SECURITIES PURCHASE AGREEMENT PARK CITY GROUP, INC.
Exhibit
99.1
PARK
CITY GROUP, INC.
SECURITIES PURCHASE
AGREEMENT (as amended or supplemented from time to time, this
"AGREEMENT"), dated as of January 12, 2009, between Park City Group, Inc., a
Nevada corporation, with its principal offices at 0000 Xxxxxxxxx Xx, Xxxx Xxxx,
Xxxx 00000 (the “Company”) and the undersigned (the “Subscriber”).
WITNESSETH:
WHEREAS, the
Company desires to issue, in a private placement subordinated promissory notes
in an aggregate principal amount of up to One Million Five Hundred Thirty-Eight
Thousand Two Hundred Forty Four Dollars ($1,538,244) in the form annexed hereto
as Exhibit A (each a “NOTE” and, collectively, the “NOTES”), together with Three
Hundred Forty-Four Thousand Two Hundred Seventy-Two (344,272) shares of the
Company’s common stock (the “COMMON STOCK”);
WHEREAS, the
parties desire that, upon the terms and subject to the conditions contained
herein, the Company shall issue and sell to the Subscriber, and the Subscriber
shall purchase from the Company, a Note in the principal amount indicated on the
signature page hereto together with such number of shares of the Company’s
Common Stock based upon the number of shares of Series E Preferred Stock of
Prescient (the “Series E Preferred Stock”) as are indicated on the signature
page hereto (the “Shares”). The Notes and Shares will be issued
in units each of which shall consist of a Note in the principal amount of
$4,021.30 and 900 Shares (a “UNIT”) with a Unit being issued with respect to
each share of Series E Preferred Stock. The Note and the Shares to be
issued pursuant hereto are collectively referred to herein as the "SECURITIES";
and
WHEREAS, the
Company and the Subscriber are executing and delivering this Agreement in
reliance upon an exemption from the registration requirements of the Securities
Act of 1933, as amended (the “1933 ACT”) afforded by the provisions of Section
4(2), Section 4(6) and/or Regulation D ("REGULATION D") as promulgated by the
United States Securities and Exchange Commission (the "COMMISSION") under the
1933 Act.
NOW,
THEREFORE, in consideration of the mutual covenants and other agreements
contained in this Agreement the Company and the Subscriber hereby agree as
follows:
1. SUBSCRIPTION FOR
SECURITIES.
(a) Upon
execution and delivery of this Agreement, and subject to the terms and
conditions hereof, including the satisfaction of the conditions described in
subsection (b) below, the Company shall deliver the original executed Note and
the certificates for the Shares to the Subscriber, each registered in the name
of the Subscriber, against receipt of an amount equal to one share of Series E
Preferred Stock for each Unit which the Subscriber is subscribing.
(b) Subscriber’s
obligation to purchase the Note and the Shares is subject to the fulfillment (or
written waiver by the Placement Agent) of each of the following
conditions:
(i) The
representations and warranties of the Company contained in this Agreement shall
be true and correct on and as of the date of such purchase;
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(ii) The
Company shall have performed and complied with all covenants, conditions and
agreements required by this Agreement to be performed or complied with by them
on or prior to the date of such purchase;
(iii) There
shall be in effect no injunction, writ, preliminary restraining order or any
order of any nature directing that the transactions contemplated by this
Agreement, including without limitation the purchase of the Note and the
Shares, not be consummated as herein provided.
2. COMPANY REPRESENTATIONS, WARRANTIES
AND COVENANTS. The Company represents and warrants to and agrees with
Subscriber that, except as set forth in the Company's Form 10-K for the year
ended June 30, 2008 and all periodic reports filed with the Commission
thereafter (hereinafter referred to collectively as the "SEC REPORTS"),
including the Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended September 30, 2008 (the "FIRST QUARTER 2008 FORM 10-Q") or as set forth on
the disclosure schedule dated the date hereof delivered by the Company to the
Subscriber (the “DISCLOSURE SCHEDULE”):
(a) DUE INCORPORATION. The Company
and each of its Subsidiaries is a corporation (or in the case of a Subsidiary
the type of entity described in the Disclosure Schedule) duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization and has the requisite corporate or other power to
own its properties and to carry on its business as disclosed in the SEC Reports.
The Company and each of its Subsidiaries is duly qualified as a foreign
corporation (or in the case of a Subsidiary the type of entity described in the
Disclosure Schedule) to do business and is in good standing in each jurisdiction
where the nature of the business conducted or property owned by it makes such
qualification necessary, other than those jurisdictions in which the failure to
so qualify would not have a Material Adverse Effect. For purpose of this
Agreement, a "MATERIAL ADVERSE EFFECT" shall mean a material adverse effect on
the financial condition, results of operations, properties or business of the
Company and its Subsidiaries taken as a whole. For purposes of this Agreement,
"SUBSIDIARY" means, with respect to any entity at any date, any corporation,
limited or general partnership, limited liability company, trust, estate,
association, joint venture or other business entity) of which more than 50% of
(i) the outstanding capital stock having (in the absence of contingencies)
ordinary voting power to elect a majority of the board of directors or other
managing body of such entity, (ii) in the case of a partnership or limited
liability company, the interest in the capital or profits of such partnership or
limited liability company or (iii) in the case of a trust, estate, association,
joint venture or other entity, the beneficial interest in such trust, estate,
association or other entity business is, at the time of determination, owned or
controlled directly or indirectly through one or more intermediaries, by such
entity. The Company’s Subsidiaries are named in the SEC Reports.
(b) AUTHORITY. 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.
(c) OUTSTANDING SECURITIES. All of
the issued and outstanding shares of the Company’s Common Stock and Series A
Convertible Preferred 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 and Series A Convertible Preferred 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.
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(d) ENFORCEABILITY. This
Agreement, the Note, and any other agreements delivered together with this
Agreement or in connection herewith (collectively "TRANSACTION DOCUMENTS") have
been duly authorized, executed and delivered by the Company and are valid and
binding agreements, enforceable against the Company in accordance with their
terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights generally and to general principles of equity regardless of
whether enforcement is sought in a court of law or equity). The Company has full
corporate power and authority necessary to enter into and deliver the
Transaction Documents and to perform its obligations thereunder.
(e) CONSENTS. No consent,
approval, authorization, filing with or notice to any person, entity or public
authority, or order of any court, governmental agency or body or arbitrator
having jurisdiction over the Company or any of its Subsidiaries, or the
Company's stockholders is required for the execution by the Company of the
Transaction Documents and compliance and performance by the Company of its
obligations under the Transaction Documents, including, without limitation, the
issuance and sale of the Securities, other than filings required by Federal or
state securities laws, which filings have been or will be made by the Company on
a timely basis.
(f) NO VIOLATION OR CONFLICT.
Assuming the representations and warranties of the Subscribers in Section 3 are
true and correct, neither the issuance and sale of the Securities nor the
performance of the Company's obligations under this Agreement and all other
agreements entered into by the Company relating thereto by the Company
will:
(i) violate,
conflict with, result in a breach of, or constitute a default (or an event which
with the giving of notice or the lapse of time or both would be reasonably
likely to constitute a default in any material respect) under (A) the
certificate of incorporation or bylaws of the Company, each as amended as of the
date hereof, (B) to the Company's knowledge, any decree, judgment, order, law,
treaty, rule, regulation or determination applicable to the Company or any of
its Subsidiaries of any court, governmental agency or body, or arbitrator having
jurisdiction over the Company or such Subsidiary or over the properties or
assets of the Company or such Subsidiary, or (C) the terms of any bond,
debenture, note or any other evidence of indebtedness, or any agreement, stock
option or other similar plan, indenture, lease, mortgage, deed of trust or other
instrument to which the Company or such Subsidiary is a party, or by which the
Company or such Subsidiary is bound, or to which any of the
properties of the Company or such Subsidiary is subject, except the violation,
conflict, breach, or default of which would not have a Material Adverse Effect;
or
(ii) result
in the creation or imposition of any lien, charge or encumbrance upon the
Securities or any of the assets of the Company or any of its
Subsidiaries.
(g) THE SECURITIES. The Securities
upon issuance:
(i) will
be free and clear of any security interests, liens, claims or other
encumbrances, subject to restrictions upon transfer under the 1933 Act and any
applicable state securities laws;
(ii) have
been duly and validly authorized and duly and validly issued, and upon payment
of the purchase price specified in this Agreement the Shares will be fully paid
and non-assessable (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; provided Subscriber's representations herein are
true and accurate and Subscribers take no actions or fail to take any actions
required for their purchase of the Securities to be in compliance with all
applicable laws and regulations; and
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(iii) will have been
issued in reliance upon an exemption from the registration requirements of and
will not result in a violation of Section 5 under the 1933 Act.
(h) LITIGATION. There is no
pending or, to the best knowledge of the Company, threatened action, suit,
proceeding or investigation before any court, governmental agency or body, or
arbitrator having jurisdiction over the Company or any of its Subsidiaries that
would affect the execution by the Company or the performance by the Company of
its obligations under the Transaction Documents. There is no pending or, to the
knowledge of the Company, threatened action, suit, proceeding or investigation
before any court, governmental agency or body, or arbitrator having jurisdiction
over the Company or any of its Subsidiaries, which litigation if adversely
determined would have a Material Adverse Effect.
(i) REPORTING COMPANY. The Company
is a publicly-held company subject to reporting obligations pursuant to Section
13 of the Securities Exchange Act of 1934 (the "1934 ACT") and the Company’s
common stock is registered pursuant to Section 12(g) of the 1934
Act.
(j) INFORMATION CONCERNING
COMPANY. The SEC Reports contain all material information relating to the
Company and its operations and financial condition as of their respective dates
and all the information required to be disclosed therein. Since the last day of
the fiscal year of the most recent audited financial statements included in the
SEC Reports ("LATEST FINANCIAL DATE"), there has been no Material Adverse Event
relating to the Company's business, financial condition or affairs not disclosed
in the SEC Reports. The SEC Reports do not contain any 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 light of the
circumstances in which made. The Company has not provided to the Subscribers any
material non-public information.
(k) FINANCIAL STATEMENTS. The
consolidated financial statements of the Company and its Subsidiaries included
in the Reports (hereinafter collectively, the “Financial Statements”), were
prepared in accordance with generally accepted accounting principles
consistently applied and present and reflect fairly the financial position of
the Company and its Subsidiaries 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 First Quarter 2008 Form 10-Q are subject to
normal year-end adjustments and lack footnotes and other presentation
items. During the period of HJ & Associates LLC’s engagement as
the Company’s independent certified public accountants, there has 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.
(l) NO UNDISCLOSED LIABILITIES.
Neither the Company nor any of its Subsidiaries has any liabilities of
any kind or nature, whether accrued or contingent, matured or unmatured, known
or unknown, which are material, individually or in the aggregate, which are not
disclosed in the SEC Reports, other than those incurred in the ordinary course
of the Company's or such Subsidiary’s businesses since the Latest Financial
Date, and which, individually or in the aggregate, would reasonably be expected
to have a Material Adverse Effect.
(m) NO UNDISCLOSED EVENTS OR
CIRCUMSTANCES. Since the Latest Financial Date, no event or circumstance
has occurred or exists with respect to the Company or any of its Subsidiaries or
their respective businesses, properties, operations or financial condition,
that, under applicable law, rule or regulation, requires public disclosure or
announcement prior to the date hereof by the Company but which has not been so
publicly announced or disclosed in the SEC Reports.
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(n) DEFAULTS. Neither the Company
nor any of its Subsidiaries is in violation of its certificate of incorporation
or bylaws. Neither the Company nor any of its Subsidiaries is in default under
or in violation of 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 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 such Subsidiary or would cause
acceleration of any obligation of the Company or such Subsidiary 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 or any of its Subsidiaries 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. The Company and its Subsidiaries are (i) not subject to nor in
default with respect to any order of any court, arbitrator or governmental body
or subject to or party to any order of any court or governmental authority
arising out of any action, suit or proceeding under any statute or other law
respecting antitrust, monopoly, restraint of trade, unfair competition or
similar matters, or (ii) to the Company's knowledge, not in violation of any
statute, rule or regulation of any governmental authority which violation would
have a Material Adverse Effect. 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 or such Subsidiary),
pending or, to the best of the Company's knowledge, threatened, against the
Company or such Subsidiary, at law or in equity or by or before any Federal,
state, county, municipal or other governmental department, the Commission, the
Financial Industry Regulatory Authority, 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.
(o) INDEBTEDNESS TO AFFILIATES.
Except as described in the SEC Reports, the Company
does not have any indebtedness to any officer, director, 5% stockholder or other
Affiliate (as defined in Rule 405 of the Rules and Regulations of the Commission
under the 0000 Xxx) of the Company.
(p) COMPLIANCE WITH LAWS. The
Company and each of its Subsidiaries 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. The Company and each of its
Subsidiaries 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.
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(q) TRANSACTIONS WITH AFFILATED
PARTIES. Except as set forth in the SEC Reports, 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.
(r) ACCOUNTS RECEIVABLE. The
accounts receivable of the Company and each Subsidiary 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 or any such Subsidiary not disclosed in the
SEC Reports.
(s) ACCOUNTS PAYABLE. The accounts
payable of the Company and each Subsidiary 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 or such
Subsidiary.
(t) EMPLOYMENT AND SEVERANCE
AGREEMENTS. Except as set forth in the SEC Reports, neither the Company
nor any of its Subsidiaries has (i) any written employment contracts or oral
employment contracts not terminable at will by the Company or such Subsidiary
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 such Subsidiary or the
creation of any commitment or obligation (absolute or contingent), of the
Company to pay any severance, termination, “golden parachute,” or similar
payment to any present or former personnel of the Company or such Subsidiary
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.
(u) LABOR AGREEMENTS AND EMPLOYEE
RELATIONS. Neither the Company nor any of its Subsidiaries is 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 or any of its Subsidiaries, nor has the
Company nor any of its Subsidiaries experienced in the last five (5) years any
work stoppage or other labor difficulty. The Company and each of its
Subsidiaries 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 neither the Company nor any Subsidiary is
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 or any of its
Subsidiaries pending before the National Labor Relations Board or any other
governmental agency.
(v) ERISA AND EMPLOYEE PLANS.
Except as set forth in the SEC Reports, there is no employee pension, retirement
or other benefit plans, maintained, contributed to or required to be contributed
to by the Company or any of its Subsidiaries covering any employee or former
employee of the Company or such Subsidiary. Neither the Company nor
any Subsidiary has any 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.
(w) TAXES. The Company and each of
its Subsidiaries 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 or any of its Subsidiaries in respect of taxes.
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(x) ENVIRONMENTAL LAWS. The
Company and each of its Subsidiaries 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 and each of its Subsidiaries 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. Neither the Company nor any of its Subsidiaries has 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 such Subsidiary 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.
(y) INTELLECTUAL PROPERTY RIGHTS.
The Company and each of its Subsidiaries 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 and
each of its Subsidiaries does not violate or infringe upon the patent,
copyright, trade secret or other proprietary rights of any third party, and
neither the Company nor any of its Subsidiaries has received any notice of any
claim of any such violation or infringement.
(z) PROPERTIES. The Company and
each of its Subsidiaries has good and marketable title to all of its material
property and assets and, except as set forth in the SEC Reports, none of such
property or assets of the Company or any such Subsidiary are subject to any
lien, mortgage, pledge, encumbrance or other security interest.
(aa) NOT AN INTEGRATED OFFERING.
Neither the Company, nor any person acting on its behalf, has knowingly, either
directly or indirectly made any offers or sales of any security or solicited any
offers to buy any security under circumstances that would cause the offer of the
Securities pursuant to this Agreement to be integrated with prior offerings by
the Company for purposes of the 1933 Act or any applicable stockholder approval
provisions, including, without limitation, under the rules and regulations of
the OTC Bulletin Board ("BULLETIN BOARD") which would impair the exemptions
relied upon in for the offer and sale of the Securities to Subscriber or the
Company's ability to timely comply with its obligations hereunder. Nor will the
Company take any action or steps that would knowingly cause the offer or
issuance of the Securities to be integrated with other offerings which would
impair the exemptions relied upon for the offer and sale of the Securities to
Subscriber or the Company's ability to timely comply with its obligations
hereunder. The Company will not knowingly conduct any offering other than the
transactions contemplated hereby that will be integrated with the offer or
issuance of the Securities, which would impair the exemptions relied upon for
the offer and sale of the Securities to Subscriber or the Company's ability to
timely comply with its obligations hereunder.
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(ab) NO GENERAL SOLICITATION.
Neither the Company, nor to its knowledge, any person acting on its or their
behalf, has engaged in any form of general solicitation or general advertising
(within the meaning of Regulation D under the 0000 Xxx) in connection with the
offer or sale of the Securities.
(ac) LISTING. The Company's common
stock is quoted on the Bulletin Board under the symbol PCYG.OB. The Company has
not received any oral or written notice that the Common Stock is not eligible
nor will become ineligible for quotation on the Bulletin Board nor that the
Common Stock does not meet all requirements for the continuation of such
quotation. The Company satisfies all the requirements for the continued
quotation of the Common Stock on the Bulletin Board.
(ad) STOP TRANSFER. The Company
will not issue any stop transfer order or other order impeding the sale, resale
or delivery of any of the Securities, except as may be required by any
applicable federal or state securities laws and unless contemporaneous notice of
such instruction is given to the Subscriber.
(ae) BROKERS. Except for
Taglich Brothers, Inc., 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.
(af) INVESTMENT COMPANY. The
Company is not an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
(ag) DISCLOSURE. The information
contained in the SEC Reports taken together, describes in all material respects
the business and financial condition of the Company and its Subsidiaries, 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 Subscriber shall be entitled to rely on such material
notwithstanding any investigation Subscriber may have made.
3. SUBSCRIBER'S REPRESENTATIONS AND
WARRANTIES. Subscriber hereby represents and warrants to and agrees with
the Company that:
(a) ORGANIZATION AND STANDING. If
the Subscriber is an entity, such Subscriber is a corporation, partnership or
other entity duly incorporated or organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or organization
and has the requisite corporate power to own its assets and to carry on its
business.
(b) AUTHORIZATION AND POWER.
Subscriber has the requisite power and authority to enter into and perform this
Agreement and to purchase the Securities. The execution, delivery and
performance of this Agreement by Subscriber and the consummation by Subscriber
of the transactions contemplated hereby and have been duly authorized by all
necessary corporate or partnership action, and no further consent or
authorization of Subscriber or its Board of Directors, stockholders, partners,
members, as the case may be, is required. This Agreement has been duly
authorized, executed and delivered by Subscriber and constitutes a valid and
binding obligation of the Subscriber enforceable against the Subscriber in
accordance with the terms hereof.
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(c) NO CONFLICTS. The execution,
delivery and performance of this Agreement and the consummation by Subscriber of
the transactions contemplated hereby do not and will not (i) result in a
violation of Subscriber's charter documents or bylaws or other organizational
documents or (ii) conflict with, or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of any
agreement, indenture or instrument or obligation to which Subscriber is a party
or by which its properties or assets are bound, or result in a violation of any
law, rule, or regulation, or any order, judgment or decree of any court or
governmental agency applicable to Subscriber or its properties (except for such
conflicts, defaults and violations as would not, individually or in the
aggregate, have a material adverse effect on Subscriber). Subscriber is not
required to obtain any consent, authorization or order of, or make any filing or
registration with, any court or governmental agency in order for it to execute,
deliver or perform any of its obligations under this Agreement or to purchase
the Securities, provided that for purposes of the representation made in this
sentence, Subscriber is assuming and relying upon the accuracy of the relevant
representations and agreements of the Company herein.
(d) INFORMATION ON COMPANY. The
Subscriber has been furnished with or has had access at the XXXXX Website of the
Commission to the SEC Reports. In addition, the Subscriber has
received in writing from the Company such other information concerning its
operations, financial condition and other matters as the Subscriber has
requested in writing (such other information is collectively, the "OTHER WRITTEN
INFORMATION"), and considered all factors the Subscriber deems material in
deciding on the advisability of investing in the Securities. Subscriber has
carefully read, and understands the information in the SEC Reports, including
without limitation, the information set forth in Item 1A of the Company's Annual
Report on Form 10-K for the fiscal year ended June 30, 2008 under the caption
"Risk Factors."
(e) INFORMATION ON SUBSCRIBER. The
Subscriber is an "accredited investor", as such term is defined in Rule 501(a)
of Regulation D promulgated by the Commission under the 1933 Act, is experienced
in investments and business matters, has made investments of a speculative
nature and has purchased securities of United States publicly-owned companies in
private placements in the past and, with its representatives, has such knowledge
and experience in financial, tax and other business matters as to enable the
Subscriber to utilize the information made available by the Company to evaluate
the merits and risks of and to make an informed investment decision with respect
to the proposed purchase, which represents a speculative investment. The
Subscriber has the authority and is duly and legally qualified to purchase and
own the Securities. The Subscriber is able to bear the risk of such
investment for an indefinite period and to afford a complete loss thereof. The
information set forth on the signature page hereto regarding the Subscriber is
accurate.
(f) PURCHASE OF SECURITIES. The
Subscriber is purchasing the Securities as principal for its own account for
investment only and not with a view toward, or for resale in connection with,
the public sale or any distribution thereof, but Subscriber does not agree to
hold the Securities for any minimum amount of time.
(g) COMPLIANCE WITH SECURITIES ACT.
The Subscriber understands and agrees that the Securities have not been
registered under the 1933 Act or any applicable state securities laws, by reason
of their issuance in a transaction that does not require registration under the
1933 Act (based in part on the accuracy of the representations and warranties of
Subscriber contained herein), and that such Securities must be held indefinitely
unless a subsequent disposition is registered under the 1933 Act or any
applicable state securities laws or is exempt from such
registration.
-9-
(h) NOTE LEGEND. The Note shall
bear the following legend:
"THIS
NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS
NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE BE
DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS
NOTE UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAW OR AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO PARK CITY GROUP, INC. THAT SUCH REGISTRATION
IS NOT REQUIRED.”
(i) SHARES LEGEND. The
certificates evidencing the Shares shall bear the following or similar
legend:
"THE
SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. THESE SHARES MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED, HYPOTHECATED OR OTHERWISE BE DISPOSED OF IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT AND ANY APPLICABLE
STATE SECURITIES LAW OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO PARK
CITY GROUP, INC. THAT SUCH REGISTRATION IS NOT REQUIRED."
(j) COMMUNICATION OF OFFER. The
offer to sell the Securities was directly communicated to the Subscriber by the
Company and no other person has solicited an investment in the Notes on behalf
of the Company, except the Broker identified in the Disclosure Schedule. At no
time was the Subscriber presented with or solicited by any leaflet, newspaper or
magazine article, radio or television advertisement, or any other form of
general advertising or solicited or invited to attend a promotional meeting
otherwise than in connection and concurrently with such communicated
offer.
(k) AUTHORITY; ENFORCEABILITY.
This Agreement has been duly authorized, executed and delivered by the
Subscriber and is a valid and binding agreement of Subscriber, enforceable
against the Subscriber in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights generally and
to general principles of equity; and Subscriber has full corporate power and
authority necessary to enter into this Agreement and to perform its obligations
hereunder.
(l) NO GOVERNMENTAL REVIEW.
Subscriber understands that no United States federal or state agency or any
other governmental or state agency has passed on or made recommendations or
endorsement of the Securities or the suitability of the investment in the
Securities nor have such authorities passed upon or endorsed the merits of the
offering of the Securities.
(m) NO TAX
ADVICE. Subscriber acknowledges that no representation has
been made and no advice has been given to Subscriber by the Company or the
Placement Agent as to the potential tax consequences of the Subscriber’s
investment in the Note and the Shares subscribed for or the repayment of the
principal and interest under the Note and that the Subscriber has been urged to
consult with his or her own tax advisors, with specific reference to the
Subscriber’s own situation, with respect to such consequences.
4. REGULATION D OFFERING. The
offer and issuance of the Securities to the Subscriber is being made pursuant to
the exemption from the registration provisions of the 1933 Act afforded by
Section 4(2) or Section 4(6) of the 1933 Act and/or Rule 506 of Regulation D
promulgated thereunder.
-10-
5. BROKER COMMISSIONS. The
Company on the one hand, and Subscriber on the other hand, agrees to indemnify
the other against and hold the other harmless from any and all liabilities to
any persons claiming brokerage commissions or similar fees other than the
persons and entities identified in the Disclosure Schedule (each a "BROKER", on
account of services purported to have been rendered on behalf of the
indemnifying party in connection with this Agreement or the transactions
contemplated hereby and arising out of such party's actions. The Company agrees
that it will pay the Broker the fee set forth in the Disclosure Schedule
("BROKER'S FEES"). The Company represents that there are no other parties
entitled to receive fees, commissions, or similar payments in connection with
the offering described in this Agreement, except the Broker identified in the
Disclosure Schedule.
6. COVENANTS OF THE COMPANY AND
SUBSCRIBER REGARDING INDEMNIFICATION.
(a) The
Company agrees to indemnify, hold harmless, reimburse and defend the Subscriber,
the Subscriber’s officers, directors, agents, affiliates, control persons, and
principal shareholders, against any claim, cost, expense, liability, obligation,
loss or damage (including reasonable legal fees) of any nature, incurred by or
imposed upon the Subscriber or any such person which results, arises out of or
is based solely upon (i) any material misrepresentation by Company or material
breach of any warranty by Company in this Agreement or in any Exhibits or
Schedules attached hereto, or other agreement delivered pursuant hereto; or (ii)
after any applicable notice and/or cure periods, any material breach or default
in performance by the Company of any covenant or undertaking to be performed by
the Company hereunder, or any other agreement entered into by the Company and
Subscriber relating hereto.
(b) Subscriber
agrees to indemnify, hold harmless, reimburse and defend the Company and each of
the Company's officers, directors, agents, affiliates, control persons against
any claim, cost, expense, liability, obligation, loss or damage (including
reasonable legal fees) of any nature, incurred by or imposed upon the Company or
any such person which results, arises out of or is based solely upon (i) any
material misrepresentation by Subscriber in this Agreement or in any Exhibits or
Schedules attached hereto, or other agreement delivered pursuant hereto; or (ii)
after any applicable notice and/or cure periods, any material breach or default
in performance by Subscriber of any covenant or undertaking to be performed by
Subscriber hereunder, or any other agreement entered into by the Company and
Subscriber, relating hereto.
-11-
(c) Any
person entitled to indemnification under Section 6(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 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 6, 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 6 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.
7. PRO RATA TREATMENT OF
NOTEHOLDERS. Each payment or prepayment of
principal of the Notes shall be made to the holders of the Notes pro rata in
accordance with the respective unpaid principal amounts of such holders’
respective Notes. Each payment of interest on the Notes shall be made
to the holders of the Notes pro rata in accordance with the amounts of interest
due and payable to such holders under such holders’ respective
Notes. Each distribution of cash, property, securities or other value
received by the holders of the Notes in respect of the indebtedness outstanding
under the Notes, after payment of collection and other expenses as provided in
the Notes, shall be apportioned to such holders pro rata in accordance with the
respective unpaid principal amounts of and interest on such holders’ respective
Notes.
-12-
8. MISCELLANEOUS.
(a) NOTICES. All notices, demands,
requests, consents, approvals, and other communications required or permitted
hereunder shall be in writing and, unless otherwise specified herein, shall be
(i)personally served, (ii) deposited in the mail, registered or certified,
return receipt requested, postage prepaid, (iii) delivered by reputable air
courier service with charges prepaid, or (iv) transmitted by hand delivery,
telegram, or facsimile, addressed as set forth below or to such other address as
such party shall have specified most recently by written notice. Any notice or
other communication required or permitted to be given hereunder shall be deemed
effective (a) upon hand delivery or delivery by facsimile, with accurate
confirmation generated by the transmitting facsimile machine, at the address or
number designated below (if delivered on a business day during normal business
hours where such notice is to be received), or the first business day following
such delivery (if delivered other than on a business day during normal business
hours where such notice is to be received) or (b) on the second business day
following the date of mailing by express courier service, fully prepaid,
addressed to such address, or upon actual receipt of such mailing, whichever
shall first occur. The addresses for such communications shall be: (i) if to
the Company, to: Park City Group, Inc., 0000 Xxxxxxxxx Xx, Xxxx Xxxx,
Xxxx 00000, Attn: Xxxxx Xxxxxx, CEO, facsimile: (000) 000-0000 and
(ii) if to the Holder, to the name, address and facsimile number set forth on
the signature page of this Agreement, with a copy by telecopier only to the
Placement Agent at Taglich Brothers, Inc., 000 Xxx Xxxx Xxxxxx, Xxxxxxxxxx, XX
00000, Attn: Mr. Xxxxxxx Xx, facsimile: (000)
000-0000.
(b) ENTIRE AGREEMENT; ASSIGNMENT.
This Agreement and other documents delivered in connection herewith represent
the entire agreement between the parties hereto with respect to the subject
matter hereof and may be amended only by a writing executed by approval or
written consent of Subscriber, as defined in subparagraph (h) hereof. Neither
the Company nor the Subscriber has relied on any representations not contained
or referred to in this Agreement and the documents delivered herewith. No right
or obligation of the Company shall be assigned without prior notice to and the
written consent of the Subscriber.
(c) COUNTERPARTS/EXECUTION. This
Agreement may be executed in any number of counterparts and by the different
signatories hereto on separate counterparts, each of which, when so executed,
shall be deemed an original, but all such counterparts shall constitute but one
and the same instrument. This Agreement may be executed by facsimile signature
and delivered by facsimile transmission.
(d) LAW GOVERNING THIS AGREEMENT
AND CONSENT TO
JURISDICTION. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without regard to conflicts of
laws principles that would result in the application of the substantive laws of
another jurisdiction. Any action brought by either party against the other
concerning the transactions contemplated by this Agreement may be brought in the
state or federal courts located in New York County in the State of New York or
in Summit County in the State of Utah. THE PARTIES AGREE TO SUBMIT TO THE
JURISDICTION OF SUCH COURTS AND WAIVE TRIAL BY JURY. Each party hereby waives,
and agrees not to assert in any such suit, action or proceeding, any claim that
it is not personally subject to the jurisdiction of such courts, that the suit,
action or proceeding is brought in an inconvenient forum or that the venue of
the suit, action or proceeding is improper. Nothing in this Section shall affect
or limit any right to serve process in any manner permitted by law.
(e) SEVERABILITY. In the event
that any provision of this Agreement or any other agreement delivered in
connection herewith is invalid or unenforceable under any applicable statute or
rule of law, then such provision shall be deemed inoperative to the extent that
it may conflict therewith and shall be deemed modified to conform with such
statute or rule of law. Any such provision which may prove invalid or
unenforceable under any law shall not affect the validity or enforceability of
any other provision of any agreement.
-13-
(f) SPECIFIC ENFORCEMENT, CONSENT TO
JURISDICTION. To the extent permitted by law, the Company and Subscriber
acknowledge and agree that irreparable damage would occur in the event that any
of the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to one or more preliminary and final injunctions to
prevent or cure breaches of the provisions of this Agreement and to enforce
specifically the terms and provisions hereof, this being in addition to any
other remedy to which any of them may be entitled by law or equity. Subject to
Section 8(d) hereof, each of the Company and Subscriber hereby waives, and
agrees not to assert in any such suit, action or proceeding, any claim that it
is not personally subject to the jurisdiction in New York of such court, that
the suit, action or proceeding is brought in an inconvenient forum or that the
venue of the suit, action or proceeding is improper. Nothing in this Section
shall affect or limit any right to serve process in any other manner permitted
by law.
(g) SURVIVAL. The representations
and warranties, covenants and other agreements of the Company and the Subscriber
set forth in this Agreement shall survive the purchase of the Securities by the
Subscriber hereunder for a period of one year from the date hereof.
[SIGNATURE
PAGE APPEARS ON THE FOLLOWING PAGE]
-14-
ALL INVESTORS MUST COMPLETE THIS
PAGE
IN
WITNESS WHEREOF, the parties have executed this Agreement as of January 12,
2009.
Number of
Shares of Series E Preferred Stock:
(an equal
number of Units consisting of 900 shares for each $4,021.30 principal
amount
of
Subordinated Promissory Note)
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_________________________________________
(Authorized
Signature)
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_________________________________________
Print
Name of Signatory and Capacity in which
Signed
if an Entity
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_________________________________________
Signature
(if Joint Tenants or Tenants in Common)
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_________________________________________
Print
Name of above Signatory
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SUBSCRIPTION
ACCEPTED:
PARK
CITY GROUP, INC.
By:_______________________________
Name:
Xxxx X. Xxxxxxx
Title:
CFO
_________________________
Aggregate
Purchase Price Accepted
-15-
Exhibit
A
THIS NOTE
HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS NOTE
MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE BE
DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT
OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO PARK CITY GROUP, INC. THAT
SUCH REGISTRATION IS NOT REQUIRED.
Principal
Amount:
$ Issue
Date: January 12, 2009
Subordinated
Promissory Note
FOR
VALUE RECEIVED, PARK CITY GROUP, INC., a Nevada corporation (hereinafter called
"Borrower"), hereby promises to pay to the order of _____________ (the "Holder",
which term includes subsequent holders of this Note), without demand, the sum of
__________________________ Dollars ($____________), on the earlier of (i) July
12, 2011 (the "Maturity Date") or (ii) at the option of the Holder, upon the
occurrence of an Event of Default referred to in Section 2. The
principal outstanding under this Note from time to time shall bear interest
computed at a rate of twelve percent (12%) per annum, compounded quarterly, with
interest accruing from and including the date hereof. Interest shall
be computed on the basis of a 365-day year and the actual number of days
elapsed. Interest shall be due and payable (i) quarterly on the first day of each March,
June, September, and December following the date of this Note on which any of
the principal amount is outstanding, and (ii) on the Maturity
Date. In the event the principal amount is not paid when due, it, and
any unpaid interest, shall thereafter bear interest at a rate of 18% per annum
until the same shall be paid.
The
Borrower may, at its option, exercisable at any time or from time to time,
prepay, without premium or penalty, all or any portion of the then outstanding
principal amount of this Note, together with all accrued and unpaid interest on
this Note to the date of prepayment In addition, upon a sale of
any patents by the Borrower, the Borrower shall promptly apply 50% of the net
proceeds of any such sale (after payment of commissions, taxes, and other costs
and expenses applicable to the sale) to the prepayment of this
Note. All prepayments shall be applied first to accrued and unpaid
interest and then to principal.
This
Note has been entered into pursuant to the terms of a securities purchase
agreement between the Borrower and the Holder, dated of even date herewith (the
"SPA"), and shall be governed by the terms of such SPA. Unless otherwise
separately defined herein, all capitalized terms used in this Note shall have
the same meaning as is set forth in the SPA.
The
following is a statement of rights of the Holder and the conditions to which
this Note is subject, and to which the Holder, by acceptance of this Note,
agrees:
1. Subordination.
(a) Notwithstanding
anything in this Note to the contrary, the indebtedness evidenced by this Note
shall be subordinated and junior in right of payment, to the extent and in the
manner set forth below, to all Senior Debt (as defined below) outstanding on the
date of this Note or incurred after the date of this Note:
-16-
(i) no
payment on account of principal of or interest on this Note shall be made, and
this Note shall not be purchased, either directly or indirectly, by the
Borrower, unless full payment of amounts then due for the principal, premium, if
any, sinking funds, and interest on all Senior Debt has been made or duly
provided for by the Borrower;
(ii) no
payment on account of principal of or interest on this Note shall be made, and
this Note shall not be purchased, either directly or indirectly, by the
Borrower, if, at the time of the payment or purchase or immediately after giving
effect to the payment or purchase, any default or any condition that, with
notice or lapse of time, or both, would constitute a default, shall exist under
any note, debenture, indenture, or agreement pursuant to which any Senior Debt
is issued, which default would entitle, or with the passage of time or notice or
both would entitle, the holder of such Senior Debt to accelerate the maturity
thereof;
(iii) upon
any acceleration of the principal of or interest on this Note pursuant to
section 5 of this Note or upon any payment or distribution of assets of the
Borrower of any kind, whether in cash, property, or securities, to creditors
upon any dissolution or winding-up or total or partial liquidation or
reorganization of the Borrower, whether voluntary or involuntary, or in
bankruptcy, insolvency, receivership, or other proceedings, all principal,
premium, if any, and interest due or to become due upon all Senior Debt shall
first be paid in full or provided for before the holder of this Note shall be
entitled to retain any assets paid or distributed in respect of principal of or
interest on this Note; under those circumstances, any payment or distribution to
which the holder of this Note would be entitled but for the provisions of this
clause (iii) shall be paid by the Borrower (or by any receiver, trustee in
bankruptcy, liquidating trustee, agent, or other person making the
payment or distribution, or by the holder of this Note, if received by such
holder) directly to the holders of Senior Debt or their representatives, to the
extent necessary to pay all Senior Debt in full, after giving effect to any
concurrent payment or distribution to or for the holders of Senior Debt (except
that, in connection with any reorganization proceedings, there may be delivered
to and retained by the holder of this Note any instruments evidencing
obligations of the Borrower that are subordinated, at least to the extent
provided in this Note, to the payment of all Senior Debt) and consistent with
the provisions of this section 1; and
(iv) by
acceptance of this Note, the Holder further agrees that (a) at the Borrower’s
request from time to time, the Holder shall execute and deliver such instruments
as the holder of any Senior Debt may require to effect the subordination of this
Note to the Senior Debt in a manner and to the extent reasonably required by the
holder of the Senior Debt, and (b) the Holder hereby appoints each executive
officer of Taglich Brothers, Inc. (as determined in the rules under the
Securities Exchange Act of 1934), acting individually, its agent and
attorney-in-fact to execute and deliver, in the name and on behalf of the
Holder, such instruments as the holder of any Senior Debt may require to effect
the subordination of this Note to the Senior Debt in a manner and to the extent
reasonably required by the holder of the Senior Debt.
The
foregoing provisions are solely for the purpose of defining the relative rights
of the holders of Senior Debt, on the one hand, and the holders of this Note, on
the other hand, and nothing in those provisions shall impair, as between the
Borrower and the holder of this Note, the obligation of the Borrower, which is
unconditional and absolute, to pay to the holder of this Note the principal of
and interest on this Note in accordance with its terms, nor shall anything in
those provisions prevent the holder of this Note from exercising all
remedies permitted by law upon default under this Note, subject to the rights
set forth above of the holders of Senior Debt to receive cash, property, or
securities otherwise payable or deliverable to the holder of this
Note.
-17-
(b) As
used in this Note, the term “Senior Debt” means the principal of, premium, if
any, unpaid interest on, and all reasonable and customary charges in connection
with, liabilities of Prescient Applied Intelligence, Inc. (“PAII”) assumed by
Borrower, liabilities of the Borrower, whether outstanding on the
date of issuance of this Note or thereafter created, incurred, or assumed, that
are for money borrowed by the Borrower or PAII, or any direct or indirect
subsidiary of the Borrower or PAII to finance or
refinance the acquisition of PAII, or to provide working capital for
the Borrower, PAII, or any direct or indirect subsidiary of the Borrower or
PAII.
(c) The
holders of Senior Debt are intended beneficiaries of this Section
1.
2. Events of
Default. The occurrence of any of the following events of
default ("Event of Default") shall, at the option of the Holder hereof, make all
sums of principal and interest then remaining unpaid hereon and all other
amounts payable hereunder immediately due and payable, upon demand, without
presentment, or grace period, all of which hereby are expressly waived, except
as set forth below:
(a) Failure to Pay
Principal. The Borrower fails to pay any principal due and payable under
this or any other Note when due and payable, and such failure continues for five
(5) business days.
(b) Failure to Pay
Interest. The Borrower fails to pay any interest or other sum (other than
principal) due and payable under this or any other Note when due and payable,
and such failure continues for five (5) business days.
(c) Breach of Covenant.
The Borrower breaches any covenant under this or any other Note
(other than a breach contemplated by (a) or (b) above or the corresponding
clauses of the other Notes) and such breach continues uncured for a period of
ten (10) business days after written notice to the Borrower from the Holder or
the holder of any other Note.
(d) Breach of Representations
and Warranties. Any material representation or warranty of the Borrower
made herein, in the SPA, or in any agreement, statement or certificate given in
writing pursuant hereto or in connection therewith shall be false or misleading
in any material respect as of the date made.
(e) Receiver or Trustee.
The Borrower shall make an assignment for the benefit of creditors, or apply for
or consent to the appointment of a receiver or trustee for it or for a
substantial part of its property or business; or such a receiver or trustee
shall otherwise be appointed without the consent of the Borrower is not
dismissed within sixty (60) days of appointment.
(f) Judgments. Any money
judgment, writ or similar final process or non-appealable order of final
judgment of a court of competent jurisdiction shall be entered or filed against
Borrower or any of its property or other assets for more than $50,000, and shall
remain unpaid, unvacated, unbonded or unstayed for a period of forty-five (45)
days.
(g) Bankruptcy.
Bankruptcy, insolvency, reorganization or liquidation proceedings or other
proceedings or relief under any bankruptcy law or any law, or the issuance of
any notice in relation to such event, for the relief of debtors shall be
instituted by or against the Borrower and if instituted against Borrower are not
dismissed within forty-five (45) days of initiation.
(h) Non-Payment. A
default by the Borrower in the payment of any one or more obligations in an
aggregate monetary amount in excess of $500,000 for more than thirty (30) days
after the due date, unless the Borrower is contesting the validity of such
obligations in good faith, or except for obligations where the Borrower and
creditor have agreed to alternative payment terms.
-18-
(i) Cross Default. Any
declared default by the Borrower under any Senior Indebtedness whether now
existing or hereafter created that gives the holder the right to accelerate such
Senior Indebtedness, and such Senior Indebtedness is in fact accelerated by the
Holder.
3. Pro Rata Treatment of
Noteholders. Each payment or prepayment of
principal of this Note and the other Notes sold in the Offering (as defined in
the SPA) (collectively, the “Notes”) shall be made to the holders of the Notes
pro rata in accordance with the respective unpaid principal amounts of such
holders’ respective Notes. Each payment of interest on the Notes
shall be made to the holders of the Notes pro rata in accordance with the
amounts of interest due and payable to such holders under such holders’
respective Notes. Each distribution of cash, property, securities or
other value received by the holders of the Notes in respect of the indebtedness
outstanding under the Notes, after payment of collection and other expenses as
provided in the Notes, shall be apportioned to such holders pro rata in
accordance with the respective unpaid principal amounts of and interest on such
holders’ respective Notes. The holders of the other Notes are
intended beneficiaries of this Section 3.
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4.
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Miscellaneous.
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(a.) Waiver. No failure or
delay on the part of Holder hereof in the exercise of any power, right or
privilege hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other right, power or privilege. All rights and
remedies existing hereunder are cumulative to, and not exclusive of, any rights
or remedies otherwise available.
(b) Notices. All notices,
demands, requests, consents, approvals, and other communications required or
permitted hereunder shall be in writing and, unless otherwise specified herein,
shall be (i) personally served, (ii)deposited in the mail, registered or
certified, return receipt requested, postage prepaid, (iii) delivered by
reputable air courier service with charges prepaid, or (iv) transmitted by hand
delivery, telegram, or facsimile, addressed as set forth below or to such other
address as such party shall have specified most recently by written notice. Any
notice or other communication required or permitted to be given hereunder shall
be deemed effective (a) upon hand delivery or delivery by facsimile, with
accurate confirmation generated by the transmitting facsimile machine, at the
address or number designated below (if delivered on a business day during normal
business hours where such notice is to be received), or the first business day
following such delivery (if delivered other than on a business day during normal
business hours where such notice is to be received) or (b) on the second
business day following the date of mailing by express courier service, fully
prepaid, addressed to such address, or upon actual receipt of such mailing,
whichever shall first occur. The addresses for such communications shall be: (i)
if to the Borrower to: Park City Group, Inc., 0000 Xxxxxxxxx Xx, Xxxx Xxxx, Xxxx
00000, Attn: Xxxxx Xxxxxx, CEO, facsimile: (000) 000-0000, and (ii)
if to the Holder, to the name, address and facsimile number set forth on the
signature page of this Agreement, with a copy by telecopier only to the
Placement Agent at Taglich Brothers, Inc., 000 Xxx Xxxx Xxxxxx, Xxxxxxxxxx, XX
00000, Attn: Mr. Xxxxxxx Xx, facsimile: (000)
000-0000.
(c) Terms. The
term "Note" and all reference thereto, as used throughout this instrument, shall
mean this instrument as originally executed, or if later amended or
supplemented, then as so amended or supplemented.
(d) Successors and
Assigns. This Note shall be binding upon the Borrower and its successors
and assigns, and shall inure to the benefit of the Holder and its successors and
assigns.
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(e) Expenses. The Company
shall reimburse Holder for all reasonable costs and expenses, including without
limitation, reasonable attorneys’ fees and expenses, incurred in connection with
(i) drafting, negotiating, executing and delivering any amendment, modification
or waiver of, or consent with respect to, any matter relating to the rights of
Holder hereunder and (ii) enforcing any provisions of this Note or the Security
Agreement and/or collecting any amounts due under this Note.
(f) Governing
Law. This Note shall be governed by and construed in
accordance with the laws of the State of New York without regard to conflicts of
laws principles that would result in the application of the substantive laws of
another jurisdiction. Any action brought by either party against the other
concerning the transactions contemplated by this Note may be brought in the
state or federal courts located in New York County in the State of New York or
in Summit County in the State of Utah. THE PARTIES AGREE TO SUBMIT TO THE
JURISDICTION OF SUCH COURTS AND WAIVE TRIAL BY JURY. Each party hereby waives,
and agrees not to assert in any such suit, action or proceeding, any claim that
it is not personally subject to the jurisdiction of such courts, that the suit,
action or proceeding is brought in an inconvenient forum or that the venue of
the suit, action or proceeding is improper. Nothing in this Section shall affect
or limit any right to serve process in any manner permitted by law.
(g) Savings
Clause. Nothing contained herein shall be deemed to establish
or require the payment of a rate of interest or other charges in excess of the
maximum permitted by applicable law. In the event that the rate of interest
required to be paid or other charges hereunder exceed the maximum permitted by
such law, any payments in excess of such maximum shall be credited against
amounts owed by the Borrower to the Holder and thus refunded to the
Borrower.
IN
WITNESS WHEREOF, Borrower has caused this Note to be signed in its name by an
authorized officer as of the 12th day of January, 2009.
PARK CITY GROUP, INC.
By:_____________________________
Name:
Xxxxx Xxxxxx
Title:
Chief Executive Officer
