SECURITIES PURCHASE
AGREEMENT
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 3160 Pinebrook Rd, Park
City, Utah 84098 (the “Company”) and the undersigned
(the “Subscriber”).
WITNESSETH:
WHEREAS,
the Subscriber is the Holder of a
promissory note dated August 27, 2008 in the amount of $500,000.00
of which the Company is the Maker (the “Initial
Note”);
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 form annexed hereto as
Exhibit A, in the principal amount indicated on the signature page
hereto together with such number of shares of the Company’s
Common Stock as are indicated on the signature page hereto (the
“Shares”). 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, upon
receipt of and in exchange for the original Initial Note marked
“cancelled”.
(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;
(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.
(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
(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.
(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 1933 Act) 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.
(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.
(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.&
