execute and perform the obligations under this Agreement and has anti-money laundering policies and procedures in place reasonably designed to verify the identity of each Beneficial Owner and the sources of each Beneficial Owner’s funds. Such policies and procedures are properly enforced and are consistent with anti-money laundering/OFAC laws (as defined below) such that the Company may rely on this representation. The Subscriber agrees, except to the extent specifically prohibited by applicable law, to indemnify the Company, the Placement Agent and their respective officers and agents for any and all costs, fees and expenses (including reasonable legal fees and disbursements) in connection with any damages resulting from the Subscriber’s or any Beneficial Owner’s misrepresentation or misstatement contained herein, or the assertion of the Subscriber’s lack of proper authorization from each Beneficial Owner of the Shares subscribed for hereby to enter into this Agreement or perform the obligations thereof.

 

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(t)             Prospective Subscribers should check the Treasury Department’s Office of Foreign Assets Control (“OFAC”) website at http://www.treas.gov/ofac before making the following representations.

The Subscriber represents that the Purchase Price was not directly or indirectly derived from activities that may contravene U.S. Federal, state and international laws and regulations, including anti-money laundering laws.

OFAC prohibits, among other things, the engagement in transactions with, and the provisions of services to, certain foreign countries, territories, entities and individuals. The lists of OFAC prohibited countries, territories, persons and entities can be found on the OFAC website.

The Subscriber hereby represents and warrants, to the best of its knowledge, that none of:

(i)

the Subscriber;

(ii)

any person controlling, controlled by or under common control with, the Subscriber;

(iii)

if the Subscriber is a privately held entity, any person having a beneficial interest in the Subscriber; or

(iv)

any person for whom the Subscriber is acting as agent or nominee in connection with this investment

(A) is a country, territory, individual or entity named on an OFAC list, or is an individual or entity that resides or has a place of business in a country or territory named on such lists;

(B) is a senior foreign political figure ¹ , or any immediate family member ² or close associate ³ of a senior foreign political figure within the meaning of the Department of Treasury’s Guidance on Enhanced Scrutiny for Transactions That May Involve

 

_________________________

1               A “senior foreign political figure” is defined as a current or former senior official in the executive, legislative, administrative, military or judicial branches of a non-U.S. government (whether elected or not), a senior official of a major non-U.S. political party, or a senior executive of a non-U.S. government-owned corporation. In addition, a “senior foreign political figure” includes any corporation, business or other entity that has been formed by, or for the benefit of, a senior foreign political figure.

2	“Immediate family” of a senior foreign political figure typically includes the figure’s parents, siblings, spouse, children and in-laws.

3                A “close associate” of a senior foreign political figure is a person who is widely and publicly known to maintain an unusually close relationship with the senior foreign political figure, and includes a person who is in a position to conduct substantial domestic and international financial transactions on behalf of the senior foreign political figure.

 

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the Proceeds of Foreign Official Corruption4 and as referenced in the USA PATRIOT Act of 2001, as amended (the “Patriot Act”);5 or

(C) is a “foreign shell bank”6 an d does not transact business with a “foreign shell bank”.

The Subscriber agrees to notify the Company promptly should the Subscriber become aware of any change in the information set forth in these representations.

The Subscriber understands that the Company may not accept any portion of the Purchase Price if the Subscriber cannot make the representation set forth above or if the information provided to the Company is incomplete or is deemed suspicious.

If the Subscriber is an investment entity, then the Subscriber hereby represents and warrants to the Company that the Subscriber is aware of the requirements of the Patriot Act, the regulations administered by OFAC and other applicable U.S. Federal, state or non-U.S. anti-money laundering laws and regulations (as amended, collectively, the “anti-money laundering/OFAC laws”). The Subscriber further warrants and represents that it has anti-money laundering policies and procedures in place reasonably designed to verify the identity of its beneficial owners and/or underlying investors (as applicable) and their sources of funds. Such policies and procedures are properly enforced and are consistent with the anti-money laundering/OFAC laws. The Subscriber hereby warrants to the Company that, to the best of its knowledge, the Subscriber’s beneficial owners and/or underlying investors (as applicable) are not individuals, entities or countries that may subject the Company to criminal or civil violations of any anti-money laundering/OFAC laws. The Subscriber hereby acknowledges and agrees that the Company, or any other party on behalf of the Company, may be required and shall be entitled to reveal any information regarding the Company and the Subscriber’s investment in the Company, including details of the Subscriber’s identity, to their regulators and/or any other government agency within their jurisdiction, as they shall, in their sole and absolute discretion, consider appropriate.

2.

TERMS OF SUBSCRIPTION.

The Private Placement Offering of the Shares is being made on a “best efforts” basis as more particularly set forth in the Memorandum.

3.

REGISTRATION RIGHTS.

3.1.          As soon as possible after the Final Closing Date, but in no event later than 45 days after the Final Closing Date (regardless of whether the Maximum Amount of Shares shall have been sold), the Company shall, at its sole cost and expense, file a registration

 

_________________________

4               For a more extensive discussion of the preceding terms and definitions, see http://www.federalreserve.gov/boarddocs/srletters/2001/sr0103a1.pdf.

5              The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Pub. L. No. 107-56 (2001).

6	A “foreign shell bank” is a foreign bank that does not have a physical presence in any country.

 

 

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statement (as amended or supplemented from time to time, the “Registration Statement”) on the appropriate form under the 1933 Act with the SEC covering all of the shares of common stock issuable upon conversation or exercise of the Securities or upon exercise of the Placement Agent Warrant as described in the Memorandum (the “Registrable Securities”) for all holders thereof, time being of the essence. The Company w ill use best efforts to have the Registration Statement declared effective, and to keep the Registration Statement effective until the earlier of (x) two years after the Final Closing Date, (y) the date when all the Registrable Securities have been sold or (z) the date on which the Registrable Securities may be sold without any restriction pursuant to the Rule 144. If the Registration Statement is not filed within 45 days after the Final Closing Date, the Company will pay to each Investor a cash amount of two percent (2.0%) of such Investor’s Purchase Price investment. In addition, if the Registration Statement is not declared effective , or the Registrable Securities may not be sold without any restriction pursuant to the Rule 144, within 180 days after the filing date, the Company will pay to each Investor a cash amount of two percent (2.0%) of such Investor’s Purchase Price (to the extent accepted) for each thirty (30) day period, or any part thereof, beyond such 180 day period, until the Registration Statement is declared effective. The maximum cash payments to each Investor pursuant to these provisions are twelve percent (12.0%) of such Investor’s Purchase Price, as the case may be.

3.2.          In the event the Company effects any registration under the 1933 Act of any Registrable Securities pursuant to Section 3.1 or 3.7 of this Agreement, the Company shall indemnify, to the extent permitted by law, and hold harmless each person whose Registrable Securities are included in such registration statement (each, a “Seller”), any underwriter, any officer, director, employee or agent of any Seller or underwriter, and each other person, if any, who controls any Seller or underwriter within the meaning of Section 15 of the 1933 Act, against any losses, claims, damages, liabilities, judgment, fines, penalties, costs and expenses, joint or several, or actions in respect thereof (collectively, the “Claims”), to which each such indemnified party becomes subject, under the 1933 Act or otherwise, insofar as such Claims arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the registration statement or prospectus or any amendment or supplement thereto or any document filed under a state securities or blue sky law (as amended or supplemented from time to time, collectively, the “Registration Documents”) or insofar as such Claims arise out of or are based upon the omission or alleged omission to state in any Registration Document a material fact required to be stated therein or necessary to make the statements made therein not misleading, and will reimburse any such indemnified party for any legal or other expenses or disbursements reasonably incurred by such indemnified party in investigating or defending any such Claim; provided that the Company shall not be liable in any such case to a particular indemnified party to the extent such Claim is based upon an untrue statement or alleged untrue statement of a material fact or omission or alleged omission of a material fact made in any Registration Document in reliance upon and in conformity with written information furnished to the Company by or on behalf of such indemnified party specifically for use in the preparation of such Registration Document.

3.3.          In connection with any registration statement in which a Seller is participating, such Seller, severally and not jointly, shall indemnify, to the extent permitted by law, and hold harmless the Company, each of its directors, each of its officers who have signed such registration statement, each other person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act, each other Seller and each underwriter, any officer,

 

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director, employee or agent of any such other Seller or underwriter and each other person, if any, who controls such other Seller or underwriter within the meaning of Section 15 of the 1933 Act against any Claims to which each such indemnified party may become subject under the 1933 Act or otherwise, insofar as such Claims (or actions in respect thereof) are based upon any untrue statement or alleged untrue statement of any material fact contained in any Registration Document, or insofar as any Claims are based upon the omission or alleged omission to state in any Registration Document a material fact required to be stated therein or necessary to make the statements made therein not misleading, and will reimburse any such indemnified party for any legal or other expenses or disbursements reasonably incurred by such indemnified party in investigating or defending any such claim; provided, however, that such indemnification or reimbursement shall be payable only if, and to the extent that, any such Claim arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in any Registration Document in reliance upon and in conformity with written information furnished to the Company by such Seller specifically for use in the preparation thereof.

3.4.          Any person entitled to indemnification under Section 3.2 or 3.3 of this Agreement shall notify promptly the indemnifying party in writing of the commencement of any Claim if a claim for indemnification in respect thereof is to be made against an indemnifying party under this Section 3.4, but the omission of such notice shall not relieve the indemnifying party from any liability which it may have to any indemnified party otherwise than under Section 3.2 or 3.3 of this Agreement, except to the extent that such failure shall materially adversely affect any indemnifying party or its rights hereunder. In case any action is brought against the indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate in, and, to the extent that it chooses, to assume the defense thereof with counsel reasonably satisfactory to the indemnified party; and, after notice from the indemnifying party to the indemnified party that it so chooses, the indemnifying party shall not be liable for any legal or other expenses or disbursements subsequently incurred by the indemnified party in connection with the defense thereof other than reasonable costs of investigation; provided, however, that (i) if the indemnifying party fails to take reasonable steps necessary to defend diligently the Claim within twenty (20) days after receiving notice from the indemnified party that the indemnified party believes it has failed to do so; (ii) if the indemnified party who is a defendant in any action or proceeding which is also brought against the indemnifying party reasonably shall have concluded that there are legal defenses available to the indemnified party which are not available to the indemnifying party; or (iii) if representation of both parties by the same counsel is otherwise inappropriate under applicable standards of professional conduct, the indemnified party shall have the right to assume or continue its own defense as set forth above (but with no more than one firm of counsel for all indemnified parties in each jurisdiction, except to the extent any indemnified party or parties reasonably shall have concluded that there are legal defenses available to such party or parties which are not available to the other indemnified parties or to the extent representation of all indemnified parties by the same counsel is otherwise inappropriate under applicable standards of professional conduct) and the indemnifying party shall be liable for any reasonable expenses therefor; provided, that no indemnifying party shall be subject to any liability for any settlement of a Claim made without its consent (which may not be unreasonably withheld, delayed or conditioned). If the indemnifying party assumes the defense of any Claim hereunder, such indemnifying party shall not enter into any settlement without the consent of the indemnified party if such settlement attributes liability to the indemnified party.

 

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3.5.          If for any reason the indemnity provided in Section 3.2 or 3.3 of this Agreement is unavailable, or is insufficient to hold harmless, an indemnified party, then the indemnifying party shall contribute to the amount paid or payable by the indemnified party as a result of any Claim in such proportion as is appropriate to reflect the relative benefits received by the indemnifying party on the one hand and the indemnified party on the other from the transactions contemplated by this Agreement. If, however, the allocation provided in the immediately preceding sentence is not permitted by applicable law, or if the indemnified party failed to give the notice required by Section 3.4 of this Agreement, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the indemnifying party and the indemnified party, as well as any other relevant equitable considerations. The relative fault 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 relates to information supplied by the indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The amount paid or payable in respect of any Claim shall be deemed to include any legal or other expenses or disbursements reasonably incurred by such indemnified party in connection with investigating or defending any such Claim. Notwithstanding the foregoing, no underwriter or controlling person thereof, if any, shall be required to contribute, in respect of such underwriter’s participation as an underwriter in the Private Placement Offering, any amount in excess of the amount by which the total price at which the Registrable Securities underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which such underwriter 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 1933 Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The obligation of any underwriters to contribute pursuant to this Section 3.5 shall be several in proportion to their respective underwriting commitments and not joint.

3.6.          The provisions of Section 3.2 through 3.5 of this Agreement shall be in addition to any other rights to indemnification or contribution which any indemnified party may have pursuant to law or contract and shall remain operative and in full force and effect regardless of any investigation made or omitted by or on behalf of any indemnified party and shall survive the transfer of the Registrable Securities by any such party.

3.7.          If and whenever the Company is required by the provisions of this Section 3 to use its best efforts to register any Registrable Securities under the 1933 Act, the Company shall, as expeditiously as possible under the circumstances:

(a)            Prepare and file with the SEC a registration statement with respect to such Registrable Securities and use its best efforts to cause such registration statement to become effective as soon as possible after filing and remain effective.

(b)            Subject to Section 3.1 of this Agreement, prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement current and

 

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effective and to comply with the provisions of the 1933 Act, and any regulations promulgated thereunder, with respect to the sale or disposition of all Registrable Securities covered by the registration statement required to effect the distribution of the securities, but in no event shall the Company be required to do so for a period of more than two (2) years following the effective date of the registration statement.

(c)            Furnish to the Sellers participating in the offering, applicable copies (in reasonable quantities) of summary, preliminary, final, amended or supplemented prospectuses, in conformity with the requirements of the 1933 Act and any regulations promulgated thereunder, and other documents as reasonably may be required in order to facilitate the disposition of the securities, but only while the Company is required under the provisions hereof to keep the registration statement current.

(d)            Use its best efforts to register or qualify the Registrable Securities covered by such registration statement under such other securities or blue sky laws of such jurisdictions of the United States as the Sellers participating in the offering shall reasonably request, and do any and all other acts and things which may be reasonably necessary to enable each participating Seller to consummate the disposition of the Registrable Securities in such jurisdictions.

(e)            Notify each Seller selling Registrable Securities, at any time when a prospectus relating to any such Registrable Securities covered by such registration statement is required to be delivered under the 1933 Act, of the Company’s becoming aware that the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing, and promptly prepare and furnish to each such Seller selling Registrable Securities a reasonable number of copies of a prospectus supplemented or amended so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing.

(f)             As soon as practicable after the effective date of the registration statement, and in any event within eighteen (18) months thereafter, make generally available to the Sellers participating in the offering an earnings statement (which need not be audited) covering a period of at least twelve (12) consecutive months beginning after the effective date of the registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the 1933 Act, including, at the Company’s option, Rule 158 thereunder. To the extent that the Company files such information with the SEC in satisfaction of the foregoing, the Company need not deliver the above referenced earnings statement to the Seller.

(g)            Upon request, deliver promptly to counsel of each Seller participating in the offering copies of all correspondence between the SEC and the Company, its counsel or auditors and all memoranda relating to discussions with the SEC or its staff with respect to the registration statement and permit each such Seller to do such investigation at such Seller’s sole cost and expense, upon reasonable advance notice, with respect to information contained in or omitted from the registration statement as it deems reasonably necessary. Each

 

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Seller agrees that it will use its best efforts not to interfere unreasonably with the Company’s business when conducting any such investigation and each Seller shall keep any such information received pursuant to this Section 3 confidential.

(h)            Provide a transfer agent and registrar located in the United States for all such Shares covered by such registration statement not later than the effective date of such registration statement.

(i)             Pay all Registration Expenses (as defined below) incurred in connection with a registration of Registrable Securities, whether or not such registration statement shall become effective; provided that each Seller shall pay all underwriting discounts, commissions and transfer taxes, and their own counsel and accounting fees, if any, relating to the sale or disposition of such Seller’s Registrable Securities pursuant to such registration statement. As used herein, “Registration Expenses” means any and all reasonable and customary expenses incident to performance of or compliance with the registration rights set forth herein, including, without limitation, (i) all SEC and stock exchange or National Association of Securities Dealers, Inc. (“NASD”) registration and filing fees, (ii) all fees and expenses of complying with state securities or blue sky laws (including reasonable fees and disbursements of counsel for the underwriters in connection with blue sky qualifications of the Registrable Securities but no other expenses of or disbursements by the underwriters or their counsel), (iii) all printing, messenger and delivery expenses, and (iv) the reasonable fees and disbursements of counsel for the Company and the Company’s independent public accountants.

(j)             Pay all NASD filing expenses (including NASD filing fees and legal fees of counsel to the Placement Agent in connection with such filing) incurred in connection with filings that are required by Rule 2710 of the NASD so that NASD members (including without limitation the Placement Agent) may resell Registrable Securities pursuant to an effective registration statement without further filings under such rule by them.

3.8.          The Company acknowledges that there is no adequate remedy at law for failure by it to comply with the provisions of this Section 3 and that such failure would not be adequately compensable in damages, and therefore agrees that its obligations and agreements contained in this Section 3 may be specifically enforced. In the event that the Company shall fail to file such registration statement when required pursuant to Section 3.1 of this Agreement or to keep any registration statement effective as provided in this Section 3 or otherwise fails to comply with its obligations and agreements in this Section 3, then, in addition to any other rights or remedies the Registered Holders may have at law or in equity, including, without limitation, the right of rescission, the Company shall indemnify and hold harmless the Registered Holders from and against any and all manner or loss which they may incur as a result of such failure. In addition, the Company shall also reimburse the Registered Holders for any and all reasonable legal fees, expenses and disbursements incurred by them in enforcing their rights pursuant to this Section 3, regardless of whether any litigation was commenced; provided, however, that the Company shall not be liable for the fees and expenses of more than one law firm, which firm shall be designated by the Placement Agent.

 

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4.

MISCELLANEOUS.

4.1.          All notices, consents and other communications under this Agreement shall be in writing and shall be deemed to have been duly given (a) when delivered by hand, (b) one (1) business day after the business day of transmission if sent by telecopier (with receipt confirmed), provided that a copy is mailed by certified mail, return receipt requested, or (c) one (1) business day after the business day of deposit with the carrier, if sent for next business day delivery by Express Mail, Federal Express or other recognized express delivery service (receipt requested), in each case addressed to the Company at the address indicated on the first page of this Agreement marked “Attention: Randy Fields” and to the Subscriber at the Subscriber’s address indicated on the last page of this Agreement (or to such other addresses and/or telecopier numbers as a party may designate as to itself by notice to the other parties).

4.2.          This Agreement shall not be changed, modified or amended except by a writing signed by the parties, and this Agreement may not be discharged except by performance in accordance with its terms or by a writing signed by the parties.

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

4.4.           Notwithstanding the place where this Agreement may be executed by any of the parties hereto, the parties expressly agree that all the terms and provisions hereof shall be construed in accordance with and governed by the laws of the State of New York without regard to New York conflict of law rules. The parties hereby agree that any dispute which may arise between them arising out of or in connection with this Agreement shall be adjudicated before a court located in New York and they hereby submit to the exclusive jurisdiction of the courts of the State of New York and of the Federal courts in New York with respect to any action or legal proceeding commenced by any party, and irrevocably waive any objection they now or hereafter may have respecting the venue of any such action or proceeding brought in such a court or respecting the fact that such court is an inconvenient forum, relating to or arising out of this Agreement or any acts or omissions relating to the sale of the Shares hereunder, and consent to the service of process in any such action or legal proceeding by means of registered or certified mail, return receipt requested, in case of the address set forth below or such other address as a party shall furnish in writing to the other parties.

4.5.          This Agreement may be executed in counterparts. Upon the execution and delivery of this Agreement by the Subscriber, this Agreement shall become a binding obligation of the Subscriber with respect to the purchase of the Shares as herein provided; subject, however, to the right hereby reserved to the Company to enter into the same agreements with other subscribers and to add and/or to delete other persons as subscribers.

 

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4.6.          The holding of any provision of this Agreement to be invalid or unenforceable by a court of competent jurisdiction shall not affect any other provision of this Agreement, which shall remain in full force and effect.

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

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

 

*** THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK ***

 

 

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ALL INVESTORS MUST COMPLETE THIS PAGE

 

IN WITNESS WHEREOF, the parties have executed this Agreement on _____________________, 2007.

 

_________ Shares x $10.00 per Share = $_______________ (minimum subscription = $10,000)

 

                                                                                                                                                                                                

Exact Name in Which Title is to be Held

 

                                                                                                                                                                                                

(Authorized Signature)

 

 

Print Name of Signatory and Capacity in which

Signed if an Entity

 

 

Signature (if Joint Tenants or Tenants in Common)

 

                                                                                                                                                                                

Print Name of above Signatory

 

SUBSCRIPTION ACCEPTED:

PARK CITY GROUP, INC.

By: ___________________________

Name:

Title:

 

Date:___________________________

_______________________________

Aggregate Purchase Price Accepted

 

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EXHIBIT A

Form of Warrant

 

 

 

17

 

 

 

Exhibit 10.2

 

Warrant to Purchase Common Stock

 

The attached Warrant to Purchase Common Stock is identical in all material respects for each of the individuals to which they were issued except as to the parties thereto, initial exercise date and the number of warrant shares granted. See table below.

 

Holder	Initial Exercise Date	Warrant Shares
Meadowbrook Opportunity Fund LLC	6/22/2007	28,571
Arthur H Finnel	6/22/2007	2,000
David G Linville	6/22/2007	714
Sandra L Brecher	6/21/2007	5,357
Joseph F Domenice	6/15/2007	714
Thomas J Bean	6/7/2007	3,571
John L Palazzola	6/21/2007	7,143
Videotape Products, Inc	6/21/2007	7,143
Harvey Bibicoff and Jacqueline Bibicoff Trustees of the Bibicoff Family Trust Dtd May 16, 2000	6/21/2007	2,000
Raymond M Beebe & Joan D Beebe JTWROS	6/4/2007	1,786
Michael P Hagerty	6/1/2007	2,000
Darrell Frost	6/5/2007	714
Lawrence Kane	6/5/2007	1,429
Jeffrey L Sadar & Barbara A Sadar JTWROS	6/5/2007	1,000
Charles M Thompson	6/5/2007	714
SEP FBO John Stevens Pershing LLC as Custodian	6/8/2007	1,429
Dr Richard V Nuttall & Annetta Mets Nuttall JTWROS	6/7/2007	714
Mark Ravich	6/5/2007	2,143
Terry E Hagen and Dawn R Hagen as JTWROS	6/6/2007	1,000
Robert G Moussa	6/7/2007	3,571
Alvin R Bonnette Rev Trust U A Dtd 1/31/85 Alvin R Bonnette Trustee	6/7/2007	4,000
Tad Wilson	6/5/2007	1,000
Robert W Allen & Susan M Allen JTWROS	6/5/2007	17,857
Robert Whitfield Donegan	6/5/2007	2,000
Frank M Durrance	6/11/2007	2,143
SEP FBO Ronald C Hintz Pershing LLC as Custodian	6/8/2007	1,071
Richard A Kraemer Trust U A/D 12/12/96 Richard A Kraemer TTEE	6/11/2007	2,857
T Mark Sledge	6/11/2007	1,429
Barbara Susca	6/12/2007	714
Albert C Esposito Brooke Crowley Esposito JT TEN	6/14/2007	1,786
Biscayne National Corp	6/7/2007	3,571
Robert B Cashion	6/14/2007	1,000
Shadow Capital LLC Attn B Kent Garlinghouse	6/13/2007	14,286
Dr Baldev S Brar & Dr Gurmukh K Brar JT TENWROS	6/14/2007	1,786
Walter E Beisler	6/15/2007	714
Michael L Smith & Larry E Smith JT TEN WROS	6/15/2007	714
Joseph Martha	6/12/2007	714
Stephen Friedland and Linda Friedland JTWROS	6/14/2007	2,000
David L Allen	6/13/2007	2,857
Kenneth Bodenstein TR Kenneth Bodenstein TTEE Dtd 7/30/84	6/13/2007	2,143
IRA FBO Arthur Resnikoff Pershing LLC as Custodian Rollover Account	6/8/2007	1,071

 

 

 

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Bart & Wendy Baker JTWROS	6/8/2007	714
Mark Bourque	6/16/2007	714
William Kehl	6/12/2007	1,429
Clyde Berg	6/12/2007	7,143
London Family Trust	6/11/2007	21,429
Keith Becker	6/18/2007	4,286
Tom C Mina	6/13/2007	714
Albert Esposito & Margaret Esposito JTWROS	6/13/2007	3,571
John W Crow	6/18/2007	1,000
Wulf Paulick & Renate Paulick JTWROS	6/16/2007	1,000
Ann B Oldfather	6/15/2007	714
Brian F Leonard and Martha E Leonard JT TEN WROS	5/12/2007	2,143
Steve Redmon & Brenda Redmon JT TEN WROS	6/15/2007	1,000
Ronald D Cowan	6/15/2007	714
Powell Family Limited Partners C/O Ron Powell	6/15/2007	714
John J Resich Jr TTEE John J Resich Jr RET Trust	6/15/2007	714
IRA FBO Russel J Bernier Pershing LLC as Custodian Rollover Account	6/11/2007	1,500
William P Kaiser	6/18/2007	3,571
Mary M Schnurer	6/17/2007	714
Stephen C Radocchia	6/19/2007	714
Paul Seid	6/15/2007	7,500
Kenneth J Feroldi Nancy J Feroldi JTWROS	6/19/2007	1,000
Neal Goldman	6/20/2007	17,857
Peder G Larsen and Margaret S Larsen JTWROS	6/15/2007	3,571
John Faure	6/19/2007	714
Sara Bower Penn TTEE Sara Bower Penn Living Trust Dtd 4/30/02	6/19/2007	10,714
Lighthouse Capital LLC	6/19/2007	7,143
IRA FBO Angel Rosario Pershing LLC as Custodian Rollover Account	6/19/2007	1,000
Robert W Allen Jr	6/17/2007	2,857
David J Larkworthy TOD Dtd 1/20/06	6/19/2007	1,000
Samuel L Box & Lisa Marsh Box JT TEN WROS	6/20/2007	1,000
Glenn Schabel	6/20/2007	4,286
Thomas R Jennett & Jodi K Jennett JT TEN WROS	6/19/2007	714
John P Junge & Sue H Junge TTEE FBO Junge Revocable Trust UAD 12-9-91	6/19/2007	3,000
Mavin J Loutsenhizer	6/21/2007	714
Mike Taglich POA Tag/Kent Partnership F/B/O Garlinghouse/M Taglich B Taglich	6/19/2007	3,571
Elliot D Cohen & Bonnie S Cohen JTWROS	6/18/2007	1,000
James B Deutsch & Deborah M Deutsch JTWROS	6/20/2007	2,000
Peter S Gold	6/19/2007	1,000
Mark C Ladendorf & Debra Ladendorf JTWROS	6/19/2007	2,143
Hillson Partners LP	6/20/2007	35,714
Hillson Private Partners II, LLLP	6/20/2007	7,143
Ronald Courey	6/21/2007	1,000
Robert G Paul	6/21/2007	1,786
RFS Trust U/A/D 12/30/96 Richard F Sherman TTEE	6/10/2007	3,000
Dennis Fortin	6/4/2007	10,714
John R Bertsch Trust Dtd 12/4/2004 John R Bertsch Trustee	6/1/2007	14,286
Applebaun Family LTD Partners Irving Applebaum General Ptnr	6/4/2007	1,786

 

 

 

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William C Steele TTEE William C Steele Living Trust UAD 5-11-98	6/5/2007	4,643
Donald McCulloch & Jacqueline McCulloch JTWROS	6/5/2007	2,000
E H Arnold	6/8/2007	17,857
Michael N Taglich	6/6/2007	17,857
Angus Bruce Lauralee Bruce	6/5/2007	1,429
Valdemar Skov	6/4/2007	714
Peter Carroll & Maureen Carroll JT/WROS	6/1/2007	714
Robert F Taglich	6/7/2007	17,857
B Roy Smith & Joyce L Smith JTWROS	6/5/2007	2,143
Paul Berko	6/5/2007	857
Susan Thorstenn & Magnus Thorstenn JTWROS	6/19/2007	8,929

 

 

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NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE HAVE 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. THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES

COMMON STOCK PURCHASE WARRANT

To Purchase [ ] Shares of Common Stock of

Park City Group, Inc.

THIS COMMON STOCK PURCHASE WARRANT CERTIFIES that, for value received, _____________________ (the “ Holder ”), is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after [ ] (the “ Initial Exercise Date ”) and on or prior to the close of business on the Termination Date (as defined below) but not thereafter, to subscribe for and purchase from Park City Group, Inc., a corporation incorporated in the State of Delaware (the “ Company ”), up to [ ] shares (the “ Warrant Shares ”) of Common Stock, of the Company (the “ Common Stock ”). The purchase price of one share of Common Stock (the “ Exercise Price ”) under this Warrant shall be $4.00 , subject to adjustment hereunder. The Exercise Price and the number of Warrant Shares for which the Warrant is exercisable shall be subject to adjustment as provided herein. As used herein “Termination Date” shall mean the earlier of (i) May 31, 2011 and (ii) the 31 ^st day after the 20 ^th Trading Day within any consecutive 30-Trading Day period on which the Company’s Common Stock has a closing price of at least $8.00 (as adjusted proportionately with any adjustments to the Exercise Price pursuant to Section 11 hereof), provided that no Termination Date shall occur pursuant to this clause (ii) unless and until (A) a registration statement covering the Warrant Shares is then effective and the prospectus contained therein does not contain a misstatement of a material fact or fail to state a material fact required to be stated therein in order to make the statements made therein not misleading and (B) the Holder has actually received 20 days’ advance notice of the pending Termination Date. In the event that a Termination Date occurs because of clause (ii) above, the Company shall pay the Holder, within twenty (20) days of such Termination Date, one cent ($0.01) per Warrant Share not issued due to exercise of the Warrant. Capitalized terms used and not otherwise defined herein shall have the meanings set forth in that certain Stock Purchase Agreement (the “ Purchase Agreement ”), dated o , 2007, between the Company and the purchasers signatory thereto.

 

 

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1.       Title to Warrant . Prior to the Termination Date and subject to compliance with applicable laws and Section 7 of this Warrant, this Warrant and all rights hereunder are transferable, in whole or in part, at the office or agency of the Company by the Holder in person or by duly authorized attorney, upon surrender of this Warrant together with the Assignment Form annexed hereto properly endorsed. The transferee shall sign an investment letter in form and substance reasonably satisfactory to the Company.

2.       Authorization of Shares . The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).

3.

Exercise of Warrant .

(a) Except as provided in Section 4 herein, exercise of the purchase rights represented by this Warrant may be made at any time or times on or after the Initial Exercise Date and on or before the Termination Date by the surrender of this Warrant and the Notice of Exercise Form annexed hereto duly executed, at the office of the Company (or such other office or agency of the Company as it may designate by notice in writing to the registered Holder at the address of such Holder appearing on the books of the Company) and upon payment of the Exercise Price of the shares thereby purchased by wire transfer or cashier’s check drawn on a United States bank or by means of a cashless exercise pursuant to Section 3(d), the Holder shall be entitled to receive a certificate for the number of Warrant Shares so purchased. Certificates for shares purchased hereunder shall be delivered to the Holder within fifteen (15) Trading Days after the date on which this Warrant shall have been exercised as aforesaid. This Warrant shall be deemed to have been exercised and such certificate or certificates shall be deemed to have been issued, and the Holder or any other person so designated to be named therein shall be deemed to have become a holder of record of such shares for all purposes, as of the date the Warrant has been exercised by payment to the Company of the Exercise Price and all taxes required to be paid by the Holder, if any, pursuant to Section 5 prior to the issuance of such shares, have been paid. “Trading Day” means a day on which the NASDAQ Stock Market is open for the transaction of business.

 

(b)            If this Warrant shall have been exercised in part, the Company shall, at the time of delivery of the certificate or certificates representing Warrant Shares, deliver to Holder a new Warrant evidencing the rights of Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant.

(c)            If the Company fails to deliver to the Holder a certificate or certificates representing the Warrant Shares pursuant to Section 3(a) of this Warrant by

 

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the close of business on the fifth Trading Day after the date of exercise, then the Holder will have the right to rescind such exercise.

(d)           If, but only if, at any time after one year from the date of issuance of this Warrant there is no effective Registration Statement registering the resale of the Warrant Shares by the Holder, this Warrant may also be exercised at such time by means of a “cashless exercise” in which the Holder shall be entitled to receive a certificate for the number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:

(A) = the Closing Price on the Trading Day immediately preceding the date of such election;

 

(B) = the Exercise Price of this Warrant, as adjusted; and

 

(X) = the number of Warrant Shares issuable upon exercise of this Warrant in accordance with the terms of this Warrant by means of a cash exercise rather than a cashless exercise.

 

4.       No Fractional Shares or Scrip . No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. As to any fraction of a share which Holder would otherwise be entitled to purchase upon such exercise, the Company shall pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Exercise Price.

5.       Charges, Taxes and Expenses . Issuance of certificates for Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Company, and such certificates shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided , however , that in the event certificates for Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the Holder; and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto.

6.       Closing of Books . The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Warrant, pursuant to the terms hereof.

7.

Transfer, Division and Combination .

(a)            Subject to compliance with any applicable securities laws and the conditions set forth in Sections 1 and 7(e) hereof and to the provisions of Section 4.1 of the Purchase Agreement, this Warrant and all rights hereunder are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer

 

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taxes payable upon the making of such transfer. Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled. A Warrant, if properly assigned, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued.

(b)            This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with Section 7(a), as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice.

 

(c)            The Company shall prepare, issue and deliver at its own expense (other than transfer taxes) the new Warrant or Warrants under this Section 7.

 

(d)            The Company agrees to maintain, at its aforesaid office, books for the registration and the registration of transfer of the Warrants.

(e)            If, at the time of the surrender of this Warrant in connection with any transfer of this Warrant, the transfer of this Warrant shall not be registered pursuant to an effective registration statement under the Securities Act and under applicable state securities or blue sky laws, the Company may require, as a condition of allowing such transfer (i) that the Holder or transferee of this Warrant, as the case may be, furnish to the Company a written opinion of counsel (which opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions) to the effect that such transfer may be made without registration under the Securities Act and under applicable state securities or blue sky laws, (ii) that the holder or transferee execute and deliver to the Company an investment letter in form and substance acceptable to the Company and (iii) that the transferee be an “accredited investor” as defined in Rule 501(a) promulgated under the Securities Act.

8.       No Rights as Shareholder until Exercise . This Warrant does not entitle the Holder to any voting rights or other rights as a shareholder of the Company prior to the exercise hereof. Upon the surrender of this Warrant and the payment of the aggregate Exercise Price (or by means of a cashless exercise), the Warrant Shares so purchased shall be and be deemed to be issued to such Holder as the record owner of such shares as of the close of business on the later of the date of such surrender or payment.

9.       Loss, Theft, Destruction or Mutilation of Warrant . The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include the posting of any bond), and upon surrender

 

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and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.

10.    Saturdays, Sundays, Holidays, etc . If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall be a Saturday, Sunday or a legal holiday, then such action may be taken or such right may be exercised on the next succeeding day not a Saturday, Sunday or legal holiday.

11.    Adjustments of Exercise Price and Number of Warrant Shares . The number and kind of securities purchasable upon the exercise of this Warrant and the Exercise Price shall be subject to adjustment from time to time upon the happening of any of the following. In case the Company shall (i) declare a dividend or other distribution in shares of Common Stock or other securities or property of the Company to holders of its outstanding Common Stock, (ii) subdivide its outstanding shares of Common Stock into a greater number of shares, (iii) combine its outstanding shares of Common Stock into a smaller number of shares of Common Stock, or (iv) issue any shares of its capital stock in a reclassification of the Common Stock, then the number of Warrant Shares purchasable upon exercise of this Warrant immediately prior thereto shall be adjusted so that the Holder shall be entitled to receive the kind and number of Warrant Shares or other securities of the Company which it would have owned or have been entitled to receive had such Warrant been exercised in advance thereof. Upon each such adjustment of the kind and number of Warrant Shares or other securities of the Company which are purchasable hereunder, the Holder shall thereafter be entitled to purchase the number of Warrant Shares or other securities resulting from such adjustment at an Exercise Price per Warrant Share or other security obtained by multiplying the Exercise Price in effect immediately prior to such adjustment by the number of Warrant Shares purchasable pursuant hereto immediately prior to such adjustment and dividing by the number of Warrant Shares or other securities of the Company that are purchasable pursuant hereto immediately after such adjustment. An adjustment made pursuant to this paragraph shall become effective immediately after the effective date of such event retroactive to the record date, if any, for such event.

12.    Reorganization, Reclassification, Merger, Consolidation or Disposition of Assets . In case the Company shall reorganize its capital, reclassify its capital stock, consolidate or merge with or into another corporation (where the Company is not the surviving corporation or where there is a change in or distribution with respect to the Common Stock of the Company), or sell, transfer or otherwise dispose of its property, assets or business to another corporation and, pursuant to the terms of such reorganization, reclassification, merger, consolidation or disposition of assets, shares of common stock of the successor or acquiring corporation, or any cash, shares of stock or other securities or property of any nature whatsoever (including warrants or other subscription or purchase rights) in addition to or in lieu of common stock of the successor or acquiring corporation (“ Other Property ”), are to be received by or distributed to the holders of Common Stock of the Company, then the Holder shall have the right thereafter to receive upon exercise of this Warrant, the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and Other Property receivable upon or as a result of such reorganization, reclassification, merger, consolidation or disposition of assets by a Holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such event. In case of any such reorganization,

 

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reclassification, merger, consolidation or disposition of assets, the successor or acquiring corporation (if other than the Company) shall expressly assume the due and punctual observance and performance of each and every covenant and condition of this Warrant to be performed and observed by the Company and all the obligations and liabilities hereunder, subject to such modifications as may be deemed appropriate (as determined in good faith by resolution of the Board of Directors of the Company) in order to provide for adjustments of Warrant Shares for which this Warrant is exercisable which shall be as nearly equivalent as practicable to the adjustments provided for in this Section 12. For purposes of this Section 12, “common stock of the successor or acquiring corporation” shall include stock of such corporation of any class which is not preferred as to dividends or assets over any other class of stock of such corporation and which is not subject to redemption and shall also include any evidences of indebtedness, shares of stock or other securities which are convertible into or exchangeable for any such stock, either immediately or upon the arrival of a specified date or the happening of a specified event and any warrants or other rights to subscribe for or purchase any such stock. The foregoing provisions of this Section 12 shall similarly apply to successive reorganizations, reclassifications, mergers, consolidations or disposition of assets.

 

13.    Notice of Adjustment . Whenever the number of Warrant Shares or number or kind of securities or other property purchasable upon the exercise of this Warrant or the Exercise Price is adjusted, as herein provided, the Company shall give notice thereof to the Holder, which notice shall state the number of Warrant Shares (and other securities or property) purchasable upon the exercise of this Warrant and the Exercise Price of such Warrant Shares (and other securities or property) after such adjustment, setting forth a brief statement of the facts requiring such adjustment and setting forth the computation by which such adjustment was made.

14.

Notice of Corporate Action . If at any time:

(a)            the Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend or other distribution, or any right to subscribe for or purchase any evidences of its indebtedness, any shares of stock of any class or any other securities or property, or to receive any other right, or

 

(b)            there shall be any capital reorganization of the Company, any reclassification or recapitalization of the capital stock of the Company or any consolidation or merger of the Company with, or any sale, transfer or other disposition of all or substantially all the property, assets or business of the Company to, another corporation or,

 

(c)            there shall be a voluntary or involuntary dissolution, liquidation or winding up of the Company;

 

then, in any one or more of such cases, the Company shall give to Holder (i) at least 10 calendar days’ prior written notice of the date on which a record date shall be selected for such dividend, distribution or right or for determining rights to vote in respect of any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, liquidation or winding up, and

 

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(ii) in the case of any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, dissolution, liquidation or winding up, at least 30 calendar days’ prior written notice of the date when the same shall take place. Such notice in accordance with the foregoing clause also shall specify (i) the date on which any such record is to be taken for the purpose of such dividend, distribution or right, the date on which the holders of Common Stock shall be entitled to any such dividend, distribution or right, and the amount and character thereof, and (ii) the date on which any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, dissolution, liquidation or winding up is to take place and the time, if any such time is to be fixed, as of which the holders of Common Stock shall be entitled to exchange their Warrant Shares for securities or other property deliverable upon such disposition, dissolution, liquidation or winding up. Each such written notice shall be sufficiently given if addressed to Holder at the last address of Holder appearing on the books of the Company and delivered in accordance with Section 17(d).

15.    Authorized Shares . The Company covenants that during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for the Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Trading Market upon which the Common Stock may be listed.

Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment. Without limiting the generality of the foregoing, the Company will (a) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value, (b) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant, and (c) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof as may be necessary to enable the Company to perform its obligations under this Warrant.

 

Before taking any action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof.

 

 

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16.    Registration Rights . The Warrant Shares shall be entitled to the registration rights as set forth in Section 3 of that certain Stock Purchase Agreement, dated as of [ ], by and between the Company and the purchasers signatory thereto. Such registration rights are incorporated herein by this reference as if such provisions had been set forth herein full.

17.

Miscellaneous .

(a)            Jurisdiction . All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be determined in accordance with the provisions of the Purchase Agreement.

(b)            Restrictions . The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered, will have restrictions upon resale imposed by state and federal securities laws.

(c)            Nonwaiver and Expenses . No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice Holder’s rights, powers or remedies, notwithstanding all rights hereunder terminate on the Termination Date. If the Company willfully and knowingly fails to comply with any provision of this Warrant, which results in any material damages to the Holder, the Company shall pay to Holder such amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys’ fees, including those of appellate proceedings, incurred by Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.

(d)            Notices . Any notice, request or other document required or permitted to be given or delivered to the Holder by the Company shall be delivered in accordance with the notice provisions of the Purchase Agreement; provided upon any permitted assignment of this Warrant, the assignee shall promptly provide the Company with its contact information.

(e)            Limitation of Liability . No provision hereof, in the absence of any affirmative action by Holder to exercise this Warrant or purchase Warrant Shares, and no enumeration herein of the rights or privileges of Holder, shall give rise to any liability of Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.

(f)             Remedies . Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive the defense in any action for specific performance that a remedy at law would be adequate.

(g)            Successors and Assigns . Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors of the Company and the successors and permitted assigns

 

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of Holder. The provisions of this Warrant are intended to be for the benefit of all Holders from time to time of this Warrant and shall be enforceable by any such Holder or holder of Warrant Shares.

(h)            Amendment . This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder.

(i)             Severability . Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.

(j)             Headings . The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.

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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized.

 

Dated: [	], 2007
			Park City Group, Inc.

 

 

 

	By:
		Name:
		Title:

 

 

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NOTICE OF EXERCISE

 

To:

Park City Group, Inc.

 

(1)     The undersigned hereby elects to purchase ________ Warrant Shares of Park City Group, Inc. pursuant to the terms of the attached Warrant (only if exercised in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.

(2)

Payment shall take the form of (check applicable box):

o in lawful money of the United States; or

o the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in subsection 3(d), to exercise this Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure set forth in subsection 3(d).

(3)     Please issue a certificate or certificates representing said Warrant Shares in the name of the undersigned or in such other name as is specified below:

_______________________________

 

 

The Warrant Shares shall be delivered to the following:

 

_______________________________

 

_______________________________

 

_______________________________

 

(4) Accredited Investor . The undersigned is an “accredited investor” as defined in Regulation D promulgated under the Securities Act of 1933, as amended.

 

[PURCHASER]

 

 

	By: ______________________________
		Name:
		Title:

 

Dated: ________________________

 

 

 

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ASSIGNMENT FORM

 

(To assign the foregoing warrant, execute

this form and supply required information.

Do not use this form to exercise the warrant.)

 

 

FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to

 

_______________________________________________ whose address is

 

_______________________________________________________________.

 

 

_______________________________________________________________

 

Dated: ______________, _______

 

 

Holder’s Signature:

_____________________________

 

Holder’s Address:

_____________________________

 

_____________________________

 

 

Signature Guaranteed: ___________________________________________

 

NOTE: The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatsoever, and must be guaranteed by a bank or trust company. Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant.

 

 

 

 

 

PLACEMENT AGREEMENT

This PLACEMENT AGREEMENT (the “Agreement”) dated as of the ____ day of _____, 2007, by and between PARK CITY GROUP, INC. , a Nevada corporation (the “Company”), and TAGLICH BROTHERS, INC. (“Placement Agent”).

W I T N E S S E T H :

WHEREAS, in reliance upon the representations, warranties, terms and conditions hereinafter set forth, the Placement Agent will use its best efforts to privately place (the “Proposed Offering”) a minimum principal amount of $1,000,000 (the “Minimum Amount”) and a maximum principal amount of $3,500,000 (the “Maximum Amount”) of the Company’s 5% convertible preferred stock, $0.01 par value per share (the “Preferred Stock” and the shares of Preferred issued being herein called the “Shares”), at a purchase price (the “Purchase Price”) equal to $10.00 per Share together with warrants to purchase 1,000 shares of Common Stock for each $14,000 in Purchase Price of Shares (the “Investor Warrants”) in one or more closings (each a “Closing”);

WHEREAS, the Shares are being issued pursuant to the Company’s Confidential Private Placement Memorandum and exhibits thereto dated May 31, 2007, as the same may be amended and/or supplemented from time to time, (collectively, the “Memorandum”); and

WHEREAS, the Shares are being issued to the buyers thereof (the “Investors”) pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended (the “1933 Act”).

NOW, THEREFORE, in consideration of the premises and the respective promises hereinafter set forth, the Company and the Placement Agent hereby agree as follows:

1.	Agreement to Act as Placement Agent .

(a)            The Placement Agent shall act on a best efforts basis and does not guarantee that it will be able to raise new capital in any prospective Offering. The Company acknowledges that any advice given by the Placement Agent to the Company is solely for the benefit and use of the Board of Directors of the Company and may not be used, reproduced, disseminated, quoted or referred to without the Placement Agent’s prior written consent.

(b)            The term of The Placement Agent’s non-exclusive engagement will end at the end of the offering period as described in the Memorandum; however, the Company may terminate the engagement at any time upon 30 days written notice to the Placement Agent. Upon termination and thereafter, the Placement Agent will be entitled to collect all amounts owed to it pursuant to Section 11 .

2.                            Representations and Warranties of the Company . The Company hereby represents and warrants to and covenants and agrees with the Placement Agent, as of the date hereof and as of the date of each Closing, as follows:

(a)            The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and is qualified and in good standing as a foreign corporation in each jurisdiction in which the nature of the business conducted by the Company or the property owned or leased by the Company requires such qualification. Except as

 

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described in the Memorandum, the Company has no subsidiaries and does not own any equity interest and has not made any loans or advances to or guarantees of indebtedness to any person, corporation, partnership or other entity.

(b)

The capital structure of the Company is as described in the Memorandum.

(c)            The Company has the full right, power and authority to execute, deliver and perform under this Agreement. This Agreement has been duly executed by the Company and this Agreement and the transactions contemplated by this Agreement have been duly authorized by all necessary corporate action and each constitute, the legal, valid and binding obligations of the Company, enforceable in accordance with their respective terms.

(d)            All of the issued and outstanding shares of the Company’s Common Stock (the “Common Stock”) have been duly and validly authorized and issued, are fully paid and nonassessable (with no personal liability attaching to the holders thereof or to the Company) and are free from preemptive rights or rights of first refusal held by any person. All of the issued and outstanding shares of Common Stock have been issued pursuant to either a current effective registration statement under the 1933 Act or an exemption from the registration requirements thereof, and were issued in accordance with all applicable Federal and state securities laws.

(e)            The Shares to be issued at each Closing, and the shares of Common Stock issuable upon conversion of such Shares, have been duly and validly authorized for issuance and, when issued pursuant to this Agreement or pursuant to such conversion, will be duly and validly authorized and issued, fully paid and nonassessable and free from preemptive rights or rights of first refusal held by any person.

(f)             The following financial statements of the Company (hereinafter collectively, the “Financial Statements”) are included in the Memorandum: (i) consolidated balance sheets as of June 30, 2005 and 2006, and consolidated statements of operations, shareholders’ deficit and cash flows for the fiscal years then ended, and the related notes thereto, which have been audited by HJ & Associates, LLC (“HJ”), independent certified public accountants, and (ii) unaudited consolidated balance sheet as of March 31, 2007, and consolidated statements of operations and cash flows for the nine months ended March 31, 2006 and 2007, and the related notes thereto. The Financial Statements, which are included in the Company’s Registration Statement on Form SB-2/A filed with the SEC on January 18, 2007 and the Company’s Form 10QSB Quarterly Report for the fiscal quarter ended March 31, 2007 (the “Form 10QSB”), were prepared in accordance with generally accepted accounting principles consistently applied and present and reflect fairly the financial position of the Company at the respective balance sheet dates and the results of its operations and cash flows for the periods then ended, provided, however , that the financial statements included in the Form 10QSB are subject to normal year-end adjustments and lack footnotes and other presentation items. During the period of HJ’s engagement as the Company’s independent certified public accountants, there have been no disagreements between the accounting firm and the Company on any matters of accounting principles or practices, financial statement disclosure or auditing scope or procedure and no events required to be reported on a current report on Form 8-K relating to the relationship between the Company and the accounting firm. The Company has made and kept books and records and accounts which are in reasonable detail and which fairly and accurately reflect the activities of the Company, subject only to year-end adjustments.

 

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(g)            The Company has good and marketable title to all of its material property and assets and, except as set forth in the Memorandum or the financial statements of the Company (the “Financial Statements”), none of such property or assets of the Company are subject to any lien, mortgage, pledge, encumbrance or other security interest.

(h)                          Except as may be disclosed in the Memorandum, since March 31, 2007, there has not been any material adverse change in the financial condition or in the operations, business or prospects of the Company from that shown in the Financial Statements or any damage or destruction, not covered by insurance, which affects the business, property or assets of the Company.

(i)                           Except as set forth in the Exhibits to the Memorandum, the Company has not filed any Current Reports on Form 8-K or other reports filed with the Securities and Exchange Commission (the “SEC”) subsequent to January 18, 2007.

(j)                            Neither the execution nor delivery of this Agreement, the Investor Warrants or the Placement Agent Warrants (as defined below) or the issuance and delivery of the Shares or the Common Stock issuable upon exercise of the Investor Warrants and Placement Agent Warrants, by the Company, nor the performance by the Company of the transactions contemplated by this Agreement or the Investor Warrants and Placement Agent Warrants: (i) requires the consent, waiver, approval, license or authorization of or filing with or notice to any person, entity or public authority (except any filings required by Federal or state securities laws, which filings have been or will be made by the Company on a timely basis); (ii) violates or constitutes a default under or breach of any law, rule or regulation applicable to the Company; or (iii) conflicts with or results in a breach or termination of any provision of, or constitutes a default under, or will result in the creation of any lien, charge or encumbrance upon any of the property or assets of the Company with or without the giving of notice, the passage of time or both, pursuant to (A) the Company’s articles of incorporation (as amended) or by-laws, (B) any mortgage, deed of trust, indenture, note, loan agreement, security agreement, contract, lease, license, alliance agreement, joint venture agreement, or other agreement or instrument, or (C) any order, judgment, decree, statute, regulation or any other restriction of any kind or character to which the Company is a party or by which any of the assets of the Company may be bound.

(k)            Except as described in the Memorandum, the Company does not have any indebtedness to any officer, director, 5% stockholder or other Affiliate (as defined in the Rules and Regulations of the SEC under the 1933 Act) of the Company.

(l)             The Company is in compliance with all laws, rules and regulations of all Federal, state, local and foreign government agencies having jurisdiction over the Company or affecting the business, assets or properties of the Company, except where the failure to comply has not and will not have a material adverse effect on the business, financial condition or results of operations of the Company, taken as a whole (a “Material Adverse Effect”). The Company possesses all licenses, permits, consents, approvals and agreements (collectively, “Licenses”) which are required to be issued by any and all applicable Federal, state, local or foreign authorities necessary for the operation of its business and/or in connection with its assets or properties, except where the failure to possess such Licenses has not and will not have a Material Adverse Effect.

(m)           The Company is not in default under any note, loan agreement, security agreement, mortgage, contract, franchise agreement, distribution agreement, lease, alliance

 

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agreement, joint venture agreement, other agreement, license, permit, consent, approval or instrument to which it is a party, and no event has occurred which, with or without the lapse of time or giving of notice, or both, would constitute such default thereof by the Company or would cause acceleration of any obligation of the Company or would adversely affect the business, operations, or financial condition of the Company, except where such default or event, whether with or without the lapse of time or giving of notice, or both, has not and will not have a Material Adverse Effect. To the best of the knowledge of the Company, no party to any note, loan agreement, security agreement, mortgage, contract, franchise agreement, distribution agreement, lease, alliance agreement, joint venture agreement, other agreement, license, permit, consent, approval or instrument with or given to the Company is in default thereunder and no event has occurred with respect to such party, which, with or without the lapse of time or giving of notice, or both, would constitute a default by such party or would cause acceleration of any obligations of such party.

(n)            To the best of the Company’s knowledge, no officer, director or 5% stockholder of the Company and no Affiliate of any such person either (i) holds any interest in any corporation, partnership, business, trust, sole proprietorship or any other entity which is engaged in a business similar to that conducted by the Company (other than a passive immaterial interest in a public company engaged in any such business) or (ii) engages in business with the Company.

(o)            There are no material ( i.e. , involving an asserted liability in excess of twenty-five thousand dollars ($25,000)) claims, actions, suits, proceedings or labor disputes, inquiries or investigations (whether or not purportedly on behalf of the Company), pending or, to the best of the Company’s knowledge, threatened, against the Company, at law or in equity or by or before any Federal, state, county, municipal or other governmental department, the SEC, the National Association of Securities Dealers, Inc., board, bureau, agency or instrumentality, domestic or foreign, whether legal or administrative or in arbitration or mediation, nor is there any basis for any such action or proceeding. Neither the Company, nor any of its assets are subject to, nor is the Company in default with respect to, any order, writ, injunction, judgment or decree that could adversely affect the financial condition, business, assets or prospects of the Company.

(p)                          The accounts receivable of the Company represent receivables generated from the sale of goods and services in the ordinary course of business. The Company knows of no material disputes concerning accounts receivable of the Company not disclosed in the Memorandum.

(q)                                         The accounts payable of the Company represent bona fide payables to third parties incurred in the ordinary course of business and represent bona fide debts for services and/or goods provided to the Company.

(r)             Except as set forth in the Memorandum, the Company does not have (i) any written employment contracts or oral employment contracts not terminable at will by the Company with any 5% percent shareholder, officer or director of the Company; (ii) any consulting agreement or other compensation agreement with any 5% percent shareholder, officer or director of the Company; or (iii) any agreement or contract with any 5% percent shareholder, officer or director of the Company that will result in the payment by the Company or the creation of any commitment or obligation (absolute or contingent), of the Company to pay any severance,

 

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termination, “golden parachute,” or similar payment to any present or former personnel of the Company following termination of employment. No director, executive officer or other key employee of the Company has advised the Company that he or she intends to resign as director and/or executive officer of the Company or to terminate his or her employment with the Company.

(s)                           Except as set forth in the Memorandum, the Company is not a party to a labor agreement with respect to any of its employees with any labor organization, union, group or association and there are no employee unions (nor any similar labor or employee organizations). There is no labor strike or labor stoppage or slowdown pending, or, to the knowledge of the Company, threatened against the Company, nor has the Company experienced in the last five (5) years any work stoppage or other labor difficulty. The Company is in compliance with all applicable laws, rules and regulations regarding employment practices, employee documentation, terms or conditions of employment and wage and hours and the Company is not engaged in any unfair labor practices, except where the failure to comply has not and will not have a Material Adverse Effect. There are no unfair labor practice charges or complaints against the Company pending before the National Labor Relations Board or any other governmental agency.

(t)                           Except as disclosed in the Memorandum, there is no employee pension, retirement or other benefit plans, maintained, contributed to or required to be contributed to by the Company covering any employee or former employee of the Company. The Company has no material liability or obligation of any kind or nature, whether accrued or contingent, matured or unmatured, known or unknown, under any provision of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) or any provision of the Internal Revenue Code of 1986, as amended, specifically relating to persons subject to ERISA.

(u)                          The Company has timely filed or will timely file with the appropriate taxing authorities all returns in respect of taxes required to be filed through the date hereof and has timely paid or will timely pay all taxes that it is required to pay or has established an adequate reserve therefore. There are no pending or, to the knowledge of the Company, threatened audits, investigations or claims for or relating to any liability of the Company in respect of taxes.

(v)            The Company has no liabilities of any kind or nature whether accrued or contingent, matured or unmatured, known or unknown, except as set forth in the Memorandum and those liabilities incurred by the Company in the ordinary course of business since March 31, 2007.

(w)           There are no finder’s fees or brokerage commissions payable with respect to the transactions contemplated by this Agreement due to the actions of the Company, except as provided in Section 11 of this Agreement.

(x)                          Except as set forth in the Memorandum, the Company is not currently and has not during the past six (6) months been engaged in negotiations with respect to: (i) any merger or consolidation of the Company where the Company would not be the surviving entity; or (ii) the sale of the Company or any of its assets other than sales in the ordinary course of business.

 

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(y)            The Company has the right to conduct its business in the manner in which its business has been heretofore conducted. To the knowledge of the Company, the conduct of such businesses by the Company does not violate or infringe upon the patent, copyright, trade secret or other proprietary rights of any third party, and the Company has not received any notice of any claim of any such violation or infringement.

(z)                           The Company is currently in compliance in all respects with all applicable Environmental Laws (as defined below), including, without limitation, obtaining and maintaining in effect all permits, licenses, consents and other authorizations required by applicable Environmental Laws, and the Company is currently in compliance with all such permits, licenses, consents and other authorizations, except where the failure to comply does not and will not have a Material Adverse Effect. The Company has not received notice from any property owner, landlord, tenant or Governmental Authority (as defined below) that Hazardous Wastes (as defined below) are being improperly used, stored or disposed of at any property currently or formerly owned or leased by the Company or that any soil or ground water contamination has emanated from any such property. For purposes hereof, the term “Environmental Laws” means, collectively, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, the Superfund Amendments and Reauthorization Act of 1986, as amended, the Resource Conservation and Recovery Act, as amended, the Toxic Substances Act, as amended, the Clean Air Act, as amended, the Clean Water Act, as amended, any other “Superfund” or “Superlien” law or any other Federal, state or local statute, law, ordinance, code, rule, regulation, order or decree regulating, relating to, or imposing liability or standards of conduct concerning any hazardous, toxic or dangerous waste, substance, or material, as now or at any time hereafter in effect. For purposes hereof, the term “Governmental Authority” shall mean the Federal Government of the United States of America, any state or any political subdivision of the Federal Government or any state, including but not limited to courts, departments, commissions, boards, bureaus, agencies, ministries or other instrumentalities. For purposes hereof, the term “Hazardous Wastes” shall mean any regulated quantity of hazardous substances as listed by the Environmental Protection Agency (the “EPA”) and the list of toxic pollutants designated by the United States Congress and/or the EPA or defined by any other Federal, state or local statute, law, ordinance, code, rule, regulation, order, or decree regulating, relating to or imposing liability for standard of conduct concerning any hazardous, toxic substance or material.

(aa)          The information contained in the Memorandum, taken together, describes in all material respects the business and financial condition of the Company, and such material, taken together, does not contain any misstatement of a material fact or omit to state a material fact necessary to make the information not misleading. The Investors and the Placement Agent shall be entitled to rely on such material notwithstanding any investigation they or any of them may have made.

(bb)          The Financial Statements included in the Memorandum present fairly the financial position of the Company as of the dates indicated and the results of its operations for the periods specified. The historical financial information included in the Memorandum has been derived from the accounting records of the Company and presents fairly the information shown thereby.

(cc)          The Investor Warrants and Placement Agent Warrants have been authorized for issuance to the Investors and the Placement Agent or its designees, respectively.

 

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The shares of Common Stock issuable upon exercise of the Investor Warrants and Placement Agent Warrants (the “Warrant Shares”), when issued and delivered against payment therefor in accordance with the terms thereof, will be duly and validly issued, fully paid, nonassessable and free of preemptive rights or rights of first refusal held by any person, and all corporate action required to be taken for the authorization and issuance of the Investor Warrants and Placement Agent Warrants and the Warrant Shares has been validly and sufficiently taken. The execution by the Company of the Investor Warrants and Placement Agent Warrants has been duly authorized by all required action of the Company and, when so executed and delivered, will constitute the valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms, subject, as to enforcement, to bankruptcy, insolvency, reorganization and other laws of general applicability relating to or affecting creditors’ rights and to general equity principles.

3.	Representations, Warranties and Covenants of Placement Agent.

(a)                                         Placement Agent hereby represents and warrants that it is duly authorized to execute this Agreement and perform its duties hereunder, and the execution and delivery by Placement Agent of this Agreement and the consummation of the transactions contemplated by this Agreement have been authorized by all necessary corporate action and will not result in any violation of, or be in conflict with, or constitute a default under, Placement Agent’s Articles of Incorporation or By-Laws, any agreement or instrument to which Placement Agent is a party or Placement Agent’s property is bound, or any judgment, decree, order or any statute, rule or regulation applicable to Placement Agent.

(b)                                         In offering the Shares for sale, Placement Agent will not offer the Shares for sale, or solicit any offers to buy any Shares, or otherwise negotiate with any person in respect of the Shares, on the basis of any communications or documents relating to the Shares or any investment therein or to the Company or investment therein, other than the Memorandum and any other document satisfactory in form and substance to the Company. Placement Agent will promptly deliver a copy of each amendment or supplement to the Memorandum (i) to all offerees then being or thereafter solicited by Placement Agent, and (ii) to each person who has subscribed for Shares prior to the receipt by such person of such amendment or supplement.

(c)                                                        In offering the Shares for sale, Placement Agent shall conduct such sales in the manner described in the Memorandum.

4.	Covenants of the Company.

(a)            In connection with the Proposed Offering, the Company will at all times comply with all requirements imposed upon it by the 1933 Act, as now and hereafter amended, and by all applicable state securities laws and regulations, to permit the continuance of offers and sales of the Units in accordance with the provisions hereof and the Memorandum. During such period, the Company will amend and supplement the Memorandum in order to make the Memorandum comply with the requirements of the Act.

(b)            If at any time it is known or believed that any event occurred as a result of which the Memorandum or any representation or warranty contained in this section includes an untrue statement of a material fact or, in view of the circumstances under which they were made, omits to state any material fact necessary to make the statements therein not misleading, the

 

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Company will notify The Placement Agent and will prepare an amended or supplemented Memorandum which will correct such statement or omission.

(c)            The Company will not make any offers or sales of any security (other than the Shares) under circumstances that would cause the Proposed Offering to fail to qualify for an exemption from the registration requirements of applicable federal and state securities laws                          

.

(d)     The Company agrees at all times as long as the Investor Warrants or Placement Agent Warrants may be exercised, to keep reserved from the authorized and unissued Common Stock, such number of shares of Common Stock as may be, from time to time, issuable upon exercise of the Investor Warrants and Placement Agent Warrants.

(e)    For so long as at least twenty-five percent (25%) of the Shares are issued and outstanding, the Company shall cause its board of directors to invite a person designated by the Placement Agent to attend all meetings of the board of directors and all committees of the board of directors as an observer of such meetings and shall give such person the same notice of such meetings as it gives to the directors.

5.                       Survival of Representations and Warranties and Indemnification . The representations, warranties and covenants of the Company and Placement Agent set forth in Sections 2, 3 and 4 of this Agreement shall survive the execution and delivery of the Shares. The indemnification obligations of the Company as set forth in the indemnification rider identified as Appendix II (as amended or supplemented from time to time, the “Indemnification Rider”) to that certain engagement letter between the Company and the Placement Agent, dated May 7, 2007 (as amended or supplemented from time to time) is hereby incorporated by reference in its entirety as if more fully set forth herein, and the provisions of the Indemnification Rider shall apply and be applicable to, among other things, all representations and warranties of the Company.

6.                       Use of Proceeds . The net proceeds to the Company from the sale of the Minimum Amount of Common Stock and the Maximum Amount of Common Stock are estimated to be approximately 885,000 and 3,185,000, respectively, after deducting the fees and expenses associated with the Private Placement Offering. The net proceeds from the sale of the Shares will be used by the Company as disclosed in the Offering Materials.

7.                       Unregistered Securities . None of the Shares or the Warrant Shares have been registered under the 1933 Act, in reliance upon the applicability of Section 4(2), 4(6) and/or Rule 506 of Regulation D of the 1933 Act to the transactions contemplated hereby. The certificates representing the Shares and the Warrant Shares will bear an investment legend stating that they are “restricted securities” (as defined in Rule 144 under the Securities Act) and may only be publicly offered and sold pursuant to an effective registration statement filed with the SEC or pursuant to an exemption from the registration requirements.

8.                       Registration Rights . The Placement Agent shall be deemed to be a party to, and entitled to the benefits of the registration rights set forth in Section 3 of, that certain Stock Purchase Agreement executed and delivered by the Company to the Investors, and the shares of Common Stock issuable upon exercise of the Placement Agent Warrants shall be included as Registrable Securities in said agreement.

 

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9.                       Conditions . The following obligations of the Company shall be satisfied or fulfilled on or prior to the date of each Closing, unless otherwise agreed to in writing by the Placement Agent:

(a)      The Company shall have delivered to the Placement Agent, at the Initial Closing, (i) a currently-dated long-form good standing certificate or telegram from the Secretary of State where the Company is incorporated and each other jurisdiction in which the Company is qualified to do business as a foreign corporation; (ii) the articles of incorporation (as amended) of the Company, as currently in effect, certified by the Secretary of State of the state where the Company is incorporated; (iii) by-laws of the Company certified by the secretary of the Company; and (iv) certified resolutions of the Board of Directors of the Company approving the execution and delivery of this Agreement, the Investor Warrants and the Placement Agent Warrants, the issuance and sale of the Shares, the issuance of Common Stock upon exercise of the Investor Warrants and Placement Agent Warrants and the registration of the Registrable Securities.

(b)     There shall have occurred no event which has a Material Adverse Effect on the Company or any of its businesses, assets, prospects or the Company’s securities since the date of this Agreement.

(c)      No litigation or administrative proceeding shall have been threatened or commenced against the Company which (i) seeks to enjoin or otherwise prohibit or restrict the consummation of the transactions contemplated by this Agreement or (ii) if adversely determined, would have a Material Adverse Effect on the Company or the Company’s securities.

(d)     The Company shall have delivered to the Placement Agent a certificate of its principal executive and financial officers as to the matters set forth in paragraphs 9(a), (b) and (c) of this Agreement and to the further effect that (i) the Company is not in default, in any respect, under any note, loan agreement, security agreement, mortgage, deed of trust, indenture, contract, alliance agreement, lease, license, joint venture agreement, other agreement or other instrument to which it is a party, except as disclosed in the Financial Statements or the Memorandum and except where such default has not and will not have a Material Adverse Effect; (ii) the Company’s representations and warranties contained in this Agreement are true and correct in all respects on such date with the same force and effect as if made on such date, (iii) there has been no amendment or changes to the Company’s articles of incorporation or by-laws or authorizing resolutions from those delivered pursuant to Paragraph 9(a) of this Agreement; and (iv) no event has occurred which, with or without the lapse of time or giving of notice, or both, would constitute a breach of default thereof by the Company, or would cause acceleration of any obligation of the Company, or could adversely affect the business, operations, financial condition or prospects of the Company.

(e)      The Placement Agent shall have received the opinion of Cohne, Rappaport & Segal, counsel for the Company, dated as of the Closing date in form and substance reasonably satisfactory to the Placement Agent and its counsel.

(f)       The Company shall have prepared and filed or delivered to counsel for filing with the SEC and any states in which such filing is required, a Form D relating to the sale of the Common Stock and such other documents and certificates as are required.

 

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(g)      Subscriptions for at least the Minimum Amount of Common Stock shall have been accepted by the Company.

(h)    In addition to the right of the Placement Agent to terminate this Agreement and not consummate the transactions contemplated by this Agreement as a result of the failure of the Company to comply with any of its obligations set forth in this Agreement, this Agreement may be terminated by the Placement Agent by written notice to the Company at any time prior to the Initial Closing if, in the Placement Agent’s sole judgment, (i) the Company shall have sustained a loss that is material to the Company, whether or not insured, by reason of fire, earthquake, flood, accident or other calamity, or from any labor dispute or court or government action, order or decree; (ii) trading in securities on any exchange or system shall have been suspended or limited either generally or specifically with respect to the Common Stock; (iii) material governmental restrictions have been imposed on trading in securities generally or specifically with respect to the Common Stock (not in force and effect on the date of this Agreement); (iv) a banking moratorium shall have been declared by Federal or New York State authorities; (v) an outbreak of major international hostilities or other national or international calamity shall have occurred; (vi) the Congress of the United States or any state legislative body shall have passed or taken any action or measure, or such bodies or any governmental body or any authoritative accounting institute, or board, or any governmental executive shall have adopted any orders, rules or regulations, which the Placement Agent reasonably believes is likely to have a Material Adverse Effect on the business, financial condition or financial statements of the Company or the market for the Common Stock; (vii) the Common Stock shall have been delisted from the exchange on which it currently listed, or the Company shall have received notice from such exchange advising the Company of its intention to have the Common Stock delisted from such exchange, whether conditional or otherwise, or the Company shall fail to meet the requirements for continued listing on such exchange; or (viii) there shall have been, in the Placement Agent’s judgment, a material decline in the Dow Jones Industrial Index or the market price of the Common Stock at any time subsequent to the date of this Agreement.

10.	Indemnification .

(a)      Indemnification by Company . The Company agrees to indemnify and hold harmless Placement Agent, its officers, directors and agents from and against any and all losses, liabilities, claims, damages and expenses (each a “Claim” and, collectively, “Claims”) whatsoever arising out of (1) a breach or alleged breach by the Company of any warranty set forth in Section 2 , (2) failure or alleged failure by the Company to comply with the provisions of Section 2 , or (3) any untrue statement or alleged untrue statement of a material fact contained in the Memorandum or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided , however , that the Company will not be liable in any such case to the extent that any such Claim arises out of or is based upon any such untrue statement or alleged untrue statement or omission or alleged omission contained in the material furnished to the Company by Placement Agent on Placement Agent’s behalf, specifically for inclusion therein, which relates to Placement Agent’s activities pursuant to this Agreement.

(b)     Indemnification by Placement Agent . Placement Agent agrees to indemnify and hold harmless the Company (its officers, directors and agents) and each person, if any, who controls any of the foregoing within the meaning of the 1933 Act to the same extent as

 

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the indemnity from the Company described above against any and all Claims whatsoever (or actions in respect thereto) arising out of or based upon any misrepresentation or alleged misrepresentation, failure or alleged failure by Placement Agent to comply with the covenants and agreements set forth in Section 3 .

(c)      Any person entitled to indemnification under Section 10(a) or (b) of this Agreement (an “indemnified party”) shall notify promptly the person obligated to provide such indemnification (the “indemnifying party”) in writing of the commencement of any any action or proceeding brought by a third person against the indemnified party with respect to a Claim (a “Third Party Claim”) for which the indemnified party may be entitled to indemnification from the indemnifying party under this Section 10, but the omission of such notice shall not relieve the indemnifying party from any liability which it may have to any indemnified party under Section 10 of this Agreement, except to the extent that such failure shall materially adversely affect any indemnifying party or its rights hereunder. The indemnifying party shall be entitled to participate in, and, to the extent that it chooses, to assume the defense of any Third Party Claim with counsel reasonably satisfactory to the indemnified party; and, after notice from the indemnifying party to the indemnified party that it so chooses, the indemnifying party shall not be liable for any legal or other expenses or disbursements subsequently incurred by the indemnified party in connection with the defense thereof other than reasonable costs of investigation; provided, however, that (i) if the indemnifying party fails to take reasonable steps necessary to defend diligently the Third Party Claim within twenty (20) days after receiving notice from the indemnified party that the indemnified party of such Third Party Claim; (ii) if the indemnified party who is a defendant in such Third Party Claim which is also brought against the indemnifying party reasonably shall have concluded that there are legal defenses available to the indemnified party which are not available to the indemnifying party; or (iii) if representation of both parties by the same counsel is otherwise inappropriate under applicable standards of professional conduct, the indemnified party shall have the right to assume or continue its own defense as set forth above (but with no more than one firm of counsel for all indemnified parties in each jurisdiction, except to the extent any indemnified party or parties reasonably shall have concluded that there are legal defenses available to such party or parties which are not available to the other indemnified parties or to the extent representation of all indemnified parties by the same counsel is otherwise inappropriate under applicable standards of professional conduct) and the indemnifying party shall be liable for any reasonable expenses therefor; provided, that no indemnifying party shall be subject to any liability for any settlement of a Third Party Claim made without its consent (which may not be unreasonably withheld, delayed or conditioned). If the indemnifying party assumes the defense of any Third Party Claim hereunder, such indemnifying party shall not enter into any settlement without the consent of the indemnified party if such settlement attributes liability to the indemnified party.

11.	Fees; Other Rights .

(a)      As disclosed in the Memorandum, a fee (“Success Fee”) equal to eight percent (8%) of the gross proceeds through the sale of the Shares shall be payable to the Placement Agent, except that such fee shall be four percent (4%) for sales to purchasers that were not introduced to the Company by the Placement Agent.

(b)     In addition to the sums payable to the Placement Agent as provided elsewhere herein, the Placement Agent shall be entitled to receive at the Closing, as additional compensation for its services, warrants (the “Placement Agent Warrants”) with a five (5) year

 

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term for the purchase of an amount of Common Stock equal to ten percent (10.0%) of the Common Stock into which the Preferred Shares sold in this Offering are convertible. The exercise price of the Placement Agent Warrants will initially be equal to one hundred ten percent (110%) of the Conversion Price of the Preferred Stock.

(c)      The Company also agrees to pay to the Placement Agent, a cash fee equal to eight (8.0%) percent of the gross proceeds, if any, received subsequent to the termination of the Offering from any party introduced to the Company by the Placement Agent during the Offering Period; provided that such proceeds are received by the Company within one year of the date of such introduction and that the Placement Agent has promptly notified the Company that such introduction has been made

(d)     Upon closing, the Company will reimburse the Placement Agent for up to $35,000 of its actual and reasonable out-of-pocket expenses incurred in connection with Offering, including fees and expenses of its counsel.

(e)      The Company shall pay any fees required in connection with the qualification of the sale of the Shares under the state securities or “blue sky” laws of any state which the Placement Agent reasonably deems necessary.

(f)       All payments in connection with the sale of the Shares shall be made pursuant to the terms and conditions of the escrow agreement between Placement Agent and CSC Trust Company of Delaware, an executed copy of which has been delivered to and acknowledged by the Company.

(g)      During the 12 months following the termination of this Agreement, if the Company issues and sells securities to any person that the Placement Agent introduced to the Company or with which the Placement Agent had discussions or negotiations during the term of this Agreement on behalf of the Company regarding the Company’s securities, then the Company shall pay the Placement Agent upon such issuance and sale a cash fee equal to that which would have been payable to the Placement Agent had such issuance and sale occurred during the term of this Agreement.

(h)      If during the year following the completion of the Proposed Offering, the Company shall propose to raise debt or equity through a public offering or private placement (a “Subsequent Capital Raise”), other than senior secured financing with a bank or other financial institution, the Company shall provide written notice to the Placement Agent of the proposed terms of such Subsequent Capital Raise, including any commissions, success, finders or other fees or any similar compensation, including issuance of equity or warrants, options, rights or other securities convertible into equity of the Company to be payable or deliverable to any broker, placement or other agent, dealer or other similar person in connection with the Subsequent Capital Raise. If the Company and the Placement Agent shall not after commercially reasonable efforts negotiate and agree to mutually acceptable terms for the involvement of the Placement Agent in such Subsequent Capital Raise within thirty (30) days of such notice, the Company shall have the right to proceed with such Subsequent Capital Raise, so long as such Subsequent Capital Raise shall be consummated within one hundred eighty days of such notice and the terms upon which any broker, placement or other agent, dealer or other similar person shall participate in the Subsequent Capital Raise shall be no more favorable to such broker, placement or other agent, dealer or other similar person than the terms offered to the Placement Agent in such notice or pursuant to such negotiations, unless such more favorable terms shall

 

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first offer such more favorable terms to the Placement Agent pursuant to the terms of this subsection (h).

12.                    Confidentiality . The Placement Agent and the Company mutually agree that they will not disclose any confidential information received from the other party to others, except with the written permission of the other party or as such disclosure may be required by law.

13.                    Notices . All notices provided for in this Agreement shall be in writing signed by the party giving such notice, and delivered personally or sent by overnight courier or messenger against receipt thereof or sent by registered or certified mail, return receipt requested, or by facsimile transmission, if confirmed by mail as provided in this Section 12 . Notices shall be deemed to have been received on the date of personal delivery or facsimile or, if sent by certified or registered mail, return receipt requested, shall be deemed to be delivered on the third business day after the date of mailing. Notices shall be sent to the following addresses:

 

To the Company:

PARK CITY GROUP

3160 Pinebrook Road

Park City, Utah 84098

Attention: Randy Fields

Facsimile: (435) 645-2010

With a copy to:

Cohne, Rappaport & Segal

257 East 200 South, 7 th Floor

Salt Lake City, Utah 84111

Facsimile: (801) 355-1813

Attention: A.O. Headman Jr.

To Placement Agent:

TAGLICH BROTHERS, INC.

405 Lexington Avenue, 51 st Floor

New York, NY 10174

Facsimile: (212) 661-6824

Attention: Robert Schroeder

With a copy to:

EDWARDS ANGELL PALMER & DODGE LLP

750 Lexington Avenue

New York, NY 10022

Facsimile: (212) 308-4844

Attention: Geoffrey Etherington, Esq.

 

 

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or to such other address as any party shall designate in the manner provided in this Section 12 .

 

14.	Miscellaneous .

(a)      This Agreement constitutes the entire agreement between the parties relating to the subject matter hereof and supercedes any and all prior or contemporaneous oral and prior written agreements and understandings. This Agreement may not be modified or amended nor may any right be waived except by a writing which expressly refers to this Agreement, states that it is a modification, amendment or waiver and is signed by all parties with respect to a modification or amendment or the party granting the waiver with respect to a waiver. No course of conduct or dealing and no trade custom or usage shall modify any provisions of this Agreement.

(b)     This Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and to be performed entirely within such state. Each party hereby consents to the exclusive jurisdiction of the Federal and state courts situated in New York County, New York in connection with any action arising out of or based upon this Agreement and the transactions contemplated by this Agreement.

(c)      This Agreement shall be binding upon and inure to the benefit of the parties hereto, and their respective personal representatives, successors and permitted assigns.

(d)     In the event that any provision of this Agreement becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement shall continue in full force and effect without said provision.

(e)      Each party shall, without payment of any additional consideration by any other party, at any time on or after the date of any Closings take such further action and execute such other and further documents and instruments as the other party may request in order to provide the other party with the benefits of this Agreement.

(f)       The captions and headings contained herein are solely for convenience and reference and do not constitute a part of this Agreement.

(g)      All references to any gender shall be deemed to include the masculine, feminine or neuter gender, the singular shall include the plural and the plural shall include the singular.

(h)      This Agreement may be executed in any number of counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same document.

 

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[ Signature page follows ]

 

                 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first set forth above.

 

PARK CITY GROUP, INC.			TAGLICH BROTHERS, INC.
By:			By:
Name:			Name:
Title:			Title:

 

 

 

 

 

 

 

NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE HAVE 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. THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES

COMMON STOCK PURCHASE WARRANT

To Purchase 194,966 Shares of Common Stock of

Park City Group, Inc.

THIS COMMON STOCK PURCHASE WARRANT CERTIFIES that, for value received, Taglich Brothers, Inc. (the “ Holder ”), is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after [ ] (the “ Initial Exercise Date ”) and on or prior to the close of business on the Termination Date (as defined below) but not thereafter, to subscribe for and purchase from Park City Group, Inc., a corporation incorporated in the State of Delaware (the “ Company ”), up to [ ] shares (the “ Warrant Shares ”) of Common Stock, of the Company (the “ Common Stock ”). The purchase price of one share of Common Stock (the “ Exercise Price ”) under this Warrant shall be $3.30 , subject to adjustment hereunder. The Exercise Price and the number of Warrant Shares for which the Warrant is exercisable shall be subject to adjustment as provided herein. As used herein “Termination Date” shall mean o , 2012.

 

Capitalized terms used and not otherwise defined herein shall have the meanings set forth in that certain Stock Purchase Agreement (the “ Purchase Agreement ”), dated May 31, 2007, between the Company and the purchasers signatory thereto.

 

 

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1.       Title to Warrant . Prior to the Termination Date and subject to compliance with applicable laws and Section 7 of this Warrant, this Warrant and all rights hereunder are transferable, in whole or in part, at the office or agency of the Company by the Holder in person or by duly authorized attorney, upon surrender of this Warrant together with the Assignment Form annexed hereto properly endorsed. The transferee shall sign an investment letter in form and substance reasonably satisfactory to the Company.

2.       Authorization of Shares . The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).

3.

Exercise of Warrant .

(a) Except as provided in Section 4 herein, exercise of the purchase rights represented by this Warrant may be made at any time or times on or after the Initial Exercise Date and on or before the Termination Date by the surrender of this Warrant and the Notice of Exercise Form annexed hereto duly executed, at the office of the Company (or such other office or agency of the Company as it may designate by notice in writing to the registered Holder at the address of such Holder appearing on the books of the Company) and upon payment of the Exercise Price of the shares thereby purchased by wire transfer or cashier’s check drawn on a United States bank or by means of a cashless exercise pursuant to Section 3(d), the Holder shall be entitled to receive a certificate for the number of Warrant Shares so purchased. Certificates for shares purchased hereunder shall be delivered to the Holder within five (5) Trading Days after the date on which this Warrant shall have been exercised as aforesaid. This Warrant shall be deemed to have been exercised and such certificate or certificates shall be deemed to have been issued, and the Holder or any other person so designated to be named therein shall be deemed to have become a holder of record of such shares for all purposes, as of the date the Warrant has been exercised by payment to the Company of the Exercise Price and all taxes required to be paid by the Holder, if any, pursuant to Section 5 prior to the issuance of such shares, have been paid. “Trading Day” means a day on which the NASDAQ Stock Market is open for the transaction of business.

 

(b)            If this Warrant shall have been exercised in part, the Company shall, at the time of delivery of the certificate or certificates representing Warrant Shares, deliver to Holder a new Warrant evidencing the rights of Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant.

(c)            If the Company fails to deliver to the Holder a certificate or certificates representing the Warrant Shares pursuant to Section 3(a) of this Warrant by

 

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the close of business on the fifth Trading Day after the date of exercise, then the Holder will have the right to rescind such exercise.

(d)           If, but only if, at any time after one year from the date of issuance of this Warrant there is no effective Registration Statement registering the resale of the Warrant Shares by the Holder, this Warrant may also be exercised at such time by means of a “cashless exercise” in which the Holder shall be entitled to receive a certificate for the number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:

(A) = the Closing Price on the Trading Day immediately preceding the date of such election;

 

(B) = the Exercise Price of this Warrant, as adjusted; and

 

(X) = the number of Warrant Shares issuable upon exercise of this Warrant in accordance with the terms of this Warrant by means of a cash exercise rather than a cashless exercise.

 

4.       No Fractional Shares or Scrip . No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. As to any fraction of a share which Holder would otherwise be entitled to purchase upon such exercise, the Company shall pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Exercise Price.

5.       Charges, Taxes and Expenses . Issuance of certificates for Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Company, and such certificates shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided , however , that in the event certificates for Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the Holder; and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto.

6.       Closing of Books . The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Warrant, pursuant to the terms hereof.

7.

Transfer, Division and Combination .

(a)            Subject to compliance with any applicable securities laws and the conditions set forth in Sections 1 and 7(e) hereof and to the provisions of Section 4.1 of the Purchase Agreement, this Warrant and all rights hereunder are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer

 

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taxes payable upon the making of such transfer. Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled. A Warrant, if properly assigned, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued.

(b)            This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with Section 7(a), as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice.

 

(c)            The Company shall prepare, issue and deliver at its own expense (other than transfer taxes) the new Warrant or Warrants under this Section 7.

 

(d)            The Company agrees to maintain, at its aforesaid office, books for the registration and the registration of transfer of the Warrants.

(e)            If, at the time of the surrender of this Warrant in connection with any transfer of this Warrant, the transfer of this Warrant shall not be registered pursuant to an effective registration statement under the Securities Act and under applicable state securities or blue sky laws, the Company may require, as a condition of allowing such transfer (i) that the Holder or transferee of this Warrant, as the case may be, furnish to the Company a written opinion of counsel (which opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions) to the effect that such transfer may be made without registration under the Securities Act and under applicable state securities or blue sky laws, (ii) that the holder or transferee execute and deliver to the Company an investment letter in form and substance acceptable to the Company and (iii) that the transferee be an “accredited investor” as defined in Rule 501(a) promulgated under the Securities Act.

8.       No Rights as Shareholder until Exercise . This Warrant does not entitle the Holder to any voting rights or other rights as a shareholder of the Company prior to the exercise hereof. Upon the surrender of this Warrant and the payment of the aggregate Exercise Price (or by means of a cashless exercise), the Warrant Shares so purchased shall be and be deemed to be issued to such Holder as the record owner of such shares as of the close of business on the later of the date of such surrender or payment.

9.       Loss, Theft, Destruction or Mutilation of Warrant . The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include the posting of any bond), and upon surrender

 

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and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.

10.    Saturdays, Sundays, Holidays, etc . If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall be a Saturday, Sunday or a legal holiday, then such action may be taken or such right may be exercised on the next succeeding day not a Saturday, Sunday or legal holiday.

11.    Adjustments of Exercise Price and Number of Warrant Shares . The number and kind of securities purchasable upon the exercise of this Warrant and the Exercise Price shall be subject to adjustment from time to time upon the happening of any of the following. In case the Company shall (i) declare a dividend or other distribution in shares of Common Stock or other securities or property of the Company to holders of its outstanding Common Stock, (ii) subdivide its outstanding shares of Common Stock into a greater number of shares, (iii) combine its outstanding shares of Common Stock into a smaller number of shares of Common Stock, or (iv) issue any shares of its capital stock in a reclassification of the Common Stock, then the number of Warrant Shares purchasable upon exercise of this Warrant immediately prior thereto shall be adjusted so that the Holder shall be entitled to receive the kind and number of Warrant Shares or other securities of the Company which it would have owned or have been entitled to receive had such Warrant been exercised in advance thereof. Upon each such adjustment of the kind and number of Warrant Shares or other securities of the Company which are purchasable hereunder, the Holder shall thereafter be entitled to purchase the number of Warrant Shares or other securities resulting from such adjustment at an Exercise Price per Warrant Share or other security obtained by multiplying the Exercise Price in effect immediately prior to such adjustment by the number of Warrant Shares purchasable pursuant hereto immediately prior to such adjustment and dividing by the number of Warrant Shares or other securities of the Company that are purchasable pursuant hereto immediately after such adjustment. An adjustment made pursuant to this paragraph shall become effective immediately after the effective date of such event retroactive to the record date, if any, for such event.

12.    Reorganization, Reclassification, Merger, Consolidation or Disposition of Assets . In case the Company shall reorganize its capital, reclassify its capital stock, consolidate or merge with or into another corporation (where the Company is not the surviving corporation or where there is a change in or distribution with respect to the Common Stock of the Company), or sell, transfer or otherwise dispose of its property, assets or business to another corporation and, pursuant to the terms of such reorganization, reclassification, merger, consolidation or disposition of assets, shares of common stock of the successor or acquiring corporation, or any cash, shares of stock or other securities or property of any nature whatsoever (including warrants or other subscription or purchase rights) in addition to or in lieu of common stock of the successor or acquiring corporation (“ Other Property ”), are to be received by or distributed to the holders of Common Stock of the Company, then the Holder shall have the right thereafter to receive upon exercise of this Warrant, the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and Other Property receivable upon or as a result of such reorganization, reclassification, merger, consolidation or disposition of assets by a Holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such event. In case of any such reorganization,

 

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reclassification, merger, consolidation or disposition of assets, the successor or acquiring corporation (if other than the Company) shall expressly assume the due and punctual observance and performance of each and every covenant and condition of this Warrant to be performed and observed by the Company and all the obligations and liabilities hereunder, subject to such modifications as may be deemed appropriate (as determined in good faith by resolution of the Board of Directors of the Company) in order to provide for adjustments of Warrant Shares for which this Warrant is exercisable which shall be as nearly equivalent as practicable to the adjustments provided for in this Section 12. For purposes of this Section 12, “common stock of the successor or acquiring corporation” shall include stock of such corporation of any class which is not preferred as to dividends or assets over any other class of stock of such corporation and which is not subject to redemption and shall also include any evidences of indebtedness, shares of stock or other securities which are convertible into or exchangeable for any such stock, either immediately or upon the arrival of a specified date or the happening of a specified event and any warrants or other rights to subscribe for or purchase any such stock. The foregoing provisions of this Section 12 shall similarly apply to successive reorganizations, reclassifications, mergers, consolidations or disposition of assets.

 

13.    Notice of Adjustment . Whenever the number of Warrant Shares or number or kind of securities or other property purchasable upon the exercise of this Warrant or the Exercise Price is adjusted, as herein provided, the Company shall give notice thereof to the Holder, which notice shall state the number of Warrant Shares (and other securities or property) purchasable upon the exercise of this Warrant and the Exercise Price of such Warrant Shares (and other securities or property) after such adjustment, setting forth a brief statement of the facts requiring such adjustment and setting forth the computation by which such adjustment was made.

14.

Notice of Corporate Action . If at any time:

(a)            the Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend or other distribution, or any right to subscribe for or purchase any evidences of its indebtedness, any shares of stock of any class or any other securities or property, or to receive any other right, or

 

(b)            there shall be any capital reorganization of the Company, any reclassification or recapitalization of the capital stock of the Company or any consolidation or merger of the Company with, or any sale, transfer or other disposition of all or substantially all the property, assets or business of the Company to, another corporation or,

 

(c)            there shall be a voluntary or involuntary dissolution, liquidation or winding up of the Company;

 

then, in any one or more of such cases, the Company shall give to Holder (i) at least 10 calendar days’ prior written notice of the date on which a record date shall be selected for such dividend, distribution or right or for determining rights to vote in respect of any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, liquidation or winding up, and

 

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(ii) in the case of any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, dissolution, liquidation or winding up, at least 30 calendar days’ prior written notice of the date when the same shall take place. Such notice in accordance with the foregoing clause also shall specify (i) the date on which any such record is to be taken for the purpose of such dividend, distribution or right, the date on which the holders of Common Stock shall be entitled to any such dividend, distribution or right, and the amount and character thereof, and (ii) the date on which any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, dissolution, liquidation or winding up is to take place and the time, if any such time is to be fixed, as of which the holders of Common Stock shall be entitled to exchange their Warrant Shares for securities or other property deliverable upon such disposition, dissolution, liquidation or winding up. Each such written notice shall be sufficiently given if addressed to Holder at the last address of Holder appearing on the books of the Company and delivered in accordance with Section 17(d).

15.    Authorized Shares . The Company covenants that during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for the Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Trading Market upon which the Common Stock may be listed.

Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment. Without limiting the generality of the foregoing, the Company will (a) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value, (b) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant, and (c) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof as may be necessary to enable the Company to perform its obligations under this Warrant.

 

Before taking any action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof.

 

 

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16.    Registration Rights . The Warrant Shares shall be entitled to the registration rights as set forth in Section 3 of that certain Stock Purchase Agreement, dated as of [ ], by and between the Company and the purchasers signatory thereto as if the Holder were a party thereto. Such registration rights are incorporated herein by this reference as if such provisions had been set forth herein full.

17.

Miscellaneous .

(a)            Jurisdiction . All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be determined in accordance with the provisions of the Purchase Agreement.

(b)            Restrictions . The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered, will have restrictions upon resale imposed by state and federal securities laws.

(c)            Nonwaiver and Expenses . No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice Holder’s rights, powers or remedies, notwithstanding all rights hereunder terminate on the Termination Date. If the Company willfully and knowingly fails to comply with any provision of this Warrant, which results in any material damages to the Holder, the Company shall pay to Holder such amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys’ fees, including those of appellate proceedings, incurred by Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.

(d)            Notices . Any notice, request or other document required or permitted to be given or delivered to the Holder by the Company shall be delivered in accordance with the notice provisions of the Purchase Agreement; provided upon any permitted assignment of this Warrant, the assignee shall promptly provide the Company with its contact information.

(e)            Limitation of Liability . No provision hereof, in the absence of any affirmative action by Holder to exercise this Warrant or purchase Warrant Shares, and no enumeration herein of the rights or privileges of Holder, shall give rise to any liability of Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.

(f)             Remedies . Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive the defense in any action for specific performance that a remedy at law would be adequate.

(g)            Successors and Assigns . Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and

 

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be binding upon the successors of the Company and the successors and permitted assigns of Holder. The provisions of this Warrant are intended to be for the benefit of all Holders from time to time of this Warrant and shall be enforceable by any such Holder or holder of Warrant Shares.

(h)            Amendment . This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder.

(i)             Severability . Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.

(j)             Headings . The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.

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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized.

 

Dated: [	], 2007
			Park City Group, Inc.

 

 

 

	By:
		Name:
		Title:

 

 

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NOTICE OF EXERCISE

 

To:

Park City Group, Inc.

 

(1)     The undersigned hereby elects to purchase ________ Warrant Shares of Park City Group, Inc. pursuant to the terms of the attached Warrant (only if exercised in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.

(2)

Payment shall take the form of (check applicable box):

o in lawful money of the United States; or

o the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in subsection 3(d), to exercise this Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure set forth in subsection 3(d).

(3)     Please issue a certificate or certificates representing said Warrant Shares in the name of the undersigned or in such other name as is specified below:

_______________________________

 

 

The Warrant Shares shall be delivered to the following:

 

_______________________________

 

_______________________________

 

_______________________________

 

(4) Accredited Investor . The undersigned is an “accredited investor” as defined in Regulation D promulgated under the Securities Act of 1933, as amended.

 

[PURCHASER]

 

 

	By: ______________________________
		Name:
		Title:

 

Dated: ________________________

 

 

 

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ASSIGNMENT FORM

 

(To assign the foregoing warrant, execute

this form and supply required information.

Do not use this form to exercise the warrant.)

 

 

FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to

 

_______________________________________________ whose address is

 

_______________________________________________________________.

 

 

_______________________________________________________________

 

Dated: ______________, _______

 

 

Holder’s Signature:

_____________________________

 

Holder’s Address:

_____________________________

 

_____________________________

 

 

Signature Guaranteed: ___________________________________________

 

NOTE: The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatsoever, and must be guaranteed by a bank or trust company. Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant.